Docstoc

ITC HOLDINGS S-1/A Filing

Document Sample
ITC HOLDINGS  S-1/A Filing Powered By Docstoc
					QuickLinks -- Click here to rapidly navigate through this document
                                  As filed with the Securities and Exchange Commission on May 10, 2005

                                                                                                                 Registration No. 333-123657




                       SECURITIES AND EXCHANGE COMMISSION
                                                             Washington, D.C. 20549


                                                         AMENDMENT NO. 1
                                                              TO

                                                              FORM S-1
                                                        REGISTRATION STATEMENT
                                                                UNDER
                                                       THE SECURITIES ACT OF 1933



                                                 ITC HOLDINGS CORP.
                                             (Exact Name of Registrant as Specified in its Charter)

                  Michigan                                             4911                                       32-0058047
        (State or other jurisdiction of                   (Primary Standard Industrial                         (I.R.S. Employer
       incorporation or organization)                     Classification Code Number)                       Identification Number)

                                                            39500 Orchard Hill Place
                                                                    Suite 200
                                                              Novi, Michigan 48375
                                                                 (248) 374-7100
                                          (Address, including zip code, and telephone number, including
                                              area code, of registrant's principal executive offices)

                                                       Daniel J. Oginsky, Esq.
                                           Vice President, General Counsel and Secretary
                                                         ITC Holdings Corp.
                                                 39500 Orchard Hill Place, Suite 200
                                                        Novi, Michigan 48375
                                                            (248) 374-7045
                 (Name and Address, including Zip Code, and Telephone Number, including Area Code of agent for service)




                                                                 With copies to:
                      Risë B. Norman, Esq.                                                       Erica A. Ward, Esq.
                Simpson Thacher & Bartlett LLP                                                 Richard B. Aftanas, Esq.
                     425 Lexington Avenue                                             Skadden, Arps, Slate, Meagher & Flom LLP
                New York, New York 10017-3954                                                    Four Times Square
                         (212) 455-2000                                                   New York, New York 10036-5622
                                                                                                   (212) 735-3000

     Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration
Statement.
     If the securities being registered on this form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box. 

     If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 


.

    If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. 


.

    If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. 


.

     If delivery of the prospectus is expected to be made pursuant to Rule 434 under the Securities Act, please check the following box. 


       The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date
until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933, or until this registration statement shall become effective on such
date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to
sell these securities and it is not soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not
permitted.

PROSPECTUS

                                                  Subject to Completion, dated May 10, 2005

                                                                        Shares




                                                            Common Stock

This is the initial public offering of ITC Holdings Corp. common stock. The selling stockholder is offering       shares of our common stock
and we are offering           shares of our common stock. No public market currently exists for our common stock. We will not receive any
proceeds from the sale of our common stock by the selling stockholder.

We intend to apply for the listing of our common stock on the New York Stock Exchange under the symbol "ITC." We currently estimate that
the initial public offering price will be between $ and $ per share.

Investing in our common stock involves risks. See "Risk Factors" beginning on page 12.
                                                                                        Per Share         Total

Public offering price                                                                  $              $
Underwriting discounts and commissions                                                 $              $
Proceeds to the selling stockholder (before expenses)                                  $              $
Proceeds to ITC Holdings Corp. (before expenses)                                       $              $

The selling stockholder has granted the underwriters a 30-day option to purchase up to an additional             shares of common stock on
the same terms and conditions as set forth above if the underwriters sell more than              shares of common stock in this offering.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed
upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.


Lehman Brothers, on behalf of the underwriters, expects to deliver the shares on or about           , 2005.




LEHMAN BROTHERS                                  CREDIT SUISSE FIRST BOSTON                                       MORGAN STANLEY
               , 2005
                                                             TABLE OF CONTENTS

                                                                                                                                               Page

Summary                                                                                                                                            1
Risk Factors                                                                                                                                      12
Forward-Looking Statements                                                                                                                        22
Use of Proceeds                                                                                                                                   23
Dividend Policy                                                                                                                                   23
Capitalization                                                                                                                                    25
Dilution                                                                                                                                          26
Selected Consolidated Financial Data                                                                                                              27
Management's Discussion and Analysis of Financial Condition and Results of Operations                                                             31
Industry Overview                                                                                                                                 54
Rate Setting                                                                                                                                      57
Business                                                                                                                                          60
Management                                                                                                                                        67
Principal and Selling Stockholders                                                                                                                80
Certain Relationships and Related Party Transactions                                                                                              82
Description of Our Indebtedness                                                                                                                   88
Description of Our Capital Stock                                                                                                                  91
Shares Eligible for Future Sale                                                                                                                   96
Certain United States Federal Income and Estate Tax Consequences to Non-U.S. Holders                                                              98
Underwriting                                                                                                                                     101
Legal Matters                                                                                                                                    105
Experts                                                                                                                                          105
Where You Can Find Additional Information                                                                                                        105
Index to Financial Statements                                                                                                                    F-1


     Until         , 2005, 25 days after the date of this prospectus, all dealers that effect transactions in our common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or subscriptions.


                                                          ABOUT THIS PROSPECTUS

     You should rely only on the information contained in this prospectus. We, the selling stockholder and the underwriters have not authorized
any other person to provide you with information different from that contained in this prospectus. If any person provides you with different or
inconsistent information, you should not rely on it. We and the selling stockholder are only offering to sell, and only seeking offers to buy, the
common stock in jurisdictions where offers and sales are permitted.

      The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since
that date.

     Unless otherwise noted or the context requires, all references in this prospectus to:

     •
            "ITC Holdings" are references to ITC Holdings Corp. and not any of its subsidiaries;

     •
            "ITC" are references to International Transmission Company, a wholly-owned subsidiary of ITC Holdings; and

     •
            "We," "our" and "us" are references to ITC Holdings, together with all of its subsidiaries.

     All references in this prospectus to "kV" are references to kilovolts (one kilovolt equaling 1,000 volts). All references to "MW" are
references to megawatts (one megawatt equaling 1,000,000 watts), all references to "kW" are references to kilowatts (one kilowatt equaling
1,000 watts) and all references to "TWh" are to terawatt hours (one terawatt hour equaling 1,000,000,000,000 watt hours).

                                                                          i
                                                                    SUMMARY

      This summary highlights selected information in this prospectus, but it may not contain all of the information that you should consider
before deciding to invest in our common stock. You should read this entire prospectus carefully, including the "Risk Factors" section and our
historical financial statements, which are included elsewhere in this prospectus.


                                                                   Our Business

Overview

      Our operating subsidiary, ITC, is the first independently owned and operated electricity transmission company in the United States. We
operate, maintain and invest in transmission infrastructure in order to enhance system integrity and reliability and relieve transmission
constraints. By pursuing this goal, we seek to reduce the overall cost of delivered energy for end-use consumers by providing them with access
to electricity from the lowest cost electricity generation sources. ITC owns a fully-regulated, high-voltage system that transmits electricity to
local electricity distribution facilities from generating stations in Michigan and surrounding areas. The local distribution facilities connected to
the ITC transmission system served a population of approximately 4.9 million people, as of December 31, 2004, in an area comprised of 13
southeastern Michigan counties, including the Detroit metropolitan area.

     As a transmission utility with rates regulated by the Federal Energy Regulatory Commission, ITC earns revenues through fees charged for
the use of its electricity transmission system by its customers, which include investor-owned utilities, municipalities, co-operatives, power
marketers and alternative energy suppliers. The rates charged to ITC's customers are established on a cost-of-service model, which allows for
the recovery of expenses and income taxes and a return on and of invested capital.

The Electricity Transmission Sector

      Electricity transmission is the flow of electricity at high voltages from electricity generation resources to local distribution systems. The
electricity transmission system in the U.S. consists of nearly 160,000 miles of high-voltage transmission lines and an estimated $60 billion of
net installed assets, according to recent data collected by the U.S. Department of Energy. In the United States, electricity transmission assets are
predominantly owned, operated and maintained by utilities that also own electricity generation and distribution assets, known as vertically
integrated utilities. The vertically integrated model has discouraged investment in transmission systems and has inhibited the provision of
non-discriminatory transmission access to all market participants.

      According to the Edison Electric Institute, transmission investment made by investor-owned utilities declined from $42.3 billion during
the 10-year period from 1975 to 1984 to $29.5 billion during the 10-year period from 1992 to 2001 (both in 2003 dollars), while, according to
the U.S. Department of Energy, annual consumption doubled from 1,747 TWh in 1975 to 3,544 TWh in 2001. These trends have resulted in
significant transmission constraints, increased stress on aging transmission equipment, power outages and other power quality problems. The
costs associated with unreliable electricity transmission systems are high. According to the Electric Power Research Institute, cost estimates
attributed to the August 2003 blackout range from $4 billion to $10 billion in the United States alone. Given historical underinvestment,
continued growth in demand and the costs associated with outages, we believe a significant opportunity exists to invest in transmission
infrastructure with the support of policy makers and end-use consumers.

                                                                         1
Our Operations

     ITC began operations under independent ownership in February 2003. We have no ownership of or financial interest in electricity
generation or distribution assets, allowing us to focus solely on the transmission of electricity and investment in transmission infrastructure.
ITC's primary operating responsibilities include scheduling outages on system elements to allow for maintenance and construction, balancing
electricity generation and demand, and monitoring flows over transmission lines to ensure physical limits are not exceeded.

     ITC's operating assets consist primarily of approximately 2,700 circuit miles of transmission lines, approximately 16,000 transmission
towers and poles and 30 stations, which connect ITC's transmission lines to generation resources, distribution facilities and neighboring
transmission systems.

      ITC is committed to investing capital in its transmission system to improve reliability and meet its customers' ongoing needs. By prudently
investing capital in our transmission system, we believe we will enhance our earnings growth potential as we continue to earn a regulated
return on this expanding rate base. When ITC began independent operations, its net property, plant and equipment was approximately
$435.8 million. Since that time, ITC has invested approximately $122.5 million in property, plant and equipment and expects to invest
approximately $100 million in additional property, plant and equipment in 2005. Prudent capital investment is indicative of our growth
strategy.

     Property, plant and equipment additions in excess of depreciation and amortization expense as illustrated below result in an expansion of
ITC's rate base.




(a)
       Amount represents additions to property, plant and equipment. Additions to property, plant and equipment differ from cash
       expenditures for property, plant and equipment primarily due to construction labor and materials costs incurred as of the period end but
       not yet paid for.

(b)
       Amount represents depreciation and amortization expense related to property, plant and equipment.

(c)
       Approximate amount ITC expects to invest in property, plant and equipment additions in 2005.



     Substantially all of ITC's revenues for the year ended December 31, 2004 were derived from providing transmission service. ITC's
principal customer is The Detroit Edison Company, a wholly-owned subsidiary of DTE Energy Company, or DTE Energy, which accounted
for approximately 68% of ITC's revenues for the year ended December 31, 2004. We generated revenues, net income and EBITDA of
$126.4 million, $2.6 million and $57.7 million, respectively, for the year ended December 31, 2004 and $42.5 million, $7.9 million and
$26.5 million, respectively, for the three months ended March 31, 2005. See "—Summary Historical Financial Data" for a discussion of the
usefulness of EBITDA as a measure of our overall financial and operating performance and a reconciliation of net income to EBITDA. As
described below, ITC's customers were charged a frozen rate until December 31, 2004. If ITC's customers had been billed the rate under the
Attachment O formula, we would have generated revenues of $168.5 million for the year ended December 31, 2004.

                                                                        2
Regulation and Ratemaking

      To further its policy objective of establishing the independent operation and ownership of, and investment in, transmission facilities, the
Federal Energy Regulatory Commission authorized our acquisition of the transmission assets of DTE Energy, and allowed ITC to earn a return
of 13.88% on the equity portion of its capital structure. The Federal Energy Regulatory Commission, in an order dated May 5, 2005, confirmed
that ITC Holdings and ITC will remain independent of market participants after this offering, subject to the enforcement of the restrictions on
ownership and voting by market participants in ITC Holdings' Amended and Restated Articles of Incorporation and notifications to the Federal
Energy Regulatory Commission regarding such ownership. Based on its independence from market participants, ITC will continue to collect
the 100 basis point incentive portion of its rate of return. As of December 31, 2004, equity constituted 60.8% of ITC's capital structure.

     ITC's rates are determined using a Federal Energy Regulatory Commission-approved formulaic rate setting mechanism known as
Attachment O and automatically adjust annually to account for year-to-year changes in network load, expenses and return on and of invested
capital. Beginning June 1, 2005 and each June thereafter, ITC will implement a new rate calculated using data from the previous calendar year
as described above.

      On January 1, 2005, ITC's billed rate increased 47% from $1.075 per kW/month to $1.587 per kW/month, as it moved from a frozen rate
with a revenue deferral, approved in connection with our acquisition of ITC, to an Attachment O formula rate. The revenue deferral resulted
from the difference between the revenues ITC would have collected under Attachment O and the actual revenues ITC received based on the
frozen rate. ITC's customers would have been billed a rate of $1.278 per kW/month during the period from June 1, 2003 to May 31, 2004 and a
rate of $1.587 per kW/month during the period from June 1, 2004 to December 31, 2004 had its customers been charged the Attachment O rate
during those periods. Based upon 2004 year-end results, the rate for the one-year period starting June 1, 2005 will be $  per kW/month.

Business Strengths

     We believe that ITC's business combines the stability of a regulated utility with significant opportunities for growth through prudent
capital investment. Our business strengths include:

Stability



     •
            Supportive Regulatory Environment for Independent Transmission Companies. We operate under a supportive federal regulatory
            policy, which allows 100 basis points of additional return on the equity portion of ITC's capital structure as a reward for being
            independent.

     •
            Efficient and Predictable Rate Setting Process. The formulaic nature of ITC's rate setting mechanism enables ITC to generate
            predictable revenues and cash flows as the rates ITC charges are determined annually using actual historical data. The rate setting
            process significantly streamlines ITC's rate determination procedures and substantially reduces the delay between the incurrence
            and recovery of costs through rates.

     •
            Minimal Weather, Commodity and Energy Demand Risk. ITC's network revenues are a product of its regulated transmission rate
            and its monthly peak network load, which varies with weather and the general demand for electricity. If loads are reduced due to
            cool weather in a calendar year, ITC's rates increase effective the following June 1, assuming all other conditions remain equal.
            ITC operates a transmission system and, accordingly, is not impacted by electricity commodity pricing or price volatility.

                                                                        3
     •
            Attractive Service Territory. ITC is the only transmission system in its service territory, which includes a concentration of
            industrial and residential end-use consumers that are receptive to transmission infrastructure projects as the cost of lost
            productivity resulting from poor reliability may far exceed the cost of reliability enhancements.

     •
            Lack of Competition. ITC's transmission system is the primary means in its service territory to transmit electricity from generators
            to distribution facilities that ultimately provide electricity to end-use consumers.

     •
            Operational Excellence. ITC's system performed well above the system average of those surveyed in a 2004 study by the East
            Central Area Reliability Council on 345 kV lines, in terms of outages per 100 miles and momentary outages per 100 miles. In
            addition to consistently outperforming these system averages, ITC has experienced significant year-over-year performance
            improvement.

     •
            Experienced and Incentivized Management Team. Our pioneering management team, which averages over 22 years of utility
            industry experience, identified the business opportunity for the formation of ITC. Our management and employees collectively
            owned approximately 9.35% of ITC Holdings' common stock on a fully-diluted basis at March 31, 2005.

Growth

     Our growth strategy is aligned with the Federal Energy Regulatory Commission's policy objective to promote needed investment in
transmission infrastructure, improve reliability and reduce system constraints. Key elements of our strategy are:

     •
            Significant Prudent Investment in ITC's Existing Transmission System. We believe that prudent capital investment will expand
            ITC's rate base and earnings potential. We intend to invest our resources to upgrade ITC's transmission system, where appropriate,
            to meet system capacity needs, to increase reliability and to provide lower delivered electricity costs to end-use consumers.

     •
            Pursuit of Acquisitions of Other Transmission Systems. We intend to pursue opportunities to acquire transmission systems similar
            to ITC's in order to expand our existing service territory. Subject to applicable regulatory limitations, we will seek to apply our
            business model and operating expertise across these systems to improve reliability, deliver lower energy costs to end-use
            customers and create value for our stockholders.




      Our principal executive offices are located at 39500 Orchard Hill Place, Suite 200, Novi, Michigan 48375 and our telephone number at
that address is (248) 374-7100. ITC's website is located at www.itctransco.com. The information on ITC's website is not part of this prospectus.

                                                                        4
                                                              Ownership Structure

     ITC Holdings is controlled by International Transmission Holdings Limited Partnership, a Michigan limited partnership, or the IT
Holdings Partnership, which is managed by its general partner, Ironhill Transmission, LLC. The sole member of Ironhill Transmission, LLC is
Mr. Lewis M. Eisenberg. We refer to Ironhill Transmission, LLC, together with its sole member, Mr. Lewis Eisenberg, as the General Partner.
The IT Holdings Partnership has issued limited partnership interests to:

      •
              investment partnerships that are managed and advised by affiliates of Kohlberg Kravis Roberts & Co. L.P., or KKR;

      •
              investment partnerships that are managed and advised by affiliates of Trimaran Capital Partners, L.L.C., or Trimaran; and

      •
              Stockwell Fund, L.P., or Stockwell, an entity formed to make direct investments for certain State of Michigan retirement funds.

     The chart below illustrates the ownership of ITC Holdings on a fully-diluted basis after giving effect to the exercise of all outstanding
stock options held by management and employees of ITC Holdings at March 31, 2005, but before giving effect to this offering.




(1)
          KKR Millennium Fund, L.P. and KKR Partners III, L.P. (Series A).

(2)
          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 MB Inc.

                                                                         5
                                                                  The Offering

Shares of common stock outstanding prior to this offering                9,180,770.

Shares of common stock offered by the selling stockholder                         .

Shares of common stock offered by ITC Holdings Corp.                              .

Shares of common stock outstanding after this offering                            .

Use of proceeds                                                          We estimate that our net proceeds from this offering, after deducting
                                                                         estimated underwriting discounts and commissions and estimated
                                                                         offering expenses, will be approximately $         million, assuming
                                                                         an initial public offering price of $      per share, which is the
                                                                         midpoint of the range set forth on the cover page of this prospectus.

                                                                         We intend to use the net proceeds we receive from the offering to
                                                                         repay borrowings under ITC Holdings' revolving credit agreement and
                                                                         for general corporate purposes, including for capital expenditures at
                                                                         ITC.

                                                                         We will not receive any of the proceeds from the sale of shares of our
                                                                         common stock by the selling stockholder in this offering.

Dividend policy                                                          We currently intend to pay quarterly dividends on our common stock.
                                                                         We anticipate paying our first dividend in the      quarter of 2005.

Proposed New York Stock Exchange symbol                                  "ITC."

    Unless we specifically state otherwise, all information in this prospectus:

    •
            assumes no exercise of the over-allotment option by the underwriters;

    •
            assumes that none of the remaining 681,436 shares of common stock reserved for issuance under the 2003 Stock Purchase and
            Option Plan for Key Employees of ITC Holdings Corp. and its Subsidiaries, or the 2003 Stock Purchase and Option Plan, has been
            issued, including 595,800 shares of common stock issuable upon the exercise of outstanding stock options at an exercise price of
            $25.00 per share, 239,920 of which were vested as of March 31, 2005; and

    •
            assumes that a        -for-one stock split of our outstanding shares of common stock has been effected prior to the completion of
            this offering.




                                                                        6
                                                                  Risk Factors

     Investing in our common stock involves substantial risk. You should carefully consider all of the information set forth in this prospectus
and, in particular, should evaluate the specific factors set forth under "Risk Factors" in deciding whether to invest in our common stock.

                                                                        7
                                                     Summary Historical Financial Data

     Set forth below is summary historical financial, operating and other data of ITC's predecessor and summary historical consolidated
financial, operating and other data of ITC Holdings and subsidiaries, in each case, at the dates and for the periods indicated.

     The summary historical financial data presented on the following pages for the year ended December 31, 2002, and for the two-month
period ended February 28, 2003, have been derived from audited financial statements of ITC's predecessor included elsewhere in this
prospectus. The summary historical consolidated financial data presented on the following pages as of and for the period from February 28,
2003 through December 31, 2003, and as of and for the year ended December 31, 2004, have been derived from our audited consolidated
financial statements included elsewhere in this prospectus. The summary historical condensed consolidated financial data presented on the
following pages as of March 31, 2005 and for the three months ended March 31, 2004 and 2005 have been derived from our unaudited
condensed consolidated financial statements included elsewhere in this prospectus. The financial data presented for the three months ended
March 31, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.

    Prior to June 1, 2001, the provision of electricity transmission services over the facilities now owned by ITC was undertaken as part of
The Detroit Edison Company's, or Detroit Edison's, transmission business which was integrated with Detroit Edison's distribution business. On
May 31, 2001, Detroit Edison's transmission business was separated from Detroit Edison's distribution business and was contributed to ITC's
predecessor.

     From June 1, 2001 until February 28, 2003, ITC's predecessor was operated as a subsidiary of DTE Energy.

     On February 28, 2003, ITC Holdings acquired ITC's predecessor from DTE Energy and began operating the transmission system as a
stand-alone company, independent of DTE Energy and Detroit Edison. For the period from March 1, 2003 to December 31, 2004, ITC's rate
was $1.075 per kW/month based on a frozen rate with a revenue deferral to be recovered in future periods. The term "Predecessor ITC" refers
to the ITC business prior to its acquisition by ITC Holdings on February 28, 2003.

    The summary historical financial data presented below should be read together with "Selected Financial Data," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," Predecessor ITC's financial statements and the notes to those statements, our
consolidated financial statements and the notes to those statements, in each case, included elsewhere in this prospectus.

                                                                      8
                                                                                                               ITC Holdings
                                                                                                              and Subsidiaries

                                           Predecessor ITC

                                                                                                                                 Three Months Ended March 31,

                                                                             Period From
                                                                           February 28, 2003
                                   Year Ended       Two-Month Period           Through
                                   December 31,     Ended February 28,       December 31,            Year Ended
                                       2002              2003(a)               2003(a)            December 31, 2004

                                                                                                                                   2004                2005

                                                                     (in thousands, except share and per share data)


Statement of operations
data:
Operating Revenues             $        137,535 $              20,936     $          102,362 $              126,449 $                  27,544 $            42,460

Operating Expenses:
  Operation and
  maintenance                            34,699                 5,675                  22,902                 24,552                      6,394               6,522
  General and
  administrative                              —                    —                   26,342                 24,412                      6,448               5,286
  Depreciation and
  amortization                           21,996                 3,665                  21,463                 29,480                      6,966               8,018
  Taxes other than income
  taxes                                  15,776                 4,298                  11,499                 20,840                      5,424               4,299

       Total operating
       expenses                          72,471                13,638                  82,206                 99,284                   25,232              24,125


Operating Income                         65,064                 7,298                  20,156                 27,165                      2,312            18,335


Other Expenses (Income):
  Interest expense                            58                   —                   21,630                 25,585                      6,291               6,854
  Allowance for equity
  funds used in construction                  —                    —                     (322 )                (1,691 )                    (318 )               (580 )
  Loss on extinguishment
  of debt                                    —                     —                   11,378                      —
  Other income                           (1,720 )                (147 )                  (197 )                (1,289 )                      (12 )              (305 )
  Other expense                             245                    45                      27                     283                         37                 176

       Total other expenses
       (income)                          (1,417 )                (102 )                32,516                 22,888                      5,998               6,145


Income (Loss) Before
Income Taxes                             66,481                 7,400                (12,360 )                  4,277                     (3,686 )         12,190


Income Tax Provision
(Benefit)                                23,268                 3,915                  (4,306 )                 1,669                     (1,268 )            4,320


Net Income (Loss)              $         43,213 $               3,485     $            (8,054 ) $               2,608 $                   (2,418 ) $          7,870

Net Income (loss) per share
data:(b)
Basic net income (loss) per
share:
   Net income (loss) per
   share                        $           (0.92 ) $        0.29 $       (0.27 ) $            0.87
   Weighted average shares              8,775,804       9,028,403     9,020,979           9,075,687
Diluted net income (loss) per
share:
   Net income (loss) per
   share                        $           (0.89 ) $        0.28 $       (0.26 ) $            0.85
Weighted average shares                 8,956,103       9,242,467     9,149,002           9,314,481

                                                                                  (footnotes on next page)


                                    9
                                                                               As of December 31,

                                                                                                                         As of                      As Adjusted for
                                                                                                                     March 31, 2005                  this Offering

                                                                            2003                    2004

                                                                                                             (in thousands)


Balance sheet data:
Cash and cash equivalents                                          $            8,139 $               14,074 $                  3,863
Working capital (deficit)                                                     (17,633 )              (27,117 )                 (6,870 )
Property, plant and equipment—net                                             459,393                513,684                  543,251
Total assets                                                                  751,657                808,847                  833,087
Total debt:
    ITC Holdings                                                              265,866                273,485                  280,315
    ITC                                                                       184,887                209,945                  239,448
Stockholders' equity                                                          191,246                196,602                  204,846
                                                                                                                  ITC Holdings
                                            Predecessor ITC                                                      and Subsidiaries

                                                                                 Period From
                                                                               February 28, 2003
                                                                                   Through
                                                                                 December 31,
                                                                                   2003(a)                                          Three Months Ended March 31,

                                  Year Ended             Two-Month                                         Year Ended
                                  December 31,          Period Ended                                       December 31,
                                      2002           February 28, 2003(a)                                      2004

                                                                                                                                       2004                  2005

                                                                  (in thousands)


Other data:
EBITDA(c)                     $          88,535     $             11,065      $         41,789        $           57,651      $             9,253      $        26,482
Capital expenditures                     15,360                    5,616                26,805                    76,779                   21,549               36,112
                                                                       2002                         2003                            2004                       2005

Operating data:
Monthly Peak Load (MW):
  January                                                               7,668                         7,608                          8,022                       8,090
  February                                                              7,572                         7,437                          7,656                       7,672
  March                                                                 7,566                         7,542                          7,434                       7,562
  April                                                                 8,386                         6,934                          7,305                       7,299
  May                                                                   8,702                         7,017                          8,718
  June                                                                 11,067                        11,266                         11,114
  July                                                                 11,423                        10,225                         11,344
  August                                                               11,438                        11,617                         10,877
  September                                                            10,894                         8,717                          9,841
  October                                                               8,645                         7,369                          7,197
  November                                                              7,271                         7,843                          7,832
  December                                                              7,772                         8,124                          8,469


(a)
       Our business is seasonal, with peak transmission loads occurring during the summer air conditioning months. Annualized financial data
       for the two-month period ended February 28, 2003 and the period from February 28, 2003 through December 31, 2003 are not
       indicative of results for the full year.

(b)
       Net income (loss) per share is calculated by dividing net income (loss) by the weighted average shares outstanding. Weighted average
       shares for the purposes of the basic net income (loss) per share calculation has been adjusted to reflect the -for-one stock split
       on        , 2005. Basic net income (loss) per share excludes 121,286 and 100,883 shares of restricted common stock at December 31,
2003 and 2004, respectively, and 131,168 and 103,083 shares of restricted common stock at March 31, 2004 and 2005, respectively,
that were issued and outstanding, but had not yet vested as of such dates.

                                                             10
(c)
          EBITDA is not a measurement of operating performance calculated in accordance with generally accepted accounting principles in the
          United States, or GAAP, and should not be considered a substitute for net income, operating income, net profit after tax or cash flows
          from operating activities, as determined in accordance with GAAP.

       We define EBITDA as net income plus :

            •
                    income taxes;

            •
                    depreciation and amortization expense; and

            •
                    interest expense;

        excluding


            •
                    allowance for equity funds used during construction; and

            •
                    certain other items not related to day-to-day operating performance such as loss on extinguishment of debt.

       We use EBITDA as a single measure to assess our overall financial and operating performance. We believe this measure is helpful in
       identifying trends in our performance because the items excluded have little or no significance to our day-to-day operations. This measure
       is a significant component in the determination of our annual cash bonus goals. EBITDA has limitations as an analytical tool, and should
       not be viewed in isolation and is not a substitute for GAAP measures of earnings or cash flow.

       The following table reconciles net income (loss) to EBITDA:

                                                                                                                    ITC Holdings
                                                     Predecessor ITC                                               and Subsidiaries

                                                                                         Period From
                                                                                       February 28, 2003
                                                                                           Through
                                                                                         December 31,
                                                                                           2003(a)                                    Three Months Ended March 31,

                                                                     Two-Month
                                                                    Period Ended
                                                                    February 28,
                                                                       2003(a)

                                            Year Ended                                                         Year Ended
                                            December 31,                                                       December 31,
                                                2002                                                               2004

                                                                                                                                         2004              2005

                                                                            (in thousands)


      Net income (loss)                 $          43,213       $            3,485     $         (8,054 ) $            2,608      $        (2,418 ) $         7,870
      Income taxes                                 23,268                    3,915               (4,306 )              1,669               (1,268 )           4,320
      Loss on extinguishment of
      debt                                                 —                       —            11,378                        —                 —                 —
      Allowance for equity funds
      used during construction                             —                       —              (322 )              (1,691 )               (318 )            (580 )
      Interest expense                                     58                      —            21,630                25,585                6,291             6,854
      Depreciation and
      amortization                                 21,996                    3,665              21,463                29,480                6,966             8,018

      EBITDA                            $          88,535       $          11,065      $        41,789     $          57,651      $         9,253     $     26,482
11
                                                                RISK FACTORS

      An investment in our common stock involves risks. You should carefully consider the risks described below, together with the other
information in this prospectus, before deciding to purchase any common stock.

Risks Related to Our Business

ITC Holdings is a holding company with no operations, and unless ITC Holdings receives dividends or other payments from ITC, ITC
Holdings will be unable to pay dividends to its stockholders and fulfill its cash obligations.

      As a holding company with no business operations, ITC Holdings' material assets consist only of the common stock of ITC (and any other
subsidiaries ITC Holdings may own in the future), dividends and other payments received from time to time from ITC or such subsidiaries and
the proceeds raised from the sale of debt and equity securities. ITC Holdings may not be able to access cash generated by ITC in order to fulfill
cash commitments or to pay dividends to stockholders. ITC Holdings will have to rely upon dividends and other payments from ITC (and any
other subsidiaries ITC Holdings may have in the future) to generate the funds necessary to fulfill its cash obligations. ITC, however, is legally
distinct from ITC Holdings and has no obligation, contingent or otherwise, to make funds available to ITC Holdings. The ability of ITC to
make dividend and other payments to ITC Holdings is subject to the availability of funds after taking into account ITC's funding requirements,
the terms of ITC's indebtedness, the regulations of the Federal Energy Regulatory Commission, or the FERC, under the Federal Power Act of
1935, or the FPA, and applicable state laws.

Certain elements of ITC's cost recovery through rates can be challenged before and by the regulators which could result in lowered rates
and have an adverse effect on our business, financial condition and results of operations.

     ITC provides transmission service under rates regulated by the FERC. The FERC has approved ITC's rate setting formula under
Attachment O, but it has not expressly approved the amount of ITC's actual capital and operating expenditures to be used in that formula. In
addition, all aspects of ITC's rates approved by the FERC, including the Midwest Independent Transmission System Operator, Inc., or MISO,
Attachment O rate mechanism, ITC's allowed 13.88% return on the equity portion of its capital structure, and the data inputs provided by ITC
for calculation of each year's rate, are subject to challenge by interested parties at the FERC in a Section 206 proceeding under the FPA. If a
challenger can establish that any of these aspects are unjust, unreasonable, imprudent or unduly discriminatory, then the FERC will make
appropriate adjustments to them and/or disallow ITC's inclusion of those aspects in the rate setting formula. This could result in lowered rates
and an adverse effect on our business, financial condition and results of operations.

The regulations to which ITC is subject may limit our ability to raise capital and/or pursue acquisition or development opportunities.

     ITC is a "public utility" under the FPA and, accordingly, is subject to regulation by the FERC. As a "public utility," ITC must obtain
approval from the FERC under Section 203 of the FPA for dispositions of its regulated facilities and acquisitions of regulated facilities and any
securities of another public utility. ITC must also seek approval by the FERC under Section 204 of the FPA for issuances of its securities.

    In addition, ITC is a "public-utility company" as defined under the Public Utility Holding Company Act of 1935, or PUHCA. ITC
Holdings and ITC are currently exempt from all provisions of PUHCA other than Section 9(a)(2), which generally requires prior Securities and
Exchange Commission, or SEC, approval for any person to, directly or indirectly, acquire a 5% or greater voting

                                                                       12
interest in more than one "public-utility company." The restrictions imposed on us by PUHCA may limit our ability to pursue acquisition or
development opportunities or subject us to more burdensome and costly regulation if an acquisition results in ITC Holdings or ITC having the
status of a registered holding company.

Changes in federal energy laws, regulations or policies could reduce the dividends we may be able to pay our stockholders.

     The Attachment O rate setting mechanism used by ITC has only been approved through January 31, 2008, subject to further extension that
must be approved by the FERC. After January 31, 2008, we cannot predict whether the FERC will change its policies or regulations or whether
the approved transmission rates, rate determination mechanism or methodologies will be changed. Any changes could significantly decrease
our revenues and ITC Holdings' ability to pay dividends to its stockholders and meet its obligations.

      Transmission costs constitute a relatively small portion of end-use consumers' overall electric utility costs. However, some large
institutional end-use consumers may attempt to influence government and/or regulators to change the rate setting system that applies to ITC,
particularly if rates for delivered electricity increase substantially.

     ITC is regulated by the FERC as a "public utility" under the FPA. The FERC could propose new policies and regulations concerning
transmission services or rate setting methodologies. In addition, the U.S. Congress has periodically considered enacting energy legislation that
would repeal PUHCA, shift certain of the SEC's responsibilities to the FERC, modify provisions of the FPA or provide the FERC or another
entity with increased authority to regulate transmission reliability matters. ITC cannot predict whether, and to what extent, it may be affected
by any such changes in federal energy laws, regulations or policies in the future.

If the network load on ITC's transmission system is lower than expected, our revenues would be reduced.

     ITC Holdings' sole operating asset is its interest in ITC. ITC's business is the regulated transmission of high-voltage electricity between
power generation facilities and local distribution networks. If the network load on ITC's transmission system is lower than expected due to mild
weather, a weak economy, changes in the nature or composition of the transmission grid in Michigan or surrounding regions, poor transmission
quality of neighboring transmission systems, or for any other reason, it would reduce ITC's and our revenues.

ITC's operating results fluctuate on a seasonal and quarterly basis and based upon weather conditions.

     Demand for electricity is largely dependent on weather conditions. As a result, ITC's overall operating results fluctuate substantially on a
seasonal basis, thereby impacting ITC's and our operating results. In general, ITC's revenues have historically exhibited summer peaking
patterns. However, a particularly cool summer may reduce demand for electricity below that expected by ITC, causing a decrease in ITC's
revenues from the same period of the previous year.

ITC depends on Detroit Edison, its primary customer, for a substantial portion of its revenues, and any material failure by Detroit Edison to
make payments for transmission services would adversely affect our revenues and our ability to service ITC's and our debt obligations.

     ITC derives a substantial portion of its revenues from the transmission of electricity between Detroit Edison's power generation facilities
and Detroit Edison's local distribution facilities. Payments from Detroit Edison, billed by MISO, constituted approximately 76%, 68% and 74%
of ITC's total operating revenues for the ten months ended December 31, 2003, the year ended December 31, 2004 and the three months ended
March 31, 2005, respectively, and are expected to constitute the majority

                                                                        13
of ITC's revenues for the foreseeable future. Any material failure by Detroit Edison to make payments for transmission services would
adversely affect our revenues and our ability to service ITC's and our debt obligations.

Deregulation and/or increased competition may adversely affect ITC's customers, or Detroit Edison's customers, which in turn may reduce
our revenues.

     The business of ITC's primary customer, Detroit Edison, is subject to regulation that has undergone substantial change in accordance with
Michigan Public Act 141 of 2000, which mandates the implementation of retail access, as well as changes in federal regulatory requirements.
The utility industry has also been undergoing dramatic structural change for several years, resulting in increasing competitive pressures on
electric utility companies, such as Detroit Edison, and we expect that trend to continue for the foreseeable future. Finally, the manufacturing
sector in Detroit Edison's service territory has also been subject to increasing competitive pressures. As a result, demand for electricity
transmission service by manufacturing companies in ITC's service territory may be negatively impacted. These factors may create greater risks
to the stability of Detroit Edison's revenues and may affect Detroit Edison's ability to make its payments for transmission service to MISO and
thus to ITC, which would adversely affect our financial condition and results of operations.

    On April 1, 2005, MISO began centrally dispatching generation resources throughout much of the Midwest with the launch of its Midwest
Energy Markets. Because of this restructuring of power markets throughout the Midwest, the risk profile of some of ITC's customers may
change, thus affecting the ability of these customers to pay for the services provided by ITC.

Hazards associated with high-voltage electricity transmission may result in suspension of ITC's operations or the imposition of civil or
criminal penalties.

      ITC's operations are subject to the usual hazards associated with high-voltage electricity transmission, including explosions, fires,
inclement weather, natural disasters, mechanical failure, unscheduled downtime, equipment interruptions, remediation, chemical spills,
discharges or releases of toxic or hazardous substances or gases and other environmental risks. The hazards can cause personal injury and loss
of life, severe damage to or destruction of property and equipment and environmental damage, and may result in suspension of operations and
the imposition of civil or criminal penalties. We maintain property and casualty insurance, but we are not fully insured against all potential
hazards incident to our business, such as damage to poles and towers or losses caused by outages.

ITC is subject to environmental regulations and to laws that can give rise to substantial liabilities from environmental contamination.

      ITC's operations are subject to federal, state and local environmental laws and regulations, which impose limitations on the discharge of
pollutants into the environment, establish standards for the management, treatment, storage, transportation and disposal of hazardous materials
and of solid and hazardous wastes, and impose obligations to investigate and remediate contamination in certain circumstances. Liabilities to
investigate or remediate contamination, as well as other liabilities concerning hazardous materials or contamination such as claims for personal
injury or property damage, may arise at many locations, including formerly owned or operated properties and sites where wastes have been
treated or disposed of, as well as at properties currently owned or operated by ITC. Such liabilities may arise even where the contamination
does not result from noncompliance with applicable environmental laws. Under a number of environmental laws, such liabilities may also be
joint and several, meaning that a party can be held responsible for more than its share of the liability involved, or even the entire share.
Environmental requirements generally have become more stringent in recent years, and compliance with those requirements more expensive.

                                                                       14
     ITC has incurred expenses in connection with environmental compliance, and we anticipate that it will continue to do so in the future.
Failure to comply with the extensive environmental laws and regulations applicable to it could result in significant civil or criminal penalties
and remediation costs. ITC's assets and operations also involve the use of materials classified as hazardous, toxic, or otherwise dangerous.
Some of ITC's facilities and properties are located near environmentally sensitive areas such as wetlands. In addition, certain properties in
which ITC has an ownership interest or at which ITC operates are, and others are suspected of being, affected by environmental contamination.
Compliance with these laws and regulations, and liabilities concerning contamination or hazardous materials, may adversely affect our costs
and, therefore our business, financial condition and results of operations.

     In addition, claims have been made or threatened against electric utilities for bodily injury, disease or other damages allegedly related to
exposure to electromagnetic fields associated with electricity transmission and distribution lines. We cannot assure you that such claims will
not be asserted against us or that, if determined in a manner adverse to our interests, would not have a material adverse effect on our business,
financial condition and results of operations.

Acts of war, terrorist attacks and threats or the escalation of military activity in response to such attacks or otherwise may negatively affect
our business, financial condition and results of operations.

     Acts of war, terrorist attacks and threats or the escalation of military activity in response to such attacks or otherwise may negatively affect
our business, financial condition and results of operations in unpredictable ways, such as increased security measures and disruptions of
markets. Strategic targets, such as energy-related assets, including, for example, ITC's transmission facilities and Detroit Edison's generation
and distribution facilities, may be at risk of future terrorist attacks. In addition to the increased costs associated with heightened security
requirements, such events may have an adverse effect on the economy in general. A lower level of economic activity could result in a decline in
energy consumption, which may adversely affect our business, financial condition and results of operations.

Risks Related to Our Capital Structure and Leverage

Because we are controlled by the IT Holdings Partnership, your ability as a stockholder of ITC Holdings to influence our management and
policies will be severely limited.

     As of March 31, 2005, approximately 90.65% of the shares of common stock of ITC Holdings on a fully-diluted basis was beneficially
owned by the IT Holdings Partnership. Members of management and our employees own the remaining shares of common stock. After giving
effect to the sale of all of the shares of common stock in this offering, approximately % and % of the outstanding shares of common stock
of ITC Holdings will be beneficially owned by the IT Holdings Partnership and members of our management and employees, respectively.
Consequently, the IT Holdings Partnership has, and after this offering will continue to have, the power to determine matters submitted to a vote
of ITC Holdings' stockholders without the consent of ITC Holdings' other stockholders and could take other actions that might be favorable to
the IT Holdings Partnership or its partners, including electing all of ITC Holdings' directors, appointing new management and adopting
amendments to ITC Holdings' Articles of Incorporation and bylaws. In addition, the ability of stockholders, other than the IT Holdings
Partnership, to influence our management and policies will be severely limited, including with respect to our acquisition or disposition of
assets, the approval of a merger or similar business combination, the incurrence of indebtedness, the issuance of additional shares of common
stock or other equity securities and the payment of dividends or other distributions on our common stock. In addition, we cannot take certain
actions that would adversely affect the limited partners of the IT Holdings Partnership without their approval. We cannot assure you that the
interests of the IT Holdings Partnership and/or its limited partners will not conflict with the interests of other holders of our common stock.

                                                                         15
We are highly leveraged and our dependence on debt may limit our operating flexibility and ability to pay dividends and/or obtain
additional financing.

     We had $519.8 million of consolidated indebtedness as of March 31, 2005. ITC had $185.0 million of 4.45% First Mortgage Bonds
Series A due July 15, 2013 and ITC Holdings had $267.0 million of 5.25% Senior Notes due July 15, 2013 outstanding as of December 31,
2004 and March 31, 2005. Additionally, we had total revolving credit facility commitments at ITC and ITC Holdings of $25.0 million and
$40.0 million, respectively, and amounts outstanding of $25.0 million and $7.5 million, respectively, at December 31, 2004. We had total
revolving credit facility commitments at ITC and ITC Holdings of $65.0 million and $47.5 million, respectively, and amounts outstanding of
$54.5 million and $14.3 million, respectively, at March 31, 2005. Total interest expense, including facility fees, on the indebtedness identified
above for the year ended December 31, 2004 and for the three months ended March 31, 2005 was approximately $23.0 million and
$6.2 million, respectively. At March 31, 2005, our total consolidated debt to capitalization was 71.7% and total stockholders' equity was
$204.8 million.

     This capital structure can have several important consequences, including, but not limited to, the following:

     •
            If future cash flows are insufficient, we or our subsidiaries may need to incur further indebtedness in order to make the capital
            expenditures and other expenses or investments planned by us. We expect to invest approximately $100 million in ITC's
            transmission system in 2005, but this amount could vary depending on the requirements of ITC's transmission system and the
            factors discussed below.

     •
            ITC Holdings' indebtedness will have the general effect of reducing its flexibility to react to changing business and economic
            conditions insofar as they affect its financial condition and, therefore, may pose substantial risk to ITC Holdings' stockholders. A
            substantial portion of the dividends and payments in lieu of taxes ITC Holdings receives from ITC will be dedicated to the
            payment of interest on its indebtedness, thereby reducing the funds available for the payment of dividends on our common stock.

     •
            In the event that ITC Holdings is liquidated, any senior or subordinated creditors of ITC Holdings and any senior or subordinated
            creditors of our subsidiaries will be entitled to payment in full prior to any distributions to the holders of shares of common stock
            of ITC Holdings.

     •
            Our credit facilities mature in March 2007, and our ability to secure additional financing prior to or after that time, if needed, may
            be substantially restricted by the existing level of our indebtedness and the restrictions contained in our debt instruments.



ITC's actual capital expenditures may be lower than planned, which would decrease ITC's expected rate base and therefore our revenues.

     ITC's rate base is determined in part by its capital expenditures, specifically for property, plant and equipment, or PP&E, when placed in
service. ITC expects to invest approximately $100 million in additional PP&E in 2005. If ITC's capital expenditures and the resulting in service
PP&E are lower for any reason, including, among other things, the impact of weather conditions, union strikes, material prices and availability,
our ability to obtain financing for such expenditures, if necessary, limitations on the amount of construction that can be undertaken on our
system at any one time or regulatory approvals for reasons relating to environmental, siting or regional planning issues or as a result of legal
proceedings, ITC will have a lower than anticipated rate base during the year ending December 31, 2005, thus causing its revenue requirement
and future earnings to be potentially lower than anticipated.

                                                                        16
Certain provisions in our debt instruments limit our capital flexibility.

     Our debt instruments include senior notes and first mortgage bonds and revolving credit facilities containing numerous financial and
operating covenants that place significant restrictions on, among other things, our ability to:

     •
            incur additional indebtedness;

     •
            engage in sale and lease-back transactions;

     •
            create liens or other encumbrances;

     •
            enter into mergers, consolidations, liquidations or dissolutions, or sell or otherwise dispose of all or substantially all of our assets;
            and

     •
            pay dividends or make distributions on ITC Holdings' and ITC's capital stock.

     The revolving credit facilities also require ITC Holdings and ITC to meet certain financial ratios. The ability of ITC Holdings and ITC to
comply with these and other requirements and restrictions may be affected by changes in economic or business conditions, results of operations
or other events beyond our control. A failure to comply with the obligations contained in the senior secured credit facilities could result in
acceleration of the related debt and the acceleration of debt under other instruments evidencing indebtedness that may contain
cross-acceleration or cross-default provisions.

Our ability to raise capital may be restricted which may, in turn, restrict our ability to make capital expenditures or dividend payments to
our stockholders.

     Because the IT Holdings Partnership may seek to maintain its beneficial ownership percentage of ITC Holdings and may not choose to
acquire additional shares of our common stock in connection with a future issuance of shares of our common stock by us, we may be
constrained in our ability to raise equity capital in the future from sources other than the limited partners of the IT Holdings Partnership and
other affiliates of KKR, Trimaran or Stockwell. Moreover, we cannot assure you that the IT Holdings Partnership will make any capital
contributions to us in the future. If we are unable to raise capital and we do not receive capital contributions from the IT Holdings Partnership
in the future, our ability to make capital expenditures or dividend payments to our stockholders may be limited.

We are a "controlled company" within the meaning of the New York Stock Exchange rules and, as a result, will qualify for, and intend to
rely on, exemptions from certain corporate governance requirements.

     Upon completion of this offering, the IT Holdings Partnership will continue to control a majority of our outstanding common stock. As a
result, we are a "controlled company" within the meaning of the New York Stock Exchange, or NYSE, corporate governance standards. Under
the NYSE rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a "controlled
company" and may elect not to comply with certain NYSE corporate governance requirements, including:

     •
            the requirement that a majority of the board of directors consist of independent directors;

     •
            the requirement that we have a nominating/corporate governance committee that is composed entirely of independent directors
            with a written charter addressing the committee's purpose and responsibilities;

     •
            the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter
            addressing the committee's purpose and responsibilities; and

     •
            the requirement for an annual performance evaluation of the nominating/corporate governance and compensation committees.
17
     Following this offering, we intend to utilize these exemptions. As a result, we will not have a majority of independent directors nor will
our nominating/corporate governance and compensation committees consist entirely of independent directors. Accordingly, you will not have
the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements.

Risks Related to This Offering

There is currently no public market for our common stock and we cannot assure you that an active market will develop to provide you with
adequate liquidity.

     There has not been a public market for our common stock. We cannot predict the extent to which investor interest in our company will
lead to the development of a trading market on the NYSE or otherwise or how liquid that market might become. The initial public offering
price for our common stock will be determined by negotiations between us, the selling stockholder and the representatives of the underwriters
and may not be indicative of prices that will prevail in the open market following this offering. We cannot assure you that the market price for
our common stock after this offering will ever exceed the price that you pay for our common stock in this offering.

Future sales of our shares could depress the market price of our common stock.

      The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market
after this offering or the perception that these sales could occur. These sales, or the possibility that these sales may occur, also might make it
more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. We, our directors and executive
officers and the selling stockholder have agreed with the underwriters not to sell, dispose of or hedge any shares of our common stock or
securities convertible into or exchangeable for shares of our common stock during the period from the date of this prospectus continuing
through the date that is 180 days after the date of this prospectus, except with the prior written consent of Lehman Brothers Inc.

     Pursuant to the management stockholder's agreements that we entered into with each of our employees who have purchased or been
granted shares of our common stock (equal to an aggregate of 320,564 shares as of the date of this prospectus), these employee stockholders
have the right, upon the sale by IT Holdings Partnership of shares of our common stock in any underwritten offering, to sell a percentage of the
shares of our common stock that the employee stockholders hold at the time of the offering and any shares of our common stock underlying
then exercisable options. As a percentage of total shares held, the employee stockholders shall be eligible to sell a percentage equal to the
percentage sold by the IT Holdings Partnership. Otherwise, each of these employee stockholders is restricted from selling any common stock
he or she holds until the fifth anniversary of the date of the execution of the employee stockholder's respective management stockholder's
agreement (which were generally entered into between February 2003 and November 2004), which date in all cases falls after 180 days from
the date of this prospectus. The "piggyback" registration rights described above also expire on such fifth anniversary. See "Certain
Relationships and Related Party Transactions—Management Stockholder's Agreements."

      After this offering, we will have approximately         million shares of common stock outstanding. Of those shares, the            shares
selling stockholder and we are offering will be freely tradeable. The                 remaining shares will be eligible for resale from time to time
after the expiration of the lock-up period, subject to contractual and Securities Act restrictions. The approximately         shares that were
outstanding immediately prior to this offering will be eligible for resale from time to time, subject to the volume, manner of sale and other
conditions of Rule 144, including approximately            shares which may be sold freely pursuant to Rule 144(k) and
approximately           shares

                                                                         18
which may be sold freely pursuant to Rule 144(k) once they have been held for at least five years from the date of the relevant management
stockholder's agreement. See "Shares Eligible for Future Sale."

     In addition, 681,436 shares were available for future issuance under our 2003 Stock Purchase and Option Plan as of March 31, 2005,
including 595,800 shares issuable upon the exercise of presently outstanding stock options, of which 239,920 were vested as of March 31,
2005. In the future, we may issue our common stock in connection with investments or repayment of our debt. The amount of such common
stock issued could constitute a material portion of our then outstanding common stock.

We may not be able to pay dividends, and the reduction or elimination of dividends would negatively affect the market price of our common
stock.

     While we currently intend to pay quarterly dividends on our common stock, we have no obligation to do so. Dividend payments are within
the absolute discretion of our board of directors and will depend on, among other things, our results of operations, working capital
requirements, capital expenditure requirements, financial condition, contractual restrictions, anticipated cash needs and other factors that our
board of directors may deem relevant. For example, we may not generate sufficient cash from operations in the future to pay dividends on our
common stock in the intended amounts or at all. In addition, ITC Holdings is a holding company and its ability to pay dividends may be limited
by restrictions upon transfer of funds applicable to its subsidiaries (including, for example, those which are contained in ITC's revolving credit
agreement and the IT Holdings Partnership agreement). As a holding company without any specific operations, ITC Holdings is dependent on
receiving dividends from its operating subsidiaries, such as ITC, in order to be able to make dividend distributions of its own. Any reduction or
elimination of dividends would adversely affect the market price of our common stock. See "Dividend Policy."

Provisions in the Articles of Incorporation and bylaws of ITC Holdings and Michigan corporate law may prevent efforts by our
stockholders to change the direction or management of our company.

     Prior to completion of this offering, the Articles of Incorporation and bylaws of ITC Holdings will contain provisions that might enable
our management to resist a proposed takeover. These provisions could discourage, delay or prevent a change of control or an acquisition at a
price that our stockholders may find attractive. These provisions also may discourage proxy contests and make it more difficult for our
stockholders to elect directors and take other corporate actions. The existence of these provisions could limit the price that investors might be
willing to pay in the future for shares of our common stock. These provisions will include:

     •
            a requirement that special meetings of our stockholders may be called only by our board of directors, the chairman of our board of
            directors, our president or the holders of a majority of the shares of our outstanding common stock;

     •
            a requirement of unanimity when stockholders are acting by consent without a meeting if the IT Holdings Partnership owns less
            than 35% of the common stock of ITC Holdings;

     •
            advance notice requirements for stockholder proposals and nominations; and

     •
            the authority of our board to issue, without stockholder approval, common or preferred stock, including in connection with our
            implementation of any stockholders rights plan, or "poison pill."



    For additional information regarding these provisions, you should read the information under the heading "Description of Our Capital
Stock."

                                                                        19
Provisions of the Articles of Incorporation of ITC Holdings will restrict market participants from voting or owning 5% or more of the
outstanding shares of capital stock of ITC Holdings.

     ITC was granted favorable rate treatment by the FERC based on its independence from market participants. The FERC defines a "market
participant" as any person or entity that, either directly or through an affiliate, sells or brokers electricity or provides ancillary services to ITC
or MISO. An affiliate, for these purposes, includes any person or entity that directly or indirectly owns, controls or holds with the power to vote
5% or more of the outstanding voting securities of a market participant. To help ensure that ITC Holdings and ITC will remain independent of
market participants following this offering, we will amend ITC Holdings' Articles of Incorporation prior to the completion of this offering in
order to impose certain restrictions on the ownership and voting of shares of capital stock of ITC Holdings by market participants. In particular,
the Articles of Incorporation will provide that ITC Holdings will not issue shares that would constitute 5% or more of any series of its
outstanding shares of capital stock to any market participant. Additionally, if a market participant or a "group" (as defined in SEC beneficial
ownership rules) of stockholders including a market participant acquires beneficial ownership of 5% or more of any series of the outstanding
shares of capital stock of ITC Holdings, such market participant or any stockholder who is a member of a group including a market participant
will not be able to vote or direct or control the votes of shares representing 5% or more of any series of ITC Holdings' outstanding capital stock.
Finally, to the extent a market participant acquires beneficial ownership of 5% or more of the outstanding shares of any series of capital stock
of ITC Holdings, the Articles of Incorporation will allow the board of directors of ITC Holdings to redeem any shares of capital stock of ITC
Holdings so that, after giving effect to the redemption, the market participant will cease to beneficially own 5% or more of that series of ITC
Holdings' outstanding capital stock.

The trading price of our common stock is likely to be volatile and you may not be able to sell your shares at or above the initial public
offering price.

   The trading prices of securities of companies in the power industry have been highly volatile. Accordingly, the trading price of our
common stock is likely to fluctuate widely. Factors that will affect the trading price of our common stock include:

     •
             variations in our operating results;

     •
             the gain or loss of significant customers;

     •
             changes in the estimates of our operating results or changes in recommendations by any securities analysts that elect to follow our
             common stock;

     •
             terrorist acts and political instability; and

     •
             market conditions in our industry and the economy as a whole.

     In addition, if the market for power industry securities, or the stock market in general, experiences continued or increased loss of investor
confidence, the trading price of our common stock could decline for reasons unrelated to our business, operating results or financial condition.

The book value of shares of common stock purchased in this offering will be immediately diluted.

     Purchasers of common stock in this offering will suffer immediate dilution of $          per share in the pro forma net tangible book value
per share. We also have a large number of outstanding stock options to purchase common stock with exercise prices that are below the
estimated initial public offering price of the common stock. To the extent that these options are exercised, purchasers in this offering will be
further diluted.

                                                                         20
We will incur increased costs as a result of being a public company.

     As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In
addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the SEC and the NYSE, have required changes in
corporate governance practices of public companies. We expect these new rules and regulations to significantly increase our legal and financial
compliance costs and to make some activities more time-consuming and costly. For example, in anticipation of becoming a public company,
we are in the process of creating additional board committees and adopting policies regarding internal controls and disclosure controls and
procedures. In addition, we are beginning the process of evaluating our internal control structure in relation to Section 404 of the
Sarbanes-Oxley Act and, pursuant to this section, we will be required to include management attestations and auditor reports on internal
controls in our annual report for the year ending December 31, 2006. We will incur additional costs and dedicate significant resources toward
complying with these requirements. We also expect these new laws, rules and regulations to make it more difficult and more expensive for us
to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially
higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on
our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these new laws, rules
and regulations, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. The costs of
compliance or our failure to comply with these laws, rules and regulations could adversely affect our reputation, financial condition, results of
operations and the price of our common stock.

                                                                         21
                                                   FORWARD-LOOKING STATEMENTS

    This prospectus contains certain statements that describe our management's beliefs concerning future business conditions and prospects,
growth opportunities and the outlook for our business and the electricity transmission industry based upon information currently available.
Wherever possible, we have identified these "forward-looking" statements by words such as "anticipates," "believes," "intends," "estimates,"
"expects," "projects" and similar phrases.

     These forward-looking statements are based upon assumptions our management believes are reasonable. Such forward-looking statements
are subject to risks and uncertainties which could cause our actual results, performance and achievements to differ materially from those
expressed in, or implied by, these statements, including, among other things:

     •
            our ability to obtain regulatory approval for rate adjustments in response to changing circumstances and changes in laws or
            regulations affecting us;

     •
            restrictions imposed by laws, including PUHCA and the FPA, or regulations affecting ITC Holdings and ITC;

     •
            changes in the nature or the composition of the transmission grid in surrounding areas, location of generation assets within ITC's
            service territory and in surrounding regions and the impact on the flow of transmission;

     •
            any changes in our regulatory construct;

     •
            the stability of Detroit Edison or deregulation affecting Detroit Edison;

     •
            protracted generation outages;

     •
            potential environmental liabilities;

     •
            hazards related to our business;

     •
            damage to our assets or our ability to serve our customers, market disruptions and other economic effects as a result of terrorism,
            military activity or war and action by the United States and other governments in reaction thereto;

     •
            higher property tax assessments from various municipalities;

     •
            decrease in revenues due to abnormal weather conditions; and

     •
            other risk factors discussed herein and listed from time to time in our public filings with the SEC.

     Any or all of our forward-looking statements in this prospectus may turn out to be wrong. They can be affected by assumptions we might
make or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in this prospectus will be important in
determining future results. Consequently, we cannot assure you that our expectations or forecasts expressed in such forward-looking statements
will be achieved. Actual future results may vary materially.

     Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new
information, future events, or otherwise. Also, please note that we provide a cautionary discussion of risks and uncertainties under the caption
"Risk Factors" in this prospectus. These are factors that we think could cause our actual results to differ materially from expected results. Other
factors besides those listed here could adversely affect our business and results of operations.

                                                                        22
                                                              USE OF PROCEEDS

     We estimate that our net proceeds from the sale of               shares of common stock in this offering, after deducting estimated
underwriting discounts and commissions and estimated offering expenses, will be approximately $             million, assuming an initial public
offering price of $      per share, which is the midpoint of the range set forth on the cover page of this prospectus. We intend to use the net
proceeds we receive from the offering to repay borrowings under ITC Holdings' amended and restated revolving credit agreement and for
general corporate purposes, including capital expenditures at ITC.

      ITC Holdings' amended and restated revolving credit agreement has a maturity date of March 19, 2007. Borrowings under this credit
agreement bear interest, at ITC Holdings' option, at either the applicable London Interbank Offered Rate, or LIBOR, plus 1.50% each year or
the applicable alternate base rate plus 0.50% each year, which applicable spreads are subject to adjustment based on the ratings by Moody's
Investor Service, Inc. and Standard & Poor's Ratings Services applicable to ITC Holdings' senior notes (described under "Description of Our
Indebtedness—5.25% Senior Notes and Mortgage Bonds—5.25% Senior Notes due July 15, 2013") from time to time. See "Description of Our
Indebtedness—Revolving Credit Facilities." An affiliate of Credit Suisse First Boston LLC, one of the underwriters of this offering, is one of
the lenders under this credit agreement. We expect to use $           of the net proceeds received by us in this offering to repay a portion of the
amount that is currently outstanding under this credit agreement.

     We will not receive any of the proceeds from the sale of shares of our common stock by the selling stockholder in this offering.


                                                              DIVIDEND POLICY

     We currently intend to declare and pay quarterly dividends on our common stock. We anticipate paying our first dividend in
the        quarter of 2005. The declaration and payment of dividends is subject to the discretion of our board of directors and depends on
various factors, including our net income, financial condition, cash requirements, future prospects and other factors deemed relevant by our
board of directors. If and when our board of directors declares and pays a dividend on our common stock, pursuant to our Dividend Equivalent
Rights Plan, amounts equivalent to the dividend will be credited to the accounts of participants in our Dividend Equivalent Rights Plan in
respect of each share of common stock subject to the vested and unvested options that such participants hold at that time, unless our board of
directors determines otherwise. See "Management—Dividend Equivalent Rights Plan."

     In August 2003, ITC Holdings made a distribution to stockholders of $27.1 million, or $3.00 per share of common stock.

     As a holding company with no business operations, ITC Holdings' material assets consist only of the stock of ITC and cash on hand. ITC
Holdings' only sources of cash to pay dividends to its stockholders are dividends and other payments received by ITC Holdings from time to
time from ITC and the proceeds raised from the sale of our debt and equity securities. ITC, however, is legally distinct from ITC Holdings and
has no obligation, contingent or otherwise, to make funds available to ITC Holdings for the payment of dividends to ITC Holdings'
stockholders or otherwise. The ability of ITC to pay dividends and make other payments to ITC Holdings is subject to, among other things, the
availability of funds, after taking into account capital expenditure requirements, the terms of its indebtedness, applicable state laws and
regulations of the FERC and the FPA.

                                                                        23
     ITC Holdings' revolving credit agreement and ITC's revolving credit agreement impose restrictions on our ability to pay dividends if an
event of default has occurred under the relevant agreement, and thus our ability to pay dividends on our common stock will depend upon,
among other things, our level of indebtedness at the time of the proposed dividend and whether we are in compliance with the covenants under
our revolving credit facilities and our debt instruments. See "Description of Our Indebtedness." Our future dividend policy will also depend on
the requirements of any future financing agreements to which we may be a party and other factors considered relevant by our board of
directors. For a discussion of our cash resources and needs, see "Management's Discussion and Analysis of Financial Condition and Results of
Operations—Liquidity and Capital Resources."

                                                                      24
                                                                CAPITALIZATION

      The following table sets forth our capitalization as of March 31, 2005 on an actual basis and on an as adjusted basis after giving effect to:

      •
              the sale of approximately        shares of our common stock in this offering at an assumed public offering price of $        per
              share, the midpoint of the estimated price range on the cover page of this prospectus, after deducting underwriting discounts and
              commissions; and

      •
              the application of the net proceeds to us described under "Use of Proceeds."

     You should read the information in this table in conjunction with "Selected Consolidated Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our audited financial statements and related notes included elsewhere in this
prospectus.

                                                                                           As of March 31, 2005

                                                                                        Actual             As Adjusted

                                                                                      (in thousands, except share data)


Cash and cash equivalents                                                         $           3,863


Long-term debt:
  5.25% Senior Notes due July 15, 2013                                            $       266,015
  4.45% First Mortgage Bonds Series A due July 15, 2013                                   184,902
  Revolving credit facilities (a)                                                          68,800
  Other                                                                                        39

          Total long-term debt                                                    $       519,756


Stockholders' equity:
  Common stock, without par value, 10,000,000 shares authorized,
  9,179,570 shares issued and outstanding and   shares as adjusted for
  this offering                                                                   $       203,848
  Unearned compensation-restricted stock                                                   (1,426 )
  Accumulated deficit                                                                       2,424

          Total stockholders' equity                                              $       204,846

               Total long-term debt and stockholders' equity                      $       724,602



(a)
          Consists of amounts outstanding under a $25.0 million 2 1 / 2 -year revolving credit agreement entered into by ITC in July 2003 and a
          $40.0 million three-year revolving credit agreement entered into by ITC Holdings in March 2004. In January 2005, these credit facilities
          were separately amended and restated to consist of a $65.0 million amended and restated revolving credit agreement entered into by
          ITC and a $47.5 million revolving credit agreement entered into by ITC Holdings, each with a March 2007 maturity date. The amounts
          available under our revolving credit facilities are subject to customary borrowing conditions.

     The table above excludes 239,920 shares of common stock issuable upon the exercise of options that were vested at March 31, 2005, with
an exercise price of $25.00 per share.

                                                                         25
                                                                     DILUTION

      Dilution is the amount by which the offering price paid by the purchasers of the common stock to be sold in this offering will exceed the
net tangible book value per share of common stock after this offering. The net tangible book value per share is equal to the amount of our total
tangible assets (total assets less intangible assets) less total liabilities, divided by the number of shares of our common stock outstanding as of
March 31, 2005. After giving effect to the sale of shares of common stock in this offering at an assumed initial public offering price of
$        per share, the midpoint of the range set forth on the cover page of this prospectus, and after deducting estimated underwriting
discounts and commissions and estimated offering expenses, our pro forma net tangible book value as of March 31, 2005 would have been
$        , or $        per share of common stock. This represents an immediate increase in net tangible book value of $             per share to
existing stockholders and an immediate dilution in net tangible book value of $                per share to new investors.

     The following table illustrates this per share dilution:

                                                                                                             Per share

Initial public offering price per share                                                                     $
   Net tangible book value per share before this offering                                                   $
   Increase per share attributable to this offering
Pro forma net tangible book value per share after this offering

Dilution per share to new investors                                                                         $

     The following table summarizes, on a pro forma basis as of December 31, 2004, the total number of shares of common stock purchased
from us and the selling stockholder, the total consideration paid to us and the selling stockholder and the average price per share paid by new
investors purchasing shares in this offering:

                                                                  Shares Purchased             Total Consideration

                                                                                                                               Average Price
                                                                                                                                Per Share

                                                                Number         Percent        Amount            Percent

Existing stockholders                                                                    %$                               %$
New investors

     Total                                                                      100.00 % $                       100.00 %


     Assuming the underwriters' over-allotment option is exercised in full, the net tangible book value at December 31, 2004 would have been
$       , or $       per share, the immediate increase in net tangible book value of stock owned by existing stockholders would have been
$       per share, and the immediate dilution to purchasers of the common stock in this offering would have been $         per share.

     The tables and calculations above assume no exercise of outstanding options. As of March 31, 2005, there were 595,800 shares of our
common stock reserved for issuance upon exercise of outstanding options at an exercise price of $25.00 per share. To the extent that these
options are exercised, there will be further dilution to new investors. See "Management—Compensation of Directors and Executive
Officers—Option Holdings" and "Description of Our Capital Stock."

                                                                          26
                                             SELECTED CONSOLIDATED FINANCIAL DATA

    The following table sets forth selected historical financial data of Predecessor ITC and selected historical consolidated financial data of
ITC Holdings and subsidiaries as of the dates and for the periods indicated.

     The selected financial data presented on the following pages as of and for the seven-month period ended December 31, 2001 has been
derived from the audited financial statements of Predecessor ITC not included in this prospectus. The selected financial data presented on the
following pages as of and for the year ended December 31, 2002, and for the two-month period ended February 28, 2003, have been derived
from audited financial statements of Predecessor ITC included elsewhere in this prospectus. The selected consolidated financial data presented
on the following pages as of and for the period from February 28, 2003 through December 31, 2003, and as of and for the year ended
December 31, 2004, have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected
historical condensed consolidated financial data presented on the following pages as of March 31, 2005 and for the three months ended
March 31, 2004 and 2005 have been derived from our unaudited condensed consolidated financial statements included elsewhere in this
prospectus. The financial data presented for the three months ended March 31, 2005 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2005.

     The selected financial data for the year ended December 31, 2000 and the five months ended May 31, 2001 are omitted because, prior to
June 1, 2001, the provision of electricity transmission services over the facilities now owned by ITC was undertaken as part of Detroit Edison's
transmission business which was integrated with Detroit Edison's distribution business and the revenues, expenses and cash flows associated
with the transmission business were integrated with Detroit Edison's other operations and were not separately identifiable. On May 31, 2001,
Detroit Edison's transmission business was separated from Detroit Edison's distribution business and was contributed to Predecessor ITC.

     From June 1, 2001 until February 28, 2003, Predecessor ITC was operated as a subsidiary of DTE Energy.

     On February 28, 2003, ITC Holdings acquired Predecessor ITC from DTE Energy and began operating the transmission system as a
stand-alone company, independent of DTE Energy and Detroit Edison. For the period from March 1, 2003 to December 31, 2004, ITC's rate
was $1.075 per kW/month based on a frozen rate with a revenue deferral for recovery in future periods.

     The selected financial data presented below should be read together with Predecessor ITC's financial statements and the notes to those
statements, our consolidated financial statements and the notes to those statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations", in each case, included elsewhere in this prospectus.

                                                                        27
                                                                                                                   ITC Holdings
                                             Predecessor ITC                                                      and Subsidiaries

                                                                                        Period From
                                                                                       February 28,
                                                                                       2003 Through
                                                                                       December 31,
                                                                                          2003(a)

                              Seven-Month                         Two-Month
                              Period Ended                       Period Ended
                              December 31,                       February 28,
                                 2001(a)                            2003(a)                                                      Three Months Ended March 31,

                                                Year Ended                                                Year Ended
                                                December 31,                                              December 31,
                                                    2002                                                      2004

                                                                                                                                     2004             2005

                                                                    (in thousands, except share and per share data)


Statement of
operations data:
Operating Revenues        $         63,664 $        137,535 $          20,936      $        102,362 $            126,449 $             27,544 $          42,460

Operating Expenses:
  Operation and
  maintenance                       22,566            34,699            5,675                22,902               24,552                    6,394            6,522
  General and
  administrative                         —                 —                —                26,342               24,412                    6,448            5,286
  Depreciation and
  amortization                      12,481            21,996            3,665                21,463               29,480                    6,966            8,018
  Taxes other than
  income taxes                        8,875           15,776            4,298                11,499               20,840                    5,424            4,299

      Total operating
      expenses                      43,922            72,471           13,638                82,206               99,284               25,232            24,125


Operating Income                    19,742            65,064            7,298                20,156               27,165                    2,312        18,335


Other Expenses
(Income):
   Interest expense                      12                58               —                21,630               25,585                    6,291            6,854
   Allowance for equity
   funds used in
   construction                          —                 —                —                   (322 )                (1,691 )              (318 )           (580 )
   Loss on
   extinguishment of
   debt                                  —                —                 —                11,378                       —                    —               —
   Other income                      (1,120 )         (1,720 )            (147 )               (197 )                 (1,289 )                (12 )          (305 )
   Other expense                        551              245                45                   27                      283                   37             176

      Total other
      expenses
      (income)                         (557 )         (1,417 )            (102 )             32,516               22,888                    5,998            6,145


Income (Loss) Before
Income Taxes                        20,299            66,481            7,400                (12,360 )                4,277             (3,686 )         12,190


Income Tax Provision
(Benefit)                             7,105           23,268            3,915                 (4,306 )                1,669             (1,268 )             4,320
Net Income (Loss)          $     13,194 $      43,213 $          3,485      $         (8,054 ) $            2,608 $            (2,418 ) $               7,870


Net Income (loss) per
share data:(b)
Basic net income (loss)
per share:
   Net income (loss) per
   share                                                                    $          (0.92 ) $             0.29 $             (0.27 ) $                0.87
   Weighted average
   shares                                                                        8,775,804              9,028,403           9,020,979             9,075,687
Diluted net income
(loss) per share:
   Net income (loss) per
   share                                                                    $          (0.89 ) $             0.28 $             (0.26 ) $                0.85
   Weighted average
   shares                                                                        8,956,103              9,242,467           9,149,002             9,314,481
                                                                                                          ITC Holdings and Subsidiaries

                                                                                                      As of                    As of
                                                     Predecessor ITC                               December 31,               March 31,

                                               As of                 As of
                                            December 31,          December 31,                                                                  As Adjusted
                                                2001                  2002                                                                      for Offering

                                                                                            2003                  2004          2005

                                                                                       (in thousands)


Balance sheet data:
Cash and cash equivalents               $                8 $                     —     $       8,139 $             14,074        3,863
Working capital (deficit)                           (2,573 )                 46,041          (17,633 )            (27,117 )     (6,870 )
Property, plant and equipment— net                 441,035                  434,539          459,393              513,684      543,251
Total assets                                       514,927                  634,785          751,657              808,847      833,087
Total debt:
           ITC Holdings                                 —                        —           265,866              273,485      280,315
           ITC                                          —                        —           184,887              209,945      239,448
Stockholders'/Member's equity                      339,577                  382,790          191,246              196,602      204,846

                                                                                                                                          (footnotes on next page)

                                                                       28
                                                                                                                         ITC Holdings
                                        Predecessor ITC                                                                 and Subsidiaries

                                                                                               Period From
                                                                                              February 28,
                                                                                              2003 Through
                                                                                              December 31,
                                                                                                 2003 (a)                                  Three Months Ended March 31,

                        Seven-Month                                     Two-Month
                        Period Ended                                   Period Ended
                        December 31,                                   February 28,
                          2001 (a)                                       2003 (a)

                                             Year Ended                                                               Year Ended
                                             December 31,                                                             December 31,
                                                 2002                                                                     2004

                                                                                                                                               2004            2005

                                                                                       (in thousands)


Other data:
EBITDA (c)          $          32,792    $         88,535          $         11,065      $               41,789   $         57,651         $     9,253     $     26,482
Capital
expenditures                   22,322              15,360                      5,616                     26,805             76,779              21,549           36,112
Operating data:                                             2001                  2002                  2003              2004                 2005

Monthly Peak Load (MW):
 January                                                     7,753                 7,668                 7,608             8,022                8,090
 February                                                    7,355                 7,572                 7,437             7,656                7,672
 March                                                       7,258                 7,566                 7,542             7,434                7,562
 April                                                       7,012                 8,386                 6,934             7,305                7,299
 May                                                         8,068                 8,702                 7,017             8,718
 June                                                       10,895                11,067                11,266            11,114
 July                                                       11,309                11,423                10,225            11,344
 August                                                     11,875                11,438                11,617            10,877
 September                                                  10,037                10,894                 8,717             9,841
 October                                                     7,145                 8,645                 7,369             7,197
 November                                                    7,343                 7,271                 7,843             7,832
 December                                                    7,573                 7,772                 8,124             8,469


(a)
        Our business is seasonal, with peak transmission loads occurring during the summer air conditioning months. Annualized financial data
        for the seven-month period ended December 31, 2001, the two-month period ended February 28, 2003 and the period from February 28,
        2003 through December 31, 2003 are not indicative of results for the full year.

(b)
        Net income (loss) per share is calculated by dividing net income (loss) by the weighted average shares outstanding. Weighted average
        shares for the purposes of the basic net income (loss) per share calculation has been adjusted to reflect the -for-one stock split
        on        , 2005. Basic net income (loss) per share excludes 121,286 and 100,883 shares of restricted common stock at December 31,
        2003 and 2004, respectively, and 131,168 and 103,083 shares of restricted common stock at March 31, 2004 and 2005, respectively,
        that were issued and outstanding, but had not yet vested as of such dates.

(c)
        EBITDA is not a measurement of operating performance calculated in accordance with GAAP and should not be considered a substitute
        for net income, operating income, net profit after tax or cash flows from operating activities, as determined in accordance with GAAP.


              •
                    income taxes;

              •
              depreciation and amortization expense; and

       •
              interest expense;

excluding

   •
            allowance for equity funds used during construction; and

   •
            certain other items not related to day-to-day operating performance such as loss on extinguishment of debt.

                                                                 29
We use EBITDA as a single measure to assess our overall financial and operating performance. We believe this measure is helpful in
identifying trends in our performance because the items excluded have little or no significance to our day-to-day operations. This measure is a
significant component in the determination of our annual cash bonus goals. EBITDA has limitations as an analytical tool, and should not be
viewed in isolation and is not a substitute for GAAP measures of earnings or cash flow.

     The following table reconciles net income (loss) to EBITDA:

                                                                                                             ITC Holdings
                                               Predecessor ITC                                              and Subsidiaries

                                                                                        Period From
                                                                                       February 28,
                                                                                       2003 Through
                                                                                       December 31,                            Three Months Ended
                                                                                          2003 (a)                                  March 31,

                                Seven-Month                        Two-Month
                                Period Ended                      Period Ended
                                December 31,                      February 28,
                                  2001 (a)                          2003 (a)

                                                  Year Ended                                              Year Ended
                                                  December 31,                                            December 31,
                                                      2002                                                    2004

                                                                                                                               2004          2005

                                                                  (in thousands)


       Net income (loss)   $           13,194 $         43,213 $          3,485    $           (8,054 ) $         2,608 $       (2,418 ) $     7,870
       Income taxes                     7,105           23,268            3,915                (4,306 )           1,669         (1,268 )       4,320
       Loss on
       extinguishment of
       debt                                —                 —                —                11,378                 —
       Allowance for
       equity funds used
       during construction                 —                 —                —                  (322 )          (1,691 )         (318 )        (580 )
       Interest expense                    12                58               —                21,630            25,585          6,291         6,854
       Depreciation and
       amortization                    12,481           21,996            3,665                21,463            29,480          6,966         8,018

       EBITDA               $          32,792 $         88,535 $         11,065    $           41,789 $          57,651 $        9,253 $     26,482


                                                                            30
                                          MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                                       FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      You should read the following discussion together with our audited consolidated financial statements and related notes and the audited
financial statements and related notes of International Transmission Company, LLC, or Predecessor ITC, included elsewhere in this
prospectus. This discussion contains forward-looking statements. Actual results could differ materially from those discussed below. Please see
"Forward-Looking Statements" and "Risk Factors" for a discussion of certain of the uncertainties, risks and assumptions associated with these
statements.

Overview

      ITC is the first independently owned and operated electricity transmission company in the United States. ITC owns, operates and
maintains a fully-regulated, high-voltage transmission system that transmits electricity to local electricity distribution facilities from generating
stations in Michigan, other midwestern states and Ontario, Canada. The local distribution facilities connected to the ITC transmission system
served a population of approximately 4.9 million people, as of December 31, 2004, in an area comprised of 13 southeastern Michigan counties,
including the Detroit metropolitan area. ITC's electricity transmission system also acts as a conduit for transmitting electricity to and from
adjacent third party electricity transmission systems.

      ITC was formed as a legal entity and subsidiary of Detroit Edison in January 2001, but initially had no assets or employees and was
supported by employees of DTE Energy. Prior to January 1, 2001, there was no separation of the transmission business from the distribution
business within Detroit Edison. The distribution and transmission operations were commingled and operated jointly until June 1, 2001. Detroit
Edison separated its transmission assets from its distribution assets on June 1, 2001, placing these assets in a separate subsidiary, namely ITC.
A process to separately identify costs and revenues associated with ITC was implemented simultaneously with ITC becoming a subsidiary of
DTE Energy. ITC became independent as a result of DTE Energy's divestiture of its electricity transmission business, consistent with FERC
and State of Michigan policy initiatives promoting an independent transmission system. The FERC's transmission policy was developed in part
in response to the significant historical underinvestment in transmission infrastructure in the United States and the potential for discrimination
that arises when a utility operates transmission and generation facilities within the same region.

     ITC is a member of MISO, a FERC-approved regional transmission organization, or RTO, which has responsibility for the oversight and
coordination of transmission service for a substantial portion of the midwestern United States and Manitoba, Canada. MISO establishes
regional operating and market practices and scheduling protocols. It also administers the transmission tariff under which all customers procure
transmission service.

     ITC's primary operating responsibilities include maintaining, improving and expanding its transmission system to meet its customers'
ongoing needs, scheduling outages on system elements to allow for maintenance and construction, balancing electricity generation and demand,
maintaining appropriate system voltages and monitoring flows over transmission lines and other facilities to make sure physical limits are not
exceeded. ITC's operating assets consist primarily of approximately 2,700 circuit miles of transmission lines, approximately 16,000
transmission towers and poles and 30 stations, which connect ITC's transmission lines to generation resources, distribution facilities and
neighboring transmission systems. ITC's transmission system serves distribution utilities that are located in an approximately 7,600 square mile
area throughout southeastern Michigan. As of February 28, 2003, ITC's net PP&E was $435.8 million. Since that time, and through
December 31, 2004, ITC has invested approximately $122.5 million in PP&E and has incurred other net PP&E activity of $0.8 million
consisting of accrued asset removal costs reclassified to regulatory liabilities and asset settlements with

                                                                         31
DTE Energy, offset by depreciation and amortization of $45.4 million, increasing its net PP&E to $513.7 million, as of December 31, 2004.
For 2005, ITC expects to invest approximately $100 million in additional PP&E, primarily on projects reviewed by MISO. During the three
months ended March 31, 2005, ITC invested approximately $35.7 million in PP&E and has incurred other net PP&E activity of $1.2 million
consisting of accrued asset removal costs reclassified to regulatory liabilities and asset settlements with DTE Energy, offset by depreciation and
amortization of $7.3 million, increasing its net PP&E to $543.3 million, as of March 31, 2005.

     As a transmission utility whose rates are regulated by the FERC, ITC earns revenues through fees charged for the use of its transmission
system by its customers, which include investor-owned utilities, municipalities, co-operatives, power marketers and alternative energy
suppliers. ITC's rates are established on a cost-of-service model allowing for the recovery of expenses, including depreciation and amortization,
and a return on invested capital. ITC's transmission rates are determined on an annual basis using a FERC-approved formulaic rate setting
mechanism known as Attachment O.

Attachment O Rate Setting

      Attachment O is a FERC-approved cost of service rate formula mechanism that is applied annually by MISO to determine the rate for
transmission service to customers in the zones of most transmission-owning members of MISO. MISO verifies and uses selected financial and
operating data from the transmission owner's most recently completed calendar year to determine the new rate for transmission to its customers
in its zone. These data are taken from the transmission owner's FERC Form 1 filing, made by the end of April of each year, which is designed
to collect financial and operating information from electric utilities subject to the jurisdiction of the FERC. Under Attachment O, transmission
rates and revenue requirements incorporate a return on the transmission owner's rate base, consisting primarily of net PP&E, an accumulated
deferred income tax adjustment, certain regulatory assets and a materials and supplies allocation; and a recovery of operating expenses,
including depreciation and amortization, and interest expense and taxes. After MISO confirms the rate derived from the information supplied
by the transmission owner, no further actions or approvals are required for the new calculated rate to take effect. By completing the
Attachment O template on an annual basis, ITC is able to adjust its transmission rates based on year-to-year changes in network load on its
transmission system, operating expenses and rate base.

      ITC charged a fixed rate of $1.075 per kW/month from June 1, 2002 to December 31, 2004, which was based primarily on actual and
allocated transmission expenses from Detroit Edison's 2000 FERC Form 1 when the transmission business was integrated with the overall
utility business of Detroit Edison. Neither ITC nor its transmission business existed as a separate FERC Form 1 reporting entity until June 1,
2001. Instead, the transmission-related activities of Detroit Edison were integrated into the overall utility business of Detroit Edison. The
increase in tariff rates from $1.075 per kW/month to $1.587 per kW/month in January 2005, was due primarily to changes in capital structure,
the elimination of deferred taxes, the inclusion of certain regulatory assets, the inclusion in rate base of the revenue deferral associated with the
rate freeze, the increase in the FERC-approved return on equity and increases in plant in service and operating expenses. Beginning June 1,
2005 and each June thereafter, ITC will implement a new rate calculated using data from the previous calendar year as described above. Based
upon 2004 year-end results, the rate for the one-year period starting June 1, 2005 will be $          per kW/month.

     We expect that our revenues, operating cash flows and net income will increase in 2005 compared to 2004 as a result of the increase in the
rates ITC charges; however, other factors may affect these measures, such as the effect of changes in expenses on operating cash flows and net
income or the effect of network load on operating revenues, operating cash flows and net income.

                                                                         32
Recent Regulatory Matters

       Initial Public Offering. On March 30, 2005, we filed a Joint Application for Authorization of an Indirect Disposition of Jurisdictional
Facilities under Section 203 of the FPA and Notification of Change in Ownership Structure with the FERC. The filing contemplates the public
offering of ITC Holdings' common stock, including an initial public offering and potential future public offerings. The FERC approved the
application in its order issued on May 5, 2005 and, in doing so, authorized this offering, as well as potential future public offerings of ITC
Holdings' common stock occurring within two years of May 5, 2005.

      Redirected Transmission Service. In January and February 2005, in FERC Docket EL05-55 and EL05-63, transmission customers filed
complaints against MISO claiming that MISO was charging excessive rates for redirected transmission service. In April 2005, the FERC
ordered MISO to refund, with interest, excess amounts charged to all affected transmission customers. ITC earns revenues based on an
allocation from MISO for this redirected transmission service and is obligated to refund the excess amounts charged to all affected transmission
customers. We had not accrued any amounts relating to this proceeding as of March 31, 2005 based on our assessment of the likelihood of any
refunds resulting from these complaints at that date. Based on the April 2005 order, we will be required to refund amounts relating to redirected
transmission service upon completion of the refund calculations by MISO, which MISO expects to complete during second quarter of 2005.
We cannot estimate the amount of the refund until the calculations are completed.

       Long-Term Pricing. In November 2004, in FERC Docket EL02-111 et al., the FERC approved a pricing structure to facilitate seamless
trading of electricity between MISO and PJM Interconnection. The order establishes a Seams Elimination Cost Adjustment, or SECA, as set
forth in previous FERC orders, to take effect December 1, 2004, and remain in effect through March 31, 2006 as a transitional pricing
mechanism. The SECA revenues are subject to refund and will be litigated in a contested hearing before the FERC with a final order expected
in 2006. We cannot anticipate whether any refunds of amounts earned by ITC will result from this hearing and we have not accrued any
amounts relating to this proceeding. Through March 31, 2005, ITC has recorded $0.7 million of SECA revenue.

      Elimination of Transmission Rate Discount. Several energy marketers filed a complaint against MISO in February 2005 in FERC
Docket EL05-66, asserting that MISO improperly eliminated a rate discount that had previously been effective for transmission service at the
Michigan-Ontario Independent Electric System Operator interface. Since the complaints were filed, MISO has held amounts in escrow that it
has collected for the difference between the discounted tariff rate and the full tariff rate. The FERC has not yet acted on this complaint. ITC has
recorded revenues based only on the amounts collected by MISO and remitted to ITC. These amounts do not include the amounts held in
escrow by MISO of $0.6 million as of March 31, 2005.

ITC Acquisition

     ITC Holdings was formed for the purpose of acquiring International Transmission Company, LLC, or Predecessor ITC. On February 28,
2003, following the approval of the transaction by the FERC, ITC Holdings acquired the outstanding ownership interests of Predecessor ITC
from DTE Energy for $610.0 million in cash plus direct transaction costs, subject to purchase price adjustments relating to PP&E and other
items identified subsequent to February 28, 2003. In 2003, we paid $8.3 million in additional consideration for the acquisition of Predecessor
ITC. Immediately following the acquisition, Predecessor ITC was merged with and into ITC Holdings Merger Sub, Inc., an entity formed by
ITC Holdings, and ITC Holdings Merger Sub, Inc. was then renamed International Transmission Company.

     We accounted for the acquisition using the purchase method. The excess purchase price, including transaction costs, over the fair value of
net assets acquired was classified as goodwill. The acquisition was treated as a taxable transaction, adjusting the tax basis of the assets to fair
value pursuant to an

                                                                        33
election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended. The goodwill amount of $176.0 million is expected to be
deductible for federal income tax purposes, with the majority of the goodwill being amortized over 15 years.

Trends and Seasonality

     We expect a general trend of moderate growth in our tariff rate over the next few years under Attachment O, although we cannot predict a
specific year-to-year trend due to the variability of network load and other factors beyond our control. The tariff rate for the period from June 1,
2005 through May 31, 2006 is based primarily on FERC Form 1 data for the year ended December 31, 2004 and will be $               per kW/month
compared to $1.587 per kW/month for the period from January 1, 2005 through May 31, 2005. Absent any other factors, there are two known
items that will cause an increase in rate in 2006. Beginning June 1, 2006, one-fifth, or approximately $11.9 million, of the revenue that was
deferred during the rate freeze will be included in ITC's rates in each of the following five 12-month periods, which will cause an increase in
rates during these periods. Another component of the increase in rates that is expected to continue over the next few years is as a result of
increased capital investment in excess of depreciation. This is in part due to our application of industry standards in our capital investment
decision process. We continually test our transmission system against reliability standards established by the North American Electric
Reliability Council, or NERC, and the MISO. These reliability standards have become more specific and stringent in recent years, primarily as
a reaction to the August 2003 electrical blackout. We believe that investing in the system to meet these NERC standards, although not
mandated by FERC, is a prudent way to prioritize capital spending. Moreover, since the August 2003 blackout, Congress has several times
considered legislation that would make compliance with reliability standards established by NERC or another entity mandatory. In addition to
investments that improve the reliability of the transmission system, we continue to identify investment opportunities that increase throughput
and reduce transmission constraints in ITC's system and in turn reduce the delivered cost of energy to end-use consumers. We expect the levels
for capital spending for the next few years to be moderately higher than those seen in 2004. ITC strives for improved reliability of its system
and lower delivered costs of electricity to end-use consumers.

     In support of the application of the NERC reliability standards, the FERC in a Policy Statement on Matters Related to Bulk Power System
Reliability, Docket No. PL04-5-000, issued April 19, 2004, clarified its position on several matters relating to the application of the standards,
one of which was a policy to allow utilities "to recover prudently incurred costs necessary to ensure bulk electric system reliability, including
prudent expenditures for vegetation management, improved grid management and monitoring equipment, operator training, and compliance
with NERC reliability standards and Good Utility Practices."

      Our results of operations are subject to seasonal variations. Our revenues depend on the monthly peak loads and regulated transmission
rates. Demand for electricity and thus transmission load, to a large extent depend upon weather conditions. Our revenues and operating income
are higher in the summer months when cooling demand and network load are higher.

     We are not aware of any trends or uncertainties in the economy and industries in ITC's service territory that are reasonably likely to have a
material effect on our financial condition or results of operations. However, any changes in economic conditions that either increase or decrease
the use of ITC's system to transmit electricity will impact revenue for a given year. Additionally, adverse economic conditions could impact our
customers' ability to pay for our services.

Management Fees

     On February 28, 2003, we entered into agreements with KKR, Trimaran Fund Management, L.L.C. and the IT Holdings Partnership for
the provision of management, consulting and financial services in

                                                                        34
exchange for annual fees. We paid $1.0 million and $1.3 million for 2003 and 2004, respectively, in respect of these annual fees, excluding
out-of-pocket costs. In connection with this offering, the parties have agreed to amend and restate these agreements. The amended and restated
agreements provide for the termination of the annual fees in exchange for one-time fees payable upon the completion of this offering in an
aggregate amount of $6.7 million. The amended and restated agreements also provide for the payment of additional fees for future, mutually
agreed-upon services.

Basis of Presentation

     We acquired the outstanding ownership interests of Predecessor ITC from DTE Energy on February 28, 2003 and accounted for the
acquisition as a purchase. We adopted certain accounting policies and methods which differ from those followed by Predecessor ITC prior to
the acquisition and as reflected in Predecessor ITC's audited financial statements and related notes included elsewhere in this prospectus.

Revenues

      We derive nearly all of our revenues from providing network transmission service, point-to-point transmission service and other related
services over our system. The revenue information throughout this Basis of Presentation section is presented for a full year of operations for the
year ended December 31, 2004, which may be more meaningful than revenue information presented for a three-month period given the
seasonality of our revenues. Most of our expenses and substantially all of our assets are devoted to providing transmission service. ITC's
principal transmission service customer is Detroit Edison which accounted for approximately 68% of ITC's total operating revenues for the
year ended December 31, 2004. ITC's system is the only transmission system that directly interconnects with Detroit Edison's distribution
network. ITC's remaining revenues were generated from providing service to other entities such as alternative electricity suppliers, power
marketers and other wholesale customers that provide electricity to end-use consumers and from transaction-based capacity reservations on
ITC's transmission system. MISO is responsible for billing and collection of transmission services in the MISO service territory. MISO, as the
billing agent for ITC, collects fees for the use of ITC's transmission system, invoicing Detroit Edison and other ITC customers on a monthly
basis. MISO has implemented credit policies for its members, which include ITC's customers.

      Network Revenues are generated from fees charged to network customers for their use of ITC's electricity transmission system during the
one hour of monthly peak usage. For the year ended December 31, 2004, approximately 90.2% of ITC's operating revenues were derived from
the provision of network service. ITC's network revenues are dependent on monthly peak loads and regulated transmission rates.

    Network revenues are determined using rates regulated by the FERC. ITC's monthly network revenues are the result of a calculation
which can be simplified into the following:

     (1)
            multiply:

     •
            the network load measured in kWs achieved during the one hour of monthly peak usage for ITC's transmission system by

     •
            the appropriate monthly tariff rate as calculated under Attachment O by

     •
            12 by

     •
            the number of days in that month; and

     (2)
            divide the result by 365.

                                                                       35
Therefore, ITC earns proportionately more revenues in months with 31 days than in months with a lesser number of days if all other factors
remain equal. Set forth below is a simplified illustrative calculation of the network revenue earned for the month of December 2004:

     8,469,000 (peak network load in kW in December) × $1.075 (the monthly tariff) × 12 × 31 (days in December)/365 = $9,278,776 total
     December network revenues.

      Point-to-Point Revenues consist of revenues generated from a type of transmission service for which the customer pays for transmission
capacity reserved along a specified path between two points on an hourly, daily, weekly or monthly basis. Point-to-point revenues also include
other components pursuant to schedules under the MISO transmission tariff. Approximately 13.4% of ITC's operating revenues for the year
ended December 31, 2004 was derived from providing point-to-point service, without giving effect to the refund described below.

      The rates approved by the FERC in connection with our acquisition of ITC from DTE Energy included a departure from the Attachment O
formula with respect to the treatment of point-to-point revenues received during 2003 and 2004. Based on FERC orders as part of the
acquisition of ITC's transmission system from DTE Energy, ITC has refunded or will refund a portion of point-to-point revenues earned during
the period from March 1, 2003 through December 31, 2004 to network and point-to-point customers pro rata. ITC refunded 100% of 2003
point-to-point revenues in March 2004 and refunded 75% of 2004 point-to-point revenues in March 2005. 25%, or $4.2 million, of 2004
point-to-point revenues will be treated as a revenue credit in the Attachment O calculation for the new rate that takes effect on June 1, 2005. A
revenue credit is not a cash refund but rather a reduction in the Attachment O rate mechanism. Point-to-point revenues collected for periods
after December 31, 2004 are no longer refunded, and Attachment O provides that any point-to-point revenues not refunded to customers will be
treated as a revenue credit in determining network transmission rates under Attachment O for the following year.

      Scheduling, Control and Dispatch Revenues also are approved by the FERC and are allocated to ITC by MISO as compensation for the
services ITC performs, jointly with the Michigan Electric Transmission Company, or METC, in operating the Michigan Electric Coordinated
Systems, or MECS, control area. Such services include processing energy schedule requests utilizing the MECS system, monitoring of
reliability data, implementation of emergency procedures, and coordination of the MECS operation. Approximately 4.9% of ITC's operating
revenues for the year ended December 31, 2004 were derived from providing scheduling, control and dispatch services.

     Other Revenues consist primarily of rental revenues received from METC for the use of the Michigan Electric Power Coordination
Center, or MEPCC, building as well as property easement revenues. Approximately 1.6% of ITC's revenues for the year ended December 31,
2004 consisted of other revenues.

                                                                       36
    The following table sets forth the components of our revenue, expressed as a dollar amount and percentage of net revenues, for the year
ended December 31, 2004:

                                                                                                    Year Ended
                                                                                                 December 31, 2004

                      Revenues

                                                                                              Amount               Percentage

                                                                                          (in thousands, except percentages)


                      Network                                                            $      114,082                   90.2 %
                      Point-to-point                                                             16,989                   13.4
                      Scheduling, control and dispatch                                            6,146                    4.9
                      Other                                                                       1,973                    1.6

                      Total                                                                     139,190                 110.1
                      Refundable point-to-point                                                 (12,741 )               (10.1 )

                      Net operating revenues                                             $      126,449                 100.0 %


     The total of the monthly peak loads for 2004 was up 4.0% and down 2.4% as compared to the corresponding totals for 2003 and 2002,
respectively.

                                                                        Monthly Peak Load (in Megawatts)

                                                    2001             2002              2003                 2004                  2005

January                                              7,753            7,668             7,608                8,022                 8,090
February                                             7,355            7,572             7,437                7,656                 7,672
March                                                7,258            7,566             7,542                7,434                 7,562
April                                                7,012            8,386             6,934                7,305                 7,299
May                                                  8,068            8,702             7,017                8,718
June                                                10,895           11,067            11,266               11,114
July                                                11,309           11,423            10,225               11,344
August                                              11,875           11,438            11,617               10,877
September                                           10,037           10,894             8,717                9,841
October                                              7,145            8,645             7,369                7,197
November                                             7,343            7,271             7,843                7,832
December                                             7,573            7,772             8,124                8,469

Expenses

       Operation and Maintenance Expenses consist primarily of the costs of contractors to operate and maintain ITC's transmission system
and salary-related expenses for ITC personnel involved in operation and maintenance activities. The majority of expenses for the operation of
the transmission system relate to activities of the MECS control area. Maintenance expenses include preventative or planned maintenance, such
as vegetation management, tower painting and equipment inspections, as well as reactive maintenance for equipment failures.

      Prior to February 28, 2003, ITC had entered into a Master Services Agreement with Detroit Edison whereby Detroit Edison performed
maintenance, asset construction and day-to-day management of transmission operations and administration services. Detroit Edison received
compensation for wages and benefits for employees performing work on behalf of ITC and for costs of construction or maintenance directly
related to ITC in addition to overhead and other fees. Subsequent to February 28, 2003 and through April 2004, ITC had operated under a
construction and maintenance, engineering, and system operations service level agreements, or the SLA, with Detroit Edison whereby Detroit
Edison performed maintenance, asset construction, and certain aspects of transmission operations and administration, or the SLA Activities, on
behalf of ITC. ITC entered into the SLA to provide an

                                                                      37
orderly transition from being a subsidiary of an integrated utility to a stand-alone independent transmission company. The SLA, as amended,
had a term through February 29, 2004, with certain specified services extending through April 30, 2004, as necessary. Under the terms of the
SLA, ITC's SLA Activities were jointly managed by ITC and Detroit Edison and therefore ITC did not have exclusive control over its
expenditures relating to the SLA Activities through the term of the SLA. The terms of the SLA included an agreed upon pricing mechanism
whereby Detroit Edison was paid an amount to compensate them for their fully allocated costs.

     In August 2003, ITC entered into an Operation and Maintenance Agreement with its primary maintenance contractor and a Supply Chain
Management Agreement with its primary purchasing and inventory management contractor to perform these services subsequent to the term of
the SLA. In order to facilitate the transition from Detroit Edison, the new contractors had performed work in parallel with Detroit Edison prior
to the termination of the SLA. The agreements reduce uncertainty with regard to ITC's cost structure for the period ending August 28, 2008.
Additionally, the new operating agreements allow ITC to exclusively manage and control operating expenditures.

    Because Predecessor ITC had no employees of its own, it was supported by employees of other DTE Energy subsidiaries, principally
Detroit Edison. Any work a person did on behalf of Predecessor ITC (both field operations or administrative) was captured and recorded as
operation and maintenance expense. In addition, there were allocations of employee benefits (for those employees whose time was billed to
Predecessor ITC), corporate overhead (executive staff, legal) and infrastructure costs (facilities, information technology, equipment etc.) that
were assigned to Predecessor ITC and recorded as operation and maintenance expense. Administrative costs such as employee benefits,
corporate overhead and infrastructure costs are now recorded in general and administrative expenses at ITC.

      General and Administrative Expenses consist primarily of compensation and related costs for personnel and facilities for our finance,
human resources, regulatory, information technology and legal organizations, and fees for professional services. Professional services are
principally composed of outside legal, audit, consulting and information technology services. Additionally, benefits expenses for all employees
are included in general and administrative expenses.

     During 2003, under the terms of the SLA, Detroit Edison performed many of the administrative duties in support of ITC's construction
program. Subsequent to the termination of the SLA, we began to capitalize certain general and administrative expenses in July 2004 that
resulted from our management of the expanded construction program. These expenses are included in PP&E.

      Depreciation and Amortization Expenses consist primarily of depreciation of PP&E using the straight-line method for financial
reporting. Additionally, we amortize the regulatory asset-acquisition adjustment, representing a portion of the goodwill created from the
acquisition of ITC that was approved for recovery in rates by the FERC. The original amount of $60.6 million as of February 28, 2003 is being
amortized over 20 years on a straight-line basis.

      Taxes other than Income Taxes consist primarily of property tax expenses. In accordance with Michigan law, ITC's real property tax
values were uncapped as a result of the change in ownership of the assets of ITC. Additionally, numerous municipalities have applied their own
valuation tables in assessing the value of ITC's personal property, rather than using the valuation tables approved by the State Tax Commission,
or STC, resulting in higher property values. ITC has filed tax appeals and is in the process of discussing December 31, 2003 tax assessments
with various municipalities, which are the basis for 2004 property tax expense. ITC has developed an appeal strategy and filed formal appeals
with the Michigan Tax Tribunal, or MTT, for the municipalities that did not utilize the STC tax tables. The December 31, 2004 tax assessments
received from the municipalities that are the basis for 2005 property taxes use the STC-approved valuation tables.

     Interest Expense consists primarily of interest on ITC Holdings' $267.0 million of 5.25% Senior Notes and ITC's $185.0 million of
4.45% Series A Mortgage Bonds. ITC Holdings and ITC also have

                                                                        38
revolving credit facilities outstanding, with the interest expense and facility fees being recorded to interest expense. Additionally, the
amortization of debt financing expenses is recorded to interest expense.

Critical Accounting Policies and Methods

     Preparation of financial statements and related disclosures in compliance with GAAP requires the application of appropriate technical
accounting rules and guidance, as well as the use of estimates. The application of these policies necessarily involves judgments regarding future
events, including legal and regulatory challenges and anticipated recovery of costs. These judgments, in and of themselves, could materially
impact the financial statements and disclosures based on varying assumptions. In addition, the financial and operating environment also may
have a significant effect, not only on the operation of our business, but on our results reported through the application of accounting measures
used in preparing the financial statements and related disclosures, even if the nature of the accounting policies applied has not changed.

     The following is a list of accounting policies that are most significant to the portrayal of our financial condition and results of operations
and that require management's most difficult, subjective or complex judgments.

     Regulation. Nearly all of ITC's business is subject to regulation. As a result, we apply accounting principles in accordance with
Statement of Financial Accounting Standards, or SFAS, 71, "Accounting for the Effects of Certain Types of Regulation," or SFAS 71. Use of
SFAS 71 results in differences in the application of GAAP between regulated and non-regulated businesses. SFAS 71 requires the recording of
regulatory assets and liabilities for certain transactions that would have been treated as expense or revenue in non-regulated businesses. Future
regulatory changes or changes in the competitive environment could result in discontinuing the application of SFAS 71. If we were to
discontinue the application of SFAS 71 on ITC's operations, we may be required to record extraordinary losses of $55.1 million relating to the
regulatory asset-acquisition adjustment and $8.1 million of other regulatory assets relating to deferred financing fees at December 31, 2004.
Additionally, we may be required to record extraordinary gains of $43.9 million relating to asset removal costs that have been accrued in
advance of incurring these costs, recorded as regulatory liabilities at December 31, 2004.

     We believe that currently available facts support the continued applicability of SFAS 71 and that all regulatory assets and liabilities are
recoverable or refundable under our current rate environment.

     Attachment O Revenue Deferral. ITC's revenue deferral resulted from the difference between the revenue ITC would have collected
under Attachment O and the actual revenue ITC received based on the frozen rate. The final revenue deferral at December 31, 2004 as
established during the rate freeze was $59.7 million ($38.8 million net of tax). The revenue deferral and related taxes are not reflected as an
asset or as revenue in our consolidated financial statements because they do not meet the criteria to be recorded as regulatory assets in
accordance with SFAS 71 or Emerging Issues Task Force 92-7, "Accounting by Rate-Regulated Utilities for the Effects of Certain Alternative
Revenue Programs," or EITF 92-7. SFAS 71 provides that an enterprise shall capitalize all or part of an incurred cost that would otherwise be
charged to expense if certain criteria are met, including whether it is probable that future revenue in an amount at least equal to the capitalized
cost will result from inclusion of that cost in allowable costs for rate-making purposes. Although the amortization of the revenue deferral is an
allowable component of future rates based on FERC approval obtained for this item, the revenue deferral does not represent an incurred cost.
Rather, it is a delayed recovery of revenue based on many components of our tariff rate, including incurred costs, rate base, capital structure,
network load and other components of Attachment O. EITF 92-7 provides that a regulated enterprise should recognize revenue for other than
incurred costs if the revenue program meets certain criteria. The revenue deferral does not satisfy the criteria of EITF 92-7 to record the
revenue deferral in the year it is

                                                                         39
determined. We believe the proper revenue recognition relating to the revenue deferral occurs when we begin to charge the rate that includes
the amortization of the revenue deferral beginning in June 2006.

     Purchase Accounting. We accounted for our acquisition of Predecessor ITC using the purchase method, prescribed by SFAS 141,
"Business Combinations." Estimates have been made in valuing certain assets and liabilities in the balance sheet. The provisions of the
acquisition required an adjustment to the acquisition price of $610.0 million based on the closing balance sheet at February 28, 2003 prepared
by DTE Energy. ITC Holdings paid an additional $8.3 million to DTE Energy subsequent to February 28, 2003 relating to the acquisition.
During 2004, ITC Holdings and DTE Energy negotiated additional adjustments to the purchase price relating to the acquisition for various
PP&E and inventory balances. These negotiations are not final; however, ITC Holdings recorded an increase in the purchase price related to its
best estimate of the outcome. There may be additional purchase price adjustments as ITC and DTE Energy continue to identify differences
from the closing balance sheet at February 28, 2003. We do not expect any additional purchase price adjustments to be significant. If additional
purchase price adjustments are identified, the amount recorded for goodwill or other balance sheet items would be impacted.

     Goodwill. We have goodwill resulting from the acquisition of Predecessor ITC. In accordance with SFAS 142, "Goodwill and Other
Intangible Assets," we are required to perform an impairment test annually or whenever events or circumstances indicate that the value of
goodwill may be impaired. In order to perform these impairment tests, we determined fair value using valuation techniques based on estimates
of market-based valuation multiples for companies within ITC's peer group and also considered discounted future cash flows under various
scenarios. The market-based multiples involve judgment regarding the appropriate peer group and the appropriate multiple to apply in the
valuation and the cash flow estimates involve judgments based on a broad range of assumptions, information and historical results. To the
extent estimated market-based valuation multiples and/or discounted cash flows are revised downward, we may be required to write down all
or a portion of ITC's goodwill, which would adversely impact earnings. As of December 31, 2004, goodwill totaled $176.0 million and we
determined that no impairment existed as of our goodwill impairment testing date of October 1, 2004.

      Valuation. Our accounting for stock-based compensation requires us to determine the fair value of shares of ITC Holdings' common
stock. The fair value of ITC Holdings' common stock is determined using a discounted future cash flow method, which is a valuation technique
that is acceptable for privately-held companies. The cash flow estimates involve judgments based on a broad range of assumptions, information
and historical results. In the event different assumptions were used, it would result in a different fair value of ITC Holdings' common stock
which would impact the amount of compensation expense recognized related to our stock-based awards.

     Property Taxes. Property taxes recognized for 2004 are based on a total annual legal liability of $20.3 million from the 2004 tax
statements received from municipalities. Numerous municipalities have applied their own valuation tables in assessing the value of ITC's
personal property subsequent to the acquisition of Predecessor ITC, rather than the valuation tables approved by the STC. ITC has filed tax
appeals and is in the process of discussing December 31, 2003 tax assessments with various municipalities, which are the basis for 2004
property tax expense. ITC has developed an appeal strategy and filed formal appeals with the MTT for the municipalities that did not utilize the
STC tax tables. Until this issue is resolved, ITC is making property tax payments based on the valuation tables approved by the STC, while
continuing to expense the full amounts billed by the municipalities in applying their own valuation tables. In the event that there are changes to
the estimated personal property tax values based on negotiations with municipalities or through appeals with the MTT, any adjustments to
ITC's property tax expense would be recorded at that time.

                                                                       40
Results of Operations

     The financial information presented in this prospectus includes results of operations for Predecessor ITC for the two-month period ended
February 28, 2003 and ITC Holdings Corp. for the period from February 28, 2003 through December 31, 2003. Neither the two-month period
nor the ten-month period is reflective of a twelve-month year of operations and, accordingly, neither of such periods individually is directly
comparable to the results of operations for the year ended December 31, 2004 or for the year ended December 31, 2002.

     In order to provide a year-over-year analysis, audited financial information for Predecessor ITC for the two-month period ended
February 28, 2003 and audited information for ITC Holdings for the period from February 28, 2003 through December 31, 2003 have been
combined to create a pro forma period consisting of the year ended December 31, 2003, which we refer to as the 2003 Pro Forma Period. The
discussion is provided for comparative purposes only, but the value of such a comparison may be limited. You should not interpret the 2003
Pro Forma Period financial information as the result of operations that ITC Holdings would have achieved had the acquisition occurred prior to
January 1, 2003.

      The following statement summarizes historical operating results for the periods indicated:

                                                                                ITC Holdings
                                                                               and Subsidiaries

                                                                                                                                           ITC Holdings
                                                                                                                                          and Subsidiaries

                                           Predecessor ITC

                                                                                 Period From
                                                                                February 28,
                                                                                2003 Through
                                                                                December 31,
                                                                                     2003

                                                                                                                                                   Three              Three
                                                        Two-Month                                                                                  Months             Months
                                  Year Ended           Period Ended                                    2003 Pro            Year Ended              Ended              Ended
                                  December 31,         February 28,                                     Forma              December 31,           March 31,          March 31,
                                      2002                 2003                                         Period                 2004                 2004               2005

                                                                                                     (unaudited)


                                                                                           (in thousands)


Operating revenues            $            137,535 $             20,936 $                102,362 $          123,298 $               126,449 $          27,544 $           42,460
Operating expenses:
   Operation and
   maintenance                              34,699                5,675                   22,902             28,577                  24,552             6,394              6,522
   General and
   administrative                                —                      —                 26,342             26,342                  24,412             6,448              5,286
   Depreciation and
   amortization                             21,996                3,665                   21,463             25,128                  29,480             6,966              8,018
   Taxes other than income
   taxes                                    15,776                4,298                   11,499             15,797                  20,840             5,424              4,299

        Total operating
        expenses                            72,471               13,638                   82,206             95,844                  99,284            25,232             24,125
Operating income                            65,064                7,298                   20,156             27,454                  27,165             2,312             18,335
Other expenses (income):
   Interest expense                              58                     —                 21,630             21,630                  25,585             6,291              6,854
   Allowance for equity
   funds used in
   construction                                  —                      —                   (322 )                (322 )             (1,691 )            (318 )            (580 )
   Loss on extinguishment
   of debt                                      —                       —                 11,378             11,378                      —
   Other income                             (1,720 )                  (147 )                (197 )             (344 )                (1,289 )                (12 )         (305 )
   Other expense                               245                      45                    27                 72                     283                   37            176

       Total other expenses
       (income)                             (1,417 )                  (102 )              32,516             32,414                  22,888             5,998              6,145

Income (loss) before
income taxes                                66,481                7,400                  (12,360 )            (4,960 )                4,277             (3,686 )          12,190
Income tax provision
(benefit)                                   23,268                3,915                   (4,306 )                (391 )              1,669             (1,268 )           4,320
Net income (loss)   $   43,213 $   3,485 $        (8,054 ) $   (4,569 ) $   2,608 $   (2,418 ) $   7,870



                                             41
 Results of Operations for the Three Months Ended March 31, 2004 Compared to the Three Months Ended March 31, 2005

     Operating Revenues. Revenues increased by $15.0 million, or 54.5%, from $27.5 million in the three months ended March 31, 2004 to
$42.5 million in the three months ended March 31, 2005.

      The following table sets forth the components of our revenue, expressed as a dollar amount and percentage of net operating revenues, for
the three months ended March 31, 2004 and 2005:

                                                                                                 Three Months
                                                                                                Ended March 31,

                                                                                   2004                                      2005

                                                                        Amount            Percentage           Amount               Percentage

                                                                                        (in thousands, except percentages)


Network                                                             $        24,741               89.8 % $         36,577                  86.2 %
Point-to-point                                                                3,890               14.1              4,087                   9.6
Scheduling, control and dispatch                                              1,359                5.0              1,332                   3.1
Other                                                                           471                1.7                464                   1.1

Total                                                                        30,461              110.6             42,460                100.0
Refundable point-to-point                                                    (2,917 )            (10.6 )               —                    —

Net operating revenues                                              $        27,544              100.0 % $         42,460                100.0 %


      Network revenues increased by $11.9 million, or 48.2%, from $24.7 million in the three months ended March 31, 2004 to $36.6 million in
the three months ended March 31, 2005. The increase was due primarily to an increase in the rate used for network revenues from $1.075 per
kW/month in the three months ended March 31, 2004 to $1.587 in the three months ended March 31, 2005, which increased revenues by
$11.4 million. The remaining increase of $0.5 million was primarily due to an increase in the total of the monthly peak loads for the three
months ended March 31, 2005 of 0.9% compared to the three months ended March 31, 2004, which increased revenues by $0.3 million.

     Point-to-point revenues, net of refunds, increased by $3.1 million, or 310.0% from $1.0 million in the three months ended March 31, 2004
to $4.1 million in the three months ended March 31, 2005, primarily because ITC is no longer is required to refund point-to-point revenues
earned in 2005, as was required for point-to-point revenues earned during the three months ended March 31, 2004 in the amount of
$2.9 million.

    Operating Expenses. Total operating expenses decreased by $1.1 million, or 4.4%, from $25.2 million in the three months ended
March 31, 2004 to $24.1 million in the three months ended March 31, 2005.

      Operation and maintenance expenses increased by $0.1 million, or 1.6%, from $6.4 million in the three months ended March 31, 2004 to
$6.5 million in the three months ended March 31, 2005. The increase was due to increased operation and maintenance activities performed
during the three months ended March 31, 2005 of $1.7 million, primarily due to increases in preventative maintenance for vegetation
management of $0.9 million and circuit breaker inspections of $0.6 million, as well as other net increases of $0.2 million. Partially offsetting
this increase was a $1.6 million decrease in expenses relating to training contract personnel to transition ITC's operation and maintenance
activities from Detroit Edison in the three months ended March 31, 2004 that did not recur during the three months ended March 31, 2005.

     General and administrative expenses decreased by $1.1 million, or 17.2%, from $6.4 million in the three months ended March 31, 2004 to
$5.3 million in the three months ended March 31, 2005. The decrease was primarily due to the capitalization of certain general and
administrative expenditures totaling $0.9 million in the three months ended March 31, 2005. No such amounts were capitalized in

                                                                        42
the three months ended March 31, 2004. Additionally, general and administrative expenses decreased by $0.9 million due to losses incurred in
the three months ended March 31, 2004 related to our investment in Conjunction LLC, or Conjunction, through our wholly-owned subsidiary,
New York Transmission Holdings Corporation, or NYTHC. Conjunction was formed in 2003 to develop a high-voltage direct current line to be
built within New York state to transmit power to the metropolitan New York City area. There was no impact from Conjunction in the three
months ended March 31, 2005. Partially offsetting these decreases of $1.8 million were increases of $0.7 million, which related to higher
compensation and benefits expense of $0.6 million due to additions in headcount and various other items totaling a net increase of $0.1 million.

      Depreciation and amortization expenses increased by $1.0 million, or 14.3%, from $7.0 million in the three months ended March 31, 2004
to $8.0 million in the three months ended March 31, 2005 due to a higher depreciable asset base as a result of PP&E additions during 2004 and
the three months ended March 31, 2005.

     Taxes other than income taxes decreased by $1.1 million, or 20.4%, from $5.4 million in the three months ended March 31, 2004 to
$4.3 million in the three months ended March 31, 2005 due to ITC's lower assessed property tax values as of December 31, 2004 that are the
basis for the 2005 property taxes compared to the assessed values as of December 31, 2003 that were the basis for the 2004 property taxes.
Numerous municipalities had applied their own valuation tables in assessing the value of ITC's personal property at December 31, 2003, rather
than using the valuation tables approved by the STC. The municipalities used the valuation tables approved by the STC in assessing the value
of ITC's personal property at December 31, 2004, which will result in lower property taxes in 2005 compared to 2004.

      Other Expenses. Interest expense increased by $0.6 million, or 9.5%, from $6.3 million in the three months ended March 31, 2004 to
$6.9 million in the three months ended March 31, 2005. The increase was primarily due to higher borrowing levels under our revolving credit
facilities in the three months ended March 31, 2005 to finance capital expenditures at ITC.

     Net Income (Loss). As a result of the factors identified above, net income after taxes increased by $10.3 million from a net loss of
$2.4 million in the three months ended March 31, 2004 to net income of $7.9 million in the three months ended March 31, 2005.

Results of Operations for the Year Ended December 31, 2004 Compared to the 2003 Pro Forma Period

     Operating Revenues. Revenues increased by $3.1 million, or 2.5%, from $123.3 million in the 2003 Pro Forma Period to
$126.4 million in 2004. This increase was primarily due to higher monthly peak load in 2004 resulting in increased network revenues of
$2.8 million and a $1.3 million increase in net point-to-point revenues. Partially offsetting these increases was a net $1.0 million decrease
primarily in revenues associated with scheduling, controlling and dispatch services and amounts received for use of utility property.

     Operating Expenses.      Total operating expenses increased by $3.5 million, or 3.7%, from $95.8 million in the 2003 Pro Forma Period to
$99.3 million in 2004.

     Operation and maintenance expenses decreased by $4.0 million, or 14.0%, from $28.6 million in the 2003 Pro Forma Period to
$24.6 million in 2004 primarily due to active cost management. During 2003, Detroit Edison and ITC jointly controlled maintenance activities
under the terms of the SLA. Beginning in April 2004, ITC had exclusive control over its operation and maintenance activities.

     General and administrative expenses decreased by $1.9 million, or 7.2%, from $26.3 million in the 2003 Pro Forma Period to
$24.4 million in 2004. The decrease was primarily due to non-recurring expenses of $4.9 million in the 2003 Pro Forma Period comprised of
regulatory asset amortization

                                                                        43
relating to MISO and ITC start-up costs partially offset by general increases in salary, benefits, and professional services in 2004. The
offsetting increase relating to salary, benefits and other expenses would have been higher in 2004 if not for the capitalization of certain general
and administrative expenditures totaling $2.5 million.

     Depreciation and amortization expenses increased by $4.4 million, or 17.5%, from $25.1 million in the 2003 Pro Forma Period to
$29.5 million in 2004 due to a higher depreciable asset base as a result of PP&E additions during 2004 and the 2003 Pro Forma Period.

     Taxes other than income taxes increased by $5.0 million, or 31.6%, from $15.8 million in the 2003 Pro Forma Period to $20.8 million in
2004 due to ITC's higher property tax values as of December 31, 2003. In accordance with Michigan law, ITC's real property tax values were
uncapped as a result of the change in ownership of ITC's assets. Additionally, numerous municipalities have applied their own valuation tables
in assessing the value of ITC's personal property, rather than using the valuation tables approved by the STC, resulting in higher property taxes.

     Other Expenses. Interest expense increased by $4.0 million, or 18.5%, from $21.6 million in the 2003 Pro Forma Period to
$25.6 million in 2004. The increase was primarily due to 12 months of borrowings in 2004, as compared to 10 months of borrowings in the
2003 Pro Forma Period, as well as higher borrowing levels in 2004 related to increased capital expenditures in 2004.

    There was a non-recurring expense of $11.4 million in the 2003 Pro Forma Period relating to the extinguishment of debt as a result of ITC
Holdings' debt refinancing in July 2003.

     Net Income (Loss). As a result of the factors identified above, net income after taxes increased by $7.2 million from a net loss of
$4.6 million in the 2003 Pro Forma Period to net income of $2.6 million in 2004.

Results of Operations for the 2003 Pro Forma Period Compared to the Year Ended December 31, 2002

     Operating Revenues. Revenues decreased by $14.2 million, or 10.3%, from $137.5 million in 2002 to $123.3 million in the 2003 Pro
Forma Period. This decrease was due to a $13.3 reduction of net Point-to-Point revenues due primarily to the refunding of 100% of March
through December 2003 Point-to-Point revenues and a $4.2 million decrease in network revenues due primarily to lower monthly peak loads.
Partially offsetting these decreases was a net increase of $3.3 million primarily as a result of scheduling, controlling and dispatch revenues and
amounts received for use of utility property.

    Operating Expenses.       Total operating expenses increased by $23.3 million, or 32.1%, from $72.5 million in 2002 to $95.8 million in the
2003 Pro Forma Period.

      Operation and maintenance expenses decreased by $6.1 million, or 17.6%, from $34.7 million in 2002 to $28.6 million in the 2003 Pro
Forma Period. In 2002 and the first two months of 2003, general and administrative costs were classified as operation and maintenance
expense. Directly identifiable general and administrative costs of $9.0 million and allocated corporate overhead costs of $11.0 million were
billed by DTE Energy to ITC and classified as operation and maintenance expense in 2002 as compared to $3.1 million and $0.9 million,
respectively, in the 2003 Pro Forma Period. Predecessor ITC had no employees and was supported by employees of other DTE Energy
subsidiaries. We record these types of expenses as general and administrative expenses. Offsetting the $16.0 million decrease was an increase
relating to operation and maintenance expenses for transmission station equipment of $6.8 million and overhead and underground lines of
$1.7 million and an increase of $1.4 million in miscellaneous expenses.

     General and administrative expenses increased by $26.3 million in the 2003 Pro Forma Period as Predecessor ITC recognized no general
and administrative expenses in 2002. The 2003 Pro Forma Period general and administrative expenses resulted from non-recurring expenses of
$4.9 million for the

                                                                        44
amortization of a regulatory asset relating to MISO and Predecessor ITC start-up costs. In 2003, we acquired a majority interest in Conjunction.
We recorded $1.6 million of expenses at NYTHC in the 2003 Pro Forma Period related to the start-up activities of Conjunction. The remaining
increase of $19.8 million related to certain general and administrative expenses. In 2002 expenses for these functions charged by DTE Energy
to Predecessor ITC were recorded as operation and maintenance expense. These expenses in the 2003 Pro Forma Period included salary and
benefits costs of $8.8 million, professional services of $6.4 million, insurance expense of $1.7 million and $2.9 million of general office
expenses such as rent and supplies.

     Depreciation and amortization expenses increased by $3.1 million, or 14.1%, from $22.0 million in 2002 to $25.1 million in the 2003 Pro
Forma Period primarily due to $2.5 million in amortization expense related to a regulatory asset-acquisition adjustment in the 2003 Pro Forma
Period, as well as other increases of $0.6 million for depreciation expense as a result of a higher depreciable asset base in 2003.

     Taxes other than income taxes did not change significantly from 2002 to the 2003 Pro Forma Period.

     Other Expenses. Interest expense increased by $21.5 million from $0.1 million in 2002 compared to $21.6 million in the 2003 Pro
Forma Period primarily as a result of the fact that no debt was outstanding during 2002. 2003 Pro Forma Period interest expense on borrowings
was $11.4 million and $7.6 million at Holdings and ITC, respectively. Additionally, amortization of debt issuance costs of $2.6 million was
recorded in the 2003 Pro Forma Period with no corresponding amount in 2002.

    There was a non-recurring expense of $11.4 million in the 2003 Pro Forma Period relating to the extinguishment of debt as a result of
Holdings' debt refinancing in July 2003.

     Net Income (Loss). As a result of the factors identified above, net income after taxes decreased by $47.8 million from net income of
$43.2 million in 2002 to a net loss of $4.6 million in the 2003 Pro Forma Period.

Liquidity and Capital Resources

Liquidity

     We expect to fund our future liquidity needs with cash from operations, our cash and cash equivalents, proceeds from our initial public
offering of common stock and amounts available under our revolving credit facilities, subject to certain conditions. We expect that our liquidity
requirements will arise principally from our need to:

     •
            fund capital expenditures;

     •
            fund ITC Holdings' and ITC's debt service requirements;

     •
            fund working capital requirements; and

     •
            pay dividends on our common stock.

We believe that we have sufficient liquidity to meet our cash and other needs for at least the next 12 months.

     For 2005, we expect to invest approximately $100 million in additional PP&E, primarily on projects reviewed by MISO. This amount
could vary as ITC continues to identify prudent capital investment opportunities that would reduce transmission constraints, increase flows
across the system, or improve system reliability. Additionally, the amount could vary for other reasons, including, among other things, the
impact of weather conditions, union strikes, material prices and availability, our ability to obtain financing for such expenditures, if necessary,
limitations on the amount of construction that can be undertaken on our system at any one time or regulatory approvals for reasons relating to
environmental, siting or regional planning issues or as a result of legal proceedings, as well as variances between the actual costs of
construction contracts awarded compared to the forecasted costs.

     We expect to pay approximately $24.0 million of interest expense in 2005. In 2005, we expect to pay an aggregate of approximately
$      in dividends to our stockholders.

                                                                         45
      The following table summarizes cash flows for the periods indicated:

                                                                                       ITC Holdings
                                                                                           and
                                                                                        Subsidiaries

                                                                                                                                                   ITC Holdings
                                                                                                                                                       and
                                                                                                                                                    Subsidiaries

                                                        Predecessor ITC

                                                                                        Period From
                                                                                       February 28,
                                                                                       2003 Through
                                                                                       December 31,
                                                                                            2003

                                                                                                                                                        Three             Three
                                                                    Two-Month                                                                           Months            Months
                                                Year Ended         Period Ended                                 2003 Pro            Year Ended          Ended             Ended
                                                December 31,       February 28,                                  Forma              December 31,       March 31,         March 31,
                                                    2002               2003                                      Period                 2004             2004              2005

                                                                                                               (unaudited)


                                                                                                  (in thousands)


Operating activities
Net income (loss)                           $          43,213 $              3,485 $              (8,054 ) $           (4,569 ) $            2,608 $        (2,418 ) $         7,870
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
    Depreciation and amortization
    expense                                            21,996                3,665                21,463               25,128              29,480            6,966             8,018
    Loss on extinguishment of debt                         —                    —                 11,378               11,378                  —                —                 —
    Deferred income taxes                                 646                 (827 )              (4,306 )             (5,133 )             1,435           (1,269 )           4,320
    Regulatory assets                                  (2,469 )               (105 )               6,769                6,664               1,933              483               483
    Other deferred assets and liabilities                  —                    —                  6,962                6,962                 552              335               560
    Changes in working capital                         28,356              (36,203 )              18,664              (17,539 )            13,638           (7,789 )         (31,063 )

            Net cash provided by (used
            in) operating activities                   91,742              (29,985 )              52,876               22,891              49,646           (3,692 )          (9,812 )

Investing activities
   Expenditures for property, plant and
   equipment                                           (15,360 )            (5,616 )             (26,805 )            (32,421 )            (76,779 )       (21,549 )         (36,112 )
   Acquisition of ITC and related
   transaction fees                                         —                   —               (634,004 )           (634,004 )                 —                  —              —
   Change in affiliated note receivable                (72,355 )            72,355                    —                72,355                   —                  —              —
   Other                                                   304                  12                (2,000 )             (1,988 )                308                 —             229

            Net cash provided by (used
            in) investing activities                   (87,411 )            66,751              (662,809 )           (596,058 )            (76,471 )       (21,549 )         (35,883 )

Financing activities
   Issuance of long-term debt                               —                     —              891,593              891,593                   46                 —              —
   Repayment of long-term debt                              —                     —             (435,000 )           (435,000 )                 —                  —              —
   Borrowings under revolving credit
   facilities                                               —                     —                    —                     —             54,500           21,500            51,000
   Repayments of revolving credit
   facilities                                               —                     —                   —                    —               (22,000 )               —         (14,700 )
   Distributions to stockholders                            —                     —              (27,095 )            (27,095 )                 —                  —              —
   Acquisition-related debt issuance
   costs                                                    —                     —             (20,878 )             (20,878 )                 —               —                 —
   Issuance of common stock                                 —                     —             218,675               218,675                1,020             264                —
   Cash effect of assets and liabilities
   transferred to DTE Energy                                —              (36,766 )                   —              (36,766 )                 —                  —              —
   Net short-term borrowings from DTE
   Energy                                               (4,339 )                  —                   —                    —                    —               —                 —
   Other                                                    —                     —               (9,223 )             (9,223 )               (806 )          (355 )            (816 )

            Net cash provided by (used
            in) financing activities                    (4,339 )           (36,766 )            618,072               581,306              32,760           21,409            35,484

Net increase in cash and cash
equivalents                                                 (8 )                  —                8,139                8,139                5,935          (3,832 )         (10,211 )
Cash and cash equivalents—beginning
of period                                 8     —            —         —       8,139      8,139     14,074


Cash and cash equivalents—end of
period                                $   — $   — $        8,139 $   8,139 $   14,074 $   4,307 $    3,863



                                                      46
Operating Activities

     Net cash used in operating activities was $9.8 million and $3.7 million for the three months ended March 31, 2005 and 2004, respectively.
Our main source of liquidity is our cash flows generated by operating activities. We experienced negative operating cash flows for the three
months ended March 31, 2004 and 2005, as a result of the seasonality of operating revenues, as well as property taxes, interest and
point-to-point revenue refunds paid during the first quarter.

     Net cash from operating activities was $49.6 million, $22.9 million and $91.7 million for 2004, the 2003 Pro Forma Period and 2002,
respectively. Our main source of liquidity is our cash flow generated by operating activities. Excluding the changes in operating cash flows
from Predecessor ITC during the 2003 Pro Forma Period, which primarily consisted of significant non-recurring items relating to settlement of
intercompany balances prior to our acquisition of ITC from DTE Energy, operating cash flows were consistent between the 2003 Pro Forma
Period and 2004.

Investing Activities

     Net cash used in investing activities was $35.9 million and $21.5 million for the three months ended March 31, 2005 and 2004,
respectively. The majority of our cash outflows related to expenditures for PP&E.

     Net cash used by investing activities was $76.5 million, $596.1 4million and $87.4 million for 2004, the 2003 Pro Forma Period and 2002,
respectively. The majority of our cash outflow for 2004 related to expenditures for PP&E. The majority of our cash outflow for the 2003 Pro
Forma Period related to our acquisition of ITC from DTE Energy for $618.3 million, plus transaction costs of $15.7 million. Net cash used by
investing activities in 2002 included a working capital loan of $72.4 million from Predecessor ITC to DTE Energy.

     During 2004, ITC made capital expenditures of $76.8 million, primarily relating to projects that improved the transmission system
reliability or projects that reduced transmission constraints. During the 2003 Pro Forma Period, ITC made capital expenditures of
$32.4 million. The majority of these expenditures were made under the SLA. Capital expenditures for 2002 were $15.4 million.

Financing Activities

     Net cash provided by financing activities was $35.5 million and $21.4 million for the three months ended March 31, 2005 and 2004,
respectively. The amount of net cash from financing activities is attributable to borrowings under our revolving credit facilities to finance our
capital expenditures.

     Net cash from financing activities was $32.8 million for 2004 and $581.3 million for the 2003 Pro Forma Period. There were no
significant financing activities in 2002, since Predecessor ITC did not have outstanding debt.

     We manage our cash needs for capital expenditures through revolving credit facilities at both ITC Holdings and ITC. The cash inflow for
2004 represented primarily net borrowings under those revolving credit facilities. In July 2003, the original term loans borrowed in connection
with our acquisition of ITC from DTE Energy were refinanced. ITC Holdings issued $267.0 million of its 5.25% Senior Notes due July 15,
2013, or the ITC Holdings 5.25% Senior Notes, and ITC issued $185.0 million of its 4.45% First Mortgage Bonds Series A due July 15, 2013,
or the ITC Series A Mortgage Bonds. The proceeds of both issues were used to redeem the term loans used to partially finance the acquisition
and, in addition, ITC Holdings' proceeds were used in part to make a $27.1 million distribution to its stockholders, or $3.00 per share of
common stock. ITC also issued $15.0 million of its First Mortgage Bonds Series B due February 28, 2006, or the ITC Series B Mortgage
Bonds, in July 2003 in support of its revolving credit agreement. Under the terms of the ITC Series B Mortgage Bonds, ITC is only required to
make interest or principal payments on the ITC Series B Mortgage Bonds if payments are not made under ITC's revolving credit agreement.

                                                                        47
      In July 2003, ITC entered into a 2 1 / 2 -year $15.0 million revolving credit agreement with a syndicate of lenders. On September 15,
2003, ITC obtained FERC approval to issue an additional $10.0 million of long-term debt, increasing the authorized debt capacity at ITC from
$200.0 million to $210.0 million. The additional $10.0 million capacity was obtained under ITC's revolving credit agreement in January 2004
and ITC issued an additional $10.0 million of the ITC Series B Mortgage Bonds in support of its revolving credit agreement at that time.

     On February 13, 2004, ITC filed an application with the FERC to issue additional debt and/or equity securities in the amount of
$50.0 million, which increased ITC's total FERC-approved borrowing capacity to $75.0 million. On March 10, 2004, the FERC issued a letter
order authorizing the issuance of such securities subject to various terms and conditions. At December 31, 2004, ITC had $25.0 million
outstanding under its revolving credit agreement.

     In March 2004, ITC Holdings obtained capacity of $20.0 million under a three-year revolving credit agreement, subject to increase to up
to $45.0 million under certain conditions. ITC Holdings obtained an additional $10.0 million of commitments in May 2004 and another
$10.0 million of commitments in June 2004. At December 31, 2004, ITC Holdings had $7.5 million outstanding under its revolving credit
agreement.

      On January 12, 2005, ITC Holdings and a syndicate of lenders amended and restated ITC Holdings' revolving credit agreement to increase
the total commitments thereunder to $47.5 million, with an option to increase the commitments to $50.0 million subject to ITC Holdings'
ability to obtain the agreement of willing lenders. ITC Holdings' revolving credit agreement contains a $10.0 million letter of credit
sub-facility. As amended and restated, ITC Holdings' revolving credit agreement has a maturity date of March 19, 2007. At March 31, 2005,
ITC Holdings had $14.3 million outstanding under its revolving credit facility.

     On January 19, 2005, ITC and a syndicate of lenders amended and restated ITC's revolving credit agreement to increase the total
commitments thereunder to $65.0 million, with an option to increase the commitments to $75.0 million subject to ITC's ability to obtain the
agreement of willing lenders. ITC issued an additional $50.0 million of the ITC Series B Mortgage Bonds in support of its amended and
restated revolving credit agreement. As amended and restated, ITC's revolving credit agreement and the aggregate of $75.0 million of ITC's
Series B Mortgage Bonds have a maturity date of March 19, 2007. At March 31, 2005, ITC had $54.5 million outstanding under its revolving
credit facility. There were no amounts outstanding under the letter of credit.

      Borrowings under ITC's revolving credit agreement bear interest, at ITC's option, at either LIBOR plus 1.25% each year or the alternate
base rate plus 0.25% each year, which applicable spreads are subject to adjustment based on the ratings by Moody's Investor Service, Inc. and
Standard & Poor's Ratings Services applicable to ITC's First Mortgage Bonds from time to time. ITC's revolving credit agreement also
provides for the payment to the lenders of a commitment fee on the average daily unused commitments under the revolving credit agreement at
a rate equal to 0.50% each year, payable quarterly in arrears.

     Borrowings under ITC Holdings' revolving credit agreement bear interest, at ITC Holdings' option, at either LIBOR plus 1.50% each year
or the alternate base rate plus 0.50% each year, which applicable spreads are subject to adjustment based on the ratings by Moody's Investor
Service, Inc. and Standard & Poor's Ratings Services applicable to ITC Holdings' senior notes from time to time. ITC Holdings' revolving
credit agreement provides for the payment to the lenders of a commitment fee on the average daily unused commitments under the revolving
credit agreement at a rate equal to 0.375% each year and a letter of credit fee on the average daily stated amount of all outstanding letters of
credit at a rate equal to the then-applicable spread for LIBOR loans, in each case payable quarterly in arrears. ITC Holdings' revolving credit
agreement also provides for the payment to Canadian Imperial Bank of Commerce, as letter of credit issuer, of a letter of credit fronting fee on
the average daily

                                                                       48
stated amount of all outstanding letters of credit at a rate equal to 0.125% each year, payable quarterly in arrears.

    The ITC Holdings 5.25% Senior Notes, ITC Series A Mortgage Bonds and revolving credit facilities contain numerous financial and
operating covenants that place significant restrictions on, among other things, our ability to:

     •
             incur additional indebtedness;

     •
             engage in sale and lease-back transactions;

     •
             create liens or other encumbrances;

     •
             enter into mergers, consolidations, liquidations or dissolutions, or sell or otherwise dispose of all or substantially all of our assets;
             and

     •
             pay dividends or make distributions on ITC Holdings' and ITC's capital stock.

      In addition, ITC's revolving credit agreement requires ITC to maintain a ratio of total debt to total capitalization (calculated as total debt
plus total stockholder's equity) of less than or equal to 60%, and ITC Holdings' revolving credit agreement requires ITC Holdings to maintain a
ratio of total debt to total capitalization (calculated as total debt plus total stockholders' equity) of less than or equal to 85%. Both ITC and ITC
Holdings have complied with their respective total debt to total capitalization ratios over the life of the revolving credit agreements as well as
their other covenants. We do not expect that the completion of this offering will have any affect on ITC Holdings' or ITC's ability to comply
with the financial covenants described above. See "Description of Our Indebtedness."

     We rely on both internal and external sources of liquidity to provide working capital and to fund capital requirements. We expect to
continue to utilize our existing revolving credit facilities as needed to meet our cash requirements and we may secure additional funding from
either our existing equity investors or in the financial markets.

     ITC Holdings maintains credit ratings of BBB- and Baa3 and ITC maintains credit ratings of BBB+ and Baa1 by Standard and Poor's and
Moody's, respectively. In July 2004, Standard and Poor's lowered ITC's outlook from "stable" to "negative" to recognize ITC's significant use
of cash for its extensive capital and maintenance programs while operating under a rate freeze. In March 2005, Standard and Poor's revised its
outlook to "stable" from "negative" following the rate increase that occurred January 1, 2005. We believe our investment-grade credit ratings
should provide a significant degree of flexibility in obtaining funds on competitive terms. However, these credit ratings reflect the views of the
rating agencies only. An explanation of the significance of these ratings may be obtained from each rating agency. Such ratings are not a
recommendation to buy, sell, or hold debt securities, but rather an indication of creditworthiness. Any rating can be revised upward or
downward or withdrawn at any time by a rating agency if it decides that the circumstances warrant the change. Each rating should be evaluated
independently of any other rating.

                                                                          49
Reconciliation of PP&E Activity

     The following table displays the activity for gross PP&E for the period from February 28, 2003 through December 31, 2003 and for the
year ended December 31, 2004:

                                                                                                2003                    2004

                                                                                                       (in thousands)




Gross PP&E at February 28, 2003 and January 1, 2004                                     $        816,767 $                847,664
Additions to PP&E                                                                                 40,968                   81,520
Retirements of PP&E (a)                                                                          (10,071 )                 (8,260 )
Net reductions in PP&E due to proposed asset settlements with DTE Energy (b)                          —                    (5,214 )

Gross PP&E at December 31, 2003 and 2004                                                $        847,664        $         915,710



(a)
       When PP&E is replaced or otherwise disposed of, the gross book value of the retired PP&E is removed from gross PP&E.

(b)
       Subsequent to February 28, 2003, ITC Holdings and DTE Energy identified certain PP&E that was included in the February 28, 2003
       balance sheet that was not transmission PP&E and should not be included in PP&E on our balance sheet. These items reduced our gross
       PP&E balance when they were identified and recorded in 2004. These items are partially offset by transmission PP&E ITC Holdings
       and DTE Energy identified that should have been included in the February 28, 2003 balance sheet that was not included in PP&E. We
       recorded our best estimate of the outcome of these negotiations based on actual recorded balances for this PP&E.

     The following table reconciles the differences between additions to PP&E from the table above to cash expenditures for PP&E for the
period from February 28, 2003 through December 31, 2003 and for the year ended December 31, 2004:

                                                                                                  2003                    2004

                                                                                                         (in thousands)




Additions to PP&E                                                                           $           40,968 $           81,520
Change in accrued liabilities and accounts payable relating to PP&E (a)                                (14,216 )           (5,963 )
PP&E actual removal costs (b)                                                                              375              4,365
Non-cash PP&E adjustments (c)                                                                             (322 )           (3,143 )

Expenditures for PP&E in statements of cash flows                                           $          26,805       $      76,779



(a)
       PP&E additions that are unpaid as of year end are not cash expenditures for PP&E for purposes of the statement of cash flows.

(b)
       Consists of actual costs incurred for the removal of PP&E. These amounts are not included in additions to PP&E, but are included in
       cash expenditures for PP&E in the statements of cash flows. We classify accruals for future removal costs as regulatory liabilities, and
       actual removal costs incurred reduce the regulatory liability.

(c)
       Consists primarily of allowance for equity funds used in construction, which is included in additions to PP&E, but is a non-cash item, as
       well as proposed asset settlements with DTE Energy in 2004.

                                                                       50
    The following table displays the activity for accumulated depreciation and amortization for the period from February 28, 2003 through
December 31, 2003 and for the year ended December 31, 2004:

                                                                                                                  2003                        2004

                                                                                                                         (in thousands)


Accumulated depreciation and amortization at February 28, 2003 and
January 1, 2004                                                                                            $        (380,962 ) $                (388,271 )
PP&E depreciation expense                                                                                            (18,938 )                   (26,450 )
Retirements of depreciable PP&E (a)                                                                                   10,071                       8,236
Net reductions in accumulated depreciation and amortization due to proposed asset settlements
with DTE Energy                                                                                                             —                        2,603
Accrued removal costs and other (b)                                                                                      1,558                       1,856

Accumulated depreciation and amortization at December 31, 2003 and 2004                                    $        (388,271 ) $                (402,026 )



(a)
        When depreciable PP&E is replaced or otherwise disposed of, the gross book value of the retired PP&E is removed from accumulated
        depreciation and amortization.

(b)
        Consists primarily of estimated accrued removal costs that are a component of depreciation expense but are not recorded in
        accumulated depreciation and amortization. We record accruals for future removal costs as regulatory liabilities.

Contractual Obligations and Commitments

      The following table details our contractual obligations as of December 31, 2004:

                                                                                Less than              1-3                4-5                 More than
                                                               Total             1 year               years              years                 5 years

                                                                                                (in thousands)


Long-term debt:
    ITC Series A Mortgage Bonds                           $      185,000    $               —   $            —     $             —        $          185,000
    ITC revolving credit agreement                                25,000                    —            25,000                  —                        —
    ITC Holdings 5.25% Senior Notes                              267,000                    —                —                   —                   267,000
    ITC Holdings revolving credit agreement                        7,500                    —             7,500                  —                        —
    Other                                                             46                    7                22                  8                         9
Interest payments for long-term debt:
    ITC Series A Mortgage Bonds                                   70,342              8,232              24,698            16,465                     20,947
    ITC Holdings 5.25% Senior Notes                              119,772             14,017              42,053            28,035                     35,667
Operating leases                                                   2,781                771               2,010                —                          —
Deferred payables                                                  6,109              1,222               3,665             1,222                         —
Electric plant-related                                            52,009             49,894               1,164               951                         —
Minimum pension funding                                              758                758                  —                 —                          —

Total obligations                                         $      736,317    $        74,901     $      106,112     $       46,681         $          508,623

     Interest payments included above relate to our fixed-rate long-term debt. We also expect to make interest payments under our variable-rate
revolving credit agreements.

     Pursuant to the terms of the SLA, deferred payables were recorded for operation and maintenance expenses incurred by ITC under the
SLA during 2003 to the extent these expenses exceeded $15.9 million. The deferred payables were recognized as expense but payment was
deferred as a long-term payable and will subsequently be paid to Detroit Edison in five equal annual installments beginning June 30, 2005.

    The electric plant-related items represent commitments for materials, services and equipment that had not been received as of
December 31, 2004 for construction and maintenance projects for which

                                                                       51
we have an executed contract. The majority of the items relate to materials and equipment that have long production lead times.

     The minimum pension funding requirement is only estimable for 2005 as of December 31, 2004. Our minimum contribution is
$0.8 million, which is included above; however, we expect to contribute $1.6 million to the defined benefit retirement plan relating to 2004
during 2005. It is expected that there will be additional minimum funding requirements in future years.

Off-balance Sheet Arrangements

     We have no off-balance sheet arrangements.

Quantitative and Qualitative Disclosures About Market Risk

Commodity Price Risk

     ITC has commodity price risk arising from market price fluctuations for materials such as copper, aluminum, steel, oil and gas and other
goods used in construction and maintenance activities. Higher costs of these materials are passed on to ITC by the contractors for these
activities, which are a component of the tariff rate under Attachment O.

Interest Rate Risk

     ITC and ITC Holdings had been subject to interest rate risk in connection with the issuance of variable rate term loans used to partially
finance our acquisition of ITC from DTE Energy. In order to manage interest costs, ITC entered into an interest rate swap as a hedge of the
variable rate interest on the ITC term loans. In July 2003, ITC's variable rate term loan was repaid with the proceeds from the issuance of the
ITC Series A Mortgage Bonds and the interest rate swap agreement was terminated at that time. Additionally in July 2003, ITC Holdings'
variable rate term loans were repaid with the proceeds from the issuance of the ITC Holdings 5.25% Senior Notes.

     At March 31, 2005, ITC had $54.5 million outstanding under its revolving credit agreement and ITC Holdings had $14.3 million
outstanding under its revolving credit agreement, both of which are variable rate loans and therefore fair value approximates book value.

     Based on the borrowing rates currently available for bank loans with similar terms and average maturities, the fair value of the ITC
Series A Mortgage Bonds and ITC Holdings 5.25% Senior Notes was $432.7 million at March 31, 2005. The total book value of the ITC
Series A Mortgage Bonds and ITC Holdings 5.25% Senior Notes was $450.9 million at March 31, 2005. We performed a sensitivity analysis
calculating the impact of changes in interest rates on the fair value of long-term debt at March 31, 2005. An increase in interest rates of 10% at
March 31, 2005 would decrease the fair value of debt by $16.0 million, and a decrease in interest rates of 10% at March 31, 2005 would
increase the fair value of debt by $16.8 million.

Credit Risk

      Our credit risk is primarily with Detroit Edison, which was responsible for approximately 68% of our total operating revenues for 2004
and 74% of our total operating revenues for the three months ended March 31, 2005. Under Detroit Edison's current rate structure, Detroit
Edison includes the cost of transmission services provided by ITC in its billings to its customers, effectively passing through to end-use
consumers the total cost of transmission service. However, any financial difficulties experienced by Detroit Edison may affect Detroit Edison's
ability to make its payments for transmission service to ITC which could negatively impact our business. MISO, as ITC's billing agent, bills
Detroit Edison and other ITC customers on a monthly basis and collects fees for the use of ITC's transmission system. MISO has implemented
strict credit policies for its members, which include customers using ITC's

                                                                        52
transmission system. In general, if these customers do not maintain their investment grade credit rating or have a history of late payments,
MISO may require them to provide MISO with a letter of credit or cash deposit equal to the highest monthly invoiced amount over the previous
12 months.

Recent Accounting Pronouncements

     We adopted the SFAS and implemented the Financial Accounting Standards Board Interpretation, or FIN, listed below on the dates set
forth below. Except as noted below, implementation of these accounting standards has had no significant impact on our financial position,
results of operations or cash flows.

SFAS 150                   Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity
SFAS 123R                  Share-Based Payment
FIN 46R                    Consolidation of Variable Interest Entities—an Interpretation of ARB No. 51 (revised)
FIN 47                     Accounting for Conditional Asset Retirement Obligations

      SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both
liabilities and equity. SFAS 150 requires that certain financial instruments be classified as liabilities that were previously considered equity.
The adoption of this standard as of July 1, 2003, as required, had no impact on our consolidated financial statements.

     SFAS 123R requires all entities to recognize compensation expense in an amount equal to the fair value of share-based payments made to
employees, among other requirements. SFAS 123R is effective in the first reporting period beginning after December 15, 2005. We have
already adopted the expense recognition provisions of SFAS 123 for our stock-based compensation and have not concluded whether the
transition to SFAS 123R will have a material effect on our consolidated financial statements.

     FIN 46R provides guidance on the identification of entities for which control is achieved through means other than through voting rights
("variable-interest entity") and how to determine when an entity is the primary beneficiary and required to consolidate a variable interest entity.
The adoption of FIN 46R, as of January 1, 2004, had no impact on our consolidated financial statements.

      FIN 47 is an interpretation of SFAS 143, "Accounting for Asset Retirement Obligations." FIN 47 clarifies that the term "conditional asset
retirement obligation" as used in SFAS 143, refers to a legal obligation to perform an asset retirement activity in which the timing and/or
method of settlement are conditional on a future event that may or may not be within the control of the entity. An entity is required to recognize
a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. FIN 47 is
effective for us on December 31, 2005. We have not concluded whether FIN 47 will have a material effect on our consolidated financial
statements.

                                                                         53
                                                           INDUSTRY OVERVIEW

Overview

     Electricity transmission is the flow of electricity at high voltages from electricity generation resources to local distribution systems. The
FERC has a policy goal of ensuring non-discriminatory transmission access for all transmission customers. In the United States, electricity
transmission assets are predominantly owned, operated and maintained by utilities that also own electricity generation and distribution assets,
known as vertically integrated utilities. The FERC has recognized that the vertically integrated utility model inhibits the provision of
non-discriminatory transmission access and, in order to alleviate this discrimination, the FERC has mandated that all transmission systems over
which it has jurisdiction, must be operated on an arm's-length basis from any associated electricity generation operations. The FERC has also
indicated that independent transmission companies should play a prominent role in furthering its policy goals and has encouraged the legal and
functional separation of transmission operations from generation and distribution operations.

     On the basis of recent data collected by the U.S. Department of Energy, or the DOE, the U.S. electricity transmission system consists of
nearly 160,000 miles of high-voltage transmission lines and has an estimated $60 billion of net installed assets. The electricity transmission
sector has historically experienced significant underinvestment. According to the Edison Electric Institute, transmission investment made by
investor-owned utilities declined from $42.3 billion in the 10-year period from 1975 to 1984 to $29.5 million in the 10-year period from 1992
to 2001 (both in 2003 dollars), or a reduction of $12.8 billion. According to the DOE, annual electricity consumption more than doubled in the
same period, increasing from 1,747 TWh in 1975 to 3,544 TWh in 2001. The DOE expects electricity to remain the fastest growing segment of
delivered energy and projects total electricity consumption to increase by approximately 50.0% from 2003 through 2025. The disproportionate
growth in electricity generation, wholesale power sales and consumption versus transmission investment have resulted in significant
transmission constraints across the United States and increased stress on aging equipment. These problems will be exacerbated without
increased investment in transmission infrastructure.

      The blackout in August 2003 and the investigations into its causes have confirmed the need for broad-based transmission investment with
estimates ranging from $50 billion to $100 billion across the United States, according to a recent DOE study. After the blackout, the DOE
established the Office of Electric Transmission and Distribution to improve the reliability of, and to increase investment in, transmission and
distribution infrastructure.

     According to the Electric Power Research Institute, U.S. businesses lose $45.7 billion annually in foregone production due to power
outages and another $6.7 billion annually due to power quality issues. The cost of power outages includes losses of production materials and
employee productivity due to interrupted manufacturing processes. For example, cost estimates attributed to the 2003 blackout range from
$4 billion to $10 billion in the United States alone. Transmission system investments over and above maintenance-related investments can
increase system reliability and reduce the frequency of power outages. Such investments can reduce transmission constraints and improve
access to lower cost generation resources, resulting in a lower overall cost of delivered electricity for end-use consumers. Given historical
underinvestment, continued growth in demand and the costs associated with outages, we believe a significant opportunity exists to invest in
transmission infrastructure with the support of policy makers and end-use consumers.

Regulatory Environment

     Regulators and public policy makers have seen the need for further investment in the transmission grid. After the 2003 blackout, DOE has
established the new Office of Electric Transmission and Distribution, focused on working with reliability experts from the power industry, state
governments, and their Canadian counterparts to improve grid reliability and increase investment in the country's

                                                                       54
electric infrastructure. In addition, the FERC has clearly signaled its desire for substantial new investment in the transmission sector by
proposing financial incentives, such as raising the return on equity for transmission-only companies to a level that is greater than that of
traditional utilities and then implementing such an incentive in ITC's case.

      In the FERC's January 15, 2003 "Proposed Pricing Policy for Efficient Operation and Expansion of Transmission Grid," the FERC stated
that its proposed policy is to "promote competitive wholesale electric markets, reduce wholesale electric costs and improve electric reliability."
The FERC further proposed to "reward transmission owners for forming independent transmission companies or taking other measures which
make their transmission facilities operationally independent from the activities of other market participants." The FERC defines a "market
participant" as any entity that sells or brokers electricity, or provides ancillary services to ITC or MISO or any person or entity that holds 5% or
more of the voting securities of such entity or any affiliate thereof. An affiliate, for these purposes, includes any person or entity that directly or
indirectly owns, controls or holds with the power to vote 5% or more of the outstanding voting securities of a market participant. The FERC
distinguishes market participants from truly independent owners of transmission assets because of the potential for discrimination inherent in
operating a transmission system and participating in the sale of electricity in wholesale or retail markets. The FERC also proposed to "reward
transmission owners for pursuing additional measures to operate and expand the transmission grid efficiently in ways that resolve . . . system
needs using either classic transmission investment or innovative technologies."

Federal Regulation

     Background of the Federal Energy Regulatory Commission. The FERC is an independent regulatory commission within the
Department of Energy that regulates the interstate transmission and certain wholesale sales of natural gas, the transmission of oil and oil
products by pipeline, and the transmission and wholesale sale of electricity in interstate commerce. The FERC also administers accounting and
financial reporting regulations and standards of conduct for the companies it regulates.

     Federal Regulatory History. In 1996, in order to facilitate open access transmission for participants in wholesale power markets, the
FERC issued Order No. 888. The open access policy promulgated by the FERC in Order No. 888 was upheld in a United States Supreme Court
decision issued on March 4, 2002. To facilitate open access, among other things, Order No. 888 encouraged investor owned utilities, or IOUs,
to cede control over their transmission systems to Independent System Operators, or ISOs, which are not-for-profit entities.

      As an alternative to ceding operating control of their transmission assets to ISOs, increasing numbers of IOUs began to promote the
formation of for-profit transmission companies, which would assume control of the operation of the grid. In December 1999, the FERC issued
Order No. 2000, which strongly encouraged utilities to voluntarily transfer operational control of their transmission systems to Regional
Transmission Organizations, or RTOs. RTOs, as envisioned in Order No. 2000, would assume many of the functions of an ISO, but the FERC
permitted greater flexibility with regard to the organization and structure of RTOs than it had for ISOs. Unlike ISOs, RTOs could accommodate
the inclusion of independently owned, for-profit companies that own transmission assets within their operating structure. Independent
ownership would facilitate not only the independent operation of the transmission systems but also the formation of companies with a greater
financial interest in maintaining and augmenting the capacity and reliability of those systems.

     MISO was formed in 1996 as a voluntary association of electricity transmission owners consistent with the principles in FERC Order
No. 888. Later, in response to Order 2000, MISO evolved into an RTO with an open architecture framework capable of accommodating a
variety of business models including independently owned, for-profit transmission companies. On December 20, 2001, the FERC approved
MISO as the nation's first RTO. MISO, in its role as a regional transmission organization,

                                                                          55
monitors electric reliability throughout much of the Midwest — an area that encompasses more than 100,000 miles of interconnected, high
voltage transmission lines in 15 states and the Canadian province of Manitoba. MISO is responsible for more than 107,000 MW of peak load
and 132,000 MW of generation. MISO is responsible for coordinating the operation of the wholesale electricity transmission system and
ensuring fair, non-discriminatory access to the transmission grid. On April 1, 2005, MISO began centrally dispatching generation resources
throughout much of the Midwest with the launch of its Midwest Energy Markets.

    In Order No. 2000, the FERC also expressed a willingness to create financial incentives for new investment in transmission assets and to
motivate the independent ownership and operation of transmission assets.

State Regulation

     The MPSC does not have jurisdiction over ITC's rates or terms and conditions of service, but it has jurisdiction over siting of new
transmission lines. Pursuant to Michigan Public Acts 197 and 198 of 2004, ITC has the right as an independent transmission company to
condemn property in the State of Michigan for the purposes of building new transmission facilities.

     ITC is also subject to the regulatory oversight of the Michigan Department of Environmental Quality for compliance with all
environmental standards and regulations.

                                                                      56
                                                                RATE SETTING

Rate Setting and Attachment O

     Transmission Rates. ITC's revenue for transmission services is collected by charging transmission service rates that are regulated by
the FERC. ITC, ITC Holdings, IT Holdings Partnership, DTE Energy and Detroit Edison submitted a joint application seeking authorization for
the acquisition of ITC and its transmission facilities by ITC Holdings and approval of transmission rates for ITC as a stand-alone, independent
transmission company. On February 20, 2003, the FERC issued an order authorizing the acquisition, approving ITC's transmission rates and
deeming ITC independent from all market participants, as defined by the FERC. In its February 20, 2003 order, the FERC accepted ITC's
proposed return of 13.88% on the equity portion of its capital structure. ITC's proposal to use its actual capital structure, targeting 60% equity
and 40% debt, was also accepted by the FERC consistent with Attachment O which uses ITC's actual capital structure from its FERC Form 1.
Since Attachment O is a FERC-approved rate formula, no FERC filing is required to put the calculated rates into effect. The FERC, in an order
dated May 5, 2005, confirmed that ITC Holdings and ITC will remain independent of market participants after this offering, subject to the
enforcement of the restrictions on ownership and voting by market participants in ITC Holdings' Amended and Restated Articles of
Incorporation and notifications to the FERC regarding such ownership. Based on its independence from market participants, ITC will continue
to collect the 100 basis point incentive portion of its rate of return.

     In accordance with the FERC's February 20, 2003 order, ITC's billed transmission service rate was frozen at $1.075 per kW/month from
March 1, 2003 through December 31, 2004. In order to compensate ITC for the revenue foregone during the rate freeze, FERC allowed ITC to
recover the difference between the revenue ITC would have been entitled to collect using Attachment O and the actual revenue ITC received
from March 1, 2003 to December 31, 2004. At December 31, 2004, this difference, which we refer to as the revenue deferral, was fixed at
$59.7 million, which will be included in ITC's rates over the five-year period beginning June 1, 2006. The revenue deferral will be included in
the rate that would otherwise be charged under Attachment O, resulting in higher payments to ITC during this five-year period.

     Attachment O is a FERC-approved cost of service formula rate template that is completed annually by most transmission-owning
members of MISO. Rates are set annually under Attachment O and are in effect for the one-year period beginning June 1 of each year. Pursuant
to the FERC's February 20, 2003 order, on January 1, 2005, ITC began billing its then effective Attachment O transmission rate of $1.587 per
kW/month. This rate is based on financial data and load information for the year ended December 31, 2003, and will be charged for service on
the ITC transmission system for the period from January 1, 2005 through May 31, 2005. For the purpose of determining rates for the period
from June 1, 2005 through May 31, 2006, MISO will use primarily selected financial and operating data as reported on ITC's FERC Form 1 as
of and for the year ended December 31, 2004 and its network load for 2004. As a result, the Attachment O rate is based on data collected
during the year ending five months prior to the effectiveness of the Attachment O rate. To the extent that actual conditions during the 12-month
period vary from the data on which the Attachment O rate is based, ITC may recover more or less than its revenue requirement for that period.
Rates derived using Attachment O are posted on the MISO Open Access Same-time Information System on June 1 of each calendar year. The
information used to complete the Attachment O template comes from the previous calendar year's FERC Form 1 (or other pertinent financial
information), and is subject to verification by MISO. By completing the Attachment O template on an annual basis, ITC is able to adjust its
transmission rates for any variances experienced in the prior calendar year, including the amount of network load on its transmission system,
operating expenses and capital expenditures. Because Attachment O is a FERC-approved formula rate, no further action or FERC filings are
required for the calculated rates to go into effect, although the rate is subject to legal challenge at the FERC.

                                                                       57
     The Attachment O rate setting mechanism has been approved for MISO transmission owners through January 31, 2008, subject to further
extension that must be approved by the FERC.

      Revenue Calculations—Transmission Tariff Rate.            The following three steps illustrate ITC's rate plan methodology:

     Step One—Establish Rate Base and Calculate Allowed Return




     ITC's rate base is calculated at December 31 each year and consists primarily of net PP&E, an accumulated deferred income tax
adjustment, certain regulatory assets and a materials and supplies allocation; and a recovery of operating expenses, including depreciation and
amortization, and taxes. PP&E included in rate base is restricted to those assets used only for utility transmission services and includes capital
expenditures incurred and in service which are added to rate base on an annual basis. Moreover, ITC's rate base includes a regulatory asset
approved for recovery by the FERC at the time of our acquisition of ITC from DTE Energy and the revenue deferral.

     The rate base is then multiplied by ITC's weighted average cost of capital to determine the allowed return on rate base. The weighted
average cost of capital is calculated using the actual capital structure of ITC, the actual pre-tax cost of the debt portion of our capital structure
and a FERC-approved 13.88% return on the equity portion of its capital structure.

     Step Two—Calculate Revenue Requirement




     The gross revenue requirement is calculated beginning with the allowed return on rate base, as calculated in Step One above and adding
recoverable operating expenses, including depreciation and amortization and taxes.

     Step Three—Calculate Transmission Rate




                                                                          58
     After calculating the gross revenue requirement in Step Two above, ITC is required to credit certain revenues, other than network
revenues, such as point-to-point and rental revenues, which it generated during the prior year. This net amount represents revenues to be
recovered from network customers through transmission rates. This transmission rate is calculated by dividing the net amount by the prior
year's annual network load.

     Illustration of Attachment O Rate Setting. Set forth below is a simplified illustration of the calculation of ITC's monthly network and
point-to-point rates under the Attachment O rate setting mechanism for the period from January 1, 2005 through May 31, 2005, based primarily
upon ITC's 2003 FERC Form 1 data.

Line
                                      Attachment O Items                                          Instructions                       Amount
       1       Rate Base (as of December 31, 2003)                                                                            $        475,781,576
       2       Multiply by Weighted Average Cost of Capital relying on                                                                       10.81 %
               data from the 2003 FERC Form 1 (1)
        3      Allowed Return on Rate Base                                         (Line 1 × Line 2)                          $         51,431,988
        4      Recoverable Operating Expenses                                                                                 $         52,821,008
        5      Taxes and Depreciation and Amortization                                                                        $         60,917,884
        6      Allowed Return on Rate Base                                         (Line 3)                                   $         51,431,988
        7      Gross Revenue Requirement                                           (Line 4 + Line 5 + Line 6)                 $        165,170,880
        8      Less Revenue Credits                                                                                           $          3,766,551
        9      Net Revenue Requirement                                             (Line 7 – Line 8)                          $        161,404,329
       10      Divide by 2003 Network Load (in kW)                                                                                       8,474,917
       11      Annual Network and P-T-P Transmission Rate                          (Line 9 divided by Line 10)                $             19.045
       12      Monthly Network and P-T-P Transmission Rate ($/kW                   (Line 11 divided by 12)                    $              1.587
               per month)

(1)

            The weighted average cost of capital is calculated as follows:


                                                                                                                       Weighted
                                                           Percentage of ITC's                                        Average Cost
                                                           Total Capitalization                 Cost of Capital        of Capital

                             Debt                                38.95                 x    6.00%       (Pre-tax)=      2.34%

                             Equity                              61.05                 x   13.88%      (After tax)=     8.47%

                                                                100.00                                                 10.81%

Rate Setting Proceeding

     In PSC Kentucky v. FERC , decided on February 18, 2005, the U.S. Court of Appeals for the District of Columbia Circuit found that the
FERC failed to give customers adequate notice that it would add 50 basis points to the rate of return on equity used in Attachment O to
encourage participation in MISO. By its terms, the order would prohibit certain MISO transmission owners other than ITC from collecting the
50 basis point incentive component of the Attachment O formula. However, the court reached its conclusion on purely procedural grounds and
declined to address the merits of whether such an incentive, if supported by a proper record, is appropriate. The court's order is subject to
rehearing and possible discretionary review by the U.S. Supreme Court. It is too early to speculate on whether the FERC or any party adversely
affected by the order will seek further review, or will seek approval of such a 50 basis point incentive in a new FERC proceeding.

      In any case, the court's order does not apply to ITC's rates. In its February 20, 2003 order, the FERC, acting from a separate record in a
distinct case, approved a 13.88% rate of return on the equity portion of its capital structure, which was not challenged on rehearing or appeal
either in the PSC Kentucky v. FERC proceeding or in any other proceeding. As with all FERC-approved rates, ITC's rates remain subject to
challenge under Section 206 of the FPA.

                                                                                  59
                                                                     BUSINESS

Our History

     In 1996, FERC issued Order No. 888. That landmark order directed utilities to file open access transmission tariffs allowing the open use
of their transmission lines by others on a non-discriminatory basis. The first step in the formation of a truly independent, stand-alone
transmission company occurred in May 2000, when Predecessor ITC, Detroit Edison and DTE Energy filed a joint application with the FERC,
seeking permission to transfer all jurisdictional transmission assets from Detroit Edison to a subsidiary of Detroit Edison. This permission was
granted in June 2000 and Predecessor ITC became a subsidiary of Detroit Edison on January 1, 2001.

      Also in 2000, the State of Michigan enacted legislation to permit unbundled retail electric service and allow consumers a choice among
electricity generation providers. That legislation, in part, required major electric utilities, such as Detroit Edison, to join an RTO and/or divest
its transmission facilities. Michigan's effort to unbundle electric service dates back to 1994 when it first established a retail electric choice
program in Detroit Edison's and Consumers Energy Company's service territories.

     On June 1, 2001, Predecessor ITC began operations as a wholly-owned subsidiary of DTE Energy. In December of that year, Predecessor
ITC joined MISO. Predecessor ITC was the first company to join MISO under Appendix I of the MISO transmission owners agreement, which
allows independent transmission companies to claim greater control over certain functions. Consistent with the policy goals of the FERC and
the State of Michigan regarding the separation of electricity transmission from electricity generation, distribution, marketing and trading, DTE
Energy decided to undertake a corporate restructuring and to divest Predecessor ITC.

     ITC Holdings was incorporated in Michigan in November 2002 for the purpose of acquiring Predecessor ITC, and has no material assets
other than the common stock of ITC and cash on hand. The FERC-approved the sale of Predecessor ITC by DTE Energy to ITC Holdings on
February 20, 2003 and the transaction closed on February 28, 2003. After an accelerated transition period during which Detroit Edison
performed limited service-related functions for ITC, on April 8, 2004, ITC became the first independently owned and operated electricity
transmission company in the United States.

Overview

     ITC transmission facilities are located in an approximately 7,600 square mile area serving distribution customers in 13 counties in
southeastern Michigan with a population of approximately 4.9 million as of December 31, 2004. Much of ITC's service area is urban, densely
populated, and industrial. ITC's transmission system consists of:

     •
             approximately 2,700 circuit miles of overhead and underground transmission rated at 120 kV to 345 kV;

     •
             approximately 16,000 transmission towers and poles;

     •
             30 stations which connect transmission facilities;

     •
             other transmission equipment necessary to safely operate the system ( e.g. , switching stations, breakers and metering equipment);

     •
             associated land, rights of way and easements;

     •
             certain assets of our Novi, Michigan-based office space, which consist of a transmission operations control room, furniture,
             fixtures and office equipment; and

                                                                         60
     •
            the Michigan Electric Power Coordination Center, or MEPCC, located near Ann Arbor, Michigan, which provides control area
            services for all of the electrical systems of ITC and the METC.

Business Strengths

     Our strategy is aligned with the FERC's policy objective to promote needed investment in transmission infrastructure in order to enhance
competition in wholesale power markets, improve reliability and reduce system constraints to decrease the overall costs of delivered electricity.
As a result, we believe ITC's business combines the stability of a regulated utility with significant opportunities for growth through prudent
capital investment.

Stability

     •
            Supportive Regulatory Environment for Independent Transmission Companies. The FERC has allowed independent transmission
            system owners to earn incentive rates of return to encourage the separation of transmission systems from the generation and sale of
            electricity and to facilitate greater investment in transmission infrastructure. The FERC currently allows ITC, as the first
            independently owned and operated electricity transmission company in the United States, to collect in its rates a 13.88% return on
            the equity portion of its capital structure, which includes 100 basis points of additional return to reward ITC for its independent
            status.

     •
            Efficient and Predictable Rate Setting Process . The formulaic nature of ITC's rate setting mechanism enables ITC to generate
            predictable revenues and cash flows as the rates ITC charges are determined annually using actual historical data. ITC's rate setting
            process is approved by the FERC, and administered and confirmed by MISO pursuant to Attachment O, which significantly
            streamlines ITC's rate determination procedures and substantially reduces the delay between the incurrence and recovery of costs
            through rates. By contrast, most regulated investor-owned utilities endeavor to recover their investments and expenses through
            rates set by state commissions or the FERC. These proceedings are often adversarial and protracted and may delay recovery of
            costs for years with an uncertain outcome. ITC is obligated and committed to ensure that its operating and capital expenditures are
            prudent.

     •
            Minimal Weather, Commodity and Energy Demand Risk. ITC's network revenues are a product of its regulated transmission rate
            and the monthly peak network load that is connected to its transmission system. Peak network load varies with weather and the
            general demand for electricity. ITC's rates are adjusted annually to incorporate any changes in network load. If loads are reduced
            due to cool weather in a calendar year, ITC's rates would increase effective the following June 1, assuming all other conditions
            remained equal. ITC operates a transmission system and, accordingly, is not impacted by electricity commodity pricing or price
            volatility.

     •
            Attractive Service Territory . ITC is the only transmission system in its service territory, serving 13 counties in southeastern
            Michigan. ITC's service territory includes a concentration of industrial end-use consumers, including automobile manufacturers
            and suppliers. Many of these industrial consumers employ advanced manufacturing techniques that require reliable delivery of
            electricity. These consumers are receptive to transmission infrastructure projects as the cost of lost productivity resulting from poor
            reliability may far exceed the cost of reliability enhancements. ITC's service territory also includes residential and other end-use
            consumers in a densely populated urban area. These characteristics have provided ITC with operating and capital expenditure
            efficiencies that lead to relatively low operating and maintenance costs compared to more geographically dispersed transmission
            systems.

     •
            Lack of Competition. The introduction of deregulation to foster competition among power industry participants is not expected to
            have any impact on independent operators of

                                                                       61
         transmission systems. ITC's transmission system is the primary means in its service territory to transmit electricity from generators to
         distribution facilities that ultimately provide electricity to end-use consumers.

    •
            Operational Excellence . ITC's goal is to provide best-in-class system performance to better serve the needs of its customers. A
            recent study by the East Central Area Reliability Council, or ECAR, on 345 kV lines showed that ITC's system performed well
            above the system average of those surveyed. For example, in 2004 ITC's system had an average of 0.68 outages per 100 miles
            compared to the ECAR system average of 2.21. ITC's system outperformed the ECAR system average in momentary outages as
            well, experiencing 0.43 momentary outages per 100 miles compared to the ECAR system average of 2.0. ITC's goal is not only to
            outperform other transmission systems, but also to operate the most reliable, highest performing system possible. In addition to
            consistently outperforming the ECAR system average, ITC has experienced year-over-year improvement from 1.11 outages per
            100 miles in 2003 to 0.68 outages per 100 miles in 2004.

    •
            Experienced and Incentivized Management Team . Our pioneering management team identified the business opportunity for the
            formation of ITC. They have worked over the past decade with state and federal regulators to understand their policy objectives
            and to contribute to the development of the current policy framework for independent transmission companies. Our senior
            management team is comprised of individuals with an average of 22 years of utility industry experience. Much of that experience
            relates directly to ITC's transmission system. Our management and employees collectively own approximately 9.35% of ITC
            Holdings' common stock on a fully-diluted basis at March 31, 2005.

Growth

     Our growth strategy, which includes prudently investing in ITC's transmission system as well as pursuing opportunities to acquire other
transmission systems, has relatively low execution risk. No single investment project represents a material portion of our total capital
expenditure program and a significant portion of our budget is based on upgrading or replacing existing equipment, rather than building new
transmission lines with new right-of-way requirements.

    •
            Significant Prudent Investment Opportunities in ITC's Existing Transmission System . We believe that prudent capital investment
            will expand ITC's rate base and earnings potential. We intend to invest our resources to upgrade ITC's transmission system to meet
            system capacity needs, to increase reliability and to provide lower delivered electricity costs to end-use consumers. We intend to
            invest in infrastructure projects, such as replacing outdated equipment, enhancing security for transmission infrastructure,
            providing interconnection to new generation resources in the region and responding to power flows in neighboring regions that
            impact ITC's service territory. For the year ended December 31, 2004, we invested $81.5 million in ITC's transmission system,
            versus $26.4 million of depreciation and amortization. We expect to invest approximately $100 million in additional PP&E during
            2005, primarily on projects reviewed by MISO.

    •
            Pursue Opportunities to Acquire Other Transmission Systems . We intend to pursue opportunities to acquire transmission systems
            similar to ITC's in order to expand our existing service territory. Subject to applicable regulatory limitations, we will seek to
            identify attractive transmission systems and apply our business model and operating expertise across these systems to improve
            reliability, deliver lower energy costs to end-use customers and create value for our stockholders. We believe we are well
            positioned to capitalize on these opportunities given our experienced management team, our relationships with our financial
            sponsors and the ability to use our publicly traded common stock as acquisition consideration.

                                                                      62
Operations

     As a transmission-only company, ITC functions as a conduit, moving power from generators to local distribution systems either entirely
through its own system or in conjunction with other neighboring transmission systems. Detroit Edison and other third parties then transmit
power through these local distribution systems, to end-use consumers. The transmission of electricity by ITC is a central function to the
provision of electricity to residential, commercial and industrial end-use consumers. The operations performed by ITC fall into the following
categories:

     •
             asset planning;

     •
             engineering, design and construction;

     •
             maintenance; and

     •
             real time operations.

Asset Planning

      ITC is focused on identifying opportunities to reduce transmission system constraints, increase flows across its system and increase
system reliability through prudent capital investment. ITC believes that the historic under-investment in the transmission grid, coupled with an
ability to generate attractive returns on equity, will provide it with opportunities for growth.

     The planning division uses detailed system models and long-term load forecasts to develop ITC's capital expansion plan. The expansion
plan identifies projects that address potential future reliability issues and produce economic savings for customers by eliminating constraints.

     ITC works closely with MISO in the development of ITC's annual capital plan performing technical evaluations and detailed studies to
identify capital investment requirements to improve reliability or eliminate constraints on its transmission system. As the regional planning
authority, MISO reviews regional system improvement projects by its members, including ITC, and if MISO supports the projects, it
incorporates them into its regional transmission expansion plan.

Engineering, Design and Construction

      ITC's engineering, design and construction division is responsible for design, creating equipment specifications, developing maintenance
plans and project management for capital, operation and maintenance work. ITC works with outside contractors to perform some of its
engineering and design and all of its construction, but retains internal technical experts that have expertise with respect to the key elements of
the transmission system such as substations, towers and relays. This internal expertise allows ITC to effectively manage outside contractors,
keeping projects on track and minimizing costs.

     ITC's engineering, design and construction operations are handled by six sub-groups. The relay group is responsible for developing all
new designs for protective relaying and for the day-to-day monitoring of performance, development, testing, and maintenance of the protective
relay system. The tower group is responsible for all the overhead lines. Station design is responsible for designing new and existing stations and
substations, as well as leading the design for overhead and underground lines. The equipment group manages all the technical aspects,
specifications, and policies and procedures for the electric system equipment. They are also responsible for the upkeep of engineering data and
asset tracking in ITC's asset management system. Project engineering schedules and is responsible for the construction of capital projects, as
well as leading the effort to develop and track the preventative maintenance plan to help ensure a safe and reliable system. Field supervision
monitors, evaluates, and audits all work on the ITC system.

                                                                        63
Maintenance

     ITC's maintenance division develops and tracks the preventative maintenance plan to help ensure a safe and reliable system. By
performing preventative maintenance on its assets, ITC can minimize the need for reactive maintenance, which may impact reliability and
tends to be more costly than preventative maintenance. ITC contracts with Utility Lines Construction, which is a division of Asplundh Tree
Expert Co., to perform the bulk of its maintenance. We do not expect the pricing structure of the agreements with the contractors to have a
negative impact on our financial results. The agreements provide ITC with access to an experienced and scalable workforce with intimate
knowledge of the ITC system at a known cost for the five-year period ending August 28, 2008.

Real Time Operations

      Joint Control Area Operator. Under the operational control of MISO, ITC and METC operate their electricity transmission systems as
a combined control area under the MECS Control Area Agreement. The operation is performed at the MEPCC where employees of both ITC
and METC jointly perform the functions as the control area operator which include balancing loads and generation in order to ensure a supply
of electricity to customers, maintaining voltage, coordinating the use of ITC and METC transmission facilities and monitoring the flow on
critical facilities to avoid exceeding operating security limits.

     Field Operations. As part of day to day operations in ITC's operations control room located in Novi, Michigan, transmission system
coordinators analyze system conditions at all times, allowing them to react quickly to changing conditions. Transmission system coordinators
must also work with maintenance and construction crews in the field to ensure the safe and reliable operation of the grid. A key component of
this work involves scheduling outages on system elements to allow crews to safely perform maintenance and construction while maintaining
reliability for our customers.

Operating Contracts

      Detroit Edison operates the electricity distribution system to which ITC's transmission system connects. A set of three operating contracts
sets forth terms and conditions related to Detroit Edison's and ITC's ongoing working relationship. These contracts include the following:

     Master Operating Agreement. The Master Operating Agreement, or MOA, governs the primary day-to-day operational responsibilities
of ITC and Detroit Edison and will remain in effect until terminated by mutual agreement of the parties (subject to any required FERC
approvals) unless earlier terminated pursuant to its terms. The MOA identifies the control area coordination services that ITC is obligated to
provide to Detroit Edison. The MOA also requires Detroit Edison to provide certain generation-based support services to ITC.

     Generator Interconnection and Operation Agreement. Detroit Edison and ITC entered into the Generator Interconnection and
Operation Agreement, or GIOA, in order to establish, re-establish and maintain the direct electricity interconnection of Detroit Edison's
electricity generating assets with ITC's transmission system for the purposes of transmitting electric power from and to the electricity
generating facilities. Unless otherwise terminated by mutual agreement of the parties (subject to any required FERC approvals), the GIOA will
remain in effect until Detroit Edison elects to terminate the agreement with respect to a particular unit or until a particular unit ceases
commercial operation.

      Coordination and Interconnection Agreement. The Coordination and Interconnection Agreement, or CIA, governs the rights,
obligations and responsibilities of ITC and Detroit Edison regarding, among other things, the operation and interconnection of Detroit Edison's
distribution system and ITC's transmission system, and the construction of new facilities or modification of existing facilities. Additionally, the
CIA allocates costs for operation of supervisory, communications and metering

                                                                        64
equipment. The CIA will remain in effect until terminated by mutual agreement of the parties (subject to any required FERC approvals).

Billing

      MISO administers the transmission tariff under which all customers procure transmission service and, in addition, MISO is responsible for
billing and collection for transmission services in the MISO service territory. As the billing agent for ITC, MISO bills Detroit Edison, a wholly
owned subsidiary of DTE Energy whose long-term senior unsecured rating is Baa1/BBB (Moody's/S&P), and other ITC customers on a
monthly basis and collects fees for the use of ITC's transmission system. MISO has implemented strict credit policies for its members, which
include customers using ITC's transmission system. In general, if these customers do not maintain their investment grade credit rating or have a
history of late payments, MISO may require them to provide MISO with a letter of credit or a cash deposit equal to the highest monthly
invoiced amount over the previous 12 months.

Competition

     ITC is the only transmission system in its service area and, therefore, effectively has no competitors.

Employees

     As of March 31, 2005 , we had 122 employees. We consider our relations with our employees to be good.

Environmental Matters

      ITC's operations are subject to federal, state, and local environmental laws and regulations, which impose limitations on the discharge of
pollutants into the environment, establish standards for the management, treatment, storage, transportation and disposal of hazardous materials
and of solid and hazardous wastes, and impose obligations to investigate and remediate contamination in certain circumstances. Liabilities to
investigate or remediate contamination, as well as other liabilities concerning hazardous materials or contamination, such as claims for personal
injury or property damage, may arise at many locations, including formerly owned or operated properties and sites where wastes have been
treated or disposed of, as well as at properties currently owned or operated by ITC. Such liabilities may arise even where the contamination
does not result from noncompliance with applicable environmental laws. Under a number of environmental laws, such liabilities may also be
joint and several, meaning that a party can be held responsible for more than its share of the liability involved, or even the entire share.
Environmental requirements generally have become more stringent and compliance with those requirements more expensive. We are not aware
of any specific developments that would increase ITC's costs for such compliance in a manner that would be expected to have a material
adverse effect on our results of operations, financial position or liquidity.

     ITC's assets and operations also involve the use of materials classified as hazardous, toxic or otherwise dangerous. Many of the properties
ITC owns or operates have been used for power generation, transmission and distribution operations for many years, and include older facilities
and equipment that may be more likely than newer ones to contain or be made from such materials. Some of these properties include
aboveground or underground storage tanks and associated piping. Some of them also include large electrical equipment filled with mineral oil,
which may contain or previously have contained polychlorinated biphenyls (sometimes known as PCBs). ITC's facilities and equipment are
often situated close to or on property owned by others so that, if they are the source of contamination, other's property may be affected. For
example, aboveground and underground transmission lines sometimes traverse properties that ITC does not own, and, at some of ITC's

                                                                        65
transmission stations, transmission assets (owned or operated by ITC) and distribution assets (owned or operated by ITC's transmission
customer) are commingled.

     Several properties in which ITC has an ownership interest or at which ITC operates are, and others are suspected of being, affected by
environmental contamination. ITC is not aware of any claims pending or threatened against ITC with respect to environmental contamination,
or of any investigation or remediation of contamination at any properties, that entail costs likely to materially affect it. In addition, DTE Energy
has certain indemnity obligations under the stock purchase agreement relating to our acquisition of ITC with respect to environmental
conditions, including certain known or suspected environmental contamination at such properties. Some facilities and properties are located
near environmentally sensitive areas such as wetlands.

     Claims have been made or threatened against electric utilities for bodily injury, disease or other damages allegedly related to exposure to
electromagnetic fields associated with electricity transmission and distribution lines. While ITC does not believe that a causal link between
electromagnetic field exposure and injury has been generally established and accepted in the scientific community, if such a relationship is
established or accepted, the liabilities and costs imposed on our business could be significant. We are not aware of any claims pending or
threatened against ITC for bodily injury, disease or other damages allegedly related to exposure to electromagnetic fields and electricity
transmission and distribution lines that entail costs likely to have a material adverse effect on our results of operations, financial position or
liquidity.

Litigation

     Various claims and legal proceedings generally incidental to the normal course of business are pending against us. Management intends to
vigorously defend all lawsuits. The ultimate outcome of these lawsuits is not expected to have a material adverse effect on our results of
operations, financial position or liquidity.

                                                                        66
                                                                 MANAGEMENT

Directors and Executive Officers

       Set forth below are the names and titles of the directors and executive officers of ITC Holdings as of March 31, 2005.

Name                                                    Age                           Position

Lewis M. Eisenberg                                      62      Director
Joseph L. Welch                                         56      Director, President, Chief Executive Officer and
                                                                Treasurer
Daniel J. Oginsky                                       31      Vice President, General Counsel and Secretary
Edward M. Rahill                                        51      Vice President—Finance and Chief Financial
                                                                Officer
Richard A. Schultz                                      60      Vice President—Asset Planning
Linda H. Blair                                          35      Vice President—Business Strategy
Jim D. Cyrulewski                                       58      Vice President—Asset Performance
Joseph R. Dudak                                         57      Vice President—Resource and Asset
                                                                Management
Larry Bruneel                                           48      Vice President—Federal Affairs
Jon E. Jipping                                          39      Vice President—Engineering

    Lewis M. Eisenberg. Mr. Eisenberg is the sole member of Ironhill Transmission LLC. From April 1995 to December 2001, he was the
Chairman of the Board of Commissioners of the Port Authority of New York and New Jersey. From December 2001 to April 2003,
Mr. Eisenberg served as a director of the Lower Manhattan Development Corporation for which he chaired the Victims' Families and
Transportation Advisory Councils. Mr. Eisenberg is co-founder and co-chairman of Granite Capital International Group, an investment
management company. Prior to co-founding Granite Capital, Mr. Eisenberg was a general partner and co-head of the equity division of
Goldman, Sachs & Co.

     Mr. Eisenberg currently serves on the Advisory Council of Samuel Johnson Graduate School of Management at Cornell University.
Mr. Eisenberg also currently serves on the Board of Directors of Granum Value Fund. Mr. Eisenberg has been a member of the Board of
Directors of the Republican Jewish Coalition since November 1996 and a member of its Vice Chairman's Council since 1995. He served on the
National Board of Directors for American Israel Public Affairs Committee from June 1998 to April 2003. Mr. Eisenberg was a board member
of St. Barnabas Health Care System from April 1997 to April 2003 and Chairman of its Investment Committee from June 1998 to April 2003.
He also served on the Board of Trustees of Monmouth Medical Center Foundation from October 1998 to May 2003, and since then has been a
member of its honorary Board of Trustees.

       Mr. Eisenberg graduated from Dartmouth College in 1964 and received an MBA from Cornell University in 1966.

     Joseph L. Welch. Mr. Welch is Director, President, Chief Executive Officer and Treasurer. As its founder, Mr. Welch had overall
responsibility for ITC's vision, foundation and transformation into the first independently owned and operated electricity transmission company
in the United States. As president and CEO, Mr. Welch is focused on establishing ITC as a best-in-class electricity transmission company
through the implementation of innovative methods to improve reliability, reduce transmission constraints and lower the total cost of delivered
energy. During his career at Detroit Edison from 1971 to 2003, Mr. Welch has held positions of increasing responsibility in the electricity
transmission, distribution, rates, load research, marketing and pricing areas and regulatory affairs that included the development and
implementation of regulatory strategies.

                                                                        67
    Mr. Welch has a Bachelor of Science degree in Electrical Engineering from the University of Kansas and is a Licensed Professional
Engineer in the State of Michigan.

     Daniel J. Oginsky. Mr. Oginsky is Vice President, General Counsel and Secretary. Mr. Oginsky's official appointment to those
positions was effective on December 27, 2004 but his employment with us began on October 20, 2004. As Vice President and General Counsel,
Mr. Oginsky is responsible for the legal affairs of ITC Holdings and manages our legal department. From June 2002 until joining Holdings,
Mr. Oginsky was an attorney with Dykema Gossett PLLC in Lansing, Michigan. At Dykema Gossett, Mr. Oginsky represented ITC and other
energy clients, as well as telecommunications clients, on regulatory, administrative litigation, transactional, property tax and legislative matters.
Mr. Oginsky practiced state regulatory law at Dickinson Wright PLLC in Lansing, Michigan from August 2001 to May 2002. From 1999 to
2001, Mr. Oginsky was an attorney with Sutherland Asbill & Brennan LLP in Washington, D.C. At Sutherland Asbill & Brennan, Mr. Oginsky
focused on the FERC and state electric and natural gas matters on behalf of various energy clients.

     Mr. Oginsky earned his Bachelor of Arts degree, with honors, from Michigan State University (James Madison College) in East Lansing,
Michigan. He earned his Juris Doctor, with honors, from George Washington University Law School in Washington, D.C. Mr. Oginsky is a
licensed attorney in Michigan and Washington, D.C.

     Edward M. Rahill. Mr. Rahill has been Vice President—Finance and Chief Financial Officer since 2003, and has responsibility for the
financial operations and reporting, including Treasury Management, Accounting, Tax and the Financial Planning and Analysis functions for
ITC. Prior to his current position, Mr. Rahill headed the Planning and Corporate Development functions for DTE. He joined DTE Energy in
1999 as the Manager of Mergers, Acquisitions and Alliances. Mr. Rahill has over 22 years of experience in finance and accounting. Prior to
joining DTE Energy, Mr. Rahill led the Corporate Development Function for Equitable Resources. He has also held various finance and
accounting positions with Bell & Howell, Atlantic Richfield and Carborundum Corporation.

    Mr. Rahill earned an undergraduate degree from the University of Notre Dame and an MBA in Finance and a Masters Certification in
Economics from State University of New York at Buffalo.

     Richard A. Schultz. Mr. Schultz has been Vice President—Asset Planning since 2003 and is responsible for transmission planning and
system optimization for ITC. He began his career in 1968 with Detroit Edison. Over the years, Mr. Schultz held a variety of positions with
leading companies, including Florida Power and Light and Midland Cogeneration Venture. From 2000 to 2003, Mr. Schultz was Director for
Restructuring/Regulation in the Transmission Organization at Detroit Edison. From 1997 to 2000, Mr. Schultz worked for Seminole Electric
Cooperative as a Transmission Planning Engineer.

     Mr. Schultz is a graduate of the University of Michigan with a Bachelor of Science degree in Electrical Engineering. He is a Registered
Professional Engineer in the States of Michigan and Florida.

     Linda H. Blair. Ms. Blair is Vice President—Business Strategy and is responsible for managing Regulatory Affairs, Policy
Development, Internal and External Communications, Community Affairs and Human Resource functions. Ms. Blair has served in this
capacity since March 2003. From 2001 through February 2003, Ms. Blair was the Manager of Transmission Policy and Business Planning at
ITC when it was a subsidiary of DTE Energy. Prior to this time, Ms. Blair was the Supervisor of Regulatory Relations within Detroit Edison's
Regulatory Affairs organization from 1999 to 2000. In this position, her responsibilities included the development and management of all
regulatory relations and communications activities with the MPSC and the FERC. Ms. Blair joined Detroit Edison in 1994.

     Ms. Blair earned both her MBA and a Bachelor of Science degree in Public Affairs Management from Michigan State University.

                                                                         68
     Jim D. Cyrulewski. Mr. Cyrulewski has been Vice President—Asset Performance for ITC since March 2003. He is responsible for
ITC's real-time operation of transmission facilities including its Novi Operation Control Room. Mr. Cyrulewski also is responsible for the
operation of the MECS Control Area as Manager of the MEPCC, which is located in Ann Arbor. From 1999 to 2003, Mr. Cyrulewski worked
for DTE Energy as Manager of the MEPCC. From 1997 to 1999, he was Detroit Edison's Director of Power Delivery
Transactions-Transmission and was responsible for development and administration of the Detroit Edison Open Access Transmission Tariff
and Michigan Electric Coordinated Systems Joint Open Access Transmission Tariff. During his 30-year career at Detroit Edison, he also held
positions in generation engineering, planning, engineering research, power-supply transactions and worked on the Fermi 1, Fermi 2 and St.
Clair power plants, as well as the Atomic Power Development Authority.

    Mr. Cyrulewski has a Masters of Engineering and Bachelor of Science degrees in Engineering from the University of Detroit and is a
Registered Professional Engineer in the State of Michigan.

     Joseph R. Dudak. Mr. Dudak is Vice President—Resource and Asset Management. He is responsible for suppliers, capital projects,
operation and maintenance management and services for the ITC assets company-wide. From April 2001 to April 2003, Mr. Dudak was a
management consultant to energy, utility and manufacturing clients, a business he pursued after his early retirement from National Steel
Corporation in 2001. While at National Steel from 1970 to 2001, he held various executive and management positions in energy and
environmental affairs, purchasing, strategic sourcing, transportation, special projects and asset sales. Throughout his career, Mr. Dudak has
served as an active large industrial customer advocate in the utility regulatory and legislative arenas in Washington, D.C., Minnesota, Illinois,
Indiana, and especially in Michigan, in both natural gas and electricity matters, including restructuring. Mr. Dudak led the industrial group, the
Association of Businesses Advocating Tariff Equity, as Chairperson for 10 years.

    Mr. Dudak holds a Bachelor of Science degree in Mechanical Engineering Technology from Western Michigan University, an MBA from
Robert Morris University, and a lifetime Certified Purchasing Management certification.

      Larry Bruneel. Mr. Bruneel is Vice President—Federal Affairs. Located in ITC's Washington, D.C. office, Mr. Bruneel is primarily
responsible for the development of federal regulatory strategies and advocacy before the U.S. Congress and federal agencies, including the
FERC. Mr. Bruneel has more than 20 years of experience in federal energy policy issues, most recently focusing on issues affecting electric
utilities. From 1997 until joining ITC in 2003, he was the Assistant Vice President for Federal Policy at We-Energies, a combined gas and
electric utility company subsidiary of the Wisconsin Energy Corporation. From 1993 to 1997, Mr. Bruneel served as Technical Advisor to
Commissioner Vicky A. Bailey at the FERC and from 1991 to 1993, he was an Industry Policy Analyst at the U.S. Department of Energy.
Mr. Bruneel was at the Madison Public Affairs Group from 1989 to 1991, where he facilitated policy disputes under the auspices of the
Keystone Energy program and prior to that he was at the American Public Power Association. Mr. Bruneel started his energy career in 1980 at
the General Accounting Office where he investigated energy and natural resource issues for the U.S. Congress.

     Mr. Bruneel received a Bachelor of Science degree in Engineering Arts from Michigan State University. He went on to receive a Masters
of Science degree in Science, Technology and Values from Rensselaer Polytechnic Institute with a specialty in energy policy.

     Jon E. Jipping. Mr. Jipping is Vice President—Engineering and is responsible for transmission system design, maintenance and
project engineering. Prior to joining ITC in 2003, Mr. Jipping was Manager of Business Systems & Applications in Detroit Edison's Service
Center Organization, responsible for implementation and management of business applications across the distribution business unit.
Mr. Jipping joined Detroit Edison in 1990 and has held various positions of increasing

                                                                        69
responsibility in Transmission Operations and Transmission Planning, including serving as Principal Engineer and Manager of Transmission
Planning during the sale of ITC.

     Mr. Jipping earned a Bachelor of Science degree in Electrical Engineering from Calvin College and a Masters of Science degree in
Electrical Engineering, concentrating in power systems, from Michigan Technological University. He is a Registered Professional Engineer in
the State of Michigan.

Board of Directors

Composition

     Our board of directors currently consists of two directors.

     We intend to avail ourselves of the "controlled company" exception under the NYSE corporate governance rules that eliminates the
requirements that we have a majority of independent directors on our board of directors and compensation and nominating and corporate
governance committees composed entirely of independent directors. As a controlled company, we are required to have an audit committee
composed entirely of independent members and consisting of at least three members within one year of the consummation of this offering.
Consequently, we will add an independent member to our board of directors prior to the consummation of this offering, an additional
independent member within 90 days of this offering and a third independent member within one year of this offering. After giving effect to
these additions, we expect our board of directors to consist of     members.

Committees

      Audit Committee. Prior to the completion of this offering, we will form an audit committee. We plan to nominate a new independent
member to our audit committee prior to the consummation of this offering, a second new independent member within 90 days thereafter and a
third new independent member within one year thereafter to replace existing members so that all of our audit committee members will be
independent as such term is defined in Rule 10A-3(b)(i) under the Exchange Act and under the NYSE Rule 303A. In addition, one of them will
be determined to be an "audit committee financial expert" as such term is defined under the SEC rules.

      Our audit committee will be responsible for (1) selecting our independent public accountants, (2) approving the overall scope of the audit,
(3) assisting the board in monitoring the integrity of our financial statements, the independent public accountant's qualifications and
independence, the performance of the independent public accountants and our internal audit function and our compliance with legal and
regulatory requirements, (4) annually reviewing a report of the independent public accountants describing the firm's internal quality-control
procedures and any material issues raised by the most recent internal quality-control review, or peer review, of the firm, (5) discussing the
annual audited and quarterly financial statements with management and our independent public accountants, (6) discussing earnings press
releases, as well as financial information and earnings guidance provided to analysts and rating agencies, (7) discussing policies with respect to
risk assessment and risk management, (8) meeting separately, periodically, with management, internal auditors and our independent public
accountants, (9) reviewing with our independent public accountants any audit problems or difficulties and managements' response, (10) setting
clear hiring policies for employees or former employees of our independent public accountants, (11) handling such other matters that are
specifically delegated to the audit committee by the board of directors from time to time and (12) reporting regularly to the full board of
directors.

     Our board of directors will adopt a written charter for the audit committee which will be available on our website.

    Compensation Committee. Prior to the completion of this offering, we will form a compensation committee. Our compensation
committee will be responsible for (1) reviewing key employee compensation policies, plans and programs, (2) reviewing and approving the
compensation of our

                                                                        70
executive officers, (3) reviewing and approving employment contracts and other similar arrangements between us and our executive officers,
(4) reviewing and consulting with the chief executive officer on the selection of officers and evaluation of executive performance and other
related matters, (5) administration of stock plans and other incentive compensation plans and (6) such other matters that are specifically
delegated to the compensation committee by the board of directors from time to time.

     Our board of directors will adopt a written charter for the compensation committee which will be available on our website.

      Nominating and Corporate Governance Committee. Prior to the completion of this offering, we will form a nominating and corporate
governance committee. The nominating and corporate governance committee will be responsible for (1) developing and recommending criteria
for selecting new directors, (2) screening and recommending to the board of directors individuals qualified to become executive officers,
(3) overseeing evaluations of the board of directors, its members and committees of the board of directors and (4) handling such other matters
that are specifically delegated to the nominating and corporate governance committee by the board of directors from time to time.

    Our board of directors will adopt a written charter for the nominating and corporate governance committee which will be available on our
website.

2003 Stock Purchase and Option Plan

     The 2003 Stock Purchase and Option Plan, which has been approved by our stockholders, provides for the granting of equity awards,
which consist of the right to purchase shares of common stock, restricted common stock and options to purchase shares of common stock, as
well as stock appreciation rights and dividend equivalent rights, for up to an aggregate of 1,000,000 shares of ITC Holdings' common stock.
The 2003 Stock Purchase and Option Plan is administered by the compensation committee of our board of directors. The compensation
committee has the power to select the recipients of equity awards, although it may delegate to certain officers the authority to grant equity
awards and to otherwise act with respect to awards made to participants who are not officers or directors of ITC Holdings, subject to Section 16
of the Securities Exchange Act of 1934. Employees, non-employee directors, consultants and other persons having a relationship with ITC
Holdings are eligible to receive awards under the 2003 Stock Purchase and Option Plan.

     The compensation committee also has broad power to determine the terms of equity awards and to change such terms in various ways
subsequent to grant, but generally may not change such terms in a manner adverse to the grantee without the grantee's consent other than
certain adjustments made in good faith in connection with certain corporate events, such as a stock split or other change in the outstanding
common stock or a merger or other extraordinary transaction involving ITC Holdings. The board is permitted to amend or terminate the 2003
Stock Purchase and Option Plan at any time without stockholder approval, other than to increase the number of shares available under the 2003
Stock Purchase and Option Plan, decrease the price of outstanding grants, change the requirements relating to the compensation committee,
extend the term of the 2003 Stock Purchase and Option Plan or in a manner that would be materially adverse to all participants with respect to
outstanding grants. No grants may be made under the 2003 Stock Purchase and Option Plan after February 28, 2013.

     Options are granted under the 2003 Stock Purchase and Option Plan pursuant to stock option agreements. The options generally vest and
become exercisable over the passage of time at the rate of 20% per year over five years, assuming the recipient of the option continues to be
employed during such time by ITC Holdings or any if its subsidiaries, and expire on the tenth anniversary of the date of the grant. The purchase
price of the shares subject to each currently outstanding option is greater than or equal to the fair market value of the shares on the date of the
grant of the option. In addition, the options automatically become exercisable immediately prior to a change of ownership of ITC Holdings (as
defined in the 2003 Stock Purchase and Option Plan) as to 100% of the shares subject to the

                                                                        71
option. The options expire earlier in the event of the termination of the option holder's employment, certain change in ownership events, or a
termination of the option pursuant to the Management Stockholder's Agreement.

      Restricted stock is also granted under the 2003 Stock Purchase and Option Plan pursuant to restricted stock award agreements. The
restricted stock grants generally vest five years after the date of grant, assuming the grantee continues to be employed by ITC Holdings or any
of its subsidiaries during such time. Restricted stock becomes 100% vested immediately upon a change of ownership of ITC Holdings (as
defined in the 2003 Stock Purchase and Option Plan). In addition, restricted stock will become vested upon termination of the recipient's
employment with ITC Holdings if termination is by ITC Holdings without cause or by the recipient for good reason (as such terms are defined
in the restricted stock award agreements). However, if the recipient's employment is terminated due to the recipient's death or permanent
disability (as defined in the restricted stock award agreements), any unvested restricted stock will only become vested in increments of 20% of
such stock in respect of each anniversary of the date of the grant on which the recipient was employed by ITC Holdings prior to his or her death
or permanent disability. If the recipient's employment is terminated by ITC Holdings for cause or by the recipient without good reason, any
unvested restricted shares will be forfeited.

Dividend Equivalent Rights Plan

     This plan was adopted by the stockholders of ITC Holdings on August 21, 2003. This plan currently allows all employees of ITC
Holdings who hold options to purchase shares of ITC Holdings common stock the opportunity to participate in any dividends otherwise
payable to ITC Holdings stockholders. Under this plan, ITC Holdings establishes bookkeeping accounts for each participant, to which cash
amounts are credited upon the payment of any cash or non-common stock dividends. For cash dividends, the amount that is credited to each
participant's account is equal to the per share dividend amount, multiplied by the number of shares of ITC Holdings common stock that is
subject to any unexercised options held by the participant (whether such options are vested or unvested) at the time the dividend is paid. For
dividends that are paid in the form of ITC Holdings common stock, the amount that is credited to each participant's account is equal to the per
share fair market value of the stock dividend being paid, multiplied by the number of shares of ITC Holdings common stock that is subject to
any unexercised options held by the participant (whether such options are vested or unvested) at the time the dividend is paid. Under the plan,
the participants' account balances are treated as being invested in certain investment alternatives, and any gains or losses on such deemed
investments are credited to each participant's plan account accordingly. Plan participants are fully vested at all times in all amounts held in their
plan accounts.

     Under the plan, participants' accounts are payable in cash only upon the earliest to occur of (1) the fifth anniversary of the date the
participant was first granted an option on ITC Holdings' common stock, (2) the participant's death or permanent disability, (3) a change of
ownership of ITC Holdings (as such term is defined in the plan) or (4) termination of the plan. Participants' accounts under the plan are also
payable pro rata upon the sale or other disposition by the IT Holdings Partnership of any portion of its ITC Holdings common stock, based on
the percentage of ITC Holdings common stock being sold by the IT Holdings Partnership relative to the total number of shares of ITC Holdings
common stock held by the IT Holdings Partnership, on a fully diluted basis, at the time of such sale.

      When ITC Holdings made a distribution in August 2003, the board of directors authorized compensation under the plan to all option
holders in an amount equivalent to the per share distribution with respect to vested and unvested options, as well as shares of common stock,
that they owned on that date. If and when our board of directors declares and pays a dividend on our common stock, pursuant to our Dividend
Equivalent Rights Plan, amounts equivalent to the dividend will be credited to the accounts of participants in our Dividend Equivalent Rights
Plan in respect of each share

                                                                         72
of common stock subject to the vested and unvested options that such participants hold at that time, unless our board of directors determines
otherwise.

     This plan is administered, and may be amended or terminated at any time, by the compensation committee of the board of directors of ITC
Holdings. ITC Holdings' obligations under this plan are funded through a grantor trust established by ITC Holdings. As of December 31, 2004,
the aggregate amount of all plan participants' account balances equaled approximately $1.9 million.

Compensation of Directors and Executive Officers

     Director Compensation. Except as described below under "—Partnership Director Compensation," we do not currently pay any
compensation to any of our directors for serving as a director or as a member or chair of a committee of the board of directors. We expect to
add an independent director prior to the consummation of this offering, another independent director within three months after the
consummation of this offering and a third independent director to our board within 12 months after the consummation of this offering. We plan
to pay our independent directors an annual cash retainer of $         and a fee of $      for each board meeting and each committee meeting
attended. We may also pay them a fee for acting as committee chair and we may grant them stock options and/or restricted stock awards under
the 2003 Stock Purchase and Option Plan.

     Partnership Director Compensation. ITC Holdings, ITC and the IT Holdings Partnership entered into a partnership services letter
agreement whereby the IT Holdings Partnership or its designee performs certain management, consulting, and financial services, which
includes participation on the board of directors. The IT Holdings Partnership designated Lewis M. Eisenberg to the board of directors.
Mr. Eisenberg earned $200,000 in 2004 relating to this agreement. Prior to the offering we will terminate our agreement with Mr. Eisenberg in
exchange for a one-time payment of $1.0 million to the General Partner. After the offering, Mr. Eisenberg will receive the same retainer and
fee as our independent directors.

    Executive Compensation. We have established or will establish compensation plans for our executive officers that will link
compensation with our performance including the Deferred Compensation Plan and the Short-Term Incentive Compensation Plan described
below. We will continually review our compensation programs to ensure that they are competitive.

     Summary Compensation Table. The following table sets forth information, for the fiscal year ended December 31, 2004, with respect
to the compensation of our Chief Executive Officer, each of our four other most highly compensated executive officers who were serving as
executive officers on December 31, 2004 and one executive officer who was not serving as an executive officer on December 31, 2004, but
who would otherwise have been one of our four most highly compensated officers. These six executive officers are collectively referred to as
the "named executive officers."

                                                                       73
                                                          Summary Compensation Table

                                                                                                         Long-term
                                                            Annual Compensation                      Compensation Awards

                                                                                                                 Securities
                                                                             Other Annual         Restricted     Underlying        All Other
                                                 Salary                      Compensation           Stock         Options        Compensation
Name and Principal Position                        ($)        Bonus ($)         ($)(1)            Awards($)         (#)              ($)(9)

Joseph L. Welch
Director, President, Chief Executive Officer
and Treasurer                                    361,981       296,800             150,848 (2)             —               —             21,756

Edward M. Rahill
Vice President—Finance and Chief
Financial Officer                                198,326         80,674              35,861 (3)            —               —             20,586

Larry Bruneel
Vice President—Federal Affairs                   184,171         74,520              23,160 (4)            —               —             21,014

Linda H. Blair
Vice President—Policy and Business
Development                                      170,283         69,630              31,319 (5)            —               —              9,792

Joseph R. Dudak
Vice President—Resource and Asset
Management                                       169,189         68,640              52,996 (6)            —               —             38,645

John H. Flynn(8)
Former Vice President, General Counsel
and Secretary                                    166,269         66,000              34,146 (7)            —               —             83,063


(1)
        Other annual compensation includes amounts for perquisites such as auto allowance and expenses, financial planning, income tax return
        preparation, social clubs and home security, as well as reimbursements for income tax gross-ups related to the inclusion of the value of
        the payment by ITC Holdings of certain perquisites. Perquisites with an incremental cost to ITC Holdings of more than 25% of the total
        other annual compensation for the named executive officers are separately itemized in the footnotes below.

(2)
        Includes country club initiation fee and monthly dues of $66,676 and reimbursement for income tax gross-ups related to the inclusion of
        the value of the payment by ITC Holdings of certain perquisites of $52,205.

(3)
        Includes auto allowance and related expenses of $14,751.

(4)
        Includes auto allowance and related expenses of $13,434.

(5)
        Includes auto allowance and related expenses of $13,998.

(6)
        Includes auto allowance and related expenses of $14,513, financial planning of $14,500 and reimbursement for income tax gross-ups
        related to the inclusion of the value of the payment by ITC Holdings of certain perquisites of $17,027.

(7)
        Includes auto allowance and related expenses of $13,605.

(8)
Mr. Flynn resigned from his position as Vice President, General Counsel and Secretary of ITC Holdings effective December 31, 2004.

                                                             74
(9)
       All other compensation includes the following amounts:


                                                                                          Executive
                                              Relocation                                   Defined
                                              Assistance         401K Match              Contribution              Termination
Name                                             ($)                 ($)                   Plan($)                Payments($)(10)             Total($)

Joseph L. Welch                                         —                 12,135                     9,621                        —             21,756
Edward M. Rahill                                        —                 10,329                    10,257                        —             20,586
Larry Bruneel                                           —                 10,251                    10,763                        —             21,014
Linda H. Blair                                          —                  9,792                        —                         —              9,792
Joseph R. Dudak                                     16,928                12,037                     9,680                        —             38,645
John H. Flynn                                           —                  7,147                    11,067                    64,849            83,063

(10)
       Pursuant to Mr. Flynn's termination agreement, ITC Holdings paid Mr. Flynn $2,528 in vacation pay and $62,321 in lieu of certain
       other benefits to which he had been entitled under his employment agreement with ITC Holdings.

     Option Grants in Last Fiscal Year.    There were no individual grants of stock options made during 2004 to any of the named executive
officers.

    Option Holdings. The following table sets forth information concerning the value of unexercised options held by each of the named
executive officers as of December 31, 2004. There were no exercises during 2004 by the named executive officers. The dollar values of
unexercised in-the-money options were determined using the Black-Scholes pricing model. Assumptions used for stock option value of $18.35
was as follows: expected volatility of 30.3%, risk-free interest rate of 3.2%, exercise price of $25.00, dividend yield of 0%, fair value of
underlying shares of $39.77 and expected lives of 3.2 years.


                          Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values

                                                                  Number of Securities Underlying                     Value of Unexercised
                                                                            Unexercised                              In-the-Money Options
                                                                  Options at December 31, 2004(#)                   at December 31, 2004($)

Name

                                                                 Exercisable         Unexercisable           Exercisable             Unexercisable

Joseph L. Welch                                                       36,000                144,000      $         660,671      $             2,642,685

Edward M. Rahill                                                        6,000                 24,000               110,112                     440,447

Larry Bruneel                                                           3,200                 12,800                58,726                     234,905

Linda H. Blair                                                          6,000                 24,000               110,112                     440,447

Joseph R. Dudak                                                         3,200                 12,800                58,726                     234,905

John H. Flynn (1)                                                       6,000                        —             110,112                               —


(1)
       Mr. Flynn resigned from his position as Vice President, General Counsel and Secretary of ITC Holdings effective December 31, 2004.



     Pension Plans. ITC maintains a defined benefit retirement plan for eligible employees, comprised of a traditional pension plan and a
cash balance plan. ITC has also established two supplemental nonqualified, noncontributory, unfunded retirement benefit plans for selected
management employees. The plans provide for benefits that supplement those provided by ITC's defined benefit retirement plan.

                                                                     75
      Under the traditional final average pay portion of the defined benefit plan, retirement benefits payable as a life annuity at the normal
retirement age of 65 are based on a participant's average final compensation and years of service multiplied by certain specified percentages. A
participant's average final compensation is equal to one-fifth of the participant's 260 highest compensation weeks of credited service with ITC.
For this purpose, a participant's compensation is defined as the participant's base salary, exclusive of bonuses, overtime, and fringe benefits, but
includes the participant's salary reduction contributions made by the participant to the ITC Holdings tax-qualified defined contribution plan.
Participants in the traditional pension plan become vested after five years of service. Benefits payable under the traditional final average pay
portion of the defined benefit plan are not subject to offset for Social Security or other benefits. There is no lump sum payment option for this
benefit.

      The following table shows the estimated annual pension benefits payable at normal retirement age to plan participants under the traditional
final average pay portion of the defined benefit plan, based on compensation that is covered under the plan.


                                            PENSION PLAN TABLE—ANNUAL PENSION BENEFIT
                                                             (in Dollars)

                                                                              Years of Service

                  Average Final
                  Compensation                15                 20                  25                 30                  35

                        $125,000        $     28,125       $      37,500       $      46,875       $     56,250       $      65,000
                         150,000              33,750              45,000              56,250             67,500              78,000
                         175,000              39,375              52,500              65,625             78,750              91,000
                         200,000              45,000              60,000              75,000             90,000             104,000
                         210,000              47,250              63,000              78,750             94,500             109,200

     Mr. Rahill is the only named executive officer who participates in the traditional final average pay portion of the defined benefit plan. The
covered annual compensation for Mr. Rahill under this plan is $210,000, the maximum amount permitted to be taken into account for purposes
of calculating his annual pension benefit in 2005 under federal tax law. He currently has six years of credited service and is vested in his
benefits under the plan.

      For participants (which include the named executive officers other than Mr. Rahill) in the cash balance portion of the defined benefit plan,
a participant's plan account is credited with two amounts at the close of each year of participation in the defined benefit plan. First, there is a
credit of 7% of the participant's total compensation earned for the year. For this purpose, a participant's compensation includes a participant's
base salary and bonuses, as well as any elective salary reduction contribution made by the participant to ITC Holdings' 401(k) plan. However,
this plan does not consider annual compensation in excess of the maximum amount permitted to be taken into account for purposes of
calculating this contribution amount under federal tax law ($210,000 for 2005). Second, each participant's plan account as of January 1 of each
year is credited with interest at an assumed rate equal to the 30-year U.S. Treasury bond rate in effect for September of the previous year. The
effective rate used to determine participants' interest credits on January 1, 2004 was 5.14% and the rate used on January 1, 2005 was 4.90%.

      Participants in the cash balance portion of the defined benefit plan are entitled to a lump sum distribution of their plan account upon
retirement or may elect to have this balance transferred to one of several lifetime annuity options using the plan's stated actuarial assumptions
for the age at which payments are to begin. Benefits payable under the cash balance portion of the defined benefit plan are not offset for Social
Security or other benefits.

                                                                        76
      ITC has also established two supplemental nonqualified, noncontributory, unfunded retirement benefit plans for selected management
employees. First, ITC has established the Management Supplemental Benefit Plan for Mr. Welch, which entitles him to receive a supplemental
pension benefit from ITC Holdings if the sum of his pension benefits under the cash balance portion of the plan and certain other retirement
benefits to which he is entitled under retirement plans of his prior employer, DTE Energy, do not equal a target percentage of his final average
compensation. For this purpose, Mr. Welch's compensation includes his base salary and bonuses, and the target percentage is determined by
years of service. Benefits payable under this plan are not offset by Social Security or any other benefits. The current estimated lump sum and
annual lifetime benefits payable to Mr. Welch under this agreement are included in the amounts set forth in the table below. Mr. Welch is not
entitled to receive a lump sum payment of his supplemental pension benefit under the plan.

      The named executive officers other than Mr. Welch are also entitled to receive a supplemental pension benefit from ITC Holdings. At the
close of each year of participation in this supplemental plan, each officer's supplemental pension plan account is credited with two amounts.
First, there is a credit of 9% of the participant's total compensation earned for the year. For this purpose, compensation includes a participant's
base salary, plus bonuses, as well as any elective salary reduction contribution made by the participant to ITC Holdings' 401(k) plan. Second,
each participant's plan account as of January 1 of each year is credited with interest at an assumed rate equal to 9.5%. Benefits payable under
this plan are not offset by Social Security or any other benefits.

     Estimated lump sum benefits and annual lifetime annuity amounts payable at age 65 to each of the named executive officers, based on
projected future earnings and interest rates as of December 31, 2004, are as follows:

                                                                             Projected Lump Sum Balance        Alternative Annual
              Name                                                              Plan Benefit at Age 65          Benefit at Age 65

              Joseph L. Welch                                                $               5,959,028    $                  561,568
              Edward M. Rahill                                                                 818,152                        57,129
              Larry Bruneel                                                                  1,487,801                       109,623
              Linda H. Blair                                                                 5,068,890                       359,353
              Joseph R. Dudak                                                                  486,479                        37,166
              John H. Flynn(1)                                                                 414,531                        31,962


(1)
       Mr. Flynn resigned from his position as Vice President, General Counsel and Secretary of ITC Holdings effective December 31, 2004.

      The amounts in the table above represent aggregate amounts payable under the qualified cash balance portion of the defined benefit
retirement plan and the nonqualified supplemental pension plans, to each of the named executive officers other than Mr. Rahill. The amounts
payable to Mr. Rahill under the traditional final average pay portion of the defined benefit retirement plan have been excluded, but see the
discussion of the calculation of such amounts above. Supplemental pension plan benefits included in the annual benefit amount in the table
above represent amounts payable in the first year only. Annual benefit payments for all of the named executive officers except Mr. Welch
would increase from year to year based on interest earned on the unpaid balance of their pension plan accounts. All annual benefits are
normally payable as life annuities, except that Mr. Welch's supplemental pension plan benefit is normally payable as a 15-year certain and life
annuity.

Employment Agreements

     Prior to the completion of this offering, ITC Holdings contemplates entering into employment agreements with each of Messrs. Welch,
Schultz, Rahill, Jipping, Oginsky, Cyrulewski, Bruneel and Dudak and Ms. Blair. The employment agreements are substantially similar to each
other, with the exceptions described below.

                                                                        77
    Each of the employment agreements has an initial term of employment of two years and is subject to automatic one-year employment term
renewals thereafter unless either party provides the other with 30 days advance written notice of intent not to renew the employment term.
Under the employment agreements, Mr. Welch reports to our board of directors and all of the other executives report to Mr. Welch.

      The employment agreements also state each executive's current annual base salary, which will be subject to annual review and increase by
our board of directors in their discretion. The employment agreements also provide that the executives are eligible to receive an annual cash
bonus, subject to our achievement of certain performance targets established by our board of directors. The target annual bonuses stated in the
employment agreements are as follows: (1) Mr. Welch, 100% of his base salary; (2) Messrs. Rahill, Schultz and Jipping and Ms. Blair, 80% of
their base salary; and (3) Messrs. Oginsky, Cyrulewski, Bruneel and Dudak, 40% of their base salary.

      The employment agreements also provide the executives with the right to participate in certain welfare and pension benefits, including the
right to participate in certain tax qualified and non-tax-qualified defined benefit and defined contribution plans and a retiree welfare benefit
plan. Mr. Welch's employment agreement also acknowledges that he is entitled to receive benefits under the supplemental pension plan
(described above) that is maintained for him.

     If the executives' employment with ITC Holdings is terminated without cause by ITC Holdings or by the executive for good reason (as
such terms are defined in the employment agreements), the executives will receive:

     •
            any accrued but unpaid compensation and benefits;

     •
            continued payment during a specified severance period (as described below) of the executive's annual rate of base salary (plus, for
            Mr. Welch only, an amount equal to the average of each of the annual bonuses that were payable to him for the three fiscal years
            immediately preceding the fiscal year in which his employment terminates, commencing on the earliest date that is permitted under
            the new Section 409A of the Internal Revenue Code of 1986, as amended, or the Code (relating to the taxation of deferred
            compensation));

     •
            continued coverage under our active health and welfare plans for the specified severance period and outplacement services for at
            least one year; and

     •
            (1) for Messrs. Welch and Rahill and Ms. Blair only, deemed satisfaction of the eligibility requirements of our retiree welfare
            benefit plan for purposes of participation therein; and (2) for the other executives, participation in our retiree welfare benefit plan
            only if, by the end of their specified severance period, they have achieved the necessary age and service credit otherwise necessary
            to meet the eligibility requirements.

In addition, if we terminate our retiree welfare benefit plan and, by application of the provisions described in the prior sentence, the executives
would otherwise be entitled to retiree welfare benefits, the executives will receive a cash payment to the executives equal to our cost of
providing such benefits, in order to assist the executives in obtaining other retiree welfare benefits.

     The specified severance period referenced above is two years for each of Messrs. Welch, Rahill, Schultz and Jipping and Ms. Blair and
one year for each of Messrs. Oginsky, Cyrulewski, Bruneel and Dudak.

      In addition, while employed by ITC Holdings and (1) for Messrs. Welch, Rahill, Schultz and Jipping and Ms. Blair, (x) for a period of two
years after any termination of employment without cause by ITC Holdings (other than due to their disability) or for good reason by them, and
(y) for a period of one year following any other termination of their employment and (2) for Messrs. Oginsky, Cyrulewski, Bruneel and Dudak,
for a period of one year following any termination of their

                                                                        78
employment, the executives will be subject to certain covenants not to compete with or assist other entities in competing with our business and
not to encourage our employees to terminate their employment with us. At all times while employed and thereafter, the executives will also be
subject to a covenant not to disclose confidential information.

Executive Compensation Plans

     Short-Term Incentive Plan. Prior to the completion of this offering, ITC Holdings contemplates adopting a short-term cash incentive
plan, designed to provide certain of our employees, including the executive officers, with incentive compensation, on an annual or other
short-term basis, based upon the achievement of pre-established performance goals. The annual incentive plan is designed to comply with the
performance-based compensation exemption from Section 162(m) of the Code during any period during which Section 162(m) of the Code is
applicable. The incentive plan will be administered by the compensation committee of our board of directors, which will have the authority to
identify the individuals who will be eligible to receive an award under the plan and award bonuses under the plan.

      In the event that the bonuses are awarded to employees covered by Section 162(m) of the Code during any period during which
Section 162(m) of the Code is applicable, ITC Holdings contemplates that bonuses will be payable to such employees only upon the
achievement of certain pre-established performance goals, which will be based on one or more of the following criteria, as determined by the
committee: (1) earnings before or after taxes (including earnings before interest, taxes, depreciation and amortization); (2) net income;
(3) operating income; (4) earnings per share; (5) book value per share; (6) return on shareholders' equity; (7) expense management; (8) return
on investment before or after the cost of capital; (9) improvements in capital structure; (10) profitability of an identifiable business unit or
product; (11) maintenance or improvement of profit margins; (12) stock price; (13) market share; (14) revenues or sales; (15) costs; (16) cash
flow; (17) working capital; (18) return on assets; and (19) changes in net assets. The foregoing criteria may relate to ITC Holdings, one or more
of its subsidiaries or one or more of its divisions or units, all as the committee shall determine. The incentive plan will also impose a limit on
the maximum amount of any bonuses that a participant in the plan may receive under the plan with respect to any given fiscal year.

      Deferred Compensation Plan. ITC Holdings maintains the Deferred Compensation Plan, which provides all executive officers of ITC
Holdings with the opportunity to defer receipt of certain compensation into a bookkeeping account established under the plan for each
participant. For this purpose, compensation includes all wages, including base salary, bonuses, and any other taxable or deferred compensation
earned by a participant. Also under the plan, ITC Holdings is required to credit to the participants' accounts certain "make whole" contributions
in respect of benefits lost under the ITC Holdings tax-qualified defined contribution and defined benefit plans in which the Deferred
Compensation Plan participant participates, due to such participant's election to defer certain amounts into the Deferred Compensation Plan.
Under the plan, all such deferred compensation is treated as being invested in certain investment alternatives, and any gains or losses on such
deemed investments are credited to each participant's plan account accordingly. Deferred Compensation Plan participants are fully vested at all
times in all amounts held in their plan accounts.

     Under this plan, account balances can be distributed upon the earliest to occur of the participant's termination, reaching normal retirement
age, becoming disabled or experiencing a financial hardship or a change in control of ITC Holdings (as all such terms are defined in the plan).
The Deferred Compensation Plan may be amended or terminated at any time by the board of directors.

    ITC Holdings' obligations under the Deferred Compensation Plan are funded through a grantor trust established by ITC Holdings.
Currently, the only participants in this plan are Mr. Welch and Mr. Flynn, and the aggregate liability under this plan as of December 31, 2004
was approximately $0.4 million.

                                                                       79
                                                  PRINCIPAL AND SELLING STOCKHOLDERS

      The following table sets forth information as of March 31, 2005 with respect to the beneficial ownership of our common stock before and
after this offering by:

      •
               each person who beneficially owns more than 5% of our common stock;

      •
               each of our directors and named executive officers; and

      •
               all of our directors and executive officers as a group.

     Unless otherwise indicated, the address of each person named in the table below is c/o ITC Holdings Corp., 39500 Orchard Hill Place,
Suite 200, Novi, Michigan 48375.

                                                                                                                Percentage After
                                                                                                                  this Offering

                                               Beneficial Ownership
                                                of Common Stock

                                                                                   Shares of       Without Exercise            With Exercise
                                                                                Common Stock       of Underwriters'           of Underwriters'
                                                                                 Being Sold in     Over-Allotment             Over-Allotment
                                                                                 the Offering          Option                     Option

                                                             Percentage
                                                             Prior to this
Name of Beneficial Owner                  Number(1)           Offering

International Transmission
Holdings Limited Partnership(2)            8,860,206                   94.1 %
Lewis M. Eisenberg(3)                      8,860,206                   94.1 %
Joseph L. Welch                              132,000                    1.4 %
Edward M. Rahill                              24,000                      *
Larry Bruneel                                 14,400                      *
Linda H. Blair                                22,000                      *
Joseph R. Dudak                               14,400                      *
John H. Flynn(4)                              16,000                      *
All directors and executive
officers as a group
(10 persons)(3)                            9,136,224                   97.0 %


*
          Less than one percent.

(1)
          The amounts and percentages of our common stock beneficially owned are reported on the basis of regulations of the SEC governing
          the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a "beneficial owner" of a
          security if that person has or shares "voting power," which includes the power to vote or to direct the voting of such security, or
          "investment power," which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a
          beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Under these rules,
          more than one person may be deemed to be a beneficial owner of such securities as to which such person has an economic interest.



          The column includes shares of common stock that the individual had the right to acquire on March 31, 2005 or within 60 days thereafter
          pursuant to stock options, as set forth below.


                            Name                                                                             Option Shares
                       Joseph L. Welch                                                                  72,000
                       Edward M. Rahill                                                                 12,000
                       Larry Bruneel                                                                     6,400
                       Linda H. Blair                                                                   12,000
                       Joseph R. Dudak                                                                   6,400
                       John H. Flynn                                                                     6,000
                       All directors and executive officers as a group (10 persons)                    141,200

(2)
      The "Limited Partners" of the IT Holdings Partnership are the KKR partnerships (KKR Millennium Fund, L.P. and KKR Partners III,
      L.P. (Series A)), the Trimaran partnerships (Trimaran Fund II, L.L.C.,

                                                                    80
      Trimaran Parallel Fund II, L.P., Trimaran Capital, L.L.C., CIBC Employee Private Equity Fund (Trimaran) Partners and CIBC MB Inc.)
      and Stockwell Fund, L.P. (an entity formed to make direct investments for certain State of Michigan retirement funds), Ironhill
      Transmission LLC (the sole member of Ironhill Transmission, LLC is Lewis M. Eisenberg) is the General Partner of the IT Holdings
      Partnership. See "Summary—Ownership Structure."

(3)
        Includes 8,860,206 shares beneficially owned by the IT Holdings Partnership. Mr. Eisenberg is the sole member of Ironhill
        Transmission, LLC, which is the General Partner of the IT Holdings Partnership.

(4)
        Mr. Flynn resigned from his position as Vice President, General Counsel and Secretary of ITC Holdings effective December 31, 2004.

                                                                      81
                                CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

       The following is a brief summary of the material agreements we have entered into with our current and former stockholders as amended
prior to the completion of this offering. The descriptions below are summaries and should not be relied upon as a complete description of all
the various terms and provisions of these agreements. We will file copies of these agreements as exhibits to the registration statement of which
this prospectus forms a part.

The IT Holdings Partnership

IT Holdings Partnership Agreement

     Prior to our acquisition of ITC from DTE Energy, the General Partner, the KKR partnerships and the Trimaran partnerships formed the IT
Holdings Partnership to facilitate their investment in ITC Holdings. Under the terms of the IT Holdings partnership agreement as amended
upon completion of this offering, the General Partner will have the exclusive and complete authority and discretion to manage the day-to-day
operations and affairs of the IT Holdings Partnership and to make all decisions regarding the business of the IT Holdings Partnership. However,
the IT Holdings partnership agreement will contain restrictions on the ability of the General Partner to take (or permit ITC Holdings and ITC to
take) limited actions with respect to us and our business, except with the approval of a majority in interest or, in some cases, three-fourths in
interest, of the Limited Partners. In particular, following the offering, ITC Holdings and ITC may not, without the required approval of the
Limited Partners, among other things:

     •
            create any additional class, or issue or sell equity interests, of the IT Holdings Partnership (or any warrants, options or rights to
            acquire such equity interests or securities convertible into or exchangeable for such equity interests);

     •
            amend, modify or repeal any provision of the formation or organizational documents of the IT Holdings Partnership or any of its
            subsidiaries in a manner adverse to the Limited Partners;

     •
            initiate, settle or compromise certain suits in which any amount is claimed by or against the IT Holdings Partnership or that would
            require the IT Holdings Partnership to be subject to equitable relief or to take or refrain from taking any material action;

     •
            take any material action with respect to any transaction that results in actual or potential conflicts of interest that arise with the
            General Partner or any of the Limited Partners (and their respective affiliates); or

     •
            take (or fail to take) any action that would result in a Limited Partner (or its affiliates) (1) being deemed to be engaged in a trade or
            business for U.S. federal tax purposes or having unrelated business taxable income for U.S. federal tax purposes, (2) being deemed
            to be a holding company, subsidiary company or an affiliate of a public-utility company under PUHCA or any similar legislation,
            or as a public utility under the FPA or (3) being subject to any other federal or state regulation that would have an adverse effect on
            the Limited Partners or any of their affiliates (in addition to this provision, a majority in interest of the Limited Partners may, at
            any time, direct the General Partner to take reasonable actions to preclude the foregoing regulatory events).

      The IT Holdings partnership agreement will also provide that certain of the Limited Partners have the right to attend meetings of the
boards of directors of ITC Holdings and ITC and receive information provided to the directors and notice of certain significant events. The
Limited Partners have agreed to take reasonable steps to maintain the confidentiality of any non-public information concerning ITC Holdings
or its subsidiaries.

                                                                         82
Registration Rights Agreement

     In connection with the acquisition, the IT Holdings Partnership entered into a Registration Rights Agreement with ITC Holdings. Pursuant
to the Registration Rights Agreement, the IT Holdings Partnership has the right to require ITC Holdings to effect an unlimited number of
registrations of ITC Holdings' common stock. ITC Holdings has agreed to pay for the first six of these demand registrations. In addition, if ITC
Holdings conducts a registered offering of its common stock, such as this offering, the IT Holdings Partnership has the right to include all or a
portion of its common stock in the offering.

    The Management Stockholders (as defined below under "—Management Stockholder's Agreement") are also parties to this Registration
Rights Agreement, but generally do not have the ability to demand a registration. See "—Management Stockholder's Agreements."

Management, Consulting and Financial Services Letter Agreements

     Each of KKR and Trimaran Fund Management, L.L.C., the investment manager to the Trimaran partnerships, entered into a management,
consulting and financial services letter agreement with the IT Holdings Partnership and ITC. Under these agreements, each of KKR and
Trimaran Fund Management received a one-time transaction fee for advisory services with respect to the acquisition of ITC of $7.0 million and
$3.0 million, respectively. In addition, pursuant to these agreements, KKR and Trimaran Fund Management agreed to provide customary
management, consulting and financial services to us in exchange for annual fees in the aggregate since 2003 of $1.4 million and $0.6 million,
respectively. In connection with this offering, the parties to these agreements have agreed to terminate ITC's obligation to pay these annual fees
in exchange for one-time fees to KKR and Trimaran Fund Management of $4.0 million and $1.7 million, respectively, which will be payable
upon the completion of this offering. The agreements also contain provisions for additional fees for future, mutually agreed-upon services,
which may include advisory, consulting or financial services. ITC and the IT Holdings Partnership have also agreed to reimburse KKR and
Trimaran Fund Management for reasonable expenses incurred in providing services under the agreement and to indemnify KKR and Trimaran
Fund Management (and their affiliates) for losses arising out of the performance of these services. The terms of the management, consulting
and financial services letter agreements, including the related fees, are no less favorable to the IT Holdings Partnership and ITC than those that
the IT Holdings Partnership and ITC could have obtained from unaffiliated third parties.

     ITC Holdings and ITC also agreed to retain the IT Holdings Partnership to provide to ITC, when and if called upon, certain management,
consulting and financial services. As consideration for these services, ITC Holdings and ITC agreed to pay an annual fee of $0.2 million to IT
Holdings Partnership. In connection with this offering, the parties to this agreement have agreed to terminate ITC's and ITC Holdings'
obligation to pay this annual fee in exchange for a one-time fee of $1.0 million to the IT Holdings Partnership, which will be payable upon the
completion of this offering. The agreement also contains provisions for additional fees for future, mutually agreed-upon services. We have also
agreed to reimburse IT Holdings Partnership for reasonable expenses incurred in providing services under the agreement and to indemnify IT
Holdings Partnership (and its affiliates) for losses arising out of the performance of these services.

Management Rights Letters

     In connection with the acquisition, ITC, ITC Holdings and the IT Holdings Partnership entered into agreements with each of (1) the KKR
Millennium Fund, L.P., or KKR Millennium, a KKR Partnership, and (2) Trimaran Fund II, L.L.C., or Trimaran II, a Trimaran Partnership,
pursuant to

                                                                       83
which, for so long as the IT Holdings partnership agreement remains in full force and effect, KKR Millennium and Trimaran II will have the
right to designate one representative each to:

     •
            attend as a non-voting observer all meetings of the board of directors of ITC and ITC Holdings (although such representative is not
            entitled to vote at any such meeting and his or her attendance at any such meeting does not affect any quorum requirements); and

     •
            meet periodically with the General Partner at such times as reasonably requested by KKR Millennium or Trimaran II, as
            applicable.

     In addition, each of KKR Millennium and Trimaran II is entitled to (x) receive advance written notice of any meetings of the boards of
directors of ITC or ITC Holdings and all information provided to the members of such boards of directors and (y) meet with the appropriate
officers and/or directors of each of ITC, ITC Holdings and/or the IT Holdings Partnership periodically and at such times as reasonably
requested by KKR Millennium or Trimaran II, as applicable, with respect to matters relating to the business and affairs of each of ITC, ITC
Holdings and the IT Holdings Partnership. The IT Holdings Partnership has agreed to cause ITC Holdings and ITC to grant similar rights to
certain Limited Partners from time to time.

Management Stockholder's Agreements

     ITC Holdings has entered into management stockholder's agreements, or the Management Stockholder's Agreements, with all current and
former officers and employees of ITC Holdings and/or ITC who have purchased or acquired shares of ITC Holdings' common stock and/or
received options to purchase ITC Holdings' common stock. We refer to these persons as Management Stockholders. The Management
Stockholder's Agreements contain transfer restrictions, put and call rights, registration rights and a non-compete and confidentiality covenant.

     Restrictions on Transfers. The Management Stockholder's Agreements impose significant restrictions on transfers of shares of
common stock. Pursuant to the Management Stockholder's Agreements, the shares of common stock acquired by a Management Stockholder
generally will be non-transferable until the fifth anniversary of the effective date of the Management Stockholder's Agreement, or the Closing
Date, except for (1) permitted non-public transfers (as defined in the Management Stockholder's Agreements), (2) subject to the provisions
described under "—Registration Rights" below, a sale of shares of common stock pursuant to an effective registration statement filed by ITC
Holdings under the Securities Act (not including a registration statement on Form S-8), (3) pursuant to the Sale Participation Agreement
described below or (4) transfers approved by our board of directors.

     Stockholder's Resale of Common Stock and Options to ITC Holdings Upon Death or Disability. If, prior to the fifth anniversary of
the applicable Closing Date, a Management Stockholder is still employed by ITC Holdings or any subsidiary of ITC Holdings and that
Management Stockholder either dies or becomes permanently disabled, then the Management Stockholder will have the right, for a period of
60 days to require ITC Holdings to purchase (1) all of the shares of common stock then held by the Management Stockholder at the fair market
value per share of the underlying common stock and (2) all of the Management Stockholder's then exercisable options to purchase ITC
Holdings' common stock at a price equal to the excess, if any, of the fair market value per share of the underlying common stock over the
applicable option exercise price. However, we propose to amend this provision in the manner discussed below.

     ITC Holdings' Right to Repurchase Common Stock and Options of Stockholder. ITC Holdings may repurchase common stock and
exercisable options to purchase ITC Holdings' common stock held by a Management Stockholder upon the termination of that Management
Stockholder's employment with ITC Holdings or any of its subsidiaries if the termination occurs prior to the fifth anniversary of the

                                                                       84
applicable Closing Date at various repurchase prices that are equal to or less than the fair market value per share of the common stock being
repurchased.

     Lapse of Certain Provisions on Change of Ownership. Some of the provisions of the Management Stockholder's Agreement,
including those described under "—Restrictions on Transfers," "—Stockholder's Resale of Common Stock and Options to ITC Holdings Upon
Death or Disability" and "—ITC Holdings' Right to Repurchase Common Stock and Options of Stockholder" above, will lapse upon the
occurrence of a change of ownership of ITC Holdings. A change of ownership means any of the following events that result in the inability of
any of the IT Holdings Partnership, the General Partner or the Limited Partners (other than Stockwell) to designate or elect a majority of our
board of directors:

     •
             the sale of all or substantially all of our assets to any person or group other than the IT Holdings Partnership, the General Partner, a
             Limited Partner and their respective affiliates (any such person or group, an "unaffiliated person");

     •
             a sale resulting in more than 50% of our voting stock being held by an unaffiliated person; or

     •
             a merger, consolidation, recapitalization or reorganization of us with or into another unaffiliated person.

     Registration Rights. If the IT Holdings Partnership sells shares of common stock in a public offering in accordance with the
Registration Rights Agreement, the Management Stockholders will have limited "piggyback" registration rights with respect to the shares of
common stock purchased under or held subject to the Management Stockholder's Agreement or underlying then exercisable options. These
registration rights terminate upon the fifth anniversary of the applicable Closing Date. Shares of common stock included in a public offering
pursuant to the Registration Rights Agreement will cease to be subject to any restrictions on transfer imposed by the Management
Stockholder's Agreements. However, ITC Holdings anticipates asking all Management Stockholders to agree to waive their "piggyback"
registration rights in this offering in exchange for certain other rights and/or benefits as further described below.

     Restrictions on Public Sale Relating to a Public Offering. Each Management Stockholder will be prohibited from effecting any public
sale or distribution of shares of common stock not covered by a registration statement within the period between seven days before and
180 days after, the effective date of a registration statement (or, if later, the date of the public offering pursuant to the registration statement) in
connection with a public offering of capital stock of ITC Holdings. ITC Holdings may waive this restriction.

     Non-Compete and Confidentiality Covenant. Pursuant to the Management Stockholder's Agreements, for so long as a Management
Stockholder is employed by ITC Holdings or one of its subsidiaries and for a period of one year thereafter, the Management Stockholder is
subject to covenants not to:

     •
             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 ITC Holdings or any of its subsidiaries;

     •
             solicit customers or clients of ITC Holdings or any of its subsidiaries to terminate their relationship with ITC Holdings or any of its
             subsidiaries or otherwise compete with any business of ITC Holdings or any of its subsidiaries; or

                                                                          85
     •
            solicit or offer employment to any person who has been employed by ITC Holdings or any of its subsidiaries at any time during the
            12 months immediately preceding the termination of the Management Stockholder's employment.

In addition, the Management Stockholder has agreed not to disclose or use at any time any confidential information pertaining to the business
of ITC Holdings or any of its subsidiaries, except when required to perform his or her duties to ITC Holdings or one of its subsidiaries, by law
or judicial process.

First Amendment to Management Stockholder's Agreements

     ITC Holdings proposes to enter into amendments to the Management Stockholder's Agreements with each Management Stockholder. This
amendment will (1) eliminate the Management Stockholder's right to cause ITC Holdings to purchase all of the Management Stockholder's then
exercisable options to purchase ITC Holdings' common stock, (2) allow such exercisable options to be exercised by having ITC Holdings
retain, as payment for such exercise price, a number of shares of ITC Holdings' common stock having a value that is equal to the exercise price
of the options and (3) allow the Management Stockholder (or his or her estate, in the event of death) to require ITC Holdings to purchase the
stock obtained upon exercise of such options for a period of 60 days following the date that is six months after the date the options are
exercised.

Executive and Non-Executive Waiver and Agreements

    ITC Holdings anticipates proposing to all Management Stockholders that they enter into certain waiver and agreement arrangements with
ITC Holdings. These waiver and agreements would provide for the following:

     •
            Certain executives (including Messrs. Welch, Schultz, Cyrulewski and Oginsky, and Ms. Blair) will agree to waive their right to
            exercise their "piggyback" registration rights described above in exchange for (1) the right to sell, at any time after the 180 days
            after the date of this prospectus, a certain number of shares of ITC Holdings' common stock that they hold and (2) the grant (other
            than to Mr. Oginsky) of a certain number of stock options at an exercise price equal to the offering price set forth on the cover page
            of this prospectus that vest 20% per year as long as the Management Stockholder remains employed with ITC Holdings.

     •
            Certain other executives will agree to waive their right to exercise their "piggyback" registration rights described above in
            exchange for the grant of an option to purchase a certain number of shares of ITC Holdings' common stock having the same terms
            as the options described in the immediately preceding paragraph.

     •
            All non-executive Management Stockholders will agree to waive their right to exercise their "piggyback" registration rights
            described above in exchange for the right to sell, pursuant to a registration statement on Form S-8 filed concurrently with the sale
            of ITC Holdings' common stock under this prospectus, at any time after the date of this prospectus, all or any

            portion of the same number of shares of ITC Holdings' common stock that the Management Stockholders could have disposed of
            by exercising their "piggyback" registration rights.

Sale Participation Agreements

     Each Management Stockholder has also entered into a Sale Participation Agreement with the IT Holdings Partnership, which grants to the
Management Stockholders the right to participate in any sale (other than a public offering or sale to an affiliate of the IT Holdings Partnership)
for cash or other consideration of shares of common stock by the IT Holdings Partnership occurring prior to the fifth anniversary of this
offering. The Management Stockholder may also be required to participate in such a

                                                                        86
sale in the event the acquiring party in the sale so requires. Shares of common stock sold by a Management Stockholder pursuant to the Sale
Participation Agreements will not be subject to any restrictions on transfer imposed by the Management Stockholder's Agreements.

Put Agreement

     In connection with the investment by Management Stockholders in ITC Holdings, CIBC, Inc., a bank affiliated with one of the Limited
Partners, and Comerica Bank, a non-affiliated bank, provided some of the Management Stockholders with loans to acquire shares of our
common stock. The loans are evidenced by notes made by the Management Stockholders and require a pledge of each Management
Stockholder's shares of our common stock. We refer to CIBC and Comerica together as the Lenders. As a condition to making these loans, ITC
Holdings entered into put agreements with the Lenders pursuant to which ITC Holdings agreed that upon the occurrence of certain events, ITC
Holdings would be assigned the note and pledge and would either pay the Lenders the aggregate principal amount outstanding of the note plus
interest thereon or execute a demand promissory note in a principal amount equal to the aggregate principal amount outstanding of the note
plus interest thereon. The maximum potential amount of future payments for ITC Holdings under these put agreements was approximately
$2.0 million at December 31, 2004. The fair value of the liability in respect of the put agreements at inception and as of December 31, 2004
was not material.

      Prior to this offering, ITC Holdings and Comerica terminated the put agreement between them. The put agreement with CIBC will remain
in effect until the date when the ITC Holdings obligations under the agreement are satisfied or when any amounts outstanding under the notes
have been paid in full. This put agreement with CIBC previously covered loans to Management Stockholders who are executive officers of ITC
Holdings; however, this put agreement currently is only applicable to loans made to Management Stockholders who are not executive officers
of ITC Holdings.

Agreements with Detroit Edison

     ITC and Detroit Edison entered into a construction and maintenance, engineering, and system operations service level agreement, or the
SLA, whereby Detroit Edison performed maintenance, asset construction, and certain aspects of transmission operations and administration on
behalf of ITC. Under the SLA, as amended, ITC utilized Detroit Edison or other vendors for the services specified. When other vendors were
used, ITC was required to pay Detroit Edison 100% of the operation and maintenance expenditure markup fees and 50% of the capital
expenditure markup fees specified in the SLA. ITC entered into the SLA to provide a more orderly transition from an integrated utility to a
stand-alone independent transmission company. The SLA, as amended, had a term through February 29, 2004, with certain specified services
extending through April 30, 2004, as necessary.

     In August 2003, ITC entered into an Operation and Maintenance Agreement and a Supply Chain Management Agreement with other
contractors to perform these services subsequent to the term of the SLA. In order to facilitate the transition from Detroit Edison, the new
contractors performed work in parallel with Detroit Edison prior to the termination of the SLA.

                                                                       87
                                                DESCRIPTION OF OUR INDEBTEDNESS

Revolving Credit Facilities

     In July 2003, ITC entered into a 2 1 / 2 -year $15.0 million revolving credit agreement with Canadian Imperial Bank of Commerce, as
administrative agent, and Credit Suisse First Boston, Cayman Islands Branch, as documentation agent. In January 2004, the capacity under
ITC's revolving credit facility was increased to $25.0 million. At December 31, 2004, ITC had $25.0 million outstanding under its revolving
credit agreement.

     On January 19, 2005, ITC and a syndicate of lenders led by Canadian Imperial Bank of Commerce amended and restated this revolving
credit agreement to increase the total commitments thereunder to $65.0 million, with an option to increase the commitments to $75.0 million
subject to ITC's ability to obtain the agreement of willing lenders. As amended and restated, ITC's revolving credit agreement has a maturity
date of March 19, 2007. ITC's obligations under its revolving credit agreement are supported by an aggregate of $75.0 million of its Series B
Mortgage Bonds (described below) issued to Canadian Imperial Bank of Commerce.

     Borrowings under ITC's revolving credit agreement bear interest, at ITC's option, at either LIBOR plus 1.25% each year or the alternate
base rate plus 0.25% each year, which applicable margins are subject to adjustment based on the ratings by Moody's Investor Service, Inc. and
Standard & Poor's Ratings Services applicable to ITC's Mortgage Bonds from time to time.

   ITC's revolving credit agreement also provides for the payment to the lenders of a commitment fee on the average daily unused
commitments under the revolving credit agreement at a rate equal to 0.50% per annum, payable quarterly in arrears.

    On March 19, 2004, ITC Holdings entered into a three-year $20.0 million revolving credit agreement with Canadian Imperial Bank of
Commerce, as administrative agent, and Credit Suisse First Boston, Cayman Islands Branch, as documentation agent. In May 2004, the
capacity under ITC Holdings' revolving credit facility was increased to $30.0 million and in June 2004 it was increased to $40.0 million. At
December 31, 2004, ITC Holdings had $7.5 million outstanding under its revolving credit agreement.

     On January 12, 2005, ITC Holdings and a syndicate of lenders led by Canadian Imperial Bank of Commerce amended and restated this
revolving credit agreement to increase the total commitments thereunder to $47.5 million, with an option to increase the commitments to
$50.0 million subject to ITC Holdings' ability to obtain the agreement of willing lenders. As amended and restated, ITC Holdings' revolving
credit agreement has a maturity date of March 19, 2007. ITC Holdings' revolving credit agreement contains a $10.0 million letter of credit
sub-facility.

      ITC Holdings' obligations under its revolving credit agreement are secured by 158 shares of ITC's common stock, representing 15 5 / 6 %
of the total outstanding common stock of ITC. Increasing commitments to $50.0 million would require an additional 8 shares of security, for a
total of 166 shares, representing 16 3 / 5 % of the total outstanding common stock of ITC.

     Borrowings under ITC Holdings' revolving credit agreement bear interest, at ITC Holdings' option, at either LIBOR plus 1.50% each year
or the alternate base rate plus 0.50% each year, which applicable margins are subject to adjustment based on the ratings by Moody's Investor
Service, Inc. and Standard & Poor's Ratings Services applicable to ITC Holdings' 5.25% Senior Notes (described below) from time to time.

     ITC Holdings' revolving credit agreement provides for the payment to the lenders of a commitment fee on the average daily unused
commitments under the revolving credit agreement at a rate equal to 0.375% per annum and a letter of credit fee on the average daily stated
amount of all outstanding letters of credit at a rate equal to the then-applicable spread for LIBOR loans, in each case payable quarterly in
arrears. ITC Holdings' revolving credit agreement also provides for the payment to Canadian Imperial Bank of Commerce, as letter of credit
issuer, of a letter of credit

                                                                      88
fronting fee on the average daily stated amount of all outstanding letters of credit at a rate equal to 0.125% per annum, payable quarterly in
arrears.

     Our revolving credit facilities contain numerous financial and operating covenants that limit the discretion of our management with
respect to certain business matters. These covenants place significant restrictions on, among other things, our ability to:

     •
            create liens or other encumbrances;

     •
            enter into any mergers, consolidations, liquidations or dissolutions, or sell or otherwise dispose of all or substantially all of our
            assets; and

     •
            pay dividends or make distributions on or redemptions of ITC's and ITC Holdings' capital stock.

      In addition, ITC's revolving credit agreement requires ITC to maintain a ratio of total debt to total capitalization (calculated as total debt
plus total stockholders' equity) of less than or equal to 60%, and ITC Holdings' revolving credit agreement requires ITC Holdings to maintain a
ratio of total debt to total capitalization (calculated as total debt plus total stockholders' equity) of less than or equal to 85%.

    Our revolving credit facilities provide for voluntary prepayments of the loans and voluntary reductions of the unutilized portions of the
commitments, without penalty, subject to certain conditions pertaining to minimum notice and pre-payment/reduction amounts and subject to
payment of any applicable breakage costs on LIBOR loans.

5.25% Senior Notes and Mortgage Bonds

     In July 2003, we refinanced the original variable rate term loans used to finance our acquisition of ITC from DTE Energy through the
issuance by:

     •
            ITC Holdings of $267 million of its 5.25% Senior Notes due July 15, 2013, or the ITC Holdings 5.25% Senior Notes; and

     •
            ITC of $185 million of its 4.45% First Mortgage Bonds Series A due July 15, 2013, or the 4.45% First Mortgage Bonds Series A.



      Additionally, the proceeds from the issuance of the ITC Holdings 5.25% Senior Notes were used in part to make a $27.1 million
distribution to ITC Holdings' stockholders.

     In July 2003, ITC also issued $15.0 million of its 4.45% First Mortgage Bonds Series B due February 28, 2006, or the ITC Series B
Mortgage Bonds. We refer to the ITC Series B Mortgage Bonds, together with the 4.45% First Mortgage Bonds Series A, as the Mortgage
Bonds. In January 2004, ITC issued an additional $10.0 million of its Series B Mortgage Bonds and on January 19, 2005, ITC issued an
additional $50.0 million of its Series B Mortgage Bonds. As amended and restated in connection with the January 2005 amended and restated
revolving credit agreement, all outstanding ITC Series B Mortgage Bonds will mature on March 19, 2007. All of the ITC Series B Mortgage
Bonds were issued to Canadian Imperial Bank of Commerce, as administrative agent under ITC's revolving credit agreement, in support of its
obligations under that agreement. Under the terms of the ITC Series B Mortgage Bonds, ITC is only required to make interest or principal
payments on the ITC Series B Mortgage Bonds if payments are not made under ITC's revolving credit agreement.

     There are no maintenance covenants governing the ITC Holdings 5.25% Senior Notes or Mortgage Bonds.

5.25% Senior Notes due July 15, 2013

     General. The ITC Holdings 5.25% Senior Notes were issued under an indenture, dated as of July 16, 2003, between ITC Holdings and
BNY Midwest Trust Company, as trustee, as amended and supplemented by the first supplemental indenture thereto, dated as of July 16, 2003.
The ITC Holdings 5.25% Senior Notes bear interest at a rate of 5.25% per annum.

                                                                         89
     Ranking. The ITC Holdings 5.25% Senior Notes rank equally in right of payment with all of our existing and future unsecured senior
indebtedness. The ITC Holdings 5.25% Senior Notes are structurally subordinated to all existing and future indebtedness and other obligations
of ITC Holdings' subsidiaries, including trade payables and the Mortgage Bonds.

     Optional Redemption. The ITC Holdings 5.25% Senior Notes may be redeemed, in whole or in part, at any time, at ITC Holdings'
option, at a redemption price equal to the greater of (1) 100% of the principal amount of the ITC Holdings 5.25% Senior Notes being redeemed
and (2) as determined by an independent investment banker (as such term is defined in the indenture), the sum of the present values of the
remaining scheduled payments of principal and interest on the ITC Holdings 5.25% Senior Notes being redeemed (not including any portion of
such payments of interest accrued as of the redemption date) discounted to the redemption date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the adjusted treasury rate (as such term is defined in the indenture), plus, in each case, accrued and
unpaid interest thereon to, but excluding, the redemption date.

     Covenants.     The indenture contains covenants limiting, among other things, the ability of ITC Holdings to:

     •
            incur additional indebtedness;

     •
            create liens; and

     •
            engage in sale and lease-back transactions.

     Events of Default. The indenture provides for events of default, which, if any of them occurs, would permit or require the principal of
and accrued interest on the ITC Holdings 5.25% Senior Notes to become or to be declared due and payable.

4.45% First Mortgage Bonds due July 15, 2013

     General. The Mortgage Bonds were issued under a first mortgage and deed of trust, dated as of July 15, 2003, between ITC and BNY
Midwest Trust Company, as trustee, as supplemented and amended by the first and second supplemental indentures thereto, each dated as of
July 15, 2003, and the amendment to the second supplemental indenture, dated as of January 19, 2005. The mortgage and deed of trust, as
supplemented, does not limit the amount of Mortgage Bonds that ITC may offer thereunder. The Mortgage Bonds bear interest at a rate of
4.45% per annum.

     Ranking. The Mortgage Bonds are secured by a first mortgage lien on substantially all of the property owned by ITC from time to
time. The Mortgage Bonds will be secured equally with all other securities issued under the first mortgage and deed of trust.

     Optional Redemption. The Mortgage Bonds may be redeemed, in whole or in part, at any time, at ITC's option, at a redemption price
equal to the greater of (1) 100% of the principal amount of the Mortgage Bonds being redeemed and (2) as determined by an independent
investment banker (as such term is defined in the first mortgage and deed of trust), the sum of the present values of the remaining scheduled
payments of principal and interest on the Mortgage Bonds being redeemed (not including any portion of such payments of interest accrued as
of the redemption date) discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day
months) at the adjusted treasury rate (as such term is defined in the first mortgage and deed of trust), plus, in each case, accrued and unpaid
interest thereon to, but excluding, the redemption date.

     Events of Default. The first mortgage and deed of trust provides for events of default, which, if any of them occurs, would permit or
require the principal of and accrued interest on the Mortgage Bonds to become or to be declared due and payable.

                                                                        90
                                                 DESCRIPTION OF OUR CAPITAL STOCK

      The following is a summary of the material terms of ITC Holdings' capital stock and the provisions of ITC Holdings' Articles of
Incorporation and bylaws as they will be amended prior to the completion of this offering, which we refer to as "our capital stock," "our
Articles of Incorporation" and "our bylaws," respectively. It also summarizes relevant provisions of the Michigan Business Corporation Act, or
MBCA. Since the terms of our Articles of Incorporation, bylaws and the MBCA are more detailed than the general information provided below,
we urge you to read the actual provisions of those documents and the MBCA. The following summary of our capital stock is subject in all
respects to the MBCA, our Articles of Incorporation and our bylaws. We will file our Articles of Incorporation and bylaws as exhibits to the
registration statement of which this prospectus forms a part.

General

     Immediately following the offering, our authorized capital stock will consist of:

     •
             100 million shares of common stock, without par value; and

     •
             10 million shares of preferred stock, without par value.

     As of the date of this prospectus, there are 9,180,770 shares of our common stock outstanding and no shares of preferred stock
outstanding. Immediately following the completion of this offering, there are expected to be                 shares of common stock issued and
outstanding (or         shares of common stock if the underwriters exercise their over-allotment option in full), and no shares of preferred stock
outstanding, excluding 239,920 shares of common stock issuable upon the exercise of options outstanding at March 31, 2005, with an exercise
price of $25.00 per share.

     As of March 31, 2005, we had 125 holders of record of our common stock.

Common Stock

     All of the outstanding shares of our common stock are fully paid and nonassessable.

     Voting Rights. Each holder of our common stock is entitled to cast one vote for each share held of record on all matters submitted to a
vote of stockholders, including the election of directors, subject to the restrictions on market participants described below. Holders of our
common stock have no cumulative voting rights.

      Dividends. Holders of our common stock are entitled to receive dividends or other distributions declared by the board of directors. The
right of the board of directors to declare dividends is subject to the right of any holders of our preferred stock, to the extent that any preferred
stock is authorized and issued, and the availability under the MBCA of sufficient funds to pay dividends.

     Liquidation Rights. If our company is dissolved, the holders of our common stock will share ratably in the distribution of all assets that
remain after we pay all of our liabilities and satisfy our obligations to the holders of any of our preferred stock, to the extent that any preferred
stock is authorized and issued.

     Preemptive and Other Rights. Holders of our common stock have no preemptive rights to purchase or subscribe for any stock or other
securities of our company, and, other than as described below, there are no conversion rights or redemption or sinking fund provisions with
respect to our common stock.

    Restrictions on Ownership by Market Participants. Our Articles of Incorporation include the following restrictions on issuance to, and
ownership and voting of our capital stock by, "market participants," as defined below, which are provisions designed to ensure that ITC
remains an

                                                                         91
"independent" transmission company eligible for favorable rate treatment, consistent with FERC orders.

     •
            We are restricted from issuing any shares of capital stock or recording any transfer of shares if the issuance or transfer would cause
            any market participant, either individually or together with its group members, to beneficially own 5% or more of any class or
            series of our capital stock, provided that we may issue shares in excess of 5% to the underwriters of this offering or underwriters or
            initial purchasers in future underwritten offerings or private placements approved by our board of directors. In addition, this
            restriction will not preclude settlement of any transfer that occurs on the New York Stock Exchange (or another national securities
            exchange or automated inter-dealer quotation system on which the shares may trade).

     •
            If a market participant, together with its group members, beneficially owns 5% or more of any class or series of our capital stock,
            that market participant, together with its group members, will not be permitted to exercise voting rights on shares constituting 5%
            or more of that class or series.

     •
            We will have the right to redeem shares of capital stock beneficially owned by a market participant (or its group members) if that
            market participant, together with its group members, beneficially owns 5% or more of any class or series of our capital stock so
            that the market participant, together with its group members, ceases to beneficially own 5% or more of that class or series.



Prior to redeeming any shares, we will be required to give at least 45 days' written notice to the holder of the shares. Prior to the redemption
date, the stockholder may sell any shares that would otherwise be redeemed to avoid redemption of those shares. The redemption price for any
shares redeemed will be the fair market value of the shares, as determined by our board of directors in good faith. If our shares are listed on the
New York Stock Exchange (or another national securities exchange or automated inter-dealer quotation system), the fair market value will be
equal to the lesser of (x) the volume weighted average price for the shares over the 10 most recent trading days immediately prior to the
delivery of the redemption notice and (y) the volume weighted average price for the shares over the 10 trading days immediately prior to the
date the shares are redeemed.

     A "market participant" has the meaning given to that term by the FERC and includes:

     •
            any person or entity that, either directly or through an affiliate, sells or brokers electric energy, or provides ancillary services to
            ITC or to an RTO to which we belong (unless the FERC finds that the person or entity does not have economic or commercial
            interests that would be significantly affected by the actions or decisions of ITC or an RTO to which we belong); or

     •
            any other person or entity that the FERC finds to be a market participant because it has economic or commercial interests that
            would be significantly affected by the actions or decisions of ITC or any RTO to which we belong.

An affiliate, for these purposes, includes any person or entity that directly or indirectly owns, controls or holds with the power to vote 5% or
more of the outstanding voting securities of a market participant.

     A determination by our board of directors, acting in good faith, that a person or entity is a market participant will be binding on all
stockholders. In determining whether any shares of capital stock are beneficially owned by a market participant, or its group members, our
board of directors may rely on our stock transfer records, public filings with the SEC on Schedule 13G or Schedule 13D by beneficial owners
of our shares and on the declarations described below.

                                                                         92
     Certain Stockholders Required to Certify as to Market Participant Relationships.           Our Articles of Incorporation permit, and require if
we request, the following persons or entities to make certain declarations to us:

     •
            any person or entity that, together with its group members, acquires beneficial ownership of 5% or more of any class or series of
            capital stock of ITC Holdings and which has made a filing with the SEC under Regulation 13D-G in respect of such beneficial
            ownership; or

     •
            any person or entity (other than a depositary institution or broker-dealer who is not a beneficial owner for purposes of
            Regulation 13D-G) that is a record holder of 5% or more of any class or series of capital stock of ITC Holdings.

     The declaration must be delivered to us within 10 days of any request and must include the following information:

     •
            the number of shares of capital stock beneficially owned by such person or entity, together with its group members, together with
            the name of the record holders of such shares; and

     •
            a certification by such person or entity that neither it nor its group members is a market participant (or, in lieu of such certification,
            the stockholder may deliver a certified list of all of such person's or entity's activities and investments related to the sale,
            marketing, trading, brokering or distribution of electric energy or provision of ancillary services to ITC or to the RTO to which we
            belong).

     Any person, entity or group that fails to deliver the declaration when requested by us to do so will be deemed to be a market participant for
purposes of the voting restrictions and redemption provisions described above, unless that person, entity or group subsequently delivers the
required declaration to ITC Holdings and the board of directors determines that such person, entity or group is not a market participant.

Preferred Stock

      Our Articles of Incorporation authorize our board of directors to establish one or more series of preferred stock. Unless required by law or
by any stock exchange on which our common stock is listed, the authorized shares of preferred stock will be available for issuance without
further action by you. Our board of directors is authorized to determine, with respect to any series of preferred stock, the terms and rights of
that series including:

     •
            the designation of the series;

     •
            the number of shares of the series;

     •
            the preferences and relative, participating, option or other special rights, if any, and any qualifications, limitations or restrictions of
            such series; and

     •
            the voting rights, if any, of the holders of the series.

Provisions That May Discourage Takeovers

     The MBCA and our Articles of Incorporation and bylaws contain provisions that may have the effect of discouraging transactions
involving an actual or threatened change of control. These provisions could protect the continuity of our directors and management and
possibly deprive our stockholders of an opportunity to sell their shares of common stock at prices higher than the prevailing market prices. The
following description is subject in its entirety to applicable provisions of the MBCA and our Articles of Incorporation and bylaws.

                                                                         93
     Availability of Authorized but Unissued Shares. Under the terms of our Articles of Incorporation, our board of directors may issue
shares of authorized common stock without stockholder approval. However, the listing requirements of the NYSE, which would apply so long
as our common stock is listed on the NYSE, require stockholder approval of certain issuances equal to or exceeding 20% of the
then-outstanding voting power or then-outstanding number of shares of common stock. If our board of directors decides to issue shares to
persons supportive of current management, this could render more difficult or discourage an attempt to obtain control of our company by
means of a merger, tender offer, proxy contest or otherwise. Authorized but unissued shares also could be used to dilute the stock ownership of
persons seeking to obtain control of our company, including dilution through a stockholder rights plan of the type commonly known as a
"poison pill," which the board of directors could adopt without a stockholder vote.

     Issuance of Preferred Stock. In addition, our board of directors could issue shares of preferred stock having voting rights that
adversely affect the voting power of holders of our common stock, which could have the effect of delaying, deferring or impeding a change in
control of our company.

     No Cumulative Voting. Under the MBCA, stockholders do not have cumulative voting rights for the election of directors unless the
Articles of Incorporation so provide. Our Articles of Incorporation do not provide for cumulative voting.

     Limitation on Calling Special Meetings of Stockholders. The MBCA allows the board of directors or officers, directors or
stockholders authorized in our bylaws to call special meetings of stockholders. Our bylaws provide that a special meeting may be called by our
board of directors, the chairperson of the board (if the office is filled) or president, and shall be called by the president or secretary at the
written request of stockholders holding a majority of the outstanding shares of stock entitled to vote at the proposed special meeting. Business
to be transacted at a special meeting is limited by our bylaws to the purpose or purposes stated in the notice of the meeting.

     Action without Meeting of Stockholders. If the IT Holdings Partnership, or its affiliates or limited partners or their respective affiliates,
hold less than 35% of the outstanding capital stock of ITC Holdings, any action required or permitted by the MBCA to be taken at a meeting of
stockholders may be taken without a meeting, without prior notice and without a vote, only if consent in writing to such action is signed by the
holders of all of the outstanding capital stock.

     Advance Notice Requirements for Stockholder Proposals and Director Nominations. Our bylaws provide that stockholders seeking to
nominate candidates for election as directors or to bring business before an annual or special meeting of stockholders must provide timely
notice of their proposal in writing to the corporate secretary. Generally, to be timely, a stockholder's notice must be received at our principal
executive offices not less than 90 days nor more than 120 days prior to the first anniversary date of the previous year's annual meeting or, in the
case of a special meeting, the date of the special meeting. Our bylaws also specify requirements as to the form and content of a stockholder's
notice. These provisions may impede stockholders' ability to bring matters before an annual or special meeting of stockholders or make
nominations for directors at an annual or special meeting of stockholders.

     Business Combinations and Change of Control.           The MBCA contains statutes which regulate business combinations and changes in
control of Michigan corporations.

      Chapter 7A of the MBCA provides that a business combination subject to Chapter 7A between a covered Michigan corporation or any of
its subsidiaries and a beneficial owner of shares entitled to 10% or more of the voting power of such corporation generally requires the
affirmative vote of 90% of the votes of each class of stock entitled to vote, and not less than 2 / 3 of the votes of each class of stock entitled to
vote (excluding voting shares owned by such 10% or more owner), voting as a separate class.

                                                                          94
These requirements do not apply if (1) the corporation's board of directors approves the transaction before the 10% or more owner becomes
such or (2) the transaction satisfies certain fairness standards, certain other conditions are met and the 10% or more owner has been such for at
least five years. Chapter 7A business combinations include, among other transactions, mergers, significant asset transfers, certain
disproportionate issuances of shares to an interested stockholder, certain reclassifications and recapitalizations disproportionately favorable to
such stockholder, and the adoption of a plan of liquidation or dissolution in which such a stockholder would receive anything other than cash.
Chapter 7A does not restrict the purchase of shares from other stockholders in the open market, through private transactions or acquired
through a tender offer.

     As permitted by Chapter 7A, our Articles of Incorporation provide that we are not governed by the provisions of that Chapter. In order for
ITC Holdings to become subject to the provisions of Chapter 7A, our stockholders would have to vote affirmatively to amend our Articles of
Incorporation.

     Chapter 7B of the MBCA provides that, unless a corporation's articles of incorporation or bylaws provide that Chapter 7B does not apply,
"control shares" of a corporation acquired in a control share acquisition have no voting rights except as granted by the stockholders of the
corporation. "Control shares" are outstanding shares which, when added to shares previously owned by a stockholder, increase such
stockholder's voting power, acting alone or in a group, to exceed three separate thresholds: (1) more than 20% but less than 33 1 / 3 %, (2) more
than 33 1 / 3 % but less than a majority, or (3) more than a majority of the shares entitled to vote for the election of directors. A control share
acquisition must be approved by the affirmative vote of a majority of the votes cast by holders of all shares entitled to vote, excluding shares
owned by the acquiror and certain officers and employee directors. However, no such approval is required for gifts or other transactions not
involving consideration, for a merger to which the corporation is a party or for certain other transactions described in Chapter 7B. Although
control shares include, for the purpose of determining whether the thresholds have been met, shares beneficially owned by persons acting as a
group, the formation of a group does not constitute a control share acquisition of shares held by members of the group.

     Chapter 7B applies to Michigan corporations which have 100 or more stockholders of record, their principal place of business or
substantial assets in Michigan and at least one of the following characteristics: (a) more than 10% of their shares are owned of record by
Michigan residents; (b) more than 10% of their stockholders of record are Michigan residents or (c) 10,000 of their stockholders of record are
Michigan residents.

     As permitted by Chapter 7B, our bylaws provide that we will not be governed by the provisions of that Chapter. In order for ITC Holdings
to become subject to the provisions of Chapter 7B, our board of directors or stockholders may at any time amend our bylaws to cause Chapter
7B to become applicable to us if the statutory conditions for applicability are satisfied.

Transfer Agent and Registrar

                    is the transfer agent and registrar for our common stock.

Listing

     We propose to list our common stock on the New York Stock Exchange under the symbol "ITC."

                                                                        95
                                                   SHARES ELIGIBLE FOR FUTURE SALE

Sales of Restricted Shares

    Upon the completion of this offering,            shares of our common stock will be outstanding. Of these shares,          shares of our
common stock sold in this offering will be freely tradable by persons other than our affiliates, as that term is defined in Rule 144 under the
Securities Act, without restriction or further registration under the Securities Act.

      Approximately            of the shares of common stock that will be outstanding after this offering will be either "restricted securities" or
affiliate securities as such terms are defined in Rule 144. These restricted and affiliate securities may be sold in the future without registration
under the Securities Act to the extent permitted under Rule 144. Approximately              outstanding shares of these restricted or affiliate
securities will be eligible for sale under Rule 144 subject to applicable holding period, volume limitations, manner of sale and notice
requirements set forth in applicable SEC rules, and approximately            shares of the restricted securities will be saleable without regard to
these restrictions under Rule 144(k).

Rule 144

     In general, under Rule 144, a stockholder who has beneficially owned his or her restricted shares for at least one year is entitled to sell,
within any three-month period, a number of shares of our common stock that does not exceed the greater of:

     •
             1% of the then-outstanding shares of our common stock, which is approximately               shares of our common stock immediately
             after the completion of this offering; or

     •
             the average weekly trading volume in our common stock on the NYSE during the four calendar weeks preceding the date on which
             notice of such sale is filed, provided certain requirements concerning availability of public information, manner of sale and notice
             of sale are satisfied.

      In addition, our affiliates must comply with the restrictions and requirements of Rule 144, other than the one-year holding period
requirement, in order to publicly sell shares of our common stock which are not restricted securities. A stockholder who is not one of our
affiliates and has not been our affiliate for at least three months prior to the sale and who has beneficially owned restricted shares of our
common stock for at least two years may resell the shares without limitation. In meeting the one-and two-year holding periods described above,
a holder of restricted shares of our common stock can include the holding period of a prior owner who was not our affiliate. The one- and
two-year holding periods described above do not begin to run until the full purchase price or other consideration is paid by the person acquiring
the restricted shares of our common stock from us or one of our affiliates.

Lock-Up Agreements

     We, all of our directors and executive officers and the selling stockholder have agreed that, without the prior written consent of Lehman
Brothers Inc., we and they will not, directly or indirectly, offer, pledge, announce the intention to sell, sell, contract to sell, sell an option or
contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of
any common stock or any securities which may be converted into or exchanged for any common stock or enter into any swap or other
agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common stock for a period of 180 days
from the date of this prospectus other than permitted transfers.

    Pursuant to the terms of the Management Stockholder's Agreements, the Management Stockholders have the right, upon the sale by the IT
Holdings Partnership of shares of our common

                                                                          96
stock in any underwritten offering to sell a percentage of the shares of our common stock that they hold at the time of the offering and any
shares of our common stock underlying then exercisable options. As a percentage of total shares held, the Management Stockholders shall be
eligible to sell a percentage equal to the percentage sold by the IT Holdings Partnership. Otherwise, each Management Stockholder is restricted
from selling any common stock he or she holds until the fifth anniversary of the date of the execution of the Management Stockholder's
respective Management Stockholder's Agreement. The "piggyback" registration rights described above also expire on such fifth anniversary.
See "Certain Relationships and Related Party Transactions—Management Stockholder's Agreements."

Rule 701

     Under Rule 701, common stock acquired upon the exercise of certain currently outstanding options or pursuant to other rights granted
under our stock plans may be resold, to the extent not subject to lock-up agreements or the restriction on transfer in the management
stockholder's agreement, (1) by persons other than affiliates, beginning 90 days after the effective date of this offering, subject only to the
manner-of-sale provisions of Rule 144, and (2) by affiliates, subject to the manner-of-sale, current public information, and filing requirements
of Rule 144, in each case, without compliance with the one-year holding period requirement of Rule 144.

Stock Options

      Options to purchase up to an aggregate of approximately         million shares of our common stock will be outstanding as of the closing
of this offering. Of these options, approximately       million will have vested at or prior to the closing of this offering and
approximately               million may vest over the next two years.

     Following the consummation of this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act to
register all shares of common stock subject to outstanding stock options and options issuable under our 2003 Stock Option and Purchase Plan.
After expiration of the applicable contractual resale restrictions, shares covered by these registration statements will be eligible for sale in the
public markets, other than shares owned by our affiliates, which may be sold in the public market if they are registered or qualify for an
exemption from registration under Rule 144.

Registration Rights

     We granted registration rights to all of our current stockholders with respect to a percentage of the shares of our common stock that each
of them owns and will own upon the consummation of this offering. For a description of the terms of these registration rights, see "Certain
Relationships and Related Party Transactions—Registration Rights Agreement."

     Any sales of substantial amounts of our common stock in the public markets, or the perception that such sale may occur, could adversely
affect the market price of our common stock. See "Risk Factors—Risks Related to this Offering—Future sales of our shares could depress the
market price of our common stock."

                                                                        97
                                  CERTAIN UNITED STATES FEDERAL INCOME AND ESTATE TAX
                                           CONSEQUENCES TO NON-U.S. HOLDERS

     The following is a summary of certain United States federal income and estate tax consequences of the purchase, ownership and
disposition of our common stock as of the date hereof. Except where noted, this summary deals only with common stock that is held as a
capital asset by a non-U.S. holder.

     A "non-U.S. holder" means a person (other than a partnership) that is not for United States federal income tax purposes any of the
following:

     •
            an individual citizen or resident of the United States;

     •
            a corporation (or any other entity treated as a corporation for United States federal income tax purposes) created or organized in or
            under the laws of the United States, any state thereof or the District of Columbia;

     •
            an estate the income of which is subject to United States federal income taxation regardless of its source; or

     •
            a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have
            the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable United States
            Treasury regulations to be treated as a United States person.



     This summary is based upon provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and
judicial decisions as of the date hereof. Those authorities may be changed, perhaps retroactively, so as to result in United States federal income
and estate tax consequences different from those summarized below. This summary does not address all aspects of United States federal
income and estate taxes and does not deal with foreign, state, local or other tax considerations that may be relevant to non-U.S. holders in light
of their personal circumstances. In addition, it does not represent a detailed description of the United States federal income and estate tax
consequences applicable to you if you are subject to special treatment under the United States federal income tax laws (including if you are a
United States expatriate, "controlled foreign corporation," "passive foreign investment company," corporation that accumulates earnings to
avoid United States federal income tax or an investor that holds our common stock through a pass-through entity). We cannot assure you that a
change in law will not alter significantly the tax considerations that we describe in this summary.

     If a partnership holds our common stock, the tax treatment of a partner will generally depend upon the status of the partner and the
activities of the partnership. If you are a partner of a partnership holding our common stock, you should consult your tax advisors.

     If you are considering the purchase of our common stock, you should consult your own tax advisors concerning the particular
United States federal income and estate tax consequences to you of the ownership of the common stock, as well as the consequences to
you arising under the laws of any other taxing jurisdiction.

Dividends

     Dividends paid to a non-U.S. holder of our common stock generally will be subject to withholding of United States federal income tax at a
30% rate or such lower rate as may be specified by an applicable income tax treaty. However, dividends that are effectively connected with the
conduct of a trade or business by the non-U.S. holder within the United States (and, where a tax treaty applies, are attributable to a United
States permanent establishment of the non-U.S. holder) are not subject to the withholding tax, provided certain certification and disclosure
requirements are satisfied. Instead, such dividends are subject to United States federal income tax on a net income basis in the same manner as

                                                                        98
if the non-U.S. holder were a United States person as defined under the Code. Any such effectively connected dividends received by a foreign
corporation may be subject to an additional "branch profits tax" at a 30% rate or such lower rate as may be specified by an applicable income
tax treaty.

      A non-U.S. holder of our common stock who wishes to claim the benefit of an applicable treaty rate and avoid backup withholding, as
discussed below, for dividends will be required to (a) complete Internal Revenue Service Form W-8BEN (or other applicable form) and certify
under penalty of perjury that such holder is not a United States person as defined under the Code or (b) if our common stock is held through
certain foreign intermediaries, satisfy the relevant certification requirements of applicable United States Treasury regulations. Special
certification and other requirements apply to certain non-U.S. holders that are pass-through entities rather than corporations or individuals.

     A non-U.S. holder of our common stock eligible for a reduced rate of United States withholding tax pursuant to an income tax treaty may
obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the Internal Revenue Service.

Gain on Disposition of Common Stock

     Any gain realized on the disposition of our common stock generally will not be subject to United States federal income tax unless:

     •
            the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, where a tax treaty
            applies, is attributable to a United States permanent establishment of the non-U.S. holder);

     •
            the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition,
            and certain other conditions are met; or

     •
            we are or have been a "United States real property holding corporation" for United States federal income tax purposes.

      An individual non-U.S. holder described in the first bullet point immediately above will be subject to tax on the net gain derived from the
sale under regular graduated United States federal income tax rates. An individual non-U.S. holder described in the second bullet point
immediately above will be subject to a flat 30% tax on the gain derived from the sale, which may be offset by United States source capital
losses, even though the individual is not considered a resident of the United States. If a non-U.S. holder that is a foreign corporation falls under
the first bullet point immediately above, it will be subject to tax on its net gain in the same manner as if it were a United States person as
defined under the Code and, in addition, may be subject to the branch profits tax equal to 30% of its effectively connected earnings and profits
or at such lower rate as may be specified by an applicable income tax treaty.

      We believe we are not and do not anticipate becoming a "United States real property holding corporation" for United States federal
income tax purposes although no assurance can be given in this regard as the determination of whether we are a "United States real property
holding corporation" is fact-specific and depends on the composition of our assets. If, contrary to our belief, we are or become a "United States
real property holding corporation," so long as our common stock continues to be regularly traded on an established securities market (such as
the NYSE), only a non-U.S. holder who holds or held (at any time during the shorter of the five year period preceding the date of disposition or
the holder's holding period) more than 5% of our common stock will be subject to United States federal income tax on the disposition of our
common stock.

                                                                         99
Federal Estate Tax

     Common stock held by an individual non-U.S. holder at the time of death will be included in such holder's gross estate for United States
federal estate tax purposes, unless an applicable estate tax treaty provides otherwise.

Information Reporting and Backup Withholding

     We must report annually to the Internal Revenue Service and to each non-U.S. holder the amount of dividends paid to such holder and the
tax withheld with respect to such dividends, regardless of whether withholding was required. Copies of the information returns reporting such
dividends and withholding may also be made available to the tax authorities in the country in which the non-U.S. holder resides under the
provisions of an applicable income tax treaty.

     A non-U.S. holder will be subject to backup withholding for dividends paid to such holder unless such holder certifies under penalty of
perjury that it is a non-U.S. holder, and the payor does not have actual knowledge or reason to know that such holder is a United States person
as defined under the Code, or such holder otherwise establishes an exemption.

     Information reporting and, depending on the circumstances, backup withholding will apply to the proceeds of a sale of our common stock
within the United States or conducted through certain United States-related financial intermediaries, unless the beneficial owner certifies under
penalty of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a
United States person as defined under the Code) or such owner otherwise establishes an exemption.

     Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holder's United
States federal income tax liability provided the required information is furnished to the Internal Revenue Service.

                                                                       100
                                                                 UNDERWRITING

     Under the terms of an underwriting agreement, which will be filed as an exhibit to the registration statement of which this prospectus
forms a part, each of the underwriters named below, for whom Lehman Brothers Inc., Credit Suisse First Boston LLC and Morgan Stanley &
Co. Incorporated are acting as representatives, have severally agreed to purchase from us and the selling stockholder the respective number of
shares of common stock opposite their names below:

                                                                                                                             Number of
                     Underwriters                                                                                             Shares

                     Lehman Brothers Inc.
                     Credit Suisse First Boston LLC
                     Morgan Stanley & Co. Incorporated

                     Total

     The underwriting agreement provides that the underwriters' obligations to purchase shares of common stock depends on the satisfaction of
the conditions contained in the underwriting agreement, including:

     •
             the obligation to purchase all of the shares of common stock offered hereby if any of the shares are purchased;

     •
             the representations and warranties made by us to the underwriters are true;

     •
             there is no material change in the financial markets; and

     •
             we deliver customary closing documents to the underwriters.

Option to Purchase Additional Shares

     The selling stockholder has granted the underwriters an option exercisable for 30 days after the date of the underwriting agreement, to
purchase, from time to time, in whole or in part, up to an aggregate of                  shares at the public offering price less underwriting
discounts and commissions. This option may be exercised if the underwriters sell more than              shares in connection with this offering. To
the extent that this option is exercised, each underwriter will be obligated, subject to certain conditions, to purchase its pro rata portion of these
additional shares based on the underwriter's percentage underwriting commitment in the offering as indicated in the table at the beginning of
this Underwriting section.

Commissions and Expenses

     The following table summarizes the underwriting discounts and commissions that we and the selling stockholder will pay to the
underwriters. The amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase up to an
additional               shares from the selling stockholder. The underwriting fee is the difference between the public offering price and the
amount the underwriters pay to purchase the shares from us or the selling stockholder, as the case may be.

                                                                                           No Exercise       Full Exercise

Per share                                                                              $                 $
Total                                                                                  $                 $

     The underwriters have advised us that they propose to offer the shares of common stock directly to the public at the public offering price
presented on the cover page of this prospectus, and to

                                                                         101
selected dealers, who may include the underwriters, at the public offering price less a selling concession not in excess of $        per share. The
underwriters may allow, and the selected dealers may reallow, a concession not in excess of $           per share to brokers and dealers. After this
offering, the underwriters may change the offering price and other selling terms.

      We estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting
expenses, but excluding the underwriting discounts and commissions, will be approximately $                  . We will pay all costs and expenses of
this offering.

Offering Price Determination

     Prior to this offering, there has been no public market of our common stock. The initial public offering price will be negotiated between
the representatives, the selling stockholder and us. In determining the initial public offering price of our common stock, the representatives will
consider:

     •
             prevailing market conditions;

     •
             our historical performance and capital structure;

     •
             estimates of our business potential and earnings prospects;

     •
             an overall assessment of our management; and

     •
             the consideration of these factors in relation to market valuation of companies in related businesses.

Lock-Up Agreements

     We, all of our directors and executive officers and the selling stockholder have agreed that, without the prior written consent of Lehman
Brothers Inc., we and they will not, directly or indirectly, offer, pledge, announce the intention to sell, sell, contract to sell, sell an option or
contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of
any common stock or any securities which may be converted into or exchanged for any common stock or enter into any swap or other
agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common stock for a period of 180 days
from the date of this prospectus other than permitted transfers. Pursuant to the terms of the Management Stockholder's Agreements, each
Management Stockholder has agreed to be subject to a similar 180-day restriction on sales of his or her shares.

Indemnification

    We and the selling stockholder have agreed to indemnify the underwriters against liabilities relating to this offering, including liabilities
under the Securities Act, and to contribute to payments that the underwriters may be required to make for these liabilities.

Directed Share Program

     At our request, the underwriters have reserved for sale at the initial public offering price up to        shares offered hereby for officers,
directors, employees and certain other persons associated with us. The number of shares available for sale to the general public will be reduced
to the extent such persons purchase such reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the
general public on the same basis as the other shares offered hereby. We have agreed to indemnify the underwriters against certain liabilities and
expenses, including liabilities under the Securities Act, in connection with the sales of the reserved shares.

                                                                         102
Stabilization, Short Positions and Penalty Bids

      The representatives may engage in over-allotment, stabilizing transactions, syndicate covering transactions, and penalty bids or purchases
for the purpose of pegging, fixing or maintaining the price of the common stock, in accordance with Regulation M under the Securities
Exchange Act of 1934, as amended:

     •
            Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified
            maximum;

     •
            Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been
            completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the
            underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the
            price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be
            covered by the over-allotment option, a naked short position, the position can be closed out only by buying shares in the open
            market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward
            pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in this
            offering; and

     •
            Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally
            sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price
of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of the common stock
may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the NYSE or otherwise and,
if commenced, may be discontinued at any time.

     Neither we nor the selling stockholder nor any of the underwriters make any representation or prediction as to the direction or magnitude
of any effect that the transactions described above may have on the price of the common stock. In addition, neither we nor the selling
stockholder nor any of the underwriters make representations that the representatives will engage in these stabilizing transactions or that any
transaction, once commenced, will not be discontinued without notice.

Listing

      We will apply to list our common stock on the New York Stock Exchange under the symbol "ITC." In connection with that listing, the
underwriters will undertake to sell the minimum number of shares to the minimum number of beneficial owners necessary to meet the NYSE
listing requirements.

Stamp Taxes

     If you purchase shares of common stock offered in this prospectus, you may be required to pay stamp taxes and other charges under the
laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.

Discretionary Sales

     The underwriters have informed us that they do not intend to confirm sales to discretionary accounts that exceed 5% of the total number of
shares offered by them.

                                                                      103
Electronic Distribution

      A prospectus in electronic format may be made available on Internet sites or through other online services maintained by one or more of
the underwriters and/or selling group members participating in this offering, or by their affiliates. In those cases, prospective investors may
view the preliminary prospectus and the final prospectus online and, depending upon the particular underwriter or selling group member,
prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares for
sale to online brokerage account holders. Any such allocation for online distributions will be made by the representatives on the same basis as
other allocations. In addition, one or more of the underwriters participating in this offering may distribute prospectuses electronically.

     Other than the prospectus in electronic format, information on any underwriter's or selling group member's website and any information
contained in any other website maintained by an underwriter or selling group member is not part of this prospectus or the registration statement
of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity
as underwriter or selling group member and should not be relied on by investors.

Other Relationships

      Some of the underwriters have performed and may in the future perform investment banking and advisory services for us from time to
time for which they have received or may in the future receive customary fees and expenses. Credit Suisse First Boston LLC, or CSFB, is an
affiliate of one of the lenders under the revolving credit facilities of both ITC Holdings' and ITC. In July 2003, CSFB was the initial purchaser
of ITC Holdings' Senior Notes and ITC's Mortgage Bonds. CSFB also acted as a financial advisor to DTE Energy in connection with our
acquisition of ITC in February 2003.

                                                                       104
                                                              LEGAL MATTERS

      Dykema Gossett PLLC will pass upon the validity of the issuance of our common stock and as to certain matters of Michigan law. Certain
legal matters will be passed upon for us by Simpson Thacher & Bartlett LLP, New York, New York. Certain legal matters will be passed upon
for the underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. In addition, Stuntz, Davis & Staffier, P.C.,
Washington, D.C. is advising us on matters relating to the FERC and PUHCA. Simpson Thacher & Bartlett LLP is relying upon the opinion of
Dykema Gossett PLLC as to certain matters of Michigan law. Certain partners of Simpson Thacher & Bartlett LLP, members of their families,
related persons and others have an indirect interest, through limited partnerships, who are investors in KKR Millennium Fund, L.P., in less than
1% of the common stock of ITC Holdings.


                                                                   EXPERTS

     The financial statements of ITC Holdings Corp. and subsidiaries as of December 31, 2004 and 2003, and for the year ended December 31,
2004 and the period February 28, 2003 (Date of Acquisition) through December 31, 2003, and the financial statements of International
Transmission Company, LLC (Predecessor ITC) for the two-month period ended February 28, 2003 and the year ended December 31, 2002,
included in this prospectus have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their
reports appearing herein, and are included in reliance upon the reports of such firm given upon their authority as experts in accounting and
auditing.


                                        WHERE YOU CAN FIND ADDITIONAL INFORMATION

      We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the issuance of shares of our
common stock being offered hereby. This prospectus, which forms a part of the registration statement, does not contain all of the information
set forth in the registration statement. For further information with respect to us and the shares of our common stock, reference is made to the
registration statement. Statements contained in this prospectus as to the contents of any contract or other document are not necessarily
complete, and, where such contract or other document is an exhibit to the registration statement, each such statement is qualified by the
provisions in such exhibit, to which reference is hereby made. We are not currently subject to the informational requirements of the Exchange
Act. As a result of this offering of the shares of our common stock, we will become subject to the informational requirements of the Exchange
Act, and, in accordance therewith, will file periodic reports and other information with the SEC. The registration statement, such reports and
other information can be inspected and copied at the Public Reference Room of the SEC located at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington D.C. 20549. Copies of such materials, including copies of all or any portion of the registration statement, can be
obtained from the Public Reference Room of the SEC at prescribed rates. You can call the SEC at 1-800-SEC-0330 to obtain information on
the operation of the Public Reference Room. Such materials may also be accessed electronically by means of the SEC's home page on the
Internet ( http://www.sec.gov ).

                                                                       105
                                             ITC HOLDINGS CORP. AND SUBSIDIARIES

                                                INDEX TO FINANCIAL STATEMENTS

PREDECESSOR INTERNATIONAL TRANSMISSION COMPANY, LLC

Report of Independent Registered Public Accounting Firm                                            F-2

Statements of Operations for the Year Ended December 31, 2002 and the Two-Month Period Ended
February 28, 2003                                                                                  F-3

Statement of Member's Interest/Stockholders' Equity for the Year Ended December 31, 2001 and
2002 and the Two-Month Period Ended February 28, 2003                                              F-4

Statements of Cash Flows for the Year Ended December 31, 2002 and the Two-Month Period Ended
February 28, 2003                                                                                  F-5

Notes to Financial Statements                                                                      F-6

ITC HOLDINGS CORP. AND SUBSIDIARIES

Report of Independent Registered Public Accounting Firm                                           F-12

Consolidated Statements of Financial Position at December 31, 2003 and 2004                       F-13

Consolidated Statements of Operations for the Period February 28, 2003 (Date of Acquisition)
through December 31, 2003 and the Year Ended December 31, 2004                                    F-14

Consolidated Statement of Changes in Stockholders' Equity and Comprehensive Income (Loss) for
the Period February 28, 2003 (Date of Acquisition) through December 31, 2003 and the Year Ended
December 31, 2004                                                                                 F-15

Consolidated Statements of Cash Flows for the Period February 28, 2003 (Date of Acquisition)
through December 31, 2003 and the Year Ended December 31, 2004                                    F-16

Notes to Consolidated Financial Statements                                                        F-17

Condensed Consolidated Statements of Financial Position at December 31, 2004 and March 31, 2005
(unaudited)                                                                                       F-42

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2004 and
2005 (unaudited)                                                                                  F-43

Condensed Consolidated Statement of Changes in Stockholders' Equity for the Three Months Ended
March 31, 2005 (unaudited)                                                                        F-44

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and
2005 (unaudited)                                                                                  F-45

Notes to Condensed Consolidated Financial Statements (unaudited)                                  F-46

                                                                    F-1
                              REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of
International Transmission Company, LLC
Detroit, Michigan

     We have audited the balance sheets of International Transmission Company, LLC (the "Company," formerly International Transmission
Company) as of February 28, 2003 and December 31, 2002 (not presented separately herein), and the related statements of operations,
member's interest/stockholder's equity and cash flows for the two-month period ended February 28, 2003 and the year ended December 31,
2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, such financial statements present fairly, in all material respects, the results of operations and cash flows of International
Transmission Company, LLC for the two-month period ended February 28, 2003 and the year ended December 31, 2002, in conformity with
accounting principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP

Detroit, Michigan
May 28, 2003

                                                                        F-2
                                        INTERNATIONAL TRANSMISSION COMPANY, LLC

                                              STATEMENTS OF OPERATIONS
                                            YEAR ENDED DECEMBER 31, 2002 AND
                                        TWO-MONTH PERIOD ENDED FEBRUARY 28, 2003

                                                         (in thousands)

                                                                                                              Two-month
                                                                                      Year ended             period ended
                                                                                     December 31,            February 28,
                                                                                         2002                    2003

OPERATING REVENUES:                                                           $             137,535      $            20,936

OPERATING EXPENSES:
  Operation and maintenance                                                                   34,699                   5,675
  Depreciation and amortization                                                               21,996                   3,665
  Taxes other than income taxes                                                               15,776                   4,298

     Total operating expenses                                                                 72,471                  13,638


OPERATING INCOME                                                                              65,064                   7,298


INTEREST EXPENSE AND OTHER:
  Interest expense                                                                                58                          —
  Other income                                                                                (1,720 )                      (147 )
  Other expense                                                                                  245                          45

     Total interest expense and other                                                         (1,417 )                      (102 )


INCOME BEFORE INCOME TAXES                                                                    66,481                   7,400

PROVISION FOR INCOME TAXES                                                                    23,268                   3,915


NET INCOME                                                                    $               43,213     $             3,485


                                                See notes to financial statements.

                                                               F-3
                                  INTERNATIONAL TRANSMISSION COMPANY, LLC

                          STATEMENT OF MEMBER'S INTEREST/STOCKHOLDERS' EQUITY
                                   YEAR ENDED DECEMBER 31, 2001 AND 2002
                             AND THE TWO-MONTH PERIOD ENDED FEBRUARY 28, 2003

                                                      (in thousands)

                                                     Common Stock

                                                                                  Retained           Member's
                                                                                  Earnings            Interest

                                            Shares              Amount                                                   Total

BALANCE, DECEMBER 31, 2001                   60,000       $         326,383   $       13,194     $               —   $    339,577
Net income                                       —                       —            43,213                     —         43,213

BALANCE, DECEMBER 21, 2002                   60,000 $                326,383 $        56,407 $               — $          382,790
Net income                                       —                        —            3,485                 —              3,485
Change in legal status (Note 1)             (60,000 )               (326,383 )       (59,892 )          386,275                —
Member distribution (Note 4)                     —                        —               —             (36,766 )         (36,766 )
Member contribution (Note 4)                     —                        —               —               1,406             1,406

BALANCE, FEBRUARY 28, 2003                           —    $              —    $              —   $      350,915      $    350,915


                                          See notes to financial statements.

                                                              F-4
                                          INTERNATIONAL TRANSMISSION COMPANY, LLC

                                                STATEMENTS OF CASH FLOWS
                                              YEAR ENDED DECEMBER 31, 2002 AND
                                          TWO-MONTH PERIOD ENDED FEBRUARY 28, 2003

                                                                   (in thousands)

                                                                                              Year ended        Two-month period
                                                                                             December 31,        ended February
                                                                                                 2002               28, 2003

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                             $         43,213       $         3,485
  Adjustments to reconcile net income to net cash provided by operating
  activities:
      Depreciation and amortization                                                                21,996                 3,665
      Deferred income taxes                                                                           646                  (827 )
      Change in operating assets and liabilities:
          Accounts receivable                                                                     (51,347 )            106,523
          Inventory                                                                                  (190 )               (450 )
          Regulatory assets                                                                        (2,469 )               (105 )
          Accounts payable and other current liabilities                                           59,862             (124,235 )
          Income taxes payable and deferred income taxes                                           20,031              (18,041 )

              Net cash provided by operating activities                                            91,742               (29,985 )

CASH FLOWS FROM INVESTING ACTIVITIES:
  Change in affiliated note receivable                                                            (72,355 )              72,355
  Proceeds from sales of assets                                                                       304                    12
  Expenditures for property, plant and equipment                                                  (13,901 )              (3,099 )
  Costs of removal                                                                                 (1,459 )              (2,517 )

      Net cash used in investing activities                                                       (87,411 )              66,751

CASH FLOWS FROM FINANCING ACTIVITIES
  Cash effect of assets and liabilities transferred to DTE Energy                                       —               (36,766 )
  Net short-term borrowings from DTE Energy                                                         (4,339 )                 —

      Net cash used in financing activities                                                         (4,339 )            (36,766 )


NET CHANGE IN CASH AND CASH EQUIVALENTS                                                                 (8 )                 —

CASH AND CASH EQUIVALENTS—Beginning of period                                                               8                —


CASH AND CASH EQUIVALENTS—End of period                                                  $              —       $            —


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for interest                                                                 $              58      $            —

   Cash paid to DTE Energy for federal income taxes                                      $          2,838       $            —


                                                          See notes to financial statements.

                                                                         F-5
                                           INTERNATIONAL TRANSMISSION COMPANY, LLC

                                               NOTES TO FINANCIAL STATEMENTS
                                               YEAR ENDED DECEMBER 31, 2002 AND
                                           TWO-MONTH PERIOD ENDED FEBRUARY 28, 2003

1. ORGANIZATION AND BASIS OF PRESENTATION

      As of February 28, 2003, International Transmission Company, LLC (the "Company," formerly International Transmission Company)
was a wholly owned subsidiary of DTE Energy Company ("DTE Energy"). In December 2002, DTE Energy entered into a definitive
agreement with ITC Holdings Corp., an entity that was then affiliated with each of Kohlberg Kravis Roberts & Co. L.P. and Trimaran Fund
Management, L.L.C., which agreement provided for the sale of the Company for approximately $610 million in cash (the "Stock Purchase
Agreement"). Following receipt of regulatory approvals and resolution of other contingencies, the sale closed on February 28, 2003. The
Company is regulated by the Federal Energy Regulatory Commission (the "FERC") for rates, conditions of service and operations relating to
the transmission of electricity.

     Effective February 28, 2003, International Transmission Company, a Michigan corporation, changed its legal structure to a Michigan
limited liability company. In conjunction with the change in legal structure to a limited liability company, the Company elected to retain its
federal tax status.

     These financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.
These financial statements were prepared prior to the closing of sale transaction and do not give effect to the change in basis relative to the sale
transaction.

      The Company's electricity transmission system is operated pursuant to an arrangement established by the Midwest Independent
Transmission System Operator ("MISO") (see Note 3). MISO, a FERC-approved regional transmission organization ("RTO"), which has
responsibility for the oversight and coordination of transmission service for a substantial portion of the midwestern United States and
Manitoba, Canada. MISO establishes regional operating and market practices and scheduling protocols. It also administers the transmission
tariff under which all customers procure transmission service. ITC coordinates with MISO with respect to ITC's operations, as well as the need
for capital investment in its electricity transmission system. Prior to June 1, 2002, The Detroit Edison Company ("Detroit Edison"), an affiliate
of the Company, billed and collected revenues from its retail customers as then authorized in its bundled rates approved by the Michigan Public
Service Commission ("MPSC"). These bundled rates included a transmission component. The Company received transmission revenues from
Detroit Edison and other wholesale customers based on FERC-approved rates. Beginning June 1, 2002, MISO as billing agent for the Company
bills and collects revenues from wholesale customers, including Detroit Edison, at FERC-approved rates. These revenues are then remitted to
the Company. In an order issued February 20, 2003 authorizing DTE Energy to transfer the Company's transmission facilities to the purchaser,
the FERC accepted a rate level of $1.075 per kilowatt ("kW")/month through December 31, 2004. Thereafter, rates will be derived in
accordance with Attachment O of the MISO transmission tariff.

2. SIGNIFICANT ACCOUNTING POLICIES

     Cash Equivalents —The Company considers all unrestricted highly liquid temporary investments with an original maturity of three
months or less at the date of purchase to be cash equivalents.

      Inventories —Materials and supplies inventories are valued at average cost.

     Property, Plant and Equipment —Property, plant and equipment ("PP&E"), is stated at original cost. The cost of properties retired is
charged to accumulated depreciation. The composite depreciation rate

                                                                        F-6
was 2.8% for the year ended December 31, 2002 and for the two-month period ended February 28, 2003, which includes depreciation primarily
on transmission station equipment, towers and overhead and underground lines that have a useful life ranging from 36 to 43 years. Depreciation
is computed over the estimated useful lives of the assets using the straight-line method for financial reporting purposes and accelerated methods
for income tax reporting purposes, as approved by MPSC and as approved by the FERC effective when ITC became a subsidiary of DTE
Energy.

      Revenues —Revenues from deliveries of electricity are recognized as services are provided. The Company accrues revenues for
transmission services provided but unbilled at month-end.

    Income Taxes —DTE Energy and subsidiaries file a consolidated federal income tax return. Income taxes are computed as if the
Company were filing on a stand-alone basis. As discussed in Note 1, in connection with the change in legal structure to a limited liability
company, the Company filed an election with the Internal Revenue Service to be classified as a taxable entity.

      Use of Estimates —The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

       New Accounting Pronouncement —In July 2001, the Financial Accounts Standards Board issued Statement of Financial Accounting
Standards No. 143 ("SFAS 143"), "Accounting for Asset Retirement Obligations." SFAS 143 requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes a
cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its then present value, and the
capitalization cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation
for its recorded amount or incurs a gain or loss upon settlement. SFAS 143 is effective for fiscal years beginning after June 15, 2002. There was
no net impact to the Company's financial statements upon adoption on January 1, 2003.

3. REGULATORY MATTERS

       Regulation —The Company is subject to the regulatory jurisdiction of the FERC, which issues orders pertaining to rates, recovery of
certain costs, including the costs of transmission assets and regulatory assets, conditions of service, accounting and operating-related matters,
the issuance of securities and the direct or indirect change of control over ITC and its transmission facilities.

     The transmission operations of the Company meet the criteria of Statement of Financial Accounting Standards ("SFAS") No. 71,
"Accounting for the Effects of Certain Types of Regulation." This accounting standard recognizes the cost-based rate setting process, which
results in differences in the application of generally accepted accounting principles between regulated and non-regulated businesses. SFAS
No. 71 requires the recording of regulatory assets and liabilities for certain transactions that would have been treated as revenue and expense in
non-regulated businesses.

                                                                         F-7
Regulatory assets represent costs that will probably be recovered from customers through the rate setting process. Continued applicability of
SFAS No. 71 requires that rates be designed to recover specific costs of providing regulated services and can be charged to and collected from
customers. Management believes that currently available facts support the continued application of SFAS No. 71. Future regulatory changes or
changes in the competitive environment could result in the Company discontinuing the application of SFAS No. 71 and require the write-off of
the portion of any regulatory asset or liability that was no longer probable of recovery through regulated rates.

       Regulatory Assets —Regulatory assets recorded at February 28, 2003 and December 31, 2002 include costs incurred related to Regional
Transmission Organization ("RTO") dues and consulting costs associated with the implementation and structuring of the Company to comply
with FERC requirements and Michigan Public Act 141 of 2000 ("PA 141"). Management believes these types of costs are probable of recovery
in future MISO transmission rates as prudently incurred costs based on FERC Docket No. RT01-88-000.

     During 2001, the Company paid Alliance RTO start-up costs of $2.5 million in exchange for promissory notes due in 2002. The first
payment due in March 2002 has not yet been received. In the event the amounts are not collected from Alliance RTO or its successor, these
costs are expected to be recovered through the FERC rate setting process as an RTO start-up expense. Accordingly, the amounts have been
presented as regulatory assets. In accordance with the terms of the Stock Purchase Agreement, any future recovery of this regulatory asset
would be remitted to DTE Energy.

       Regional Transmission Organization —PA 141 and Public Act 142 of 2000 were passed by the State of Michigan and among other
things, required Detroit Edison to have its transmission assets operated independently by joining a FERC-approved RTO or divesting its
interest in transmission to an independent transmission owner by December 31, 2001. During 2001, the Company was formed and
subsequently joined the Alliance RTO. On August 31, 2001, in Docket Nos. ER01-3000, EC01-137 and RT01-101, the Company informed the
FERC that it was withdrawing from the Alliance RTO under the terms of the Alliance RTO Transmission Owners' Agreement. In the same
filing, the Company sought FERC approval of an agreement between the Company and MISO to become an independent transmission
company under the MISO structure. On January 31, 2002, the Company obtained FERC approval of its request in Docket No. EC02-28 to
transfer its obligations under the Joint Open Access Transmission Tariff ("JOATT") to MISO. Subsequently, on February 20, 2003 in Docket
Nos. ER03-366-000 and ER03-368-000, the FERC conditionally approved conforming the JOATT to the MISO Open Access Transmission
Tariff ("OATT") and in Docket No. ER03-368-000, the FERC approved the cancellation of the JOATT. The MISO OATT specifies the rates
and terms for transmission service on the Company's transmission system.

      Tariff Rates —The Company's initial transmission tariff was approved as a Detroit Edison Open Access Transmission Tariff by the
FERC in Docket No. OA96-78-000 on July 15, 1999. This tariff resulted in approximately $93 million of revenue per year. Detroit Edison
requested FERC approval to transfer its OATT to the Company on May 26, 2000 in Docket No. ER00-2622 and the FERC authorized this
transfer on July 6, 2000.

                                                                     F-8
     The Detroit Edison and Consumer Energy Company individual OATT tariff rates were incorporated in the JOATT, a transmission tariff
that was accepted by the FERC in Docket Nos. OA97-249 and ER97-1166 on February 28, 1997 and became effective on March 1, 1997 that
covers service of both Detroit Edison and Consumers Energy Company, a neighboring utility. Detroit Edison requested the FERC to transfer its
portion of the JOATT to the Company on July 7, 2000 in Docket No. ER00-3094. The FERC accepted this transfer on September 5, 2000.

      On July 28, 2000, the Company filed a new tariff at FERC, in Docket No. ER00-3295, which requested the approval of an innovative rate
that would have resulted in approximately $138 million of revenue per year. On September 28, 2000, the FERC conditionally accepted this rate
filing. However, this rate was not implemented. On September 10, 2001, the Company requested FERC approval to suspend the
implementation of the innovative rate until the Company became a part of an RTO and independent of any market participant.

      The transmission rates of certain transmission owners participating in the MISO are established using a FERC-approved rate setting
formula set forth in Attachment O of the MISO's OATT. These rates are calculated primarily using information in each respective transmission
owner's annual FERC Form No. 1 Report ("FERC Form 1"). On May 31, 2002, the MISO submitted a filing ("May 31 Filing") containing
certain specific and limited adjustments to the Company's Attachment O inputs based on 2001 FERC Form 1 data. On July 19, 2002, the FERC
issued an order accepting the May 31 Filing, suspending the proposed revisions to the Company's Attachment O inputs, subject to refund, and
establishing hearing and settlement procedures for the establishment of the Company's transmission rates. This proceeding is currently still in
settlement discussions. However, during this time, the rate charged for transmission service was $1.075 per kW/month. The Company does not
expect the resolution to have a materially adverse affect on the financial statements.

4. RELATED PARTY TRANSACTIONS

      The Company and Detroit Edison have entered into a Master Services Agreement (the "Agreement") whereby Detroit Edison performs
maintenance, asset construction and day-to-day management of transmission operations and administration on behalf of the Company. Detroit
Edison receives compensation for the wages and benefits for employees performing work on behalf of the Company and for costs of
construction or maintenance directly related to the Company. Amounts incurred related to the Agreement totaled $50 million and $11.1 million
for the year ended December 31, 2002 and for the two-month period ended February 28, 2003, respectively, a portion of which was capitalized
in PP&E.

     The current Agreement provides generally for all required services and that consideration for the services shall include a 25% overhead
fee as a percentage of the charges specified in the Detroit Edison Accounting Policies and Guidelines for 2002 and 2003 ("Charges"). In
addition, the Agreement provides for an additional 9.5% fee as a percentage of the sum of Charges and overhead fee in 2003.

     The Company's transmission services are primarily provided to Detroit Edison for retail customers, and Detroit Edison in turn invoices the
end user of the electricity. Revenues earned from Detroit Edison totaled $118 million and $17.9 million for the year ended December 31, 2002
and for the

                                                                      F-9
two-month period ended February 28, 2003, respectively. Detroit Edison is the Company's largest customer, comprising the majority of its
revenue. Accounts receivable also includes amounts that were collected on the Company's behalf by Detroit Edison and not yet remitted to the
Company, via MISO.

      The Company's property taxes are currently combined with Detroit Edison's when assessed by taxing authorities. The Company's share of
all property taxes assessed to Detroit Edison is calculated by and remitted to Detroit Edison for ultimate payment to those taxing authorities.
The Company's share of personal property taxes for the year ended December 31, 2002 and for the two-month period ended February 28, 2003,
was determined to be approximately 7% and 11.8%, respectively, calculated as the Company's weighted average percentage of Detroit Edison's
total personal and real property balances. The Company's share of real property taxes for the two-month period ended February 28, 2003, was
determined by specifically identifying the taxes assessed on the Company's real property. All property tax amounts billed to the Company prior
to February 28, 2003 were paid to Detroit Edison as of February 28, 2003.

     The Company is allocated certain overhead charges from DTE Energy relating to DTE Energy's corporate expenses. The amounts
included in operation and maintenance for these charges are $11 million and $0.9 million for the year ended December 31, 2002 and for the
two-month period ended February 28, 2003, respectively.

      On February 28, 2003, prior to the sale of the Company, all DTE Energy affiliate receivable and payable balances and current federal and
state taxes, were settled with or assigned to DTE Energy. As such, all amounts were recorded as a member distribution of $36.8 million. For
the year ended December 31, 2002, the Company had outstanding trade accounts receivable and accounts payable with DTE Energy and
affiliates totaling $94 million and $121 million, respectively.

     The Company has a working capital loan/investing agreement with DTE Energy. The maximum amount of borrowings permitted by the
Company under this agreement is $17.0 million. Variable interest rates on the receivables and payables were 1.21% and 1.16% at
December 31, 2002 and February 28, 2003, respectively. At December 31, 2002, the Company had a receivable balance of $72 million. This
agreement was terminated on February 28, 2003.

     On February 28, 2003, prior to the sale of the Company, DTE Energy made a non-cash contribution of certain internally-developed
software assets necessary to the operations of the Company. The software assets were transferred at their net book value of approximately
$1.4 million.

5. INCOME TAXES

     The Company establishes deferred tax assets and liabilities, as appropriate, for all temporary differences. As the temporary differences
reverse, the related accumulated deferred income taxes are reversed. The Company has an income tax sharing arrangement with DTE Energy.
Under this arrangement, DTE Energy is responsible for payment of all federal and state income taxes. Income tax liabilities paid by DTE
Energy on behalf of the Company are repaid to DTE Energy. The Company's deferred income tax liability at December 31, 2002 and
February 28, 2003 relates to depreciation of PP&E, property taxes and regulatory assets.

                                                                     F-10
    The effective tax rate varied from the statutory federal income tax rate due to the following

                                                                                                                         Two-month
                                                                                    Year ended                          period ended
                                                                                 December 31, 2002                    February 28, 2003

                                                                                          (in thousands, except tax rates)


              Federal income tax effective rate                                                   35.0 %                               52.9 %
              Income tax expense at 35% statutory rate                       $                  23,268 $                              2,590
              Adjustment for property-related differences                                           —                                 1,325

              Total                                                          $                  23,268        $                       3,915


     Federal income tax expense is as follows:

                                                                                                                         Two-month
                                                                                    Year ended                          period ended
                                                                                 December 31, 2002                    February 28, 2003

                                                                                                     (in thousands)


              Current income taxes                                           $                   22,622       $                           4,742
              Deferred income taxes                                                                 646                                    (827 )

              Total                                                          $                   23,268       $                           3,915


6. MICHIGAN ELECTRIC COORDINATED SYSTEM

     The Company and Consumers Energy Company have maintained their existing interconnections and continue to offer joint transmission
service on their respective transmission systems pursuant to the terms of a JOATT, and to operate their interconnected transmission systems as
a single electric control area, known as the Michigan Electric Coordinated System, pursuant to the Michigan Electric Coordinated Systems
Transmission Interconnection and Control Area Operating Agreement, between Consumers Energy Company and ITC, dated February 7, 2001.
The Company earned $2 million and $0.3 million in rental income from Consumers Energy Company for operation of the joint control area for
the year ended December 31, 2002 and for the two-month period ended February 28, 2003, respectively, which is recorded in Operating
Revenues.

7. COMMITMENT AND CONTINGENCY

    The Company is involved in routine litigation in the normal course of its business. Such proceedings are not expected to have a material
adverse impact on the Company's results of operations, financial position or liquidity.

                                                                      F-11
                              REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
ITC Holdings Corp.
Novi, Michigan

     We have audited the accompanying consolidated statements of financial position of ITC Holdings Corp. and subsidiaries (the "Company")
as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders' equity and comprehensive income
(loss), and cash flows for the year ended December 31, 2004 and the period from February 28, 2003 (date of acquisition) through December 31,
2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of ITC Holdings Corp.
and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for the year ended December 31,
2004 and the period from February 28, 2003 (date of acquisition) through December 31, 2003, in conformity with accounting principles
generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Detroit, Michigan
March 21, 2005

                                                                       F-12
                             ITC HOLDINGS CORP. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                                  DECEMBER 31, 2003 AND 2004

                                                                                 2003                        2004

                                                                              (in thousands, except number of shares)


ASSETS
Current assets
  Cash and cash equivalents                                               $          8,139             $        14,074
  Accounts receivable                                                               15,936                      15,614
  Inventory                                                                          8,045                      13,785
  Other                                                                                885                         954

           Total current assets                                                     33,005                      44,427
Property, plant and equipment (net of accumulated depreciation and
amortization of $388,271 and $402,026, respectively)                               459,393                     513,684
Other assets
   Goodwill                                                                        178,414                     176,039
   Regulatory assets—acquisition adjustment                                         58,077                      55,047
   Other regulatory assets                                                           9,986                       8,053
   Deferred financing fees (net of accumulated amortization of $330
   and $1,294, respectively)                                                         6,215                        6,058
   Deferred income taxes                                                             4,306                        2,871
   Other                                                                             2,261                        2,668

           Total other assets                                                      259,259                     250,736

TOTAL ASSETS                                                              $        751,657             $       808,847

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Accounts payable                                                        $         19,738             $        29,788
  Accrued interest                                                                  10,198                      10,294
  Accrued taxes                                                                      5,909                      12,831
  Point-to-point revenue due to customers                                            9,907                      12,903
  Other                                                                              4,886                       5,728

          Total current liabilities                                                 50,638                      71,544
Accrued pension liability                                                            2,708                       3,783
Accrued postretirement liability                                                     1,960                       2,338
Deferred compensation liability                                                      1,744                       2,329
Regulatory liabilities                                                              46,411                      43,941
Deferred payables                                                                    6,197                       4,887
Long-term debt                                                                     450,753                     483,423
STOCKHOLDERS' EQUITY
Common stock, without par value, 10,000,000 shares authorized,
9,110,106 and 9,176,570 shares issued and outstanding, respectively                200,956                     203,459
Unearned compensation—restricted stock                                              (1,656 )                    (1,411 )
Accumulated deficit                                                                 (8,054 )                    (5,446 )

Total stockholders' equity                                                         191,246                     196,602

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                $        751,657             $       808,847


                                 See notes to consolidated financial statements.

                                                      F-13
                                           ITC HOLDINGS CORP. AND SUBSIDIARIES
                                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                  FOR THE PERIOD FEBRUARY 28, 2003 (DATE OF ACQUISITION)
                                             THROUGH DECEMBER 31, 2003 AND
                                          FOR THE YEAR ENDED DECEMBER 31, 2004

                                                                                                2003                                   2004

                                                                                                   (in thousands, except per share data)


OPERATING REVENUES                                                                   $                 102,362               $                126,449
OPERATING EXPENSES
  Operation and maintenance                                                                             22,902                                 24,552
  General and administrative                                                                            26,342                                 24,412
  Depreciation and amortization                                                                         21,463                                 29,480
  Taxes other than income taxes                                                                         11,499                                 20,840

         Total operating expenses                                                                       82,206                                 99,284


OPERATING INCOME                                                                                        20,156                                 27,165


OTHER EXPENSES (INCOME)
  Interest expense                                                                                      21,630                                 25,585
  Allowance for equity funds used in construction                                                         (322 )                               (1,691 )
  Loss on extinguishment of debt                                                                        11,378                                     —
  Other income                                                                                            (197 )                               (1,289 )
  Other expense                                                                                             27                                    283

         Total other expenses                                                                           32,516                                 22,888


INCOME (LOSS) BEFORE INCOME TAXES                                                                      (12,360 )                                4,277

INCOME TAX PROVISION (BENEFIT)                                                                          (4,306 )                                1,669


NET INCOME (LOSS)                                                                    $                  (8,054 )             $                  2,608


Weighted average common shares outstanding—basic                                                  8,775,804                                9,028,403
Net income (loss) per share—basic                                                    $                (0.92 )                $                  0.29

Weighted average common shares outstanding—diluted                                                8,956,103                                9,242,467
Net income (loss) per share—diluted                                                  $                (0.89 )                $                  0.28

                                              See notes to consolidated financial statements.

                                                                   F-14
                                       ITC HOLDINGS CORP. AND SUBSIDIARIES
                          CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                        AND COMPREHENSIVE INCOME (LOSS)
                              FOR THE PERIOD FEBRUARY 28, 2003 (DATE OF ACQUISITION)
                                         THROUGH DECEMBER 31, 2003 AND
                                        THE YEAR ENDED DECEMBER 31, 2004

                                                                                                        Accumu-
                                                                                                          lated
                                                                                                          other
                                                                                                        compre-
                                                                                                        hensive
                                                                                                         income
                                                                                                          (loss)

                                                                   Unearned
                                                                    compen-
                                                                     sation
                                                                   restricted
                                                                      stock

                                                                                                                                       Compre-
                                                                                                                                       hensive
                                                                                                                                        income
                                        Common Stock                                                                                     (loss)

                                                                                      Accumu-
                                                                                       lated
                                                                                       deficit

                                    Shares        Amount                                                                 Total

                                                                   (in thousands, except number of shares)


 INITIAL CAPITAL
CONTRIBUTION AT
FEBRUARY 28, 2003:
   Common stock                     8,440,000 $        211,000 $             — $                 — $               — $    211,000 $               —
   Restricted stock                    16,000              400             (400 )                —                 —           —                  —


BALANCE, FEBRUARY 28,
2003                                8,456,000          211,400             (400 )             —                    —      211,000              —
  Net loss                                 —                —                —            (8,054 )                 —       (8,054 )        (8,054 )
  Issuance of common stock            308,614            7,675               —                —                    —        7,675              —
  Conversion of subordinated
  notes to common stock              240,206             6,005              —                    —                 —         6,005                —
  Issuance of restricted stock       105,286             2,434          (1,505 )                 —                 —           929                —
  Amortization of restricted
  stock                                      —              —               249                  —                 —          249                 —
  Distribution to stockholders               —         (27,095 )             —                   —                 —      (27,095 )               —
  Other                                      —             537               —                   —                 —          537                 —
  Unrealized losses on cash flow
  hedge, net of tax of $914                  —              —                   —                —           (1,698 )            —         (1,698 )
  Reclassification of unrealized
  loss on cash flow hedge to
  other regulatory assets, net of
  tax of $914                                —              —                   —                —           1,698               —         1,698

  Comprehensive loss                         —              —                   —                —                 —             — $       (8,054 )


BALANCE, DECEMBER 31,
2003                                9,110,106 $        200,956 $        (1,656 ) $        (8,054 )                 — $    191,246             —
  Net income                                                —               —              2,608                   —        2,608          2,608
  Issuance of common stock             46,382            1,020              —                 —                    —        1,020             —
 Issuance of restricted stock       21,082         521             (506 )          —        —         15      —
 Forfeiture of restricted stock     (1,000 )       (22 )             22            —        —         —       —
 Amortization of restricted
 stock                                  —           —               729            —        —        729      —
 Other                                  —          984               —             —        —        984      —

 Comprehensive income                   —           —                 —            —        —         — $   2,608


BALANCE, DECEMBER 31,
2004                              9,176,570 $   203,459 $         (1,411 ) $   (5,446 ) $   — $   196,602


                                                           F-15
                                          ITC HOLDINGS CORP. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 FOR THE PERIOD FEBRUARY 28, 2003 (DATE OF ACQUISITION)
                                            THROUGH DECEMBER 31, 2003 AND
                                         FOR THE YEAR ENDED DECEMBER 31, 2004

                                                                                                      2003                    2004

                                                                                                             (in thousands)


CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Net income (loss)                                                                                 $          (8,054 ) $              2,608
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
  Depreciation and amortization expense                                                                      21,463              29,480
  Amortization of deferred financing fees and discount                                                        1,695               1,094
  Stock-based compensation expense                                                                            1,056               1,262
  Loss on extinguishment of debt                                                                             11,378                  —
  Deferred income taxes                                                                                      (4,306 )             1,435
  Deferred payables                                                                                           6,197              (1,309 )
  Accrued pension and postretirement liabilities                                                              1,042               1,453
  Regulatory assets                                                                                           6,769               1,933
  Allowance for equity funds used in construction                                                              (322 )            (1,691 )
  Other                                                                                                      (2,706 )              (257 )
  Changes in current assets and liabilities, exclusive of changes shown separately (Note 2)                  18,664              13,638

  Net cash provided by operating activities                                                                  52,876              49,646
CASH FLOWS FROM INVESTING ACTIVITIES
  Expenditures for property, plant and equipment                                                         (26,805 )              (76,779 )
  Acquisition of ITC                                                                                    (618,306 )                   —
  ITC Acquisition-related transaction fees                                                               (15,698 )                   —
  Bridge loan to Conjunction                                                                              (1,100 )                   —
  Other                                                                                                     (900 )                  308

          Net cash used in investing activities                                                         (662,809 )              (76,471 )
CASH FLOWS FROM FINANCING ACTIVITIES
  Issuance of long-term debt                                                                             891,593                     46
  Repayment of long-term debt                                                                           (435,000 )                   —
  Borrowings under revolving credit facilities                                                                —                  54,500
  Repayments of revolving credit facilities                                                                   —                 (22,000 )
  Distributions to stockholders                                                                          (27,095 )                   —
  Acquisition-related debt issuance costs                                                                (20,878 )                   —
  Other debt issuance costs                                                                               (6,611 )                 (806 )
  Interest rate swap termination cost                                                                     (2,612 )                   —
  Issuance of common stock                                                                               218,675                  1,020

          Net cash provided by financing activities                                                      618,072                 32,760

NET INCREASE IN CASH AND CASH EQUIVALENTS                                                                     8,139                  5,935
CASH AND CASH EQUIVALENTS—Beginning of period                                                                    —                   8,139

CASH AND CASH EQUIVALENTS—End of period                                                           $           8,139     $        14,074


                                                See notes to consolidated financial statements.

                                                                     F-16
                                               ITC HOLDINGS CORP. AND SUBSIDIARIES

                                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               FOR THE PERIOD FEBRUARY 28, 2003 (DATE OF ACQUISITION)
                           THROUGH DECEMBER 31, 2003 AND THE YEAR ENDED DECEMBER 31, 2004

1.   ORGANIZATION

      ITC Holdings Corp. ("Holdings") was incorporated for the purpose of acquiring International Transmission Company, LLC ("Predecessor
ITC") from DTE Energy Company ("DTE Energy"). Following the approval of the transaction by the Federal Energy Regulatory Commission
(the "FERC"), Holdings acquired the outstanding ownership interests of Predecessor ITC (the "Acquisition") under the terms of the Stock
Purchase Agreement (the "Stock Purchase Agreement") for $610.0 million in cash plus direct transaction costs on February 28, 2003.
Immediately following the Acquisition, Predecessor ITC was merged with and into ITC Holdings Merger Sub, Inc., an entity formed by
Holdings, and ITC Holdings Merger Sub, Inc. was then renamed International Transmission Company ("ITC"). ITC was the surviving entity
following the merger. The financial information presented herein for Holdings and its consolidated subsidiaries ("ITC Holdings Corp.," "we,"
"our," and "us") includes results of operations for the period from February 28, 2003 through December 31, 2003 (the "2003 Period"), the
initial period of operations of ITC as a subsidiary of Holdings. The 2003 Period is a ten-month period and therefore not directly comparable to
the results of operations for the year ended December 31, 2004.

     ITC is an independently-owned electricity transmission company with assets located in southeastern Michigan. ITC is regulated by the
FERC for rates, conditions of service, and electricity transmission operations, among other aspects of the business. The Midwest Independent
System Operator ("MISO") bills and collects revenues from ITC's customers at FERC-approved rates.

2.   SIGNIFICANT ACCOUNTING POLICIES

      Principles of Consolidation —Holdings consolidates majority owned subsidiaries and investments in entities for which it has effective
management control, which consists of ITC and New York Transmission Holdings Corporation ("NYTHC") as of December 31, 2003 and
2004. We eliminate all intercompany balances and transactions.

      Accounts Receivable —We recognize losses for uncollectible accounts based on specific identification of any such items. We did not
have an accounts receivable reserve balance at December 31, 2003 or 2004.

      Inventories —Materials and supplies inventories are valued at average cost.

      Property, Plant and Equipment —Property, plant and equipment ("PP&E"), is stated at its original cost when first placed in service. The
gross book value of assets retired less salvage proceeds is charged to accumulated depreciation. Depreciation is computed over the estimated
useful lives of the assets using the straight-line method for financial reporting purposes and accelerated methods for income tax reporting
purposes. Our composite depreciation rate was 2.8% and 3.1% for the 2003 Period and 2004, respectively, which includes depreciation
primarily on transmission station equipment, towers and overhead and underground lines that have a useful life ranging from 36 to 43 years.
Depreciation and amortization expense relating to PP&E was $18.9 million and $26.4 million for the 2003 Period and 2004, respectively. The
portion of depreciation expense related to asset removal costs is credited to regulatory liabilities. ITC capitalizes an allowance for the cost of
equity and borrowings used during construction in accordance with FERC regulations. The allowance for the cost of borrowed funds of
$0.1 million and $0.4 million for the 2003 Period and 2004, respectively, was credited to interest

                                                                       F-17
expense. The allowance for the cost of equity funds of $0.3 million and $1.7 million for the 2003 Period and 2004, respectively, was credited to
other income.

       Software Costs —We capitalize the costs associated with computer software we develop or obtain for use in our business which is
included in PP&E. We amortize computer software costs on a straight-line basis over the expected period of benefit once the installed software
is ready for its intended use.

      Long-Lived Assets —Long-lived assets that we own are reviewed for impairment whenever events or changes in circumstances indicate
the carrying amount of an asset may not be recoverable. If the carrying amount of the asset exceeds the expected future cash flows generated by
the asset, an impairment loss is recognized resulting in the asset being written down to its estimated fair value.

       Regulation —ITC is subject to the regulatory jurisdiction of the FERC, which issues orders pertaining to rates, recovery of certain costs,
including the costs of transmission assets and regulatory assets, conditions of service, accounting, financing authorization and operating-related
matters. The electricity transmission operations of ITC meet the criteria of Statement of Financial Accounting Standards ("SFAS") 71,
"Accounting for the Effects of Certain Types of Regulation." This accounting standard recognizes the cost-based rate setting process, which
results in differences in the application of generally accepted accounting principles between regulated and non-regulated businesses. SFAS 71
requires the recording of regulatory assets and liabilities for certain transactions that would have been treated as revenue and expense in
non-regulated businesses. Regulatory assets represent costs that will be included as a component of tariff rates and regulatory liabilities
represent estimated asset removal costs to be incurred in the future or amounts to be refunded to customers. The financial statements include
assumptions for the regulatory treatment of certain matters that are subject to review by the FERC and would be adjusted in the period where a
different regulatory treatment is required.

     The Michigan Public Service Commission does not have jurisdiction over ITC's rates or terms and conditions of service, but it continues
to maintain jurisdiction over siting of new transmission lines. Pursuant to Michigan Public Acts 197 and 198 of 2004, ITC has the right as an
independent transmission company to condemn property in the State of Michigan for the purposes of building new transmission facilities.

     Cash and Cash Equivalents —We consider all unrestricted highly liquid temporary investments with an original maturity of three
months or less at the date of purchase to be cash equivalents.

                                                                      F-18
Consolidated Statements of Cash Flows

                                   Cash flows for the period February 28, 2003 through December 31, 2003
                                                    and the year ended December 31, 2004

                                                                                                                   2003                    2004

                                                                                                                          (in thousands)


Change in current assets and liabilities, exclusive of changes shown separately:
  Accounts receivable                                                                                        $       (6,472 ) $                 322
  Inventory                                                                                                          (3,189 )                (5,739 )
  Other current assets                                                                                                 (885 )                   (75 )
  Accounts payable                                                                                                   11,544                  12,387
  Accrued interest                                                                                                   10,198                      96
  Accrued taxes                                                                                                      (1,192 )                 6,922
  Point-to-point revenue due to customers                                                                             9,907                   2,996
  Other current liabilities                                                                                          (1,247 )                (3,271 )

Total change in current assets and liabilities                                                               $       18,664        $         13,638

Supplementary cash flow information—
  Interest paid (excluding interest capitalized)                                                             $            8,852    $         22,403

Noncash investing and financing activities:
  Conversion of restricted stock to Holdings' common stock                                                                —                      943
  Conversion of Holdings debt to Holdings' common stock                                                                6,005                      —
  Conversion of Conjunction loan to Class B units in Conjunction                                                      (1,100 )                    —
  ITC purchase price adjustment resulting in reduced PP&E                                                                 —                   (1,431 )

      Revenues —Revenues from transmission of electricity are recognized as services are provided. ITC's revenues consist primarily of
network revenues, which are calculated monthly by multiplying 1) the peak network load achieved during any one hour each month by 2) the
appropriate tariff rate as calculated under the MISO rate setting mechanism, known as Attachment O ("Attachment O") by 3) the number of
days in that month divided by the number of days in the year by 4) 12.

      Property Taxes —We use a calendar year method of accounting for property taxes. Property tax expense is accrued on a straight-line
basis over the calendar year immediately following the tax lien date of December 31 of each year.

      Deferred Financing Fees —The costs related to the issuance of long-term debt are deferred and amortized over the life of the debt issue.
In accordance with FERC regulations, the unamortized discount, premium and expense related to debt redeemed with a refinancing at ITC are
amortized over the remainder of the original life of the issue retired, and the unamortized amounts are classified as other regulatory assets. For
Holdings, unamortized discount, premium and expense related to debt redeemed with a refinancing are recorded as expense. Amortization of
deferred financing fees for the 2003 Period and 2004 of $1.6 million and $1.0 million, respectively, was recorded in interest expense.

       Goodwill —We comply with SFAS 142, "Goodwill and Other Intangible Assets," which addresses the financial accounting and reporting
standards for goodwill and other intangible assets subsequent to their acquisition. This accounting standard requires that goodwill be reviewed
at least annually for

                                                                      F-19
impairment. We completed our annual goodwill impairment test as of October 1, 2004 and determined that no impairment exists.

      Stock-Based Compensation —We have a stock-based compensation plan under which we make various stock-based awards, including
options and restricted stock. Stock-based awards are accounted for under the recognition and measurement principles of SFAS 123,
"Accounting for Stock-Based Compensation." Compensation expense for employees is recorded for stock options and restricted stock awards
based on their fair value at the grant date, and is amortized over the expected vesting period. The grant date is the date at which our
commitment to issue stock awards to the employee arises, which is generally the later of the board approval date, the date of hire of the
employee or the date of the employee's compensation agreement which contains the commitment to issue the award. For non-employees,
expense is recognized based on the fair value of the options at each financial reporting date until the related services are completed upon
vesting of the options. The effect of forfeitures on unvested awards is recognized in the period they occur.

      Comprehensive Income —Comprehensive income is the change in common stockholders' equity during a period arising from
transactions and events from non-owner sources, including net income. Amounts recorded as other comprehensive income during the 2003
Period consisted of unrealized losses associated with cash flow hedging activities and the reclassification of those unrealized losses to other
regulatory assets upon termination of the hedge.

       Income Taxes —Deferred income taxes are recognized for the expected future tax consequences of events that have been recognized in
the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the differences between the financial
statement and tax bases of various assets and liabilities using the tax rates in effect for the year in which the differences are expected to reverse.

       Use of Estimates —The preparation of the consolidated financial statements in accordance with accounting principles generally accepted
in the United States of America ("GAAP") requires us to make estimates and assumptions that impact the reported amounts of assets, liabilities,
revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from these estimates.

      Reclassifications —We reclassified certain prior year balances to match the current year's financial statement presentation, primarily to
separately present amounts that had been previously combined in one financial statement line item.

      Other accounting policies impacting our financial statements —See the following notes for other accounting policies impacting our
financial statements:

Note 7                Long-Term Debt
Note 11               Retirement Benefits and Assets Held in Trust
Note 12               Deferred Compensation Plans

                                                                        F-20
3.   RECENT ACCOUNTING PRONOUNCEMENTS

Share-based Payment

     SFAS 123R, "Share-Based Payment" requires all entities to recognize compensation expense in an amount equal to the fair value of
share-based payments made to employees, among other requirements. SFAS 123R is effective in the first reporting period beginning after
June 15, 2005. We have already adopted the expense recognition provisions of SFAS 123 for our stock-based compensation and have not
concluded whether the transition to SFAS 123R will have a material effect on our consolidated financial statements.

Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity

     SFAS 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity" establishes standards for
how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS 150 requires that
certain financial instruments be classified as liabilities that were previously considered equity. The adoption of this standard as of July 1, 2003,
as required, had no impact on our consolidated financial statements.

4.   ACQUISITIONS AND DISPOSITIONS

      Acquisition of ITC —On February 28, 2003, Holdings acquired all of Predecessor ITC's outstanding ownership interests from DTE
Energy for $610.0 million in cash plus direct transaction costs. Prior to the Acquisition, Holdings had no operations. In accordance with
provisions of the Stock Purchase Agreement the agreement that sets various terms and conditions of the Acquisition, the purchase price was
adjusted based on a closing balance sheet of Predecessor ITC at February 28, 2003. Holdings paid $8.3 million in additional consideration for
the Acquisition during the 2003 Period, primarily relating to incremental PP&E balances of Predecessor ITC at February 28, 2003 compared
with the preliminary PP&E balances estimated at the time of the closing of the Acquisition. During 2004, Holdings and DTE Energy negotiated
additional PP&E, inventory, and other closing balance sheet items relating to the Acquisition. These negotiations are not final; however,
Holdings' best estimate of the outcome has been recorded resulting in an increase in the purchase price of $1.4 million. There may be additional
purchase price adjustments as Holdings and DTE Energy finalize their negotiations or continue to identify differences from the closing balance
sheet at February 28, 2003.

      Holdings accounted for the Acquisition using the purchase method. The excess purchase price, including transaction costs, over the fair
value of net assets acquired was classified as goodwill. The Acquisition was treated as a taxable transaction, adjusting the tax basis of the assets
acquired to fair value pursuant to an election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended. The goodwill
amount of $176.0 million is expected to be deductible for federal income tax purposes, with the majority of the goodwill being amortized over
fifteen years for federal income tax purposes.

                                                                        F-21
    The following table summarizes the allocation of the purchase price to the fair values of the assets acquired and liabilities assumed in the
Acquisition:

(in thousands)
Current assets                                                                                                               $         14,449
Property, plant and equipment (net)(a)                                                                                                433,536
Other regulatory assets                                                                                                                 5,883
Regulatory assets—acquisition adjustment                                                                                               60,602

Total assets acquired                                                                                                                 514,470


Current liabilities                                                                                                                      (231 )
Regulatory liabilities                                                                                                                (45,227 )
Other liabilities                                                                                                                     (11,775 )

Total liabilities assumed                                                                                                             (57,233 )

Net assets acquired                                                                                                                   457,237
Goodwill(a)                                                                                                                           176,039

Acquisition price, including transaction costs                                                                               $        633,276



(a)
       Includes purchase price adjustments recorded during 2004 relating to PP&E.



      Conjunction —We acquired a majority membership interest in Conjunction LLC ("Conjunction") in the 2003 Period, subsequent to
approval by the FERC, through our newly-formed wholly-owned subsidiary, NYTHC. The majority interest was acquired in October 2003 for
$2.0 million, consisting of the conversion of a loan receivable to membership interest of $1.1 million, cash of $0.9 million and direct
transaction costs of $0.3 million. Additional membership interests were acquired in December 2003 for cash of $1.0 million. The investment in
Conjunction was used to fund initial planning and development of a 130-mile high-voltage direct current transmission line to be built within
New York State to transmit power to the metropolitan New York City area. On July 16, 2004, the Conjunction agreement was amended in
several respects, including providing substantial participating rights to the minority membership interest holder of Conjunction. As a result,
NYTHC discontinued the application of consolidation accounting for Conjunction and prospectively began to apply equity method accounting
in July 2004. Conjunction had goodwill of $3.8 million, accounts payable of $3.9 million and other current liabilities of $0.3 million that were
no longer included in the consolidated statement of financial position beginning in July 2004 due to the discontinuation of consolidation
accounting for Conjunction. The impact from Conjunction for the 2003 Period resulted in losses of $1.6 million ($1.0 million after tax). The net
impact from Conjunction for 2004 resulted in losses of $1.7 million ($1.1 million after tax), comprised of general and administrative expenses
of $2.4 million offset by the reversal of previously recognized losses upon application of the equity method of $0.7 million recorded in other
income. In November 2004, Conjunction announced that the development of the proposed transmission line had been terminated. We have no
remaining investment balance relating to Conjunction at December 31, 2004 and therefore no equity method losses to record prospectively.

                                                                      F-22
      Goodwill —The following table summarizes the changes in the carrying amount of goodwill during the 2003 Period and 2004:

                                                                                              2003                    2004

                                                                                                     (in thousands)


Goodwill balance, beginning of period                                                   $      170,171        $        178,414
Changes to goodwill:
  Acquisition of Conjunction                                                                         3,806                   —
  ITC purchase price adjustments                                                                     4,437                1,431
  Deconsolidation of Conjunction                                                                        —                (3,806 )

Goodwill balance, end of period                                                         $      178,414        $        176,039


5.   REGULATORY MATTERS

       Regulatory Assets—Acquisition Adjustment —The regulatory assets-acquisition adjustment balance at December 31, 2004 of
$55.1 million is the remaining unamortized balance of the portion of the ITC purchase price in excess of the fair value of net assets acquired
approved for inclusion in future rates by the FERC. ITC earns a return on the remaining unamortized balance of the regulatory asset-acquisition
adjustment. The FERC based the original amount on the accumulated deferred income taxes recorded by Predecessor ITC at February 28,
2003, the benefit of which remained with DTE. The original amount recorded for this regulatory asset of $60.6 million is being recognized in
rates and amortized on straight-line basis over 20 years. ITC recorded amortization expense of $2.5 million and $3.0 million during the 2003
Period and 2004, respectively, which is included in depreciation and amortization.

       Other Regulatory Assets —During the 2003 Period, ITC amortized $4.9 million of regulatory assets relating to MISO and ITC start-up
activities to general and administrative expense. Additionally, during the 2003 Period, approximately $1.0 million of costs previously deferred
as regulatory assets relating to MISO Integrated Control Center System were reimbursed by MISO. There was no remaining balance for this
regulatory asset at December 31, 2003.

     In July 2003, unamortized debt expense of $10.9 million related to ITC debt redeemed with the July 2003 refinancing was reclassified
from deferred financing fees to other regulatory assets. ITC amortized $0.9 million and $1.9 million of this regulatory asset to interest expense
during the 2003 Period and 2004, respectively. The balance of this regulatory asset at December 31, 2004 was $8.1 million. ITC does not earn a
return on this regulatory asset, and the amounts are amortized on a straight-line basis through February 2009.

      Regulatory Liabilities —At December 31, 2004, we had recorded an estimated $43.9 million for accrued asset removal costs related to
ITC, included in regulatory liabilities. Removal expenditures incurred are charged to regulatory liabilities.

      Tariff Rates/Attachment O —ITC's transmission rates are regulated by the FERC. On February 20, 2003, the FERC issued an order
authorizing the Acquisition and approving transmission rates for ITC, including a fixed transmission rate of $1.075 per kilowatt ("kW") per
month through December 31,

                                                                      F-23
2004 (the "Freeze Period"). This fixed rate was less than the rate that would otherwise have applied upon closing of the Acquisition if rates had
reflected ITC's FERC-approved capital structure, rate base and other components of revenue requirements under Attachment O.

      Attachment O is a FERC-approved cost of service formula rate template that is completed annually by all transmission-owning members
of the MISO, except for members who have alternative rate structures approved by the FERC. Under Attachment O, transmission rates are
determined annually based on an allowed rate of return on rate base (weighted average cost of capital), network load, operating expenses
(including taxes) and depreciation and amortization, among other components. The financial information used to complete ITC's Attachment O
filing is taken primarily from ITC's most recently completed FERC Form 1. In its February 20, 2003 order, the FERC accepted ITC's proposed
return of 13.88% on the equity portion of its capital structure. ITC's proposed capital structure targeting 60% equity and 40% debt was also
accepted by the FERC although Attachment O uses ITC's actual capital structure from its FERC Form 1. Since Attachment O is a
FERC-approved rate formula, no FERC filing is required to put the calculated rates into effect.

     During the Freeze Period, the difference between the revenue ITC would have been entitled to collect under Attachment O and the actual
revenue ITC received based on the fixed transmission rate in effect during the Freeze Period (the "Revenue Deferral") will not be recognized as
revenue until billed. The cumulative Revenue Deferral at December 31, 2004 was $59.7 million ($38.8 million net of tax). At the end of each
year, the cumulative Revenue Deferral, net of taxes, will be included in rate base on Attachment O to determine ITC's annual revenue
requirement. The Revenue Deferral will be included ratably in rates over the five-year period beginning June 1, 2006. The Revenue Deferral
and related taxes are not reflected as an asset or as revenue in the 2003 or 2004 consolidated financial statements, because the Revenue Deferral
does not meet the criteria to be recorded as a regulatory asset in accordance with SFAS 71.

    The February 20, 2003 order required ITC to submit a compliance filing explaining the Attachment O deferral calculation and its proposed
accounting for the Acquisition. On March 24, 2003, ITC submitted its compliance filing. On July 2, 2003 the FERC issued an order that
accepted the March 24, 2003 compliance filing but deferred action on ITC's proposed accounting.

     On April 29, 2004, the FERC issued an order accepting in part and modifying in part ITC's proposed accounting and related rate setting
items contained in its March 24, 2003 compliance filing and directed ITC to make a further compliance filing to revise its Attachment O tariff
sheets in accordance with the accounting items. On May 28, 2004, ITC submitted its compliance filing in response to the April 29, 2004 order.
On July 14, 2004 the FERC accepted ITC's May 28, 2004 compliance filing. On September 16, 2004, and as amended on September 20, 2004,
MISO and ITC submitted a joint filing to incorporate the tariff revisions accepted on July 14, 2004 into the MISO Open Access Transmission
Tariff. On November 16, 2004, the FERC accepted the submittals for filing.

     Beginning January 1, 2005, ITC began to charge a rate of $1.587 per kW/month as calculated under the Attachment O formula based
primarily on FERC Form 1 data for the year ended December 31, 2003. Beginning June 1, 2005, and each June 1 thereafter, ITC will charge
rates based primarily on data from the previous year's FERC Form 1. ITC's rates beginning June 1, 2006 will be

                                                                      F-24
based primarily on FERC Form 1 data for the year ended December 31, 2005 and will also include recovery of a portion of the Revenue
Deferral. ITC's rates will be based on Attachment O through January 31, 2008, subject to further extension by the FERC.

      Other —On September 4, 2003, ITC was represented and testimony was submitted in hearings before the Energy and Commerce
Committee of the United States House of Representatives investigating the August 14, 2003 electrical blackout. These hearings together with
other investigations may result in further regulatory proceedings and initiatives that would affect the operations of the transmission grid.

    On September 15, 2003, the FERC issued an order authorizing an increase in the aggregate amount of long-term debt securities that ITC
may issue from $200 million to $210 million subject to various conditions.

    On February 13, 2004, ITC filed an application with the FERC to issue additional debt and/or equity securities in an aggregate amount of
$50 million. On March 10, 2004, the FERC issued a letter order authorizing the issuance of such securities subject to various terms and
conditions.

      On July 13, 2004, Michigan Public Acts 197 and 198 were signed. This legislation clarifies that independent transmission companies such
as ITC may use the eminent domain procedures, where necessary and appropriate, to site new transmission lines. This legislation updated
existing Michigan statutes to ensure independent transmission companies have the same eminent domain authority possessed by traditional
utilities. It allows independent transmission companies to gain siting approval for new transmission facilities from the Michigan Public Service
Commission.

     On October 29, 2004, MISO and certain MISO transmission owners, other than ITC, filed revisions to their Attachment O tariff sheets
with respect to the treatment of long-term interest on advances from associated companies. Under the previous version of Attachment O,
long-term interest on advances from associated companies was not included as a component of revenue requirements. The revision, as filed,
would have allowed ITC to include long-term interest on advances from associated companies in its weighted average cost of borrowings and
therefore, such interest would be a component of revenue requirements. On November 1, 2004, ITC and MISO filed a corresponding revision
to ITC's Attachment O tariff sheet. In December 2004, the FERC accepted this filing. This Attachment O revision did not have an impact on
ITC in 2004.

     ITC is actively involved in numerous other FERC proceedings either directly or jointly with MISO as part of its ongoing operations.

6.   PROPERTY, PLANT AND EQUIPMENT

     PP&E-net consisted of the following at December 31, 2003 and 2004:

                                                                                               2003                    2004

                                                                                                      (in thousands)


Property, plant and equipment
  Transmission plant in service                                                           $      821,839       $        886,918
  Construction work in progress                                                                   17,851                 20,568
  Other                                                                                            7,974                  8,224

Total                                                                                            847,664                915,710
Less accumulated depreciation and amortization                                                  (388,271 )             (402,026 )

Property, plant and equipment-net                                                         $      459,393       $        513,684


                                                                      F-25
7.   LONG-TERM DEBT

     The following amounts were outstanding at December 31, 2003 and 2004:

                                                                                                                  2003                      2004

                                                                                                                         (in thousands)


Holdings 5.25% Senior Notes due July 15, 2013 (net of discount of $1,134 and $1,015, respectively)         $        265,866       $            265,985
ITC 4.45% First Mortgage Bonds Series A due July 15, 2013 (net of discount of $113 and $101,
respectively)                                                                                                       184,887                    184,899
Holdings revolving credit facility                                                                                       —                       7,500
ITC revolving credit facility                                                                                            —                      25,000
Other                                                                                                                    —                          46

                                                                                                                    450,753                    483,430
Less amounts due within one year                                                                                         —                           7

                                                                                                           $        450,753       $            483,423

     The annual maturities of long-term debt as of December 31, 2004 are as follows:

                                                                                                                                      (in thousands)
2005                                                                                                                     $                           7
2006                                                                                                                                            25,007
2007                                                                                                                                             7,507
2008                                                                                                                                                 7
2009                                                                                                                                                 5
2010 and thereafter                                                                                                                            450,897

Total long-term debt                                                                                                     $                     483,430

      On February 28, 2003, Holdings and ITC borrowed funds in order to partially finance the Acquisition. On July 16, 2003, those variable
rate term loans were refinanced with ITC's issuance of $185 million 4.45% First Mortgage Bonds Series A due July 15, 2013 (the "ITC
Mortgage Bonds"). The bonds are issued under ITC's First Mortgage and Deed of Trust, and therefore have the benefit of a first mortgage lien
on substantially all of ITC's property. Holdings issued $267 million unsecured 5.25% Senior Notes due July 15, 2013 (the "Holdings Senior
Notes") and used a portion of the proceeds to make a $27.1 million distribution to its stockholders in August 2003. Holdings recorded a loss on
extinguishment of debt of $11.4 million in connection with the July refinancing.

     We are in compliance with our debt covenants under the ITC Mortgage Bonds and Holdings Senior Notes. Additionally, in order to incur
additional indebtedness at Holdings or any of its Subsidiaries the Holdings Senior Notes require that we maintain a funds from operations to
interest ratio of 2.0 to 1.0 after including the effect of the new indebtedness. Funds from operations is computed using operating cash flows less
the change in working capital plus cash paid for interest.

    Based on the borrowing rates currently available to us for loans with similar terms and average maturities, the fair value of the ITC
Mortgage Bonds and Holdings Senior Notes is $443.0 million at

                                                                      F-26
December 31, 2004. The total book value of the ITC Mortgage Bonds and Holdings Senior Notes is $450.9 million at December 31, 2004. Our
other long-term debt of $32.5 million included in total long-term debt is comprised of variable rate instruments the fair value of which
approximates book value.

     In July 2003, a convertible variable rate loan of $5.9 million obtained as part of the Acquisition financing and accrued interest of
$0.1 million were converted into 240,206 shares of Holdings' common stock.

     ITC had $25.0 million outstanding under its revolving credit facility at December 31, 2004 with a variable weighted-average interest rate
of 3.66% and a maturity date of February 28, 2006. The commitment under this facility was $25.0 million at December 31, 2004.

     In January 2005, ITC amended and restated its revolving credit facility to increase the total commitment thereunder to $65.0 million with
an option to increase the commitments to $75.0 million, subject to ITC's ability to obtain the agreement of willing lenders. The maturity date
was amended to March 19, 2007. ITC's revolving credit facility is supported by the issuance of $75.0 million of ITC's Series B Mortgage
Bonds, which in turn are supported by a first mortgage lien on substantially all of ITC's property. ITC must not exceed a total debt to total
capital ratio of 60% under its revolving credit facility.

     Holdings had borrowings of $7.5 million under its revolving credit facility at December 31, 2004 with a variable weighted-average
interest rate of 3.91% and a maturity date of March 19, 2007. The commitment under this facility was $40.0 million at December 31, 2004.

     In January 2005, Holdings amended and restated its revolving credit facility to increase the total commitments thereunder to $47.5 million,
with an option to increase the commitments to $50.0 million, subject to Holdings' ability to obtain the agreement of willing lenders. We must
not exceed a debt to total capital ratio of 85% under Holdings' revolving credit facility. Holdings' revolving credit facility is secured by a
perfected first priority pledge of 158 of the 1,000 outstanding shares of common stock of ITC.

      Interest Rate Swap — On March 31, 2003, ITC entered into an interest rate swap to limit sensitivity to market interest rate risk associated
with the variable rate term loan that ITC obtained to partially finance the Acquisition. The interest rate swap was designated as a cash flow
hedge under SFAS 133, "Accounting for Derivative Instruments and Hedging Activities." The fixed rate under the swap agreement was 5.41%
with an original notional of $185 million and a maturity date of March 30, 2007. On July 16, 2003, the interest rate swap was terminated in
conjunction with the refinancing of ITC's long-term debt. The termination cost of the cash flow hedge of $2.6 million was reclassified to other
regulatory assets.

8.   EARNINGS PER SHARE

      We report both basic and diluted earnings per share. Basic earnings (loss) per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share assumes the issuance of potentially
dilutive shares of

                                                                       F-27
common stock during the period resulting from the exercise of common stock options and vesting of restricted stock awards. A reconciliation
of both calculations for the 2003 Period and 2004 is presented in the following table:

                                                                                                       2003                              2004

                                                                                                      (in thousands, except shares outstanding
                                                                                                              and per share amounts)


Basic earnings (loss) per Share
  Weighted average common shares outstanding                                                               8,775,804                         9,028,403
  Net income (loss)                                                                           $               (8,054 )       $                   2,608

   Earnings (loss) per share of common stock based on number of shares outstanding            $                  (0.92 )     $                    0.29

Diluted earnings (loss) per Share
   Weighted average common shares outstanding                                                              8,775,804                         9,028,403
   Incremental shares of stock-based awards                                                                   82,073                           214,064
   Incremental shares for assumed conversion of debt                                                          98,226                                —
   Average number of dilutive shares outstanding                                                           8,956,103                         9,242,467
   Net income (loss)                                                                          $               (8,054 )       $                   2,608
   Plus income impact of assumed conversions                                                                      44                                —

   Net income (loss) plus assumed conversions                                                                  (8,010 )                          2,608

   Earnings (loss) per share of common stock assuming issuance of incremental shares          $                  (0.89 )     $                    0.28

     The 2003 calculation of diluted earnings (loss) per share includes the assumed conversion of convertible debt of $5.9 million plus accrued
interest, which was converted in July 2003.

     Compensation arrangements for certain employees and non-employees included a commitment by each of these individuals to purchase a
stated number of shares of common stock of Holdings. Prior to the actual purchase of such shares, the commitment is treated as a stock
subscription, and because such shares effectively participate in dividends, share amounts of 19,779 and 24,784 for the 2003 Period and 2004,
respectively, have been included in the weighted average common shares outstanding used to determine both basic and diluted earnings per
share.

     Basic net income (loss) per share excludes 121,286 and 100,883 shares of restricted common stock at December 31, 2003 and 2004,
respectively, that were issued and outstanding, but had not yet vested as of such dates.

     Options to purchase approximately 0.6 million shares of common stock at December 31, 2003 were not included in the computation of
diluted earnings per share because the options' exercise price was greater than the average fair value of the shares of common stock during the
respective periods, making them anti-dilutive.

                                                                      F-28
9.    INCOME TAXES

     Our effective tax rate varied from the statutory federal income tax rate due to permanent differences between the book and tax treatment of
various transactions as follows:

                                                                                                                              2003                    2004

                                                                                                                                     (in thousands)


Income tax expense (benefit) at 35% statutory rate                                                                    $          (4,326 ) $              1,497
Lobbying expenses not deductible                                                                                                     46                    147
Other—net                                                                                                                           (26 )                   25

Deferred income tax provision (benefit)                                                                               $          (4,306 ) $              1,669

      Deferred income tax assets (liabilities) consisted of the following at December 31, 2003 and 2004:

                                                                                                           2003                              2004

                                                                                                                     (in thousands)


Property, plant and equipment                                                                   $                 (4,346 )       $                  (21,948 )
Tax loss carryforward                                                                                             10,390                             26,161
Goodwill                                                                                                          (3,527 )                           (6,279 )
Debt issue costs                                                                                                  (3,495 )                           (2,819 )
Property taxes                                                                                                     3,666                              5,264
Other—net                                                                                                          1,618                              2,492

                                                                                                $                   4,306        $                    2,871

Deferred income tax liabilities                                                                 $                 (11,368 )      $                  (31,994 )
Deferred income tax assets                                                                                         15,674                            34,865

Net deferred tax assets                                                                         $                   4,306        $                    2,871


     We have federal income tax operating loss carryforwards of $74.7 million as of December 31, 2004 that we expect to use within the next
several years. The tax loss carryforwards of $36.1 million and $38.6 million relating to the 2003 Period and 2004, respectively, expire in 2023
and 2024, respectively.

10.   LEASES

     ITC has operating lease agreements for office space rental which expire in May 2008. ITC has two successive one-year options to renew a
portion of the leased premises upon expiration solely at ITC's discretion. Additionally, ITC has operating leases for office equipment and
storage facilities. Rent expense during the 2003 Period and 2004 was $0.3 million and $0.5 million, respectively, recorded in general and
administrative expenses.

                                                                      F-29
      Future minimum lease payments under the leases at December 31, 2004 were:

                                                                                                                                (in thousands)

2005                                                                                                                      $                       771
2006                                                                                                                                              823
2007                                                                                                                                              836
2008                                                                                                                                              351
2009 and thereafter                                                                                                                                —

Total minimum lease payments                                                                                              $                      2,781

11.     RETIREMENT BENEFITS AND ASSETS HELD IN TRUST

Retirement Plan Benefits

     We have a defined benefit retirement plan for eligible employees, comprised of a traditional final average pay plan and a cash balance
plan. The defined benefit retirement plan is noncontributory, covers substantially all employees, and provides retirement benefits based on the
employees' years of benefit service. The traditional final average pay plan benefits factor average final compensation and age at retirement in
determining retirement benefits provided. The cash balance plan benefits are based on annual employer contributions and interest credits. We
have also established two supplemental nonqualified, noncontributory, unfunded retirement benefit plans for selected management employees.
The plans provide for benefits that supplement those provided by our other retirement plans.

    Our policy is to fund the defined benefit retirement plan by contributing the minimum amount required by the Employee Retirement
Income Security Act of 1974, as amended, and additional amounts deemed appropriate. We expect to contribute $1.6 million to the defined
benefit retirement plan relating to 2004 in 2005. The minimum funding requirement relating to 2004 is $0.8 million.

    As outlined in the Stock Purchase Agreement, we assumed certain retirement benefit obligations from DTE Energy as part of the
Acquisition and the parties agreed that DTE Energy would transfer $3.6 million into our pension trust. The transfer occurred on December 29,
2003. The plan assets consisted of the following at September 30, 2003 and 2004:

                                                                                                                   2003                 2004

Asset Category

Receivable from DTE Energy pension                                                                                    100.0 %                 —
Fixed income securities                                                                                                  —                  59.5 %
Equity securities                                                                                                        —                  40.5 %

Total                                                                                                                 100.0 %              100.0 %


     The investment objective of the retirement benefit plan is to maximize total return with moderate tolerance for risk. Targeted asset
allocation is equally weighted between equity and fixed income securities. Management believes that this strategy will provide flexibility for
liquidity purposes but also

                                                                      F-30
establishes some investment for growth. We began implementing this strategy in July 2004. As of September 30, 2004, this strategy had not yet
been fully implemented as the plan was in the process of gradually transferring its investments from guaranteed deposits to equity and fixed
income securities.

     We had an initial measurement date of February 28, 2003 to determine the pension benefit obligation recorded at the date of Acquisition
and have an annual measurement date of September 30.

     Net pension cost for the 2003 Period and 2004 includes the following components:

                                                                                                                     2003                      2004

                                                                                                                             (in thousands)


Service cost                                                                                              $                  474         $              769
Interest cost                                                                                                                398                        511
Expected return on plan assets                                                                                              (211 )                     (254 )
Amortization of prior service cost                                                                                           445                        533
Amortization of actuarial gain                                                                                                —                          (3 )

Net pension cost                                                                                          $                 1,106        $            1,556


     The following table reconciles the obligations, assets and funded status of the plans as well as the amounts recognized as pension liability
in the consolidated statement of financial position as of the measurement date of September 30:

                                                                                                              2003                            2004

                                                                                                                        (in thousands)


Accumulated benefit obligation September 30                                                          $                5,005          $                7,000

Projected benefit obligation February 28, 2003 and
October 1, 2003, respectively                                                                        $                7,650                           8,517
Service cost                                                                                                            288                             769
Interest cost                                                                                                           285                             511
Actuarial net loss                                                                                                      294                             324
Plan amendments                                                                                                          —                              (82 )

Projected benefit obligation September 30                                                            $                8,517          $               10,039

Plan assets at fair value February 28, 2003 and
October 1, 2003, respectively                                                                                         3,628                           3,628
Actual return on plan assets                                                                                             —                              148
Employer contributions                                                                                                   —                              250

Plan assets at fair value September 30                                                               $                3,628          $                4,026

Funded status                                                                                        $               (4,889 )        $               (6,013 )
Unrecognized prior service cost                                                                                       2,491                           1,875
Unrecognized actuarial net loss                                                                                         206                             640

Prepaid (accrued) cost                                                                               $               (2,192 )        $               (3,498 )


                                                                      F-31
     We recognized an additional minimum pension liability as required under SFAS 87, "Employers' Accounting for Pensions." An additional
pension liability may be required when the accumulated benefit obligation of the plan exceeds the fair value of plan assets. Under SFAS 87, we
recorded an additional minimum pension liability and recorded an intangible pension asset of $0.5 million and $0.3 million in other assets as of
December 31, 2003 and 2004, respectively, in our consolidated statement of financial position.

     Actuarial assumptions used to determine the benefit obligation are listed below:

                                                             February 28, 2003             September 30, 2003             September 30, 2004
                                                             Benefit Obligation            Benefit Obligation             Benefit Obligation

Discount rate                                                                     6.25 %                        6.0 %                          5.75 %
Annual rate of salary increases                                                    3.5 %                        3.5 %                           3.5 %

     Actuarial assumptions used to determine the benefit cost for the 2003 Period and 2004 are listed below:

                                                                                                                        2003              2004

Discount rate                                                                                                             6.25 %                   6%
Annual rate of salary increases                                                                                            3.5 %                 3.5 %
Expected long-term rate of return on plan assets                                                                             7%                    7%

     The expected long-term rate of return was estimated using market benchmarks for equities and bonds applied to the plan's target asset
allocation. The expected return on plan assets component of net pension cost was determined based on the expected long-term rate of return on
plan assets and the fair value of plan assets.

     At December 31, 2004, the projected benefit payments for the defined benefit retirement plan are $75,000 in 2005, $110,000 in 2006,
$151,000 in 2007, $3.8 million in 2008, $493,000 in 2009 and a total of $3.6 million for 2010 through 2014. The projected payments were
calculated using the same assumptions as those used to calculate the benefit obligations described above.

      We also sponsor a defined contribution retirement savings plan. Participation in this plan is available to substantially all employees. We
match employee contributions up to certain predefined limits based upon eligible compensation and the employee's contribution rate. The cost
of this plan was $0.4 million and $0.6 million for the 2003 Period and 2004, respectively.

Other Postretirement Benefits

     We provide certain postretirement health care, dental, and life insurance benefits for employees who may become eligible for these
benefits. We had an initial measurement date of February 28, 2003 to determine the benefit obligation recorded at the date of Acquisition.
Annual measurement dates are September 30 of each year. We made our initial contribution to the plan in September 2004 and expect to
contribute $0.6 million to the plan in first quarter 2005. The plan assets consisted exclusively of fixed income securities at September 30, 2004.

     The investment objective for the postretirement benefit plan is to maximize total return with moderate tolerance for risk. Targeted asset
allocation is equally weighted between equity and fixed income securities. This strategy will provide flexibility for liquidity purposes but also
establishes some investment for growth. As of September 30, 2004, this strategy had not yet been implemented as we made our initial
contribution to the plan on September 15, 2004.

                                                                        F-32
     On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act") was signed into law. In
accordance with FASB Staff Position No. 106-2, ITC's measurement of the accumulated postretirement benefit obligation as of September 30,
2004 reflects amounts associated with the expected subsidies under the Act because we have concluded that the benefits provided by the plan
are actuarially equivalent to Medicare Part D under the Act.

     Net postretirement cost for the 2003 Period and 2004 includes the following components:

                                                                                                                             2003                      2004

                                                                                                                                    (in thousands)


Service cost                                                                                                        $               192        $              498
Interest cost                                                                                                                        88                       118

Net postretirement cost                                                                                             $               280        $              616

     The following table reconciles the obligations, assets and funded status of the plans as well as the amounts recognized as accrued
postretirement liability in the consolidated statement of financial position as of the measurement date of September 30:

                                                                                                                  2003                          2004

                                                                                                                           (in thousands)


Accumulated postretirement obligation February 28, 2003
and October 1, 2003, respectively                                                                        $               (1,680 )      $               (1,971 )
Service cost                                                                                                               (111 )                        (498 )
Interest cost                                                                                                               (85 )                        (118 )
Actuarial loss                                                                                                              (95 )                        (995 )
Effect of Medicare Part D 28% Subsidy                                                                                        —                            394

Accumulated postretirement obligation September 30                                                       $               (1,971 )      $               (3,188 )

Plan assets at fair value February 28, 2003 and October 1, 2003, respectively                            $                   —         $                  —
Actual return on plan assets                                                                                                 —                            —
Employer contributions                                                                                                       —         $                 237

Plan assets at fair value September 30                                                                   $                   —         $                 237


Funded status                                                                                            $               (1,971 )      $               (2,951 )
Unrecognized prior service cost                                                                                              —                             —
Unrecognized actuarial net loss                                                                                              11                           613

Prepaid (accrued) cost                                                                                   $               (1,960 )      $               (2,338 )


     Actuarial assumptions used to determine the benefit obligation are as follows:

                                                                                      February 28,           September 30,                 September 30,
                                                                                         2003                    2003                          2004

Discount rate                                                                                   6.25 %                      6.0 %                        5.75 %
Annual rate of salary increases                                                                  3.5 %                      3.5 %                         3.5 %
Health care cost trend rate assumed for next year                                                 10 %                       10 %                          11 %
Rate to which the cost trend rate is assumed to decline                                            5%                         5%                            5%
Year that the rate reaches the ultimate trend rate                                              2013                      2013                          2014
Annual rate of increase in dental benefit costs                                                    4%                         4%                            5%

                                                                      F-33
      Actuarial assumptions used to determine the benefit cost for the 2003 Period and 2004 are as follows:

                                                                                                     2003                      2004
                                                                                                  Benefit Cost              Benefit Cost

                Discount rate                                                                                  6.25 %                  6.0 %
                Annual rate of salary increases                                                                 3.5 %                  3.5 %
                Health care cost trend rate assumed for next year                                                10 %                   10 %
                Rate to which the cost trend rate is assumed to decline                                           5%                     5%
                Year that the rate reaches the ultimate trend rate                                            2013                   2013

    At December 31, 2004, the projected benefit payments for the postretirement benefit plan, net of the Medicare subsidy, are $22,000 in
2005, $25,000 in 2006, $40,000 in 2007, $72,000 in 2008, $145,000 in 2009 and a total of $1.6 million for 2010 through 2014. The projected
payments were calculated using the same assumptions as those used to calculate the benefit obligations listed above.

     Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point
increase and decrease in assumed health care cost trend rates would have the following effects on costs for the 2004 and benefit obligation at
September 30, 2004:

                                                                                     One-percentage-                    One-percentage-
                                                                                      point increase                     point decrease

                                                                                                       (in thousands)


              Effect on total of service and interest cost                       $                      110      $                         (84 )
              Effect on postretirement benefit obligation                        $                      487      $                        (398 )

12.   DEFERRED COMPENSATION PLANS

     Certain of our employees participate in our deferred compensation plan (the "Deferred Compensation Plan"). The investments in the
Deferred Compensation Plan trust of $0.4 million at December 31, 2004 are included in other assets with the corresponding liability in
Deferred compensation liability. We account for the assets contributed under the Deferred Compensation Plan and held in a trust as trading
securities under SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities". Accordingly, gains or losses on the
investments, for which the employees are at risk for the investment returns, are recorded as investment income or loss with an offsetting
amount recorded to compensation expense. Total compensation expense for 2004, including investment earnings, was $0.4 million recorded in
general and administrative expense.

     We have a Dividend Equivalents Rights Plan (the "Dividend Plan") that is accounted for as a deferred compensation plan. Participants in
the Dividend Plan are our employees with Holdings' stock options. Awards under the Dividend Plan are recognized on the record date of any
dividend declared on the outstanding shares of common stock of Holdings and contributed to a trust. The investments in the Dividend Plan trust
of $1.9 million at December 31, 2004 are included in other assets with the corresponding liability in deferred compensation liability. We
account for the assets contributed under

                                                                          F-34
the Dividend Plan and held in a trust as trading securities under SFAS 115. Accordingly, gains or losses on the investments are recorded as
investment income or loss with an offsetting amount recorded to compensation expense. Total compensation expense for the 2003 Period and
2004 was $1.7 million and $0.2 million, respectively, recorded in general and administrative expense.

13.   STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION

Common Stock

      Our authorized capital stock consists of 10 million shares of Holdings common stock, without par value.

      Voting Rights —Each holder of Holdings common stock, including holders of restricted stock awards, is entitled to cast one vote for
each share held of record on all matters submitted to a vote of stockholders, including the election of directors. Holders of Holdings common
stock have no cumulative voting rights.

       Dividends —Holders of Holdings common stock, including holders of restricted stock, are entitled to receive dividends or other
distributions declared by the board of directors. The right of the board of directors to declare dividends is subject to the right of any holders of
our preferred stock, to the extent that any preferred stock is authorized and issued, and the availability under the Michigan Business
Corporation Act of sufficient funds to pay dividends. We have not issued any preferred stock.

      Liquidation Rights —If we are dissolved, the holders of Holdings common stock will share ratably in the distribution of all assets that
remain after we pay all of our liabilities and satisfy our obligations to the holders of any of our preferred stock, to the extent that any preferred
stock is authorized and issued.

      Preemptive and Other Rights —Holders of Holdings common stock have no preemptive rights to purchase or subscribe for any of our
stock or other securities, and there are no conversion rights or redemption or sinking fund provisions with respect to our common stock.

Stock-based compensation

     Our stock-based compensation plan permits the awarding of various stock awards to employees and non-employees, including options to
purchase Holdings' common stock and restricted stock of Holdings. The number of shares authorized for grant under the plan is 1,000,000
shares of Holdings common stock.

Options

     During the 2003 Period and 2004, we granted options with vesting schedules of 20% each over a five-year period beginning on
February 28, 2004 or February 28, 2005. The exercise price for all options is $25 per share. The options have a term of 10 years subsequent to
the grant date, with a remaining

                                                                        F-35
weighted average contract life of approximately 8.5 years. Stock option activity for the 2003 Period and 2004 was as follows:

                                                                                                          Number of options

                     Outstanding at February 28, 2003                                                                  —
                       Granted                                                                                    602,600


                     Outstanding at December 31, 2003
                     (none exercisable)                                                                           602,600
                        Granted                                                                                    29,200
                        Cancelled                                                                                 (24,000 )


                     Outstanding at December 31, 2004
                     (121,960 exercisable)                                                                        607,800


     Based on the fair value of the options at the grant dates for employees, and the fair value of the options as the related services are
completed at each vesting date and as valued at each financial reporting date through the vesting date for non-employees, ITC recognized
approximately $0.5 million and $0.6 million of compensation expense for the 2003 Period and 2004, respectively. Fair value of the stock
options was determined using a Black-Scholes option pricing model. The following assumptions were used in determining the weighted
average fair value per option of $5.60 and $14.78 in the 2003 Period and 2004, respectively:

                                                                                                        2003                       2004
                                                                                                       Awards                     Awards

Weighted average expected volatility                                                                  21.3%                      28.1%
Weighted average risk-free interest rate                                                               2.9%                       3.2%
Weighted average expected life                                                                       4.8 years                  3.4 years
Range of estimated fair values of underlying shares                                                $22.00-$25.00              $22.00-$39.77

Restricted Stock Awards

     Holders of restricted stock awards have all the rights of a holder of common stock of Holdings, including dividend and voting rights. The
holder becomes vested as a result of certain events, but not longer than five years after the grant date. The average expected remaining vesting
period at December 31, 2004 is 3.2 years. Restricted stockholders may not sell, transfer, or pledge their shares.

    Restricted stock awards are recorded at fair value at the date of grant. Awards that were granted for future services are accounted for as
unearned compensation, with amounts amortized over the

                                                                      F-36
vesting period. Awards that were granted as a signing bonus have been expensed at the grant date. Restricted stock award activity for the 2003
Period and 2004 is as follows:

                                                                                              2003              2004

                    Restricted stock awarded                                                    121,286           21,082
                    Restricted stock forfeited                                                       —            (1,000 )
                    Weighted average fair value of shares awarded                        $        23.37    $       24.70
                    Compensation expense recognized (in millions)                        $          0.5    $         0.6

14.   RELATED-PARTY TRANSACTIONS

      We pay consulting fees, including out-of-pocket expenses, to certain of our stockholders (and affiliates of their partners) for ongoing
management and administration services. Additionally, we pay insurance premiums to certain of our stockholders (and affiliates of their
partners). During the 2003 Period and 2004, we incurred $1.2 and $1.5 million for these services, respectively, which were recorded in general
and administrative expenses. The consulting fees are generally paid at the end of each quarter and the insurance premiums are paid in advance
for a twelve-month period.

15.   JOINTLY OWNED UTILITY PLANT/COORDINATED SERVICES

      The Michigan Public Power Agency ("MPPA") has a 50.41% ownership interest in ITC's Greenwood-St. Clair-Jewell-Stephens
Transmission Line and Monroe-Wayne-Coventry-Majestic Transmission Line. ITC had $21.4 million of gross transmission plant in service
relating to its ownership interest of 49.59% at December 31, 2004. An Ownership and Operating Agreement provides ITC with authority for
construction of capital improvements and for the operation and management of the transmission lines. MPPA is responsible for the capital and
operating and maintenance costs allocable to their ownership interest. There was no jointly-owned plant under construction at December 31,
2004.

      ITC and the Michigan Electric Transmission Company ("METC") operate their interconnected transmission systems as a single control
area from the Michigan Electric Power Coordination Center ("MEPCC") which is owned by ITC. ITC and METC are each responsible for 50%
of all costs, obligations and liabilities incurred by either party in connection with the operation and maintenance of the MEPCC, including the
monthly fixed charges on the investment made by ITC in the MEPCC. The monthly fixed charges totaling $1.4 million and $1.8 million for the
2003 Period and 2004, respectively, is recorded in operating revenues.

16.   COMMITMENTS AND CONTINGENCIES

Litigation

    We are involved in routine litigation in the normal course of our business. Such proceedings are not expected to have a material adverse
impact on our results of operations, financial position or liquidity.

                                                                     F-37
MPPA Accounts Receivable

     ITC has billed MPPA $2.1 million under the Ownership and Operating Agreement, which is included in accounts receivable as of
December 31, 2004. MPPA has withheld payment of the amount as a setoff to revenues for which it believes ITC should have provided them
through a recovery mechanism. MPPA has not disputed that it is obligated to reimburse ITC under the terms of the Ownership and Operating
Agreement. However, MPPA has asserted that ITC should have executed a revenue distribution mechanism with MPPA that would enable
MPPA to establish a revenue requirement to be collected by MISO from customers in ITC's service territory. ITC believes it has no obligation
to unilaterally impose such a revenue requirement on these customers and accordingly it believes the assertion made by MPPA is not
supportable. ITC will seek legal remedies should the amounts continue to be unpaid. ITC has not recorded any reserves relating to this matter
as of December 31, 2004 because it believes collection of the receivable is probable.

     Beginning January 2005, the rate charged by MISO to customers in ITC's service territory includes an amount relating to MPPA's revenue
requirements allocable to their ownership interest. These amounts are not included in ITC's Attachment O, but currently are expected to be
collected by MISO, paid to ITC, and remitted by ITC to MPPA.

Thumb Loop Project

     ITC currently is upgrading its electric transmission facilities in Lapeer County, Michigan (the "Thumb Loop Project"). As part of the
Thumb Loop Project, ITC is replacing existing H-frame transmission poles with single steel poles and replacing a single circuit transmission
line with a double circuit transmission line. Certain property owners along the Thumb Loop have alleged that ITC's facilities upgrades
overburden ITC's easement rights, and in part have alleged trespass. Litigation regarding the property owners' claims is being held in abeyance
and, accordingly, remains in its early stages. We cannot predict the final disposition of such proceedings. The legal costs incurred relating to
the Thumb Loop Project are included as a cost of the project and are recorded in PP&E. Additionally, any damages that result from these
proceedings would be included in PP&E. The legal costs incurred as of December 31, 2004 were not material.

Personal Property Taxes

     The Detroit Edison Company ("Detroit Edison"), a subsidiary of DTE Energy, was responsible for paying property taxes for combined
DTE Energy distribution and transmission properties prior to the Acquisition. The property tax valuation tables established by the Michigan
State Tax Commission ("STC") are used to determine the taxable value of personal property based on the property's age. In November 1999,
the STC approved new valuation tables that more accurately recognize the value of a utility's personal property. The new valuation tables
became effective in 2000 and are currently used to calculate property tax expense. However, several local taxing jurisdictions have taken legal
action attempting to prevent the STC from implementing the new valuation tables and have continued to prepare assessments based on the
superseded valuation tables or their own tables. The legal actions regarding the appropriateness of the new valuation tables were before the
Michigan Tax Tribunal ("MTT") which, in April 2002, issued its decision essentially affirming the validity of the STC's new

                                                                      F-38
valuation tables. In June 2002, petitioners in the case filed an appeal of the MTT's decision with the Michigan Court of Appeals. On
January 20, 2004, the Michigan Court of Appeals upheld the validity of the new valuation tables.

     Predecessor ITC had recorded property tax expense based on the new valuation tables prior to the Acquisition, and ITC continued to
record property tax expense based on the new valuation tables. Property taxes for lien dates December 31, 2002 and prior periods were billed to
Predecessor ITC or ITC by Detroit Edison, as the taxable value of PP&E for Predecessor ITC or ITC was included in Detroit Edison's property
tax values. Beginning with property taxes for lien date December 31, 2003, ITC is billed directly by municipalities. In the event that lien date
December 31, 2001 or 2002 property tax assessments are further appealed by the petitioners in the case, ITC may be required to pay additional
amounts or may be refunded amounts paid relating to these years.

     Numerous municipalities have applied their own valuation tables in assessing the value of ITC's personal property subsequent to the
Acquisition, rather than the valuation tables approved by the STC. ITC has filed tax appeals and is in the process of discussing lien date
December 31, 2003 tax assessments with various municipalities, which are the basis for 2004 property tax expense. ITC has developed an
appeal strategy and filed formal appeals with the MTT for the municipalities that did not utilize the STC tax tables. Until this issue is resolved,
ITC is making property tax payments based on the valuation tables approved by the STC, while continuing to expense the full amounts billed
by the municipalities in applying their own valuation tables. Tax assessments of certain real property have also been appealed. Property taxes
accrued for 2004 are based on a total annual liability of $20.3 million from the 2004 tax statements received from the municipalities. In the
event that there are changes to the estimated real or personal property tax values based on negotiations with municipalities or through appeals
with the MTT, any adjustments to ITC's property tax expense would be recorded at that time.

Service Level Agreement

      During 2003 and through April 2004, ITC and Detroit Edison had operated under a construction and maintenance, engineering, and
system operations service level agreement (the "SLA") whereby Detroit Edison performs maintenance, asset construction, and certain aspects
of transmission operations and administration (the "SLA Activities") on our behalf. The original term of the SLA was for periods ranging from
two to six years from the Acquisition date. During 2003, the FERC required ITC to transition the SLA Activities from Detroit Edison to ITC on
an accelerated basis to promote the transition to an independent transmission operator. The SLA, as amended and accepted by the FERC in
March 2003, had a revised term ending on February 29, 2004. The SLA was further amended and accepted by the FERC in April 2004 to
extend certain services under the SLA through April 30, 2004, as necessary.

     Detroit Edison receives compensation for the wages and benefits of its employees performing work on behalf of ITC and for costs of
construction or maintenance directly related to ITC. Under the SLA, as amended, ITC utilizes Detroit Edison or other vendors for the services
specified. When other vendors are used, ITC is required to pay Detroit Edison 100% of the operation and maintenance expenditure markup fees
and 50% of the capital expenditure markup fees specified in the SLA. The

                                                                       F-39
amount expensed during the 2003 Period for these markup fees when other vendors were used was $0.4 million and were recorded in operation
and maintenance expenses.

     Operation and maintenance expenses incurred by ITC under the SLA that exceeded $15.9 million during 2003 were recognized as expense
but are deferred as a long-term payable and will be paid to Detroit Edison in equal annual installments over a five-year period beginning
June 1, 2005. As of December 31, 2004, ITC has deferred the payment of $6.1 million of SLA expenses that exceeded the 2003 threshold, with
$1.2 million recorded in other current liabilities and $4.9 million recorded in deferred payables. There is no payment deferral for construction
expenditures.

     In August 2003, ITC entered into an Operation and Maintenance Agreement with its primary maintenance contractor and a Supply Chain
Management Agreement with its primary purchasing and inventory management contractor to replace the services that Detroit Edison has
provided under the SLA. ITC is not obligated to take any specified amount of services under the terms of the Operation and Maintenance
Agreement or the Supply Chain Management Agreement, which have a five-year term ending August 28, 2008.

Put Agreement

     Certain officers and employees of Holdings (the "Management Stockholders") have purchased or acquired shares of common stock of
Holdings. In connection with this investment in Holdings, CIBC, Inc., a bank affiliated with one of the limited partners of our parent company,
and a non-affiliated bank (together, the "Banks"), provided some of the Management Stockholders with loans to acquire shares of Holdings'
common stock. The loans are evidenced by notes made by such Management Stockholders and require a pledge of their common stock of
Holdings. As a condition to making such loans, Holdings entered into put agreements with the Banks pursuant to which Holdings agreed that
upon the occurrence of certain events, Holdings would be assigned the note and pledge and would either pay the Banks the aggregate principal
amount outstanding of the note plus interest thereon or execute a demand promissory note in a principal amount equal to the aggregate
principal amount outstanding of the note plus interest thereon. The maximum potential amount of future payments for Holdings under the put
agreements was approximately $2.0 million at December 31, 2004. The fair value of this liability at inception and as of December 31, 2004 was
not material.

      After December 31, 2004, Holdings and the non-affiliated Bank terminated the put agreement between them. The put agreement with the
affiliated Bank shall remain in effect until the date when the Holdings obligations under the agreement are satisfied or when any amounts
outstanding under the notes have been paid in full. The put agreement with the affiliated Bank is only applicable to loans made to Management
Stockholders who are not executive officers of Holdings.

Concentration of credit risk

     Our credit risk is primarily with Detroit Edison, which is responsible for approximately 68% of total operating revenue for the year ended
December 31, 2004. Any financial difficulties experienced by Detroit Edison could negatively impact our business. MISO, as ITC's billing
agent, bills Detroit Edison and other ITC customers on a monthly basis and collects fees for use of ITC's transmission system.

                                                                     F-40
MISO has implemented credit policies for its members, including ITC's customers, in general, if these customers do not maintain their credit
rating or have a history of late payments, MISO may require them to provide MISO with a letter of credit or cash deposit equal to the highest
monthly invoiced amount over the previous twelve months.

17.    SEGMENT INFORMATION

     Our business segments consist of ITC and NYTHC. ITC is a regulated enterprise. NYTHC is a subsidiary that invests in non-regulated
ventures, which consisted exclusively of Conjunction during the 2003 Period and 2004. Holdings' activities include general corporate expenses
and interest expense. Holdings has no revenue generating activities.

                                                                                          Holdings, Reconciliations
                                                                                                    and
2003                                                         ITC             NYTHC              Eliminations          Total

                                                                                     (in thousands)


Operating revenues                                      $     102,362    $          — $                       — $      102,362
Depreciation and amortization                                  21,463               —                         —         21,463
Interest expense                                                9,218               —                     12,412        21,630
Income taxes                                                    4,887             (561 )                  (8,632 )      (4,306 )
Net income (loss)                                               9,018           (1,041 )                 (16,031 )      (8,054 )
Total assets                                                  744,045            4,135                     3,477       751,657
Goodwill                                                      174,608            3,806                        —        178,414
Capital expenditures                                           26,802                3                        —         26,805
                                                                                          Holdings, Reconciliations
                                                                                                    and
2004                                                         ITC             NYTHC              Eliminations          Total

                                                                                     (in thousands)


Operating revenues                                      $     126,449    $          — $                        — $     126,449
Depreciation and amortization                                  29,480               —                          —        29,480
Interest expense                                               10,759               —                      14,826       25,585
Income taxes                                                    7,713             (601 )                   (5,443 )      1,669
Net income (loss)                                              13,859           (1,117 )                  (10,134 )      2,608
Total assets                                                  801,815               —                       7,032      808,847
Goodwill                                                      176,039               —                          —       176,039
Capital expenditures                                           76,779               —                          —        76,779

                                                                     F-41
                                   ITC HOLDINGS CORP. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
                                   DECEMBER 31, 2004 AND MARCH 31, 2005

                                                                                      2004                     2005

                                                                                    (in thousands, except share data)


ASSETS
Current assets
  Cash and cash equivalents                                                     $       14,074          $         3,863
  Accounts receivable                                                                   15,614                   19,204
  Inventory                                                                             13,785                   15,702
  Other                                                                                    954                    2,935

         Total current assets                                                           44,427                   41,704
Property, plant and equipment (net of accumulated depreciation and
amortization of $402,026 and $408,117, respectively)                                   513,684                 543,251
Other assets
   Goodwill                                                                            176,039                 174,569
   Regulatory assets-acquisition adjustment                                             55,047                  54,289
   Other regulatory assets                                                               8,053                   7,570
   Deferred financing fees (net of accumulated amortization of $1,294 and
   $1,625, respectively)                                                                  6,058                    6,399
   Deferred income taxes                                                                  2,871
   Other                                                                                  2,668                    5,305

         Total other assets                                                            250,736                 248,132

TOTAL ASSETS                                                                    $      808,847          $      833,087

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Accounts payable                                                              $       29,788          $        27,581
  Accrued interest                                                                      10,294                    5,126
  Accrued taxes                                                                         12,831                    9,785
  Point-to-point revenue due to customers                                               12,903                      131
  Other                                                                                  5,728                    5,951

         Total current liabilities                                                      71,544                  48,574
Accrued pension liability                                                                3,783                   4,202
Accrued postretirement liability                                                         2,338                   2,639
Deferred compensation liability                                                          2,329                   2,306
Deferred income taxes                                                                                            1,449
Regulatory liabilities                                                                  43,941                  44,428
Deferred payables                                                                        4,887                   4,887
Long-term debt                                                                         483,423                 519,756
STOCKHOLDERS' EQUITY
Common stock, without par value, 10,000,000 shares authorized, 9,176,570
and 9,178,770 shares issued and outstanding at December 31, 2004 and
March 31, 2005, respectively                                                           203,459                 203,848
Unearned compensation-restricted stock                                                  (1,411 )                (1,426 )
Accumulated (deficit) earnings                                                          (5,446 )                 2,424

         Total stockholders' equity                                                    196,602                 204,846

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                      $      808,847          $      833,087


                                      See notes to condensed consolidated financial statements (unaudited).
F-42
                                            ITC HOLDINGS CORP. AND SUBSIDIARIES

                        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

                                 FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2005

                                                                                  2004                    2005

                                                                                (in thousands, except share data)


OPERATING REVENUES                                                          $         27,544       $          42,460
OPERATING EXPENSES
 Operation and maintenance                                                               6,394                   6,522
 General and administrative                                                              6,448                   5,286
 Depreciation and amortization                                                           6,966                   8,018
 Taxes other than income taxes                                                           5,424                   4,299

    Total operating expenses                                                          25,232                  24,125
OPERATING INCOME                                                                       2,312                  18,335

OTHER EXPENSES (INCOME)
 Interest expense                                                                        6,291                   6,854
 Allowance for equity funds used in construction                                          (318 )                  (580 )
 Other income                                                                              (12 )                  (305 )
 Other expense                                                                              37                     176

       Total other expenses (income)                                                     5,998                   6,145

INCOME (LOSS) BEFORE INCOME TAXES                                                      (3,686 )               12,190
INCOME TAX PROVISION (BENEFIT)                                                         (1,268 )                4,320

NET INCOME (LOSS)                                                           $          (2,418 ) $                7,870

Basic earnings (loss) per common share                                      $         (0.27 ) $                0.87
Diluted earnings (loss) per common share                                    $         (0.26 ) $                0.85
Weighted-average basic common shares                                              9,020,979               9,075,687
Weighted-average diluted common shares                                            9,149,002               9,314,481

                                   See notes to condensed consolidated financial statements (unaudited).

                                                                   F-43
                                     ITC HOLDINGS CORP. AND SUBSIDIARIES
                               CONDENSED CONSOLIDATED STATEMENT OF CHANGES
                                    IN STOCKHOLDERS' EQUITY (UNAUDITED)
                                 FOR THE THREE MONTHS ENDED MARCH 31, 2005

                                                                                     Unearned
                                                                                   compensation
                                                                                     restricted
                                                  Common stock                         stock

                                                                                                                  Accumulated
                                                                                                                    (deficit)
                                                                                                                    earnings

                                             Shares           Amount                                                                   Total

                                                                        (in thousands, except number of shares)


BALANCE, DECEMBER 31, 2004                   9,176,570 $          203,459 $                   (1,411 ) $                  (5,446 ) $    196,602
Net income                                          —                  —                          —                        7,870          7,870
Issuance of restricted stock                     3,000                151                       (151 )                        —              —
Forfeiture of restricted stock                    (800 )              (18 )                       18                          —              —
Amortization of restricted stock                    —                  —                         118                          —             118
Other                                               —                 256                         —                           —             256

BALANCE, MARCH 31, 2005                      9,178,770    $       203,848     $               (1,426 ) $                   2,424   $    204,846

                               See notes to condensed consolidated financial statements (unaudited).

                                                                 F-44
                                      ITC HOLDINGS CORP. AND SUBSIDIARIES
                         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                               FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2005

                                                                                  2004                    2005

                                                                                         (in thousands)


CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                                                            $       (2,418 ) $              7,870
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
    Depreciation and amortization expense                                             6,966                  8,018
    Amortization of deferred financing fees and discount                                226                    363
    Stock-based compensation expense                                                    263                    283
    Deferred income taxes                                                            (1,269 )                4,320
    Accrued pension and postretirement liabilities                                      544                    720
    Other regulatory assets                                                             483                    483
    Allowance for equity funds used in construction                                    (318 )                 (580 )
    Other                                                                              (380 )                 (226 )
    Changes in current assets and liabilities, exclusive of changes shown
    separately (Note 1)                                                              (7,789 )              (31,063 )

        Net cash used in operating activities                                        (3,692 )               (9,812 )
CASH FLOWS FROM INVESTING ACTIVITIES
  Expenditures for property, plant and equipment                                   (21,549 )               (36,112 )
  Other                                                                                 —                      229

         Net cash used in investing activities                                     (21,549 )               (35,883 )
CASH FLOWS FROM FINANCING ACTIVITIES
  Borrowings under revolving credit facilities                                      21,500                  51,000
  Repayments of revolving credit facilities                                             —                  (14,700 )
  Debt issuance costs                                                                 (355 )                  (671 )
  Issuance of common stock                                                             264                      —
  S-1 filing costs                                                                      —                     (145 )

          Net cash provided by financing activities                                 21,409                  35,484

NET DECREASE IN CASH AND CASH EQUIVALENTS                                            (3,832 )              (10,211 )
CASH AND CASH EQUIVALENTS—Beginning of period                                         8,139                 14,074

CASH AND CASH EQUIVALENTS—End of period                                      $       4,307        $          3,863


                                     See notes to condensed consolidated financial statements (unaudited).

                                                                     F-45
                                                  ITC HOLDINGS CORP. AND SUBSIDIARIES

                        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

                                      FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2005

1.    GENERAL

     These condensed consolidated financial statements for ITC Holdings Corp. and Subsidiaries ("we," "our" and "us") should be read in
conjunction with the notes to the consolidated financial statements as of and for the period ended December 31, 2004.

      The accompanying consolidated financial statements are prepared using accounting principles generally accepted in the United States of
America ("GAAP"). These accounting principles require us to use estimates and assumptions that impact the reported amounts of assets,
liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from our estimates.

      The consolidated financial statements are unaudited, but in our opinion include all adjustments necessary for a fair statement of the results
for the interim period. Financial results for this interim period are not necessarily indicative of results that may be expected for any other
interim period or the fiscal year. International Transmission Company's ("ITC") revenues are dependent on the monthly peak loads and
regulated transmission rates. Electric transmission is generally a seasonal business since demand for electricity largely depends on weather
conditions. Revenues and operating income are higher in the summer months when cooling demand is high.

Condensed Consolidated Statements of Cash Flows

                                                                                         Three months                       Three months
                                                                                        ended March 31,                    ended March 31,
                                                                                             2004                               2005

                                                                                                          (in thousands)


Change in current assets and liabilities,
exclusive of changes shown separately:
   Accounts receivable                                                            $                     655 $                           (3,590 )
       Inventory                                                                                        213                             (1,917 )
       Other current liabilities                                                                      2,719                             (2,021 )
       Point-to-point revenue due to customers                                                       (6,990 )                          (12,772 )
       Accounts payable                                                                               3,280                               (568 )
       Accrued taxes                                                                                   (484 )                           (3,046 )
       Accrued interest                                                                              (5,474 )                           (5,168 )
       Other current assets                                                                          (1,708 )                           (1,981 )

     Total change in current assets and liabilities                               $                  (7,789 ) $                        (31,063 )

Supplementary cash flows information—Interest paid (excluding interest
capitalized)                                                                      $                  11,137        $                    11,175

      S-1 Filing —On March 29, 2005, we filed a Form S-1 with the Securities and Exchange Commission ("SEC") to register common stock
of ITC Holdings Corp. ("Holdings"). We have incurred professional services in connection with the filing and the related anticipated initial
public offering and we recorded an estimate for these services of $2.7 million in other assets and $2.5 million in other current liabilities for the
amounts that had not been paid as of March 31, 2005 in the consolidated statements of financial position. These amounts will be recorded as a
reduction in stockholders' equity if a portion of the proposed public offering includes the issuance of new shares of common stock or will be
recorded as general and administrative expense if the proposed public offering consists entirely of selling existing shares of common stock.

                                                                        F-46
2.   NEW ACCOUNTING PRONOUNCEMENTS

Share-based Payment

     Statement of Financial Accounting Standards ("SFAS") 123R, "Share-Based Payment", as interpreted by Securities and Exchange
Commission Staff Accounting Bulletin 107, requires all entities to recognize compensation expense in an amount equal to the fair value of
share-based payments made to employees, among other requirements. SFAS 123R is effective for us on January 1, 2006. We have already
adopted the expense recognition provisions of SFAS 123 for our stock-based compensation and have not concluded whether the transition to
SFAS 123R will have a material effect on our consolidated financial statements.

Accounting for Conditional Asset Retirement Obligations

      Financial Accounting Standards Board Interpretation 47, "Accounting for Conditional Asset Retirement Obligations" ("FIN 47") is an
interpretation of SFAS 143, "Accounting for Asset Retirement Obligations". FIN 47 clarifies that the term "conditional asset retirement
obligation" as used in SFAS 143, refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of
settlement are conditional on a future event that may or may not be within the control of the entity. An entity is required to recognize a liability
for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. FIN 47 is effective for
us on December 31, 2005. We have not concluded whether FIN 47 will have a material effect on our consolidated financial statements.

3.   ACQUISITIONS

       Acquisition of ITC —In accordance with provisions of the Stock Purchase Agreement, the agreement that sets various terms and
conditions of the Acquisition, the purchase price was adjusted based on a closing balance sheet of International Transmission Company, LLC
("Predecessor ITC") at February 28, 2003. Holdings paid $8.3 million in additional consideration for the Acquisition during 2003, primarily
relating to incremental PP&E balances of Predecessor ITC at February 28, 2003 compared with the preliminary PP&E balances estimated at
the time of the closing of the Acquisition. During the three months ended March 31, 2005, Holdings and DTE Energy Company ("DTE
Energy") negotiated additional PP&E, inventory, and other closing balance sheet items relating to the Acquisition. These negotiations are not
final; however, Holdings' best estimate of the outcome has been recorded resulting in a decrease in the purchase price of $1.5 million during the
three months ended March 31, 2005. There may be additional purchase price adjustments as Holdings and DTE Energy finalize their
negotiations or continue to identify differences from the closing balance sheet at February 28, 2003. The following table summarizes the
changes in the carrying amount of goodwill during the three months ended March 31, 2005:

                                                                                                                     (in thousands)

               Goodwill balance, December 31, 2004                                                               $            176,039
               Changes to goodwill:
                  ITC purchase price adjustments                                                                                (1,470 )

               Goodwill balance, March 31, 2005                                                                  $            174,569

                                                                         F-47
4.   REGULATORY MATTERS

       Tariff Rates/Attachment O —ITC's transmission rates are regulated by the Federal Energy Regulatory Commission ("FERC"). On
February 20, 2003, the FERC issued an order authorizing the Acquisition and approving transmission rates for ITC, including a fixed
transmission rate of $1.075 per kilowatt ("kW") per month through December 31, 2004 (the "Freeze Period"). This fixed rate was less than the
rate that would otherwise have applied upon closing of the Acquisition if rates had reflected ITC's FERC-approved capital structure, rate base
and other components of revenue requirements under Attachment O.

     Attachment O is a FERC-approved cost of service formula rate template that is completed annually by all transmission-owning members
of the Midwest Independent Transmission System Operator, Inc. ("MISO,") except for members who have alternative rate structures approved
by the FERC. Under Attachment O, transmission rates are determined annually based on an allowed rate of return on rate base (weighted
average cost of capital), network load, operating expenses (including taxes) and depreciation and amortization, among other components. The
financial information used to complete ITC's Attachment O filing is taken primarily from ITC's most recently completed FERC Form 1. In its
February 20, 2003 order, the FERC accepted ITC's proposed return of 13.88% on the equity portion of its capital structure. ITC's proposed
capital structure targeting 60% equity and 40% debt was also accepted by the FERC although Attachment O uses ITC's actual capital structure
from its FERC Form 1. Since Attachment O is a FERC-approved rate formula, no FERC filing is required to put the calculated rates into effect.

     During the Freeze Period, the difference between the revenue ITC would have been entitled to collect under Attachment O and the actual
revenue ITC received based on the fixed transmission rate in effect during the Freeze Period (the "Revenue Deferral") will not be recognized as
revenue until billed. The final Revenue Deferral at December 31, 2004 as established during the Freeze Period was $59.7 million
($38.8 million net of tax). At the end of each year, the cumulative Revenue Deferral, net of taxes, will be included in rate base on Attachment
O to determine ITC's annual revenue requirement. The Revenue Deferral will be included ratably in rates over the five-year period beginning
June 1, 2006. The Revenue Deferral and related taxes are not reflected as an asset or as revenue in the 2004 or 2005 consolidated financial
statements, because the Revenue Deferral does not meet the criteria to be recorded as a regulatory asset in accordance with SFAS 71.

     Beginning January 1, 2005, ITC began to charge a rate of $1.587 per kW/month as calculated under the Attachment O formula based
primarily on FERC Form 1 data for the year ended December 31, 2003. Beginning June 1, 2005, and each June 1 thereafter, ITC will charge
rates based primarily on data from the previous year's FERC Form 1. ITC's rates beginning June 1, 2006 will be based primarily on FERC
Form 1 data for the year ended December 31, 2005 and will also include recovery of a portion of the Revenue Deferral. ITC's rates will be
based on Attachment O through January 31, 2008, subject to further extension by the FERC.

       Holdings' Initial Public Offering —On March 30, 2005, we filed a Joint Application for Authorization of an Indirect Disposition of
Jurisdicitonal Facilities Under Section 203 of the Federal Power Act and Notification of Change in Ownership Structure with the FERC. The
filing contemplates the public offering of Holdings common stock, including an initial public offering and future public offerings. The FERC
approved the application in its order issued on May 5, 2005 and, in doing so, authorized this

                                                                     F-48
offering, as well as potential future public offerings of ITC Holdings' common stock occurring within two years of May 5, 2005.

       Redirected Transmission Service —In January and February 2005 in FERC Docket EL05-55 and EL05-63, transmission customers filed
complaints against MISO claiming that MISO is charging excessive rates for redirected transmission service. In April 2005, FERC ordered
MISO to refund, with interest, excess amounts charged to all affected transmission customers. ITC earns revenues based on an allocation from
MISO for this redirected transmission service and is obligated to refund the excess amounts charged to all affected transmission customers. We
had not accrued any amounts relating to this proceeding as of March 31, 2005 based on our assessment of the likelihood of any refunds
resulting from these complaints at that date. Based on the April 2005 order, we will be required to refund amounts relating to redirected
transmission service upon completion of the refund calculations by MISO, which MISO expects to complete during second quarter 2005. We
cannot estimate the amount of the refund until the calculations are completed.

       Long Term Pricing —In November 2004 in FERC Docket EL02-111 et al., the FERC approved a pricing structure to facilitate seamless
trading of electricity between MISO and PJM Interconnection. The order establishes a Seams Elimination Cost Adjustment (SECA), as set
forth in previous Commission orders, to take effect December 1, 2004, and remain in effect through March 31, 2006 as a transitional pricing
mechanism. The SECA revenues are subject to refund and will be litigated in a contested hearing before the FERC with a final order expected
in 2006. We cannot anticipate whether any refunds of amounts earned by ITC will result from this hearing and has not accrued any amounts
relating to this proceeding. Through March 31, 2005, ITC has recorded $0.7 million of SECA revenue.

       Elimination of Transmission Rate Discount —Several energy marketers filed a complaint against MISO in February 2005 in FERC
Docket EL05-66 asserting that MISO improperly eliminated a rate discount that had previously been effective for transmission service at the
Michigan-Ontario Independent Electric System Operator interface. Since the complaints have been filed, MISO has held amounts in escrow
that it has collected for the difference between the discounted tariff rate and the full tariff rate. FERC has not yet acted on this complaint. ITC
has recorded revenues based only on the amounts collected by MISO and remitted to ITC. These amounts do not include the amounts held in
escrow by MISO of $0.6 million as of March 31, 2005.

5.   LONG TERM DEBT—REVOLVING CREDIT FACILITIES

     In January 2005, ITC amended and restated its revolving credit facility to increase the total commitment thereunder to $65.0 million with
an option to increase the commitments to $75.0 million, subject to ITC's ability to obtain the agreement of willing lenders. The maturity date
was amended to March 19, 2007. ITC's revolving credit facility is supported by the issuance of $75.0 million of ITC's Series B Mortgage
Bonds, which in turn are supported by a first mortgage lien on substantially all of ITC's property. ITC must not exceed a total debt to total
capital ratio of 60% under its revolving credit facility. At March 31, 2005, ITC had $54.5 million outstanding under its revolving credit facility.

     In January 2005, Holdings amended and restated its revolving credit facility to increase the total commitments thereunder to $47.5 million,
with an option to increase the commitments to $50.0 million,

                                                                        F-49
subject to Holdings' ability to obtain the agreement of willing lenders. We must not exceed a debt to total capital ratio of 85% under Holdings'
revolving credit facility. Holdings' revolving credit facility is secured by a perfected first priority pledge of 158 of the 1,000 outstanding shares
of common stock of ITC. ITC Holdings' revolving credit agreement contains a $10.0 million letter of credit sub-facility. At March 31, 2005,
Holdings had $14.3 million outstanding under its revolving credit facility. There were no amounts outstanding under the letter of credit.

6.   EARNINGS PER SHARE

     We report both basic and diluted earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share assumes the issuance of
potentially dilutive shares of common stock during the period resulting from the exercise of common stock options and vesting of restricted
stock awards. A reconciliation of both calculations for the three months ended March 31, 2004 and 2005 is presented in the following table:

                                                                                                      2004                        2005

                                                                                               (in thousands, except share and per share data)


              Basic earnings (loss) per share:
                 Net income (loss)                                                         $               (2,418 )      $              7,870
                 Weighted-average common shares outstanding                                             9,020,979                   9,075,687

                  Earnings (loss) per share- basic                                         $                  (0.27 )    $                 0.87

              Diluted earnings (loss) per share:
                 Net income (loss)                                                         $               (2,418 )      $              7,870
                 Weighted-average common shares outstanding                                             9,020,979                   9,075,687
                 Incremental shares of stock-based awards                                                 128,023                     238,794

                  Weighted-average number of dilutive shares outstanding                                9,149,002                   9,314,481

                  Earnings (loss) per share- diluted                                       $                  (0.26 )    $                 0.85

     Basic earnings (loss) per share excludes 131,168 and 103,083 shares of restricted common stock at March 31, 2004 and 2005,
respectively, that were issued and outstanding, but had not yet vested as of such dates.

     Compensation arrangements for certain employees and non-employees included a commitment by the individual to purchase a stated
number of shares of stock of Holdings. Prior to the actual purchase of such shares, the commitment is treated as a stock subscription, and
because such shares effectively participate in dividends, share amounts of 25,302 for the three months ended March 31, 2004 have been
included in the weighted average common shares outstanding used to determine both basic and diluted earnings per share.

                                                                        F-50
7.   RETIREMENT BENEFITS AND ASSETS HELD IN TRUST

Pension Benefits

     We have a defined benefit retirement plan for eligible employees, comprised of a traditional final average pay plan and a cash balance
plan. The defined benefit retirement plan is noncontributory, covers substantially all employees, and provides retirement benefits based on the
employees' years of benefit service. The traditional final average pay plan benefits factor average final compensation and age at retirement in
determining retirement benefits provided. The cash balance plan benefits are based on annual employer contributions and interest credits. We
have also established two supplemental nonqualified, noncontributory, unfunded retirement benefit plans for selected management employees.
The plans provide for benefits that supplement those provided by our other retirement plans.

     Net pension cost for the three months ended March 31, 2004 and 2005 includes the following components:

                                                                                                         2004                2005

                                                                                                            (in thousands)


              Service cost                                                                           $          193     $           225
              Interest cost                                                                                     128                 144
              Expected return on plan assets                                                                    (64 )               (72 )
              Amortization of prior service cost                                                                133                 122
              Amortization of unrecognized (gain)/loss                                                           (1 )                (1 )

              Net pension cost                                                                       $          389     $           418


Other Postretirement Benefits

    We provide certain postretirement health care, dental, and life insurance benefits for employees who may become eligible for these
benefits. Net postretirement cost for the three months ended March 31, 2004 and 2005 includes the following components:

                                                                                                         2004                2005

                                                                                                            (in thousands)


              Service cost                                                                           $          124     $           250
              Interest cost                                                                                      30                  46
              Expected return on plan assets                                                                     —                   (3 )
              Amortization of actuarial loss                                                                     —                    8

              Net postretirement cost                                                                $          154     $           301


Defined Contribution Plans

      We also sponsor a defined contribution retirement savings plan. Participation in this plan is available to substantially all employees. We
match employee contributions up to certain predefined limits based upon eligible compensation and the employee's contribution rate. The cost
of this plan was $0.2 million and $0.3 million for the three months ended March 31, 2004 and 2005, respectively.

                                                                      F-51
8.   CONTINGENCIES

Litigation

    We are involved in routine litigation in the normal course of our business. Such proceedings are not expected to have a material adverse
impact on our results of operations, financial position or liquidity.

Reactive Power Service

     In April 2005, ITC received an invoice from an electricity generating company (the "Generator") for charges for reactive power in the
amount of $0.5 million for services from October 2004 through March 2005. The Generator has stated that it is invoicing ITC pursuant to its
Tariff for Sales of Ancillary Services and Interconnected Operations Services. ITC does not believe it is obligated to pay for any reactive power
service beyond service provided in an emergency condition. The Generator has not suggested that any reactive power service was provided
under an emergency condition. We have not recorded an accrual for this matter based on our assessment of the likelihood of any liabilities
resulting from these claims.

MPPA Accounts Receivable

     ITC has billed MPPA $2.8 million under the Ownership and Operating Agreement, which is included in accounts receivable as of
March 31, 2005. MPPA has withheld payment of the amount as a setoff to revenues for which it believes ITC should have provided them
through a recovery mechanism. MPPA has not disputed that it is obligated to reimburse ITC under the terms of the Ownership and Operating
Agreement. However, MPPA has asserted that ITC should have executed a revenue distribution mechanism with MPPA that would enable
MPPA to establish a revenue requirement to be collected by MISO from customers in ITC's service territory. ITC believes it has no obligation
to unilaterally impose such a revenue requirement on these customers and accordingly it believes the assertion made by MPPA is not
supportable. ITC will seek legal remedies should the amounts continue to be unpaid. ITC has not recorded any reserves relating to this matter
as of December 31, 2004 because it believes collection of the receivable is probable.

     Beginning January 2005, the rate charged by MISO to customers in ITC's service territory includes an amount relating to MPPA's revenue
requirements allocable to their ownership interest. These amounts are not included in ITC's Attachment O, but currently are expected to be
collected by MISO, paid to ITC, and remitted by ITC to MPPA.

Thumb Loop Project

     ITC currently is upgrading its electric transmission facilities in Lapeer County, Michigan (the "Thumb Loop Project"). As part of the
Thumb Loop Project, ITC is replacing existing H-frame transmission poles with single steel poles and replacing a single circuit transmission
line with a double circuit transmission line. Certain property owners along the Thumb Loop have alleged that ITC's facilities upgrades
overburden ITC's easement rights, and in part have alleged trespass. Litigation regarding the property owners' claims is being held in abeyance
and, accordingly, remains in its early stages. We cannot predict the final disposition of such proceedings. The legal costs incurred relating to

                                                                      F-52
the Thumb Loop Project are recorded in PP&E and totaled $0.1 million as of March 31, 2005. Additionally, any damages that result from these
proceedings would be included in PP&E.

Property Taxes

     Numerous municipalities applied their own valuation tables in assessing the value of ITC's personal property at December 31, 2003 rather
than the valuation tables approved by the STC. ITC has filed tax appeals and is in the process of discussing lien date December 31, 2003 tax
assessments with various municipalities, which are the basis for 2004 property tax expense. ITC has developed an appeal strategy and filed
formal appeals with the Michigan Tax Tribunal ("MTT") for the municipalities that did not utilize the STC tax tables. Until this issue is
resolved, ITC made property tax payments based on the valuation tables approved by the STC, while continuing to expense the full amounts
billed by the municipalities in applying their own valuation tables. Tax assessments of certain real property have also been appealed. Property
taxes accrued for 2004 are based on a total annual liability of $20.3 million from the 2004 tax statements received from the municipalities. In
the event that there are changes to the estimated real or personal property tax values based on negotiations with municipalities or through
appeals with the MTT, any adjustments to ITC's property tax expense would be recorded at that time.

     The December 31, 2004 tax assessments received from the municipalities that are the basis for 2005 property taxes use the STC-approved
valuation tables. Property taxes accrued during 2005 are based on a total estimated annual liability of $16.7 million.

9.   SEGMENT INFORMATION

     Our business segments consisted of ITC and NYTHC in 2004. ITC is a regulated enterprise. NYTHC is a subsidiary that invests in
non-regulated ventures, which consisted exclusively of

                                                                     F-53
Conjunction during 2004. There was no activity in the NYTHC segment in 2005. Holdings' activities include general corporate expenses and
interest expense. Holdings has no revenue generating activities.

                                                                                                  Three months ended March 31, 2004

                                                                                                                        Holdings,
                                                                                                                      Reconciliations
                                                                                                                           and
                                                                           ITC                    NYTHC                Eliminations                Total

                                                                                                            (in thousands)


Operating revenues                                             $             27,544       $              — $                           — $            27,544
Net income (loss)                                                               675                    (613 )                      (2,480 )           (2,418 )
Total assets                                                                752,777                       9                         1,712            754,498
                                                                                                   Three months ended March 31, 2005

                                                                                                                          Holdings,
                                                                                                                        Reconciliations
                                                                                                                             and
                                                                            ITC                    NYTHC                 Eliminations               Total

                                                                                                             (in thousands)


Operating revenues                                                 $          42,460          $            —      $                         — $         42,460
Net income (loss)                                                             10,503                       —                            (2,633 )         7,870
Total assets                                                                 827,136                       —                             5,951         833,087

                                                           *   *       *    *     *   *

                                                                       F-54
                  Shares




       Common Stock

         PROSPECTUS
               , 2005


    LEHMAN BROTHERS
CREDIT SUISSE FIRST BOSTON
    MORGAN STANLEY
                                                                       PART II

                                             INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.   Other Expenses of Issuance and Distribution.

    The actual and estimated expenses in connection with this offering, all of which will be borne by ITC Holdings Corp., a Michigan
corporation (the "Registrant"), are as follows:

                     SEC registration fee                                                                          $      35,310
                     Printing and engraving expenses                                                                       *
                     Legal fees                                                                                            *
                     Accounting fees                                                                                       *
                     NYSE listing fees                                                                                     *
                     NASD filing fee                                                                                      30,500
                     Miscellaneous                                                                                         *

                     Total                                                                                         $       *

*
       To be filed by amendment.

Item 14.   Indemnification of Directors and Officers

     As permitted by the Michigan Business Corporation Act, or MBCA, the Amended and Restated Articles of Incorporation of the Registrant
generally limit the personal liability of its directors to the Registrant and its stockholders for breach of their fiduciary duty. The Articles of
Incorporation, however, do not eliminate or limit the liability of a director for any of the following: (1) the amount of a financial benefit
received by a director to which he or she is not entitled; (2) intentional infliction of harm on the Registrant or its stockholders; (3) a violation of
the MBCA provision relating to unlawful distributions or loans; and (4) an intentional criminal act.

     Sections 561 through 571 of the MBCA authorize indemnification of directors and officers of Michigan corporations. The Registrant's
Articles of Incorporation and bylaws will be amended, prior to the completion of the offering, to require the Registrant to indemnify directors
and officers to the fullest extent permitted by the MBCA. Specifically, the Registrant's bylaws will require it to indemnify directors and officers
against expenses (including actual and reasonable attorneys' fees), judgments, penalties, fines, excise taxes and settlements actually and
reasonably incurred in connection with any threatened, pending or completed action or proceeding brought against a director or officer by
reason of the fact that the person is or was a director or officer of the Registrant or, while serving as a director or officer, is or was serving at
the request of the Registrant as a director, officer, member, partner, trustee, employee, fiduciary or agent of another enterprise to the maximum
extent permitted by the MBCA. The bylaws will further require the Registrant to indemnify officers and directors whose defense on the merits
or otherwise has been successful.

      Although the Registrant's bylaws will require indemnification in the situations described above, each request by an officer or director for
indemnification must be individually authorized upon a determination that indemnification is proper in the circumstances because the person
has met the applicable standard of conduct provided in the MBCA. The determination may be made in any one of the following ways: (1) by a
majority of a quorum of the board consisting of directors who are not parties or threatened to be made parties to the action, suit or proceeding;
(2) if the quorum in (1) is not obtainable, then by majority vote of a committee of at least two directors who are not at the time parties or
threatened to be made parties to the action, suit or proceeding; (3) by independent legal counsel in a written opinion; (4) the Registrant's
stockholders, other than directors, officers, employees or agents who are parties or threatened to be made parties; or (5) by all directors meeting
the MBCA

                                                                         II-1
definition of "independent director" who are not parties or threatened to be made parties to the action, suit or proceeding. However, because the
Registrant's Articles of Incorporation contain a provision limiting monetary liability of directors, the Registrant may indemnify a director
without a determination that the applicable standard of conduct has been met unless the director received a financial benefit to which he or she
was not entitled, intentionally inflicted harm on the Registrant or its stockholders, violated the MBCA provision relating to unlawful
distributions or loans or intentionally violated criminal law. The authorization of payment may be made in any one of the following ways: (1) if
there are two or more directors who are not parties or threatened to be made parties to the action, suit or proceeding, by a majority of all such
directors or by majority vote of a committee of at least two such directors; (2) by a majority vote of any directors of the Registrant meeting the
MBCA definition of "independent director" who are not parties or threatened to be made parties to the action, suit or proceeding; (3) if there
are no "independent directors" and fewer than two directors who are not parties or threatened to be made parties to the action, suit or
proceeding, by majority vote of the board; or (4) the Registrant's stockholders, other than directors, officers, employees or agents who are
parties or threatened to be made parties. The bylaws also will provide that indemnification is a contractual right between the Registrant and the
officer or director, who may not be adversely affected by a repeal of the indemnification provisions of the Registrant's bylaws.

     Section 567 of the MBCA and the Registrant's bylaws will authorize the Registrant to purchase and maintain insurance on behalf of a
person who is or was a director, officer, employee or agent of the Registrant or who serves at the request of the Registrant as a director, officer,
partner, trustee, employee or agent of another enterprise, whether or not the Registrant would have the power to indemnify him or her under the
bylaws or the laws of the State of Michigan. The Registrant intends to maintain a directors' and officers' insurance policy. The policy is
expected to insure directors and officers against unindemnified losses from certain wrongful acts in their capacities as directors and officers and
reimburse the Registrant for those losses for which the Registrant has lawfully indemnified the directors and officers. The policy will contain
various exclusions, none of which apply to this offering.

     Insofar as indemnification for liabilities arising under the Securities Act may be permitted to officers and directors pursuant to the
foregoing provisions, the Registrant has been informed that, in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

Item 15.   Recent Sales of Unregistered Securities

     Since its inception, the Registrant has issued securities in the following transactions, each of which was exempt from the registration
requirements of the Securities Act of 1933, as amended, as transactions by an issuer not involving any public offering thereunder. All of the
below-referenced securities are deemed restricted securities for the purposes of the Securities Act. No underwriters were involved in any of the
below-referenced sales of securities.

     On February 28, 2003 the Registrant sold 8,420,000 shares of its Common Stock to International Transmission Holdings Limited
Partnership in consideration for $210,500,000.

     On February 28, 2003 the Registrant sold 20,000 shares of its Common Stock to its President and Chief Executive Officer in consideration
for $500,000.

     On April 15, 2003 the Registrant sold 95,158 shares of its Common Stock to certain of its officers and employees for consideration of
$2,378,950.

     On July 3, 2003, the Registrant sold 240,206 shares of its Common Stock to International Transmission Holdings Limited Partnership in
consideration for converted debt of $6,005,150.

                                                                        II-2
     On August 13, 2003, the Registrant sold 200,000 shares of its Common Stock to International Transmission Holdings Limited Partnership
in consideration for $5,000,000.

    On November 25, 2003 the Registrant sold 5,456 shares of its Common Stock to certain of its officers and employees for consideration of
$120,032.

     On December 24, 2003 the Registrant sold 8,000 shares of its Common Stock to one of its officers in consideration for $176,000.

     On February 9, 2004 Registrant sold 12,000 shares of its Common Stock to one of its officers in consideration for $264,000.

     On November 30, 2004 the Registrant sold 34,382 shares of its Common Stock to certain of its officers and employees for consideration
of $756,404.

     The sales of the above securities were exempt from the registration requirements of the Securities Act, in reliance on Section 4(2) of the
Securities Act, Regulation D or Rule 701 promulgated thereunder, as transactions by an issuer not involving a public offering or transactions
pursuant to compensatory benefit plans and contracts relating to compensation as provided under Rule 701. There were no underwriters
involved in connection with the sale of the above securities.

     On July 16, 2003, the Registrant sold $267.0 million aggregate principal amount at maturity of 5.25% senior notes due July 15, 2013 (the
"Notes") to Credit Suisse First Boston LLC and CIBC World Markets Corp as initial purchasers for aggregate net proceeds of approximately
$264.1 million. The Notes were sold at a price of 99.555% resulting in an aggregate offering price of $265.8 million and the aggregate
underwriting discounts amounted to approximately $1.7 million. The sales of the Notes were exempt from the registration requirements of the
Securities Act in reliance on Rule 144A and Regulation S promulgated under the Securities Act as transactions by an issuer not involving a
public offering.

Item 16.     Exhibits and Financial Statement Schedules

     (a)
              Exhibit Index

     A list of exhibits filed with this registration statement on Form S-1 is set forth on the Exhibit Index and is incorporated in this Item 16(a)
by reference.

     (b)
              Financial Statement Schedules



     None.

Item 17.     Undertakings

     Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the registrants have been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication of such issue.

                                                                         II-3
      (1) The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

     (2) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared
effective.

      (3) For purposes of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the securities offering therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.

                                                                        II-4
                                                                SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, ITC Holdings Corp. has duly caused this amendment no. 1 to the registration
statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Novi, State of Michigan, on May 9, 2005.


                                                     ITC Holdings Corp.

                                                     By:      /s/ JOSEPH L. WELCH

                                                              Name: Joseph L. Welch
                                                              Title: Director, President, Chief Executive
                                                                    Officer and Treasurer

     Pursuant to the requirements of the Securities Act of 1933, this amendment no. 1 to the registration statement has been signed by the
following persons in the capacities indicated on May 9, 2005.

                                Signature                                                                    Title


                   /s/ JOSEPH L. WELCH                                       Director, President, Chief Executive Officer and Treasurer (Principal
                                                                             Executive Officer)
                            Joseph L. Welch

                                    *                                        Vice President-Finance and Chief Financial Officer (Principal
                                                                             Financial Officer and Principal Accounting Officer)
                         Edward M. Rahill

                                   *                                         Director

                        Lewis M. Eisenberg

*By:     /s/ JOSEPH L. WELCH

         Attorney-in-Fact

                                                                      II-5
                                                           EXHIBIT INDEX

Exhibit No.                                                         Description of Exhibit

       1.1*   Form of Underwriting Agreement

      2.1**   Stock Purchase Agreement by and between DTE Energy Company and the Registrant, dated December 3, 2002

       3.1*   Form of Amended and Restated Articles of Incorporation of the Registrant.

       3.2*   Form of Amended and Restated Bylaws of the Registrant.

       4.1*   Form of Certificate of Common Stock

      4.2**   Registration Rights Agreement, dated as of February 28, 2003, among the Registrant and International Transmission
              Holdings Limited Partnership

      4.3**   Indenture, dated as of July 16, 2003, between the Registrant and BNY Midwest Trust Company, as trustee

      4.4**   First Supplemental Indenture, dated as of July 16, 2003, supplemental to the Indenture dated as of July 16, 2003, between the
              Registrant and BNY Midwest Trust Company, as trustee

      4.5**   First Mortgage and Deed of Trust, dated as of July 15, 2003, between International Transmission Company and BNY
              Midwest Trust Company, as trustee

      4.6**   First Supplemental Indenture, dated as of July 15, 2003, supplementing the First Mortgage and Deed of Trust dated as of July
              15, 2003, between International Transmission Company and BNY Midwest Trust Company, as trustee

      4.7**   Second Supplemental Indenture, dated as of July 15, 2003, supplementing the First Mortgage and Deed of Trust dated as of
              July 15, 2003, between International Transmission Company and BNY Midwest Trust Company, as trustee

       4.8*   Amendment to Second Supplemental Indenture, dated as of January 19, 2005, between International Transmission Company
              and BNY Midwest Trust Company, as trustee

      5.1**   Form of Opinion of Dykema Gossett PLLC

      10.1*   Amended and Restated Agreement of Limited Partnership of International Transmission Holdings Limited

      10.2*   Amended and Restated Management, Consulting and Financial Services Letter Agreement, dated March 18, 2005, among
              Kohlberg, Kravis Roberts & Co. L.P., International Transmission Holdings Limited Partnership and International
              Transmission Company

      10.3*   Amended and Restated Management, Consulting and Financial Services Letter Agreement, dated March 18, 2005, among
              Trimaran Fund Management, L.L.C., International Transmission Holdings Limited Partnership and International
              Transmission Company

      10.4*   Amended and Restated Management, Consulting and Financial Services Letter Agreement, dated March 18, 2005, among
              International Transmission Holdings Limited Partnership, ITC Holdings Corp. and International Transmission Company

    10.5**    Amended and Restated VCOC Rights Letter, dated February 25, 2003, among International Transmission Holdings Limited
              Partnership, the Registrant, International Transmission Company and KKR Millennium Fund, L.P.

    10.6**    Amended and Restated VCOC Rights Letter, dated February 25, 2003, among International Transmission Holdings Limited
              Partnership, the Registrant, International Transmission Company and Trimaran Fund II, L.L.C.

      10.7*   Form of Management Stockholder's Agreement

      10.8*   Form of First Amendment to Management Stockholder's Agreement
  10.9*   Form of Waiver and Agreement for Executive Stockholders

 10.10*   Form of Waiver and Agreement for Non-Executive Stockholders

10.11**   Form of Sale Participation Agreement

10.12**   Put Agreement, dated as of February 28, 2003, by the Registrant in favor of CIBC, Inc., along with letter amendment thereto,
          dated March 4, 2005

 10.13*   Form of Amended and Restated 2003 Stock Purchase and Option Plan for Key Employees of the Registrant and its
          Subsidiaries

 10.14*   Form of Amended and Restated Dividend Equivalent Rights Plan of the Registrant

 10.15*   Form of Short Term Incentive Plan of the Registrant

 10.16*   Form of Deferred Compensation Plan

 10.17*   Form of Management Supplemental Benefit Plan

10.18**   Revolving Credit Agreement, dated as of March 19, 2004, among the Registrant, as the Borrower, Various Financial
          Institutions and Other Persons from Time to Time Parties Hereto, as the Lenders, Canadian Imperial Bank of Commerce, as
          the Administrative Agent, Credit Suisse First Boston, Cayman Islands Branch, as the Documentation Agent and Joint Lead
          Arranger, and CIBC World Markets Corp., as the Joint Lead Arranger

10.19**   Pledge Agreement, dated as of March 19, 2004, between the Registrant and Canadian Imperial Bank of Commerce

10.20**   First Amended and Restated Revolving Credit Agreement, dated as of January 12, 2005, among ITC Holdings Corp., as the
          Borrower, Various Financial Institutions and Other Persons from Time to Time Parties Hereto, as the Lenders, Canadian
          Imperial Bank of Commerce, as the Administrative Agent, Credit Suisse First Boston, Cayman Islands Branch and CIBC
          World Markets, as the Joint Lead Arrangers, and Comerica Bank, as the Documentation Agent

10.21**   Amendment No. 1 to the Pledge Agreement, dated as of January 12, 2005, between the Registrant and Canadian Imperial
          Bank of Commerce

10.22**   Revolving Credit Agreement, dated as of July 16, 2003, among International Transmission Company, as the Borrower,
          Various Financial Institutions and Other Persons from Time to Time Parties Hereto, as the Lenders, Canadian Imperial Bank
          of Commerce, as the Administrative Agent, and Credit Suisse First Boston, Cayman Islands Branch, as the Documentation
          Agent and Arranger

10.23**   First Amended and Restated Revolving Credit Agreement, dated as of January 19, 2005, among International Transmission
          Company, as the Borrower, Various Financial Institutions and Other Persons from Time to Time Parties Hereto, as the
          Lenders, Canadian Imperial Bank of Commerce, as the Administrative Agent, Credit Suisse First Boston, Cayman Islands
          Branch and CIBC Inc., as the Joint Lead Arrangers, and Comerica Bank, as the Documentation Agent

 10.24*   Form of Employment Agreement between the Registrant and Joseph L. Welch

 10.25*   Form of Employment Agreements between the Registrant and Edward M. Rahill, Linda H. Blair

 10.26*   Form of Employment Agreements between the Registrant and Richard A. Schultz and Jon Jipping

 10.27*   Form of Employment Agreements between the Registrant and Daniel J. Oginsky,
          Jim D. Cyrulewski, Joseph R. Dudak and Larry Bruneel

10.28**   Service Level Agreement — Construction and Maintenance/Engineering/System Operations, dated February 28, 2003,
          between The Detroit Edison Company and International Transmission Company, LLC
      21.1***     List of Subsidiaries

        23.1*     Consent of Dykema Gossett PLLC (included as part of its opinion filed as Exhibit 5.1 hereto)

       23.2**     Consent of Deloitte & Touche LLP relating to International Transmission Company, LLC

       23.3**     Consent of Deloitte & Touche LLP relating to the Registrant and subsidiaries

      24.1***     Powers of Attorney of the directors and officers of the registrants (included in the signature pages to the registration
                  statement)


*
        To be filed by amendment.

**
        Filed herewith.

***
        Previously filed.
QuickLinks

 TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
 SUMMARY
Our Business
Ownership Structure
 The Offering
Risk Factors
Summary Historical Financial Data
 RISK FACTORS
 FORWARD-LOOKING STATEMENTS
 USE OF PROCEEDS
DIVIDEND POLICY
CAPITALIZATION
DILUTION
SELECTED CONSOLIDATED FINANCIAL DATA
 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 INDUSTRY OVERVIEW
RATE SETTING
 BUSINESS
 MANAGEMENT
 Summary Compensation Table
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
PENSION PLAN TABLE—ANNUAL PENSION BENEFIT (in Dollars)
 PRINCIPAL AND SELLING STOCKHOLDERS
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
 DESCRIPTION OF OUR INDEBTEDNESS
DESCRIPTION OF OUR CAPITAL STOCK
 SHARES ELIGIBLE FOR FUTURE SALE
CERTAIN UNITED STATES FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO NON-U.S. HOLDERS
 UNDERWRITING
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND ADDITIONAL INFORMATION
 ITC HOLDINGS CORP. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 INTERNATIONAL TRANSMISSION COMPANY, LLC STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2002 AND
TWO-MONTH PERIOD ENDED FEBRUARY 28, 2003 (in thousands)
INTERNATIONAL TRANSMISSION COMPANY, LLC STATEMENT OF MEMBER'S INTEREST/STOCKHOLDERS' EQUITY YEAR
ENDED DECEMBER 31, 2001 AND 2002 AND THE TWO-MONTH PERIOD ENDED FEBRUARY 28, 2003 (in thousands)
INTERNATIONAL TRANSMISSION COMPANY, LLC STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31, 2002 AND
TWO-MONTH PERIOD ENDED FEBRUARY 28, 2003 (in thousands)
 INTERNATIONAL TRANSMISSION COMPANY, LLC NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2002
AND TWO-MONTH PERIOD ENDED FEBRUARY 28, 2003
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 ITC HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2003
AND 2004
 ITC HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE PERIOD FEBRUARY
28, 2003 (DATE OF ACQUISITION) THROUGH DECEMBER 31, 2003 AND FOR THE YEAR ENDED DECEMBER 31, 2004
 ITC HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY AND
COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD FEBRUARY 28, 2003 (DATE OF ACQUISITION) THROUGH DECEMBER
31, 2003 AND THE YEAR ENDED DECEMBER 31, 2004
 ITC HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIOD FEBRUARY
28, 2003 (DATE OF ACQUISITION) THROUGH DECEMBER 31, 2003 AND FOR THE YEAR ENDED DECEMBER 31, 2004
 ITC HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD
FEBRUARY 28, 2003 (DATE OF ACQUISITION) THROUGH DECEMBER 31, 2003 AND THE YEAR ENDED DECEMBER 31, 2004
 ITC HOLDINGS CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED) DECEMBER 31, 2004 AND MARCH 31, 2005
 ITC HOLDINGS CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2005
 ITC HOLDINGS CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
EQUITY (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2005
 ITC HOLDINGS CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2005
 ITC HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2005
 PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
SIGNATURES
 EXHIBIT INDEX
                                                         Exhibit 2.1


                              [Conformed Copy to Reflect Supplement
                             and Amendment dated February 28, 2003]


STOCK PURCHASE AGREEMENT

        by and between

  DTE ENERGY COMPANY

             and

   ITC HOLDINGS CORP.

    Dated December 3, 2002
                                                             Table of Contents

                                                    ARTICLE 1
                                    PURCHASE AND SALE OF MEMBERSHIP INTERESTS

1.1    Sale of Membership Interests
1.2    Purchase Price
1.3    Projected and Final Closing Statements; Adjustments

                                                             ARTICLE 2
                                                             CLOSING

2.1    Closing
2.2    Deliveries of Seller
2.3    Deliveries of Purchaser

                                                     ARTICLE 3
                                     REPRESENTATIONS AND WARRANTIES OF SELLER

3.1    Organization and Good Standing
3.2    Power and Authority
3.3    Binding Effect
3.4    No Violation; Consents
3.5    Capitalization
3.6    Corporate Structure; Organizational Documents; Directors and Officers; Books and Records
3.7    Financial Statements
3.8    Liabilities; Guaranties
3.9    Personal Property and Assets
3.10   Real Property
3.11   No Material Adverse Change
3.12   Litigation
3.13   Environmental
3.14   Brokers’ Fees
3.15   Benefit Plans
3.16   Employees
3.17   Compliance With Laws and Orders
3.18   Contracts
3.19   Licenses
3.20   Insurance
3.21   Affiliate Transactions
3.22   Asset Contribution
3.23   No Other Representations and Warranties

                                                                     i
                                                    ARTICLE 4
                                  REPRESENTATIONS AND WARRANTIES OF PURCHASER

4.1    Organization and Good Standing
4.2    Power and Authority
4.3    Binding Effect
4.4    No Violation; Consents
4.5    Investment
4.6    Brokers’ Fees
4.7    Litigation
4.8    Financial Capability
4.9    No Other Representations and Warranties

                                                        ARTICLE 5
                                                 ADDITIONAL AGREEMENTS

5.1    Covenants Pending Closing
5.2    Inter-Company and Tax Accounts
5.3    Publicity
5.4    Cooperation of the Parties
5.5    Consents and Approvals
5.6    Insurance
5.7    Records
5.8    Use of Marks
5.9    Certain Assets and Liabilities
5.10   Post Closing Obligations
5.11   RTO Matters
5.12   Transmission Expansion
5.13   Transmission Rates
5.14   Point-to-Point Revenue Crediting
5.15   Fermi 2 Facility
5.16   Phase Angle Regulators
5.17   Other Agreements.
5.18   Nonsolicitation
5.19   Service Providers
5.20   Conversion of ITC to an LLC
5.21   Pending Rate Case

                                                       ARTICLE 6
                                        CONDITIONS TO OBLIGATIONS OF PURCHASER

6.1    Representations and Warranties
6.2    Performance of Covenants
6.3    Governmental Action
6.4    No Injunctions
6.5    Opinion of Counsel
6.6    Financing

                                                             ii
6.7    Material Adverse Effect
6.8    Closing Certificate

                                                       ARTICLE 7
                                          CONDITIONS TO OBLIGATIONS OF SELLER

7.1    Representations and Warranties
7.2    Performance of Covenants
7.3    Governmental Action
7.4    MPSC
7.5    No Injunctions
7.6    Opinion of Counsel
7.7    Closing Certificate

                                                               ARTICLE 8
                                                             TAX MATTERS

8.1    Definitions
8.2    Section 338(h)(10) Election
8.3    Returns, Inclusions
8.4    Indemnification of Taxes
8.5    Other Covenants and Agreements
8.6    Cooperation on Tax Matters
8.7    Property Taxes

                                                          ARTICLE 9
                                                      EMPLOYEE MATTERS

9.1    Hiring of Employees
9.2    Compensation and Benefits

                                                           ARTICLE 10
                                                        INDEMNIFICATION

10.1   Survival of Representations and Warranties
10.2   Indemnification Provisions for Benefit of Purchaser
10.3   Indemnification Provisions for Benefit of Seller
10.4   Matters Involving Third Parties
10.5   Special Damages Mitigation
10.6   Determination of Damages
10.7   Exclusive Remedy; Release

                                                           ARTICLE 11
                                                         MISCELLANEOUS

11.1 Termination
11.2 No Third-Party Beneficiaries
11.3 Entire Agreement

                                                                    iii
11.4    Succession and Assignment
11.5    Counterparts
11.6    Headings
11.7    Notices
11.8    Governing Law
11.9    Amendments and Waivers
11.10   Severability
11.11   Expenses
11.12   Construction
11.13   Incorporation of Exhibits and Schedules
11.14   No Recourse
11.15   Definitions

Exhibits

Exhibit A           Description of ITC (or any ITC Successor) Attachment O Formula for the Period from the Closing Date through May 31,
                    2004
Exhibit B           Illustrative Calculation ITC (or any ITC Successor) Attachment O Formula for the Period from the Closing Date through
                    May 31, 2004
Exhibit C           Service Agreements
Exhibit D           Generator Interconnection and Operation Agreement
Exhibit E           Master Operating Agreement
Exhibit F           Coordination and Interconnection Agreement
Exhibit G           Opinion of Troutman Sanders LLP
Exhibit H           Opinion of Patrick B. Carey
Exhibit I           Opinion of Milbank, Tweed, Hadley & McCloy LLP
Exhibit J           Opinion of Dykema Gossett PLLC
Exhibit K           Subsequent Conversion

                                                                     iv
                                                     STOCK PURCHASE AGREEMENT

        THIS STOCK PURCHASE AGREEMENT (the ― Agreement ‖) is made and entered into this 3 rd day of December, 2002, by and
between DTE ENERGY COMPANY , a Michigan corporation (― Seller ‖), and ITC HOLDINGS CORP. , a Michigan corporation (―
Purchaser ‖). Seller and Purchaser are sometimes referred to herein together as the ― Parties ‖ and individually as a ― Party .‖

                                                                   RECITALS :

         A.       Seller owns all of the equity and membership interests (the ― Membership Interests ‖) of International Transmission
Company, LLC (―ITC‖), a Michigan limited liability company and successor by merger to International Transmission Company, a Michigan
corporation (―ITC Corp‖).

         B.          ITC is engaged in the business of developing, owning and maintaining certain assets and facilities (such assets and facilities,
as well as the related contracts, books and records of ITC, being referred to herein as the ― Transmission Assets ‖) utilized in the provision of
open access, nondiscriminatory electric transmission service in the State of Michigan at voltage ratings of 120 kV and above (the ― Business ‖).

         C.          Pursuant to the terms and conditions contained herein, Seller desires to sell to Purchaser, and Purchaser desires to purchase
from Seller, all of the Membership Interests.

         NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual promises, covenants and agreements
contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby
agree as follows:

                                                         ARTICLE 1
                                         PURCHASE AND SALE OF MEMBERSHIP INTEREST S

         1.1         Sale of Membership Interests . Subject to the terms and conditions set forth in this Agreement, at the ―Closing‖ (as
defined in Section 2.1 hereof) Seller shall sell, transfer and deliver to Purchaser, and Purchaser shall purchase and receive from Seller, all of the
Membership Interests, free and clear of any and all liens, charges, security interests, mortgages, hypothecations, pledges, claims and other
encumbrances (collectively, ― Liens ‖).

         1.2         Purchase Price . As consideration for Seller’s sale of the Membership Interests to Purchaser, at the Closing Purchaser shall
pay to Seller a purchase price equal to $610,000,000 (the ― Base Purchase Price ‖) by wire transfer of immediately available funds to such bank
account as is designated by Seller, which Base Purchase Price shall be subject to adjustment in accordance with Section 1.3 (as so adjusted, the
― Purchase Price ‖).

         1.3         Projected and Final Closing Statements; Adjustments .

                   (a)      Attached hereto as Schedule 1.3(a) is (i) a projected balance sheet for ITC as of the Closing Date accompanied by a
description of certain accounting policies and practices
applied in the preparation of such projected balance sheet (the ― Projected Closing Statement ‖), and (ii) Seller’s calculation of the estimated
―Stockholders’ Equity‖ (as defined below) of ITC as of such date (the ― Projected Stockholders’ Equity Amount ‖). Purchaser acknowledges
and agrees that Seller makes no representation or warranty (i) with respect to the Projected Closing Statement or the Projected Stockholders’
Equity Amount, or (ii) as to the amount of stockholders’ equity that will actually exist, or the amount or balance of any item that will be
reflected on the actual balance sheet of ITC, as of the Closing Date. For purposes of this Agreement, the term ― Stockholders’ Equity ‖ means
an amount equal to the total assets of ITC as of the applicable balance sheet date minus the total liabilities of ITC as of such date, after giving
effect, in each case, to the accounting policies and practices set forth in Schedule 1.3(a) .

                   (b)        As soon as reasonably practicable after the Closing Date, but in any event within ninety (90) days thereafter, Seller
shall deliver to Purchaser, (i) an actual balance sheet for ITC as of the Closing Date, audited by Deloitte & Touche LLP, the cost of which audit
shall be shared equally by the Parties (the ― Actual Closing Statement ‖), (ii) a calculation of the actual Stockholders’ Equity of ITC as of such
date (the ― Actual Stockholders’ Equity Amount ‖), and (iii) a certificate of an officer of Seller certifying the foregoing. Except as set forth in
the accounting policies and practices included in Schedule 1.3(a) , (i) the Actual Closing Statement and all items included in the calculation of
the Actual Stockholders’ Equity Amount shall be prepared in accordance with generally accepted accounting principles (― GAAP ‖),
consistently applied, and otherwise on a basis consistent with the Financial Statements and the Projected Closing Statement, and (ii) the Actual
Stockholders’ Equity Amount shall be calculated in a manner consistent with the calculation of the Projected Stockholders’ Equity Amount.

                   (c)        Purchaser shall make available to Seller and its accountants and their representatives all books and record of ITC in
the possession of Purchaser or ITC (or any ―ITC Successor,‖ as defined in Section 5.6(b)) after the Closing, and shall permit Seller and its
accountants and their representatives to make inquiry of ITC (or any ITC Successor’s) personnel and its accountants and their representatives,
as reasonably requested by Seller, in connection with the preparation and audit of the Actual Closing Statement. Purchaser and its independent
public accountants may review (and Seller shall make available) the Actual Closing Statement and all supporting work papers and the books
and records of ITC, and Purchaser may make inquiry of the representatives of Seller’s accountants and Seller, as reasonably requested by
Purchaser in connection with such review. The Actual Closing Statement shall be binding and conclusive upon, and deemed accepted by,
Purchaser unless Purchaser shall have notified Seller in writing of any objections thereto (the ― Closing Statement Objection Notice ‖) within
sixty (60) days after receipt by Purchaser of the Actual Closing Statement. The Closing Statement Objection Notice under this Section 1.3(c)
shall specify in reasonable detail the items in the Actual Closing Statement which are being disputed, a summary of the reasons for such dispute
and Seller’s proposed calculation of each disputed item. Items not specifically disputed in the Closing Statement Objection Notice in
accordance with this Section 1.3(c) shall be deemed to be accepted by Purchaser.

                   (d)        The Parties shall attempt in good faith to resolve any dispute relating to the Actual Closing Statement. Any such
dispute which cannot be resolved by them within thirty (30) days after receipt by Seller of the Closing Statement Objection Notice shall, within
sixty (60) days after Seller’s receipt of the Closing Statement Objection Notice, be referred by the

                                                                         2
Parties to PricewaterhouseCoopers LLP or another firm of independent public accountants mutually satisfactory to Purchaser and Seller (the ―
Independent Accountants ‖), which Independent Accountants shall issue a decision with respect to such disputed items. The personnel of the
Independent Accountants performing such services shall be individuals who are independent of, and impartial with respect to Purchaser and
Seller and their Affiliates, officers, directors, agents and employees, and the officers, directors, agents and employees of their respective
Affiliates. The Independent Accountants’ decision shall be final and binding on both Parties. The Parties agree that they will require the
Independent Accountants to render their decision within thirty (30) days after referral of the dispute to the Independent Accountants for
decision pursuant hereto.

                   (e)        Before referring a matter to the Independent Accountants, the Parties shall agree on procedures to be followed by
the Independent Accountants (including procedures for the presentation of evidence). If the Parties are unable to agree upon procedures before
the expiration of thirty (30) days after receipt by Seller of the Closing Statement Objection Notice, the Independent Accountants shall establish
procedures, which procedures may be, but need not be, those proposed by either Party. The Parties shall, as promptly as practicable, submit
evidence to the Independent Accountants in accordance with such procedures. The fees and expenses of the Independent Accountants incurred
in the resolution of such dispute shall be borne by the Parties in such proportion as is appropriate to reflect the relative benefits received by
Seller on the one hand and Purchaser on the other from the resolution of the dispute. For example, if Purchaser challenges items underlying
the calculation of the Actual Stockholders’ Equity Amount in the net amount of $100,000, but the Independent Accountants determine that
Purchaser has a valid claim for only $40,000, Purchaser shall bear 60% of the fees and expenses of the Reviewing Party and Seller shall bear
the other 40% of such fees and expenses. The decision rendered by the Independent Accountants pursuant to this Section 1.3 may be filed as a
judgment in any court of competent jurisdiction. Either Party may seek specific enforcement or take other necessary legal action to enforce
any decision of the Independent Accountants under this Section 1.3.

                   (f)        The Actual Closing Statement shall become final and binding on both Parties upon the earliest of (i) if no Closing
Statement Objection Notice has been given, the expiration of the period within which Purchaser may deliver the Closing Statement Objection
Notice, (ii) agreement by Seller and Purchaser that the Actual Closing Statement, together with any modifications thereto agreed to by Seller
and Purchaser, shall have become final and binding and (iii) the date on which the Independent Accountants shall issue their decision with
respect to any dispute relating to the Actual Closing Statement. The Actual Closing Statement without adjustment if no timely objection is
made, or as adjusted pursuant to any agreement between the Parties or pursuant to the decision of the Independent Accountants, when final and
binding on both Parties, is herein referred to as the ― Final Closing Statement ,‖ and the calculation of Stockholders’ Equity based on the Final
Closing Statement is herein referred to as the ― Final Stockholders’ Equity Amount .‖

                  (g)       Promptly (but not more than five (5) Business Days) following there being established the Final Closing Statement
pursuant to Section 1.3(f):

                                                                        3
                           (i)        if the Final Stockholders’ Equity Amount exceeds the Projected Stockholders’ Equity Amount, (x)
         Purchaser shall pay to Seller, by wire transfer in immediately available funds to the account designated by Seller, an amount equal to
         one hundred percent (100%) of such difference (the ― Purchaser Adjustment Amount ‖) and (y) the Purchase Price shall be deemed to
         be equal to the Base Purchase Price plus the Purchaser Adjustment Amount, or

                            (ii)      if the Final Stockholders’ Equity Amount is less than the Projected Stockholders’ Equity Amount,
         (x) Seller shall pay to Purchaser, by wire transfer in immediately available funds to the account designated by Purchaser, an amount
         equal to one hundred percent (100%) of such difference (the ― Seller Adjustment Amount ‖) and (y) the Purchase Price shall be
         deemed to be equal to the Base Purchase Price minus the Seller Adjustment Amount.

Notwithstanding the foregoing, no payment of the Purchaser Adjustment Amount or the Seller Adjustment Amount, as applicable, shall be
required, and the Purchase Price shall not be deemed to be adjusted, if the payment that would otherwise be required pursuant to clauses (i) or
(ii) of this Section 1.3(g) would be less than $100,000.

                  (h)       Notwithstanding anything to the contrary set forth in this Section 1.3, pending resolution of all disputed items with
respect to the Actual Closing Statement, any portion of the adjustment contemplated by Section 1.3(g), if any, that is not in dispute shall be
paid in accordance with Section 1.3(g) (with interest, as described in Section 1.3(i)) within five (5) Business Days after the delivery of the
Closing Statement Objection Notice.

                   (i)        All payments required to be made pursuant to this Section 1.3 shall be paid to Purchaser or Seller, as the case may
be, together with interest at a rate per annum equal to the ―prime‖ U.S. dollar rate quoted by J.P. Morgan Chase & Co., from time to time and
accruing from the Closing Date to the date of payment.

                                                                  ARTICLE 2
                                                                  CLOSING

          2.1         Closing . Subject to the fulfillment of the conditions precedent specified in Articles 6 and 7 of this Agreement (or the
waiver thereof as provided herein), the purchase and sale of the Membership Interests shall be consummated at a closing (the ― Closing ‖) to be
held at the offices of Seller, located at 2000 Second Avenue, Detroit, Michigan, at 10:00 a.m. on the third (3 rd ) Business Day (as defined
below) following the date upon which all of the conditions set forth in Articles 6 and 7 have been satisfied (or waived as provided herein), or
on such other date and/or at such other time or place as the Parties shall mutually agree; provided, however, that, unless otherwise agreed by
the Parties, in no event shall the Closing occur later than March 31, 2003. The date on which the Closing occurs is hereinafter referred to as
the ― Closing Date .‖ For purposes of this Agreement, ― Business Day ‖ means a day other than Saturday, Sunday or any day on which banks
located in the States of Michigan or New York are authorized or obligated to close. The Closing shall be deemed effective as of 11:59 p.m. on
the Closing Date.

                                                                        4
        2.2          Deliveries of Seller . At the Closing, Seller shall deliver to Purchaser each of the following, in form and substance
reasonably satisfactory to Purchaser:

                    (a)       An assignment of equity and membership interests, evidencing (i) the transfer of all Membership Interests from
Seller to Purchaser and (ii) the withdrawal of Seller as the sole member of ITC and the admission of Purchaser as the sole member of ITC, with
requisite transfer tax stamps, if any, attached.

                  (b)       A certified copy of the Articles of Organization of ITC and a certificate of good standing for ITC, each issued by
the Michigan Department of Consumer and Industry Services, Bureau of Commercial Services, Corporation Division, as of a date no more than
three (3) Business Days prior to the Closing Date.

                    (c)      All minute books, stock record books (or similar registries) and corporate (or similar) seals of ITC and ITC Corp.

                    (d)      A receipt for payment of the Purchase Price by Purchaser.

         2.3          Deliveries of Purchaser . At the Closing, Purchaser shall deliver to Seller the Base Purchase Price in accordance with
Article 1 hereof.

                                                          ARTICLE 3
                                          REPRESENTATIONS AND WARRANTIES OF SELLER

        Except as set forth in the Schedules delivered by Seller to Purchaser simultaneously with the execution of this Agreement (the ― Seller
Schedules ‖), which are hereby incorporated herein by reference, Seller hereby represents and warrants to Purchaser, as of the date of this
Agreement and as of the Closing, as follows:

         3.1         Organization and Good Standing . Seller is a corporation duly organized, validly existing and in good standing under the
laws of the State of Michigan.

         3.2        Power and Authority . Seller has full corporate power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Seller, and no
other corporate proceedings on the part of Seller are necessary to authorize the execution, delivery and performance of this Agreement by
Seller.

         3.3         Binding Effect . This Agreement has been duly executed and delivered by Seller and constitutes its legal, valid and
binding obligation, enforceable in accordance with its terms.

         3.4        No Violation; Consents . Neither the execution and delivery of this Agreement by Seller, nor the performance by it of its
obligations hereunder, will:

                  (a)        violate or conflict with any provision of the Articles of Incorporation or Bylaws of Seller or the Articles of
Organization of ITC.

                                                                         5
                    (b)        (i) breach or otherwise constitute or give rise to a breach of or default under, (ii) result in or give to any person or
entity any right of termination, cancellation, acceleration or modification in or with respect to, (iii) result in or give to any person or entity any
additional rights or entitlement to increased, additional, accelerated or guaranteed payments under, or (iv) result in the creation or imposition of
any Lien upon ITC or any of its assets or properties under, any lease, contract, mortgage, indenture, license, permit, commitment or other
obligation to or by which Seller or ITC is a party or is bound, except (1) as set forth on
Schedule 3.4(b) , and (2) to the extent any such breaches, defaults, rights, Liens or other matters set forth in clauses (i)-(iv) would not,
individually or in the aggregate, have (A) a material adverse effect on the business, prospects, financial condition or results of operations of
ITC taken as a whole (excluding any such effect caused by general economic, regulatory, legal or political developments or conditions
affecting the utility or electric transmission business generally that are not specific to ITC), or (B) a material adverse effect on the ability of
Seller to execute and deliver and perform its obligations under this Agreement or to consummate the transactions contemplated by this
Agreement (each of (A) or (B) being referred to herein as a ― Material Adverse Effect ‖);

                    (c)       violate or breach any statute, ordinance, law, rule, regulation, judgment, order or decree of any court (including any
tribunal or arbitrator) or other governmental or regulatory authority, agency or commission (each, a ― Governmental or Regulatory Authority ‖)
to which Seller or ITC is subject, except to the extent any such violations or breaches would not, individually or in the aggregate, have a
Material Adverse Effect; or

                   (d)         require any consent, approval or authorization of, notice to, or filing, recording, registration or qualification with
any person, entity or Governmental or Regulatory Authority on the part of Seller or ITC, except (i) as set forth on
Schedul e 3.4(d) , (ii) to the extent the failure to obtain any such consents, approvals or authorizations, to give such notices or to make such
filings, recordings, registrations or qualifications would not, individually or in the aggregate, have a Material Adverse Effect, and (iii) for (A)
filings and expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the ― HSR Act ‖), and
(B) notices to and approval of the Federal Energy Regulatory Commission or any successor governmental agency (the ― FERC ‖) pursuant to
the Federal Power Act (the ― Power Act ‖) and any applicable rules or regulations of the FERC as set forth in Schedule 3.4(d) (such actions set
forth in (A) and (B) plus any additional consents and approvals referred to in
Section 4.4(d)(iii) and Schedule 4.4 , being hereinafter referred to as the ― Required Governmental Actions ‖).

         3.5         Capitalization .

                  (a)         The authorized equity and membership interests of ITC consist solely of the Membership Interests. All of the
issued equity and membership interests are owned beneficially and of record solely by Seller (as the sole member of ITC), free and clear of all
Liens, were duly authorized and validly issued. The delivery of the assignment of equity and membership interests at Closing pursuant to
Section 2.2(a) will transfer to Purchaser good, valid and marketable title to the Membership Interests, free and clear of all Liens.

                                                                           6
                   (b)        There are no outstanding options, warrants, calls, rights, commitments or agreements obligating Seller or ITC to
issue, deliver or sell any equity or membership interests of ITC, and there are no outstanding securities or other rights which are convertible or
exchangeable into membership interests of or any other equity interest in ITC. Neither ITC nor Seller is subject to any obligation to repurchase
or otherwise acquire or retire or to register any membership interest or any other equity interest in ITC. Seller is not a party to any equity
holder, member, operating, voting or similar arrangement with respect to the Membership Interests and has not granted a proxy, power of
attorney or other authority with respect to the Membership Interests or the management of ITC to any person or entity.

          3.6        Corporate Structure; Organizational Documents; Directors and Officers; Books and Records .

                  (a)        ITC is a limited liability company duly organized, validly existing and in good standing under the laws of the State
of Michigan.

                   (b)       ITC has the necessary power and authority to carry on the Business as it is now being conducted and to own and
lease the properties and assets it owns and leases, including the Transmission Assets. ITC is not transacting business in any jurisdiction
without the required qualifications, except for those jurisdictions in which the failure to so qualify would not, individually or in the aggregate,
have a Material Adverse Effect.

                  (c)        ITC has no ownership interest in any partnership, joint venture, corporation, limited liability company or other
entity.

                    (d)      Attached to Schedule 3.6(d) is a true, complete and correct copy of the Articles of Organization of ITC, as in effect
as of the date of this Agreement. There is no operating, member or other governing agreement in respect of ITC (other than the Articles of
Organization).

                    (e)      The names of each officer of ITC holding office on the date hereof, and the position with ITC held by each such
person, are listed in Schedule 3.6(e) . ITC has no directors or managers (other than the Seller, in its capacity as the sole member of ITC).

                   (f)         The minute books and other similar records of ITC as made available to Purchaser prior to the execution of the
Supplement and Amendment dated as of February 28, 2003, to this Agreement (the ― Amendment ‖) contain a true and complete record, in all
material respects, of all action taken by Seller, as the sole member of ITC. The equity and membership interest register and other similar
records of ITC as made available to Purchaser prior to the execution of the Amendment accurately reflect all record transfers prior to the
execution of the Amendment. Except as set forth in Schedule 3.6(f) , ITC does not have any of its books and records recorded, stored,
maintained, operated or otherwise wholly or partly dependent upon or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which (including all means of access thereto and therefrom) are not under the exclusive
ownership and direct control of ITC, Seller or one of their Affiliates.

                                                                         7
         3.7         Financial Statements .

                   (a)       Attached to Schedule 3 .7(a) are copies of (a) the audited balance sheet, income statement and statement of cash
flow of ITC as of and for the seven months ended December 31, 2001 (the ― Audited Financial Statements ‖), together with a true and correct
copy of the report on such audited information by Deloitte & Touche LLP, and (b) the unaudited balance sheet, income statement and statement
of cash flow of ITC as of, and for the three months, six months and nine months, respectively, ended, March 31, June 30 and September 30,
2002 (the ― Interim Financial Statements ,‖ and together with the Audited Financial Statements, the ― Financial Statements ‖). Except as set
forth on Schedule 3.7(a) , the Financial Statements were prepared in accordance with GAAP, consistently applied, and present fairly in all
material respects the financial condition of ITC as of the dates indicated therein and the results of operations and cash flows of ITC for the
periods covered thereby; provided that the Interim Financial Statements (i) lack footnotes and (ii) are subject to normal year-end adjustments.

                  (b)        The schedule of capital expenditures attached to Schedule 3.7(b) is, in all material respects, a true and correct
schedule of the actual capital expenditures made by ITC during the period from January 1, 2002 through October 31, 2002.

                  (c)        The Audited Financial Statements were prepared in accordance with the FERC uniform system of accounts.

           3.8         Liabilities; Guaranties . Except as set forth on Schedule 3.8 , ITC does not have any debt or liability which would be
required by GAAP to be disclosed in a balance sheet of ITC, except for (a) liabilities reflected in the Financial Statements or the notes thereto,
(b) liabilities incurred since the most recent date of the Interim Financial Statements under $1,000,000, individually or in the aggregate, (c)
liabilities incurred in the ordinary course of business consistent with past practice since the most recent date of the Interim Financial
Statements, and (d) liabilities arising under this Agreement. Except as set forth on Schedule 3.8 , ITC does not have any obligations (absolute
or contingent) to provide funds on behalf of, or to guarantee or assume any debt, liability or obligation of, any person or entity.

          3.9         Personal Property and Assets . Except as set forth on Schedule 3.9(a) , ITC has or will on the Closing Date have
marketable title to all tangible personal property reflected on the Financial Statements and acquired by ITC after the date of the Financial
Statements, other than property sold or otherwise disposed of in the ordinary course of business consistent with past practice since the date of
the Financial Statements, free and clear of all Liens, except for any Liens reflected on the Financial Statements or the notes thereto, Liens for
current property taxes not yet due and payable, Liens imposed by law and incurred in the ordinary course of business consistent with past
practice for obligations not yet due to carriers, laborers, materialmen and the like, and Liens which would not, individually or in the aggregate,
have a Material Adverse Effect (collectively, ― Permitted Liens ‖). Except as set forth on Schedule 3.9(b) , ITC has or will on the Closing Date
have the right to use all of the leased tangible personal property used by ITC in the conduct of the Business pursuant to valid and enforceable
lease agreements, except to the extent the invalidity, ineffectiveness, unenforceability, illegality or nonbinding nature of any such lease
agreements would not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth on Schedule 3.9(c) , ITC is in
possession of, and has or will on the Closing Date have marketable title to or valid leasehold interests in or valid rights under contract to use, all
tangible personal property used by ITC which is necessary to the conduct of the Business as it is presently

                                                                          8
conducted. During the two (2) year period immediately preceding the date hereof, there has not been any material interruption of the
Business. All tangible personal property of ITC used for the transmission of electricity is, in all material respects, suitable for such use and in
reasonably good operating condition, ordinary wear and tear excepted, and its use complies in all material respects with all applicable laws,
regulations, rules and orders of any Governmental or Regulatory Authority. EXCEPT AS EXPRESSLY SET FORTH HEREIN , (1)
SELLER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION
ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AS TO ANY OF THE
TANGIBLE PERSONAL PROPERTY OR ASSETS OWNED OR LEASED BY ITC, AND (2) SUCH ASSETS AND PROPERTIES
WILL BE INDIRECTLY ACQUIRED BY PURCHASER AT THE CLOSING ―AS IS, WHERE IS‖ ON THE CLOSING DATE,
―WITH ALL FAULTS.‖

         3.10        Real Property .

                    (a)       Schedule 3.10(a) contains a true and correct list of (i) each parcel of real property owned by ITC (the ― Owned Real
Property ‖), (ii) each parcel of real property leased by ITC, as lessee (the ― Leased Real Property ,‖ and together with the Owned Real Property,
the ― Real Property ‖), and (iii) each parcel of real property as to which ITC has rights of easement (the ― Easements ‖).

                   (b)      Except as set forth on Schedule 3.10(b) , ITC has or will on the Closing Date have marketable title to all of the
Owned Real Property, free and clear of all Liens that attached to any of the Owned Real Property during the period of ownership thereof by
ITC, Seller or any other subsidiary of Seller (including all Liens arising under or pursuant to that Mortgage and Deed of Trust by and between
The Detroit Edison Company and Bankers Trust Company dated as of October 24, 1924, as amended, modified and supplemented from time to
time), except for Permitted Liens.

                    (c)       Each of the leases (the ― Property Leases ‖) with respect to the Leased Real Property is or will on the Closing Date
be valid, in full force and effect, and enforceable in accordance with its terms and constitutes a legal and binding obligation of each party
thereto, except to the extent the invalidity, ineffectiveness, unenforceability, illegality, or nonbinding nature of any such Property Leases would
not, individually or in the aggregate, have a Material Adverse Effect. ITC has neither given nor received any notice of default, termination or
partial termination under any Property Lease, and there is no existing or continuing default by ITC or, to the Knowledge of Seller, any other
party in the performance or payment of any obligation under any Property Lease, except to the extent any such defaults, terminations or partial
terminations would not, individually or in the aggregate, have a Material Adverse Effect.

                  (d)       Except as set forth on Schedule 3.10(d) , and except for any Real Property leased to others, ITC is in possession of
each parcel of Real Property, together with all buildings, structures, facilities, fixtures and other improvements thereon. ITC has or will on the
Closing Date have adequate rights of ingress and egress with respect to the Real Property and all buildings, structures, facilities, fixtures and
other improvements thereon, except to the extent any deficiencies in such rights would not, individually or in the aggregate, have a Material
Adverse

                                                                         9
Effect. None of such Real Property, Easements, buildings, structures, facilities, fixtures or other improvements, or the use thereof, contravenes
or violates any building, zoning or land use law, except for such violations and contraventions as would not, individually or in the aggregate,
have a Material Adverse Effect. Except as set forth on Schedule 3.10(d) , the Real Property (other than Real Property leased to others by ITC)
and the Easements, and ITC’s rights and interests therein, comprise or will on the Closing Date comprise real estate and real estate rights that
are necessary, in all material respects, for ITC to conduct the Business as it is presently conducted.

           (e)    EXCEPT AS EXPRESSLY SET FORTH HEREIN, (1) SELLER MAKES NO REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AS TO ANY REAL PROPERTY OR ANY
IMPROVEMENTS THERETO OR FIXTURES THEREON, AND (2) SUCH ASSETS AND PROPERTIES WILL BE INDIRECTLY
ACQUIRED BY PURCHASER AT THE CLOSING ―AS IS, WHERE IS‖ ON THE CLOSING DATE, ―WITH ALL FAULTS.‖

        3.11       No Material Adverse Change . Except as set forth on Schedule 3 .11 , or as otherwise contemplated by this Agreement,
since December 31, 2001,

                    (a)        there has not occurred any change, event, circumstance or development which, individually or in the aggregate, has
had, or could reasonably be expected to have, a material adverse effect on the business, prospects, financial condition or results of operations of
ITC taken as a whole (excluding any such change caused by general economic, regulatory, legal or political developments or conditions
affecting the utility or electric transmission business generally that are not specific to ITC);

                  (b)        Seller and ITC have conducted the Business in the ordinary course consistent with past practice; and

                   (c)       there has not occurred any (i) (A) split, combination or reclassification of any of ITC’s capital stock (including the
Membership Interests), or issuance or authorization for the issuance of any other securities in respect of, in lieu of or in substitution for, shares
of ITC’s capital stock, (B) purchase, redemption or other acquisition of any such capital stock of ITC or any option with respect thereto,
(ii) change in any material accounting principles applicable to ITC, (iii) incurrence by ITC of any indebtedness (other than intercompany
payables and trade payables, in each case arising in the ordinary course of business) in excess of $500,000 individually or $2,500,000 in the
aggregate, issuance or sale by ITC of any debt securities or warrants or other rights to acquire any debt securities of ITC, guarantee by ITC of
any debt securities of another person or entity, ―keep well‖ or other agreement on the part of ITC to maintain any financial statement condition
of another person or entity or any arrangement having the economic effect of any of the foregoing, (iv) loans, advances or capital
contributions by ITC to, or investments by ITC in, any other person or entity, (v) sale, lease, license or other disposition of any of the assets of
ITC requiring authorization of the FERC or having a fair market value in excess of $500,000 individually or $2,500,000 in the aggregate,
(vi) acquisition by ITC of or agreement by ITC to acquire (A) by merging or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any

                                                                         10
corporation, partnership, joint venture, association or other business organization or division thereof or (B) any assets requiring authorization of
the FERC or having a fair market value in excess of $500,000 individually or $2,500,000 in the aggregate, except for purchases of equipment
in the ordinary course of business consistent with past practice, or (vii) (A) waiver by ITC of any claims or rights of substantial value or (B)
waiver by ITC or Seller of any benefits of, or agreement by ITC or Seller to modify in any manner, any confidentiality, standstill or similar
agreement to which Seller or ITC is a party with respect to ITC or the Business .

         3.12        Litigation . Except as set forth on Schedule 3 .12 , there is no litigation, action, suit, arbitration, mediation, hearing or
governmental investigation pending or, to the Knowledge of Seller, threatened, by or against ITC or Seller which has had or would reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect. Except as set forth on Schedule 3 .12 , no judgment, award,
order or decree has been rendered against Seller (relating to the Business or the Transmission Assets) or ITC which is still outstanding and
which has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

         3.13        Environmental . Except for any events, matters or occurrences contrary to the following representations that would not,
individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect,

                  (a)       except as set forth on Schedule 3.13(a) , each of Seller (to the extent related to the Business or the Transmission
Assets) and ITC is, and during the term of all applicable statutes of limitation has been, in compliance with applicable Environmental Law;
provided that no representation is made with respect to Seller’s compliance with applicable Environmental Law to the extent not related to the
Business or the Transmission Assets;

                    (b)       ITC (or Seller or one of its Affiliates) has all permits, licenses, approvals, and authorizations, and has filed all
reports, registrations, applications and notices (― Environmental Authorizations ‖), required under Environmental Law for the operation of the
Business, is in compliance with the Environmental Authorizations, and has received no notice that any Environmental Authorization is subject
to termination, modification or revocation;

                   (c)       except as set forth on Schedule 3.13(c) , neither Seller nor ITC has received any notice from any person or entity
regarding any actual or alleged Environmental Claims against, or violation of any Environmental Law by, ITC or against or by any other
person or entity with respect to the Real Property or Easements, or alleging that ITC has liability under any Environmental Law for any
disposal or release of Hazardous Materials at any location;

                   (d)       except as set forth on Schedule 3.13(d) , neither Seller nor ITC nor any other person or entity has disposed of,
released, or arranged for the disposal of any Hazardous Materials on, at, under or from any of the Real Property or Easements, and, to the
Knowledge of Seller, no other person or entity has done so;

                    (e)       there are no underground storage tanks owned, leased, used, operated or maintained by Seller or ITC (or any of
their Affiliates) or, to the Knowledge of Seller, otherwise located at any Real Property or on any of the Easements;

                                                                        11
                  (f)       neither Seller nor ITC is a party to any contract or agreement pursuant to which ITC assumes any liability for any
Environmental Claim (asserted or unasserted) against any other person or entity, or assumes any liability with respect to any Environmental
Claim (asserted or unasserted) related to the Real Property or Easements, or indemnifies any person or entity with respect to any Environmental
Claim (asserted or unasserted) related to real property or interests therein not owned by ITC (other than, with respect to unasserted
Environmental Claims, under general indemnification obligations of Seller or ITC that do not expressly address or relate to any Environmental
Law, Hazardous Materials or environmental condition); and

                  (g)       there are no polychlorinated biphenyls or asbestos-containing materials owned, leased, used, operated or
maintained by Seller or ITC (or any of their Affiliates) or, to the Knowledge of Seller, otherwise located at any Real Property or on any of the
Easements that could result in any liability to ITC or Purchaser under any Environmental Law or otherwise give rise to any Environmental
Claim affecting ITC or Purchaser.

         3.14       Brokers’ Fees . Neither Seller nor ITC has any liability or obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this Agreement for which Purchaser or ITC could become liable or obligated.

         3.15       Benefit Plans .

                   (a)        Schedule 3.15(a) contains a true and complete list of each ― employee benefit plan ‖ (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (― ERISA ‖), including, without limitation, multiemployer
plans within the meaning of ERISA Section 3(37)), stock purchase, stock option, severance, employment, change-in-control, fringe benefit,
collective bargaining, bonus, incentive, deferred compensation, retention and all other employee benefit plans, agreements, programs, policies
or other arrangements maintained by Seller or any of its Affiliates, whether or not subject to ERISA (including any funding mechanism therefor
now in effect), oral or written, under which any of the ―Available Employees‖ (as defined in Section 9.1) has any present or future right to
benefits. All such plans, agreements, programs, policies and arrangements are collectively referred to herein as the ― Seller Plans .‖ ITC has
no ―employee benefit plans‖ and, except as disclosed in
Schedule 3.15(a) , no obligations or liabilities under or with respect to the Seller Plans. Except as provided in Article 9 of this Agreement, ITC
has no express or implied commitment to (i) create, incur liability with respect to, or cause to exist any ―employee benefit plan‖ or (ii) to enter
into any contract or agreement to provide compensation or benefits to any individual.

                   (b)        With respect to each Seller Plan, Seller has delivered to Purchaser a current, accurate and complete copy (or, to the
extent no such copy exists, an accurate description) thereof and, to the extent applicable: (i) any related trust agreement or other funding
instrument; (ii) the most recent determination letter, if applicable; (iii) any summary plan description and other written communications (or a
description of any oral communications) by Seller to the Available Employees concerning the extent of the benefits provided under any Seller
Plan; and (iv) for the three most recent years (A) the Form 5500 and attached schedules, (B) audited financial statements, (C) actuarial
valuation reports and (D) attorney’s response to any auditor’s request for information.

                                                                        12
                   (c)       Except as contemplated by Article 9 of this Agreement, the consummation of the transactions contemplated by this
Agreement will not, under the terms of any Seller Plan, result in the payment by ITC or Purchaser to any Available Employee of any money or
other property, or accelerate or provide any other rights or benefits to any Available Employee, whether or not such payment would constitute
―a parachute payment‖ within the meaning of ―Code‖ (as defined in Article 8) Section 280G.

         3.16        Employees . ITC has no employees.

         3.17         Compliance With Laws and Orders . Except as disclosed in Schedule 3.17 , neither Seller nor any of its subsidiaries (with
respect to the Business and Transmission Assets only) nor ITC is or has at any time within the last three (3) years (or, as to ITC, since its
organization) been, or has received any notice that it is or has at any time within the last three (3) years (or, as to ITC, since its organization)
been, in violation of any law or order of any Governmental or Regulatory Authority applicable to ITC, the Business or the Transmission
Assets, except for such violations as would not, individually or in the aggregate, have a Material Adverse Effect. Except as disclosed on
Schedule 3.17 , neither Seller nor ITC has at any time within the last three (3) years (or as to ITC, since its organization) received any written
notice from any Governmental or Regulatory Authorities of any actual, alleged possible or potential obligations to undertake any material
remedial action applicable to ITC, the Business or the Transmission Assets.

         3.18        Contracts .

                   (a)        Schedule 3.18(a) contains a true and complete list of all of the following agreements, leases, licenses, evidences of
indebtedness, mortgages, security agreements or other contracts (whether written or oral) or other arrangements (true and complete copies (or,
if none, reasonably complete and accurate written descriptions) of which, together with all amendments and supplements thereto, have been
delivered to Purchaser prior to the date hereof), to which ITC is a party or by which any of its assets or properties is bound (such agreements,
leases, licenses, and other items required to be set forth on Schedule 3.18(a) being referred to herein as the ― Contracts ‖) (with paragraph
references corresponding to those set forth below):

                            (i)        (A) all Contracts (excluding Seller Plans) providing for a commitment of employment or consultation
         services for a specified or unspecified term or otherwise relating to employment or the termination of employment, the name, position
         and rate of compensation of each person or entity party to such a Contract and the expiration date of each such Contract; and (B) any
         written or unwritten representations, commitments, promises, communications or courses of conduct (excluding Seller Plans and any
         such Contracts referred to in clause (A)) involving an obligation of ITC to make payments in any year, other than with respect to
         salary or incentive compensation payments in the ordinary course of business, to any employee;

                           (ii)      all Contracts containing any provision or covenant prohibiting or materially restricting the ability of ITC
         to engage in any lawful business activity or compete with any person or entity;

                                                                         13
                           (iii)     all Contracts relating to indebtedness (other than trade payables arising in the ordinary course of business)
         of ITC in excess of $50,000;

                          (iv)      all Contracts relating to (A) the future disposition or acquisition of any assets with a fair market value in
         excess of $500,000 individually or $2,500,000 in the aggregate or requiring authorization of the FERC, or (B) any merger or other
         business combination;

                            (v)       all collective bargaining or similar labor Contracts to which ITC is a party or by the terms of which it is
         bound;

                             (vi)      all Contracts that (A) limit or contain restrictions on the ability of ITC to declare or pay dividends on, to
         make any other distribution in respect of or to issue or purchase, redeem or otherwise acquire its capital stock, to incur indebtedness,
         to incur or suffer to exist any lien, to purchase or sell any assets, or to engage in any business combination or merger or (B) require
         ITC to maintain specified financial ratios or levels of net worth or other indicia of financial condition;

                            (vii)     all Contracts pertaining to interconnection with the Transmission Assets, the provision of transmission or
         ancillary services by ITC, and the purchase of ancillary services by ITC;

                           (viii)     all Contracts between or among ITC, on the one hand, and Seller, any officer, director or Affiliate (other
         than ITC) of Seller or ITC, on the other hand; and

                           (ix)        all other Contracts (other than Seller Plans and insurance policies) that (A) involve the payment or
         potential payment, pursuant to the terms of any such Contract, by or to ITC of more than $500,000 annually and (B) cannot be
         terminated within thirty (30) days after giving notice of termination without resulting in any material cost or penalty to ITC.

                    (b)        Except as disclosed in Schedule 3.18(b) , each Contract required to be disclosed in Schedule 3.18(a) is in full force
and effect and constitutes a legal, valid and binding agreement, enforceable in accordance with its terms, of each party thereto, except to the
extent the illegality, invalidity, unenforceability or non-binding nature of any such Contracts would not, individually or in the aggregate, have a
Material Adverse Effect. Except as disclosed in Schedule 3.18(b) , ITC is not, and, to the Knowledge of Seller, no other party to such Contract
is, or has received notice that it is, in violation or breach of or default under any such Contract (or with notice or lapse of time or both, would be
in violation or breach of or default under any such Contract), except to the extent any such violations, breaches or defaults would not,
individually or in the aggregate, have a Material Adverse Effect.

         3.19        Licenses . Except as disclosed in Schedule 3.19 :

                   (a)       ITC holds or will on the Closing Date hold all licenses, permits, certificates of authority, authorizations, approvals,
registrations and similar consents granted or issued by any Governmental or Regulatory Authority (― Licenses ‖) that are necessary for ITC to

                                                                         14
own and operate the Business as it is presently conducted, except for Licenses the absence of which would not, individually or in the aggregate
have a Material Adverse Effect;

                  (b)        each License held by ITC is valid, binding and in full force and effect, except for License the absence of which
would not, individually or in the aggregate, have a Material Adverse Effect;

                 (c)        ITC is not, and has not received any notice that it is, in default (or with the giving of notice or lapse of time or both,
would be in default) under any such License, except to the extent any such defaults would not, individually or in the aggregate, have a Material
Adverse Effect.

                (d)        As of the Closing, Seller shall have, or shall have caused to be, assigned or transferred to ITC, or shall have
otherwise made available for use by ITC after the Closing, the software programs and licenses used in the Business.

          3.20        Insurance . Schedule 3.20 contains a true and complete list of all liability, property, workers’ compensation, directors’ and
officers’ liability and other insurance policies currently in effect that insure the Business or the operations of ITC or affect or relate to the
ownership, use or operation of any of the Transmission Assets and that (i) have been issued to Seller or any subsidiary of Seller (including ITC)
or (ii) have been issued to any person or entity (other than Seller or its subsidiaries) for the benefit of ITC (the ― Seller Insurance Policies
‖). Each policy listed in Schedule 3.20 is valid and binding and in full force and effect, no premiums due thereunder have not been paid (to the
extent any such non-payment would entitle the insurer to terminate such policy) and neither Seller nor the person or entity to whom such policy
has been issued has received any notice of cancellation or termination in respect of any such policy or is in default thereunder (to the extent any
such default would entitle the insurer to terminate such policy). Neither Seller, any subsidiary (including ITC) nor the person or entity to
whom such policy has been issued has received notice that any insurer under any policy referred to in this section is denying liability with
respect to a claim thereunder related to the Business or the operations of ITC or the ownership, use or operation of any of the Transmission
Assets.

           3.21        Affiliate Transactions . Except as disclosed in Schedule 3.21 , (i) there are no intercompany liabilities, indebtedness or
obligations between ITC, on the one hand, and Seller or any officer, director or Affiliate (other than ITC) of Seller or ITC, on the other hand,
(ii) ITC does not provide or cause to be provided any assets, services (other than the transmission of electricity and related business functions)
or facilities to Seller or any such officer, director or Affiliate and (iii) ITC does not beneficially own, directly or indirectly, any debentures,
notes and other evidences of indebtedness, stocks, securities (including rights to purchase and securities convertible into or exchangeable for
other securities), interests in joint ventures and general and limited partnerships, mortgage loans and other investment or portfolio assets issued
by Seller or any such officer, director or Affiliate.

         3.22        Asset Contribution .

                (a)       Pursuant to that certain Separation and Subscription Agreement by and between The Detroit Edison Company, a
Michigan corporation and wholly-owned subsidiary of

                                                                         15
Seller (― Detroit Edison ‖), and ITC Corp. dated as of December 5, 2000 (the ― Separation Agreement ‖), effective January 1, 2001 Detroit
Edison contributed and transferred to ITC Corp. substantially all of the assets, functions, facilities and liabilities associated with the Business
on such date (the ― Separation ‖). Except as set forth on Schedule 3.22(a) , Seller has provided to Purchaser a true, correct and complete copy
of the Separation Agreement and any and all other agreements and other documents executed by Detroit Edison (or any Affiliate of Detroit
Edison a party thereto) and ITC Corp. pursuant to the Separation Agreement or otherwise in connection with the Separation (collectively, the ―
Separation Documents ‖).

                   (b)       Except as set forth on Schedule 3.22(b) , each of the Separation Documents is, and at all times since its execution
has been, a legal, valid and binding agreement of, and enforceable against, Detroit Edison (or its applicable Affiliates) and ITC. Each of ITC
Corp. and Detroit Edison (and any of its Affiliates party thereto) had the requisite corporate power and authority to execute and deliver the
Separation Documents and to complete the transactions contemplated thereby. Each of ITC Corp. and Detroit Edison (and any of its Affiliates
party thereto) duly and validly executed and delivered the Separation Documents.

                (c)       The execution and delivery by Detroit Edison (and any of its Affiliates party thereto) and ITC Corp. of the
Separation Documents, and the consummation of the transactions contemplated thereby, did not:

                         (i)        violate or conflict with any provision of the certificate or articles of incorporation or bylaws (or other
         comparable corporate charter documents) of Seller, Detroit Edison (or any of its Affiliates party to any of the Separation Documents)
         or ITC Corp.;

                          (ii)      violate or breach any statute, ordinance, law, rule, regulation, judgment, order or decree of any
         Governmental or Regulatory Authority to which Seller, Detroit Edison (or any of its Affiliates party to any of the Separation
         Documents) or ITC Corp. was subject at the time of the Separation, except to the extent any such violations or breaches have not had
         and would not have, individually or in the aggregate, a Material Adverse Effect; or

                             (iii)       except as disclosed in Schedule 3.22(c)(iii) , (i) breach or otherwise constitute or give rise to a breach of
         or default under, (ii) result in or give to any person or entity any right of termination, cancellation, acceleration or modification in or
         with respect to, (iii) result in or give to any person or entity any additional rights or entitlement to increased, additional, accelerated or
         guaranteed payments under, or (iv) result in the creation or imposition of any Lien upon ITC Corp. or any of its assets or properties
         under, any lease, contract, mortgage, indenture, license, permit, commitment or other obligation to or by which Seller, Detroit Edison
         (or any of its Affiliates party to the Separation Documents) or ITC Corp. was a party or was bound at the time of the Separation,
         except to the extent any such breaches, defaults, rights, Liens or other matters set forth in clauses (i)-(iv) have not had and would not
         have, individually or in the aggregate, a Material Adverse Effect.

                                                                          16
         3.23         No Other Representations and Warranties . Except as expressly set forth in this Article 3, Seller makes no representation
or warranty, express or implied, in respect of Seller, ITC, or their respective assets, liabilities or operations, and Seller expressly disclaims any
such other representations or warranties. Without limiting the foregoing, except as expressly set forth in this Article 3, the Seller does not
make, and has not made, any representation or warranty regarding the principles to be applied by any governmental or regulatory authority with
respect to the regulation of the Business, the Transmission Assets or the electric transmission industry in general. Notwithstanding anything to
the contrary contained in this Agreement or in any of the Seller Schedules, any information disclosed in one Seller Schedule shall be deemed to
be disclosed in all Seller Schedules, to the extent that it is reasonably apparent that such disclosure is applicable to such other Seller
Schedules. Certain information set forth in the Seller Schedules is included solely for informational purposes and may not be required to be
disclosed pursuant to this Agreement. The disclosure of any such information shall not be deemed to constitute an acknowledgment that such
information is required to be disclosed in connection with the representations and warranties made by the Seller in this Agreement or that it is
material, nor shall such information be deemed to establish a standard of materiality. For purposes of this Agreement or any certificate
delivered pursuant hereto, matters as to which Seller has ― Knowledge ‖ shall be limited to those matters of which Seller’s officers have actual
knowledge on the date as of which the applicable representation or warranty is made.

                                                         ARTICLE 4
                                       REPRESENTATIONS AND WARRANTIES OF PURCHA SER

         Purchaser hereby represents and warrants to Seller, as of the date of this Agreement and as of the Closing, as follows:

         4.1         Organization and Good Standing . Purchaser is a corporation duly organized, validly existing and in good standing under
the laws of the State of Michigan.

         4.2        Power and Authority . Purchaser has the corporate power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Purchaser,
and no other corporate proceedings on the part of Purchaser are necessary to authorize the execution, delivery and performance of this
Agreement by Purchaser.

         4.3         Binding Effect . This Agreement has been duly executed and delivered by Purchaser and constitutes its legal, valid and
binding obligation, enforceable in accordance with its terms.

          4.4        No Violation; Consents . Neither the execution and delivery of this Agreement by Purchaser, nor the performance by it of
its obligations hereunder, will:

                   (a)       violate or conflict with any provision of the Articles of Incorporation or Bylaws of Purchaser;

                   (b)        (i) breach or otherwise constitute or give rise to a breach of or default under, (ii) result in or give to any person or
entity any right of termination, cancellation,

                                                                           17
acceleration or modification in or with respect to, (iii) result in or give to any person or entity any additional rights or entitlement to increased,
additional, accelerated or guaranteed payments under, or (iv) result in the creation or imposition of any Lien upon Purchaser or any of its assets
or properties under any lease, contract, mortgage, indenture, license, commitment or other obligation to or by which Purchaser or any of its
Affiliates is a party or is bound, except to the extent any such breaches, defaults, rights, Liens or other matters set forth in clauses (i)-(iv) would
not, individually or in the aggregate, have a material adverse effect on the ability of Purchaser to execute and deliver and perform its
obligations under this Agreement or to consummate the transactions contemplated hereby a ― Purchaser Material Adverse Effect ‖);

                  (c)      violate or breach any statute, ordinance, law, rule, regulation, judgment, order or decree of any Governmental or
Regulatory Authority to which Purchaser or any of its Affiliates is subject, except to the extent any such violations would not, individually or in
the aggregate, have a Purchaser Material Adverse Effect; or

                    (d)       require any consent, approval or authorization of, notice to, or filing, recording, registration or qualification with
any person, entity or Governmental or Regulatory Authority by Purchaser or any of its Affiliates, except (i) as set forth on Schedul e 4.4 , (ii) to
the extent the failure to obtain any such consents, approvals or authorizations, to give such notices or to make such filings, recordings,
registrations or qualifications would not, individually or in the aggregate, have a Purchaser Material Adverse Effect, and (iii) for (A) filings and
expiration of the applicable waiting period under the HSR Act, and (B) notices to and approval of the FERC pursuant to the Power Act and any
applicable rules or regulations of the FERC as set forth in Schedule 4.4 .

          4.5         Investment . Purchaser: (a) understands that the Membership Interests have not been, and will not be, registered under
the Securities Act of 1933, as amended (the ― Securities Act ‖), or under any state securities laws, and are being offered and sold in reliance
upon federal and state exemptions for transactions not involving any public offering; (b) is acquiring the Membership Interests solely for its
own account for investment purposes and not with a view to their distribution or resale; (c) has knowledge and experience in business and
financial matters; (d) has received certain information concerning ITC and has had the opportunity to obtain additional information as desired
in order to evaluate the merits and the risks inherent in holding the Membership Interests; (e) is able to bear the economic risk and lack of
liquidity inherent in holding the Membership Interests; and (f) is, or will be as of the Closing, an ―Accredited Investor‖ (as defined in
Regulation D promulgated under the Securities Act).

         4.6         Brokers’ Fees . Purchaser has no liability or obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which Seller could become liable or obligated.

        4.7       Litigation . There is no litigation, action, suit, arbitration, mediation, hearing or governmental investigation pending or, to
the Knowledge of Purchaser, threatened by or against Purchaser or any of its Affiliates which would have a Purchaser Material Adverse Effect.

         4.8      Financial Capability . Simultaneously with the execution and delivery of this Agreement, Purchaser has delivered to Seller
equity commitment letters executed by KKR 1996

                                                                          18
Fund L.P. (― KKR ‖) and Trimaran Fund II, L.L.C. (― Trimaran ‖), respectively, (the ― Equity Letters ‖). Purchaser has received binding
commitment letters from the Canadian Imperial Bank of Commerce and CIBC World Markets Corp. (the ― Commitment Letters ‖) which are
currently in full force and effect and, together with the Equity Letters, will provide sufficient financial capability for Purchaser to purchase the
Membership Interests on the terms and conditions set forth in this Agreement on the Closing Date. True and correct copies of the Equity
Letters and the Commitment Letters are attached to Schedule 4.8 , and such letters have not been revoked, terminated, altered or amended since
the date on which they were issued through the date of this Agreement.

         4.9         No Other Representations and Warranties . Except as expressly set forth in this Article 4, Purchaser makes no
representation or warranty, express or implied, in respect of Purchaser, and Purchaser expressly disclaims any such other representations or
warranties. For purposes of this Agreement or any certificate delivered pursuant hereto, matters as to which Purchaser has ― Knowledge ‖ shall
be limited to those matters of which the officers of Purchaser or any entity that controls Purchaser have actual knowledge on the date as of
which the applicable representation or warranty is made.

                                                               ARTICLE 5
                                                        ADDITIONAL AGREEMENTS

         5.1         Covenants Pending Closing .

                  (a)         Conduct of the Business Pending Closing . Seller agrees that from the date hereof until the Closing, except as
otherwise contemplated by this Agreement or required by any rule, regulation, order or directive of any Governmental or Regulatory Authority,
ITC shall carry on the Business in the usual, regular and ordinary course. Without limiting the foregoing, from the date hereof until the
Closing, Seller shall, unless otherwise consented to in writing by Purchaser in each instance, and except as otherwise contemplated by this
Agreement or required by any rule, regulation, order or directive of any Governmental or Regulatory Authority:

                           (i)        not cause or permit ITC to (A) dispose of any Transmission Assets having a fair market value in excess of
         $500,000 individually or $2,500,000 in the aggregate or requiring authorization of the FERC or (B) voluntarily terminate, assign,
         convey, encumber or otherwise transfer, in whole or in part, its rights and interests in or under any Contract listed on, or required to be
         listed on, Schedule 3.18(a) , except for any Contract with customers of the Business involving payments of not more than $ 100,000
         per month which is terminated by ITC for non-payment or non-performance by the other party to such Contract;

                            (ii)      cause ITC not to issue or sell any shares of capital stock, or issue or sell any options, warrants or other
         rights of any kind to acquire any such shares, or securities convertible into or exchangeable for, or which otherwise confer on the
         holder thereof any right to acquire, any such shares;

                                                                         19
                            (iii)    cause ITC to discuss with Purchaser any material filing (or amendment thereto) relating to this Agreement
         or the transactions contemplated hereby with any Governmental or Regulatory Agency;

                            (iv)       not, and cause ITC not to, take any action which would render the representations and warranties of Seller
         set forth in Section 3.11 inaccurate as of the Closing Date;

                           (v)       not transfer or, except in the ordinary course of business consistent with past practice, discharge any
         Available Employee or take any action to increase any current or future benefit of any Available Employee under any Seller Plan,
         except for any increase required to be made in the ordinary course of business consistent with past practice, or any increase provided
         or made available to employees of Seller and its subsidiaries generally and not specifically to the Available Employees;

                            (vi)       maintain or cause ITC to maintain the Transmission Assets in accordance with ―Good Utility Practices‖
         (as defined below); provided that Good Utility Practices for purposes of this subsection shall be determined by reference to and in the
         context of Seller’s current status as the owner of entities and assets engaged in the generation, transmission and distribution of electric
         energy;

                            (vii)     not permit any material change in any accounting or tax practice or policy of ITC;

                             (viii)     use commercially reasonable efforts to maintain in full force and effect until the Closing substantially the
         same levels of coverage of insurance with respect to the operations and activities of ITC, and ITC’s assets, properties and liabilities as
         are in effect as of the date of this Agreement;

                           (ix)      comply with all laws, rules, regulations and orders of any Governmental or Regulatory Authority
         applicable to ITC, the Transmission Assets or the Business; or

                            (x)        not enter into any agreement obligating Seller or ITC to take any action prohibited by clauses (i) through
         (ix).

         For purposes of this Agreement, ― Good Utility Practices ‖ shall mean any of the practices, methods and acts engaged in or approved
by a significant proportion of the electric utility industry during the relevant time period, or any of the practices, methods and acts which, in the
exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the
desired result at a reasonable cost consistent with good business practices, reliability, safety and expedition. Good Utility Practice is not
intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be acceptable practices, methods or
acts generally accepted in the applicable region.

                   (b)       Access to the Business . From the date hereof until the Closing, Seller and ITC shall permit Purchaser and its
representatives, agents, counsel and accountants, to have reasonable access at reasonable times during normal business hours, and upon
reasonable notice,

                                                                         20



to the premises, business, properties, assets, financial statements, contracts, books, records and working papers of, and other relevant
information pertaining to, ITC and the Business.

                   (c)       Updates . From the date hereof until the Closing, Seller shall have the right to notify Purchaser by a written update
of any matters occurring after the date hereof and prior to Closing which, if existing or occurring on the date hereof, would have been required
to be set forth on a Schedule to this Agreement or which would render inaccurate any of the representations or warranties made by Seller in this
Agreement (each a ― Supplement ‖). No Supplement shall cure any breach of any of Seller’s representations and warranties, and all
Supplements shall be disregarded for purposes of determining whether the conditions to Closing set forth in Article 6 shall have been satisfied
and for purposes of the indemnification provisions of Article 10.

                  (d)        Confidentiality .

                            (i)       Purchaser and Seller acknowledge and agree that all information furnished to or obtained by Purchaser
         and its representatives, agents, counsel and accountants pursuant to this Section 5.1 or otherwise in connection with Purchaser’s
         evaluation of the transactions contemplated by this Agreement shall be subject to the provisions of the letter agreement dated as of
         May 30, 2002 between Seller and Kohlberg Kravis Roberts & Co. (the ― Confidentiality Agreement ‖) and shall be treated as
         ―Evaluation Material‖ (as defined in the Confidentiality Agreement); provided, however, that following the Closing, the provisions of
the Confidentiality Agreement shall not apply to Purchaser’s use of Evaluation Material concerning ITC (but not including any such
information concerning Seller or any other subsidiary or Affiliate of Seller).

                    (ii)        From and after the Closing, Seller shall, and shall cause each of its Affiliates and its and their respective
directors, employees and advisors to, hold in strict confidence any and all trade secrets of ITC existing on the Closing Date (for so
long as such information constitutes a trade secret under applicable law) and any and all confidential and proprietary information
existing on the Closing Date regarding ITC, the Business or the Transmission Assets that is of tangible or intangible value to ITC or
Purchaser (collectively, the ― ITC Confidential Information ‖); provided, however, that ITC Confidential Information shall not
include, and the provisions of this Section 5.1(d)(ii) shall not apply to, any information that becomes generally available to the public
other than as a result of disclosure by any of Seller or any of its Affiliates or any of their respective directors, employees and
advisors. Notwithstanding the foregoing, Seller may disclose ITC Confidential Information in the event that Seller or any of its
Affiliates receives a request to disclose all or any part of the ITC Confidential Information under the terms of a valid and effective
subpoena or order issued by a Governmental or Regulatory Authority, or to the extent disclosure of any ITC Confidential Information
directly related to the rates, terms and conditions of any service provided by ITC (or any regional transmission organization or
functionally equivalent entity in which ITC participates) to Seller or any of its Affiliates is required in the context of a regulatory
proceeding, including, without limitation, any rate case before the FERC or the Michigan Public Service Commission; provided that
Seller shall (A) promptly notify Purchaser of the existence, terms and circumstances compelling such disclosure

                                                                 21
         (unless Seller is prohibited from doing so by law or the terms of any such request), so that Purchaser may seek an appropriate
         protective order and/or waive compliance with the provisions of this Section 5.1(d)(ii) (and, if Purchaser seeks such an order, Seller
         shall provide such cooperation as Purchaser shall reasonably request), and (B) if disclosure of such information is required, use
         reasonable efforts to obtain an order or other reliable assurance that the information to be disclosed will be accorded confidential
         treatment or such other protection as Purchaser reasonably designates.

                  (e)        Financial Statements . Upon the reasonable request of Purchaser at any time after the date of this Agreement, and
at Purchaser’s sole cost and expense, Seller shall cooperate with Purchaser and its representatives in good faith in connection with Purchaser’s
preparation of any audited or unaudited financial statements of ITC or the Business, historical and pro forma, which comply with Regulation
S-X promulgated by the Securities and Exchange Commission (the ― SEC ‖) for those periods which would be required to be included in a
Registration Statement on Form S-1 for ITC filed with the SEC under the Securities Act.

                    (f)        Commitment Letters . Purchaser shall use commercially reasonable efforts to obtain financing sufficient to satisfy
the condition to Closing set forth in Section 6.6 of this Agreement and, without limiting the generality of the foregoing, agrees to use
commercially reasonable efforts to exercise and enforce all of its rights under the Commitment Letters in connection therewith, and, if
necessary, to use commercially reasonable efforts to obtain alternative financing from other sources sufficient to satisfy such Closing
condition. Purchaser agrees to promptly notify Seller if at any time prior to the Closing Date it no longer believes in good faith that it will be
able to borrow sufficient funds to pay the Purchase Price or to consummate the transactions contemplated by this Agreement to the extent its
inability to borrow such funds could reasonably be expected to result in the failure of the condition to Closing set forth in Section 6.6 of this
Agreement. Purchaser further agrees that it shall use commercially reasonable efforts to exercise and enforce all of its rights under the Equity
Letters, and that it shall not amend any of the Commitment Letters or the Equity Letters in a manner that would be adverse to Seller’s or
Purchaser’s ability to consummate the transactions contemplated by this Agreement.

         5.2         Inter-Company and Tax Accounts . Seller and Purchaser agree that Seller shall cause all inter-company accounts
(including federal income tax accounts) between Seller or any of its Affiliates (other than MISO if it is deemed an Affiliate) and ITC to be
canceled or otherwise similarly settled as of the Closing Date.

          5.3         Publicity . Each Party hereto agrees to obtain the approval of the other Party hereto, which approval will not be
unreasonably withheld, prior to issuing any press release, written public statement or announcement with respect to the transactions
contemplated by this Agreement; provided , however , that the provisions of this Section 5.3 shall not prohibit any Party from making any such
release, statement or announcement if, upon advice of counsel, it is believed that such Party is required to do so under any applicable law, rule
or regulation; provided , further , that the disclosing Party shall provide a copy of such release, statement or announcement as far in advance of
its public disclosure as is reasonably practicable.

                                                                        22
          5.4        Cooperation of the Parties . The Parties shall cooperate with each other and with their respective counsel and accountants
in connection with any acts or actions required to be taken as part of or as a condition to their respective obligations under this
Agreement. Subject to the terms and conditions of this Agreement and all applicable laws and regulations, each of the Parties hereto shall use
its reasonable commercial efforts, as appropriate, to fulfill or obtain the fulfillment of the conditions to the Closing and to do or cause to be
done all things necessary to consummate and make effective the transactions contemplated by this Agreement, including, without limitation,
the execution and delivery of all agreements required hereunder to be so executed and delivered.

         5.5         Consents and Approvals .

                  (a)        As promptly as practicable, Seller and Purchaser shall each file or cause to be filed with the Federal Trade
Commission and the Department of Justice any notifications required to be filed under the HSR Act and the rules and regulations promulgated
thereunder with respect to the transactions contemplated hereby. The Parties shall respond promptly to any requests for additional information
made by either of such agencies and use their respective commercially reasonable efforts to cause the waiting periods under the HSR Act to
terminate or expire as of the earliest possible date after the date of filing and to cooperate with each other in connection with this clause
(a). Each Party will bear its own costs for the preparation of any such filing and responding to any inquiries or information requests, and
Purchaser shall be responsible for payment of the applicable filing fees.

                   (b)        Seller and Purchaser shall confer and cooperate with each other in connection with, file as promptly as practicable,
and use their respective commercially reasonable efforts to obtain the FERC approvals set forth in Schedules 3.4(d) and 4.4 at the earliest
possible date after the date of such filing. The Required Governmental Actions shall be deemed to have occurred upon the expiration of the
applicable waiting period under the HSR Act as described in Section 5.5(a) and the granting by the FERC of the applicable approvals set forth
in Schedules 3.4(d) and 4.4 .

                   (c)        In addition to the actions and filings described in Sections 5.5(a) and (b), Seller and Purchaser shall cooperate with
each other and (i) promptly prepare and file all necessary documentation, (ii) effect all necessary applications, notices, petitions and filings and
execute all agreements and documents, (iii) use commercially reasonable efforts to obtain the transfer or reissuance to Purchaser of all
necessary permits (including environmental permits) and all consents, approvals and authorizations of any other Governmental or Regulatory
Authorities, and (iv) use commercially reasonable efforts to obtain all consents, approvals and authorizations of all other parties, in the case of
each of the foregoing clauses (i), (ii), (iii) and (iv), necessary to satisfy the conditions of the Parties’ respective obligations to consummate the
transactions contemplated by this Agreement. The Parties shall respond promptly to any requests for additional information made by such
Governmental or Regulatory Authorities, and use their respective commercially reasonable efforts to cause such regulatory approvals to be
obtained at the earliest possible date after the date of filing. Each Party will bear its own costs of the preparation of such filings and
responding to any inquiries or information requests. Each of Seller and Purchaser shall have the right to review in advance all information
relating to such

                                                                         23
Party and the transactions contemplated by this Agreement which appears in any filing made under this Section 5.5 in connection with the
transactions contemplated by this Agreement.

                   (d)       Each Party shall promptly inform the other Party of any communication, and provide a copy of any writing, with,
to or from any Governmental or Regulatory Authority relating to any Required Governmental Action, including promptly notifying the other
Party of any notice from any Governmental or Regulatory Authority that contains, in the recipient’s reasonable judgment, any condition or
requirement that could reasonably be expected to result in the condition to Closing set forth in Section 6.3 or Section 7.3, as applicable, not
being satisfied. Each Party shall use commercially reasonable efforts to eliminate or mitigate the effect of any such conditions or
requirements. Notwithstanding anything to the contrary in this Section 5.5, no Party may consent, and the other Party shall not be bound by
any consent of a Party, to any condition or requirement with respect to any Required Governmental Action which is adverse to the other Party
(or ITC, in the case where Purchaser is the other Party) without the other Party’s prior written consent.

         5.6        Insurance .

                     (a)      Purchaser acknowledges and agrees that effective upon the Closing, all Seller Insurance Policies will be terminated
or modified by Seller to exclude coverage of ITC and its assets, properties liabilities and operations; provided that Seller shall maintain, for a
period of six years following the Closing, to the extent available to Seller at a cost of not more than $150,000 per year, Seller’s directors and
officers liability insurance policies set forth on Schedule 3.20 , or substitute directors and officers liability policies otherwise providing
comparable or superior coverage to the directors and officers of ITC covered thereby for acts, errors, omissions, misstatements, misleading
statements, neglect, breach of duty, liabilities and claims occurring or arising on or prior to the Closing Date. Notwithstanding the foregoing,
(i) no termination of any ―occurrence‖ based policy pursuant to this Section 5.6 shall be effective so as to prevent ITC from recovering under
such policies for losses arising from events occurring prior to the Closing, and (ii) no such termination of any ―claims made‖ policy shall be
effective so as to prevent ITC from recovering under such policies for losses from events occurring prior to the Closing to the extent Seller
shall have received written notice of claims relating to such events on or before the Closing Date. Purchaser shall, at or before the Closing,
obtain at its sole cost and expense adequate replacement insurance coverage for ITC.

                    (b)        Following the Closing, Purchaser shall cooperate, and cause ITC and any ―ITC Successor‖ (as defined below) to
cooperate with Seller in submitting any claims on behalf of Seller under any of the Seller Insurance Policies with respect to any loss, liability,
damage, claim or expense relating to the Transmission Assets or the Business occurring, or arising from events occurring, prior to the
Closing. Following the Closing, Seller shall cooperate with ITC and Purchaser in submitting any claims on behalf of ITC under the Seller
Insurance Policies with respect to any loss, liability, damages, claim or expense related to the Transmission Assets or the Business occurring, or
arising from events occurring prior to the Closing. For purposes of this Agreement, ― ITC Successor ‖ shall mean any subsequent owner(s),
successor(s), assignee(s) or other transferee(s), whether pursuant to a merger, consolidation, stock transfer, asset transfer or otherwise of ITC or
all or substantially all of the assets and properties owned by ITC as of the

                                                                        24
Closing, including the Transmission Assets, or more than 35% of the value of the rate base assets of ITC (measured at the time of the signing of
a definitive agreement related to such transaction).

                   (c)      Except as otherwise provided in this Agreement, Purchaser acknowledges that Seller shall have no responsibility
for obtaining or maintaining any insurance or bearing any liability with respect to the assets, properties, operations or activities of ITC or any
ITC Successor relating to or arising out of occurrences subsequent to the Closing. Except as otherwise provided in this Agreement, neither
Purchaser nor, following the Closing, ITC or any ITC Successor, shall have any right to make a claim directly against Seller or against any
insurance carrier under any of the Seller Insurance Policies for any claim, loss, liability, lien, damage or expense of ITC or any ITC Successor
or Purchaser.

         5.7        Records .

                   (a)        Purchaser and Seller agree that, for a period of seven (7) years after the Closing, neither Purchaser nor Seller, nor
any of their respective Affiliates will (and Purchaser will not permit ITC or any ITC Successor to) dispose of any books, records, documents,
contracts, data or information reasonably relating to ITC, the Business or the assets, properties or operations of ITC that are in their possession
as of the Closing or that come into their possession after the Closing and relate to periods prior to Closing (collectively, ― Records ‖), without
first giving notice to the other Party thereof and permitting such Party a reasonable opportunity to retain or copy such Records as it may
select. During such period, each Party will (and Purchaser will cause ITC or any ITC Successor to) permit the other Party to examine and
make copies, at the examining Party’s expense, of such Records for any reasonable purpose, including any litigation now pending or hereafter
commenced against such Party or its Affiliates, or the preparation or audit of income or other Tax Returns; provided that, if, in the reasonable
judgment of the Party being requested to provide access to documents, such access or disclosure would cause the waiver of any privilege,
including, without limitation, the attorney client privilege or the attorney work product privilege, such access or disclosure may be denied. The
examining Party will provide reasonable notice to the other Party of its need to access such Records or to receive copies thereof.

                   (b)         If privileged and/or attorney work product documents or information are disclosed in the Records, then the Parties
agree that (i) such disclosure is inadvertent, (ii) such disclosure will not constitute a waiver, in whole or in part, of any privilege or work
product, (iii) such information will constitute Evaluation Material subject to the provisions of Section 5.1(d) and (iv) it will promptly return to
the disclosing Party all copies of such Records in the possession of the receiving Party or any of their Affiliates, agents, employees or
representatives (including lenders and financial advisors). Additionally, Purchaser and Seller agree that neither Party nor their respective
Affiliates (including, in the case of Purchaser, ITC or any ITC Successor) shall waive the attorney/client, work product, or like privilege of the
other Party or its Affiliates (including, in the case of Purchaser, ITC or any ITC Successor) with respect to any of the Records, without the prior
written consent of the Party having the benefit of such privilege.

          5.8         Use of Marks . Certain tradenames, trademarks, service marks and other names and marks of or owned by Seller and its
Affiliates (other than those owned by ITC) (collectively, the ― Seller Marks ‖) will appear on some of the assets of ITC, including on signage,
supplies,

                                                                        25
equipment, materials, stationery, brochures, advertising materials, manuals and other items. Purchaser acknowledges and agrees that Purchaser
does not have and, as of and following the Closing neither Purchaser, ITC or any ITC Successor nor any of their Affiliates shall have, any right,
title, interest, license, or any other right whatsoever to use the Seller Marks. Purchaser shall (or shall cause ITC to), after the Closing Date, in
the course of regular maintenance, exercise its commercially reasonable efforts to remove the Seller Marks from, or cover or conceal the Seller
Marks on, the assets of ITC and provide written verification thereof to Seller promptly after completing such removal, coverage or
concealment. Purchaser agrees that neither Purchaser, ITC or any ITC Successor affiliated with Purchaser, nor any of their Affiliates, will ever
challenge Seller’s (or its Affiliates’) ownership of the Seller Marks or any application for registration thereof or any registration thereof or any
rights of Seller or its Affiliates therein as a result, directly or indirectly, of its ownership of ITC or any ITC Successor or its assets or
properties. Purchaser agrees that Purchaser and its Affiliates will not (and will not permit ITC or any ITC Successor to) conduct any business
under any Seller Marks, or send any correspondence or other materials to any person or entity on any stationery that contains any Seller Marks
or otherwise operate its assets or properties in any manner which would or might reasonably be expected to lead any person or entity to believe
that Purchaser, ITC or any ITC Successor or any of their Affiliates has any right, title, interest, or license to use any Seller Marks.

         5.9         Certain Assets and Liabilities .

                   (a)        Notwithstanding anything to the contrary contained in this Agreement, the assets and liabilities of ITC at the
Closing shall not include, and prior to the Closing Date, Seller may cause ITC to transfer to Seller or any of its Affiliates any of its rights and
obligations in and to the following:

                            (i)       the Seller Marks;

                      (ii)       all intercompany accounts between ITC and Seller or any of its Affiliates and all rights to receive any
         ―ARTO Repayments‖ (as defined in Section 5.11(c));

                            (iii)     all ―Property Tax Benefits‖ (as defined in Section 8.7(e)); and

                            (iv)       all rights, purposes or uses existing on the date of this Agreement under the contracts or agreements listed
         on Schedule 5.9(a)(iv) , including any renewals or extensions thereof or any replacements thereof with an agreement among the
         existing contracting parties or their successors or assigns (in each case, only to the extent of rights, purposes or uses that are permitted
         by such listed contracts or agreements) with respect to all of the Real Property and the Easements, other than the transmission of high
         voltage electricity, and all existing and future rights, purposes and uses with respect to all of the tangible personal assets and properties
         of ITC, other than the transmission of high voltage electricity, subject in each case to the requirement that no such rights, purposes or
         uses shall interfere with the transmission of high voltage electricity.

                    (b)       Each of Purchaser and Seller acknowledges that there may exist, as of the Closing, (i) assets or liabilities of Seller
and its Affiliates constituting or used primarily in

                                                                         26
connection with the Business which, by mistake or omission, have not been transferred to or assumed by ITC, and (ii) assets or liabilities of
ITC not constituting or used primarily in connection with the Business which, by mistake or omission, have been transferred to or assumed by
ITC. In the event that either Party (the ― Discovering Party ‖) discovers any such assets or liabilities following the Closing, it shall so notify, in
writing (a ― Transfer Notice ‖), the other Party (the ― Notified Party ‖) that such assets or liabilities were, by mistake or omission, transferred to
or assumed by, or not transferred to or assumed by, ITC prior to the Closing. Following the delivery of any Transfer Notice, the Parties shall
cooperate with each other in good faith either (x) to effect any transfer or assumption of any such assets or liabilities or (y) to cause ITC or any
ITC Successor and Detroit Edison to enter into another mutually agreeable arrangement, in each case as necessary and appropriate to correct
such mistake or omission. Unless, on or before the tenth (10th) Business Day following the Notified Party’s receipt of a Transfer Notice, the
Notified Party delivers a notice, in writing (an ― Transfer Objection Notice ‖), to the Discovering Party advising it that the Notified Party
disagrees with Transfer Notice, the Transfer Notice shall be deemed a binding agreement pursuant to which the Parties agree to cause to be
transferred to or assumed by ITC (or any ITC Successor) or Seller or one of its Affiliates, as appropriate, the assets or liabilities identified in
the Transfer Notice, or to cause ITC (or any ITC Successor) and Detroit Edison to enter into such other arrangement as may be specified in the
Transfer Notice. If the Notified Party delivers a timely Transfer Objection Notice, the Parties shall negotiate in good faith to determine
whether the assets or liabilities identified in the Transfer Notice should be transferred or assumed as specified therein or to cause ITC (or any
ITC Successor) and Detroit Edison to enter into another mutually agreeable arrangement as necessary to give full effect to the Separation and
the terms of the Separation Agreement.

                    (c)       Seller shall use its best efforts to transfer, or cause to be transferred or reissued, to ITC (and any ITC Successor) all
Environmental Authorizations required under Environmental Law for the operation of the Business, as of the Closing, which are held by Seller
or one of its Affiliates (other than ITC).

                  (d)       Any software programs and licenses referred to in Section 3.19(d) which are assigned or transferred, or otherwise
made available for use by ITC (and any ITC Successor) after the Closing, as the case may be, shall be so assigned, transferred or otherwise
made available without cost to ITC through December 31, 2005. Thereafter, Seller may charge ITC a cost that is no greater than would be a
reasonably allocated cost.

          5.10         Post Closing Obligations . From and after the Closing, Purchaser shall obtain, as a condition to any merger, consolidation,
stock transfer, asset transfer or other transaction pursuant to which any ITC Successor, in one or more related transactions, acquires all or
substantially all of the assets or properties owned by ITC as of the Closing (including the Transmission Assets) or more than 35% of the value
of the rate base assets of ITC (measured at the time of the signing of the definitive agreement related to such transaction), and deliver to the
Seller the written agreement (in favor of and in form and substance reasonably satisfactory to Seller) of such ITC Successor to assume, perform
and comply with any and all of ITC’s obligations and commitments (or those of any applicable ITC Successor), contractual or otherwise,
whether existing as of the Closing Date or arising or incurred thereafter; provided, however, that any such ITC Successor shall only be
obligated to assume such obligations and commitments to the extent

                                                                          27
applicable to the portion of the assets of ITC and the portion of the Business acquired by such ITC Successor.

         5.11        RTO Matters .

                  (a)       ITC is currently a member of the Midwest Independent Transmission System Operator, Inc. (― MISO ‖) pursuant to
that Appendix I Agreement dated as of August 31, 2001 between ITC and MISO (as amended or supplemented, the ― Appendix I Agreement
‖). As used herein, the term ―MISO‖ shall also refer to any successor organization of MISO. Purchaser agrees that following the Closing until
December 31, 2006, neither ITC nor any ITC Successor shall terminate the Appendix I Agreement or withdraw from or otherwise cease to be a
member of MISO, unless so ordered or required by the FERC or otherwise required by applicable law (provided that no such FERC order or
requirement shall have been initiated by or shall have resulted, directly or indirectly, from any filing, request or action on the part of Purchaser,
ITC or any ITC Successor or any of their Affiliates).

                   (b)       Purchaser agrees to notify Seller immediately of any notice given or received by Purchaser, ITC or any ITC
Successor or any of their Affiliates at any time following the Closing regarding the termination of the Appendix I Agreement or any material
modification or amendment thereto, and to provide Seller with a copy of any such notice. Purchaser further agrees to give Seller prior notice
of, and to consult with Seller in good faith regarding, any decision to join or participate in, or to withdraw from or terminate its participation in,
any regional transmission organization or other functionally equivalent entity at any time following the Closing.

                  (c)       Purchaser agrees that following the Closing, any cost reimbursements or other payments from or with respect to the
Alliance Regional Transmission Organization or Alliance Participants Administrative and Start-Up Activities Company LLC, or their
respective successors, assigns or Affiliates, received by Purchaser or ITC (or any ITC Successor) or any of their Affiliates in respect of any
investments, expenditures, loans or other advances or payments made by Seller, ITC or any of their Affiliates prior to the Closing (― ARTO
Repayments ‖), will be paid to Seller within thirty (30) days of receipt by Purchaser or ITC (or any ITC Successor) or any of their Affiliates.

         5.12        Transmission Expansion .

                  (a)        Purchaser agrees that Purchaser and its Affiliates shall at all times support and, following the Closing, cause ITC
and any ITC Successors at all times to support, in public fora and elsewhere, the joint plan filed by ITC (on behalf of Detroit Edison),
Consumers Energy Company and Great Lakes Energy Cooperative on December 28, 2000 with the Michigan Public Service Commission (the
― MPSC ‖) in Case No. U-12781 pursuant to Section 10v of the Customer Choice and Electricity Reliability Act (2000 Michigan PA 141) (the
― Michigan Act ‖), as the same may be modified or adjusted by order of the MPSC (the ― Expansion Plan ‖). Purchaser further agrees,
following the Closing, (i) to complete or cause ITC or any ITC Successor to complete, on a timely basis, all projects and other actions
regarding the Transmission Assets and the ITC transmission system (and any expansions thereof or modifications or additions thereto) required
on the part of ITC or any ITC Successor, Seller or

                                                                          28
any of their Affiliates by the terms of the Expansion Plan or any order of or direction by the MPSC pertaining to the Expansion Plan, in
accordance with the terms of the Expansion Plan and/or any applicable requirements of the MPSC, and (ii) to perform or cause ITC or any ITC
Successor to perform any and all other obligations of ITC or any ITC Successor, Seller and their respective Affiliates under the Expansion Plan
or otherwise arising under Section 10v of the Michigan Act regarding the expansion of electric transmission facilities or capabilities.

                   (b)      For the period between the date hereof and the Closing, Seller agrees that it shall, and shall cause its Affiliates to,
bill, charge and invoice ITC in a manner consistent with past practice for engineering, time, personnel, material or like work in connection with
transmission expansion, including, but not limited to, the Expansion Plan.

                    (c)       To the extent permitted under applicable law, Seller and its Affiliates shall use commercially reasonable efforts to
exercise eminent domain and/or condemnation rights, upon reasonable request of ITC, on behalf of Purchaser and ITC or any ITC Successor, in
order to enable ITC or any ITC Successor to expand or modify the ITC transmission system, until such date on which ITC (or any applicable
ITC Successor) is authorized by applicable law to acquire the right of condemnation, eminent domain or any similar right which can be
exercised on behalf of public utilities, provided, however, that Purchaser shall, as a condition to Seller’s or any of its Affiliates’ obligation to
commence any condemnation or eminent domain proceeding, (i) provide Seller with at least sixty (60) days’ prior written notice of its intent to
require Seller or one of its Affiliates commence such proceeding, which notice shall confirm Purchaser’s obligations under clauses (iii) and (iv)
below, (ii) deliver to Seller simultaneously with such notice an opinion of counsel (in form and substance reasonably satisfactory to Seller) to
the effect that Seller or one of its Affiliates may, consistent with applicable law, commence such proceeding on behalf of Purchaser, ITC or any
ITC Successor, (iii) permit Seller to control such proceeding (provided, however, that Purchaser or ITC or any ITC Successor, as applicable,
may participate in such proceeding at its sole cost and expense, and Seller and its Affiliates shall reasonably cooperate with Purchaser or ITC or
any ITC Successor in connection with such proceeding), and (iv) agree to indemnify, defend and hold harmless Seller and its Affiliates from
and against any and all ―Damages‖ (as defined in Section 10.2) suffered or incurred by Seller and its Affiliates arising in connection with or as
a result of such proceeding, and reimburse Seller and its Affiliates for all reasonable costs and expenses of Seller and its Affiliates, including
internal costs and reasonable attorneys’ fees, incurred in connection with such proceeding.

         5.13       Transmission Rates .

          (a)        Seller and Purchaser shall confer and cooperate with each other in connection with, and use their respective commercially
reasonable efforts, including, without limitation, through participation in evidentiary hearings and other proceedings and the filing of pleadings,
briefs, comments and testimony with FERC, to obtain as promptly as possible following the date hereof, all approvals necessary or desirable
from FERC of the following:

                  (i)      ―Transmission Rates‖ (as defined in section 5.13(c)(i), below) for ITC or any ITC Successor, effective as of the
         Closing Date through December 31, 2004, to be fixed at a monthly rate of $1.075/kW/month;

                                                                        29
                  (ii)      recovery by ITC or any ITC Successor of the ―Attachment O Deferral‖ (as defined in Section 5.13(c)(ii) below), to
         be amortized equally as a recoverable expense into rates over five (5) years commencing as of January 1, 2005, and to be recovered in
         rates commencing as of June 1, 2006;

                   (iii)     recovery by ITC of an amount equal to ITC’s accumulated deferred income tax balance on the Closing Date to be
         amortized equally (such amortization to commence on the Closing Date), as a recoverable expense into rates over twenty (20) years, to
         account for capital gains taxes (― ADIT Deferral ‖), with any unamortized ADIT Deferral being accounted for as a rate base asset and
         included in Account No. 182.3 (Other Regulatory Assets) in ITC’s FERC Form No. 1 and to be added in rate base as ―Adjustments to
         Rate Base‖ in page 2 on a new line 23B of Attachment O;

                   (iv)     a stated rate of return on common equity for ITC or any ITC Successor of 13.88% effective as of the Closing Date;

                   (v)      application of the actual post-Closing capital structure of ITC or any ITC Successor for purposes of the formula
         rate in Attachment O of the MISO Open Access Transmission Tariff or the MISO Joint Open Access Transmission Tariff for purposes
         of the Attachment O Deferral; and

                 (vi)      calculation of Transmission Rates for ITC, to be effective as of January 1, 2005, using the formula rate in
         Attachment O of the MISO Open Access Transmission Tariff or the MISO Joint Open Access Transmission Tariff based on ITC’s
         2003 FERC Form No. 1, as adjusted in Section 5.13(c)(ii)(B)(2) below.

          (b)       Following the Closing Date until December 31, 2005 (except as required by law), Seller shall (and shall cause its Affiliates
to) ―Actively Support‖ (as defined below) all elements of Sections 5.13(a) and 5.13(c); provided that the actions contemplated by Sections
5.13(g) and 5.13(i) shall not be deemed to contravene this Section 5.13(b) or Section 5.13(d). As used in this Section 5.13(b), the term ―
Actively Support ‖ means, through advocacy at FERC and before other regulatory or judicial bodies, and in other fora, as applicable, and in all
dealings with MISO or any other person or entity, to use commercially reasonable efforts to support, and to not oppose (either directly or
indirectly), the positions taken by ITC or any ITC Successor, to the extent consistent with the terms of Sections 5.13(a) and 5.13(c), including,
without limitation, through participation in evidentiary hearings and other proceedings and the filing of pleadings, briefs, comments and
testimony with the FERC and before other regulatory or judicial bodies, and in other fora, as applicable.

         (c)       For purposes of this Agreement:

                   (i)      ― Transmission Rates ‖ shall mean rates for network integration and point-to-point transmission services provided
         for under the MISO Open Access Transmission Tariff, the MISO Joint Open Access Transmission Tariff or for any comparable
         successor transmission service provided pursuant to an open access transmission tariff of general applicability or rate schedule, and
         does not include ancillary services or other services or

                                                                       30
charges under the MISO Open Access Transmission Tariff, the MISO Joint Open Access Transmission Tariff or any successor open
access transmission tariff of general applicability or rate schedule; and

          (ii)      ― Attachment O Deferral ‖ shall mean, an amount, treated as a rate base asset to be included in Account No. 182.3
(Other Regulatory Assets) in the FERC Form No. 1 for ITC (or any ITC Successor) and to be added to a new line (― Line 23A ‖) in
the ―Adjustments to Rate Base‖ section of the Attachment O formula rate (as provided for herein), calculated using data inputs in
accordance with this Section 5.13(c)(ii). The Attachment O Deferral shall be calculated annually according to subsection (A) below,
using data inputs as described in subsection (B) below, with such calculation to be posted on the MISO OASIS website on an annual
basis.

                          (A)           Calculation: The Attachment O Deferral shall be calculated by the taking the difference
                                   between:

                                   (1)             the revenue that the billing agent for ITC (or any ITC Successor) would have billed
                                            at the Transmission Rates that would have been in effect for ITC or any ITC Successor as
                                            of the Closing Date using the formula rate in Attachment O of the MISO Open Access
                                            Transmission Tariff or the MISO Joint Open Access Transmission Tariff; and

                                   (2)             revenue collected by ITC (or any ITC Successor) based on the Transmission Rates
                                            set forth in Section 5.13(a)(i) above.

                          (B)            Data Inputs: Data inputs for the calculation of the Attachment O formula rate between the
                                   Closing Date and December 31, 2004 shall be determined as follows:

                                   (1)           for the period from the Closing Date through May 31, 2004, ITC’s 2002 FERC
                                            Form No. 1 data, as adjusted and modified consistent with Exhibits A and B hereto; and

                                   (2)            for the period beginning on June 1, 2004, through December 31, 2004, ITC’s 2003
                                            FERC Form No. 1 data, provided that the income statement data input items used for the
                                            calculation of Attachment O rates shall be annualized by multiplying such data input
                                            items by a ratio, the numerator of which is 365 days, and the denominator of which is the
                                            number of days remaining in the calendar year following the Closing Date, and the load
                                            data are the actual load

                                                             31
                                                       data for ITC or any ITC Successor during calendar year 2003.

                                              For (B)(1) and (B)(2) above, the unamortized balance of the Attachment O Deferral shall be
                                              included in, and added to, rate base in Account No. 182.3 (Other Regulatory Assets) in ITC’s
                                              FERC Form No. 1 and will be added to a new line (― Line 23A ‖) in the ―Adjustments to Rate
                                              Base‖ section of the Attachment O Deferral Formula.

          (d)       Notwithstanding anything else set forth herein to the contrary, Seller and its Affiliates shall not challenge any part of this
Section 5.13 until after December 31, 2005. Beginning after December 31, 2005, Seller and its Affiliates may challenge the reasonableness or
prudence of ITC’s (or any ITC Successor’s) operation and maintenance expenses, administrative and general expenses, and expenses incurred
pursuant to the Service Agreements referenced in Section 5.17(a)(i) (but in no case including any expenses incurred to consummate the
transactions contemplated by this Agreement) (such expenses, in the aggregate, referred to herein as ― Controllable Expenses ‖), but only if,
and only the amount by which, such Controllable Expenses exceed the threshold levels set forth below in paragraph 5.13(d)(i) for the
applicable year. In addition to the foregoing, beginning after December 31, 2005, Seller and its Affiliates may challenge the reasonableness or
prudence of ITC’s (or any ITC Successor’s) capital expenditures, but only if, and only the amount by which, such capital expenditures exceed
the threshold levels set forth below in paragraph 5.13(d)(ii) for the applicable year. Seller’s and its Affiliates’ rights to challenge any of ITC’s
(or any ITC Successor’s) costs incurred prior to January 1, 2005, are limited as set forth in this Section 5.13(d), and in no case may Seller
challenge any other element of Sections 5.13(a) and (c), as applied to any period prior to December 31, 2004. Further, Seller and its Affiliates
shall not at any time challenge the Attachment O Deferral, except for any amounts exceeding the Controllable Expenses and capital
expenditures thresholds included in the Attachment O Deferral and described herein.

                   (i)       For Controllable Expenses, the threshold expense levels shall be:

                                     (A)       In calendar year 2003, $47,628,000; and

                                     (B)        In calendar year 2004, $48,658,000.

                   (ii)      For capital expenditures, the threshold expenditure levels shall be:

                                     (A)       In calendar year 2003, $34,200,000; and

                                     (B)        In calendar year 2004, $36,600,000.

          (e)        Absent the agreement of the Parties to the proposed change, the standard of review for changes to Sections 5.13 and 5.14 of
this Agreement and Exhibits A and B hereto, proposed by a Party or a non-Party (including, without limitation, Affiliates or successors of a
Party), shall be the ―public interest‖ standard of review set forth in United Gas Pipe Line Co. v. Mobile Gas Service Corp. , 350 U.S. 332
(1956) and Federal Power Commission v. Sierra Pacific Power Co. , 350 U.S. 348 (1956) (the ― Mobile-Sierra Doctrine ‖); provided, however,
that such

                                                                         32
standard of review shall in no event apply to (x) the right of Seller and its Affiliates to challenge the reasonableness or prudence of Controllable
Expenses or capital expenditures as contemplated by, and in accordance with, Section 5.13(d), or (y) the rights of FERC acting sua sponte or at
the request of any non-Party (other than Affiliates or successors of a Party) to change rates, terms and conditions in order to protect non-Parties
(other than Affiliates or successors of a Party).

          (f)       Purchaser agrees that, following the Closing Date, at any time prior to January 1, 2005, neither Purchaser, ITC or any ITC
Successor, nor any of their Affiliates shall implement or take any action (either directly or indirectly) which would establish, or result in the
establishment of, Transmission Rates to be charged at any time prior to January 1, 2005 at any level above the level set forth in Section
5.13(a)(i). The actions prohibited by this subsection (f) shall include, without limitation, (i) any attempt, directly or indirectly, to implement,
or cause MISO or any other applicable entity to implement any Transmission Rate not in conformance with Section 5.13(a)(i), and (ii) any
attempt to take any action, in public fora or elsewhere, or make any filings with FERC or any other governmental or regulatory authority,
inconsistent with the provisions or the intent of Section 5.13(a)(i).

          (g)         Purchaser agrees that Seller may file a request for rehearing, pursuant to 18 C.F.R. § 385.713 (2002), of the FERC’s ―Order
Authorizing Disposition of Jurisdictional Facilities, Accepting For Filing Proposed Agreements, Requiring Compliance Filing, And Accepting
In Part And Rejecting In Part Proposed Transmission Rates,‖ ITC Holdings Corp. et al , 102 FERC ¶ 61, 182 (February 20, 2003) (the ―ITC
FERC Order‖), for the purpose of requesting an extension to December 31, 2005, of the fixed monthly rate of $1.075/kW/month set forth in
Section 5.13 (a)(i) above, subject to FERC approval of: (i) an extension to January 1, 2006, of ITC’s Attachment O Deferral in Section
5.13(a)(ii), (ii) calculation of Transmission Rates for ITC, to be effective as of January 1, 2006, using the formula rate in Attachment O of the
MISO Open Access Transmission Tariff or the MISO Joint Open Access Transmission Tariff based on ITC’s 2004 FERC Form No. 1, and (iii)
an extension through December 31, 2005, of point-to-point revenue crediting in Section 5.14 (on the terms of such section prior to giving effect
to this Amendment). Purchaser shall (and shall cause its Affiliates to) file a request for rehearing in support of any such request for rehearing
filed by Seller. In the event FERC grants Seller’s request for such extension, then, to the maximum extent permitted by such grant, Sections
5.13(a), 5.13(b), 5.13(c), 5.13(d), 5.13(f), 5.14(a) and 5.14(e) of the Agreement shall revert to the terms and conditions set forth in the
Agreement before giving effect to this Amendment.

         (h)      Pursuant to paragraph 70 of the ITC FERC Order, Purchaser shall submit a compliance filing to FERC in accordance with
the Amendments to Sections 5.13(a), 5.13(c), and 5.14(a) of the Agreement. Seller shall (and shall cause its Affiliates to) Actively Support all
elements of such compliance filing contemplated herein.

          (i)        Purchaser confirms that its present intention is to seek, at least sixty (60) days prior to December 31, 2004, to obtain all
approvals necessary or desirable from FERC to extend to December 31, 2005, the fixed monthly rate of $1.075/kW/month set forth in Section
5.13 (a)(i) above, subject to FERC approval of: (i) an extension to January 1, 2006, of ITC’s Attachment O Deferral in Section 5.13(a)(ii), (ii)
calculation of Transmission Rates for ITC, to be effective as of January 1, 2006, using the formula rate in Attachment O of the MISO Open

                                                                         33
Access Transmission Tariff or the MISO Joint Open Access Transmission Tariff based on ITC’s 2004 FERC Form No. 1, and (iii) an extension
through December 31, 2005, of point-to-point revenue crediting in Section 5.14 (on the terms of such section prior to giving effect to this
Amendment); provided that the ultimate determination of whether to seek such extension will be in Purchaser’s sole discretion. In the event
that Purchaser seeks such extension, Seller shall (and shall cause its Affiliates to) Actively Support all elements of such extension sought by
Purchaser. In the event FERC grants Purchaser’s request for such extension, then, to the maximum extent permitted by such grant, the
Amendments to Sections 5.13(a), 5.13(b), 5.13(c), 5.13(d), 5.13(f), 5.14(a) and 5.14(e) of the Agreement shall revert to the terms and
conditions set forth in the Agreement before giving effect to this Amendment.

          (j)         Notwithstanding any of the provisions of this Section 5.13, in the event FERC issues any order that results in either (i) the
extension beyond December 31, 2004 of the period during which the monthly rate of $1.075/kW/ month is fixed as set forth in Section
5.13(a)(i) or (ii) the extension beyond January 1, 2005 of the date as of which the amortization of the Attachment O Deferral begins as set forth
in Section 5.13(a)(ii), then the dates set forth in Sections 5.13(b) and 5.13(d) of the Agreement shall be extended to the same extent of such
extension (or, in the event of an order resulting in an extension of both of the dates or periods contemplated in clauses (i) and (ii) above, to the
same extent as the longer of the two extensions, if applicable); provided that in no event shall the dates set forth in Sections 5.13(b) and 5.13(d)
be extended beyond the dates set forth in such sections of the Agreement before giving effect to this Amendment.

         5.14        Point-to-Point Revenue Crediting . So long as obtaining the approvals described in this Section does not delay the Closing
beyond March 31, 2003, Seller shall (and shall cause its Affiliates to) and Purchaser shall (and shall cause its Affiliates to) confer and
cooperate with each other in connection with, and use their respective commercially reasonable efforts, including without limitation through
participation in evidentiary hearings and other proceedings and the filing of pleadings, briefs, comments and testimony with the FERC, to
obtain as promptly as possible following the date hereof (in conjunction with any approval sought for the rates provided for in Section 5.13(a)
hereof) all approvals necessary or desirable from FERC of the items set forth in subsections (a), (c) and (d) below.

           (a)       For the period from the Closing Date through December 31, 2004, ITC or any ITC Successor shall provide on an annual
basis, to the extent revenues are actually received by ITC or any ITC Successor, to all transmission service customers that purchased network
and/or point to point transmission service into, within or out of the ―ITC Zone‖ (as defined in Section 5.14(d)(ii)) under the MISO Open Access
Transmission Tariff or the MISO Joint Open Access Transmission Tariff, or any comparable successor transmission service provided pursuant
to an open access transmission tariff of general applicability or rate schedule, during the period to which the refund applies, a proportionate rate
refund in the following amounts:

                  (i)      For the period from the Closing Date through December 31, 2003, 100 % of ―Point-to-Point Transmission Service
         Revenue‖ (as defined in Section 5.14(d)(i) below) received by ITC or any ITC Successor; it being understood that the calculation of
         the Attachment O formula rates of ITC or any ITC Successor based on the period ending

                                                                        34
        December 31, 2003, shall contain an amount on page 1, line 3 (Account No. 456) equal to zero.

                  (ii)     For the period from January 1, 2004, through December 31, 2004, 75% of the Point-to-Point Transmission Service
        Revenue received by ITC or any ITC Successor; it being understood that the calculation of the Attachment O formula rates of ITC or
        any ITC Successor based on the period ending December 31, 2004, shall contain an amount on page 1, line 3 (Account No. 456) equal
        to 25% of actual Point-to-Point Transmission Service revenue received by ITC or any ITC Successor for the period ending December
        31, 2004.

           (b)      Purchaser shall cause any refunds contemplated by Section 5.14(a) to be paid by ITC or any ITC Successor in the amounts
set forth in Section 5.14(a) by March 15 of the following calendar year.

          (c)        Notwithstanding anything else in this Agreement (including but not limited to Item 2 of Exhibit A ), if FERC or any other
Governmental Authority does not authorize the crediting mechanism provided for in Section 5.14(a), the Parties agree that for purposes of the
Attachment O Deferral as calculated for the time period from the Closing Date through May 31, 2004, Point-to-Point Transmission Service
Revenue received by ITC or any ITC Successor for the period ending December 31, 2002, and credited to ITC’s revenue requirement in
accordance with the formula rate in Attachment O of the MISO Open Access Transmission Tariff and MISO Joint Open Access Transmission
Tariff, shall be the actual Point-to-Point Transmission Service Revenue received by ITC or any ITC Successor for the period ending
December 31, 2002, calculated based on the data reported in ITC’s 2002 Form 1.

         (d)      For purposes of this Agreement:

                   (i)       ― Point-to-Point Transmission Service Revenue ‖ shall mean revenue: (A) received by ITC or any ITC Successor
        for point to point transmission service provided by MISO under Schedules 7, 8, and Schedule 14 of the MISO Open Access
        Transmission Tariff or the MISO Joint Open Access Transmission Tariff, or any successor transmission service provided pursuant to
        an open access transmission tariff of general applicability or rate schedule; and/or (B) revenues collected by ITC or any ITC Successor
        for comparable service provided under an open access transmission tariff of general applicability or rate schedule. ―Point-to-Point
        Transmission Service Revenue‖ shall not include revenue associated with point to point transmission service that is included in the
        load divisor on page 1, Line 15 of Attachment O. The Parties acknowledge that FERC is currently investigating the justness and
        reasonableness of through and out transmission rates in the MISO-PJM region and that the methodologies for charging and
        distributing revenue for point to point transmission service in the MISO-PJM region may change during the course of the operability
        of the revenue crediting mechanism provided for in this Section 5.14. In light of the foregoing sentence, and notwithstanding
        anything else in this Section 5.14, it is the intent of the Parties that the term ―Point-to-Point Transmission Service Revenue‖ shall
        include revenue from any ―lost pancaking revenue‖ charges collected by MISO and distributed to ITC.

                                                                      35
                   (ii)      ― ITC Zone ‖ shall mean the area within the geographic boundaries of the ITC (or any ITC Successor) transmission
         system existing as of the Closing Date, as indicated by a map of such territory in Attachment No. 1(b) to the Service Agreement for
         construction and maintenance, engineering, and system operation services.

          (e)       Following the Closing Date until the later of December 31, 2004 or the date on which Seller and its Affiliates shall have
received any refunds contemplated by this Section 5.14 (except as otherwise required by law), Purchaser shall (and shall cause its Affiliates to),
through advocacy at the FERC and before other regulatory or judicial bodies, and in other fora, as applicable, and in all dealings with MISO or
any other person or entity, not oppose (either directly or indirectly), the recovery by Seller or any of its Affiliates of any refunds contemplated
by this Section 5.14 or the positions taken by Seller or any of its Affiliates consistent with the terms of Section 5.14.

          5.15        Fermi 2 Facility . The Parties acknowledge that Detroit Edison owns and operates the Fermi 2 nuclear generating facility
(― Fermi 2 ‖), which facility is subject to regulation by the Nuclear Regulatory Commission (the ― NRC ‖) and the requirements of that NRC
Operating License Number NPF-43 (the ― Fermi 2 License ‖). Purchaser agrees that, following the Closing, Purchaser and its Affiliates (a)
shall (and shall cause ITC and any ITC Successor to) cooperate with and take any and all actions reasonably requested by Seller and its
Affiliates in order to facilitate compliance by Fermi 2 and Seller and its Affiliates with all applicable NRC regulations and orders and the terms
of the Fermi 2 License and to protect, maintain and preserve the Fermi 2 License and the standing of Fermi 2 and Seller and its Affiliates with
the NRC, and (b) shall not (and shall not permit ITC or any ITC Successor to) take any actions which might reasonably be expected to impair,
inhibit or otherwise adversely affect compliance by Fermi 2 or Seller and its Affiliates with any applicable NRC regulations or orders or the
terms of the Fermi 2 License, the validity of the Fermi 2 License or the standing of Fermi 2 or Seller and its Affiliates with the NRC.

          5.16        Phase Angle Regulators . The Parties acknowledge that ITC is a party to that certain Interconnection Facilities Expansion
Agreement dated as of December 21, 1998 with Ontario Hydro and Consumers Energy Company (the ― Expansion Agreement ‖), pursuant to
which ITC is obligated to operate certain phase angle regulators (― PARS ‖) that comprise part of the international transmission facilities
owned by ITC and located at the Michigan-Ontario, Canada border. Further, the Parties acknowledge and agree that the PARS are subject to
the jurisdiction of the Department of Energy pursuant to Presidential Permit Order No. PP-230-2, dated April 19, 2001. Purchaser shall (and
shall cause ITC or any ITC Successor to) use best efforts and take all actions necessary to cause any and all operational responsibility and
control possessed by ITC or any ITC Successor with respect to the PARS, under the Expansion Agreement or otherwise, to be transferred to
MISO as promptly as practicable following the Closing. Seller shall (and shall cause its Affiliates to) use best efforts and take all actions
necessary to help Purchaser and ITC (and any ITC Successor) to cause any and all operational responsibility and control possessed by ITC or
any ITC Successor with respect to the PARS, under the Expansion Agreement or otherwise, to be transferred to MISO as promptly as
practicable following the Closing. Without limiting the generality of the foregoing, (i) Purchaser shall (and shall cause ITC or any such ITC
Successor to) provide all notices and filings to, and use best efforts to obtain all consents, authorizations and approvals of, MISO, the
Department of

                                                                        36
Energy, any other regional transmission organization or governmental or regulatory authority, and the other parties to the Expansion
Agreement, and execute and deliver any and all documents, in each case to extent necessary to effect such transfer of operational responsibility
and control and (ii) Seller shall (and shall cause its Affiliates to) use best efforts to help Purchaser and ITC (and any ITC Successor) in
connection with the foregoing. Purchaser acknowledges that ITC has, and following the Closing shall retain, responsibility for all applicable
obligations relating to the transmission of electricity arising under or in connection with the Interconnection Agreement by and among
Consumers Power Company, The Detroit Edison Company and Ontario Hydro, dated January 29, 1975 and the Expansion Agreement.

         5.17       Other Agreements .

                (a)       At or prior to Closing, Seller shall deliver, or shall cause to be delivered, to Purchaser executed copies of the
following agreements and other documents (the documents described in clauses (i) through (v) below are collectively referred to as the ―
Additional Agreements ‖):

                           (i)        Service Level Agreements between Detroit Edison and ITC governing the provision of construction and
         maintenance, engineering, system operations and corporate administration services by Detroit Edison to ITC, substantially in the form
         of Exhibit C hereto (the ― Service Agreements ‖);

                           (ii)       Generator Interconnection and Operation Agreement between Detroit Edison and ITC governing the
         direct interconnection of the generating facilities of Detroit Edison and the transmission system of ITC, substantially in the form of
         Exhibit D hereto;

                         (iii)     Master Operating Agreement between Detroit Edison and ITC governing certain control area coordination
         arrangements between ITC and Detroit Edison, substantially in the form of Exhibit E hereto;

                           (iv)      Coordination and Interconnection Agreement between Detroit Edison and ITC governing the coordinated
         operation and interconnection of the Detroit Edison distribution system and the ITC transmission system, substantially in the form of
         Exhibit F hereto; and

                            (v)       Any and all agreements, assignments, easements, licenses or other documents necessary or desirable, and
         in each case in form and substance reasonably satisfactory to Purchaser, in order to vest in Seller or any of its Affiliates (other than
         ITC) or ITC, as the case may be, such that following Closing Seller or its Affiliates and ITC shall have the right to use, access,
         maintain, occupy, improve, enhance add on to and otherwise take any actions with respect to the assets and properties of ITC
         necessary or appropriate in order for Seller or any of its Affiliates to exercise and carry out those rights, purposes and uses with
         respect to the assets and properties of ITC contemplated by Section 5.9(a)(iv).

                (b)       At or prior to the Closing, Seller shall cause ITC and the other applicable parties to terminate that Master Services
Agreement dated as of December 22, 2000 between

                                                                        37
Detroit Edison and ITC, and that Cash Management Services and Working Capital Loan Agreement dated as of July 31, 2001 between ITC and
DTE Energy Corporation, an Affiliate of Seller, in each case, without any further obligations thereunder.

          5.18         Nonsolicitation . From the date of this Agreement through the Closing, neither Seller nor any of its Affiliates or
representatives (including but not limited to Credit Suisse First Boston) shall (a) solicit, initiate or encourage the submission by any person or
entity of a Competing Proposal (as defined below), (b) enter into or agree to enter into any contract with respect to any Competing Proposal or
(c) participate in any discussions or negotiations regarding, or furnish to any person or entity any information with respect to, or take any other
action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Competing
Proposal. For purposes of this Agreement, ― Competing Proposal ‖ shall mean any proposal to acquire any interest in the capital stock of ITC,
or any portion thereof, or any material portion of the Transmission Assets (except in the ordinary course of business), whether such transaction
takes the form of a merger, consolidation, stock sale, asset sale or other business combination involving ITC or the Business, other than the
transactions contemplated by this Agreement.

         5.19        Service Providers . Purchaser agrees that, following the Closing, ITC shall not at any time engage, hire, employ or utilize
any person or entity, or any employee or other personnel of any such person or entity, to perform or provide any construction, maintenance,
engineering or system operations services to be provided by Detroit Edison under the Service Agreements with respect to any Transmission
Assets or any portion of the ITC transmission system located within the geographical boundaries of the ITC transmission system existing as of
the Closing, unless such person or entity agrees to comply with the requirements of the Open Access Same Time Information System standard
of conduct procedures developed by ITC and accepted by FERC pursuant to 18 C.F.R. Part 37.4 (2000), as amended from time to time, and any
applicable successor standards of conduct.

          5.20        Conversion of ITC to an LLC . The Parties acknowledge and agree that at any time prior to Closing, Seller may, at its
option, cause ITC to enter into a transaction or series of transactions resulting in ITC being reorganized as a limited liability company
organized under Michigan law (the ― LLC Conversion ‖); provided that such transaction shall be in form and substance reasonably satisfactory
to Purchaser. Seller shall keep Purchaser informed regarding the status of the LLC Conversion, including Seller’s obtaining of any required
approvals or consents. Notwithstanding the foregoing, in the event that any approval of any Governmental or Regulatory Authorities required
in order for ITC to consummate the LLC Conversion is not obtained, or the LLC Conversion is not consummated, on or prior to the date that is
three (3) Business Days after the date on which all of the Required Governmental Actions have occurred, the Parties acknowledge that the LLC
Conversion shall not be effected. To the extent the LLC Conversion is effected, the Parties shall enter into any amendments to this Agreement
necessary to reflect the transfer of interests in a limited liability company rather than a transfer of shares in a corporation at the Closing. If
Seller effects the LLC Conversion, Purchaser shall have the option to effect the ―Subsequent Conversion‖ (as defined in Section 8.1 hereof). If
Purchaser elects to effect the Subsequent Conversion, Purchaser shall use commercially reasonable efforts to mitigate the costs, expenses and
other Damages covered by Seller’s indemnification obligations under clause (c) of Section 10.2 and clause (a)(ii) under Section 8.4 in
connection

                                                                        38
with the Subsequent Conversion. Upon consummation of the Subsequent Conversion, all references in this Agreement to ―ITC‖ shall also be
deemed to be references to the ―Surviving Corporation‖ (as defined in Exhibit K).

         5.21        Pending Rate Case . Seller agrees that if ITC shall, before or after the Closing, become obligated to make any refund of
any payments by transmission customers attributable to (or bear any cost, expense or obligation with respect to) the provision of transmission
services at any time prior to the Closing as a result of the settlement or other resolution of FERC Docket No. ER02-1963-000, whether by
FERC order or otherwise, Seller shall pay all such amounts on behalf of ITC as and when due (and shall expressly assume all such obligations
from ITC and bear all such costs and expenses of ITC) and shall not charge ITC for any of the foregoing. In no event shall Seller have any
obligation under this Section 5.21 with respect to refunds of any payments attributable to the provision of transmission services by MISO, ITC
(or any ITC Successor) or Purchaser after the Closing. Further, Seller shall not, and shall not allow ITC to, agree to any settlement of such
case in which ITC agrees to any obligations that would burden ITC after the Closing.

                                                          ARTICLE 6
                                           CONDITIONS TO OBLIGATIONS OF PURCHASER

        All of the obligations of Purchaser under this Agreement are subject to the fulfillment prior to or at the Closing of each of the
following conditions, any of which may be waived by Purchaser in its sole discretion:

         6.1          Representations and Warranties . The representations and warranties of Seller contained in this Agreement shall be true
and correct in all respects as of the date hereof, and such representations and warranties shall be true and correct in all respects as of the
Closing as if made at and as of such time, except in each case for (i) such failures to be true and correct that, individually or in the aggregate,
would not constitute or result in a Material Adverse Effect (it being understood that, in determining the accuracy of such representations and
warranties for purposes of this Section 6.1, all Material Adverse Effect and materiality qualifications contained in such representations and
warranties shall be disregarded), and (ii) any representations and warranties which address matters as of a particular date (other than the date
hereof), which representations and warranties shall have been true and correct in all respects (subject to the preceding clause (i)) as of such
particular date. The representations and warranties of Seller in Section 3.5 shall be true and correct in all respects as of the Closing as if made
at and as of such time.

       6.2         Performance of Covenants . Seller shall have performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by it prior to or at the Closing.

          6.3        Governmental Action . The Required Governmental Actions shall have occurred and, subject to Section 5.5(d), none of
such Required Governmental Actions shall require any modification to this Agreement or any transactions or agreements (including the
Additional Agreements) contemplated hereby, impose any condition to the effectuation of the transactions contemplated hereby, or place any
restrictions upon Purchaser, ITC or any of their Affiliates or

                                                                         39
the ownership or operation of ITC, the Business or the Transmission Assets, to the extent that any such modifications, conditions or restrictions
are not contemplated by this Agreement and would, individually or in the aggregate, result in a material adverse effect upon Purchaser or ITC
or Purchaser’s ownership or operation of ITC, the Business or the Transmission Assets after the Closing or the benefits of this Agreement and
the transactions and agreements contemplated hereby to Purchaser or ITC.

          6.4         No Injunctions . No preliminary or permanent injunction or other order by any federal, state or local Governmental or
Regulatory Authority which prevents the consummation of the transactions contemplated by this Agreement shall have been issued and remain
in effect, and no action to obtain any such injunction or order shall have been filed and remain pending.

         6.5         Opinion of Counsel . Purchaser shall have received the opinion of each of Troutman Sanders LLP and Patrick B. Carey,
counsels to Seller, dated the Closing Date, substantially in the form and to the effect of Exhibit G and Exhibit H attached hereto.

         6.6        Financing . Purchaser shall have obtained financing with respect to the transactions contemplated by this Agreement
having terms comparable or superior to Purchaser to those set forth in the Commitment Letters, or otherwise reasonably satisfactory to
Purchaser, in an amount equal to at least $303,000,000 (provided Purchaser has used commercially reasonable efforts to obtain such financing).

         6.7         Material Adverse Effect . Since the date of this Agreement, there shall not have occurred any changes, events,
circumstances, or developments having, individually or in the aggregate, a material adverse effect on the business, prospects, financial
condition or results of operations of ITC, taken as a whole. Any change, event, circumstance, development or effect expressly contemplated
by this Agreement or resulting from a breach of this Agreement by Purchaser shall not be considered in determining whether or not this
condition has been satisfied.

        6.8        Closing Certificate . Purchaser shall have received a certificate of an officer of Seller, dated as of the Closing Date and in
form and substance reasonably satisfactory to Purchaser, certifying to the fulfillment of the conditions set forth in Sections 6.1 and 6.2.

                                                            ARTICLE 7
                                               CONDITIONS TO OBLIGATIONS OF SELLER

         All of the obligations of Seller under this Agreement are subject to the fulfillment prior to or at the Closing of each of the following
conditions, any of which may be waived by Seller in its sole discretion:

         7.1          Representations and Warranties . The representations and warranties of Purchaser contained in this Agreement shall be
true and correct in all respects as of the date hereof, and such representations and warranties shall be true and correct in all respects as of the
Closing as if made at and as of such time, except in each case for (i) such failures to be true and correct that, individually or in the aggregate,
would not constitute or result in a Purchaser Material Adverse Effect (it being understood that, in determining the accuracy of such
representations and warranties for purposes of this Section 7.1, all Purchaser Material Adverse Effect and materiality qualifications contained
in such representations and warranties shall be disregarded), and (ii) any

                                                                         40
representations and warranties which address matters as of a particular date (other than the date hereof), which representations and warranties
shall have been true and correct in all respects (subject to the preceding clause (i)) as of such particular date.

        7.2        Performance of Covenants . Purchaser shall have fully performed and complied in all material respects with all covenants
and agreements required by this Agreement to be performed or complied with by it prior to or at the Closing.

          7.3         Governmental Action . The Required Governmental Actions shall have occurred and, subject to Section 5.5(d), none of
such Required Governmental Actions shall require any modification to this Agreement or any transactions or agreements (including the
Additional Agreements) contemplated hereby, impose any condition to the effectuation of the transactions contemplated hereby, or place any
restrictions upon Seller or any of its Affiliates or the ownership or operation of any of the assets, properties or businesses of Seller or any of its
Affiliates, to the extent that any such modifications, conditions or restrictions are not contemplated by this Agreement and would, individually
or in the aggregate, result in a material adverse effect upon Seller or any of its Affiliates, the benefits of this Agreement and the transactions
and agreements contemplated hereby to Seller or any of its Affiliates or the ownership or operation of any of the assets, properties or businesses
of Seller or any of its Affiliates.

          7.4        MPSC . The MPSC (a) shall not have issued an order, at any time prior to the date on which all Required Governmental
Actions have occurred, that imposes or threatens to impose any condition, obligation or rate treatment on Seller or any of its subsidiaries (other
than ITC) requiring any direct or indirect revenue or profit sharing or performance based split of the proceeds to Seller from the transactions
contemplated by this Agreement which would have or reasonably would be expected to have a material adverse effect on the benefits to Seller
of the transactions contemplated by this Agreement and (b) shall have issued an order which includes each of the findings set forth on Schedule
7.4 .

          7.5         No Injunctions . No preliminary or permanent injunction or other order by any federal, state or local Governmental or
Regulatory Authority which prevents the consummation of the transactions contemplated by this Agreement shall have been issued and remain
in effect, and no action to obtain any such injunction or order shall have been filed and remain pending.

         7.6     Opinion of Counsel . Seller shall have received the opinion of each of Milbank, Tweed, Hadley & McCloy LLP and
Dykema Gossett PLLC, counsels to Purchaser, dated the Closing Date, substantially in the form and to the effect of Exhibit I and Exhibit J
attached hereto.

        7.7        Closing Certificate . Seller shall have received a certificate of an officer of Purchaser, dated as of the Closing Date and in
form and substance reasonably satisfactory to Seller, certifying to the fulfillment of the conditions set forth in Sections 7.1 and 7.2.

                                                                         41
                                                                  ARTICLE 8
                                                                 TAX MATTERS

         8.1         Definitions . For purposes of this Agreement, the following terms shall have the following meanings:

                  ― Affiliated Group ‖ means (a) an affiliated group within the meaning of Section 1504(a) of the Code, or any similar group
defined under a similar provision of state, local or foreign law, or (b) any group of persons that files an Income Tax Return, or is liable for the
Income Taxes of each other, on an affiliated, consolidated, combined or unitary basis.

                  ― Allocation Statement ‖ means a written document which allocates the Purchase Price and liabilities of ITC among the assets
of ITC in a manner mutually agreed upon by the Parties as provided in Section 8.5(g) herein. The Allocation Statement shall also show the
―adjusted grossed-up basis‖ amount (as determined under Treasury Regulation §1.338-5) and the ―aggregate deemed sale price‖ (as determined
under Treasury Regulation §1.338-4) with respect to the sale and purchase of the stock of ITC herein, and allocate such amounts among the
assets of ITC pursuant to Treasury Regulations §1.338-6 and -7.

                  ― Assessment Year ‖ for purposes of property taxes shall mean the calendar year.

                  ― Code ‖ shall mean the Internal Revenue Code of 1986, as amended.

                 ― Income Tax ‖ shall mean any federal, state, local, or foreign income tax (and, for the avoidance of all doubt, the Michigan
Single Business Tax), including any interest, penalty, or addition thereto, whether disputed or not.

                 ― Income Tax Return ‖ shall mean any return, declaration, report, claim for refund, or information return or statement relating
to Income Taxes, including any schedule or attachment thereto, and including any amendment thereof.

                   ― Post-Closing Tax Period ‖ means (i) any Tax period beginning after the Closing Date, and (ii) with respect to a Tax period
that begins on or before the Closing Date and ends after the Closing Date, the portion of such Tax period beginning after the Closing Date.

                  ― Pre-Closing Tax Period ‖ means (i) any Tax period ending on or before the Closing Date, and (ii) with respect to a Tax
period that begins on or before the Closing Date and ends after the Closing Date, the portion of such Tax period ending on the Closing Date.

                 ― Property Tax Period ‖ means the twelve-month payment period for property taxes. For purposes of this Agreement, each
Property Tax Period is deemed to start on July 1 of the Assessment Year to which it relates and end on June 30 of the following year.

                   ― Subsequent Conversion ‖ shall mean the steps taken by Purchaser in connection with the reorganization of ITC (or any
successor entity) into an entity treated as a corporation for state law purposes, all as set forth in Exhibit K .

                                                                         42
                    ― Tax ‖ shall mean any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.

                  ― Tax Return ‖ means any return, declaration, report, claim for refund, rendition, or information return or statement relating
to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

         8.2         Section 338(h)(10) Election .

                   (a)     Seller and Purchaser shall take all steps necessary to make a timely, effective and irrevocable election under
Section 338(h)(10) of the Code and under any comparable statutes in any other jurisdiction arising out of the purchase and sale of the
Membership Interests pursuant to this Agreement (collectively, the ― Section 338(h)(10) Election ‖), and to file such election in accordance
with all applicable laws.

                  (b)       Provided the Parties agree on an Allocation Statement in the timely manner described in Section 8.5(g), the Section
338(h)(10) Election shall properly reflect such Allocation Statement, and Seller and Purchaser agree to act in accordance with such Allocation
Statement in the preparation, filing and audit of any Tax Return relating to the Section 338(h)(10) Election.

                 (c)       Seller will pay any federal, state, local, domestic or foreign Tax attributable to the making of the
Section 338(h)(10) Election and will indemnify Purchaser and ITC against any Taxes arising out of any failure to pay such Tax.

         8.3         Returns, Inclusions .

                  (a)       Seller will include the United States federal Income Tax items of ITC (including any deferred income triggered into
income by Treasury Regulations §1.1502-13 and -14 and any excess loss accounts taken into income under Treasury Regulation §1.1502-19)
on Seller’s consolidated United States federal Income Tax Returns for all periods through the Closing Date and pay any United States federal
Income Taxes attributable to such income. ITC (or any ITC Successor) will furnish Tax information to Seller for inclusion in Seller’s Income
Tax Returns for the period which includes the Closing Date in accordance with ITC’s past custom and practice. The United States federal
Income Tax items of ITC will be allocated to either (i) the period up to and including the Closing Date or (ii) the period after the Closing Date
by closing the books of ITC as of the end of the Closing Date.

                  (b)       Seller shall prepare (or cause to be prepared) and shall file (or cause to be filed) all Tax Returns for ITC for all Tax
periods which end on or prior to the Closing Date whether or not filed or required to be filed after the Closing Date. The Seller shall permit
Purchaser to review and comment on each such Tax Return described in the preceding sentence (other than Tax Returns with respect to periods
for which a consolidated, unitary or combined

                                                                        43
Tax Return of Seller will include the operations of ITC) prior to filing. Seller shall pay all Taxes of ITC with respect to such Tax periods,
including any liability of ITC under Treasury Regulation Section 1.1502-6 or any comparable state, local or foreign law, or shall reimburse
Purchaser within fifteen (15) days after payment by Purchaser or ITC of such Taxes.

                   (c)          Purchaser shall prepare (or cause to be prepared), in a manner consistent with past custom and practice, and shall
file (or cause to be filed) all Tax Returns of ITC (or any ITC Successor) for Tax periods which begin before the Closing Date and end after the
Closing Date. Purchaser shall permit Seller to review and comment on each such Tax Return. Seller shall pay to Purchaser within fifteen (15)
days after the date on which Taxes are paid with respect to such Tax periods an amount equal to the portion of such Taxes which relates to the
Pre-Closing Tax Period. For these purposes, in the case of any Taxes that are imposed on a periodic basis and are payable for a Tax period that
includes (but does not end on) the Closing Date, the portion of such Tax which relates to the Pre-Closing Tax Period shall be determined in
accordance with Section 8.4(c) of this Agreement.

         8.4        Indemnification of Taxes .

                (a)       (i) Seller agrees to indemnify Purchaser and ITC for any Taxes owed directly or indirectly by ITC (including
Taxes owed by Purchaser or ITC, as the case may be, due to this indemnification payment) with respect to any Pre-Closing Tax Period.

                            (ii) If the LLC Conversion occurs, Seller agrees to indemnify Purchaser for the excess of (A) any Taxes (including
any Taxes payable as a result of the loss or deferral of tax benefits) imposed on Purchaser, the entity (or any successor thereto) acquired by
Purchaser or any of the assets directly or indirectly acquired by Purchaser resulting from the LLC Conversion or engaging in the Subsequent
Conversion over (B) the Taxes that would have been payable if the LLC Conversion had not occurred and Purchaser acquired ITC in a
transaction treated as an asset acquisition under Code Section 338(h)(10). In the event of any dispute relating to Taxes for which an indemnity
is claimed pursuant to this Section 8.4(a)(ii), the Parties shall negotiate in good faith to resolve such dispute. Notwithstanding the above, the
indemnity provided for in this Section 8.4(a)(ii) shall not apply with respect to any Taxes imposed solely as a result of (A) the incurrence,
assumption or taking subject to by ITC or Surviving Corporation, of any liability, debt or obligation, other than any liability, debt or obligation
incurred (1) in the ordinary course of business, (2) in connection with the purchase of ITC from Seller or (3) by operation of law in connection
with the merger, (B) Purchaser’s transfer of any ownership interest in, or assets outside the ordinary course of business of, ITC or Surviving
Corporation to any person other than ITC or Surviving Corporation, (C) the consideration issued to Purchaser in connection with the merger of
ITC into Surviving Corporation being other than solely stock of Surviving Corporation (provided, that if Purchaser owns all the outstanding
stock of ITC and Surviving Corporation, then no additional shares of Surviving Corporation need be issued to Purchaser) or (D) the merger
agreement between ITC and Surviving Corporation being executed later than the date that is three (3) days after the Closing. In the event the
dispute cannot be resolved by the Parties, the dispute shall be referred to an accounting or law firm with expertise in federal income taxes
which is mutually acceptable to the Parties for resolution. The selected firm shall issue a written report which sets forth a final decision with
respect to the disputed issue. Fees and expenses of the firm shall be shared equally by Seller and Purchaser.

                                                                        44
                             In the event of any dispute relating to Taxes for which an indemnity is claimed pursuant to this Section 8.4(a)(ii), the
Parties shall negotiate in good faith to resolve such dispute. In the event the dispute cannot be resolved by the Parties, the dispute shall be
referred to a nationally recognized accounting or law firm which is mutually acceptable to the Parties for resolution. The selected firm shall
issue a written report which sets forth a final decision with respect to the disputed issue. Fees and expenses of the firm shall be shared equally
by Seller and Purchaser.

                    (b)      Purchaser agrees to indemnify Seller for any Taxes owed directly or indirectly by Seller (including Taxes owed by
Seller due to this indemnification payment) resulting from any transaction not in the ordinary course of business , other than any transaction
entered into or occurring as a result of the election to be made under Section 8.2 hereof, occurring on the Closing Date after Purchaser’s
purchase of the Membership Interests.

                  (c)        For purposes of this Section, in the case of any Taxes that are imposed on a periodic basis and are payable for a Tax
period that includes (but does not end on) the Closing Date, the portion of such Tax related to a Pre-Closing Tax Period shall (i) in the case of
any Taxes, other than gross receipts, sales or use Taxes and Taxes based upon or related to income, be deemed to be the amount of such Tax for
the entire Tax period multiplied by a fraction the numerator of which is the number of days in the Tax period ending on and including the
Closing Date and the denominator of which is the number of days in the entire Tax period, and (ii) in the case of any Tax based upon or related
to income and any gross receipts, sales or use Tax, be deemed equal to the amount which would be payable if the relevant Tax period ended on
and included the Closing Date. The portion of any credits relating to a Tax period that begins before and ends after the Closing Date shall be
determined as though the relevant Tax period ended on and included the Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior practice of ITC and/or Seller.

                   (d)       Any payment pursuant to this Section shall be made not later than thirty (30) days after receipt by Seller or
Purchaser, as the case may be, of written notice from Purchaser or Seller, as the case may be stating the amount due under this Section. Any
payment required to be made under this Section that is not made when due shall bear interest at the rate per annum determined, from time to
time, under the provision, of Section 6621(a)(2) of the Code for each day until paid.

                  (e)        Any amount paid under this Section or Article 10 of this Agreement will be treated as an adjustment to the
Purchase Price.

         8.5         Other Covenants and Agreements .

                 (a)       Tax Sharing Agreements . Any tax sharing agreement between Seller and ITC shall be terminated as of the
Closing Date and will have no further effect for any taxable year (whether the current year, a future year, or a past year).

                   (b)        Audits . Purchaser and Seller shall jointly control any audits of Tax Returns of ITC ( or any ITC Successor) that
relate to tax periods that begin on or before the Closing Date and end after the Closing Date. Seller shall control any audits of Tax Returns of

                                                                         45



ITC that relate to tax periods that end on or before the Closing Date. Each Party shall bear its own expense (including cost of counsel) in such
audits. Each Party shall be required to give the other party notice of such an audit within thirty (30) days after receiving notice of the audit
from the applicable governmental or regulatory authority. Purchaser shall not settle any such audit in a manner which would adversely affect
Seller without the prior written consent of Seller.

                  (c)        Carrybacks . Seller will immediately pay to Purchaser any Tax refund (or reduction in Tax liability) resulting from
a carryback of a Post-Closing Tax Period Tax attribute of ITC (or any ITC Successor) into any Tax Return of an Affiliated Group of which a
Seller is a member when such refund or reduction is realized by such Affiliated Group. Seller will cooperate with ITC (or any ITC Successor)
in obtaining such refunds (or reduction in Tax liability), including through the filing of amended Tax Returns or refund claims. Purchaser
agrees to indemnify Seller for any Taxes resulting from the disallowance of such Post-Closing Tax Period Tax attribute on audit or
otherwise. In all other cases, Purchaser will immediately pay to Seller the amount of any Tax refund, credit or reduction in Tax liability
received by ITC (or any ITC Successor) or any of their Affiliates with respect to any Pre-Closing Tax Period, or with respect to the carry
forward of a Tax attribute from a Pre-Closing Tax Period.

                  (d)      Post-Closing Elections . At Seller’s request, Purchaser will cause ITC (or any ITC Successor) to make or join
with Seller in making any Tax election if the making of such election does not have a material adverse impact on Purchaser or ITC (or any ITC
Successor) for any Post-Closing Tax Period.
                  (e)      Cash Dividend to Seller . Immediately prior to the Closing, Seller will cause ITC to pay Seller an aggregate
amount equal to Seller’s good faith estimate of the cash and cash equivalents (including marketable securities and short term investments) of
ITC as of the Closing. Seller may cause ITC to make any such payment to it in the form of a dividend or a redemption.

                    (f)        Transfer Taxes . All transfer, documentary, sales, use, stamp, registration, valued added, real property transfer
Taxes and other such Taxes (other than any Income Tax on any gain resulting from the sale of ITC Membership Interests or the Section
338(h)(10) Election hereunder), and all conveyance fees, recording charges and other fees and charges, and any penalties and interest
associated with such Taxes, fees and charges, incurred in connection with the consummation of the transactions contemplated by this
Agreement, shall be paid by Purchaser when due, and Purchaser will, at its own expense, file all necessary Tax Returns and other
documentation with respect to all such Taxes, fees and charges, and, if required by applicable law, the Parties will, and will cause their
Affiliates to, join in the execution of any such Tax Returns and other documentation.

                   (g)       Allocation of Purchase Price . The Parties agree that the Purchase Price and the liabilities of ITC (plus other
relevant items) will be allocated among the assets of ITC for all purposes (including Tax and financial accounting purposes) as shown on an
Allocation Statement to which the Parties mutually agree. Purchaser shall prepare and deliver a proposed Allocation Statement to Seller within
sixty (60) days after the Closing Date. If Seller disagrees with the proposed Allocation Statement and such disagreement cannot be resolved
within sixty (60)

                                                                         46
days after delivery of the proposed Allocation Statement, this Section 8.5(g) shall have no further force or effect.

         8.6         Cooperation on Tax Matters .

                    (a)      Purchaser and Seller shall cooperate fully, as and to the extent reasonably requested by the other Party, in
connection with the preparation and filing of any Tax Return (including any report required to be filed as a result of the transactions
contemplated herein), any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon
the other Party’s request) the provision of records and information which are reasonably relevant to any such audit, litigation or other
proceeding and on a mutually convenient basis providing additional information and explanation of any material provided hereunder. Seller
shall retain all books and records with respect to Tax matters pertinent to ITC relating to any Pre-Closing Tax Period until all statutes of
limitations applicable to the time period to which any particular books or records relate has expired.

                  (b)        Purchaser and Seller further agree, upon reasonable request, to seek to obtain any certificate or other document
from any governmental authority or customer of ITC or any other person as may be necessary to mitigate, reduce or eliminate any Tax that
could be imposed (including but not limited to with respect to the transactions contemplated herein), provided that the requesting Party bears all
costs, including Taxes, arising out of such a request.

                 (c)        Purchaser and Seller further agree, upon reasonable request, to provide the other Party with information that either
Party may be required to report pursuant to applicable law with respect to the transactions contemplated herein.

         8.7         Property Taxes . Notwithstanding any other provision of Article 8, this Section 8.7 applies to real and personal property
Taxes, and to the extent there is any conflict between this Section 8.7 and any other provision of this Agreement, this Section 8.7 shall govern.

                   (a)        With respect to any Tax Returns relating to personal property taxes, Seller shall prepare (or cause to be prepared)
and shall timely file (or cause to be filed) (or has already prepared and filed) all such Tax Returns relating to (i) the 2002 Assessment Year and
(ii) the 2003 Assessment Year, whether or not filed or required to be filed after the Closing Date. With respect to any Tax Returns relating to
real property taxes, Seller shall prepare (or cause to be prepared) and shall timely file (or cause to be filed) (or has already prepared and filed)
all such Tax Returns relating to the 2002 Assessment Year, whether or not filed or required to be filed after the Closing Date. Seller shall pay
the 2002 and 2003 real and personal property taxes imposed on the property or ITC (or any ITC Successor) on behalf of ITC (or any ITC
Successor), as and to the extent provided for in this Section 8.7.

                  (b)      Purchaser agrees to indemnify Seller for those real and personal property taxes allocated to ITC (or any ITC
Successor) and to Purchaser pursuant to this Section 8.7. For the 2002 and 2003 Assessment Years, Seller shall notify Purchaser in writing of
the amount of such Taxes due to Seller under this Section 8.7. Notice shall be given on a semi-annual basis, at least 15 (fifteen) days prior to
February 15 and September 15. Purchaser shall pay by wire transfer in immediately available funds the amount requested at least five (5) days
before the

                                                                         47
date to which the request relates. If necessary, Seller shall notify Purchaser in writing of the amount of any additional payment by Purchaser
(or payment back to Purchaser) as a result of any adjustment or true up of such Taxes paid, which payment shall be made by Purchaser or
Seller, as the case may be, by wire transfer in immediately available funds within fifteen (15) days after receipt of such notice. Any such
Taxes paid by Seller (or its Affiliates) shall, for income Tax purposes, be treated as paid on behalf of ITC (or any ITC Successor) or Purchaser,
and not as a purchase price adjustment. Any payment required to be made under this Section that is not made when due shall bear interest for
each day until paid at the rate of 1.5% per month. The Parties acknowledge and agree that neither ITC (nor any ITC Successor) nor Purchaser
shall dispute, contest or litigate any matter with respect to this Section 8.7 unless and until ITC (or any ITC Successor) or Purchaser have made
all the payments requested by Seller pursuant to this Section 8.7. With respect to real property taxes, if Seller receives real property tax bills
for any real property of ITC (or any ITC Successor) that are issued in the name of ITC (or any ITC Successor), then Seller can elect, instead of
requesting payment from Purchaser and paying such bills as agent for ITC (or any ITC Successor), to timely forward such bills to ITC (or any
ITC Successor) after receipt and in no case later than fifteen (15) days prior to the date such Taxes are due and payable. ITC (or any ITC
Successor) shall be liable for such real property Taxes to the extent allocable to Post-Closing Tax Periods in accordance with this Section 8.7,
and ITC (or any ITC Successor) and Purchaser shall indemnify Seller for any Taxes to the extent of any failure on the part of ITC (or any ITC
Successor) or Purchaser to fail to timely pay such bills.

                 (c)      The real property Taxes allocated to ITC (or any ITC Successor) shall be those relating to real property owned by
ITC on the Closing Date. The personal property Taxes allocated to ITC shall be determined as follows:

                           (i)       The personal property Taxes paid (or to be paid) by Seller (or an Affiliate) relating to the 2002
         Assessment Year (the ― 2002 Personal Property Taxes ‖) relating to the personal property of ITC (or any ITC Successor) and Detroit
         Edison with respect to personal property located in Michigan shall be allocated to ITC (or any ITC Successor) by multiplying (A) the
         2002 Personal Property Taxes by (B) the 2002 Factor. The ― 2002 Factor ‖ shall be a fraction, the numerator of which shall be the
         taxable value of ITC’s personal property as of December 31, 2001, as shown on Schedule 8.7, a copy of which is attached to this
         Agreement and which is hereby incorporated by reference as if set out in full, and the denominator of which shall be the sum of the
         numerator and the taxable value of the personal property of Detroit Edison as of December 31, 2001, as shown on Schedule 8.7.

                           (ii)      The personal property Taxes paid (or to be paid) by Seller (or an Affiliate) relating to the 2003
         Assessment Year (the ― 2003 Personal Property Taxes ‖) relating to the personal property taxes of ITC (or any ITC Successor) and
         Detroit Edison with respect to personal property located in Michigan shall be allocated to ITC (or any ITC Successor) by multiplying
         (A) the 2003 Personal Property Taxes by (B) the 2003 Factor. The ― 2003 Factor ‖ shall be a fraction, the numerator of which shall be
         the taxable value of ITC’s personal property as of December 31, 2002, computed by Seller in the same fashion as the 2002 ITC
         Personal Property Taxes, in accordance with Schedule 8.7 , as adjusted for additions and retirements of ITC personal property, and the
         denominator of which shall be the sum of the numerator and the taxable value of the personal property

                                                                        48
         of Detroit Edison as of December 31, 2002, as computed by Seller in the same fashion as the 2002 ITC Personal Property Taxes, in
         accordance with Schedule 8.7, as adjusted for additions and retirements of the personal property of Detroit Edison.

                            (iii)      In the event of any dispute relating to the Seller’s computation of the portion of the 2002 Personal
         Property Taxes or the 2003 Personal Property Taxes allocated to ITC (or any ITC Successor) under Section 8.7(c)(i) or 8.7(c)(ii), the
         Parties shall negotiate in good faith to resolve such dispute. In the event the dispute cannot be resolved by the Parties, the dispute
         shall be referred to an accounting or law firm which is mutually acceptable to the Parties for resolution. Such firm shall issue a
         written report which sets forth a final decision with respect to the disputed issue. Fees and expenses of such firm shall be shared
         equally by Seller and Purchaser.

                            (iv)       For purposes of this Section 8.7(c), ―personal property‖ shall mean property subject to personal property
         Tax.

                    (d)      The real and personal property Taxes allocated to ITC (or any ITC Successor) pursuant to the foregoing sentences
shall be allocated to Purchaser for any Property Tax Period by multiplying (x) the amount of such Taxes for the entire Property Tax Period by
(y) a fraction, the numerator of which is the number of days in the Property Tax Period beginning after the Closing Date and the denominator
of which is the number of days in the entire Property Tax Period.

                    (e)        Seller and/or certain of its Affiliates are currently engaged in litigation and appeals with certain municipalities and
other Governmental or Regulatory Authorities in the State of Michigan regarding real and personal property Tax assessments levied against
property owned by Seller and/or certain of its Affiliates, including without limitation certain real and personal property transferred to ITC in
connection with the Separation (the ― Transferred Property ‖). Without limiting any other provisions of this Article 8, Purchaser and Seller
agree that (i) Seller will be responsible for and will pay the appropriate Tax authorities and indemnify Purchaser and ITC (or any ITC
Successor) against any and all property Taxes with respect to property acquired by Purchaser pursuant to this Agreement, to the extent such
Taxes relate to Pre-Closing Tax Periods, (ii) Seller and its Affiliates (other than ITC) shall be entitled to and shall retain all benefits (including,
without limitation, all Tax rebates, refunds or credits) related to the Transferred Property for all Pre-Closing Tax Periods, including, without
limitation, any and all such benefits which are realized or received after the Closing (collectively, the ― Property Tax Benefits ‖), and (iii)
Purchaser will immediately pay or cause to be paid to Seller the amount of any Property Tax Benefit received by ITC (or any ITC Successor)
or any of its Affiliates after the Closing. Notwithstanding anything else set forth herein to the contrary, Seller shall control the prosecution and
settlement of any and all litigation related to or arising out of any real or personal property Taxes levied against property owned by Seller or
any of its Affiliates, including the Transferred Property, with respect to Assessment Years ending on or before the Closing Date and any
Assessment Years which include the Closing Date, and shall bear its own expense (including cost of counsel) in connection with such
litigation, provided that Seller shall not settle any such action without Purchaser’s consent if such settlement could reasonably be expected to
adversely affect Purchaser or ITC (or any ITC Successor).

                                                                          49
                                                                ARTICLE 9
                                                            EMPLOYEE MATTERS

          9.1        Hiring of Employees . As soon as practicable after the date of the signing of this Agreement, Purchaser shall offer
employment with ITC, to be effective as of the Closing Date, to up to fifty-eight (58) employees of Seller, including those set forth on
Schedule 9.1 and such other employees as the Parties to this Agreement shall mutually agree prior to the Closing Date (the ― Available
Employees ‖). Any Available Employee who accepts Purchaser’s offer of employment on or before the Closing Date shall become an
employee of ITC, effective as of the Closing Date. Any Available Employee who is not actively at work on the Closing Date and who has not
accepted Purchaser’s offer of employment on or before the Closing Date but who, within the first ninety (90) days after the Closing Date,
accepts Purchaser’s offer of employment, shall become an employee of ITC as of the date such employee commences employment with
ITC. Any Available Employee who accepts Purchaser’s offer of employment (either prior to the Closing Date or pursuant to the foregoing
sentence) in accordance with this Section 9.1 shall be referred to as a ― Transferred Employee ‖. Nothing in this Agreement shall limit or
restrict Purchaser’s or ITC’s right to terminate any Transferred Employee at any time for any reason.

         9.2        Compensation and Benefits .

                 (a)       For a period of at least thirty (30) months following the Closing Date, Purchaser shall, or shall cause ITC to,
provide the Transferred Employees with base salary, vacation, employee benefits (including welfare and pension benefits and fringe benefits),
annual bonus and other incentive opportunities that are, in the aggregate, substantially comparable to those provided under the Seller Plans to
the Transferred Employees immediately prior to the Closing Date (all such arrangements provided by ITC, the ― ITC Plans ‖).

                   (b)       Annual Bonuses . In the event that the Closing Date occurs during 2003, (excluding those individuals set forth on
Schedule 9.2(b) , the ― Excluded Employees ‖) in accordance with the terms and conditions of the Rewarding Employees Plan and the Annual
Incentive Plan, as applicable, except as modified below:

                            (i)       As soon as practicable after the Closing Date (but in no event later than thirty (30) days after the Closing
Date), Seller shall pay to each Transferred Employee a bonus equal to the product of (x) such Transferred Employee’s target annual bonus for
2003 (as established in accordance with Seller’s annual incentive plan in which each such employee participates as of the date hereof (the ―
Bonus Plan ‖), consistent with past practice), multiplied by (y) a fraction, the numerator of which shall be the number of days elapsed from
January 1, 2003 until the Closing Date and the denominator of which shall be 365; and

                            (ii)      Seller shall, in addition to paying the bonus as provided in clause (i) above, pay to each Transferred
Employee the annual bonus each such employee actually earned under the Bonus Plan in respect of the 2002 calendar year (the ― 2002 Bonuses
‖); provided , however , that the Transferred Employees shall be entitled to receive their 2002 Bonuses without regard to any requirement that
may exist under the Bonus Plan that such employees be employed by Seller on the date the 2002 Bonuses are otherwise payable in order to
receive such bonuses. Seller shall pay the 2002 Bonuses to the Transferred Employees on the

                                                                        50
Closing Date (or, if later, within thirty days after the calculation of the bonus actually earned by each Transferred Employee), in accordance
with past practice and at such time as 2002 Bonuses are otherwise payable to the employees of Seller.

Notwithstanding anything set forth above to the contrary, if the Closing Date occurs in 2004, the same procedure as set forth in clause (i) above
shall be used substituting ―2004‖ for ―2003‖ where it appears therein and clause (ii) shall be applied substituting ―2003‖ for ―2002‖ where it
appears therein.

                  (c)       Active Welfare Plans .

                             (i)        For the period commencing on the Closing Date and ending no later than December 31, 2003 (the ―
COBRA Reimbursement Period ‖), Seller shall allow the Transferred Employees (and their respective dependents) to continue to participate in
the same Seller Plans that provide medical, dental, prescription drugs and vision insurance in which the Transferred Employees participated
immediately prior to the Closing Date (the ― Health Plans ‖) in accordance with the requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (― COBRA ‖); provided , however , that the Transferred Employees (and their respective dependents) may cease to
participate in any or all such plans, and the COBRA Reimbursement Period shall end, at such time(s) as the Purchaser has established and
offered coverage to the Transferred Employees (and their respective dependents) under plans that are substantially comparable to the Health
Plans (the ― Purchaser Welfare Plans ‖).

                           (ii)      To reimburse Seller for the costs associated with the Transferred Employees (and their respective
dependents) continuing to participate in the Health Plans, Purchaser shall pay to Seller an amount equal to the product of (x) the Monthly
COBRA Rate (as defined below) and (y) the number of Transferred Employees who participate in the Health Plans during any given calendar
month during the COBRA Reimbursement Period (the ― Health Plan Reimbursement ‖). Seller acknowledges and agrees that the Health Plan
Reimbursement shall be paid by Purchaser or ITC monthly in arrears on behalf and in lieu of the Transferred Employees who participate in the
Health Plans during the COBRA Reimbursement Period. For purposes of this Section 9(c), the ― Monthly COBRA Rate ‖ shall mean the
―applicable premium‖ (as defined in Section 604 of ERISA) that Seller would require each Transferred Employee (whether electing single,
employee plus child(ren), employee plus spouse or family coverage) who experienced a qualifying event under COBRA to pay in respect of
each calendar month to maintain continuation coverage under the Health Plans.

                            (iii)     As soon as reasonably practicable following the expiration of the COBRA Reimbursement Period and a
reasonable claims runoff period, Seller shall provide to Purchaser a comprehensive and detailed list of all costs incurred by Seller under the
self-insured Health Plans only in connection with the Transferred Employees’ participation in such self-insured Health Plans, together with the
premiums paid by Seller for all benefit coverage provided to the Transferred Employees under the Health Plans (whether self-insured or
insured by a third-party insurance company) during the COBRA Reimbursement Period. Purchaser shall thereafter promptly review such list
and Seller shall cooperate with Purchaser in connection with such review (including, without limitation, providing any supporting
documentation of such costs, subject to current federal law including, without limitation, HIPAA confidentiality

                                                                       51
requirements). Upon the agreement, which shall not be unreasonably withheld, by the Seller and Purchaser of the contents of such list: (x) in
the event that the total amount of the Health Plan Reimbursement payments exceeds the total costs on such list, then the Seller shall pay to the
Purchaser, within thirty (30) days after such agreement, any such excess amount, and (y) in the event that the total costs on such list exceed the
total amount of the Health Plan Reimbursement payments, then the Purchaser shall pay to the Seller, within thirty (30) days after such
agreement, any such excess; provided , however , that in no event shall the Purchaser be obligated to pay the Seller more than $1 million (less
the total amount of the Health Plan Reimbursement payments) from the Closing Date through the expiration of the COBRA Reimbursement
Period. Notwithstanding anything set forth herein, in the event Purchaser disputes the inclusion or amount of any item on such list, Purchaser
shall notify Seller in writing of such dispute. In the event of a good faith dispute between Seller and Purchaser that is, and which remains
unresolved for thirty (30) days, the chief financial officers of Seller and Purchaser shall endeavor in good faith to resolve the issue.

                            (iv)      As soon as practicable after the Closing Date, Seller shall provide Purchaser with written notice of the
amount withheld from the payroll of each of the Transferred Employees, at their election, and contributed, as of the Closing Date (or, if later,
the date the Transferred Employee commences employment with ITC), into the Seller Plans that are Health Care and Dependent Care
Reimbursement Plans (the ― Seller FSA Plans ‖) (the ― FSA Liability ‖). Also effective as of the Closing Date, Purchaser shall cause ITC to
(x) establish, and allow the Transferred Employees to participate in, an ITC Plan for the 2003 calendar year that is substantially comparable to
the Seller FSA Plans and (y) credit the amount of the corresponding FSA Liability under such ITC Plan for the benefit of each such Transferred
Employee who participates in such ITC Plan.

                            (v)       Effective as of the Closing Date, Purchaser shall establish accidental death and dismemberment insurance,
life insurance, adoption assistance and educational assistance, and long-term and short-term disability plans that are substantially comparable to
the corresponding Seller Plans for the benefit of the Transferred Employees.

                  (d)       Retiree Welfare Plans .

                   ITC shall (other than solely with respect to retiree medical insurance benefits for the Excluded Employee designated as
―Employee 1‖ set forth on Schedule 9.2(b) ,), (i) assume the liability of Seller to provide retiree medical and life insurance benefits to the
Transferred Employees under the Seller Plans that provide for retiree medical and life insurance benefits (the ― Seller Retiree Plans ‖) and (ii)
establish retiree medical and life insurance plans for the benefit of the Transferred Employees, which plans shall provide retiree medical and
life insurance benefits substantially comparable to those provided under the Seller Retiree Plans as of the Closing Date (although Seller hereby
acknowledges and agrees that the fact that ITC may not be able to offer all the insurance carrier selections provided under the Seller Retiree
Welfare Plans shall not constitute a breach by Purchaser or ITC of the covenant to provide benefits in accordance with Section 9.2(a) or
otherwise under this Section 9.2(d)). For purposes of this Agreement, the amount of such liability to be assumed by ITC hereunder shall be
equal to the ―accumulated postretirement benefit obligation‖ under the Seller Retiree Plan with respect to the Transferred Employees as of the
Closing Date (or, if later, the date any Transferred Employee commences

                                                                        52
employment with ITC) (the ― Retiree Welfare Liabilities ‖). Subject to Section 9.2(k) of this Agreement, the Retiree Welfare Liabilities shall
be calculated by an enrolled actuary of Seller (― Seller’s Actuary ‖) using the assumptions set forth on Schedule 9.2(d) .

                  (e)        Qualified Defined Benefit Plans .

                             (i)        Effective as of the Closing Date, Purchaser shall establish a qualified defined benefit plan (the ― Purchaser
DB Plan ‖) for the benefit of the Transferred Employees which will provide substantially comparable benefits to those provided under the DTE
Energy Company Retirement Plan (whether such employees participate in the traditional final-average pay defined benefit portion of such plan
or the cash balance portion of such plan) (the ― Seller DB Plan ‖) that provides an immediately vested defined benefit, as accrued through the
Closing Date (or, if later, the date any Transferred Employee commences employment with ITC), to the Transferred Employees participating in
the Seller DB Plan immediately prior to the Closing Date in respect of whom assets and liabilities are transferred in accordance with this
Section 9.2(e). Effective as of the Initial Transfer Date (as hereinafter defined) (or the True-Up Date (as hereinafter defined), as applicable)
and contingent upon the transfer of the Initial Transfer Amount (as described in paragraph (ii) below) (or the True-Up Amount (as described in
paragraph (iii) below), as applicable) to the Purchaser DB Plan, Purchaser shall assume all liabilities of the Seller with respect to Transferred
Employees under the Seller DB Plan (whether such employees participated in the traditional final-average pay defined benefit portion of such
plan or the cash balance portion of such plan).

                              (ii)      Within 30 days after the Closing Date, or if later, 20 days following the date on which Seller has been
provided evidence reasonably satisfactory to it that Purchaser has established a trust (or trusts) to hold the assets of the Seller DB Plans that is
qualified under Section 501 of the Code and that the Purchaser DB Plan is qualified under Section 401(a) of the Code (― Initial Transfer Date
‖), Seller shall cause the trust holding the assets of the Seller DB Plan to make an initial transfer of assets in cash equal to the Initial Transfer
Amount (as hereinafter defined). In addition, prior to the Initial Transfer Date, Seller shall provide Purchaser with evidence reasonably
satisfactory to Purchaser that the Seller DB Plan remains qualified under Section 401(a) of the Code and that the trust holding the assets of the
Seller DB Plan remains qualified under Section 501 of the Code. For purposes of this Section 9.2(e), the ― Initial Transfer Amount ‖ shall be
equal to the sum of (A) the greater of (x) the projected benefit obligation under the Seller DB Plan in respect of the Available Employees who
become Transferred Employees (whether such employees participate in the traditional final-average pay defined benefit portion of such plan or
the cash balance portion of such plan), calculated as of the Closing Date (the ― Initial PBO ‖) and (y) the amount required to be transferred
hereunder pursuant to Section 414(l) of the Code and any regulations promulgated thereunder (as certified by the Seller’s Actuary), plus (B)
interest accruing from the Closing Date through the Initial Transfer Date on the Initial Transfer Amount using the rate paid on a 90-day
Treasury Bill on the auction date coincident with or immediately preceding the Closing Date, minus (C) any payments made to or in respect of
the Transferred Employees from the Seller DB Plan for whom the Initial PBO is being calculated (including any distributions of the cash
balance portion of the Seller DB Plan that are made to Transferred Employees who elect to receive such distributions in accordance with the
terms of the Seller DB Plan). Subject to Section 9.2(k) of this Agreement, the Initial PBO shall be calculated by Seller’s Actuary using

                                                                         53
the assumptions set forth on Schedule 9.2(e) . For purposes of this paragraph, ―evidence reasonably satisfactory‖ to a Party of a plan’s
qualification under Section 401(a) of the Code and a corresponding trust’s qualification under Section 501(a) of the Code shall include a
favorable determination letter from the Internal Revenue Service as to such status, as the plan and trust are currently in effect (including any
required changes thereto), or (if no such letter has been requested or received), an opinion of counsel, which states that such plan and trust in
form comply with the applicable requirements of the Code and a commitment that the Party will make any changes required by the Internal
Revenue Service to receive a favorable determination letter.

                            (iii)      Within ninety (90) days after the Initial Transfer Date (the ― True-Up Date ‖), Seller shall, if necessary,
cause a second transfer to be made in cash of the ― True-Up Amount .‖ The True-Up Amount shall be equal to the sum of (A) the greater of
(x) the projected benefit obligation under the Seller DB Plan in respect of the Available Employees who become Transferred Employees within
ninety (90) days after the Closing Date, if any (whether such employees participate in the traditional final-average pay defined benefit portion
of such plan or the cash balance portion of such plan), calculated as of such Transferred Employees’ last day of employment with Seller (the ―
True-Up PBO ‖) and (y) the amount required to be transferred hereunder pursuant to Section 414(l) of the Code and any regulations
promulgated thereunder (as certified by the Seller’s Actuary), plus (B) interest accruing from such Transferred Employees’ last day of
employment with Seller through the Second Transfer Date on the True-Up Amount using the rate paid on a 90-day Treasury Bill on the auction
date coincident with or immediately preceding the Closing Date, minus (C) any payments (including any distributions of the cash balance
portion of the Seller DB Plan that are made to Transferred Employees who elect to receive such distributions in accordance with the terms of
the Seller DB Plan) made to or in respect of the Transferred Employees from the Seller DB Plan for whom the True-Up PBO is being
calculated. The True-Up Amount shall be transferred in cash no later than thirty (30) days after the True-Up Date (such final transfer date, the
― Second Transfer Date ‖). Subject to Section 9.2(k) of this Agreement, the True-Up PBO shall be calculated by Seller’s Actuary using the
assumptions set forth on Schedule 9.2(e) .

                           (iv)     Unless the Parties agree otherwise, all transfers provided for under this Section 9.2(e) shall occur on the
last business day of a month. Subject to Section 9.2(k) of this Agreement, all determinations of the Initial PBO, Initial Transfer Amount,
True-Up PBO, True-Up Amount, shall be calculated by Seller’s Actuary.

                  (f)        Qualified Defined Contribution Plan .

                            (i)      Effective as of the Closing Date, Purchaser shall, or shall cause ITC to, establish a defined contribution
plan (the ― Purchaser Savings Plan ‖) providing benefits to the Transferred Employees substantially comparable to those provided to them
pursuant to the Seller Savings and Stock Ownership Plan (the ― Seller Savings Plan ‖).

                           (ii)      As soon as practicable after the Closing Date, but in no event later than ninety (90) days after the Closing
Date (the ― Savings Transfer Date ‖), Seller shall cause to be transferred to the Purchaser Savings Plan assets (including promissory notes
evidencing loans from the Seller Savings Plans to Transferred Employees) representing the account balances of all Transferred Employees
under the Seller Savings Plan, which shall reflect (x) the earnings, gains

                                                                        54
and losses on such account balances attributable to the period from the Closing Date to the Savings Transfer Date and (y) any benefit or
withdrawal payments made to or in respect of the Transferred Employees from the Closing Date to the Savings Transfer Date under the Seller
Savings Plan.

                            (iii)     In implementing this Section 9.2(f), Purchaser acknowledges and agrees that the assets so transferred may
include shares of DTE Stock held as of the Closing Date, as well as any subsequent dividends due from the Seller Savings Plan qualified trust,
in accounts for the benefit of Transferred Employees under that investment option under the Seller Savings Plans.

                 (g)        Equity Awards and Deferred Compensation Plan .

                            (i)      Seller shall take all actions reasonably necessary, for each Transferred Employee (other than the Excluded
        Employees) who provides his or her consent, to cause all options on DTE Stock (whether vested or unvested) held by such Transferred
        Employees under the Seller Plan immediately prior to the Closing Date (or, if later, the date the Transferred Employee commences
        employment with ITC) (the ―Options‖) to terminate effective as of the Closing Date (or, if later, the date the Transferred Employee
        commences employment with ITC). For purposes of this Agreement, the term ― Incentive Compensation Liability ‖ shall mean the
        excess, if any, of the aggregate fair market value, as of the Closing Date (or, if later, the date any Transferred Employee commences
        employment with ITC), of the DTE Stock underlying the Options over the aggregate exercise price of such Options. Purchaser shall,
        or shall cause ITC (or its Affiliates) to, establish an equity award program that is substantially comparable to the corresponding Seller
        Plan and that provides 100% vested awards denominated or related to the equity of the Purchaser or ITC (such plan, the ― ITC Equity
        Plan ‖), which provides the applicable Transferred Employees (other than the Excluded Employees) an aggregate fair value that is not
        less than the Incentive Compensation Liability.

                           (ii)        With respect to the Excluded Employee designated as ―Employee 1‖ set forth on Schedule 9.2(b) (the ―
        Deferred Comp Participant ‖) who participated in the Seller Executive Deferred Compensation Plan and the related deferred
        compensation pension make-up arrangement (such plan and arrangement together, the ― Deferred Comp Plans ‖), (A) the Purchaser
        shall establish deferred compensation plans for the benefit of the Deferred Comp Participant that are substantially comparable to the
        Deferred Comp Plans (unless the Deferred Comp Participant and the Purchaser otherwise agree), and (B) Purchaser shall, as of the
        Closing, assume (and Purchaser shall thereafter perform and discharge in accordance with their terms) all then outstanding liabilities
        of Seller and its Affiliates for any benefits the Deferred Comp Participant had accrued under the Deferred Comp Plans through the
        Closing Date (the ― Deferred Comp Liability ‖).

                  (h)        Accrued Vacation . As soon as practicable after the Closing Date, Seller shall pay to each Transferred Employee
an amount equal to such employee’s accrued vacation (as calculated under the vacation Seller Plan). Effective as of the Closing Date,
Purchaser shall, or shall cause ITC to, establish a vacation plan that is substantially comparable to that maintained

                                                                      55
by the Seller on the Closing Date. With respect to the calendar year in which the Closing Date occurs, the Purchaser shall cause ITC to give
Transferred Employees credit for their years of service for determining their vacation, prorated from January 1 of the calendar year in which
the Closing Date occurs through the Closing Date (or, if later, the date any Transferred Employee commences employment with ITC).

                  (i)        Severance Protection . For a period of not less than 30 months after the Closing Date, Purchaser shall, or shall
cause ITC to, maintain a severance plan providing severance benefits to Transferred Employees who are terminated without ―cause‖ (as
reasonably determined by Purchaser) substantially comparable to those provided under the Seller’s Severance Allowance Plan (as effective
October 1, 2002), subject to any limitations, obligations or duties to which they would have been bound under such Seller Plan.

                   (j)       Cooperation . To the extent permitted by law, all personnel records and other data maintained by Seller and its
Affiliates regarding the Transferred Employee shall be delivered as soon as practicable after the Closing Date to Purchaser. In addition, Seller
shall use its commercially reasonable efforts to assist Purchaser in (i) establishing any benefit plans that Purchaser is required to cause ITC to
establish pursuant to this Article 9, (ii) contacting Seller’s insurance and other employee benefit providers and requesting premiums and
coverage rates that are similar to those paid by Seller and (iii) any other related process or actions as Purchaser may reasonably request in
connection with its or ITC’s efforts to meet its obligations (or ITC’s obligations) under this Article 9.

                   (k)        Dispute Resolution . As indicated above, Seller’s Actuary shall calculate all amounts required to be determined
under Section 9.2(d) and Section 9.2(e). Seller shall provide an enrolled actuary of Purchaser (― Purchaser’s Actuary ‖) with all information
reasonably requested by Purchaser’s Actuary to review any such calculations solely to verify that such amounts have been calculated correctly
in accordance with the actuarial assumptions and methods set forth in Schedule 9.2(d) and Schedule 9.2(e), respectively. In the event of a
good faith dispute between Seller’s Actuary and Purchaser’s Actuary regarding either such set of calculations, wherein the amount in dispute is
less than $50,000, the amounts as determined by the Seller’s Actuary shall be conclusive. In the event of any such dispute wherein the amount
in dispute is greater than $50,000, which dispute remains unresolved for thirty (30) days, the chief financial officers of each of Seller and
Purchaser shall endeavor in good faith to resolve the issue. Should such chief financial officers be unable to resolve the issue within sixty (60)
days, the Seller and Purchaser shall select and appoint a third actuary who is mutually satisfactory to the Parties hereto. The decision of such
third party actuary shall be rendered within 30 days and shall be conclusive as to any dispute for which it was appointed. The cost of such
third party actuary shall be divided equally between the Seller and Purchaser. Each Party shall be responsible for the costs of its own actuary.

                   (l)       Service Credit . Periods of employment with Seller and its Affiliates for which credit was given under the Seller
Plans shall be taken into account for all purposes (including, without limitation, eligibility, vesting, benefit accrual and benefit level, but not for
purposes of accrual of absence bank time) to the same extent they were taken into account under the Sellers Plan; provided , however , that in
no event shall the Transferred Employees be entitled

                                                                          56
to any credit for service to the extent that it would result in a duplication of benefits with respect to the same period of service, unless otherwise
agreed to by Purchaser.

                  (m)        Seller Acknowledgement of Differences in Benefits . Seller acknowledges and agrees that the fact that the ITC
Plans will not provide the Transferred Employees with the opportunity to acquire DTE Stock (either as a continuing, active investment option
in the Purchaser Savings Plan or in the form of equity compensation awards or otherwise) shall not constitute a breach by Purchaser or ITC of
the covenants set forth in Section 9.2(a), Section 9.2(f)(i) or Section 9.2(g).

                                                                  ARTICLE 10
                                                               INDEMNIFICATION

          10.1         Survival of Representations and Warranties . The representations, warranties, covenants and agreements of Seller and
Purchaser contained in this Agreement (and the indemnification obligations of the Parties with respect thereto) will survive the Closing (a)
indefinitely with respect to the representations and warranties contained in Sections 3.1, 3.2, 3.3, 3.5, 3.6(a), 3.14, 4.1, 4.2, 4.3, 4.5 and 4.6; (b)
until sixty (60) days after the expiration of all applicable statutes of limitation (including all periods of extension, whether automatic or
permissive) with respect to the representations, warranties, covenants and agreements set forth in Section 3.15 and Articles 8 and 9; (c) until the
earlier of (i) four years from the Closing or (ii) sixty days after the expiration of all applicable statutes of limitations (including all periods of
extension, whether automatic or permissive) with respect to ―Third Party Claims‖ (as defined in Section 10.4(a)) arising from or related to any
breach of the representations and warranties set forth in any of clauses (a) through (f) of Section 3.13; (d) for a period of eighteen months
following the Closing Date in the case of all other representations and warranties set forth in Articles 3 and 4 (including Section 3.13 (except in
the case of any Third Party Claims arising from or related to any breach of any of the representations and warranties set forth in clauses (a)
through (f) of Section 3.13)) and all covenants and agreements (or applicable portions thereof) set forth in this Agreement that by their terms
are to be performed at or prior to the Closing; and (e) with respect to all other covenants and agreements set forth in this Agreement, until sixty
(60) days following the last date on which such covenant or agreement is, by its terms, to be performed or, if no such date is specified,
indefinitely; provided that any representation, warranty, covenant or agreement (and the indemnification obligations of the Parties with respect
thereto) that would otherwise terminate in accordance with clause (b), (c), (d) or (e) above will continue to survive if a notice for
indemnification (including indemnification for Third Party Claims) shall have been timely given under Article 10 on or prior to such
termination date, until the related claim for indemnification has been satisfied or otherwise resolved as provided in Article 10.

          10.2          Indemnification Provisions for Benefit of Purchaser . Subject to the terms and conditions of this Article 10, and provided
that Purchaser makes a written claim for indemnification against Seller prior to the expiration of any applicable survival period set forth in
Section 10.1, Seller agrees to indemnify, defend and hold harmless Purchaser and its Affiliates from and against all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines,
costs, liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs

                                                                          57
and reasonable attorneys’ fees and expenses (collectively, ― Damages ‖) incurred or suffered by Purchaser or any of its Affiliates and (a) caused
by any breach by Seller of any of its representations and warranties, covenants or agreements set forth herein, (b) arising out of or related to the
LLC Conversion, (c) directly resulting from the Subsequent Conversion (not including Damages arising out of or related to any defects caused
by Purchaser or its Affiliates in the consummation of the Subsequent Conversion and not including Damages to the extent resulting from any
matters set forth in the third sentence of Section 8.4(a)(ii)), (d) arising out of or related to any of the events, conditions or occurrences listed on
Schedule 10.2 in connection with any Environmental Claims or under any Environmental Law, (e) arising out of or related to any facts or
events occurring on or prior to the Closing Date in connection with the Seller Plans (the ― Indemnified Seller Plan Claims ‖) or (f) arising out of
or related to the failure by Seller to transfer, or cause to be transferred or reissued, to ITC prior to the Closing any Environmental Authorization
required under Environmental Law for the operation of the Business which is held by Seller or one of its Affiliates (other than
ITC). Notwithstanding anything else set forth herein to the contrary, (i) for purposes of this Article 10 only, all Material Adverse Effect and
materiality qualifications contained in Seller’s representations and warranties shall be disregarded in determining breaches or defaults of such
representations and warranties, (ii) as between the Parties, Purchaser and its Affiliates will not be entitled to any punitive damages resulting
from or arising out of any breach of any representation, warranty, covenant or agreement of Seller contained in this Agreement (except to the
extent paid to a third party), (iii) Seller shall not have any obligation to indemnify Purchaser and its Affiliates from and against any Damages
caused by the breach of any representation or warranty of Seller contained in Article 3 of this Agreement (A) with respect to any item or series
of related items unless, in the reasonable estimate of Purchaser, the amount of Damages in respect of such item or items, in the aggregate, is in
excess of $100,000 (a ― Seller Qualifying Claim ‖), (B) unless and until Purchaser and its Affiliates have suffered Damages arising from
(1) Seller Qualifying Claims by reason of all such breaches and (2) Indemnified Seller Plan Claims, in the aggregate, in excess of $7,500,000
(the ― Deductible ‖) (after which point Seller will be obligated to indemnify Purchaser and its Affiliates only to the extent of such Damages in
excess of the Deductible) and (C) with respect to the breach of any representations or warranties contained in Section 3.19(d), unless such
Damages arise out of or relate to Third Party Claims, (iv) Seller shall not have any obligation to indemnify Purchaser and its Affiliates under
clause (e) of this Section from and against any Damages unless and until Purchaser and its Affiliates have suffered Damages arising from
(1) Seller Qualifying Claims and (2) Indemnified Seller Plan Claims, in the aggregate, in excess of the Deductible (after which point Seller will
be obligated to indemnify Purchaser and its Affiliates only to the extent of such Damages in excess of the Deductible) and (v) in no event shall
the aggregate liability of Seller under this Article 10 for all Damages (1) incurred or suffered by Purchaser and its Affiliates arising from all
breaches of the representations and warranties of Seller contained in Article 3 of this Agreement or (2) in respect of Indemnified Seller Plan
Claims, in the aggregate, exceed 15% of the Purchase Price; provided, however that the foregoing limitation in clause (v) shall not apply to
Seller’s obligations in respect of any breaches of the representations and warranties of Seller contained in any of Sections 3.1, 3.2, 3.3, 3.5,
3.6(a), 3.14 and 3.22.

         10.3       Indemnification Provisions for Benefit of Seller . Subject to the terms and conditions of this Article 10, and provided that
Seller makes a written claim for indemnification against Purchaser prior to the expiration of any applicable survival period set forth in Section
10.1,

                                                                          58
Purchaser agrees to indemnify, defend and hold harmless Seller and its Affiliates from and against any and all Damages incurred or suffered by
Seller or any of its Affiliates and (a) caused by any breach by Purchaser of any of its representations, warranties, covenants or agreements set
forth herein or (b) arising out of or related to any facts or events occurring following the Closing Date in connection with the ITC Plans (other
than any Damages arising out of or related to any severance plan, program or arrangement of Seller or any of its Affiliates with respect to the
employment of any Transferred Employees while employed by Seller or any of its Affiliates or other severance-related claims arising
principally on account of actions or inactions of Seller or any of its Affiliates) (the ― Indemnified ITC Plan Claims ‖). Notwithstanding
anything else set forth herein to the contrary, (i) for purposes of this Article 10 only, all Purchaser Material Adverse Effect and materiality
qualifications contained in Purchaser’s representations and warranties shall be disregarded in determining breaches or defaults of such
representations and warranties, (ii) as between the Parties, Seller and its Affiliates will not be entitled to any punitive damages resulting from or
arising out of any breach of any representation, warranty, covenant or agreement of Purchaser contained in this Agreement (except to the extent
paid to a third party), (iii) Purchaser shall not have any obligation to indemnify Seller and its Affiliates from and against any Damages caused
by the breach of any representation or warranty of Purchaser contained in Article 4 of this Agreement (A) with respect to any item or series of
related items unless, in the reasonable estimate of Seller, the amount of Damages in respect of such item or items, in the aggregate, is in excess
of $100,000 (a ― Purchaser Qualifying Claim ‖), (B) unless and until Seller and its Affiliates have suffered Damages arising from (1) Purchaser
Qualifying Claims by reason of all such breaches and (2) Indemnified ITC Plan Claims, in the aggregate, in excess of the Deductible (after
which point Purchaser will be obligated to indemnify Seller and its Affiliates only to the extent of such Damages in excess of the Deductible),
(iv) Purchaser shall not have any obligation to indemnify Seller and its Affiliates under clause (b) of this Section from and against any
Damages unless and until Seller and its Affiliates have suffered Damages arising from (1) Purchaser Qualifying Claims and (2) Indemnified
ITC Plan Claims, in the aggregate, in excess of the Deductible (after which point Purchaser will be obligated to indemnify Seller and its
Affiliates only to the extent of such Damages in excess of the Deductible) and (v) in no event shall the aggregate liability of Purchaser under
this Article 10 for all Damages (1) incurred or suffered by Seller and its Affiliates arising from all breaches of the representations and
warranties of Purchaser contained in Article 4 of this Agreement or (2) in respect of Indemnified ITC Plan Claims, in the aggregate, exceed
15% of the Purchase Price; provided, however, that the foregoing limitation in clause (v) shall not apply to Purchaser’s obligations in respect of
any breaches of the representations and warranties of Purchaser contained in Sections 4.1, 4.2, 4.3, 4.5 and 4.6.

         10.4        Matters Involving Third Parties .

                   (a)       In the event of any claim by a person or entity not a party to this Agreement (a ― Third Party Claim ‖) which may
give rise to a claim for indemnification under this Article 10, then the Party entitled to indemnification (the ― Indemnified Party ‖) shall
promptly (and in any event within five (5) Business Days after receiving notice of the Third Party Claim) notify the other Party (the ―
Indemnifying Party ‖) of such Third Party Claim and the material facts known to the Indemnified Party regarding such claim in writing. The
failure to provide such notice in a timely manner will not affect the Indemnified Party’s right to indemnification

                                                                         59
hereunder, except to the extent the Indemnifying Party is prejudiced thereby. The Parties will cooperate in the defense of any Third Party
Claim.

                   (b)       No Indemnifying Party shall settle or compromise or voluntarily enter into any binding agreement to settle or
compromise, or consent to entry of any judgment arising from, any Third Party Claim except with the prior written consent of the Indemnified
Party, which consent will not be unreasonably withheld. The Indemnifying Party shall undertake the defense of any Third Party Claim by
representatives of its own choosing reasonably satisfactory to the Indemnified Party. The Indemnified Party shall have the right to participate
in any such defense of a Third Party Claim with advisory counsel of its own choosing. Such participation shall be at the expense of the
Indemnified Party, unless any Indemnified Party reasonably determines that, because of a conflict of interest or otherwise, the Indemnifying
Party is not adequately representing or may not adequately represent its interests, in which case the reasonable costs of such participation by the
Indemnified Party shall be at the expense of the Indemnifying Party. In the event the Indemnifying Party, after expiration of half of the period
for the presentation of an answer, a defense, a motion to dismiss or any other similar action against any such Third Party Claim, fails to begin
to diligently defend against such Third Party Claim (or at any time thereafter ceases to diligently defend against such Third Party Claim), the
Indemnified Party will have the right to undertake the defense, compromise or settlement of such Third Party Claim on behalf of, and for the
account of, the Indemnifying Party, at the expense and risk of the Indemnifying Party. No Indemnified Party shall settle or compromise or
voluntarily enter into any binding agreement to settle or compromise, or consent to entry of any judgment arising from, any Third Party Claim,
which agreement or judgment would impose liability on the Indemnifying Party, except with the prior written consent of the Indemnifying
Party, which consent will not be unreasonably withheld.

          10.5         Special Damages Mitigation . If Purchaser receives notice of any Environmental Claim, liability or Damages arising from
or related to any breach by Seller of the representations and warranties set forth in clause (g) of Section 3.13, it shall inform Seller of such
Environmental Claim, liability or Damages and shall cooperate with Seller in seeking to use commercially reasonable efforts to mitigate the
costs, expenses and other Damages covered by Seller’s indemnification obligation under clause (a) of Section 10.2. Seller shall have the right
to participate, at its own expense, in any action taken by Purchaser with respect to such Environmental Claim, liability or Damages.

          10.6         Determination of Damages . The Parties shall make all appropriate adjustments for tax benefits actually realized and
insurance proceeds actually received by an Indemnified Party in determining Damages for purposes of this Article 10. In computing the
amount of any Tax benefit, an Indemnified Party shall be deemed to realize the benefit arising from the incurrence or payment of Damages
after the use of all other losses, deductions and credits of items of such Indemnified Party. Purchaser and its Affiliates shall not be entitled to
make any claim for indemnification with respect to any Damages under this Article 10 if, and to the extent that, an item that would otherwise
be subject to indemnification is taken into account in calculating the Final Stockholders’ Equity Amount pursuant to Section 1.3.

          10.7        Exclusive Remedy; Release . Purchaser and Seller acknowledge and agree that the foregoing indemnification provisions
in this Article 10 shall be the exclusive remedy of

                                                                         60
Purchaser and Seller with respect to any breach of the representations, warranties, covenants or agreements set forth herein and the transactions
contemplated by this Agreement, provided that the foregoing shall not be deemed to limit in any respect any remedy to which any party may be
entitled in respect of fraud.

                                                                 ARTICLE 11
                                                               MISCELLANEOUS

         11.1        Termination .

                   (a)       Either Party may terminate this Agreement if the Closing shall not have occurred on or before March 31, 2003,
unless the failure of the Closing to occur on or before such date is a result of a material breach of such Party’s representations, warranties,
covenants or agreements set forth herein.

                  (b)      This Agreement may be terminated, and the transactions contemplated hereby may be abandoned at any time
before the Closing, by mutual written agreement of Seller and Purchaser.

                   (c)        This Agreement may be terminated, and the transactions contemplated hereby may be abandoned at any time
before the Closing, by Seller or Purchaser, (i) in the event of any breach of any of the representations, warranties, covenants or agreements of
the non-terminating Party which breach would give rise to a failure of the conditions to the terminating Party’s obligation to consummate the
transactions contemplated by this Agreement, if such non-terminating Party fails to cure such breach within thirty (30) days following
notification thereof by the terminating Party, or (ii) upon notification to the non-terminating Party by the terminating Party if the satisfaction of
any condition to the terminating Party’s obligations to consummate the transactions contemplated by this Agreement has become impossible or
impracticable with the use of commercially reasonable efforts, provided the failure of such condition to be satisfied is not caused by a breach
hereof by the terminating Party.

                  (d)        If either Party terminates this Agreement pursuant to this Section 11.1, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party (except for any liability of any Party in breach); provided that
Sections 5.1(d) and 5.3, shall survive any termination of this Agreement.

         11.2        No Third-Party Beneficiaries . This Agreement shall not confer any rights or remedies upon any person or entity other
than the Parties, ITC and their respective successors and permitted assigns.

         11.3       Entire Agreement . This Agreement (including Schedules and other documents referred to herein) constitutes the entire
agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral
(other than the Confidentiality Agreement), to the extent they have related in any way to the subject matter hereof.

         11.4        Succession and Assignment . This Agreement shall be binding upon and inure to the benefit of the Parties named herein
and their respective successors and permitted assigns. No

                                                                         61
Party may assign or delegate either this Agreement or any of its rights, interests, or obligations hereunder without the prior written consent of
the other Party (which approval may be withheld, for any reason or no reason, in the sole discretion of the non-assigning Party). To the extent
requested by Seller, in the event of any merger or consolidation of Purchaser, with or into, or any transfer of all or substantially all of the assets
of Purchaser or more than 50% of the voting securities of ITC (or any ITC Successor) to, in one or more related transactions, any other person
or entity (a ― Purchaser Successor ‖), Purchaser shall obtain, as a condition to the consummation of any such transaction, and deliver to Seller
either (i) the written agreement (in favor of and in form and substance reasonably satisfactory to Seller) of such Purchaser Successor to assume,
perform and comply with any and all then remaining obligations of Purchaser under this Agreement, or (ii) provided the Closing has already
occurred, a written agreement (in favor of and in form and substance reasonably satisfactory to Seller) on the part of ITC and/or any applicable
ITC Successor by which ITC (or such ITC Successor(s)) assumes responsibility for the performance of and compliance with any and all then
remaining obligations of Purchaser under this Agreement and which contains any other terms reasonably requested by Seller in order to
preserve its rights and benefits under this Agreement.

          11.5       Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original
but all of which together will constitute one and the same instrument.

        11.6       Headings . The section headings contained in this Agreement are inserted for convenience only and shall not affect in any
way the meaning or interpretation of this Agreement.

          11.7       Notices . All notices and other communications required or permitted hereunder to be given to a Party to this Agreement
shall be in writing and shall be telecopied or mailed, postage prepaid, or otherwise delivered by hand or by a nationally recognized overnight
courier, addressed to such Party’s address as set forth below or at such other address as the Party shall have furnished to each other Party in
writing in accordance with this provision:

         If to Seller:                                   DTE Energy Company
                                                         2000 2 nd Avenue
                                                         Detroit, Michigan 48226
                                                         Attention:    Nick A. Khouri
                                                         Telecopy:     313-235-6753

         with a copy to:                                 DTE Energy Company
         (which shall not constitute notice)             2000 2 nd Avenue
                                                         Detroit, Michigan 48226
                                                         Attention:    Patrick B. Carey
                                                         Telecopy:     313-235-8500

                                                                         62
         If to Purchaser:                               ITC Holdings Corp.
                                                        c/o Kohlberg Kravis & Roberts & Co.
                                                        9 West 57 th Street
                                                        New York, New York 10019
                                                        Attention:     Scott M. Stuart
                                                        Telecopy:      (212) 750-0003

                                                        and

                                                        ITC Holdings Corp.
                                                        c/o Trimaran Capital Partners
                                                        425 Lexington Avenue
                                                        3 rd Floor
                                                        New York, New York 10017
                                                        Attention:   Dean Kehler
                                                        Telecopy:    (212) 885-4300

         with a copy to:                                Milbank, Tweed, Hadley & McCloy LLP
         (which shall not constitute notice)            1 Chase Manhattan Plaza
                                                        New York, New York 10005
                                                        Attention:  M. Douglas Dunn
                                                        Telecopy:   (212) 530-5219

                                                        and

                                                        Simpson Thacher & Bartlett
                                                        425 Lexington Avenue
                                                        New York, New York 10017
                                                        Attention:   David J. Sorkin
                                                                     Brian M. Stadler
                                                        Telecopy:    (212) 455-2502

         All such notices and communications shall be effective when delivered by hand or nationally recognized overnight courier service, in
the case of mail, upon receipt of such mail, or, in the case of facsimile transmission, upon receipt of confirmation of delivery at the sender’s fax
machine.

         11.8       Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of
Michigan without giving effect to any choice or conflict of law provision or rule (whether of the State of Michigan or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the State of Michigan.

         11.9       Amendments and Waivers . No amendment of any provision of this Agreement shall be valid unless the same shall be in
writing and signed by Purchaser and Seller. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed by implication to extend to any prior or subsequent default, misrepresentation, or breach
of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

                                                                        63
          11.10       Severability . Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term
or provision in any other situation or in any other jurisdiction.

         11.11       Expenses . Unless otherwise expressly provided herein, each of Purchaser and Seller will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby.

          11.12        Construction . The Parties have participated jointly in the negotiation and drafting of this Agreement. If an ambiguity or
question of intent or interpretation arises, no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also
to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word ―including‖ shall mean including
without limitation. The words ―hereof‖, ―herein‖ and ―hereunder‖ and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to
this Agreement unless otherwise specified.

         11.13      Incorporation of Exhibits and Schedules . Any Exhibits and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.

         11.14       No Recourse .

                    (a)       Subject in all respects to subsection (c) below, notwithstanding anything else that may be expressed or implied in
this Agreement, Seller covenants, agrees and acknowledges that no recourse under this Agreement or any documents or instruments delivered
in connection with this Agreement or any of the transactions contemplated hereby shall be had against any current or future director, officer,
employee, general or limited partner, member or Affiliate (including KKR and Trimaran) of Purchaser or any of the foregoing, whether by the
enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law, it being
expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any current
or future officer, agent or employee of Purchaser or any current or future shareholder of Purchaser or any current or future director, officer,
employee, general or limited partner, member or Affiliate (including KKR and Trimaran) of any of the foregoing, as such, for any obligation of
Purchaser under this Agreement or any documents or instruments delivered in connection with this Agreement or any of the transactions
contemplated hereby or for any claim based on, in respect of or by reason of such obligations of Purchaser or their creation.

                  (b)       Subject in all respects to subsection (c) below, notwithstanding anything else that may be expressed or implied in
this Agreement, Purchaser covenants, agrees and acknowledges that no recourse under this Agreement or any documents or instruments
delivered in connection with this Agreement or any of the transactions contemplated hereby shall be had against any current or future director,
officer, employee, general or limited partner, shareholder or Affiliate (including Detroit Edison) of Seller or any of the foregoing, whether by
the

                                                                         64
enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law, it being
expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any current
or future officer, agent or employee of Seller or any current or future shareholder of Seller or any current or future director, officer, employee,
general or limited partner, member or Affiliate (including Detroit Edison) of any of the foregoing, as such, for any obligation of Seller under
this Agreement or any documents or instruments delivered in connection with this Agreement or any of the transactions contemplated hereby or
for any claim based on, in respect of or by reason of such obligations of Seller or their creation.

                    (c)       The provisions of this Section 11.14 shall not be deemed to limit in any respect (i) any remedy to which either
Party or any of its Affiliates may be entitled in respect of fraud on the part of any person or entity, including without limitation any person or
entity listed in subsection (a) or (b), (ii) any obligations of KKR or Trimaran to Purchaser under the Equity Letters or any rights or remedies of
Purchaser with respect thereto, (iii) any obligations of Canadian Imperial Bank of Commerce or CIBC World Markets Corp. to Purchaser under
the Commitment Letters or any rights or remedies of Purchaser with respect thereto, (iv) any obligations of ITC (or any ITC Successor(s)) to
Detroit Edison or any of its Affiliates under the Additional Agreements or any rights or remedies of Detroit Edison or any of its Affiliates with
respect thereto, (v) with respect to recourse to ITC or any ITC Successor(s) only, any obligations of Purchaser to Seller under this Agreement
that are assumed by ITC (or any ITC Successor(s)) in accordance with Section 11.4 or any rights or remedies of Seller or any of its Affiliates
with respect thereto, or (vi) any obligations of Detroit Edison to ITC (or any ITC Successor(s)) or any of its Affiliates under the Additional
Agreements, or any rights or remedies of ITC (or any ITC Successor(s)) or any of its Affiliates with respect thereto.

         11.15     Definitions . (a) When each of the following terms is used in this Agreement, it shall have the meaning stated in the
Section indicated:

         Term                                                                                          Section


         Accredited Investor                                            4.5
         Actively Support                                               5.13(b)
         Actual Closing Statement                                       1.3(b)
         Actual Stockholders’ Equity Amount                             1.3(b)
         Additional Agreements                                          5.17
         ADIT Deferral                                                  5.13(a)(iii)
         Affiliate                                                      11.15(b)
         Affiliated Group                                               8.1
         Agreement                                                      Preamble
         Allocation Statement                                           8.1
         Appendix I Agreement                                           5.11(a)
         ARTO Repayments                                                5.11(c)
         Assessment Year                                                8.1
         Attachment O Deferral                                          5.13(c)(ii)
         Audited Financial Statements                                   3.7(a)
         Available Employees                                            9.1

                                                                        65
Base Purchase Price                    1.2
Benefit Payments                       9.2(e)(iii)
Bonus Plan                             9.2(b)(i)
Business                               Recitals
Business Day                           2.1
CIAC                                   1.3(a)
Closing                                2.1
Closing Date                           2.1
Closing Statement Objection Notice     1.3(c)
COBRA                                  9.2(c)(i)
COBRA Reimbursement Period             9.2(c)(i)
Code                                   8.1
Commitment Letters                     4.8
Competing Proposal                     5.18
Confidentiality Agreement              5.1(d)(i)
Contracts                              3.18(a)
Controllable Expenses                  5.13(d)
Damages                                10.2
Deductible                             10.2
Deferred Comp Liability                9.2(g)(ii)
Deferred Comp Participant              9.2(g)(ii)
Deferred Comp Plan                     9.2(g)(ii)
Detroit Edison                         3.21(a)
Discovering Party                      5.9(b)
Easements                              3.10(a)
employee benefit plan                  3.15(a)
Environmental Authorizations           3.13(b)
Environmental Claim                    11.15(b)
Environmental Law                      11.15(b)
Equity Letters                         4.8
ERISA                                  3.15(a)
Evaluation Material                    5.1(d)(i)
Excluded Employees                     9.2(b)
Expansion Agreement                    5.16
Expansion Plan                         5.12
FERC                                   3.4(d)
Fermi 2                                5.15
Fermi 2 License                        5.15
Final Closing Statement                1.3(f)
Final Stockholders’ Equity Amount      1.3(f)
Financial Statements                   3.7(a)
FSA Liability                          9.2(c)(iv)
GAAP                                   1.3(b)
Good Utility Practices                 5.1(a)
Governmental or Regulatory Authority   3.4(c)
Hazardous Materials                    11.15(b)

                                       66
Health Plan Reimbursement                     9.2(c)(ii)
Health Plans                                  9.2(c)(i)
HSR Act                                       3.4(d)
Incentive Compensation Liability              9.2(g)(i)
Income Tax                                    8.1
Income Tax Return                             8.1
Indemnified Environmental Claims              10.2
Indemnified ITC Plan Claims                   10.3
Indemnified Seller Plan Claims                10.2
Indemnified Party                             10.4(a)
Indemnifying Party                            10.4(a)
Independent Accountants                       1.3(d)
Initial Transfer Amount                       9.2(e)(ii)
Initial Transfer Date                         9.2(e)(ii)
Interim Financial Statements                  3.7(a)
ITC                                           Recitals
ITC Confidential Information                  5.1(d)(ii)
ITC Equity Plan                               9.2(g)
ITC Plans                                     9.2(a)
ITC Successor                                 5.6(b)
ITC Zone                                      5.14(d)(ii)
KKR                                           4.8
Knowledge                                     3.23 or 4.9 (as applicable)
Leased Real Property                          3.10(a)
Licenses                                      3.19(a)
Liens                                         1.1
Line 23A                                      5.13(c)(ii)
LLC Conversion                                5.20
Material Adverse Effect                       3.4(b)
Michigan Act                                  5.12
MISO                                          5.11(a)
Monthly COBRA Rate                            9.2(c)(ii)
MPSC                                          5.12
New Nonqualified Plans                        9.2(g)
Nonqualified Participant                      9.2(g)
Nonqualified Plans                            9.2(g)
Notified Party                                5.9(b)
NRC                                           5.15
Owned Real Property                           3.10(a)
PARS                                          5.16
Parties                                       Preamble
Party                                         Preamble
PBO                                           9.2(e)(ii)
Permitted Liens                               3.9
Point-to-Point Transmission Service Revenue   5.14(d)(i)
Post-Closing Tax Period                       8.1

                                              67
Power Act                               3.4(d)
Pre-Closing Tax Period                  8.1
Projected Closing Statement             1.3(a)
Projected Stockholders’ Equity Amount   1.3(a)
Property Leases                         3.10(c)
Property Tax Benefits                   8.7(e)
Property Tax Period                     8.1
Purchase Price                          1.2
Purchaser                               Preamble
Purchaser Adjustment Amount             1.3(g)(i)
Purchaser Material Adverse Effect       4.4(b)
Purchaser Qualifying Claim              10.3
Purchaser Savings Plans                 9.2(f)(i)
Purchaser Successor                     11.4
Purchaser Welfare Plans                 9.2(c)(i)
Purchaser’s Actuary                     9.2(k)
Real Property                           3.10(a)
Records                                 5.7(a)
Required Governmental Actions           3.4(d)
Retiree Welfare Liabilities             9.2(d)
Savings Transfer Date                   9.2(f)(ii)
SEC                                     5.1(e)
Section 338(h)(10) Election             8.2(a)
Securities Act                          4.5
Seller                                  Preamble
Seller Adjustment Amount                1.3(g)(ii)
Seller DB Plan                          9.2(e)(i)
Seller FSA Plan                         9.2(c)(iv)
Seller Retiree Plan                     9.2(d)
Seller Schedules                        Article 3
Seller Insurance Policies               3.20
Seller Marks                            5.8
Seller Plans                            3.15(a)
Seller Qualifying Claim                 10.2
Seller Qualifying Software Claim        10.2
Seller Savings Plan                     9.2(f)(i)
Seller’s Actuary                        9.2(d)
Separation                              3.22(a)
Separation Agreement                    3.22(a)
Separation Documents                    3.22(a)
Service Agreements                      5.17(a)(i)
Membership Interests                    Recitals
Stockholders’ Equity                    1.3(a)
Subsequent Conversion                   8.1
Supplement                              5.1(c)
Tax                                     8.1

                                        68
         Tax Return                                                      8.1
         Third Party Claim                                               10.4(a)
         Transfer Amount                                                 9.2(e)(ii)
         Transfer Notice                                                 5.9(b)
         Transfer Objection Notice                                       5.9(b)
         Transferred Employee                                            9.1
         Transferred Property                                            8.7(e)
         Transmission Assets                                             Recitals
         Transmission Rates                                              5.13(c)(i)
         Trimaran                                                        4.8
         True-Up Amount                                                  9.2(e)(iii)
         True-Up Date                                                    9.2(e)(iii)
         True-Up PBO                                                     9.2(e)(iii)
         2002 Bonuses                                                    9.2
         2002 Personal Property Taxes                                    8.7(c)(i)
         2003 Personal Property Taxes                                    8.7(c)(ii)

                  (b)       Other Defined Terms . As used in this Agreement, the following defined terms have the meanings indicated
below:

                            ― Affiliate ‖ means any person or entity that directly, or indirectly through one of more intermediaries, controls or is
         controlled by or is under common control with the person or entity specified. For purposes of this definition, control of an entity
         means the power, direct or indirect, to direct or cause the direction of the management and policies of such entity whether by contract
         or otherwise and, in any event and without limitation of the previous sentence, any person or entity owning fifty percent (50%) or
         more of the voting securities of another entity shall be deemed to control that entity.

                           ― Environmental Claims ‖ means any and all actions, suits, causes of action, complaints, claims, liens, notices and
         orders arising under or related to any Environmental Law or any Environmental Authorization, or alleging any liability under
         Environmental Law arising from any Hazardous Materials.

                          ― Environmental Law ‖ means the Comprehensive Environmental Response, Compensation and Liability Act of
         1980, the Resource Conservation and Recovery Act of 1976, the Federal Water Pollution Control Act, and the Clean Air Act, each as
         amended, and all other federal, state and local laws and regulations (statutory or common) concerning pollution or protection of the
         natural environment or the health and safety of persons with regard to exposure to any environmental condition or harmful or
         dangerous substance.

                           ― Hazardous Materials ‖ means any pollutants, contaminants, or toxic or hazardous substances, materials, wastes,
         constituents, compounds or chemicals, including without limitation petroleum or any by-products thereof, any form of natural gas,
         asbestos or asbestos-containing materials, polychlorinated biphenyls or polychlorinated biphenyls-containing equipment, radon or
         other radioactive elements, carcinogenic or mutagenic agents, pesticides, explosives, flammables, corrosives and urea formaldehyde

                                                                         69
foam insulation, in each case that form the basis of liability, or are subject to regulation, under any Environmental Laws.

All references to ―capital stock‖ or ―shares of capital stock‖ in this Agreement shall be deemed to include, without limitation, equity
and membership interests.

                                                  [Signatures on Next Page]

                                                               70
          IN WITNESS WHEREOF , the parties hereto have caused their duly authorized representatives to execute this Agreement under
seal as of the date first above written.

                                                                       ―SELLER‖

                                                                       DTE ENERGY COMPANY

                                                                       By:
                                                                       Name:
                                                                       Title:


                                                                       ―PURCHASER‖

                                                                       ITC HOLDINGS CORP.


                                                                       By:
                                                                       Name:
                                                                       Title:


                                                                       By:
                                                                       Name:
                                                                       Title:

                                                                      71



                                                              Schedule 1.3(a):
                                                  Projected Closing Statement (in millions)

             Accounts Receivable                                                               $            8.7
             Fixed Assets, net                                                                            380.3
             Materials and Supplies                                                                         4.2
             Regulatory Assets                                                                              9.2
                 Total Assets                                                                             402.4

             SBT Liability                                                                                  1.7
             Deferred Federal income taxes                                                                 60.1
             Shareholders’ Equity                                                                         340.6
                 Total Liabilities and Shareholders’ Equity                                               402.4

                                                     Accounting Policies and Practices
                                                          for use in the Preparation
                                                     of the Projected Closing Statement
                                                     and the Actual Closing Statement

         (a)       Except as set forth below, the Actual Stockholders’ Equity Amount shall be calculated in accordance with GAAP,
consistently applied, including no change for accounting pronouncements which may require application between the date of the Agreement
and the Closing Date. There shall be no reduction in the Actual Stockholders’ Equity Amount as a result of the application of the accounting
for minimum unfunded pension liability accounting rules.

           (b)      The Actual Stockholders’ Equity Amount shall be calculated after giving effect to (i) the cancellation or similar settlement
of all intercompany accounts (including federal income tax accounts) between Seller or any of its Affiliates (other than MISO if it is deemed an
Affiliate) and ITC and (ii) the distribution of cash from ITC to Seller. ITC shall be entitled to cash collections of MISO and other receivables
set forth on the Actual Closing Statement and received after the Closing. ITC will be responsible for payment after Closing of any liabilities
set forth on the Actual Closing Statement. Liabilities shall not include any amount previously included in intercompany liabilities in the
Audited Financial Statements.
          (c)        The amount of the regulatory asset on the Actual Closing Statement shall be increased from the September 30, 2002 amount
of $9,150,000 for any proper addition in accordance with GAAP, but shall not be reduced (i) for any reserves relating to the September 30,
2002 balance sheet that may thereafter be required or (ii) for payments received by Seller or its Affiliates prior to Closing or receivable by
Seller or its Affiliates after the Closing pursuant to Section 5.11(c).

         (d)       No liability shall be included on the Actual Closing Statement, even if required by GAAP, to the extent such liability is
subject to indemnification by Seller under Section 8.4(a), Section 8.7(e) or any of clauses (b), (c), (d) or (f) of Section 10.2 of the Agreement or
to the
extent Seller is obligated to bear such liability under Section 5.21 of the Agreement. No asset shall be included on the Actual Closing
Statement, even if required by GAAP, to the extent related to a Tax refund. With respect to deferred federal Income Taxes, the Actual Closing
Statement shall reflect a liability equal to the amount of $60.1 million, the amount reflected on the Projected Closing Statement.

         (e)       Amounts included on the Actual Closing Statement for property, plant and equipment shall be based on the $394,053,000
amount included in the Audited Financial Statements, as of December 31, 2001, adjusted to reflect actual additions, retirements and
depreciation from January 1, 2002 through Closing in accordance with GAAP, consistently applied; provided that additions shall include an
overhead allocation applied in a manner consistent with Item 2 of Schedule 3.7(a) .

           (f)     The Actual Closing Statement shall reflect contributions in aid of construction in accordance with GAAP, consistently
applied.

       (g)       The Retiree Welfare Liabilities (as calculated in accordance with Section 9.2(d) of the Agreement), the Incentive
Compensation Liabilities, the Deferred Comp Liability and the FSA Liability shall be included on the Actual Closing Statement.

                                                                      2
       Schedule 3.6(d)

Articles of Organization of ITC
                                                               Schedule 4.4

(1)    Pursuant to Section 203 of the Power Act, FERC authorization of the disposition of jurisdictional facilities.

(2)    Pursuant to Section 204 of the Power Act, FERC authorization of the issuance of securities and assumption of liabilities.

(3)    Pursuant to Section 205 of the Power Act:

      (a)       FERC acceptance or approval of the agreements described in Section 5.17(a)(ii)-(iv); and

      (b)       FERC approval, without modification or condition, of Section 5.13(a), Section 5.13(c) and Section 5.13(e).
                                                                   Exhibit A

    Description of ITC (or any ITC Successor) Attachment O Formula for the Period from the Closing Date through May 31, 2004

For the purposes of determining ITC’s Attachment O rates for the period from the Closing Date through May 31, 2004:

    (1)           The amount shown on page 1, line 2 of Attachment O (Account No. 454 – Rent from Electric Property) shall exclude rental
             income for any rents received by Seller and its Affiliates for assets or rights retained by Seller and its Affiliates.

    (2)             The amounts shown on page 1, line 3 (Account No. 456) of Attachment O shall be $0 (zero).

    (3)           The amounts shown on page 1, lines 8 through 14 of Attachment O shall be the amounts applicable to ITC (or any ITC
             Successor) for the year ended December 31, 2002.

    (4)          The amounts used for the accounts on page 2 of Attachment O shall be the amounts shown for those accounts on ITC’s
             FERC Form No. 1 for the year ending December 31, 2002, with the following adjustments:

             (a)      Any amounts classified on ITC’s Report on FERC Form No. 1 for the year ending December 31, 2002 (the ― 2002 Form 1
                   ‖) as Production Plant and ordinarily appearing on page 2, line 1 of Attachment O shall be deemed misclassified and shall be
                   included in the amount reported on page 2, line 2 of Attachment O (such treatment is required because ITC is not engaged in
                   power production),

             (b)      Any amounts classified on ITC’s 2002 Form 1 as Distribution Plant and ordinarily appearing on page 2, line 3 of
                   Attachment O shall be deemed misclassified and shall be included in the amount reported on page 2, line 2 of Attachment O
                   (such treatment is required because ITC is not engaged in power distribution).

             (c)         Adjustments to rate base Line 19 (Account No. 281 273.8.k), Line 20 (Account No. 282 275.2.k), Line 21 (Account
                     No. 283 277.9.k), and Line 23 (Account No. 255 267.h.8) shall be equal to zero (0), reflecting accounting adjustments to be
                     made to ITC’s balance sheet on the Closing Date, and

             (d)      Adjustments to rate base shall contain a new line, 23B, to be added to rate base, equal to the amount of the ADIT Deferral
                   on the Closing Date.

    (5)           Since ITC is engaged in neither power production nor power distribution, amounts reported on the 2002 Form 1 for Power
             Production Expenses (FERC Form No. 1,
       321.80.b) and Distribution Expenses (FERC Form No. 1, 322.126.b) will be deemed to have been improperly classified. These
       two amounts will be added to the amount reported on the 2002 Form 1 for Transmission Expenses (FERC Form No. 1, 321.100.b)
       and included on page 3, line 1.

(6)          If there is no other tariff or FERC rate schedule whereby ITC (or any ITC Successor) may recover in rates the amounts
       reported for Customer Accounts Expenses (FERC Form No. 1, 322.134.b), Customer Service and Informational Expenses (FERC
       Form No. 1, 322.141.b), and Sales Expenses (FERC Form No. 1, 322.148.b), these amounts shall be included in the amount on
       page 3, line 1.

(7)          The amounts shown on page 3, lines 1 through 20 of Attachment O shall be the expenses ITC (or any ITC Successor)
       reports on its FERC Form No. 1 for the year ending December 31, 2002, with the following modification: a new line, 11B
       (Amortization of ADIT Deferral) shall be added and shall contain an amount equal to the amount of the ADIT Deferral on the
       Closing Date divided by twenty (20), which amount shall be included in the sum shown on line 12.

(8)          The amount under the column labeled ―$‖ on page 4, line 27 (Long Term Debt) of Attachment O shall equal ITC’s long
       term debt on the Closing Date.

(9)          The amount under the column labeled ―$‖ on page 4, line 28 (Preferred Stock) of Attachment O shall be zero (0).

(10)        The amount under the column labeled ―$‖ on page 4, line 29 (Common Stock) of Attachment O shall equal ITC’s common
       equity on the Closing Date.

(11)         The amount shown under the column labeled ―Cost‖ on page 4, line 27 (Long Term Debt) of Attachment O shall be the
       interest rate applicable to ITC’s debt immediately following the Closing Date after giving effect to all related instruments and
       costs including amortization of issuance expenses and the effect of any related interest rate swaps.

(12)    The amount shown under the column labeled ―Cost‖ on page 4, line 29 (Common Equity) of Attachment O shall be 13.88%.

                                                                 2
                                                            Exhibit B

Illustrative Calculation of ITC (or any ITC Successor) Attachment O Formula for the Period from the Closing Date through May 31,
                                                               2004

                                                    (See attached spreadsheet)
       Exhibit C

Service Level Agreements
                    Exhibit D

Generator Interconnection and Operation Agreement
        Exhibit E

Master Operating Agreement
                Exhibit F

Coordination and Interconnection Agreement
                                                                  Exhibit G

                                                    Opinion of Troutman Sanders LLP

ITC Holdings Corp.
c/o Kohlberg Kravis Roberts & Co. L.P.
9 West 57 th Street, Suite 4200
New York, New York 10019

and

c/o Trimaran Capital Partners
425 Lexington Avenue
New York, New York 10017

Ladies and Gentlemen:

          We have served as special counsel to DTE Energy Company, a corporation organized and existing under the laws of the State of
Michigan (―Seller‖), in connection with the transactions contemplated by that Stock Purchase Agreement (the ―Purchase Agreement‖) dated as
of December 3, 2002, by and between Seller and ITC Holdings Corp., a corporation organized and existing under the laws of the State of
Michigan (―Purchaser‖). This opinion is delivered pursuant to Section 6.6 of the Purchase Agreement. Capitalized terms used in this opinion
letter and not otherwise defined herein shall have the respective meanings ascribed thereto in the Purchase Agreement.

          We have reviewed the Purchase Agreement and have also examined originals or copies of such corporate records, agreements,
certificates, authorizations, and other documents, and have made such other investigations, as we have deemed relevant or necessary as a basis
for the opinions expressed herein. In such examinations we have assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to the original documents of all copies submitted to us and the authenticity of the originals of
documents submitted to us as copies.

         As to questions of fact material to this opinion, we have relied solely upon the representations and warranties as to factual matters
contained in the Purchase Agreement (and all other agreements, certificates, and other documents contemplated thereby) and certificates and
statements of officers of Seller and certain public officials. We have made no independent investigation with regard thereto and, accordingly,
we do not express any view or belief as to matters that might have been disclosed by independent verification. Whenever an opinion herein is
qualified by the words ―to our knowledge‖ or by similar words, it means that those attorneys in this firm who have devoted substantive
attention to the transactions contemplated by the Purchase Agreement, without any independent investigation, do not have current actual
knowledge of the inaccuracy of such statement. Except as otherwise expressly indicated, we have not undertaken any independent
investigation to determine the accuracy of any opinion so qualified, and no inference that we have any knowledge of any matters pertaining to
such opinion should be drawn from our representation of Seller.
         Based upon and subject to the limitations and qualifications set forth herein, we are of the opinion that:(1)

                 1.        Neither the execution and delivery of the Purchase Agreement by Seller, nor the performance pursuant to and as
contemplated by the Purchase Agreement by Seller of its obligations thereunder:

                           (a)        has violated or will violate the Federal Power Act, as amended, or any rule or regulation promulgated
thereunder, or the Public Utility Holding Company Act of 1935, as amended (the ―PUHCA‖), or any rule or regulation promulgated thereunder
(each an ―Applicable Law‖ and collectively the ―Applicable Laws‖);

                            (b)      has violated or will violate any order, judgment or decree of which we have knowledge and to which
Seller or ITC is subject and which has been issued or entered by the Federal Energy Regulatory Commission or the United States Securities and
Exchange Commission under and pursuant to any Applicable Law; or

                           (c)      requires any consent, approval or authorization of, or any notice to or filing with, any Governmental or
Regulatory Authority pursuant to any Applicable Law on the part of Seller or ITC not already given, made or obtained, except as set forth on
Schedul e 3.4(d) to the Purchase Agreement.

                2.         ITC is not, as of immediately prior to the Closing, (a) a ―holding company‖ or an ―affiliate‖ of a ―registered
holding company,‖ as such terms are defined in the PUHCA, or (b) subject to regulation under PUHCA, except pursuant to Section 9(a)(2)
thereof.

          The lawyers in this firm rendering this opinion are admitted to practice law in the District of Columbia, and the opinions set forth
herein are limited to the Applicable Laws solely as the same exist on the date hereof. This opinion is limited to the matters expressly opined
on herein, and no opinion may be implied or inferred beyond those expressly stated. This opinion is rendered as of the date hereof, and we
make no undertaking and expressly disclaim any duty to supplement or update such opinion, if, after the date hereof, facts or circumstances
come to our attention or changes in the law occur which could affect such opinion. This opinion is being furnished to you solely for your
benefit in connection with Section 6.6 of the Purchase Agreement and is not to be used, circulated, quoted or otherwise referred to for any other
purpose without our prior express written consent and may not be relied upon by any other person without our express written consent.

                                                                         Very truly yours,


                                                                         TROUTMAN SANDERS LLP



(1)       The opinions in this Exhibit assume transfer of ITC as a corporation. The opinion will be revised if prior to Closing ITC is
         converted to an LLC.

                                                                         2
                                                                    Exhibit H

                                                          Opinion of Patrick B. Carey

ITC Holdings Corp.
c/o Kohlberg Kravis Roberts & Co. L.P.
9 West 57 th Street, Suite 4200
New York, New York 10019

and

c/o Trimaran Capital Partners
425 Lexington Avenue
New York, New York 10017

Ladies and Gentlemen:

         I have served as counsel to DTE Energy Company, a corporation organized and existing under the laws of the State of Michigan
(―Seller‖), in connection with the transactions contemplated by that Stock Purchase Agreement (the ―Purchase Agreement‖) dated as of
December 3, 2002 by and between Seller and ITC Holdings Corp., a corporation organized and existing under the laws of the State of Michigan
(―Purchaser‖). This opinion is delivered pursuant to Section 6.6 of the Purchase Agreement. Capitalized terms used in this opinion letter and
not otherwise defined herein shall have the respective meanings ascribed thereto in the Purchase Agreement.

          I have reviewed the Purchase Agreement and have also examined originals or copies of such corporate records, agreements,
certificates, authorizations, and other documents, and have made such other investigations, as I have deemed relevant or necessary as a basis
for the opinions expressed herein. In such examinations I have assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to the original documents of all copies submitted to us and the authenticity of the originals of
documents submitted to us as copies.

          In rendering the opinions expressed herein, I have assumed: (a) that Purchaser was duly organized and, at all relevant times, was and
is validly existing and in good standing under the laws of the jurisdiction in which it is organized, and is qualified to do business and in good
standing under the laws of each jurisdiction where such qualification is required generally or necessary in order for such party to enforce its
rights under the Purchase Agreement; (b) that Purchaser, at all times relevant thereto, had and has all necessary power and authority to enter
into and perform its obligations under the Purchase Agreement; (c) that Purchaser has duly authorized (if applicable), executed and delivered
the Purchase Agreement; (d) that the Purchase Agreement constitutes the legal, valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms; and (e) that Purchaser has obtained all consents, approvals and authorizations required of it to execute
and deliver the Purchase Agreement and to perform its obligations thereunder.
         As to questions of fact material to this opinion, I have relied solely upon the representations and warranties as to factual matters
contained in the Purchase Agreement (and all other agreements, certificates, and other documents contemplated thereby) and certificates and
statements of officers of Seller and certain public officials. I have made no independent investigation with regard thereto and, accordingly, I
do not express any view or belief as to matters that might have been disclosed by independent verification. Whenever an opinion herein is
qualified by the words ―to my knowledge‖ or by similar words, it means that, without any independent investigation, I do not have current
actual knowledge of the inaccuracy of such statement. Except as otherwise expressly indicated, I have not undertaken any independent
investigation to determine the accuracy of any opinion so qualified, and no inference that I have any knowledge of any matters pertaining to
such opinion should be drawn from my representation of Seller.

         Based upon and subject to the limitations and qualifications set forth herein, I am of the opinion that:(1)

         1.         ITC was duly organized as a corporation, and is validly existing and in good standing, under the laws of the State of
Michigan. ITC has the requisite corporate power and authority to own and lease its properties and assets, including the Transmission Assets,
and to carry on the Business as it is, to my knowledge, presently conducted.

         2.         Seller was duly organized as a corporation, and is validly existing and in good standing under the laws of the State of
Michigan. Seller has the requisite corporate power and authority to enter into and perform its obligations under the Purchase Agreement,
including without limitation to own, hold, sell and transfer (pursuant to the Stock Purchase Agreement) the Membership Interests.

         3.        ITC’s authorized capital stock consists solely of 60,000 shares of common stock, of which 60,000 shares are issued and
outstanding. All of such shares have been duly authorized and validly issued, and are fully paid and non-assessable.

         4.         Seller has duly authorized the execution and delivery of the Purchase Agreement and all performance by Seller
thereunder. Seller has duly executed and delivered the Purchase Agreement, and the Purchase Agreement is enforceable against Seller in
accordance with its terms, except as such enforceability may be limited by (1) the effect of bankruptcy, insolvency, reorganization,
receivership, fraudulent conveyance, moratorium, and other similar laws affecting the rights and remedies of creditors; (2) the effect of any
implied duties of good faith or fair dealing, general principles of equity or considerations of public policy; (3) the effect of laws regarding
mitigation of damages; and (4) the effect of any course of dealing, course of performance or the like that would modify the terms of an
agreement or the respective rights and obligations of the parties under an agreement.



(1)       The opinions in this Exhibit assume transfer of ITC as a corporation. The opinion will be revised if prior to Closing ITC is
         converted to an LLC.

                                                                         2
        5.        Neither the execution and delivery of the Purchase Agreement by Seller, nor the performance pursuant to and as
contemplated by the Purchase Agreement by Seller of its obligations thereunder:

                  (a)            has violated or will violate any provision of Seller’s or ITC’s Articles of Incorporation or Bylaws;

                  (b)            has violated or will violate any existing statute, regulation, rule or law of the State of Michigan to which Seller
                           or ITC is subject, except to the extent any such violations would not, individually or in the aggregate, have a
                           Material Adverse Effect;

                  (c)            has violated or will violate any order, judgment or decree of any Governmental or Regulatory Authority of the
                           State of Michigan, of which I have knowledge, to which Seller or ITC is subject; or

                  (d)             requires any consent, approval or authorization of, or any notice to or filing with, any Governmental or
                           Regulatory Authority of the State of Michigan on the part of Seller or ITC not already given or obtained, except (i)
                           as set forth on Schedule 3.4(d) to the Agreement, and (ii) to the extent the failure to obtain any such consents,
                           approvals or authorizations, to give such notice or to make such filings would not, individually or in the aggregate,
                           have a Material Adverse Effect.

          I hereby confirm to Purchaser that, based upon and subject to the limitations and qualifications set forth herein, to my knowledge,
except as set forth on Schedule 3.12 to the Agreement or Exhibit A to this opinion letter, there are no actions, suits, proceedings, orders or
arbitrations against ITC pending or overtly threatened by a written communication to ITC or Seller, at law or in equity, or before or by any
Governmental or Regulatory Authority of the State of Michigan, which have had or would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect. With your permission, I have assumed that any action, suit, proceeding, order or arbitration seeking
only monetary damages of less than $1,000,000 against ITC would not have a Material Adverse Effect.

         The opinions set forth above are further qualified in that I express no opinion with respect to the validity or enforceability of any
provision in the Purchase Agreement: (1) relating to remedies upon any breach of the Purchase Agreement, including the remedy of specific
performance or other relief in equity upon any breach of the Purchase Agreement, or permitting the exercise of rights of set-off; (2) requiring
indemnification of or contribution to any party for, or providing exculpation, release or exemption from liability for, action or inaction, to the
extent such action or inaction involves the negligence or misconduct of such party or to the extent otherwise contrary to public policy; (3)
providing for choice of governing law, venue, or consent to jurisdiction; (4) permitting modifications of an agreement only in writing; (5)
providing that enumerated remedies are not exclusive or that a party has the right to pursue multiple remedies without regard to other remedies
elected or that all remedies are cumulative; (6) providing that the provisions of an agreement are severable in all circumstances; (7) providing
that waivers or

                                                                         3
consents by a party may not be given effect unless in writing or that one or more waivers may not under certain circumstances constitute a
waiver of other matters of the same kind; (8) prohibiting competition, solicitation, use or disclosure of information or other activities in
restraint of trade; (9) imposing increased interest rates or late payment charges upon delinquency in payment or default or providing for
liquidated damages, to the extent any such provisions are deemed to be penalties or forfeitures; (10) providing for waivers or advance consents
as to jurisdiction of courts, the venue of actions, the right to jury trial or notices; (11) purporting to require arbitration of disputes; (12)
providing that determinations by a party or a party’s designee are conclusive; or (13) permitting the exercise of rights without notice or without
providing opportunities to cure failures to perform.

          I am admitted to practice law in the State of Michigan, and the opinions set forth herein are limited to the internal, substantive laws of
the State of Michigan, as applied by courts located therein, to the extent the same may apply to or govern such transactions. I express no
opinion as to the laws of any other jurisdiction. In addition, I express no opinion herein with respect to the applicability or effect of (1) any
laws, statutes, ordinances or regulations of any county, town, municipality or other political subdivision of any state; (2) any securities laws,
rules or regulations; (3) any antitrust laws, rules or regulations; (4) any laws relating to interest and usury; (5) any tax laws, rules or regulations;
(6) any environmental, health or safety laws, rules or regulations; (7) any pension or employee benefit laws, rules or regulations; (8) any
zoning, land use or other real estate laws, rules or regulations; (9) any labor laws, rules or regulations; (10) any matters which are the subject of
that opinion of Troutman Sanders LLP of even date herewith delivered to Purchaser pursuant to Section 6.6 of the Purchase Agreement; or (11)
any fiduciary duties or obligations of the officers and directors of Seller or ITC.

         This opinion is limited to the matters expressly opined on herein, and no opinion may be implied or inferred beyond those expressly
stated. This opinion is rendered as of the date hereof, and I make no undertaking and expressly disclaim any duty to supplement or update
such opinion, if, after the date hereof, facts or circumstances come to our attention or changes in the law occur which could affect such
opinion. This opinion is being furnished to you solely for your benefit in connection with the transactions contemplated by the Purchase
Agreement and is not to be used, circulated, quoted or otherwise referred to for any other purpose without my prior express written consent and
may not be relied upon by any other person without my express written consent.

                                                                            Sincerely,

                                                                           4
                                                                   Exhibit I

                                            Opinion of Milbank, Tweed, Hadley & McCloy LLP

DTE Energy Company
2000 2 nd Avenue
Detroit, Michigan 48226
Attention: Nick A. Khouri

Ladies and Gentlemen:

                 We have acted as special counsel to ITC Holdings Corp., a Michigan corporation (― Purchaser ‖), in connection with the
Stock Purchase Agreement dated as of December 3, 2002 (the ― Stock Purchase Agreement ‖), by and between DTE Energy Company, a
Michigan corporation, and Purchaser and the transactions contemplated thereby. Capitalized terms used but not defined herein shall have the
respective meanings given to such terms in the Stock Purchase Agreement.

                  In rendering the opinions expressed below, we have examined (a) the Stock Purchase Agreement and (b) such records of
Purchaser and such other documents as we have deemed necessary as a basis for the opinions expressed below. In our examination, we have
assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with the authentic
original documents of all documents submitted to us as copies. When relevant facts or documents (other than the Stock Purchase Agreement)
were not independently reviewed or established, we have relied upon certificates of government officials and of Purchaser and its officers and
upon representations and warranties made in or pursuant to the Stock Purchase Agreement.

                    In rendering the opinions expressed below, we have assumed (other than as to Purchaser) that all of the documents referred to
in this opinion have been duly authorized by, have been duly executed and delivered by, and constitute legal, valid, binding and enforceable
obligations of, all of the parties to such documents, that all signatories to such documents have been duly authorized and that all such parties
are duly organized and validly existing and have the power and authority (corporate or other) to execute, deliver and perform such
documents. In rendering such opinions, we have also assumed that the Stock Purchase Agreement is, under the law of the State of Michigan
(by which law such agreement is stated to be governed), the legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms.
                 Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having
considered such questions of law as we deemed necessary as a basis for the opinions expressed below, we are of the opinion that:

                   1.       The execution, delivery and performance by Purchaser of the Stock Purchase Agreement and the consummation of
the transactions contemplated thereby did not and will not::

                          (a)       violate or breach any statute, ordinance, law, rule, regulation, judgment, order or decree of any
Governmental or Regulatory Authority to which Purchaser is subject, except to the extent any such violations would not, individually or in the
aggregate, have a Purchaser Material Adverse Effect; or

                             (b)         require any consent, approval or authorization of, notice to, or filing, recording, registration or
qualification with any person, entity or Governmental or Regulatory Authority by Purchaser except (i) as set forth on Schedul e 4.4 of the Stock
Purchase Agreement, (ii) to the extent the failure to obtain any such consents, approvals or authorizations, to give such notices or to make such
filings, recordings, registrations or qualifications would not, individually or in the aggregate, have a Purchaser Material Adverse Effect, and
(iii) for (A) filings and expiration of the applicable waiting period under the HSR Act, and (B) notices to and approval of the FERC pursuant to
the Power Act and any applicable rules or regulations of the FERC as set forth in Schedule 4.4 of the Stock Purchase Agreement.

         2.         Purchaser is not (a) a ―holding company‖ or an ―affiliate‖ of a ―registered holding company,‖ as such terms are defined in
the Public Utility Holding Company Act of 1935, as amended (―PUHCA‖), or (b) subject to regulation under PUHCA, except pursuant to
Section 9(a)(2) thereof.

                 We express no opinion as to the enforceability of provisions in the Stock Purchase Agreement to the effect that terms may
not be waived or modified except in writing under limited circumstances.

                 We are members of the bar of the State of New York. The foregoing opinions are limited to matters involving the laws of
the State of New York and the Federal laws of the United States of America, and we do not express any opinion as to the laws of any other
jurisdiction.

                  At the request of our clients, this opinion is being provided to you pursuant to Section 7.6 of the Stock Purchase Agreement,
and this opinion may not be relied upon by any other person or for any purpose other than in connection with the transactions contemplated by
the Stock Purchase Agreement without, in each instance, our prior written consent.

                                                                        Very truly yours,

                                                                       2
                                                                   Exhibit J

                                                      Opinion of Dykema Gossett PLLC

DTE Energy Company
2000 2 nd Avenue
Detroit, Michigan 48226
Attention: Nick A. Khouri

Ladies and Gentlemen:

                  We have acted as counsel to ITC Holdings Corp., a Michigan corporation (― Purchaser ‖), in connection with the Stock
Purchase Agreement dated as of December 3, 2002 (the ― Stock Purchase Agreement ‖), by and between DTE Energy Company, a Michigan
corporation, and Purchaser and the transactions contemplated thereby. Capitalized terms used but not defined herein shall have the respective
meanings given to such terms in the Stock Purchase Agreement.

                  In rendering the opinions expressed below, we have examined (a) the Stock Purchase Agreement and (b) such records of
Purchaser and such other documents as we have deemed necessary as a basis for the opinions expressed below. In our examination, we have
assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with the authentic
original documents of all documents submitted to us as copies. When relevant facts or documents (other than the Stock Purchase Agreement)
were not independently reviewed or established, we have relied upon certificates of government officials and of Purchaser and its officers and
upon representations and warranties made in or pursuant to the Stock Purchase Agreement.

                    In rendering the opinions expressed below, we have assumed (other than as to Purchaser) that all of the documents referred to
in this opinion have been duly authorized by, have been duly executed and delivered by, and constitute legal, valid, binding and enforceable
obligations of, all of the parties to such documents, that all signatories to such documents have been duly authorized and that all such parties
are duly organized and validly existing and have the power and authority (corporate or other) to execute, deliver and perform such
documents. In rendering such opinions, we have also assumed that the Stock Purchase Agreement, under the law of the State of Michigan (by
which law such agreement is stated to be governed), the legal, valid and binding obligation of Seller, enforceable against Seller in accordance
with their terms.

                 Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having
considered such questions of law as we deemed necessary as a basis for the opinions expressed below, we are of the opinion that:

                  1.      Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of
Michigan. Purchaser has full corporate power and authority to execute and deliver the Stock Purchase Agreement, to perform its obligations
thereunder and to consummate the transactions contemplated thereby.
                   2.          The execution and delivery by Purchaser of the Stock Purchase Agreement and the consummation of the
transactions contemplated by Purchaser thereunder, have been duly authorized by all necessary corporate action on the part of Purchaser, and
no other corporate proceedings on the part of Purchaser are necessary to authorize the execution, delivery and performance of the Stock
Purchase Agreement by Purchaser. The Stock Purchase Agreement has been duly executed and delivered by Purchaser and constitutes a legal,
valid and binding obligation of Purchaser and is enforceable against Purchaser. This opinion concerning the binding effect and enforceability
of such agreements means that (a) the agreements constitute effective contracts under Michigan law; (b) the agreements are not invalid in their
entirety because of a specific statutory prohibition or public policy and are not subject in their entirety to a contractual defense; and (c) subject
to the last sentence of this paragraph, some remedy is available if the Purchaser is in material default of the agreements. This opinion does not
mean that any particular remedy is available upon a material default or that every provision of such agreements will be upheld and enforced in
any or each circumstance by a court. In addition, the validity, binding effect and enforceability of the agreements may be limited or otherwise
affected by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws relating to or affecting the rights
and remedies of creditors generally and are subject to the application of general principles of equity (regardless of whether considered in a
proceeding in equity or at law), including without limitation (i) the possible unavailability of specific performance, injunctive relief or any
other equitable remedy and (ii) concepts of materiality, reasonableness, good faith and fair dealing.

                   3.       The execution, delivery and performance by Purchaser of the Stock Purchase Agreement and the consummation of
the transactions contemplated thereby did not and will not:

                  (a)        violate or conflict with any provision of the Articles of Incorporation or Bylaws of Purchaser;

                   (b)        to the actual knowledge of the specific attorneys within the firm having direct responsibility with respect to this
         transaction, (i) breach or otherwise constitute or give rise to a breach of or default under, (ii) result in or give to any person any right
         of termination, cancellation, acceleration or modification in or with respect to, (iii) result in or give to any person any additional rights
         or entitlement to increased, additional, accelerated or guaranteed payments under, or (iv) result in the creation or imposition of any
         Lien upon Purchaser or any of its assets or properties under any lease, contract, mortgage, indenture, license, commitment or other
         obligation to or by which Purchaser is a party or is bound, except to the extent any such breaches, defaults, rights, Liens or other
         matters set forth in clauses (i)-(iv) would not, individually or in the aggregate, have a Purchaser Material Adverse Effect;

                   (c)       violate or breach any statute, ordinance, law, rule, regulation, judgment, order or decree of any State of Michigan
         Governmental or Regulatory Authority to which Purchaser is subject, except to the extent any such violations would not, individually
         or in the aggregate, have a Purchaser Material Adverse Effect; or

                                                                          2
                   (d)        require any consent, approval or authorization of, notice to, or filing, recording, registration or qualification with
         any person, entity or State of Michigan Governmental or Regulatory Authority by Purchaser except (i) as set forth on Schedul e 4.4 of
         the Stock Purchase Agreement, (ii) to the extent the failure to obtain any such consents, approvals or authorizations, to give such
         notices or to make such filings, recordings, registrations or qualifications would not, individually or in the aggregate, have a Purchaser
         Material Adverse Effect, (iii) for filings and expiration of the applicable waiting period under the HSR Act, and (iv) the recording in
         the real estate records of certain of the agreements, assignments, easements, licenses and other documents referred to in Section
         5.17(a)(v) of the Stock Purchase Agreement.

                   4.          To the actual knowledge of the specific attorneys within the firm having direct responsibility with respect to this
transaction, there is no litigation, action, suit, arbitration, mediation, hearing or governmental investigation pending or threatened by or against,
Purchaser which would have a Purchaser Material Adverse Effect.

                 We express no opinion as to the enforceability of provisions in the Stock Purchase Agreement to the effect that terms may
not be waived or modified except in writing under limited circumstances.

                  This opinion is limited only to the issues addressed and we do not purport to opine on any other aspect of the transaction or
on the transaction as a whole, including but not limited to compliance with federal or state securities laws and regulations, pension and
employee benefit laws and regulations and federal or state anti-trust and unfair competition laws and regulations.

                 We are members of the bar of the State of Michigan. The foregoing opinions are limited to matters involving the laws of the
State of Michigan, and we do not express any opinion as to the laws of any other jurisdiction.

                  At the request of our clients, this opinion is being provided to you pursuant to Section 7.6 of the Stock Purchase Agreement,
and this opinion may not be relied upon by any other person or for any purpose other than in connection with the transactions contemplated by
the Stock Purchase Agreement without, in each instance, our prior written consent.

                                                                          Very truly yours,

                                                                          3
                                                                      Exhibit K

                                                              Subsequent Conversion

This Exhibit K (this ― Exhibit K ‖) contains the steps and characteristics of the transaction that constitutes the ―Subsequent Conversion,‖ as that
term is used in that certain Stock Purchase Agreement by and between DTE Energy Company, a Michigan corporation (― Seller ‖), and ITC
Holdings Corp., a Michigan corporation (― Purchaser ‖), dated the 3rd day of December, 2002 (the ― Agreement ‖), to which this Exhibit K is
appended and is incorporated by reference into as if set out in full. Unless provided otherwise, any capitalized terms used herein shall have the
meanings ascribed to them in the Agreement.

         A.        The ―Subsequent Conversion‖ shall be a transaction with the following characteristics:

                  1.         Such transaction shall constitute a merger under Michigan law.

                  2.         The merger shall be of ITC with and into Surviving Corporation, with Surviving Corporation surviving.

                  3.         Purchaser shall make (or shall cause to be made) a protective election to treat ITC as an entity taxed as a
                  corporation for income Tax purposes effective as of the time of the acquisition of ITC pursuant to the Agreement, which
                  election is assumed to be redundant in that Seller will have already made such an election as to ITC, and shall not permit the
                  occurrence of any event which would cause the classification of ITC as a corporation for income Tax purposes to change.

         B.         The ―Surviving Corporation‖ shall be a corporation newly organized under the Michigan Business Corporations Act;
         formed solely to engage in the Subsequent Conversion; which, at the time of the merger with ITC, does not and never has held,
         directly or indirectly, any assets or liabilities (other than its corporate charter), and which is not a party to any contracts, agreements,
         or understandings (other than the agreement to merge with ITC and any other contract, agreement or understanding related to the
         merger), and that is wholly owned, directly or indirectly, by the Purchaser.
                                                                                                                                      Exhibit 4.2

                                                  REGISTRATION RIGHTS AGREEMENT

                   REGISTRATION RIGHTS AGREEMENT, dated as of February 28, 2003, among ITC HOLDINGS CORP., a Michigan
corporation (the ― Company ‖) and INTERNATIONAL TRANSMISSION HOLDINGS LIMITED PARTNERSHIP, a Michigan limited
partnership ( ― Partnership ‖).

                                                                  RECITALS

                  As of the date hereof, the Partnership is the holder of 8,420,000 shares of common stock, no par value (the ― Common Stock
‖), of the Company. The Company desires to provide to the Partnership and to each other Holder (as defined below) rights to registration
under the Securities Act (as defined below) of Registrable Securities (as defined below), on the terms and subject to the conditions set forth
herein.

                                                                AGREEMENT

                 1.              Definitions . As used in this Agreement, the following capitalized terms shall have the following respective
meanings:

                 ― Demand Party ‖: (a) The Partnership or (b) any other Holder or Holders, including, without limitation, any Person that
        may become an assignee of the Partnership’s rights hereunder; provided that to be a Demand Party under this clause (b), a Holder or
        Holders must either individually or in aggregate with all other Holders with whom it is acting together to demand registration own at
        least 10% of the total number of Registrable Securities.

                  ― Exchange Act ‖: The Securities Exchange Act of 1934, as amended, or any similar federal statute then in effect, and a
        reference to a particular section thereof shall be deemed to include a reference to the comparable section, if any, of any such similar
        federal statute.

                 ― Holder ‖: The Partnership and any other holder of Registrable Securities (including any direct or indirect transferee of the
        Partnership who agrees in writing to be bound by the provisions of this Agreement).

                 ― Person ‖: Any individual, partnership, joint venture, corporation, limited liability company, trust, unincorporated
        organization, government or any department or agency thereof or any other entity.

                  ― Registrable Securities ‖: Any Common Stock acquired by the Partnership from the Company or any affiliate of the
        Company, and any Common Stock which may be issued or distributed in respect thereof by way of stock dividend or stock split or
        other distribution, recapitalization or reclassification. Any particular Registrable Securities that are issued shall cease to be
        Registrable Securities when (i) a registration statement with respect to the sale by the Holder of such securities shall have become
        effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement,
        (ii) such securities shall have been distributed to the public
         pursuant to Rule 144 (or any successor provision) under the Securities Act, (iii) such securities shall have been otherwise transferred,
         new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company and
         subsequent disposition of such securities shall not require registration or qualification of such securities under the Securities Act or
         any state securities or blue sky law then in force, or (iv) such securities shall have ceased to be outstanding.

                   ― Registration Expenses ‖: Any and all expenses incident to performance of or compliance with this Agreement, including,
         without limitation, (i) all SEC and stock exchange or National Association of Securities Dealers, Inc. (the ― NASD ‖) registration and
         filing fees (including, if applicable, the fees and expenses of any ―qualified independent underwriter,‖ as such term is defined in
         Schedule E to the By-laws of the NASD, and of its counsel), (ii) all fees and expenses of complying with securities or blue sky laws
         (including fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Registrable
         Securities), (iii) all printing, messenger and delivery expenses, (iv) all fees and expenses incurred in connection with the listing of the
         Registrable Securities on any securities exchange pursuant to clause (viii) of Section 4 and all rating agency fees, (v) the fees and
         disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits
         and/or ―cold comfort‖ letters required by or incident to such performance and compliance, (vi) the reasonable fees and disbursements
         of counsel selected pursuant to Section 7 hereof by the Holders of the Registrable Securities being registered to represent such Holders
         in connection with each such registration, (vii) any fees and disbursements of underwriters customarily paid by the issuers or sellers of
         securities, including liability insurance if the Company so desires or if the underwriters so require, and the reasonable fees and
         expenses of any special experts retained in connection with the requested registration, but excluding underwriting discounts and
         commissions and transfer taxes, if any, and (viii) other reasonable out-of-pocket expenses of Holders ( provided that such expenses
         shall not include expenses of counsel other than those provided for in clause (vi) above).

                  ― Securities Act ‖: The Securities Act of 1933, as amended, or any similar federal statute then in effect, and a reference to a
         particular section thereof shall be deemed to include a reference to the comparable section, if any, of any such similar federal statute.

                  ― SEC ‖: The Securities and Exchange Commission or any other federal agency at the time administering the Securities Act
         or the Exchange Act.

                  2.               Incidental Registrations . (a) Right to Include Registrable Securities . If the Company at any time after the
date hereof proposes to register its Common Stock under the Securities Act (other than a registration on Form S-4 or S-8, or any successor or
other forms promulgated for similar purposes), whether or not for sale for its own account (but excluding in a registration under Section 3
hereof), in a manner which would permit registration of Registrable Securities for sale to the public under the Securities Act, it will, at each
such time, give prompt written notice to all Holders of Registrable Securities of its intention to do so and of such Holders’ rights under this
Section 2. Upon the written request of any such Holder made within 15 days after the receipt of any such notice (which request shall specify
the Registrable
Securities intended to be disposed of by such Holder), the Company will use its best efforts to effect the registration under the Securities Act of
all Registrable Securities which the Company has been so requested to register by the Holders thereof, to the extent requisite to permit the
disposition of the Registrable Securities so to be registered; provided that (i) if, at any time after giving written notice of its intention to register
any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall
determine for any reason not to proceed with the proposed registration of the securities to be sold by it, the Company may, at its election, give
written notice of such determination to each Holder of Registrable Securities and, thereupon, shall be relieved of its obligation to register any
Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection
therewith), and (ii) if such registration involves an underwritten offering, all Holders of Registrable Securities requesting to be included in the
Company’s registration must sell their Registrable Securities to the underwriters selected by the Company on the same terms and conditions as
apply to the Company, with such differences, including any with respect to indemnification and liability insurance, as may be customary or
appropriate in combined primary and secondary offerings. If a registration requested pursuant to this Section 2(a) involves an underwritten
public offering, any Holder of Registrable Securities requesting to be included in such registration may elect, in writing prior to the effective
date of the registration statement filed in connection with such registration, not to register such securities in connection with such registration.

                  (b)              Expenses . The Company will pay all Registration Expenses in connection with each registration of
Registrable Securities.

                   (c)              Priority in Incidental Registrations . If a registration pursuant to this Section 2 involves an underwritten
offering and the managing underwriter advises the Company in writing that, in its opinion, the number of securities requested to be included in
such 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 securities offered in such offering as contemplated by the Company (other than the Registrable Securities), then the
Company will include in such registration (i) first, 100% of the securities the Company proposes to sell and (ii) second, to the extent of the
number of Registrable Securities requested to be included in such registration pursuant to this Section 2 which, in the opinion of such managing
underwriter, can be sold without having the adverse effect referred to above, the number of Registrable Securities which the Holders have
requested to be included in such registration, such amount to be allocated pro rata among all requesting Holders on the basis of the relative
number of shares of Registrable Securities then held by each such Holder (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).
                    3.              Registration on Request . (a) Request by the Demand Party . At any time, upon the written request of the
Demand Party requesting that the Company effect the registration under the Securities Act of all or part of such Demand Party’s Registrable
Securities and specifying the amount and intended method of disposition thereof, the Company will promptly give written notice of such
requested registration to all other Holders of such Registrable Securities, and thereupon will, as expeditiously as possible, use its best efforts to
effect the registration under the Securities Act of:

                  (i)              such Registrable Securities which the Company has been so requested to register by the Demand Party; and

                  (ii)            all other Registrable Securities of the same class or series as are to be registered at the request of a Demand
         Party and which the Company has been requested to register by any other Holder thereof by written request given to the Company
         within 15 days after the giving of such written notice by the Company (which request shall specify the amount and intended method of
         disposition of such Registrable Securities),

all to the extent necessary to permit the disposition (in accordance with the intended method thereof as aforesaid) of the Registrable Securities
so to be registered; provided that, unless Holders of a majority of the shares of Registrable Securities held by Holders consent thereto in
writing, the Company shall not be obligated to file a registration statement relating to any registration request under this Section 3(a) (x) within
a period of nine months after the effective date of any other registration statement relating to any registration request under this
Section 3(a) which was not effected on Form S-3 (or any successor or similar short-form registration statement) or relating to any registration
effected under Section 2, or (y) if, with respect thereto, the managing underwriter, the SEC, the Securities Act or the rules and regulations
thereunder, or the form on which the registration statement is to be filed, would require the conduct of an audit other than the regular audit
conducted by the Company at the end of its fiscal year, in which case the filing may be delayed until the completion of such regular audit
(unless the Holders of the Registrable Securities to be registered agree to pay the expenses of the Company in connection with such an audit
other than the regular audit).

                    (b)            Registration Statement Form . If any registration requested pursuant to this Section 3 which is proposed by
the Company to be effected by the filing of a registration statement on Form S-3 (or any successor or similar short-form registration statement)
shall be in connection with an underwritten public offering, and if the managing underwriter shall advise the Company in writing that, in its
opinion, the use of another form of registration statement is of material importance to the success of such proposed offering, then such
registration shall be effected on such other form.

                   (c)             Expenses . The Company will pay all Registration Expenses in connection with the first six (6) registrations
of each class or series of Registrable Securities pursuant to this Section 3 upon the written request of any of the Holders. All Registration
Expenses for any subsequent registrations of Registrable Securities pursuant to this Section 3 shall be paid pro rata by the Company and all
other Persons (including the Holders) participating in such registration on the basis of the relative number of shares of Common Stock of each
such person whose Registrable Securities are included in such registration.
                  (d)             Effective Registration Statement . A registration requested pursuant to this Section 3 will not be deemed to
have been effected unless it has become effective; provided that if, within 180 days after it has become effective, the offering of Registrable
Securities pursuant to such registration is interfered with by any stop order, injunction or other order or requirement of the SEC or other
governmental agency or court, such registration will be deemed not to have been effected.

                   (e)             Selection of Underwriters . If a requested registration pursuant to this Section 3 involves an underwritten
offering, the Holders of a majority of the shares of Registrable Securities which are held by Holders and which the Company has been
requested to register shall have the right to select the investment banker or bankers and managers to administer the offering; provided , however
, that such investment banker or bankers and managers shall be reasonably satisfactory to the Company.

                    (f)             Priority in Requested Registrations . If a requested registration pursuant to this Section 3 involves an
underwritten offering and the managing underwriter advises the Company in writing that, in its opinion, the number of securities requested to
be included in such registration (including securities of the Company which are not Registrable Securities) exceeds the number which can be
sold in such offering, the Company will include in such registration only the Registrable Securities of the Holders requested to be included in
such registration. In the event that the number of Registrable Securities of the Holders requested to be included in such registration exceeds
the number which, in the opinion of such managing underwriter, can be sold, the number of such Registrable Securities to be included in such
registration shall be allocated pro rata among all such requesting Holders on the basis of the relative number of shares of Registrable Securities
then held by each such Holder ( provided that any shares thereby allocated to any such Holder that exceed such Holder’s request shall be
reallocated among the remaining requesting Holders in like manner). In the event that the number of Registrable Securities requested to be
included in such registration is less than the number which, in the opinion of the managing underwriter, can be sold, the Company may include
in such registration the securities the Company proposes to sell up to the number of securities that, in the opinion of the underwriter, can be
sold.

                   (g)             Additional Rights . If the Company at any time grants to any other holders of Common Stock any rights to
request the Company to effect the registration under the Securities Act of any such shares of Common Stock on terms more favorable to such
holders than the terms set forth in this Section 3, the terms of this Section 3 shall be deemed amended or supplemented to the extent necessary
to provide the Holders such more favorable rights and benefits.

                   4.              Registration Procedures . If and whenever the Company is required to use its best efforts to effect or cause
the registration of any Registrable Securities under the Securities Act as provided in this Agreement, the Company will, as expeditiously as
possible:

                  (i)              prepare and, in any event within 120 days after the end of the period within which a request for registration
         may be given to the Company pursuant to Section 2 or 3, file with the SEC a registration statement with respect to such Registrable
         Securities and use its best efforts to cause such registration statement to become effective,
provided , however , that the Company may discontinue any registration of its securities which is being effected pursuant to Section 2
at any time prior to the effective date of the registration statement relating thereto;

          (ii)             prepare and file with the SEC such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period not in excess of
270 days and to comply with the provisions of the Securities Act, the Exchange Act and the rules and regulations of the SEC
thereunder with respect to the disposition of all securities covered by such registration statement during such period in accordance
with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement; provided that before
filing a registration statement or prospectus, or any amendments or supplements thereto, the Company will furnish to counsel selected
pursuant to Section 7 hereof by the Holders of the Registrable Securities covered by such registration statement to represent such
Holders, copies of all documents proposed to be filed, which documents will be subject to the review of such counsel;

         (iii)          furnish to each seller of such Registrable Securities such number of copies of such registration statement and
of each amendment and supplement thereto (in each case including all exhibits filed therewith, including any documents incorporated
by reference), such number of copies of the prospectus included in such registration statement (including each preliminary prospectus
and summary prospectus), in conformity with the requirements of the Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the disposition of the Registrable Securities by such seller;

          (iv)           use its best efforts to register or qualify such Registrable Securities covered by such registration in such
jurisdictions as each seller shall reasonably request, and do any and all other acts and things which may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such Seller,
except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this clause (iv), it would not be obligated to be so qualified, to subject itself to taxation
in any such jurisdiction or to consent to general service of process in any such jurisdiction;

         (v)           use its best efforts to cause such Registrable Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities;

          (vi)           notify each seller of any such Registrable Securities covered by such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the Securities Act within the appropriate period mentioned in clause (ii) of
this Section 4, of the Company’s becoming aware that the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then existing, and at the request of any such seller, prepare and
furnish to such seller a reasonable number of copies of an amended or supplemental prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing;

         (vii)          use its best efforts to comply with all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable (but not more than eighteen months) after the effective date of the registration
statement, an earnings statement which shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations
promulgated thereunder;

          (viii)         (A) use its best efforts to list such Registrable Securities on any securities exchange on which the Common
Stock is then listed if such Registrable Securities are not already so listed and if such listing is then permitted under the rules of such
exchange; and (B) use its best efforts to provide a transfer agent and registrar for such Registrable Securities covered by such
registration statement not later than the effective date of such registration statement;

         (ix)            enter into such customary agreements (including an underwriting agreement in customary form), which may
include indemnification provisions in favor of underwriters and other persons in addition to, or in substitution for the provisions of
Section 5 hereof, and take such other actions as sellers of a majority of shares of such Registrable Securities or the underwriters, if
any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities;

         (x)             obtain a ―cold comfort‖ letter or letters from the Company’s independent public accounts in customary form
and covering matters of the type customarily covered by ―cold comfort‖ letters as the seller or sellers of a majority of shares of such
Registrable Securities shall reasonably request;

          (xi)           make available for inspection by any seller of such Registrable Securities covered by such registration
statement, by any underwriter participating in any disposition to be effected pursuant to such registration statement and by any
attorney, accountant or other agent retained by any such seller or any such underwriter, all pertinent financial and other records,
pertinent corporate documents and properties of the Company, and cause all of the Company’s officers, directors and employees to
supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such
registration statement;

          (xii)          notify counsel (selected pursuant to Section 7 hereof) for the Holders of Registrable Securities included in
such registration statement and the managing underwriter or agent, immediately, and confirm the notice in writing (A) when the
registration statement, or any post-effective amendment to the registration statement, shall have become effective, or any supplement
to the prospectus or any amendment
         prospectus shall have been filed, (B) of the receipt of any comments from the SEC, (C) of any request of the SEC to amend the
         registration statement or amend or supplement the prospectus or for additional information, and (D) of the issuance by the SEC of any
         stop order suspending the effectiveness of the registration statement or of any order preventing or suspending the use of any
         preliminary prospectus, or of the suspension of the qualification of the registration statement for offering or sale in any jurisdiction, or
         of the institution or threatening of any proceedings for any of such purposes;

                   (xiii)        make every reasonable effort to prevent the issuance of any stop order suspending the effectiveness of the
         registration statement or of any order preventing or suspending the use of any preliminary prospectus and, if any such order is issued,
         to obtain the withdrawal of any such order at the earliest possible moment;

                   (xiv)         if requested by the managing underwriter or agent or any Holder of Registrable Securities covered by the
         registration statement, promptly incorporate in a prospectus supplement or post-effective amendment such information as the
         managing underwriter or agent or such Holder reasonably requests to be included therein, including, without limitation, with respect to
         the number of Registrable Securities being sold by such Holder to such underwriter or agent, the purchase price being paid therefor by
         such underwriter or agent and with respect to any other terms of the underwritten offering of the Registrable Securities to be sold in
         such offering; and make all required filings of such prospectus supplement or post-effective amendment as soon as practicable after
         being notified of the matters incorporated in such prospectus supplement or post-effective amendment;

                  (xv)            cooperate with the Holders of Registrable Securities covered by the registration statement and the managing
         underwriter or agent, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends)
         representing securities to be sold under the registration statement, and enable such securities to be in such denominations and
         registered in such names as the managing underwriter or agent, if any, or such Holders may request;

                  (xvi)         obtain for delivery to the Holders of Registrable Securities being registered and to the underwriter or agent an
         opinion or opinions from counsel for the Company in customary form and in form, substance and scope reasonably satisfactory to
         such Holders, underwriters or agents and their counsel; and

                  (xvii)        cooperate with each seller of Registrable Securities and each underwriter or agent participating in the
         disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the
         NASD.

                   The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish the
Company with such information regarding such seller and pertinent to the disclosure requirements relating to the registration and the
distribution of such securities as the Company may from time to time reasonably request in writing.
                    Each Holder of Registrable Securities agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in clause (vi) of this Section 4, such Holder will forthwith discontinue disposition of Registrable Securities pursuant
to the registration statement covering such Registrable Securities until such Holder’s receipt of the copies of the supplemented or amended
prospectus contemplated by clause (vi) of this Section 4, and, if so directed by the Company, such Holder will deliver to the Company (at the
Company’s expense) all copies, other than permanent file copies then in such Holder’s possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice. In the event the Company shall give any such notice, the period mentioned in clause
(ii) of this Section 4 shall be extended by the number of days during the period from and including the date of the giving of such notice
pursuant to clause (vi) of this Section 4 and including the date when each seller of Registrable Securities covered by such registration statement
shall have received the copies of the supplemented or amended prospectus contemplated by clause (vi) of this Section 4.

                    5.              Indemnification . (a) Indemnification by the Company . In the event of any registration of any securities of
the Company under the Securities Act pursuant to Section 2 or 3, the Company will, and it hereby does, indemnify and hold harmless, to the
extent permitted by law, the seller of any Registrable Securities covered by such registration statement, each affiliate of such seller and their
respective directors and officers, members or general and limited partners (including any director, officer, affiliate, employee, agent and
controlling Person of any of the foregoing), each other Person who participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such seller or any such underwriter within the meaning of the Securities Act (collectively, the ―
Indemnified Parties ‖), against any and all losses, claims, damages or liabilities, joint or several, and expenses (including reasonable attorney’s
fees and reasonable expenses of investigation) to which such Indemnified Party may become subject under the Securities Act, common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof, whether or not such Indemnified
Party is a party thereto) arise out of or are based upon (a) any untrue statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the Securities Act, any preliminary, final or summary prospectus
contained therein, or any amendment or supplement thereto, or (b) any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein (in the case of a prospectus, in light of the circumstances under which they were
made) not misleading, and the Company will reimburse such Indemnified Party for any legal or any other expenses reasonably incurred by it in
connection with investigating or defending against any such loss, claim, liability, action or proceeding; provided that the Company shall not be
liable to any Indemnified Party in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in
such registration statement or amendment or supplement thereto or in any such preliminary, final or summary prospectus in reliance upon and
in conformity with written information furnished to the Company through an instrument duly executed by such seller specifically stating that it
is for use in the preparation thereof; and provided , further , that the Company will not be liable to any Person who participates as an
underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of
the Securities Act, under the indemnity agreement in this Section 5(a) with
respect to any preliminary prospectus or the final prospectus or the final prospectus as amended or supplemented, as the case may be, to the
extent that any such loss, claim, damage or liability of such underwriter or controlling Person results from the fact that such underwriter sold
Registrable Securities to a person to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the final
prospectus or of the final prospectus as then amended or supplemented, whichever is most recent, if the Company has previously furnished
copies thereof to such underwriter. For purposes of the last proviso to the immediately preceding sentence, the term ―prospectus‖ shall not be
deemed to include the documents, if any, incorporated therein by reference, and no Person who participates as an underwriter in the offering or
sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the Securities Act, shall be
obligated to send or give any supplement or amendment to any document incorporated by reference in any preliminary prospectus or the final
prospectus to any person other than a person to whom such underwriter had delivered such incorporated document or documents in response to
a written request therefor. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such
seller or any Indemnified Party and shall survive the transfer of such securities by such seller.

                    (b)             Indemnification by the Seller . The Company may require, as a condition to including any Registrable
Securities in any registration statement filed in accordance with Section 4 herein, that the Company shall have received an undertaking
reasonably satisfactory to it from the prospective seller of such Registrable Securities or any underwriter to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 5(a)) the Company and all other prospective sellers with respect to any untrue
statement or alleged untrue statement in or omission or alleged omission from such registration statement, any preliminary, final or