Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers.
Approval of the Executive Omnibus Plan
On February 4, 2020, the Board of Directors
of ITC Holdings Corp. (the “Company”) approved the Executive Omnibus Plan (the “Executive Omnibus Plan”)
which is available for employees of the Company with a title of Vice President or higher, including the “Named Executive
Officers” from the most recent Annual Report on Form 10-K (“NEOs”). A summary of the key terms of the Omnibus
Plan is set forth below.
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Eligibility
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Employees with a title of Vice President or higher.
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Administration
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The Governance and Human Resources Committee (the “Committee”) of the Board generally has broad administrative power to make grants and determine award terms and conditions, including complete flexibility to determine performance conditions and vesting periods and to make adjustments for an extraordinary event.
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Types of Awards
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Units denominated in phantom common shares of Fortis, Inc. (“Fortis”) (no voting, dividend or transfer rights) based on Toronto Stock Exchange prices. Payouts will only be made in cash. There are no Company or Fortis shares reserved for issuance. Awards are not assignable.
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Performance-based units vest based on satisfying Company performance goals and continued service.
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Service-based units vest based on continued service only.
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Unless the Committee otherwise determines, dividend equivalents will be credited for both types of units, calculated based on outstanding units (including prior dividend equivalents)).
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Cash incentive awards may be issued under the Executive Omnibus Plan at the Committee’s discretion. Cash incentive awards are not based on value of Fortis shares.
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Currency Translation
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Awards are denominated in U.S. dollars. Currency translations from Canadian dollars for any award are based on the exchange rate as of beginning of year in which the award is made. The same rate is used for all currency translations relating to that award.
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Change of Control
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The vesting of units is accelerated and are paid out upon the completion of a Change of Control.
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Service-based units — full amount vests.
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Performance-based units — higher of target or actual at closing; prorated based on performance period time elapsed.
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Cash incentive awards may be paid out upon a Change of Control at the Committee’s discretion.
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Termination of Service
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Voluntary resignation, involuntary termination without cause or termination for cause results in a forfeiture of unvested amounts.
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Death, Disability or Retirement with 15 years or more of Service:
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Service-based units have accelerated vesting and are paid out
upon termination.
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Performance-based units and cash incentive awards are paid out at the end of performance period as if the participant continued to be an employee on the payment date..
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Death, Disability or Retirement with less than 15 years of Service:
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Service-based units have accelerated vesting and a prorated payout upon termination if termination occurs on or after the one year anniversary of the grant date. Service-based units are forfeited if termination occurs prior to the one year anniversary of the grant date.
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Performance-based units and cash incentive awards have a prorated payout at end of performance period to extent goals are met if termination occurs on or after the one year anniversary of the grant date. Performance-based units and cash incentive awards are forfeited if termination occurs prior to the one year anniversary of the grant date.
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Clawback
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Awards to executive officers are subject to Company Recoupment Policy, as in effect from time to time.
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Amendment
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The Executive Omnibus Plan may be amended or terminated at any time by the Board of Directors of the Company, except as to outstanding awards. Changes to outstanding awards that are material and adverse to recipient require recipient’s consent
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Other
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Plan term indefinite
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A copy of the Executive
Omnibus Plan will be filed as an exhibit to the Company’s next Annual Report on Form 10-K.
Approval of 2020 Performance-Based Unit Awards under the
Executive Omnibus Plan
On February 4, 2020, the Committee
made grants of performance-based units under the Executive Omnibus Plan to certain employees with a title of Vice President or
above employed on that date with a grant date of January 1, 2020. Grants made to the NEOs are set forth in the table below.
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Name and Office
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Performance-
Based Units(1)
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Linda H. Apsey, President and Chief Executive Officer
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32,732
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Gretchen L. Holloway, Senior Vice President and Chief Financial Officer
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11,170
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Jon E. Jipping, Executive Vice President and Chief Operating Officer
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16,448
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Daniel J. Oginsky, Executive Vice President and Chief Administrative Officer
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13,618
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Christine Mason Soneral, Senior Vice President and General Counsel
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11,060
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(1) The number of performance-based
units represents the target number awarded and issued. The actual number of units that may be earned is 200% of the target
number, but only if both performance goals are met at the maximum level.
Performance-Based Unit Award Agreement
The terms of the January 1, 2020 performance-based
units awards are set forth in a form of performance-based unit award agreement (the “PSA Agreement”), which will be
filed as an exhibit to the Company’s next Annual Report on Form 10-K. The PSA Agreement provides generally that
the award will vest on the Vesting Date to the extent one or more of the performance goals are met and if the participant continues
to be employed by the Company through the Vesting Date. The performance-based unit awards will become “earned”
as set forth in the following table:
Measurement
Category
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Goal at
Threshold
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Units at
Threshold
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Goal at
Target
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Units at
Target
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Goal at
Maximum
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Units at
Maximum
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Fortis Total Shareholder Return (“TSR”)
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30th percentile
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50% of Target Number
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50th percentile
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100% of Target Number
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85th percentile
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200% of Target Number
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Cumulative Consolidated Net Income (“CCNI”)
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99% of CCNI goal
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50% of Target Number
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100% of CCNI goal
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100% of Target Number
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102% of CCNI goal
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200% of Target Number
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101% of CCNI goal
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150% of Target Number
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The “Payment Criteria Period”
for the award is January 1, 2020 through December 31, 2022. The TSR and CCNI performance measures are independent
of each other; that is, if the threshold level of one performance measure is attained, units relating to that measure will be “earned”
even if the threshold level of the other performance measure is not attained. One-half of the target number of units shall
be related to the TSR goal and one-half of the target number of units shall be related to the CCNI goal.
The Total Shareholder Return of Fortis and
Fortis’ peer companies shall be computed in U.S. dollars as follows:
A: Calculate the market price as of
the first day of the Payment Criteria Period (if necessary, converted into U.S. dollars based on the Canadian dollar to U.S. dollar
exchange rate as of beginning of year in which award is made).
B: Calculate the market price as of
the last day of the Payment Criteria Period (if necessary, converted into U.S. dollars based on the Canadian dollar to U.S. dollar
exchange rate as of beginning of year in which award is made).
C: Calculate the total dividends paid
per share of its common stock (or equivalent security) during the Payment Criteria Period (if necessary, converted into U.S. dollars
based on the Canadian dollar to U.S. dollar exchange rate as of beginning of year in which award is made).
Total Shareholder Return = ((B – A)
+ C)/A
Fortis Total Shareholder Return will be
compared to the Total Shareholder Return during the Payment Criteria Period for each of the companies in Fortis’ peer group, excluding
those which are not traded on a national securities exchange at the end of the Payment Criteria Period.
Consolidated Net Income for the Company
for each calendar year in the Payment Criteria Period shall be equal to net income as set forth in the Company’s audited
consolidated financial statements contained in its Annual Report on Form 10-K for such year, as adjusted for certain extraordinary
items and changes in return on equity, in each case in the Committee’s discretion. Cumulative Consolidated Net Income
for the Company during the Payment Criteria Period shall be the sum of the Consolidated Net Income for each of the three years
in the Payment Criteria Period.
Under the terms of the PSA Agreement, performance-based
units vest in accordance with the Executive Omnibus Plan described above.
Item 5.07. Submission of Matter to a Vote of Security
Holders.
On February 4, 2020, the shareholder
of the Company pursuant to action by unanimous written consent of the sole shareholder elected the following directors to the Company’s
Board of Directors: Linda H. Apsey, Robert A. Elliott, Albert Ernst, Alexander I. Greenbaum, James P. Laurito, Barry V. Perry,
Sandra E. Pierce, Kevin L. Prust, A. Douglas Rothwell, Thomas G. Stephens and Joseph L. Welch.
