At an Extraordinary General Meeting of the Company in Calcutta on January 17, 2001, the shareholders of ITC Limited approved two special resolutions providing for the allotment of Stock Options to employees. The Company believes that an Employee Stock Option Scheme (ESOS) is an effective strategy to attract and retain the best talent in an increasingly competitive business environment. The Company also views stock options as an instrument to synergise the interests of employees with those of the shareholders by creating a common sense of purpose in building sustainable shareholder value.

The granting of Options to employees will result in the issue of shares not exceeding five per cent of the issued and subscribed Share Capital of the Company as on March 31, 2000. As stock options have only recently been introduced in India, the coverage will be initially confined to Directors and senior managers of the Company and its subsidiaries, numbering around 80. The Board may consider extending coverage to other levels of management later, based on the experience gained.

The appraisal process to determine the eligibility of employees for issue of Options will include the Company's performance, the level and grade of the employee and any other criteria as may be determined by the Board.

The vesting of Options will commence one year after the date of grant and may extend up to three years from that date. Vesting may take place in tranches. The exercise period will commence from the date of vesting and will expire on the completion of five years from the date of grant.

The exercise price will be the closing market price of the Company's shares on the National Stock Exchange (NSE) on the date of grant, or a price not lower than the average market price of the Company's share in the NSE in the six months preceding the date of grant, as may be determined by the Board.

The Board will determine the number of Options that will be issued to an employee. However, no single employee will be granted Options exceeding 2,45,414 ordinary shares in a block of 5 years (which is 0.1% of the issued and subscribed Share Capital of the Company).