Para 2 - Definitions - SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999

2. Definitions: 2.1 In these Guidelines, unless otherwise defined;- (1) employee means (a) a permanent employee of the company working in India or out of India; or (b) a director of the company, whether a whole time director or not; or (c) an employee as defined in sub-clauses (a) or (b) of a subsidiary, in India or out of India, or of a holding company of the company. (2) employee compensation means the total cost incurred by the company towards employee compensation including basic salary, dearness allowance, other allowances, bonus and commissions including the value of all perquisites provided, but does not include: (a) the fair value of the option granted under an Employee Stock Option Scheme; and (b) the discount at which shares are issued under an Employee Stock Purchase Scheme. [1] [(2A) employee stock option means the option given to the whole-time Directors, Officers or employees of a company which gives such Directors, Officers or employees, the benefit or right to purchase or subscribe at a future date, the securities offered by the company at a predetermined price.] [2] [(3) employee stock option scheme (ESOS) means a scheme under which a company grants employee stock option.] (4) employee stock purchase scheme (ESPS) means a scheme under which the company offers shares to employees as part of a public issue or otherwise. [3] [(4a) ESOS shares means shares arising out of exercise of options granted under ESOS.] [4] [(4b) ESPS shares means shares arising out of grant of shares under ESPS.] (5) exercise means making of an application by the employee to the company for issue of shares against option vested in him in pursuance of the ESOS. (6) exercise period means the time period after vesting within which the employee should exercise his right to apply for shares against the option vested in him in pursuance of the ESOS. (7) exercise price means the price payable by the employee for exercising the option granted to him in pursuance of ESOS. [5] [(7a) fair value of an option means the fair value calculated in accordance with Schedule III.] (8) grant means issue of option to employees under ESOS. (9) independent director means a director of the company, not being a whole time director and who is neither a promoter nor belongs to the promoter group. [6] [(9a) intrinsic value means the excess of the market price of the share ` [ ] under ESOS over the exercise price of the option (including up-front payment, if any).] [8] [(10) market price means the latest available closing price, prior to the date of the meeting of the Board of Directors in which options are granted/ shares are issued, on the stock exchange on which the shares of the company are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date shall be considered. ] [9] [(11) option grantee means an employee having right but not an obligation to exercise in pursuance of the ESOS.] (12) promoter means; (a) the person or persons who are in over-all control of the company; (b) the person or persons who are instrumental in the formation of the company or programme pursuant to which the shares were offered to the public; (c) the persons or persons named in the offer document as promoter(s). Provided that a director or officer of the company if they are acting as such only in their professional capacity will not be deemed to be a promoter. Explanation: Where a promoter of a company is a body corporate, the promoters of that body corporate shall also be deemed to be promoters of the company. (13) promoter group means (a) an immediate relative of the promoter (i.e. spouse of that person, or any parent, brother, sister or child of the person or of the spouse); (b) persons whose shareholding is aggregated for the purpose of disclosing in the offer document shareholding of the promoter group . (14) share means equity shares and securities convertible into equity shares and shall include American Depository Receipts (ADRs), Global Depository Receipts (GDRs) or other depository receipts representing underlying equity shares or securities convertible into equity shares. (15) vesting means the process by which the employee is given the right to apply for shares of the company against the option granted to him in pursuance of ESOS. (16) vesting period means the period during which the vesting of the option granted to the employee in pursuance of ESOS takes place. 2.2 All other expressions unless defined herein shall have the same meaning as have been assigned to them under the Securities and Exchange Board of India Act, 1992 or the Securities Contracts (Regulation) Act, 1956 or the Companies Act, 1956, SEBI (Disclosure and Investor Protection) Guidelines, or any statutory modification or re-enactment thereof, as the case may be. ******* [1] Inserted vide circular no. SEBI/PMD/MBD/ESOP/2/2003/30/06 dated June 30, 2003, w. e. f. June 30, 2003. [2] Substituted vide circular no. SEBI/PMD/MBD/ESOP/2/2003/30/06 dated June 30, 2003, w. e. f. June 30, 2003. Prior to its substitution, sub-clause (3) read as under: (3) employee stock option scheme (ESOS) means a scheme under which a company grants option to employees. [3] Inserted vide circular no. SEBI/PMD/MBD/ESOP/2/2003/30/06 dated June 30, 2003, w. e. f. June 30, 2003. [4] Inserted vide circular no. SEBI/PMD/MBD/ESOP/2/2003/30/06 dated June 30, 2003, w. e. f. June 30, 2003. [5] Inserted vide circular no. SEBI/PMD/MBD/ESOP/2/2003/30/06 dated June 30, 2003, w. e. f. June 30, 2003. [6] Inserted vide circular no. SEBI/PMD/MBD/ESOP/2/2003/30/06 dated June 30, 2003, w. e. f. June 30, 2003. [7] The words at the date of grant of the option omitted vide circular no. SEBI/CFD/DIL/ESOP/3/ 2004/22/7 dated July 22, 2004, w. e. f. July 22, 2004. [8] Substituted vide circular no. SEBI/CFD/DIL/ESOP/3/2004/22/7 dated July 22, 2004, w. e. f. July 22, 2004. Prior to its substitution, sub-clause (10), as substituted vide circular no. SEBI/PMD/MBD/ESOP/ 2/2003/30/06 dated June 30, 2003, w. e. f. June 30, 2003, read as under: (10) market price of a share on a given date means the average of the two weeks high and low price of the share preceding the date of grant of option on the stock exchange on which the shares of the company are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume during the aforesaid period should be considered. Prior to the abovementioned substitution made vide circular no. SEBI/PMD/MBD/ESOP/2/2003/ 30/ 06 dated June 30, 2003, sub-clause (10) originally read as under: (10) market price of a share on a given date means the closing price of the shares on that date on the stock exchange on which the shares of the company are listed. [Explanation: If the shares are listed on more than one stock exchange, but quoted only on one stock exchange on the given date, then the price on that stock exchange should be considered. If the share price is quoted on more than one stock exchange, then the stock exchange where there is highest trading volume on that date should be considered. If share price is not quoted on the given date, then the share price on the next trading day should be considered.] It is clarified that in respect of periods between June 30, 2003 and July 22, 2004, companies shall be free to follow the provisions of clause 2.1 (10), either as amended vide the aforesaid circular dated June 30, 2003 or as it existed prior to the amendment made vide the aforesaid circular dated June 30, 2003. [9] Substituted vide circular no. SEBI/PMD/MBD/ESOP/2/2003/30/06 dated June 30, 2003, w. e. f. June 30, 2003. Prior to its substitution, sub-clause (11) read as under: (11) option means a right but not an obligation granted to an employee in pursuance of ESOS to apply for shares of the company at a pre-determined price.