Hi Akangi,
i) Employee Stock Option Plan (ESOP)
Employee Stock Option Plan (ESOP) means a plan under which the company grants options to employees.
ii) Employee Stock Purchase Plan (ESPP)
Employee Stock Purchase Plan (ESPP) means a plan under which the company offers shares to employees as part of a public issue or otherwise.
(iii) Exercise
The act of exercise implies an application being made by the employee to the company to have the options vested in him issued as shares upon payment of the option price. Exercise can take place as specified after vesting.
iv) Exercise period
Exercise period means the time period after vesting within which the employee should exercise his right to buy the shares by payment of the option price on the options vested in him. If the exercise period lapses the vested option lapses and no right shall accrue to the employee thereafter. The employee may exercise all the options vested in him in one
stroke or choose to exercise a number of options within the exercise period. Unless shares are issued on exercise, the employee shall have no right to receive any dividend or to vote or in any manner enjoy the benefits of a shareholder.
v) Grant
Grant is a process by which an employee is given an option. It is the delivering of the options to the employee. The grant shall specify the number of options given, the time of vesting, etc.
vi) Independent Director
A director of the company who is not a promoter or part of the promoter group and who is not a whole time director. Market Price
vii)
Market Price of a share on a given date means the closing price on that date in the stock exchange on which it is listed. 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 during that date should be considered. If shares are not quoted on the given date, then the share price on the next trading day should be considered.
viii) Option
An option is a right but not an obligation granted to an employee under the ESOP to apply for and be allotted shares of the company at a price determined earlier, during or within a specific period of time, subject to the requirements of vesting.
ix)Option price/ grant price/ exercise price
An Option price/ grant price/ exercise price shall mean the price payable by the employee, determined by the Compensation Committee of the Board of the company for exercising the option granted to the him. In other words, this will be the price at which the employee will exercise his option.
And definitely such plan will a lot to motivate the employees, it will increase the retention, it will help to have dedicated employees and lot more.
Hope it will definitely help you a lot to understand ESOP.
Regards,
Amit Seth.