Document:

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                                                                    EXHIBIT 10.1

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                            Rediff.com India Limited
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                    EMPLOYEE STOCK OPTION PLAN 1999 ("ESOP")

                                    CONTENTS

<TABLE>
<CAPTION>
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    NO.                            PARTICULARS                         PAGE
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<S>            <C>                                                     <C>
     I.        INTRODUCTION                                             1
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    II.        DEFINITIONS                                              2
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    III.       OBJECTIVES                                               3
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    IV.        ESOP FEATURES                                            4
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     V.        ELIGIBLE PERSONS                                         5
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    VI.        ESOP COMMITTEE                                           6
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    VII.       WARRANTS                                                 8
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   VIII.       EQUITY SHARES                                            12
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    IX.        EXIT MECHANISM                                           13
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     X.        VARIATION OF TERMS OF ESOP                               14
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    XI.        APPLICABLE LAWS                                          15
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    XII.       REPRESENTATION                                           16
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   XIII.       ILLUSTRATION                                             17
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    XIV.       SPECIMEN LETTER FOR APPLICATION FOR EQUITY SHARES        19
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</TABLE>

<PAGE>   2

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                            Rediff.com India Limited
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I.     INTRODUCTION

  1.1  This Document explains the SCHEME called the "EMPLOYEE STOCK OPTION PLAN
       1999" ("ESOP ") formulated by REDIFF.COM INDIA LIMITED for the grant of
       Stock Options in the form of warrants to enable its eligible employees
       and directors to subscribe to the Equity Shares in the company.

  1.2  Every person who is eligible to participate in the ESOP does so subject
       to the provisions contained in this Scheme.

  1.3  Rediff.com India Limited is a company currently engaged in online
       Services including E-Commerce Services.

                                       1
<PAGE>   3

II.   DEFINITIONS

      The following definitions apply throughout this Plan :

<TABLE>
<CAPTION>
      --------------------------------------------------------------------------
      NO.     TERMS            DEFINITIONS
      --------------------------------------------------------------------------
<S>           <C>              <C>
        1.    ESOP             Employee Stock Option Plan of 1999 formulated by
                               the Company
      --------------------------------------------------------------------------
        2.    COMPANY          REDIFF.COM INDIA LIMITED, a company formed and
                               registered under the Companies Act, 1956 and
                               whose shares are being offered to the EMPLOYEES
                               as Stock Options under this Scheme
      --------------------------------------------------------------------------
        3.    EMPLOYEES        All the Eligible  EMPLOYEES and DIRECTORS of the
                               COMPANY, as defined in Para V of this Scheme
      --------------------------------------------------------------------------
        4.    WARRANTS         The WARRANTS issued by the COMPANY to the
                               EMPLOYEES to enable the holders to subscribe to
                               the EQUITY SHARES of the COMPANY in future at a
                               predetermined price
      --------------------------------------------------------------------------
        5.    ESOP COMMITTEE   A Committee comprising of some of the Directors
                               of the COMPANY constituted for the purposes of
                               ESOP
      --------------------------------------------------------------------------
        6.    EQUITY SHARE     Equity Share in the COMPANY of the Face Value
                               (Par Value) of Rs. 10 each or where the Equity
                               Share of the COMPANY has  been split up into a
                               Par  Value of less than Rs. 10, then the
                               equivalent  number  of equity shares  for the
                               revised Par Value per Share.
      --------------------------------------------------------------------------
</TABLE>

                                       2
<PAGE>   4

III.    OBJECTIVES OF ESOP

        The following are the objectives of this ESOP :

           -  as a part of employee Remuneration

           -  to reward employees for their contributions - a performance-linked
              bonus

           -  to encourage employees to contribute their best

           -  to attract capable people

           -  to retain capable employees

           -  to enhance Employees' wealth

           -  to give co-ownership to employees

           -  to reward Directors

                                       3
<PAGE>   5

IV.     ESOP FEATURES

    4.1 In this Paragraph, a broad overview of the ESOP is given and each of the
        features is explained in detail later on. The basic features of the ESOP
        are as follows :

        (a) The ESOP is instituted with effect from April 12, 1999.

        (b) An ESOP COMMITTEE has been constituted to determine the EMPLOYEES
            eligible for the ESOP, the number of warrants be allotted to those
            EMPLOYEES and other related matters.

        (c) The COMPANY has created certain number of WARRANTS for issue to the
            EMPLOYEES.

        (d) These WARRANTS would be allotted from time to time by the COMPANY to
            the eligible EMPLOYEES as per the decision of the ESOP COMMITTEE.

        (e) One WARRANT would entitle the Warrant Holder to subscribe to TWENTY-
            FIVE EQUITY SHARES in the COMPANY. Provided however that if the
            EQUITY SHARE of the COMPANY is split up into a face (par) value of
            less than Rs. 10, then the EMPLOYEE would be entitled to the
            equivalent number of EQUITY SHARES of the revised face (par) value
            per Share. For example, if the Company's equity share of the face
            value of Rs. 10 is split up into a share of the face (par) value of
            Rs. 5, then the entitlement to the number of equity shares of Rs. 5
            each would be 50 per WARRANT.

        (f) The WARRANT Certificate would specify the timing for exercising the
            WARRANT , i.e., for subscribing to the EQUITY SHARES in the COMPANY
            and the other terms and conditions.

        (g) The EQUITY SHARES would be issued on the terms and conditions
            specified later on in this Scheme.

                                       4
<PAGE>   6

V.      ELIGIBLE PERSONS

  5.1   All present and future permanent employees of the COMPANY or of its
        Subsidiary Companies or Holding Companies are eligible to participate in
        the ESOP.

  5.2   All present and future directors of the COMPANY, or of its Subsidiary
        Companies or Holding Companies are eligible to participate in the ESOP,
        unless they are prohibited to participate in the ESOP under any law or
        regulations for the time being in force.

  5.3   All the above-mentioned persons who are eligible to participate in the
        ESOP are for the sake of brevity referred to as "the EMPLOYEES" or "the
        EMPLOYEE", as the case may be.

                                       5
<PAGE>   7

VI.     ESOP COMMITTEE

    6.1 For the effective implementation and monitoring of the ESOP, the Board
        of Directors of the COMPANY has been authorised to constitute an ESOP
        COMMITTEE. The Board of Directors has, in its absolute discretion, power
        to change the composition of the ESOP COMMITTEE from time to time.

        Accordingly, the Board of Directors of the COMPANY has constituted an
        ESOP COMMITTEE consisting of the Chief Executive Officer of the COMPANY
        and Two Independent Directors.

    6.2 The ESOP COMMITTEE would decide the criteria for selecting the EMPLOYEES
        who would be eligible for allotment of the WARRANTS. Further, the ESOP
        COMMITTEE would select from time to time the EMPLOYEES to whom the
        WARRANTS should be allotted and determine the number of WARRANTS to be
        allotted to them. The ESOP COMMITTEE may decide to allot different
        number of WARRANTS to different EMPLOYEES or to different categories of
        EMPLOYEES. The ESOP COMMITTEE may decide to allot the WARRANTS to a Team
        of employees to encourage team spirit, in which event the allocation of
        the WARRANTS among the team members would be made in accordance with the
        principles laid down/approved by the ESOP COMMITTEE. The decision of the
        ESOP COMMITTEE would be final and binding.

    6.3 The major Criteria involved in selection of the Eligible EMPLOYEES would
        include the following factors :

            EMPLOYEES in key functional areas

            Managerial Cadre

            Past Service / Performance

            Current Performance Evaluation

            Expected Future Performance / Contribution

            Minimum years of Future Service

    6.4 The ESOP COMMITTEE shall also frame suitable policies and systems to
        ensure that there is no violation of:

           a) Securities and Exchange Board of India (Insider Trading)
              Regulations,1992; and

           b) Securities and Exchange Board of India (Prohibition of Fraudulent
              and Unfair Trade Practices relating to the Securities Market)
              Regulations,1995, by any EMPLOYEE.

                                       6
<PAGE>   8

    6.5 With respect to any matters that are not specifically provided for, the
        ESOP COMMITTEE shall have absolute discretion to decide such matters in
        the manner deemed fit by it in the best interest of the EMPLOYEES, and
        any such decision of the ESOP COMMITTEE shall be binding on all the
        EMPLOYEES.

                                       7
<PAGE>   9

VII.      WARRANTS

   7.1(a) The COMPANY has created WARRANTS for ESOP, with the rights and
          conditions attached to them as specified in the Scheme.

   (b)    The total number of WARRANTS to be issued by the COMPANY to the
          EMPLOYEES are 5,600 (five thousand six hundred ) WARRANTS entitling
          the WARRANT Holders to subscribe to 1,40,000 (one hundred forty
          thousand only) EQUITY SHARES.

   (c)    The COMPANY has also authorised the Board of Directors of the COMPANY
          to issue and allot, in addition to the WARRANTS mentioned above, such
          number of further WARRANTS to its EMPLOYEES, at such Exercise Price
          and on such other terms and conditions, as the Board of Directors may,
          in its absolute discretion decide, subject to compliance with the
          applicable laws.

   (d)    Simultaneously, with the institution of the ESOP, the COMPANY has
          decided to institute ASSOCIATE STOCK OPTION PLAN 1999 (hereinafter
          referred to as "THE ASOP"), for the purpose of encouraging various
          associates of the COMPANY, such as vendors, consultants, etc., to
          contribute their best for the growth of the COMPANY as well as to
          reward those who assist the COMPANY in its growth. Under the ASOP, the
          COMPANY has decided to allot 3,960 WARRANTS to the associates which
          would entitle them to subscribe to 99,000 (NINETY NINE THOUSAND)
          EQUITY SHARES.

   7.2    The existing issued and paid-up capital of the COMPANY consists of
          3,622,700 EQUITY SHARES of the face (par) value of Rs.10 each. The
          EQUITY SHARES aggregating to 1,40,000 to be issued under the ESOP
          would constitute 3.63 % of the Capital of the COMPANY and the 99,000
          EQUITY SHARES to be issued under the ASOP would constitute 2.56 % of
          the Capital of the COMPANY, after considering the issue of the
          additional EQUITY SHARES under the ESOP and the ASOP.

   7.3    The COMPANY reserves the right to issue / earmark further EQUITY
          SHARES/WARRANTS, at its discretion, for the purposes of the ESOP
          and/or the ASOP, subject to compliance with the applicable laws.

   7.4    Each Warrant will specify the Exercise Price, i.e., the price per
          share to be paid by the WARRANT Holder to the COMPANY for subscribing
          to the EQUITY SHARES which his WARRANT entitles him to.

          The Exercise Price for the WARRANTS will be decided by the ESOP
          Committee at the time of allotment of the WARRANTS. The Exercise Price
          will be at or around the Fair Market Value of the Equity Shares at
          that time.

                                       8
<PAGE>   10

        Provided However That, in respect of the further WARRANTS which may be
        issued by the Board of Directors of the COMPANY under the authorisation
        given by the COMPANY as mentioned in Para 7.1(c) above, the Board of
        Directors will have the absolute discretion to determine the Exercise
        Price.

 7.5    The COMPANY would, on the basis of the decision of the ESOP COMMITTEE,
        allot from time to time the WARRANTS (also known as "GRANT OF OPTION")
        to the eligible EMPLOYEES, without any consideration, along with a
        covering letter.

 7.6    Each WARRANT would grant an OPTION, i.e., entitle the WARRANT Holder, to
        subscribe to 25 (TWENTY FIVE ) EQUITY SHARES at the Exercise Price.
        However, the WARRANT Holder is not obliged to exercise the Option.

 7.7    Every WARRANT will have the minimum and the maximum time for exercising
        the option under the WARRANT. Once the minimum holding period for the
        WARRANT is over, the WARRANT Holder would become eligible for exercising
        the Option granted to him (also known as "VESTING OF THE OPTION"), i.e.,
        he would be entitled to subscribe to the EQUITY SHARES.

        At the time of allotment of the WARRANT, the COMPANY would specify, in
        accordance with the ESOP, the Minimum Holding Period (also known as "THE
        MINIMUM EXERCISE PERIOD" or "THE VESTING PERIOD ") for each WARRANT,
        i.e., the time period after which the WARRANT Holder would be eligible
        for exercising the option.

        The WARRANT Holder shall be entitled to exercise 25% of the WARRANTS
        allotted to him after every 12 months and the first exercise period
        shall commence 12 months after the date of the allotment of the WARRANTS
        to him. Thus, every time an EMPLOYEE has been allotted WARRANTS, he will
        be entitled to exercise the option over a minimum period of FOUR years
        and 25% each year.

        Provided However That, in respect of all the WARRANTS which have yet not
        been issued and / or exercised or such of these WARRANTS as may be
        selected by the Board of Directors of the COMPANY, the Board of
        Directors is authorised, in its absolute discretion, to prescribe no
        minimum holding period (i.e., vesting period) or a lesser holding
        period, for exercise of the WARRANTS.

 7.8    The Maximum Period for exercising the option would be 5 years from the
        date of allotment of the WARRANT and the WARRANT allotted to an EMPLOYEE
        would lapse if it is not exercised by him within the maximum period of 5
        years from the date of its allotment to him.

 7.9    Once WARRANTS become vested in an EMPLOYEE, he may exercise the Option
        under different WARRANTS at various points of time within the Maximum
        Period for exercising the option. However, he must exercise the Option
        under a particular WARRANT (for 25 EQUITY SHARES) at one time.

                                       9
<PAGE>   11

 7.10   If any Bonus and / or Rights Shares are issued by the COMPANY or the
        EQUITY SHARES of the COMPANY are split up reducing the face (par) value
        per share, then the Board of Directors of the COMPANY would, on the
        recommendations of the ESOP COMMITTEE, make a fair and reasonable
        adjustment to the number of outstanding WARRANTS and / or to the
        exercise price.

        Similarly, if the COMPANY takes any action which in the opinion of the
        ESOP COMMITTEE requires any adjustment to the number of outstanding
        WARRANTS and / or the exercise price, then Board of Directors of the
        COMPANY would, on the recommendations of the ESOP COMMITTEE, make a fair
        and reasonable adjustment to the number of outstanding WARRANTS and / or
        to the exercise price.

 7.11   The WARRANTS granted to an EMPLOYEE shall not be transferable to any
        person.

 7.12   No person other than the EMPLOYEE to whom the WARRANTS are allotted
        shall be entitled to exercise the Option, except in the circumstances
        provided hereinafter.

 7.13   The EMPLOYEE to whom the WARRANTS are allotted shall not be entitled to
        pledge, mortgage, hypothecate or otherwise alienate them in any manner.

 7.14   A WARRANT Holder shall be entitled, at anytime to nominate a person /
        (s) who shall be eligible to exercise the WARRANT, allotted to him in
        the event of the death of the WARRANT Holder.

 7.15   In the event of death of an EMPLOYEE while in employment, all the
        WARRANTS allotted to him till the date of his death shall automatically
        vest in his nominees as provided in Para 7.14. In the event an EMPLOYEE
        has not made a nomination, then the WARRANTS shall automatically vest in
        his legal heirs.

        Similarly, in case of permanent incapacitation of an EMPLOYEE while in
        employment, all the WARRANTS allotted to him till the date of his
        incapacitation shall automatically vest in him.

 7.16   The WARRANTS allotted to an EMPLOYEE would lapse in the following
        circumstances :

        (a) if the WARRANTS are not exercised within the Maximum Period for
            exercising the Option, i.e., 5 years from the date of allotment of
            the WARRANTS to the WARRANT Holder

        (b) in case the EMPLOYEE resigns, all the WARRANTS allotted to him for
            which the Minimum Holding Period is not over, i.e., the Option has
            not vested in him, shall lapse. If the Warrant has already vested in
            him at the time of the resignation, then that WARRANT will not
            lapse.

                                       10
<PAGE>   12

        (c) in case of termination of the employment of the WARRANT Holder for
            any reason, all the WARRANTS allotted to him for which the Minimum
            Holding Period is not over, i.e., the Option is not vested in him,
            shall lapse. If the Option has already vested in him at the time of
            the termination, then the WARRANTS will not lapse. However, if the
            termination of the employment is on account of misconduct of the
            EMPLOYEE, then even the WARRANTS for which the Option has already
            vested in him shall lapse.

        When a WARRANT lapses under any of the circumstances mentioned above,
        then the WARRANT Holder shall have no right, title or interest in
        respect thereof or any claim against the COMPANY. In the event of the
        lapse of any WARRANTS, the Board of Directors of the COMPANY shall be
        entitled, but not obliged, to issue fresh WARRANTS in lieu of the lapsed
        WARRANTS.

  7.17  In case of Retirement at the Normal Retirement age as per the policy of
        the COMPANY, in respect of all the WARRANTS allotted to an EMPLOYEE
        whether they have vested or not at the time of the retirement, the
        EMPLOYEE shall be entitled to retain them and exercise the Option in
        accordance with this Scheme.

  7.18  An EMPLOYEE shall not have a right to receive any dividend or to vote or
        in any manner enjoy the benefits of a shareholder in respect of the
        WARRANTS allotted to him, till the EQUITY SHARES are issued and allotted
        to him on exercise of the Option.

  7.19  ILLUSTRATION

        An Illustration explaining the provisions relating to vesting of the
        Warrants, Minimum Holding Period and the Maximum Period for exercising
        the option, Amount Payable, etc., is given in EXHIBIT - 1 attached
        herewith.

                                       11
<PAGE>   13

VIII.   EQUITY SHARES

  8.1   After the Minimum Holding Period specified in Para VII above, the
        EMPLOYEE to whom WARRANTS have been issued may exercise his Option to
        subscribe to the EQUITY SHARES of the COMPANY at the predetermined
        Exercise Price specified in Para VII above by making a written
        application to the COMPANY. The application shall also be accompanied by
        the relevant WARRANTS which shall be cancelled by the COMPANY. The
        EQUITY SHARES along with the duly executed share transfer forms shall be
        delivered by the COMPANY to the WARRANT Holder against the payment by
        the WARRANT Holder to the COMPANY of the Exercise Price as specified in
        Para VII above, in one or more instalments as the ESOP COMMITTEE may, in
        its absolute discretion, decide.

  8.2   The EQUITY SHARES would be of the face (par) value of Rs. 10 each. In
        the event the COMPANY splits up its EQUITY SHARES thereby reducing the
        face (par) value per share after the allotment of the WARRANTS to an
        EMPLOYEE which have yet not been exercised by the EMPLOYEE, then the
        ESOP COMMITTEE would make a fair and reasonable adjustment to the number
        of WARRANTS allotted to the Employee and / or to the exercise price.

  8.3   The EQUITY SHARES once acquired pursuant to WARRANTS would be subjected
        to a lock-in period of 4 years from the date of the allotment of the
        WARRANTS to an EMPLOYEE. For example, if a WARRANT is allotted to an
        EMPLOYEE on 1st January, 2000, and the EQUITY SHARES are allotted to the
        WARRANT Holder on 1st January, 2001, then they would be subject to a
        lock-in till 31st December, 2003 and the EMPLOYEES would be free to
        transfer those shares at any time only after that date.

        Provided however that the ESOP COMMITTEE is entitled to prescribe from
        time to time, in its absolute discretion, a lesser or no lock-in period
        for the EQUITY SHARES in which event the Equity Shares already issued
        under the ESOP as well as those which may be issued under the ESOP
        thereafter, will be subject to lock-in accordingly.

  8.4   The EQUITY SHARES would carry Voting Rights and other rights in
        accordance with the provisions of the Companies Act, 1956 or its
        modification from time to time or re-enactment, and the Articles of
        Association of the COMPANY as in force from time to time.

  8.5   ILLUSTRATION

        An Illustration explaining the provisions relating to the Exercise of
        Options, the Lock-in Period, etc., is given in EXHIBIT - 1 attached
        herewith.

                                       12
<PAGE>   14

  IX.   EXIT MECHANISM

  9.1   After the lock-in period for the EQUITY SHARES, as specified in Para
        VIII above, the EMPLOYEE would be free to transfer those shares at any
        time in accordance with the provisions of the Articles of Association of
        the COMPANY and the other applicable laws.

  9.2   In future, the COMPANY may, but is not obliged to, buy back the whole or
        any part of the EQUITY SHARES from the EMPLOYEES, in accordance with the
        provisions of the Companies Act, 1956 or its modification or
        re-enactment.

  9.3   In future, the COMPANY may, but is not obliged to, go in for listing of
        its EQUITY SHARES on any of the recognised Stock Exchanges in accordance
        with the provisions of the applicable laws at that time.

                                       13
<PAGE>   15

X.      VARIATION OF TERMS OF ESOP

 10.1  In addition to what is provided in Para 7.7 hereinabove, the COMPANY may
       by a special resolution in a general meeting vary the terms of the ESOP
       in respect of the WARRANTS which have yet not been allotted to the
       EMPLOYEES.

 10.2  Subject to what is provided in Para 7.7 hereinabove, the COMPANY will not
       vary the terms of the ESOP in any manner which may be detrimental to the
       interests of the WARRANT Holders.

                                       14
<PAGE>   16

XI.     APPLICABLE LAWS

  11.1  The issue of WARRANTS and EQUITY SHARES would be subject to the
        applicable provisions of the Income Tax Act, 1961.

        Accordingly, the eligible EMPLOYEES would accept the WARRANTS and
        exercise them subject to the applicable tax provisions from time to
        time.

  11.2  The ESOP would be subject to all applicable laws at present and those
        which may become applicable in the future.

  11.3  All disputes, differences, claims and questions which shall arise
        between the COMPANY and the EMPLOYEES in relation to the ESOP, shall be
        amicably settled. In the event of the failure to do so, the same shall
        be settled by an arbitration in accordance with the provisions of the
        Arbitration and Conciliation Act, 1996. The site of the Arbitration
        shall be Mumbai, Maharashtra, India.

  11.4  This Scheme is subject to the jurisdiction of Mumbai, Maharashtra,
        India.

                                       15
<PAGE>   17

 XII. REPRESENTATION

  12.1  Neither the COMPANY nor the ESOP COMMITTEE makes any representation
        regarding the performance of the COMPANY or the future value of the
        EQUITY SHARES. Each EMPLOYEE should take the decision to exercise the
        WARRANTS allotted to him after considering all the Provisions of this
        Scheme and other relevant factors.

  12.2  This represents the Complete Scheme for ESOP.

                                                             REDIFF- ESOP-SCHEME

                                       16
<PAGE>   18

                                                                       EXHIBIT-1

                                      ESOP

            ILLUSTRATION EXPLAINING PROVISIONS RELATING TO WARRANTS,
                            SHARES AND LOCK-IN PERIOD

1.    Let us assume that Mr. A is allotted 40 WARRANTS on 31st December, 1999
      and the Exercise Price fixed is Rs. 300.

2.    These WARRANTS would entitle him to subscribe to 1,000 EQUITY SHARES (400
      Warrants * 25 Shares per Warrant) of the Face Value of Rs.10 each and he
      would be required to pay to the COMPANY Rs. 300 per EQUITY SHARE
      aggregating to Rs. 3,00,000.

3.    His entitlement to exercise the Option will be spread over 4 years. The
      timing for exercise of the Option granted under the WARRANT to subscribe
      to the EQUITY SHARES, the amount payable and the lock-in period for the
      EQUITY SHARES would be as shown in the table below :

<TABLE>
<CAPTION>
      --------------------------------------------------------------------------
            WHEN OPTION CAN     NO. OF      NO. OF       AMOUNT        LOCK-IN
              BE EXERCISED     WARRANTS     EQUITY      PAYABLE @    PERIOD FOR
                                          SHARES OF     RS. 300 /    THE SHARES
                                          FACE VALUE      SHARE
                                          OF RS. 10        RS.
                                             EACH
      --------------------------------------------------------------------------
<S>         <C>              <C>         <C>          <C>           <C>
      1.    On or after 1st       10         250         75,000     1st January,
            January, 2001                                           2004
      --------------------------------------------------------------------------
      --------------------------------------------------------------------------
      2.    On or after 1st       10         250         75,000     1st January,
            January, 2002                                           2004
      --------------------------------------------------------------------------
      --------------------------------------------------------------------------
      3.    On or after 1st       10         250         75,000     1st January,
            January, 2003                                           2004
      --------------------------------------------------------------------------
      --------------------------------------------------------------------------
      4.    On or after 1st       10         250         75,000     1st January,
            January, 2004                                           2004
      --------------------------------------------------------------------------
      --------------------------------------------------------------------------
            TOTAL                 40        1,000        300,000
      --------------------------------------------------------------------------
</TABLE>

        NOTES :

        1.  Mr. A must exercise his Option in respect of all the 40 WARRANTS
            before 1st January 2005 (i.e., 5 years from the date of allotment of
            the Warrants) . After 1st January, 2005, all the WARRANTS in respect
            of which the Option has not been exercised, would lapse.

                                       17
<PAGE>   19

        2.  Once Mr. A becomes eligible to exercise the Option, i.e., a
            particular lot of WARRANTS vests in him, he can exercise his Option
            in respect of all the WARRANTS in that lot at one time or in
            instalments at different times. For example, in respect of the 10
            WARRANTS which vest in him on 1st January, 2001, he can exercise his
            Option for all the 250 EQUITY SHARES at one time or he may exercise
            his Option in instalments at different times, e.g., 100 EQUITY
            SHARES on 1st January, 2001, another 100 EQUITY SHARES on 15th June,
            2001 and the balance 50 EQUITY SHARES on 15th February, 2002.
            However, he must exercise his Option in respect of all the EQUITY
            SHARES covered by one WARRANT at one time.

        3.  Mr. A need not exercise his Option in respect of all the WARRANTS
            allotted to him, if he so chooses. In that event the WARRANTS for
            which he has not exercised the Option would lapse.

                                       18
<PAGE>   20

                                                                      EXHIBIT -2

                SPECIMEN LETTER FOR APPLICATION OF EQUITY SHARES

                                                             DATE :

Dear Sir,

        SUB : APPLICATION FOR EQUITY SHARES

1.      I am glad to inform you that I would like to subscribe to______
        (__________________) Equity Shares of Rediff.com India Limited. of the
        face value of Rs.10 each at the Exercise Price of Rs. ___ per share
        pursuant to the Warrants issued to me under the EMPLOYEE STOCK OPTION
        PLAN 1999, as per your letter dated ___________.

2.      For this purpose, I enclose herewith the following :

        (a)    A Share Application in the format prescribed by the Company

        (b)    The Warrant Certificates No. ___________ dated _____________

        (c)    A Cheque of Rs. ________ (Rupees ______________________ only) as
               subscription money for the Equity Shares.

3.      Please issue to me the aforesaid Equity Shares at your earliest.

Thanking you,

(               )

                                            ------------------------------------
                                            DATED                         , 1999
                                            ------------------------------------

                                                   REDIFF.COM INDIA LIMITED

                                       19
<PAGE>   21

================================================================================

                            REDIFF.COM INDIA LIMITED
              (Incorporated in India under the Companies Act, 1956)
      Regd. Office: Sterling Centre, 4th Floor, Dr.Annie Besant Road, Worli
                              Mumbai 400 016, India

        ________________________________________________________________

                               WARRANT CERTIFICATE

              (ISSUED PURSUANT TO EMPLOYEE STOCK OPTION PLAN 1999)

--------------------------------------------------------------------------------
REGD. FOLIO NO.      :   1

CERTIFICATE NO.      :   1

NO. OF WARRANTS      :   ONE
--------------------------------------------------------------------------------

Based on the decision of the ESOP COMMITTEE, this WARRANT is allotted to Mr.
________ residing at ____________ and employed as '__________'. This WARRANT
Certificate entitles the allottee thereof to subscribe to 25 EQUITY SHARES in
the COMPANY at the Exercise Price of Rs. 150/- per share in accordance with the
covenants and conditions attached.

Date of Allotment of the Warrant: April 30,1999

                                            DIRECTOR       DIRECTOR

                                                           AUTHORISED SIGNATORY

================================================================================

<PAGE>   22

--------------------------------------------------------------------------------

                            REDIFF.COM INDIA LIMITED

                       COVENANTS & CONDITIONS OF WARRANTS

1.      REDIFF.COM INDIA LIMITED would, on the basis of the decision of the ESOP
        COMMITTEE, allot this WARRANT Certificate to the Eligible EMPLOYEE of
        the COMPANY in accordance with the EMPLOYEE STOCK OPTION PLAN 1999 of
        the COMPANY.

2.      The WARRANT would be subject to a minimum holding period of 12/24/36/48
        months from the date of its allotment by the COMPANY to the EMPLOYEE,
        i.e., the WARRANT Holder would not be entitled to exercise his right to
        subscribe to the EQUITY SHARES of the COMPANY PRIOR to April 30,
        2000/2001/2002/2003.

3.      The WARRANT would lapse if it is not exercised within a maximum period
        of 5 years from the date of its allotment by the COMPANY to the
        EMPLOYEE, i.e., by April 30, 2004.

4.      The WARRANT allottee would be entitled to subscribe to and be allotted
        25 (twenty five) Equity Shares of the face value of Rs. 10/- each of the
        COMPANY at the Exercise Price of Rs. 150/- (Rupees one hundred fifty
        only) per Equity Share.

5.      The WARRANT is non-transferable.

6.      The WARRANT is governed by the terms of "EMPLOYEE STOCK OPTION PLAN
        1999" of the COMPANY.

                                             AUTHORISED SIGNATORY

--------------------------------------------------------------------------------<PAGE>   1
                                                                    EXHIBIT 10.2

--------------------------------------------------------------------------------
                            REDIFF.COM INDIA LIMITED
--------------------------------------------------------------------------------

                    ASSOCIATE STOCK OPTION PLAN 1999 ("ASOP")

                                    CONTENTS

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------
<S>                 <C>                 <C>                                    <C>
       NO.                              PARTICULARS                            PAGE
------------------------------------------------------------------------------------------

        I.          INTRODUCTION                                                1
------------------------------------------------------------------------------------------

       II.          DEFINITIONS                                                 2
------------------------------------------------------------------------------------------

       III.         OBJECTIVES                                                  3
------------------------------------------------------------------------------------------

       IV.          ASOP FEATURES                                               4
------------------------------------------------------------------------------------------

        V.          ELIGIBLE PERSONS                                            5
------------------------------------------------------------------------------------------

       VI.          ASOP COMMITTEE                                              6
------------------------------------------------------------------------------------------

       VII.         WARRANTS                                                    7
------------------------------------------------------------------------------------------

      VIII.         EQUITY SHARES                                               10
------------------------------------------------------------------------------------------

       IX.          EXIT MECHANISM                                              11
------------------------------------------------------------------------------------------

        X.          VARIATION OF RIGHTS                                         12
------------------------------------------------------------------------------------------

       XI.          APPLICABLE LAWS                                             13
------------------------------------------------------------------------------------------

       XII.         REPRESENTATION                                              14
------------------------------------------------------------------------------------------

    EXHIBIT-1       ILLUSTRATION                                                15
------------------------------------------------------------------------------------------

    EXHIBIT-2       SPECIMEN LETTER OF APPLICATION FOR EQUITY SHARES            17
------------------------------------------------------------------------------------------
</TABLE>

<PAGE>   2
--------------------------------------------------------------------------------
                            REDIFF.COM INDIA LIMITED
--------------------------------------------------------------------------------

I.     INTRODUCTION

  1.1  This Document explains the Scheme called "ASSOCIATE STOCK OPTION PLAN
       1999" ("ASOP") formulated by REDIFF.COM INDIA LIMITED for the grant of
       Stock Options in the form of warrants to enable its eligible ASSOCIATES
       to subscribe to the Equity Shares in the company.

  1.2  Every person who is eligible to participate in the ASOP does so subject
       to the provisions contained in this Scheme.

  1.3  REDIFF.COM INDIA LIMITED is a company currently engaged in online
       Services including E-Commerce Services.

                                       1

<PAGE>   3

II.      DEFINITIONS

      The following definitions apply throughout this Plan :
<TABLE>
<CAPTION>

      ------------------------------------------------------------------------------
      NO.      TERMS             DEFINITIONS
      ------------------------------------------------------------------------------
<S>            <C>               <C>
        1.     ASOP              Associate Stock Option Plan of 1999 formulated
                                 by  the Company
      ------------------------------------------------------------------------------
        2.     COMPANY           REDIFF.COM INDIA LIMITED, a company formed and
                                 registered under the Companies Act, 1956 and
                                 whose shares are being offered to its
                                 ASSOCIATES as Stock Options under this Scheme
      ------------------------------------------------------------------------------
        3.     ASSOCIATES        All the Eligible  ASSOCIATES of the COMPANY,  as
                                 defined in Para V of this Scheme
      ------------------------------------------------------------------------------
        4.     WARRANTS          The WARRANTS issued by the COMPANY to the
                                 ASSOCIATES to enable the holders to subscribe to
                                 the EQUITY SHARES of the COMPANY in future at a
                                 predetermined price
      ------------------------------------------------------------------------------
        5.     ASOP COMMITTEE    A Committee comprising of some of the Directors
                                 of the COMPANY constituted for the purposes of
                                 ASOP
      ------------------------------------------------------------------------------
        6.     EQUITY SHARE      Equity Share in the COMPANY of the Face Value
                                 (Par Value) of Rs. 10 each or where the Equity
                                 Share of the COMPANY has  been split up into a
                                 Par  Value of less than Rs. 10, then the
                                 equivalent  number  of equity shares  for the
                                 revised Par Value per Share
      ------------------------------------------------------------------------------
</TABLE>

                                       2

<PAGE>   4

III.    OBJECTIVES OF ASOP

        The following are the objectives of this ASOP :

           -   to encourage ASSOCIATES to contribute their best

           -   to attract capable people

           -   to retain capable ASSOCIATES

           -  to motivate  ASSOCIATES

                                       3
<PAGE>   5

IV.     ASOP FEATURES

    4.1 In this Paragraph, a broad overview of the ASOP is given and each of the
        features is explained in detail later on. The basic features of the ASOP
        are as follows :

        (a)  The ASOP is instituted with effect from   April 12, 1999.

        (b)  An ASOP COMMITTEE has been constituted to determine the ASSOCIATES
             eligible for the ASOP, the number of WARRANTS to be allotted to
             those ASSOCIATES and other related matters.

        (c)  The COMPANY has created certain number of WARRANTS for issuing to
             the ASSOCIATES.

        (d)  These WARRANTS would then be allotted from time to time by the
             COMPANY to the eligible ASSOCIATES as per the decision of the ASOP
             COMMITTEE.

        (e)  One WARRANT would entitle the Warrant Holder to subscribe for
             TWENTY FIVE EQUITY SHARES in the COMPANY. Provided however that if
             the EQUITY SHARE of the COMPANY is split up into a face (par) value
             of less than Rs. 10, then the ASSOCIATE would be entitled to the
             equivalent number of EQUITY SHARES of the revised face (par) value
             per Share. For example, if the COMPANY'S equity share of the face
             value of Rs. 10 is split up into a share of the face (par) value of
             Rs. 5, then the entitlement to the number of EQUITY SHARES of Rs. 5
             each would be 50 per WARRANT.

        (f)  The WARRANT Certificate would specify the timing for exercising the
             WARRANT, i.e., subscribing to the EQUITY SHARES in the COMPANY and
             the other terms and conditions.

        (g)  The EQUITY SHARES would be issued on the terms and conditions
             specified later on in this Scheme.

                                       4
<PAGE>   6

V.      ELIGIBLE PERSONS

  5.1   All present and future ASSOCIATES of the COMPANY are eligible to
        participate in the ASOP.

  5.2   ASSOCIATES means all Key Vendors, Software Developers, Retainers,
        Software Consultants, Other Consultants, whether Individuals, Firms, or
        Companies and such other Business Constituents as may be selected by the
        ASOP COMMITTEE.

  5.3   ASSOCIATES also include all other persons not eligible to participate in
        the EMPLOYEE STOCK OPTION PLAN of the COMPANY.

                                       5
<PAGE>   7

VI.     ASOP COMMITTEE

    6.1 For the effective implementation and monitoring of the ASOP, the Board
        of Directors of the COMPANY has been authorised to constitute an ASOP
        COMMITTEE. The Board of Directors has, in its absolute discretion, power
        to change the composition of the ASOP COMMITTEE from time to time.

        Accordingly, the Board of Directors of the COMPANY has constituted an
        ASOP COMMITTEE consisting of the Chief Executive Officer of the COMPANY
        and Two Independent Directors.

   6.2  The ASOP COMMITTEE would decide the criteria for selecting the
        ASSOCIATES who would be eligible for allotment of the WARRANTS. Further,
        the ASOP COMMITTEE would select from time to time the ASSOCIATES to whom
        the WARRANTS should be allotted and determine the number of WARRANTS to
        be allotted to them. The ASOP COMMITTEE may decide to allot different
        number of WARRANTS to different ASSOCIATES or to different categories of
        ASSOCIATES. The decision of the ASOP COMMITTEE would be final and
        binding.

   6.3  The major Criteria involved in selection of the Eligible ASSOCIATES
        would include the following factors :

            ASSOCIATES in key functional areas
            Past Contribution / Performance
            Current Performance Evaluation
            Expected Future Performance / Contribution
            Number of years' association with the COMPANY

   6.4  The ASOP COMMITTEE shall also frame suitable policies and systems to
        ensure that there is no violation of :

             a) Securities and Exchange Board of India (Insider Trading)
                Regulations,1992; and
             b) Securities and Exchange Board of India (Prohibition of
                Fraudulent and Unfair Trade Practices relating to
                the Securities Market) Regulations,1995, by any ASSOCIATE.

   6.5  With respect to any matters that are not specifically provided for, the
        ASOP COMMITTEE shall have absolute discretion to decide such matters in
        the manner deemed fit by it in the best interest of the ASSOCIATES, and
        any such decision of the ASOP COMMITTEE shall be binding on all the
        ASSOCIATES.

                                       6
<PAGE>   8

    VII. WARRANTS

   7.1  The COMPANY has created WARRANTS for ASOP, with the rights and
        conditions attached to them as specified in the Scheme.

        The total number of WARRANTS earmarked by the COMPANY for issue by the
        COMPANY to the ASSOCIATES are 3,960 (three thousand nine hundred sixty)
        WARRANTS which would entitle the WARRANT Holders to apply for 99,000
        (ninety nine thousand only) EQUITY SHARES.

        Simultaneously with the institution of the ASOP, the COMPANY has decided
        to institute EMPLOYEE STOCK OPTION PLAN (hereinafter referred to as "THE
        ESOP") for the purposes of motivating various employees of the COMPANY
        to contribute their best for the growth of the COMPANY. Under the ESOP,
        the COMPANY has decided to allot 5,600 WARRANTS to its EMPLOYEES which
        would entitle them to subscribe to 1,40,000 (one hundred forty thousand
        only) EQUITY SHARES of the face (par) value of Rs. 10 each. Further, the
        COMPANY has also authorised the Board of Directors of the COMPANY to
        issue and allot, in addition to the WARRANTS mentioned above, such
        number of further WARRANTS to its EMPLOYEES, at such Exercise Price and
        on such other terms and conditions, as the Board of Directors may, in
        its absolute discretion decide, subject to compliance with the
        applicable laws.

   7.2  The existing issued and paid-up capital of the COMPANY consists of
        3,62,700 EQUITY SHARES of the face (par) value of Rs. 10 each. The
        EQUITY SHARES aggregating to 99,000 to be issued against the WARRANTS
        constitute 2.56 % of the Capital of the COMPANY after considering the
        issue of the additional EQUITY SHARES against the WARRANTS, assuming
        that all the WARRANTS are allotted and exercised and after considering
        the EQUITY SHARES to be issued under the ESOP.

        The COMPANY reserves the right to issue / earmark further EQUITY SHARES
        / WARRANTS at its discretion, for the purposes of the ESOP and / or
        ASOP, subject to compliance with the applicable laws.

   7.3  Each WARRANT, will specify the Exercise Price per EQUITY SHARE, i.e. the
        price per share to be paid by the WARRANT Holder to the COMPANY for
        issue and allotment to him of the EQUITY SHARES which his WARRANT
        entitles him to. The Exercise Price of the WARRANT will be decided by
        the ASOP COMMITTEE at the time of allotment of the Warrant. The Exercise
        Price will be at or around the Fair Market Value of the Equity Shares at
        that time.

   7.4  The COMPANY will, on the basis of the decision of the ASOP COMMITTEE,
        allot from time to time the WARRANTS (also known as "GRANT OF OPTION")
        to the eligible ASSOCIATES, without any consideration along with a
        covering letter.

                                       7
<PAGE>   9

   7.5  Each WARRANT would grant an OPTION, i.e.. entitle the WARRANT Holder, to
        subscribe to 25 (Twenty Five) EQUITY SHARES in the COMPANY at the
        Exercise Price mentioned above. However, the WARRANT Holder is not
        obliged to exercise the Option.

   7.6  Once the WARRANTS are allotted to an ASSOCIATE, he would become eligible
        for exercising the Option granted to him at any time, i.e., he would be
        entitled to apply for the EQUITY SHARES.

   7.7 (a)Every WARRANT will have a maximum time for exercising the option
          under the WARRANT. The Maximum Period for exercising the option would
          be 5 years from the date of allotment of the WARRANT and the WARRANT
          allotted to an ASSOCIATE would lapse if it is not exercised by him
          within the maximum period of 5 years from the date of its allotment to
          him. In the event of the lapse of any WARRANTS, the Board of Directors
          of the COMPANY shall be entitled, but not obliged, to issue fresh
          WARRANTS in lieu of the lapsed WARRANTS.

       (b)If in future the COMPANY makes an Initial Public Offer of EQUITY
          SHARES or of any other financial instrument which is convertible into
          EQUITY SHARES, and at that time according to the prevailing
          regulations / laws of the Securities and Exchange Board of India or
          any other law in force, if the COMPANY is not allowed to keep any
          WARRANTS outstanding at the time of the Initial Public Offer, then the
          Holders of all the outstanding WARRANTS shall exercise their Option
          under the WARRANTS prior to the Initial Public Offer, and if such
          WARRANTS are not exercised, then they would either lapse or their
          validity would be governed by the applicable regulations / laws.

       (c)When a WARRANT lapses as specified above, then the WARRANT Holder
          shall have no right, title or interest in respect thereof or any claim
          against the COMPANY.

   7.8  Once the WARRANTS are allotted to an ASSOCIATE, he may exercise the
        Option under different WARRANTS at various points of time within the
        Maximum Period for exercising the option. However, he must exercise the
        Option under a particular WARRANT (for 25 EQUITY SHARES) at one time.

   7.9  If any Bonus and / or Rights Shares are issued by the COMPANY or the
        EQUITY SHARES of the COMPANY are split up reducing the face (par) value
        per share, then the Board of Directors of the COMPANY would, on the
        recommendations of the ASOP COMMITTEE, make a fair and reasonable
        adjustment to the number of outstanding WARRANTS and / or to the
        exercise price.

        Similarly, if the COMPANY takes any action which, in the opinion of the
        ASOP COMMITTEE, requires any adjustment to the number of outstanding
        WARRANTS and /or to the exercise price, then Board of Directors of the
        COMPANY would, on the recommendations of

                                       8
<PAGE>   10

      the ASOP COMMITTEE, make a fair and reasonable adjustment to the number of
      outstanding WARRANTS and / or to the exercise price.

7.10  The WARRANTS granted to an ASSOCIATE shall not be transferable to any
      person.

7.11  No person other than the ASSOCIATE to whom the WARRANTS are allotted shall
      be entitled to exercise the Option, except in the circumstances provided
      hereinafter.

7.12  The ASSOCIATE to whom the WARRANTS are allotted shall not be entitled to
      pledge, mortgage, hypothecate or otherwise alienate them in any manner.

7.13  A WARRANT Holder shall be entitled, at anytime to nominate a person /(s)
      who shall be eligible to exercise the WARRANT allotted to him in the event
      of the death of the WARRANT Holder.

7.14  In the event of death of an ASSOCIATE, all the WARRANTS allotted to him
      till the date of his death shall automatically vest in his nominee(s) as
      provided in Para 7.13. In the event an ASSOCIATE has not made a
      nomination, then the WARRANTS shall automatically vest in his legal heirs.

7.15  An ASSOCIATE shall not have a right to receive any dividend or to vote or
      in any manner enjoy the benefits of a shareholder in respect of the
      WARRANTS allotted to him, till the EQUITY SHARES are issued and allotted
      to him on exercise of the Option.

7.16  ILLUSTRATION

      An Illustration explaining the above provisions is given in EXHIBIT-1
      attached herewith.

                                       9
<PAGE>   11

VIII.   EQUITY SHARES

  8.1   The ASSOCIATE to whom WARRANTS have been issued may exercise his Option
        to subscribe to the EQUITY SHARES at the predetermined Exercise Price
        specified in Para VII above by making a written application to the
        COMPANY for this purpose in the prescribed form along with a covering
        letter which is attached herewith and marked EXHIBIT-2. The application
        shall also be accompanied by the relevant WARRANTS which shall be
        cancelled by the COMPANY. The EQUITY SHARES shall be issued by the
        COMPANY against the payment by the WARRANT Holder to the COMPANY of the
        Exercise Price as specified in Para VII above, in one or more
        instalments as the ASOP COMMITTEE may, in its absolute discretion,
        decide.

  8.2   The EQUITY SHARES would be of the face (par) value of Rs. 10 each. In
        the event the COMPANY splits up its EQUITY SHARES thereby reducing the
        face (par) value per share after the allotment of the WARRANTS to an
        ASSOCIATE which have yet not been exercised by the ASSOCIATE, then the
        ASOP COMMITTEE would make a fair and reasonable adjustment to the number
        of WARRANTS allotted to the Associate and / or to the Exercise Price.

  8.3   The EQUITY SHARES once issued pursuant to WARRANTS would be subjected to
        a lock-in period of 4 years from the date of the allotment of the
        WARRANTS. For example, if a WARRANT is allotted on 1st January, 2000,
        and the EQUITY SHARES are allotted on 1st January, 2001, then they would
        be subject to a lock-in till 31st December, 2003 and the ASSOCIATE would
        be free to transfer these shares at any time only after that date.
        Provided however that the ASOP COMMITTEE is entitled to prescribe from
        time to time, in its absolute discretion, a lesser or no lock-in period
        for the EQUITY SHARES, in which event the EQUITY SHARES already issued
        under the ASOP as well as those which may be issued under ASOP
        thereafter will be subject to lock-in accordingly.

  8.4   The EQUITY SHARES would carry Voting Rights and other rights in
        accordance with the provisions of the Companies Act, 1956 or its
        modification from time to time or re-enactment and of the Articles of
        Association of the COMPANY as in force from time to time.

  8.5   ILLUSTRATION

        An Illustration explaining the provisions relating to the Exercise of
        Options, the Lock-in Period, etc., is given in EXHIBIT-1 attached
        herewith.

                                       10
<PAGE>   12

IX.     EXIT MECHANISM

  9.1   After the lock-in period for the EQUITY SHARES, as specified in Para
        VIII above, the ASSOCIATE would be free to transfer those shares at any
        time in accordance with the provision of the Articles of Association of
        COMPANY and applicable laws.

  9.2   In future, the COMPANY may, but is not obliged to, buy back the whole or
        any part of the EQUITY SHARES from the ASSOCIATES, in accordance with
        the provisions of the Companies Act, 1956 or its modification or
        re-enactment.

  9.3   In future, the COMPANY may, but is not obliged to, go in for listing of
        its EQUITY SHARES on any of the recognised Stock Exchanges in accordance
        with the provisions of the applicable laws at that time.

                                       11
<PAGE>   13

X.    VARIATION OF TERMS OF ASOP

10.1  The COMPANY may by a special resolution in a general meeting vary the
      terms of the ASOP in respect of the WARRANTS which have not yet been
      allotted to the ASSOCIATES.

 10.2 The COMPANY will not vary the terms of the ASOP in any manner which may be
      detrimental to the interests of the WARRANT Holders.

                                       12
<PAGE>   14

XI.   APPLICABLE LAWS

 11.1   The issue of WARRANTS and EQUITY SHARES would be subject to the
        applicable provisions of the Income Tax Act, 1961.

        Accordingly, the eligible ASSOCIATES would accept the WARRANTS and
        exercise them subject to the applicable tax provisions from time to
        time.

 11.2   The ASOP would be subject to all applicable laws at present and those
        which may become applicable in the future.

 11.3   All disputes, differences, claims and questions which shall arise
        between the COMPANY and the ASSOCIATES in relation to the ASOP, shall be
        amicably settled. In the event of the failure to do so, the same shall
        be settled by an arbitration in accordance with the provisions of the
        Arbitration and Conciliation Act, 1996. The site of the Arbitration
        shall be Mumbai, Maharashtra, India.

 11.4   This Scheme is subject to the jurisdiction of Mumbai, Maharashtra,
        India.

                                       13
<PAGE>   15

XII.  REPRESENTATION

   12.1 Neither the COMPANY nor the ASOP COMMITTEE makes any representation
        regarding the performance of the COMPANY or the future value of the
        EQUITY SHARES. Each ASSOCIATE should take the decision to exercise the
        WARRANTS allotted to him after considering all the Provisions of this
        Scheme and other relevant factors.

   12.2 This represents the Complete Scheme for ASOP.

                                       14
<PAGE>   16

                                                                       EXHIBIT-1

                                      ASOP

            ILLUSTRATION EXPLAINING PROVISIONS RELATING TO WARRANTS,

                           SHARES AND LOCK-IN PERIOD

1.    Let us assume that Mr. A is allotted 40 WARRANTS on 31st December, 1999.

2.    These WARRANTS would entitle him to apply for 1,000 EQUITY SHARES ( 400
      Warrants * 25 Shares per Warrant ) of the Face Value of Rs.10 each and he
      would be required to pay to the Company Rs.300 per EQUITY SHARE
      aggregating to Rs. 300,000.

3.    The timing for exercise of the Option granted under the WARRANT to
      subscribe to the EQUITY SHARES of the COMPANY, the amount payable and the
      lock-in period for the EQUITY SHARES would be as shown in the table below:

<TABLE>
<CAPTION>

      -----------------------------------------------------------------------------------
             WHEN OPTION CAN   NO. OF         NO. OF        AMOUNT         LOCK-IN
             BE EXERCISED      WARRANTS       EQUITY        PAYABLE @      PERIOD FOR
                                              SHARES OF     RS.___/SHARE   THE SHARES
                                              FACE VALUE        (RS.)
                                              OF RS. 10
                                              EACH
      -----------------------------------------------------------------------------------
<S>                            <C>            <C>           <C>            <C>
             Any time on or         40           1,000         300,000     1st January,
             after 31st                                                    2004
             December, 1999
      -----------------------------------------------------------------------------------
</TABLE>

        NOTES :

        1.  Mr. A must exercise his Option in respect of all the 40 WARRANTS
            before 1st January 2005 (i.e., 5 years from the date of allotment of
            the Warrants). After 1st January, 2005, all the WARRANTS in respect
            of which the Option has not been exercised, would lapse.

        2.  Once Mr. A has been allotted WARRANTS, he can exercise his Option in
            respect of all the WARRANTS at one time or in instalments at
            different times. For example, in respect of the 40 WARRANTS which
            are allotted to him on 31st December, 1999, he can exercise his
            Option for all the 1,000 EQUITY SHARES at one time or he may
            exercise his Option in instalments at different times, e.g., 500
            EQUITY SHARES on 1st January, 2000, another 300 EQUITY SHARES on
            15th June, 2001 and the balance 200 EQUITY SHARES on 15th February,
            2002. However, he must exercise his Option in respect of all the
            EQUITY SHARES covered by one WARRANT at one time.

                                       15
<PAGE>   17

        3.  Mr. A need not exercise his Option in respect of all the WARRANTS
            allotted to him, if he so chooses. In that event, the WARRANTS for
            which he has not exercised the Option would lapse.

                                                             REDIFF- ASOP-SCHEME

                                       16
<PAGE>   18

                                                                     EXHIBIT - 2

                SPECIMEN LETTER FOR APPLICTION FOR EQUITY SHARES

Dear Sir,

        SUB : APPLICATION FOR EQUITY SHARES

1.      I/We am/are glad to inform you that I/we would like to subscribe
        to______ (__________________) Equity Shares of Rediff.com India Limited.
        of the face value of Rs.10 each at the Exercise Price of Rs. ___ per
        share pursuant to the Warrants issued to me /us under the ASSOCIATE
        STOCK OPTION PLAN 1999, as per your letter dated -----------.

2.      For this purpose, I/we enclose herewith the following :

        (a)    A Share Application in the format prescribed by the Company

        (b)    The Warrant Certificates No. ___________ dated _____________

        (c)    A Cheque of Rs. ________ (Rupees ______________________ only) as
               subscription money for the Equity Shares.

3.      Please issue to me /us the aforesaid Equity Shares at your earliest.

    Thanking you,

 (         )

                                            ------------------------------------
                                            DATED                         , 1999
                                            ------------------------------------

                                            REDIFF.COM INDIA LIMITED

                                       17

<PAGE>   19
================================================================================

                            REDIFF.COM INDIA LIMITED
              (Incorporated in India under the Companies Act, 1956)
     Regd. Office : Sterling Centre, 4th Floor, Dr.Annie Besant Road, Worli
                              Mumbai 400 016, India

                               WARRANT CERTIFICATE

              (ISSUED PURSUANT TO ASSOCIATE STOCK OPTION PLAN 1999)

--------------------------------------------------------------------------------
REGD. FOLIO NO.          : 1

CERTIFICATE NO.          : 1

NO. OF WARRANTS          : ONE
--------------------------------------------------------------------------------

Based on the decision of the ASOP COMMITTEE this WARRANT is allotted to
_________residing at____________

This WARRANT Certificate entitles the allottee thereof to subscribe to 25 EQUITY
SHARES in the COMPANY at the Exercise Price of Rs.150/- per share in accordance
with the covenants and conditions attached.

Date of allotment of the Warrant

                                            DIRECTOR              DIRECTOR

                                            AUTHORISED SIGNATORY
================================================================================

<PAGE>   20

--------------------------------------------------------------------------------

                            REDIFF.COM INDIA LIMITED

                       COVENANTS & CONDITIONS OF WARRANTS

--------------------------------------------------------------------------------
  1.    REDIFF.COM INDIA LIMITED would, on the basis of the decision of the ASOP
        COMMITTEE, allot this WARRANT Certificate to the Eligible ASSOCIATE of
        the COMPANY in accordance with the ASSOCIATE STOCK OPTION PLAN 1999 of
        the COMPANY.

  2.    The WARRANT Holder would be entitled to exercise his right to subscribe
        to the EQUITY SHARES of the COMPANY at anytime after allotment of the
        WARRANT to him but the WARRANT would lapse if it is not exercised within
        the maximum period of 5 years from the date of its allotment by the
        COMPANY to the ASSOCIATE, i.e., by April 30, 2004.

  3.    The WARRANT allottee would be entitled to subscribe to 25 (twenty five)
        EQUITY SHARES of the face value of Rs. 10/- each of the COMPANY at the
        Exercise Price of Rs.150/- (One Hundred and Fifty) per Equity Share.

  4.    The WARRANT is non-transferable.

  5.    The WARRANT is  governed by the terms of "ASSOCIATE STOCK OPTION PLAN
        1999" of the COMPANY.

  For REDIFF.COM INDIA LIMITED

  DIRECTOR

  DATE OF ALLOTMENT        :
--------------------------------------------------------------------------------

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