Corporate officers remuneration and regulated commitments

2015 financial year

On the basis of the financial statements drawn up for 2015, the Board of Directors set the amount of variable remuneration due to the executive officers for 2015.

For the record, in respect of 2015, the variable portion could amount to a maximum of 180% of fixed remuneration for the Chairman and Chief Executive Officer and a maximum of 140% for the Senior Executive Vice-President. It was conditional on:

• two financial criteria related to objectives concerning an increase in recurring net earnings per share (excluding foreign exchange impact and excluding significant exceptional items) (recurring EPS) and in the level of return on capital employed (ROCE), reflecting the importance for the Group of the balance between growth and the profitability of investments; (i) the objective of growth in recurring EPS is set on a consistent basis with regard to historical performances; it takes into account the Group’s growth ambition and the economic environment; (ii) the ROCE objective is set in absolute value in line with best performances in the industry, and at a level significantly higher than the weighted average cost of capital. An adjustment formula for each criterion is provided for in the event of an upward or downward variance with regard to the objective set.
• personal objectives comprising: (i) for two-thirds, qualitative objectives, for the most part shared by the two executive officers, related to management: organisation and strategy with the preparation of the 2016-2020 plan, conduct of acquisitions and start-ups of large projects, preserving financial balances, progress in the development of the Group's young generations and continued pursuit of the Corporate Social Responsibility objectives, in particular related to safety, reliability, monitoring of the risk management process and the CO₂ assessment; (ii) for one-third, individual performance.

The weight of each criterion expressed as a percentage of the fixed remuneration was as follows:

 
An assessment was made of the performance of the executive officers. The results obtained in 2015 were below the objectives set for the criterion of recurring EPS and also for the ROCE criterion. The amount of the variable remuneration, as a percentage of the fixed remuneration, amounts to 61.1% for Benoît Potier and 47% for Pierre Dufour in respect of recurring EPS, and 22.05% for Benoît Potier and 17.15% for Pierre Dufour in respect of ROCE.

The performance of the executive officers with regard to the personal objectives was considered very good: preparation of the 2016-2020 strategic plan which will be presented after finalisation of the Airgas acquisition was successfully completed; the acquisitions in the Healthcare and industrial sectors, in addition to Airgas, and the start-ups, were completed without hitch. The main financial balances were preserved in an unstable environment, making it possible to pursue a selective investment policy for future growth while strengthening the Group’s financial structure, with strict control over capital expenditure. Attention was focused on identifying young managers who could take responsibilities and career progression for young high-potential talents within the framework of the changes in the Group’s organisation. Finally, with regard to CSR, safety was improved as shown by the decrease in the number of lost-time accidents which has fallen from 144 in 2014 to 138 in 2015 on the basis of a comparable scope, and in terms of innovation, an entity combining the new businesses and the digital organisation (IDST) was created. The amount of the variable remuneration in respect of the personal objectives represents 66.5% for Benoît Potier and 49.5% for Pierre Dufour.

In total, the amount of the variable remuneration as a percentage of the fixed remuneration amounts to 149.65% (out of a maximum of 180%) for Benoît Potier, -5.1% lower than the variable portion for 2014, and 113.65% (out of a maximum of 140%) for Pierre Dufour, -2.2% lower than the variable portion for 2014.

The total amount of gross remuneration is therefore as follows:

 
The total amount of fixed and variable remuneration for 2015 is -3.1% lower than in 2014 for Benoît Potier and -1.2% lower for Pierre Dufour corresponding to an average annual increase, over the period 2012-2015, of +0.2% and +0.8% a year respectively.

Pierre Dufour, who has taken charge of the management of the hub in Frankfurt, also receives an annual amount of 250,000 euros paid by the German subsidiary, which includes, in particular, for approximately one half, an amount corresponding to the benefits in kind (housing) from which he previously benefited under his employment contract in France.

2016 financial year

The Board determined the amounts of fixed remuneration and the applicable principles for determination of the variable remuneration of Benoît Potier and Pierre Dufour for 2016, on the basis of several studies concerning the remuneration of executive officers, carried out by independent firms, both for the French market (large French industrial and services groups) and for the international market (Germany, United States).

Fixed remuneration

In order to remain competitive as compared to the reference markets, it was decided to set the amount of the fixed remuneration, which has been unchanged since 2012 for Benoît Potier, and since 2014 for Pierre Dufour, as follows:

 
This represents an increase of +6.8% as compared to 2015 for Benoît Potier, namely an increase of +1.7% a year since the last increase, and an increase of +3.8% as compared to 2015 for Pierre Dufour, namely an increase of +1.9% a year since the last increase.

Variable remuneration

The Board decided that the variable remuneration for 2016 will continue to be based on the same financial criteria, the objectives of (i) an increase in recurring net earnings per share, and (ii) return on capital employed after tax (ROCE) of the Company being identical to those for previous financial years, excluding the impact of the Airgas acquisition and its financing.

In addition to this there will be personal objectives including: (i) for two-thirds, qualitative objectives shared by the 2 executive officers which provide in particular for finalisation of the Airgas acquisition, its financing via the increase in capital in particular, and its integration, implementation of the 2016-2020 plan, preserving the Group’s main financial balances with the pursuit of a selective investment policy, supporting the young managers in their career progression and organising the succession plans; finally, continued pursuit of the Corporate Social Responsibility policy, in particular in terms of safety and reliability, and preparation for the CSR integration of Airgas; (ii) for one-third, individual performance.

The weighting formula for the various components making up the variable remuneration and the maximum percentage of variable remuneration as compared to the fixed remuneration are unchanged for Benoît Potier and Pierre Dufour.

Neither Benoît Potier nor Pierre Dufour receive directors’ fees in respect of their duties as directors as long as they hold an executive office.

Medium-term remuneration

Fulfilment of the performance conditions for the 2013 stock option and performance share plans

On the basis of the financial statements adopted for the 2015 financial year submitted for the approval of the next Annual Shareholders’ Meeting, the Board of Directors recorded the rate of achievement of the performance conditions defined at the time of implementation of the stock option and performance share plans of September 26, 2013.

The 2013 stock option plan provided that the number of options that could effectively be exercised by the beneficiary of a conditional grant of options would depend on the level of achievement of:

• (i) for 65%, the objective of growth in recurring EPS for the 2015 financial year as compared to that for financial year 2012 set at +15% in order to be able to exercise all the stock options subject to this criterion, and decreasing on a straight-line basis to 0% growth; the Board of Directors placed on record that growth in recurring EPS for the above-mentioned period amounted to +13.81% (i.e., an objective achieved at 92.1%)
• (ii) for 35%, an objective of total shareholder return, defined as the compound annual growth rate for an investment in Air Liquide shares with respect to financial years 2013, 2014 and 2015, set at 8% in order to be able to exercise all the options subject to this criterion, and decreasing on a straight-line basis to 4%. The Board of Directors recorded that the total shareholder return for the above-mentioned period was 12.82% per annum (i.e., an objective achieved at 100%).

Accordingly, the Board of Directors recorded that the total proportion of the options subject to conditions that could be exercised by the beneficiary was equal to 94.9%.

The 2013 performance share plan (of which the members of the General Management and the Executive Committee were not beneficiaries) provided that, for all the performance shares awarded, the number of performance shares that would definitively vest would depend on fulfilment of the same performance condition relating to recurring EPS over 3 years as that applicable to the 2013 stock option plan as set out above (only one criterion).

Accordingly, the Board of Directors recorded that the proportion of performance shares definitively awarded to the beneficiary was equal to 92.1%.

Setting of the performance conditions for the 2016 stock option and performance share plans

After listening to the requests made by certain investors, the Board of Directors decided from now on to set the performance conditions for the stock option and performance share plans implemented in the autumn at the start of the year in order to have a reference period of three full years. On the recommendation of the Remuneration Committee, the Board of Directors, at its meeting on February 15, 2016, adopted the principle of readopting, for the 2016 stock option and performance share plans, the same criteria of recurring EPS and total shareholder return as for the previous plans;

• Concerning the recurring EPS criterion, to take into account the impact of the Airgas acquisition and its financing, the principle was adopted (i) of making a calculation of the index on the basis of pro forma financial statements, making it possible to take into account comparable data for the period concerned (2016, 2017, 2018); and (ii) of increasing the objective of average annual growth over this period.
• Concerning the TSR criterion, the references to which TSR will be compared and the composition of the panel may be adapted to take into account the comments received from investors.

In light of the exceptional nature of the Airgas transaction and the uncertain economic environment at the present time, the Board will make sure that these performance conditions remain relevant, serious and exacting at the time of grant.

Stock ownership obligations

• Currently, each executive officer must hold in registered form until the termination of his duties, a quantity of shares arising from each exercise of stock options representing a minimum amount equal to 50% of the net capital gain on acquisition of each exercise. This percentage may be revised downwards without falling below 10%, provided that the quantity of shares arising from the exercise of stock options, for all plans combined, represents an amount at least equal to 50% of the sum of the net capital gains on acquisition of all the plans.
   
  A report was made to the Board of Directors on February 15, 2016 on the application of this rule in force since 2007 for the stock options exercised by the executive officers within the scope of the 2007 and 2008 stock option plans.
   
• In addition, the executive officers are subject to an obligation to hold a number of shares equivalent respectively to double his annual gross fixed remuneration for the Chairman and Chief Executive Officer and to his annual gross fixed remuneration for the Senior Executive Vice-President.
   
  At its meeting on February 15, 2016, the Board noted that, at January 1, 2016, the stock ownership obligation is largely respected by each of the executive officers.

Regulated agreements and commitments concerning Benoît Potier and Pierre Dufour

No regulated agreement was submitted to the Board of Directors during the 2015 financial year.

In accordance with French law, the Board of Directors carried out the annual re-examination of the agreements entered into and authorised during previous financial years which continued to be performed during the last financial year. These agreements concern the supplementary pension/death and disability benefit/life insurance plans and the termination indemnities applicable to Benoît Potier and Pierre Dufour. On the recommendation of the Remuneration Committee, the Board of Directors decided to maintain the current authorisations in force.

The Statutory Auditors’ special report on regulated agreements and commitments will be included in the 2015 reference document. It will be proposed to the Annual Shareholders’ Meeting on May 12, 2016 that it place on record that this report does not mention any new agreement.

“Say on Pay”

The Board of Directors adopted the draft resolutions and the summary tables showing the elements of remuneration due or allocated to Mr Benoît Potier, Chairman and Chief Executive Officer, and Mr Pierre Dufour, Senior Executive Vice-President, respectively, in respect of 2015, which will be put to the advisory vote of the shareholders at the Annual Shareholders’ Meeting on May 12, 2016.

Performance conditions applicable to 2013 share subscription options plan

 
The respective rates of achievements were 90.5% for the 2012 plan and 97.9% for the 2011 plan.

Performance conditions applicable to 2014 share subscription options plan and 2015 share subscription options plan and performance shares plan

Performance conditions applicable to the stock options and performance shares to be granted in 2016:

• Recurring EPS
  Concerning the recurring EPS criterion, the principle adopted, as mentioned page 158 of Air Liquide 2015 reference document, is to increase the objective of average annual growth over the 3 year period. Specifically, the recurring EPS objective, previously at +5%, has been reset to a level between +6% to +10% per year, the precise level to be disclosed ex post.
   
• TSR criterion
  The reference to which TSR will be compared and the composition of the panel may be adapted to take into account the comments received from investors, as mentioned page 158 of Air Liquide 2015 Reference Document.
  • Specifically, for the relative part of the TSR, the objective will remain based on a performance equal to the average of the two indices. However, the rate of achievement will be 0% if the rate of return on Air Liquide shares is lower than the average of the two indexes, at 50% if the average of the two indexes is reached and at 100% if the rate of return on Air Liquide shares is more than 3% higher than the average of the two indexes, on a straight line basis. This modification significantly strengthens these performance conditions, as it no longer allows vesting below the average of the two indexes.
  • The absolute TSR remains unchanged with the same objective as for previous plans, which is +8% as disclosed.

Performance conditions applicable to the stock options and performance shares to be granted in 2017:

We intend to simplify the TSR criterion to include a comparison to a unique financial market index publically available. For the portion of the performance conditions relative to this comparative TSR criterion, there shall be no vesting of stock options or performance shares if the Air Liquide TSR is below the median of such index.

These amendments will be proposed to the Board for approval.

2015 Reference Document

Volume of grants

• Executive officers

  	Volume of performance shares	IFRS value in EUR1	% of share capital
  Benoît Potier	20,000	1,494,710	0.006
  Pierre Dufour	10,000	747,355	0.003

   1. Definitive IFRS value following the closure of accounts for 2016
   
• Other beneficiaries
  The Board of Directors also decided to grant 45,230 performance shares to 87 beneficiaries.

In total, it awarded 75,230 performance shares representing 0.022% of the share capital in terms of the number of shares to 89 beneficiaries.

“Airgas” Plan Regulations

• Except with regard to the performance conditions set out below, the “Airgas France” and “Airgas World” Plan regulations are identical to those of the 2015 Plans and, in particular, the vesting and holding periods (“Airgas France” Plan: 3 years and then another 2 years; “Airgas World” Plan: 4-year vesting period without any holding period).

Performance conditions

• All the shares awarded within the scope of the “Airgas” Plans are subject to performance conditions.
   
• Such performance conditions are identical to those for the future general annual plans for 2016. These performance conditions, adopted by the Board of Directors on February 15, 2016 and modified as specified on March 24, 2016 in order to take into account the remarks of certain shareholders, are as follows:

  Weighting	65%	35%
  Of which 50%	Of which 50%
  Performance conditions	Average of annual growth rates in recurring earnings per share excluding foreign exchange impact and exceptional items for the period 2016/2017/2018	Total Shareholder Return, defined as the average annual growth rate of an investment in Air Liquide shares over the 3 financial years	Total Shareholder Return vs. 2 benchmarks as follows: ½ CAC 40 – ½ peers over the 3 financial years
  Objective	Level of growth set within a range of +6% to +10% per annum (the precise level will be communicated ex post)	Total shareholder return of 8%, as already published	0% if the Air Liquide rate of return is lower than the average of the two indexes 50% if the Air Liquide rate of return is equal to the average of the two indexes 100% if the Air Liquide rate of return is more than 3% higher than the average of the two indexes Change on a straight-line basis
  Achievement of performance conditions	This information will be published in 2019

   
• Recurring EPS
  Concerning the recurring EPS criterion, in order to take into account the impact of the Airgas acquisition and its financing, the principle was adopted:
  • of calculating the index on the basis of pro forma financial statements, which make it possible to take into account comparable data for the period concerned (2016, 2017, 2018),
  • of increasing the objective in terms of average annual growth over this period. This objective, which was previously set at +5% per annum, has thus been set at a level of growth within a range of +6% to +10% per annum. The precise level will be communicated ex post.
   
• Total shareholder return (TSR)
  • The absolute TSR objective remains unchanged as compared to the previous plans, i.e. +8% as already published.
• The objective with regard to the relative part of TSR is based on a performance equal to the average of the two indexes. The rate of achievement of the performance conditions will be 0% if Air Liquide TSR is lower than the average of the two indexes, 50% if it is equal to the average of the two indexes and 100% if it is more than 3% higher than the average of the two indexes, on the basis of a straight-line change. Any grant of shares for a performance lower than the average of the two indexes has therefore become impossible. The rate of achievement of the performance conditions will be recorded by the Board at the time of the adoption of the financial statements for the 2018 financial year. The objectives set for each performance condition will be made public ex post, at the end of the Board meeting determining the rate of achievement of the performance conditions. The result achieved and the percentage of performance shares acquired will also be communicated.

Specificities relating to the executive officers

1. Within the scope of the sub-limits authorized by the Annual Shareholders’ Meeting for 38 months, the Board of Directors sets annual limits for grants to the executive officers, expressed (i) as a percentage of the capital and (ii) as a multiple of their remuneration.
   The Board of Directors has decided to set the following limits for all plans combined for 2016:
   • for all the executive officers: the limit relating to the total number of performance shares granted in 2016 (for all performance share plans combined) to the 2 executive officers is set at 0.017% of the capital (i.e. an amount significantly lower than the average sub-limit on grants set at 0.15% of the capital for 38 months by the Annual Shareholders’ Meeting of May 12, 2016)
   • for each executive officer individually: the limit relating to the total cumulative IFRS value of the stock options and performance shares granted in 2016 (for all stock option and performance share plans combined) to each executive officer is set at approximately 1.5 times the amount of his maximum gross annual remuneration.
2. In addition, Benoît Potier and Pierre Dufour have made a commitment, for the duration of their terms of office, not to carry out transactions to hedge their risk with regard to the performance shares granted.
    
3. Furthermore, the shareholding obligations set out below apply to this specific grant, like they do to the other grants:
   • Holding, in registered form, until the termination of their duties, a minimum quantity of shares corresponding to 50% of the capital gain on acquisition net of social charges and taxes calculated on the date of the definitive award of the performance shares. This percentage will be lowered to 5% as soon as the quantity of shares held represents, for all LTI plans combined, an amount at least equal to 3 times the executive officer’s fixed gross annual remuneration.
   • Furthermore, the internal rule defined by the Board of Directors since 2008, pursuant to which the executive officers must hold, in a registered account, a number of shares equivalent to twice the fixed gross annual remuneration for the Chairman and Chief Executive Officer and the amount of fixed gross annual remuneration for the Senior Executive Vice-President remains in effect. This obligation will remain in force until it is exceeded by the effect of the above-mentioned rules resulting from the French Commercial Code. The Board of Directors recorded that this shareholding obligation is complied with by each of the executive officers at July 1, 2016.

Changes in the principles

The Board decided to continue the policy initiated in 2015 aimed at giving preference to performance shares rather than stock options in the volumes granted. Thus, for employees who up until now had received a mixed grant, the weight of performance shares has increased considerably as compared to that of options and, for many of them, performance shares have completely replaced stock options.

In the case of the executive officers, the Board decided that the grant of performance shares and stock options and its changes over time will from now on be evaluated in terms of the IFRS value (and no longer the volumes granted), for all recurring stock option and performance share plans combined, with the percentage of performance shares predominating in the total value granted.

On the basis of these principles, the Board of Directors made the following grants at its meeting on November 29, 2016:

2016 Stock Option Plan

The Board granted options to subscribe for shares in the Company in accordance with the following terms:

Exercise price

The exercise price is €93 (corresponding to the average of the opening trading prices for the Air Liquide share during the twenty trading sessions prior to the date of the Board of Directors’ meeting, rounded down to the nearest euro).

Volume of grants

• Executive officers

  	Volume	IFRS value1	% of share capital
  Benoît Potier	60,000 options	€619,440	0.015%

  1. As of November 29, 2016
• Other beneficiaries
  The Board of Directors also decided to grant 83,240 options to 242 beneficiaries.

In total, it granted 143,240 options to subscribe for shares, representing 0.037% of the share capital in terms of the number of shares, to 243 beneficiaries, representing 0.36% of the workforce.

2016 Plan Regulations

Subject to the performance conditions that apply to both the performance share and stock option plans (defined below), the provisions of the 2016 Plan Regulations are essentially unchanged as compared to those of the 2015 Plan (term of the Plan: 10 years; lock-up period of 4 years; definition of a condition of continued employment/presence in the Group at the time of exercise of the options).

2016 Performance Share Plans

The Board awarded performance shares in accordance with the following terms:

Volume of awards

• Executive officers

  	Volume	IFRS value2	% of share capital
  Benoît Potier	17,800 performance shares	€1,275,281	0.005%

  2. Definitive IFRS value following the closure of accounts for 2016
• Other beneficiaries
  The Board of Directors also decided to award 408,546 performance shares to 1,954 beneficiaries.

In total, it therefore awarded 426,346 performance shares representing 0.11% of the share capital to 1,955 beneficiaries, representing 2.87% of the workforce.

2016 Plan Regulations

Subject to the performance conditions that apply to both the performance share and stock option plans (defined below), the provisions of the 2016 “France” and “World” Performance Share Plan Regulations are essentially identical to those of the 2015 Plans and in particular:

1. For France, the vesting period is set at 3 years and the holding period at 2 years. As for the “World” Plan, it provides for a vesting period of 4 years with no additional holding obligation.
2. Definition of a condition of continued employment/presence at the end of the vesting period in order to receive the definitive award of shares.

Combined

On a combined basis, all 2016 Performance Share and Stock Option Plans combined, the grants decided by the Board on November 29, 2016 are as follows:

• Executive officers

  	Volume	IFRS value1, 2	% of share capital
  Benoît Potier	60,000 stock options 17,800 performance shares	€619,440 €1,275,2813	0.015% 0.005%
  Total	€1,894,721	0.020%

  1. 2. As of November 29, 2016
  3. Definitive IFRS value following the closing of accounts for 2016

The IFRS value of this grant, which represents a variation of +3.7% as compared to 2015, is close to, but still lower than, the value granted in 2013 (€1,957,000). It corresponds to an average annual increase since 2008, the year before the crisis, of 0.62%.

• All the beneficiaries

  	2016
  Total number of performance shares/performance share equivalents	474,093
  % of share capital	0.15%
  Number of beneficiaries	1,981
  % of workforce	2.9%

   
  The lists of employee beneficiaries were prepared with the aim of ensuring a certain rotation and an enlargement of the population of beneficiaries. 39.4% of the beneficiaries of the November 29, 2016 Plans are employees to whom no stock options/performance shares were granted over the last 5 years.

Performance conditions applicable to the 2016 Stock Option and Performance Share Plans

All the stock options and performance shares granted to any beneficiary within the scope of the November 29, 2016 Plans are subject to the following performance conditions that apply to both the Stock Option and Performance Share Plans. These conditions were adopted by the Board of Directors on February 15, 2016 and amended as communicated on March 24, 2016 in order to take account of the remarks made by certain shareholders.

The number of stock options that may be exercised out of the total number of stock options granted and the number of performance shares definitively awarded within the scope of the 2016 Plans will therefore depend:

(i) For 65% of the stock options/performance shares granted, on the rate of achievement of an objective, set by the Board, consisting of the average of the annual rates of growth in Group undiluted net earnings per share excluding foreign exchange impact and excluding exceptional items (“Recurring EPS”) for financial years 2016, 2017 and 2018. At the objective set, the grant is 100% then decreases on a straight-line basis to zero if there is no growth in EPS. In order to take into account the impact of the Airgas acquisition and its financing, the principle was adopted:

• of calculating Recurring EPS on the basis of pro forma financial statements, which make it possible to take into account comparable data for the periods concerned (2016, 2017, 2018),
• of increasing the objective in terms of the average of the annual rates of growth over this period. This objective, which was previously set at +5% per annum, has now been set at a level of growth within a range of +6% to +10% per annum. The precise objective will be communicated ex post.

(ii) For 35% of the stock options/performance shares granted:
For 50% of the stock options/performance shares referred to in sub-paragraph (ii): on an objective of Total Shareholder Return set by the Board, defined as the average annual growth rate of an investment in Air Liquide shares for financial years 2016, 2017 and 2018 (“AL TSR”). The absolute TSR objective remains unchanged as compared to the previous plans, i.e. +8% as already published. At the objective set, the grant is 100% then decreases on a straight-line basis, to a lower limit which remains significantly higher than the rate of return on capital.

For 50% of the stock options/performance shares referred to in sub-paragraph (ii): on the rate of Total Shareholder Return from an investment in Air Liquide shares, reinvested dividends – sourced from Bloomberg (“B TSR”), compared to a reference index made up of:

• for half, the CAC 40 index, reinvested dividends (sourced from Bloomberg), and
• for half, the Total Shareholder Return of the companies in the industrial gases sector (the average of Air Liquide, Linde, Praxair and Air Products), reinvested dividends (sourced from Bloomberg).

The objective with regard to the relative part of TSR is based on the average of the two indexes. The rate of achievement of the performance conditions will be 0% if Air Liquide TSR is lower than the average of the two indexes, 50% if it is equal to the average of the two indexes and 100% if it is more than 3% higher than the average of the two indexes, on the basis of a straight-line change. Any grant for a performance lower than the average of the two indexes is impossible.

In sum, the applicable performance conditions are as follows:

 
The rate of achievement of the performance conditions will be recorded by the Board at the time of its adoption of the financial statements for the 2018 financial year. The absolute TSR objective is communicated ex ante for the November 29, 2016 Plans. The precise objective set for EPS will be made public ex post, at the close of the Board meeting determining the rate of achievement of the performance conditions. The result achieved and the percentage of performance shares that vest/options that are exercisable will also be communicated.

Specificities relating to the executive officers

Limits on grant

Within the scope of the sub-limits authorized by the Annual Shareholders’ Meeting for 38 months, and most recently by the Combined Shareholders’ Meeting of May 12, 2016 (18^th and 19^th resolutions), the Board of Directors sets lower annual limits for grants to the executive officers, expressed (i) as a percentage of the capital and (ii) as a multiple of their remuneration, in accordance with the recommendations of the AFEP/MEDEF Code.

The limits set by the Board of Directors for 2016 are identical to those for 2015 and are as follows:

• For all the executive officers:
  • the total number of performance shares granted to the executive officers in 2016 (for all Plans combined) cannot grant entitlement to a total number of shares exceeding 0.017% of the capital (namely an amount significantly lower than the average sub-limit on grants set at 0.15% of the capital for 38 months by the Annual Shareholders’ Meeting of May 12, 2016);
  • the total number of stock options granted to the executive officers in 2016 cannot grant entitlement to a total number of shares exceeding 0.05% of the capital (namely an amount significantly lower than the average sub-limit on grants set at 0.3% of the capital for 38 months by the Annual Shareholders’ Meeting of May 12, 2016).
• For each executive officer individually: the limit relating to the total cumulative IFRS value of the stock options and performance shares granted in 2016 (for all stock option and performance share plans combined) to each executive officer is set at 1.5 times the amount of his maximum gross annual remuneration.

Other specific rules

The specific rules applicable to the executive officers defined at the time of the grant under the 2015 Plans were restated by the Board on November 29, 2016. They are applicable to the 2016 grants as follows:

• Obligations regarding the restriction on the exercise of stock options and the sale of performance shares during the “blackout periods” surrounding the publication of the financial statements defined by the Company.
   
• Commitment not to carry out hedging transactions with regard to the risk concerning stock options/shares resulting from the exercise of stock options and concerning the performance shares awarded, throughout the length of their term of office.
   
• Share ownership obligations:
  • obligation to retain, in registered form, until the termination of their duties, a minimum quantity of shares corresponding to 50% of the capital gain on acquisition net of social charges and taxes for each exercise of stock options/final award of performance shares. This percentage will be adjusted downwards to 5% as soon as the quantity of shares held represents an amount equal to at least 3 times the executive officer’s fixed gross annual remuneration.
  • pursuant to the internal rule defined by the Board of Directors since 2008, obligation for the executive officers to hold, in a registered account, a number of shares equivalent to twice the fixed gross annual remuneration for the Chairman and Chief Executive Officer and the amount of fixed gross annual remuneration for the Senior Executive Vice-President. This obligation will remain in force until it is exceeded by the effect of the above-mentioned rules resulting from the French Commercial Code.

These obligations are in line with the recommendations of the AFEP/MEDEF Code of November 24, 2016.

On the basis of the financial statements drawn up for 2014, the Board of Directors set the amount of variable remuneration due to the executive officers for 2014.

For the record, in respect of 2014, the variable portion could amount to a maximum of 180% of fixed remuneration for the Chairman and Chief Executive Officer and a maximum of 130% for the Senior Executive Vice-President. It was conditional on:

• two financial criteria related to objectives concerning an increase in recurring net earnings per share and in the level of return on capital employed, reflecting the importance for the Group of the balance between growth and the profitability of investments; (i) the objective of growth in recurring EPS is set on a consistent basis with regard to historical performances; it takes into account the Group’s ambition of growth and the economic environment; (ii) the ROCE objective is set in absolute value in line with best performances in the industry, and at a level significantly higher than the weighted average cost of capital. An adjustment formula for each criterion is provided for in the event of an upward or downward variance with regard to the objective set.
• personal objectives comprising: (i) for 2/3, qualitative objectives, most of which are shared by the two executive officers, related, firstly, to management: management of human resources and organisation, deployment of the strategic plan and preserving financial balances and, secondly, Corporate Social Responsibility - particularly in the areas of safety, reliability and innovation; (ii) for 1/3, individual performance.

The weight of each criterion expressed as a percentage of the fixed remuneration was as follows:

An assessment was made of the performance of the executive officers. The results obtained in 2014 were above the objective set for the criterion of recurring EPS and below the objective set for the ROCE criterion. The amount of the variable remuneration, as a percentage of the fixed remuneration, amounts to 67.6% for Benoît Potier and 52% for Pierre Dufour in respect of recurring EPS, and 28.8% for Benoît Potier and 19.2% for Pierre Dufour in respect of ROCE.

The performance of the executive officers with regard to the personal objectives was considered very good: the development efforts made in favour of high-potential young talents were pursued. Furthermore, in an uneven environment, the Group continued to make progress in line with the objectives set within the scope of ALMA 2015; the main financial balances were preserved with strict control of capital expenditure and a selective investment policy. The balance sheet is stronger with a decrease in the debt/equity ratio. Finally, with regard to CSR, safety has improved as shown by the further decrease in the lost-time accident frequency rate which fell from 1.62 in 2013 to 1.50 in 2014, and in terms of innovation, the modernisation of the Paris Innovation Campus and the construction of a new R&D centre in China were launched. The amount of the variable remuneration in respect of the personal objectives represents 61.2% of the fixed remuneration for Benoît Potier and 45% for Pierre Dufour.

In total, the amount of the variable remuneration as a percentage of the fixed remuneration amounts to 157.6% (out of a maximum of 180%) for Benoît Potier and 116.2% (out of a maximum of 130%) for Pierre Dufour.

The total amount of gross remuneration is therefore as follows:

The total amount of fixed and variable remuneration for 2014 is +9.2% higher than in 2013 for Benoît Potier and +8.5% higher for Pierre Dufour corresponding to an average annual increase, over the period 2011-2014, of +1.8% and +1.6% a year respectively.
Pierre Dufour, who has taken charge of the management of the hub in Frankfurt, also receives an annual amount of 250,000 euros paid by the German subsidiary, which includes, in particular, for approximately one half, an amount corresponding to the benefits in kind (housing) from which he previously benefited under his employment contract in France.

2015 financial year

The Board determined the amounts of fixed remuneration and the applicable principles for determination of the variable remuneration of Benoît Potier and Pierre Dufour for 2015, on the basis of several studies concerning the remuneration of executive officers, carried out by independent firms, both for the French market (French industrial groups of the CAC 40 and comparable groups; large French industrial and services groups) and for the international market.

Fixed remuneration

It was decided that the amount of fixed remuneration would remain unchanged as compared to 2014:

Variable remuneration

The Board decided that the variable remuneration for 2015 will continue to be based on the same financial criteria, the objectives (i) of increase in recurring net earnings per share, and (ii) of return on capital employed after tax (ROCE) of the Company being identical to those for previous financial years.

In addition to this there will be personal objectives including: (i) for 2/3, qualitative objectives, mostly shared by the 2 executive officers, related to management: organisation and strategy with the preparation of the 2016-2020 plan, preserving financial balances, progress in the evolution of the Group’s young generations and pursuit of the Corporate Social Responsibility objectives related, in particular, to safety, reliability, monitoring of the risk management process and the CO₂ assessment; (ii) for 1/3, individual performance.

The weighting formula for the various components making up the variable remuneration and the maximum percentage of variable remuneration as compared to the fixed remuneration are unchanged for Benoît Potier; in order to remain competitive as compared to the reference markets (France, Germany, international), they are modified as follows for Pierre Dufour:

Neither Benoît Potier nor Pierre Dufour receive directors’ fees in respect of their duties as directors as long as they hold an executive office.

Medium-term remuneration
On the basis of the financial statements for the 2014 financial year submitted for the approval of the next Annual Shareholders’ Meeting, the Board of Directors recorded the rate of achievement of the performance conditions defined at the time of implementation of the stock option plan of September 27, 2012.
The 2012 stock option plan provided that the number of options that could effectively be exercised by the beneficiary of a conditional grant of options would depend on the level of achievement of:

• (i) for 65%, the objective of growth in recurring EPS for the 2014 financial year as compared to that for financial year 2011 set at +15% in order to be able to exercise all the stock options subject to this criterion, and decreasing on a straight-line basis to 0% growth; the Board of Directors placed on record that growth in recurring EPS for the above-mentioned period amounted to +12.7% (i.e., an objective achieved at 85%)
• (ii) for 35%, an objective of total shareholder return, defined as the compound annual growth rate for an investment in Air Liquide shares with respect to financial years 2012, 2013 and 2014, set at 8% in order to be able to exercise all the options subject to this criterion, and decreasing on a straight-line basis to 4%. The Board of Directors recorded that the total shareholder return for the above-mentioned period was 12.71% per annum (i.e., an objective achieved at 100%).

Accordingly, the Board of Directors recorded that the total proportion of the options subject to conditions that could be exercised by the beneficiary was equal to 90.5%.

Due to the increase in the length of the period of calculation of the performance conditions with regard to ACAS plans for the conditional grant of shares to employees, the Board of Directors did not have to record the achievement of performance conditions concerning the 2013 plan at its meeting on February 16, 2015. For information purposes, the executive officers are not currently beneficiaries of conditional grants of shares.

Stock ownership obligations

• Each executive officer must hold in registered form until the termination of his duties, a quantity of shares arising from each exercise of stock options representing a minimum amount equal to 50% of the net capital gain on acquisition of each exercise. This percentage may be revised downwards without falling below 10%, provided that the quantity of shares arising from the exercise of stock options, for all plans combined, represents an amount at least equal to 50% of the sum of the net capital gains on acquisition of all the plans.
  A report was made to the Board of Directors on February 16, 2015 on the application of this rule in force since 2007 for the exercises of stock options made within the scope of the 2007 and 2008 stock option plans.
• In addition, the executive officers are subject to an obligation to hold a number of shares equivalent respectively to double the annual gross fixed remuneration for the Chairman and Chief Executive Officer and to the annual gross fixed remuneration for the Senior Executive Vice-President. At its meeting on February 16, 2015, the Board noted that, at January 1, 2015, the stock ownership obligation is largely respected by each of the executive officers.

Regulated agreements concerning Benoît Potier

1. Death and disability benefits plan

It was decided, in an overall logic of simplification (one unified plan instead of the two that currently exist) and ensuring the legal security of the various supplementary social protection schemes, effective as from January 1, 2015, to change the death and disability benefits plan set up for the benefit of all the personnel, in order to extend the basis for assessment of the contributions and benefits and to put an end, at the same time, to application of the death benefits plan for “senior managers”. From now on, one unified supplementary death and disability benefits plan is applied, covering all the personnel and the executive officers duly authorised to benefit from the plan, in which:

• the remuneration taken into account for the calculation of the contributions is capped at:
  • i. 16 times the annual social security ceiling for the incapacity and disability cover.
  • ii. 24 times the annual social security ceiling for the death cover.
• the rate of the employer’s contribution is 1.02%, subject to subsequent changes that may take place pursuant to the contractual provisions.

An insurance contract was entered into with an insurance company in this respect at the end of 2014 which specifies the limits of the incapacity/disability and death benefits for the same insured party.

Pursuant to a decision of November 20, 2014 made in accordance with the regulated agreements and commitments procedure, the Board of Directors authorised Benoît Potier, in respect of his duties as Chairman and Chief Executive Officer, to benefit, as from January 1, 2015, from this new unified death and disability benefits plan covering all the personnel. A report was made to the Board on February 16, 2015 on the implementation of this authorisation. In the light of the pooling of the risks covered, the amount of the annual contribution paid for Benoît Potier should amount to substantially less than the contribution paid up until now by the company within the scope of the death benefits plan for “senior managers".

2. Life insurance plan

Following the changes in the regulations, it was decided to transfer to the collective life insurance plan from which Benoît Potier benefits, from 2015 onwards, the payment of the contribution (assessed on the basis of the reference remuneration amounting to between 0 and 8 times the annual social security ceiling) paid up until then into the defined contribution pension plan for senior managers and executives, of which he is no longer a beneficiary. The financial impact of this extension is practically neutral for the Company. Pursuant to a decision made on November 20, 2014 in compliance with the regulated agreements and commitments procedure, the Board of Directors therefore authorised the extension of the life insurance plan to the bracket of reference remuneration amounting to between 0 and 8 times the annual social security ceiling. A report was made to the Board on February 16, 2015 on the effective implementation of this authorisation.

These agreements and the related Statutory Auditors’ special report will be included in the 2014 reference document. They will be put to the vote of the Annual Shareholders’ Meeting on May 6, 2015 in a specific resolution for Benoît Potier.

“Say on Pay”
The Board of Directors adopted the draft resolutions and the summary tables showing the elements of remuneration due or allocated to Mr Benoît Potier, Chairman and Chief Executive Officer, and Mr Pierre Dufour, Senior Executive Vice-President, respectively, in respect of 2014, which will be put to the advisory vote of the shareholders at the Annual Shareholders’ Meeting on May 6, 2015.

¹ For the sake of transparency and exhaustiveness, all references to the remuneration of Pierre Dufour in this document take into account his remuneration in respect of his offices in both France and Germany.

Evolution of the principles

1. After review of the long-term remuneration policy for the Group’s employees, particularly in respect of practices of equivalent-sized groups, the Board decided to give priority to performance shares (formerly known as “CGSE” and renamed “performance shares”) in the volumes granted, reducing the number of stock options granted accordingly. In this context, the Board decided, in accordance with the authorisation given by the shareholders on May 6, 2015 (i) to allow performance shares to be granted to the executive officers and members of the Executive Committee who had previously been limited to stock options, with the substitution of performance shares (and not in addition) to stock options; and (ii) with a preference to award performance shares for employees who had been previously benefited from a mix of stock options and performance shares, or limited to stock options.
    
2. The Board considered that maintenance of both plans allows for flexible management of the remuneration policy. The priority given to performance shares, at a practically equivalent cost for the Company, allows for a plan with less dilution and potential favourable tax treatment in the near future.
    
3. In accordance with the commitments made, the award of performance shares (which now includes the executive officers) is subject to reinforcement of the performance conditions with the addition of a second criterion which includes two external reference indexes, thereby making the performance conditions identical to those for stock options; thus, these performance conditions are applicable to all the stock options and performance shares granted to any beneficiary.
    
4. Furthermore, in accordance with the law in favour of revenue from work (LFRT) of December 3, 2008, the award of performance shares to the executive officers is accompanied by the implementation of a scheme in favour of the Group’s employees in France with regard to the current financial year. All the Company’s employees and 97.71% of the employees of the Group’s French entities, who are covered by an incentive plan or a special or voluntary profit sharing plan, will receive an additional incentive or profit sharing amount or benefit from an improvement in the formula of their agreements in 2015. For L’Air Liquide SA, the average incentive amount paid in this respect is €300 per employee.

New policy for the award to executive officers

1. On the basis of grants to the executive officers at a constant volume when compared to the 2014 stock option plan, the Board of Directors adopted for 2015 the following breakdown of the mix of performance shares/stock options for the executive officers: 70% options, 30% performance shares (see the details of the quantities allocated as set forth below). Over the long term, the objective is an award of both plans in equal proportions. As the IFRS value of a performance share exceeds that of a stock option, the total valuation of these awards amounts to €1,827,870 for Benoît Potier and €1,041,886 for Pierre Dufour. These amounts represent a 13% increase as compared to 2014 yet 7% inferior as compared to 2013. They correspond to an annual average increase since 2008 (year preceding the global financial crisis) of 0.2% for Benoît Potier and 4.9% for Pierre Dufour.
    
2. Within the initial limit of 38 months as authorised by the Annual Shareholders’ Meeting, the Board of Directors sets annual limits for the grants to the executive officers, expressed (i) as a percentage of the share capital and (ii) as a multiple of their remuneration.
    
   In the context of the decision to grant performance shares to the executive officers, and replace part of the stock option grant, the Board reviewed the maximum quantities of each grant allowed under the plans to the executive officers, expressed as a percentage of the share capital and a multiple of the executive officer’s remuneration in accordance with the AFEP/MEDEF Code. It was therefore decided:
   • As regards the executive officers:
     • stock options: significantly lower the limit of total stock options to 0.05% of the share capital (instead of 0.1% previously) granted for the year to the two executive officers, in a desire for consistency and with the replacement of some stock options by performance shares; through this limit, the Board sets an annual limit which is considerably lower than annual average limit of 0.3% of the share capital for 38 months by the Annual Shareholders’ Meeting;
     • performance shares: establish a limit of total performance shares to 0.017% of the share capital granted for the year to the two executive officers (equally significantly lower than the average limit of 0.15% of the share capital for 38 months by the Annual Shareholders’ Meeting)
   • For each executive officer individually:
     • to set the relative limit on the total cumulative IFRS value of the stock options and performance shares granted for the year to each executive officer at approximately 1.5 times the amount of his maximum gross annual remuneration (instead of former limit of 1 time).
3. The restrictions on the exercise of stock options during the closed periods surrounding the publication of the financial statements defined by the Company also apply to performance shares which may not be sold by the executive officers during such periods.
    
4. Moreover, at the time of this grant, in accordance with the AFEP/MEDEF Code and in line with established practices in the Company, the Board of Directors notes the engagement by Benoît Potier and Pierre Dufour not to carry out hedging transactions not only for the stock options/shares resulting from the exercise of stock options but equally with regard to performance shares awarded, throughout their entire terms of office.
    
5. The share holding obligation imposed on the executive officers pursuant to the provisions of the French Commercial Code is adjusted as from the date of this plan. It applies both to shares resulting from the exercise of stock options and to performance shares as granted to the executive officers.
    
   As of 2015, where stock options/performance shares are granted to the executive officers, the executive officers must retain a minimum quantity of shares corresponding to 50% of the capital gains at time of the acquisition, net of social charges and tax, at each exercise of stock options/final vesting of performance shares, in registered form, and until the termination of their appointments. This percentage will be reduced to 5% when the quantity of shares held represents an amount equivalent (or greater) to three times the executive officer’s gross fixed annual remuneration.
    
   Furthermore, remains today, the internal rule defined by the Board of Directors since 2008, whereby the executive officers must hold a number of shares equivalent to twice the gross fixed annual remuneration for the Chairman and Chief Executive Officer and the amount of the gross fixed annual remuneration for the Senior Executive Vice-President, continues in force. This obligation will continue to exist until it is exceeded by the effect of the above-mentioned rules from the French Commercial Code. The Board of Directors noted that this holding obligation was complied with by each of the executive officers at July 1, 2015.
    
   In light of the strict rules for the holding of shares thereby implemented, the award of performance shares to the executive officers will not be conditional on the purchase of additional shares by the executive officers when the shares awarded become available, as an exception to the recommendations in the AFEP/MEDEF Code (Article 23.2.4).
    
6. Against this background, the Board of Directors pursued its policy of enlargement of the total number of beneficiaries undertaken over the last three years, including once more this year inventors and innovators in particular; the total number of beneficiaries within the scope of the 2015 plans is 1,770 beneficiaries, representing 3.45% of the Group’s workforce.

2015 Stock Option Plan

The Board granted options to subscribe for shares in the Company to a certain number of employees, to Executive Committee members and to the executive officers of the Company in accordance with the following terms:

Exercise price

The exercise price is €105 (corresponding to the average of the opening trading prices for the Air Liquide share during the twenty trading sessions prior to the date of the Board of Directors’ meeting, rounded down to the nearest euro).

Volume of grants

• Executive officers

  	Volume	IFRS value	% of share capital
  Benoît Potier	70,000 options	€892,570	0.02%
  Pierre Dufour	39,900 options	€508,765	0.012%

   
• Other beneficiaries
   
  The Board of Directors also decided to grant 357,294 stock options to 397 beneficiaries.
   
  In total, it granted 467,194 options to subscribe for shares representing 0.14% of the share capital to 399 beneficiaries, representing 0.78% of the workforce.

2015 Plan Regulations

The provisions of the Regulations for the 2015 Plan are unchanged as compared to the Regulations for the 2014 Plan (10-year exercise period; 4-year vesting period) except for a technical change made to the method of calculation of one of the performance conditions; these conditions now apply to both the stock option plans and the performance share plans (see below). Furthermore, a condition of presence/continued employment in the Group at the time of exercise of the options is also required as in 2014.

2015 Performance Share Plan

The Board awarded performance shares to a certain number of employees, to Executive Committee members and to the executive officers of the Company in accordance with the following terms:

Volume of awards

• Executive officers

  	Volume	IFRS value	% of share capital
  Benoît Potier	10,000 performance shares	€935,300	0.003%
  Pierre Dufour	5,700 performance shares	€533,121	0.002%

   
• Other beneficiaries
   
  The Board of Directors also decided to award 271,472 performance shares to 1,742 beneficiaries.
   
  In total, it awarded 287,172 performance shares representing 0.084% of the share capital in terms of the number of shares to 1,744 beneficiaries, representing 3.40% of the workforce.

2015 Plan Regulations

1. New provisions:
   France and World Plans:
   Following the decision to allow the award of performance shares to the executive officers:
   • The new name of “performance shares” was adopted to replace the designation as “CGSE” that was used until now;
   • The performance conditions were changed to reflect identical performance conditions as those applicable to the Stock Option Plan (see below)
   France plan only:
   • The wording was adapted in order to reflect the inclusion of the executive officers among the beneficiaries of the Plan;
   • The presence condition required to benefit from performance shares at the end of the vesting period is aligned, for the executive officers, with the condition that is applicable to them in the stock option plans, the loss of the rights being limited to cases of resignation or removal from office in the event of gross misconduct.
2. The other provisions of the Regulations for the 2015 Plans are identical to those in the 2014 Plans including, in particular, the vesting/holding periods (3 years then 2 years for France; 4 years and no holding period for the international plan).

Performance conditions

• The performance shares award has been subject to reinforcement of the performance criteria with the addition of a second criterion to include two external reference indexes, and thus the performance conditions are identical to those defined for the stock option plan; these performance conditions are applicable to all stock options and performance shares granted to all beneficiaries.
   
• The calculation methodology regarding the performance condition relative to recurring EPS has been modified, thus avoiding the threshold effect resulting from the assessment of the performance for year 3 as compared to year 0. Instead, the average of the annual growth rate is now used. In light of the above, the objective of growth in recurring EPS, from date-to-date over 3 years, for the previous plans becomes an objective of annual average growth over the same period of 3 years. Subject to this reservation, the performance conditions are identical to those for the 2014 stock option plan.
   
  On the Remuneration Committee’s recommendation, the Board has decided that the number of options which may be exercised upon the total number of stock options granted, and the number of performance shares that ultimately vest, for the 2015 plans, will be in function of the following:
   
  (i) up to 65% of the stock options/performance shares granted, on the realisation of an objective set by the Board, consisting of the non-diluted average annual growth rates in net earnings per share excluding foreign exchange impact and exceptional items for financial years 2015, 2016 and 2017 (“Recurring EPS”); the growth objective set takes into account the economic environment, historical growth and the Group’s medium-term ambitions. Once the objective has been set, the grant decreases on a straight-line basis to zero if there is no growth in EPS. For information, over the last three years, the objective was extremely close to the rates of growth in EPS shown in the consolidated annual budgets presented to the Board of Directors; and
   
  (ii) up to 35% of the stock options/performance shares granted,
  • for 50% of the stock options/performance shares referred to in paragraph (ii): an objective of Total Shareholder Return as set by the Board, defined as the average annual growth rate of an investment in Air Liquide shares for financial years 2015, 2016 and 2017 (“AL TSR”). From the objective set, the grant decreases on a straight-line basis, to a lower limit which remains significantly higher than the rate of return on capital.
  • for 50% of the stock options/performance shares referred to in paragraph (ii): Total Shareholder Return from an investment in Air Liquide shares with reinvested dividends – source: Bloomberg (“B TSR”), compared to a reference index made up of:
    • one-half weighted on the CAC 40 index, reinvested dividends (source: Bloomberg), and
    • one-half weighted on the Total Shareholder Return of the companies in the industrial gas sector (the average of Air Liquide, Linde, Praxair and Air Products), reinvested dividends (source: Bloomberg).
    The median objective is based on a performance equal to the average of the two indexes cited above. The rate of realisation is 0% if the rate of return on Air Liquide shares is 3% lower than the median objective and 100% if the rate of return on Air Liquide shares is more than 3% higher than the objective.
  In summary, the applicable performance conditions are as follows:
   

  Percentage	65%	35%
  Objective	Average of annual growth rates in net earnings per share excluding foreign exchange impact and exceptional items for financial years 2015, 2016 and 2017	50%   Total Shareholder Return 2015/2016/2017	50%   Total Shareholder Return vs. benchmark ½ CAC 40 - ½ peers 2015/2016/2017
  Achievement	From 0% to 100% if the objective is achieved	Low objective 0%	High objective 100%

   
  The rate of achievement of the performance conditions will be recorded by the Board at the time of its adoption of the financial statements for the 2017 financial year. The targets set for each performance condition will be made public ex post, at the end of the Board meeting determining the rate of achievement of the performance conditions. The result achieved and the percentage of stock options/performance shares that vest will also be communicated.
   
• The Board of Directors had given its agreement in principle to the performance conditions adopted for the 2015 Plans at its meeting on May 6, 2015. Further to the requests made by certain investors, the Board of Directors confirmed that, as from 2016, the performance conditions applicable to the annual plans decided in the autumn will now be set at the beginning of the year at the meeting in February, in order to have a reference period of three full years.

2013 financial year

On the basis of the financial statements drawn up for 2013, the Board of Directors set the amount of variable remuneration due to the executive officers for 2013.

For 2013, the variable portion could amount to a maximum of 170% of fixed remuneration for the Chairman and Chief Executive Officer and a maximum of 130% for the Senior Executive Vice-President. It was conditional on:

• two financial criteria related to objectives concerning an increase in net earnings per share and return on capital employed, which together reflect the balance achieved each year between growth and return on investment; the objective of growth in EPS is set on a consistent basis with regard to historical performances; the objective of increase in ROCE is based on significant outperformance as compared to the weighted average cost of capital. An adjustment formula for each criterion is provided for in the event of an upward or downward variance with regard to the objective set.
• personal objectives, shared by the two executive officers, related, in particular, to gradual implementation of the market-focused organization, preserving financial balances, pursuit of the CSR objectives, in particular safety, and human resources development.

The weight of each criterion expressed as a percentage of the fixed remuneration was as follows:

The Board of Directors proceeded with an assessment of the performance of the executive officers. The results obtained in 2013 were below the objectives set for the financial criteria of EPS and ROCE. The amount of the variable remuneration in respect of these two criteria amounts to 77.3% of the fixed remuneration for Benoît Potier and 58.9% of the fixed remuneration for Pierre Dufour. The performance of the executive officers as compared to their personal objectives was considered very good, with, in particular, the implementation of the market-focused organization, improvement of the rating and in terms of safety, a lost-time accident frequency rate in Gas & Services, on the basis of a constant scope, which is the lowest in the Group’s history. The amount of the variable remuneration in respect of the personal objectives represents 58.5% of the fixed remuneration for Benoît Potier and 45% of the fixed remuneration for Pierre Dufour. In total, the amount of the variable remuneration in respect of 2013 adopted by the Board, as shown in the table below, is -9.6% lower for Benoît Potier and -9.2% lower for Pierre Dufour as compared to the variable remuneration for 2012.

The total amount of gross remuneration is therefore as follows:

¹ For Pierre Dufour, the amount includes the remuneration due in respect of his other functions and duties within the Group.

The total amount of fixed and variable remuneration for 2013 is -5.1% lower than in 2012 for Benoît Potier and -4.4% lower for Pierre Dufour.

Pierre Dufour, who is now in charge of the development of the Hub in Frankfurt, received, in addition, in his capacity as Managing Director, an amount of €150,000 paid by the German subsidiary, in addition to an indemnity corresponding to the benefits in kind under his previous contract in France.

2014 financial year

The Board determined the amounts of fixed remuneration and the applicable principles for determination of the variable remuneration of Benoît Potier and Pierre Dufour for 2014.

Fixed remuneration

It was decided that the amounts of fixed remuneration would be as follows:

¹ For Pierre Dufour, the amount includes the fixed remuneration due in his capacity as Managing Director of the German subsidiary (Air Liquide Global Management Services) in charge of the Hub in Frankfurt.

Variable remuneration

The Board decided that the variable remuneration for 2014 will continue to be based on financial criteria that are identical to those applied for previous financial years, i.e. the increase in earnings per share (excluding foreign exchange impact and exceptional items) and the Company’s return on capital employed after tax (ROCE).

In addition to this there will be personal objectives which will be related notably to the Group’s organization and short- and mid-term strategy, preserving financial balances, human resources development and pursuing Corporate Social and Environmental Responsibility objectives – now structurally included in the personal objectives set for the determination of the variable remuneration – and in particular those of safety and reliability, and with regard to indicators.

The weighting formula for the various components making up the variable remuneration and the maximum percentage of variable remuneration as compared to the fixed remuneration are unchanged for Pierre Dufour; they are changed as follows for Benoît Potier:

Neither Benoît Potier nor Pierre Dufour receives directors’ fees in respect of their duties as directors as long as they hold an executive office.

Medium-term remuneration
On the basis of the financial statements adopted for the 2013 financial year submitted for the approval of the next Annual Shareholders’ Meeting, the Board of Directors recorded the rate of achievement of the performance conditions defined at the time of implementation of the stock option plan of October 14, 2011 and the ACAS plan for the conditional grant of shares to employees of September 27, 2012.
The 2011 stock option plan provided that the number of options that could effectively be exercised by the beneficiary of a conditional grant of options would depend on the level of achievement:

• (i) for 65%, of the objective of growth in recurring EPS for the 2013 financial year as compared to that for financial year 2010 set at 115% in order to be able to exercise all the stock options subject to this criterion, and decreasing on a straight-line basis to 0% growth; the Board of Directors placed on record that growth in recurring EPS for the above-mentioned period amounted to 114.5%
• (ii) for 35%, of an objective of total shareholder return, defined as the compound annual growth rate for an investment in Air Liquide shares with respect to financial years 2011, 2012 and 2013, set at 8% in order to be able to exercise all the options subject to this criterion, and decreasing on a straight-line basis to 4%. The Board of Directors recorded that the total shareholder return for the above-mentioned period was 8.77%.

Accordingly, the Board of Directors recorded that the total proportion of the options subject to conditions that could be exercised by the beneficiary was equal to 97.9%.

The 2012 ACAS plan for the conditional grant of shares to employees (of which the members of the executive management and of the Executive Committee are not beneficiaries) provided that the number of shares acquired would depend on the rate of achievement of the objective of growth in recurring EPS for the 2013 financial year as compared to recurring EPS for the 2011 financial year set by the Board at 110% for all the shares to vest, and decreasing on a straight-line basis to 0% growth. The Board of Directors placed on record that growth in recurring EPS for the above-mentioned period amounted to 106.2%. Accordingly, the Board of Directors recorded that the proportion of shares subject to performance conditions which will be definitively acquired by the beneficiaries will be 62%.

Stock ownership obligation
The executive officers are subject to an obligation to hold a number of shares equivalent respectively to double the annual gross fixed remuneration for the Chairman and Chief Executive Officer and to the annual gross fixed remuneration for the Senior Executive Vice-President. The Board noted that, at January 1, 2014, the stock ownership obligation is largely respected by each of the Executive Officers.

Regulated agreements

1. Termination indemnities

The terms of the agreements applicable to the two executive officers with regard to termination indemnities are as follows:

• (i) only the cases of forced departure related to a change of strategy or a change in control may give rise to an indemnity;
• (ii) the amount of the indemnity is set at 24 months of gross fixed and variable remuneration;
• (iii) the amount of the indemnity due to Benoît Potier decreases gradually as he approaches the date at which he will reach the age limit defined in the Company’s articles of association; no indemnity will be paid to Pierre Dufour if he is entitled to claim his full pension entitlements in the short term at the date of forced departure;
• (iv) the right to payment of the indemnity is subject to achievement of performance conditions.

Entitlement to a termination indemnity, and the amount of such indemnity, depend on the average of the annual variance between the Return On Capital Employed after tax (ROCE) and the Weighted Average Cost of Capital (WACC) (assessed using accounting net equity) over the last three financial years prior to the financial year in which the departure occurs. This variance in a highly capital-intensive business makes it possible to measure regular value creation.

At the time of renewal of the terms of office of the beneficiaries, the Board of Directors decided to increase the performance criteria on which payment of the indemnity is contingent.

An average variance over three years of 300 basis points (instead of 200 previously) between ROCE and WACC will now be required in order to be able to benefit from the total amount of the indemnity. The declining percentage formula is also made more exacting

(a) bp: basis point

In addition, concerning Pierre Dufour, it has been specified that the remuneration used as a basis for calculation of the indemnity is that received by M. Dufour on any basis whatsoever from any company of the Group. As in the past, the total amount of 24 months of remuneration will include the indemnities received from any subsidiary, including the non-competition indemnity, in the event of concomitant termination of the other functions he performs in the Group.
These changes will be effective at the close of the next Annual Shareholders’ Meeting and on the condition precedent of the renewal of the terms of office of Benoît Potier as director and Chairman and Chief Executive Officer and of Pierre Dufour as Senior Executive Vice-President.

2. Defined benefit pension plan

Following the implementation of the Group’s new operational organisation, changes have been made to the defined benefit pension plan applicable to senior managers and executives and executive officers, for the portion of the remuneration exceeding 24 times the annual social security. These changes are aimed at (i) limiting the basis for calculation of the pension annuity to the fixed and variable remuneration only (to the exclusion of any other form of remuneration) whether paid by the Company or any French or foreign subsidiary of the Group; (ii) making the payment of the annuity contingent on the decision to apply for an old age pension whether at the full rate or not.

The details concerning these agreements will be included in the 2013 reference document. The text of the undertakings with regard to termination indemnities is posted on the company’s website. These agreements will be put to the vote of the next Annual Shareholders’ Meeting.

“Say on Pay”
The Board of Directors adopted the draft resolutions and the summary tables showing the elements of remuneration due or allocated to Mr Benoît Potier, Chairman and Chief Executive Officer, and Mr Pierre Dufour, Senior Executive Vice-President, in respect of 2013, which will be put to the advisory vote of the shareholders at the Annual Shareholders’ Meeting on May 7, 2014.

Change in Pierre Dufour’s situation as from January 1, 2014
The Board of Directors took due note of the main terms of the service agreement entered into with the German subsidiary Air Liquide Global Management Services GmbH (ALGMS), which defines the conditions for performance by Pierre Dufour of the new office of Managing Director which was entrusted to him, effective as of January 1, 2014. Pursuant to this agreement, Pierre Dufour receives annual fixed remuneration and a variable portion limited to 130% of such fixed portion replacing the remuneration received under his previous employment contract. He receives an annual amount of €150,000 in addition to the indemnity corresponding to the benefits in kind under his previous contract in France.
In consequence, Pierre Dufour resigned from his employment contract with L’Air Liquide S.A. as of December 31, 2013 and therefore, since that date, no longer benefits from the protection of French employment law or from the collective defined contribution pension schemes, the death and disability benefits plan for senior managers and executives, and the collective life insurance plan, which have been replaced by plans which are equivalent overall in Germany within the scope of his new duties.

Within this framework, it pursued its policy of grant under consistent conditions and continued enlargement of the plans to include an increasing number of beneficiaries, notably including again this year inventors and innovators; the total number of beneficiaries within the scope of the 2014 plans has increased by around 300, to 1,737 beneficiaries, representing 3.5% of the Group’s workforce.

2014 stock option plan

The Board granted stock options to subscribe for shares in the Company to a certain number of employees, to Executive Committee members and to the executive officers of the Company within the scope of a plan for 2014 providing for the following terms:

Length

The length of the plan is 10 years and includes a 4-year waiting period during which the stock options cannot be exercised.

Exercise price

The exercise price is €97 (corresponding to the average of the opening trading prices for the Air Liquide share during the twenty trading sessions prior to the date of the Board of Directors’ meeting, rounded down to the nearest euro).

Performance conditions/condition of continued employment

The stock options allocated may only be exercised if the Company meets certain performance conditions.

On the Remuneration Committee’s recommendation, the Board decided that these performance conditions will be applicable from now on to all beneficiaries of stock options (members of the executive management, members of the Executive Committee, and any other beneficiary) for all the options granted.

Furthermore, in order to respond to the expectations of some of the Company’s shareholders, the Board decided to change the performance conditions as compared those under previous plans, in order to include an element of relative comparison in the Total Shareholder Return criterion. Thus, the number of stock options that may be exercised out of the total number of stock options granted under the 2014 plan will depend:

• (i) for 65% of the options granted, on the rate of achievement of an objective set by the Board, of growth in Group undiluted net earnings per share excluding foreign exchange impact and exceptional items (Recurring EPS) for financial year 2016 as compared to Recurring EPS for the 2013 financial year; and
• (ii) for 35% of the options granted,
• for 50% of the options referred to in paragraph (ii): on an objective with regard to Total Shareholder Return set by the Board, defined as the average annual growth rate of an investment in Air Liquide shares for financial years 2014, 2015 and 2016 (“AL TSR”);
• for 50% of the options referred to in paragraph (ii): the Total Shareholder Return from an investment in Air Liquide shares, reinvested dividends - source: Bloomberg (“B TSR”), compared to a reference index made up of:
• for half, the CAC 40 index, reinvested dividends (source: Bloomberg), and
• for half, the Total Shareholder Return of the companies in the industrial gas sector (the average of Air Liquide, Linde, Praxair and Air Products), reinvested dividends (source: Bloomberg).

This choice results from the wish, firstly, to take account of a request made by international investors, who are generally sensitive to outperformance as compared to the sector average, and secondly to take into account the proportion of French shareholders in the Group’s capital (55%), for whom the CAC 40 index remains a natural reference, as demonstrated by the correlation studies.

In summary the applicable performance conditions are as follows:

As regards EPS, the growth objective set takes account of the economic environment, historical growth and the Group’s medium-term ambitions. It is unchanged as compared with the 2013 plan. From the objective set, the grant decreases on a straight-line basis and no grant is made if there is zero growth in EPS.
For information purposes, over the last three years, the objective was extremely close to the rates of growth in EPS shown in the consolidated annual budgets presented to the Board of Directors.

With respect to Total Shareholder Return defined as the average annual growth rate of an investment in Air Liquide shares (AL TSR), the objective set is in line with past performance. It is unchanged as compared with the 2013 plan. From the objective set, the grant decreases on a straight-line basis, down to a lower limit which remains significantly higher than the rate of return on capital.

With respect to Total Shareholder Return from an investment in Air Liquide shares - source: Bloomberg (B TSR) as compared to the CAC 40 index and the sector, the median objective is based on a performance close to the average of the two indices.

The targets set for each performance condition will be made public ex post, at the end of the Board meeting determining the rate of achievement of the performance conditions at the time of adoption of the financial statements for the financial year concerned. The result achieved and the percentage of stock options/shares that vest will also be communicated.

Furthermore, a condition of continued employment in the Group at the time of exercise of the stock options is also defined, as was the case in 2013.

Beneficiaries

Executive officer beneficiaries

100,000 stock options and 57,000 stock options to subscribe for shares were granted to Benoît Potier and Pierre Dufour respectively within the scope of the 2014 Plan, numbers that are unchanged as compared to 2013; this represents in total 0.05% of the share capital.

For the executive officers, it should be noted that the total number of options granted in 2014 may not grant entitlement to a number of shares exceeding:

• for all the executive officers combined, 0.1% of the share capital (it being specified that a sub-limit on grants specific to the executive officers of 0.3% of the capital for 38 months was set by the Annual Shareholders’ Meeting on May 7, 2013);
• for each executive officer individually, on the basis of a valuation of the stock options in accordance with the IFRS standard, approximately the amount of the executive officer’s maximum gross annual remuneration for the same financial year.

In addition, the Board specifies that the executive officers are subject to an obligation to retain, until the end of their duties, a defined minimum quantity of shares resulting from each exercise of stock options, corresponding to 50% of the capital gain on acquisition. In addition, the executive officers are also subject to an obligation to hold a number of shares equivalent to twice the amount of fixed gross annual remuneration for the Chairman and Chief Executive Officer and to the amount of fixed gross annual remuneration for the Senior Executive Vice-President. At its meeting on September 22, 2014, the Board of Directors recorded that this holding obligation is complied with by each of the executive officers at July 1, 2014.

The Company’s corporate governance practices and all the components of the remuneration of the executive officers are set out in detail in Air Liquide’s 2013 Reference Document.

Other beneficiaries

The Board of Directors decided to enlarge the number of beneficiaries of stock options, to increase it from 727 to 849.

Within this framework, it pursued its policy of grant under consistent conditions and continued enlargement of the plans to include an increasing number of beneficiaries, notably including again this year inventors and innovators; the total number of beneficiaries within the scope of the 2013 plans has increased by 100, to 1,453 beneficiaries, representing 2.9% of the Group’s workforce.

2013 stock option plan

The Board granted stock options to subscribe for shares in the Company to a certain number of employees, to Executive Committee members and to the executive officers of the Company within the scope of a plan for 2013 providing for the following terms:

Length

The length of the plan is 10 years and includes a 4-year waiting period during which the stock options cannot be exercised.

Exercise price

The exercise price is €102 (corresponding to the average of the opening trading prices for the Air Liquide share during the twenty trading sessions prior to the date of the Board of Directors’ meeting, rounded down to the nearest euro).

Performance conditions/condition of continued employment

The stock options allocated may only be exercised if the Company meets certain performance conditions. These performance conditions are identical to those adopted in 2012. Thus, the number of stock options that may be exercised out of the total number of stock options granted under the 2013 plan will depend:

• for 65%, on the rate of achievement of an objective, set by the Board, of growth in Group undiluted net earnings per share excluding foreign exchange impact and exceptional items (Recurring EPS) for the financial year 2015 as compared to Recurring EPS for the 2012 financial year; and
• for 35%, on a target compound annual growth rate, set by the Board, defined as the average annual growth in TSR over financial years 2013, 2014 and 2015.

These performance conditions apply to the members of the Executive Management and Executive Committee members for 100% of the stock options granted to them, and to any other beneficiaries of more than 1,500 options, for 50% of the number of options allocated to them above such limit.

As regards EPS, the growth objective set takes account of the economic environment, historical growth and the Group’s medium-term ambitions. From the objective set, the grant decreases on a straight-line basis and no grant is made if there is zero growth in EPS.

For information purposes, over the last three years, the objective was extremely close to the rates of growth in EPS shown in the consolidated annual budgets presented to the Board of Directors.

With respect to Total Shareholder Return (TSR), the objective set is in line with past performance. From the objective set, the grant decreases on a straight-line basis, down to a lower limit which remains significantly higher than the historical Total Shareholder Return for the CAC 40 index with reinvested dividends (an annual average of 1.6% for the period 2009-2012. Source: Bloomberg). The Board has asked the Remuneration Committee to study the possibility of changing this criterion in future, to include in it a reference to a comparative analysis, to be determined. The Committee’s recommendations on this point will be discussed at the Board meeting before grants are made under the Stock Option Plan in 2014.

It was decided that the targets set for each performance condition will be made public ex post, at the end of the Board meeting determining the rate of achievement of the performance conditions at the time of adoption of the financial statements for the financial year concerned. The result achieved and the percentage of stock options/shares that vest will also be communicated.

Furthermore, a condition of continued employment in the Group at the time of exercise of the stock options is also defined, as was the case in 2012.

Beneficiaries

Executive officers

100,000 stock options and 57,000 stock options to subscribe for shares were granted to Benoît Potier and Pierre Dufour respectively within the scope of the 2013 Plan; the number of options has increased for the first time in 6 years for Benoît Potier and the first time in 4 years for Pierre Dufour; this represents in total 0.05% of the share capital.

For the executive officers, it should be noted that the total number of options granted in 2013 may not grant entitlement to a number of shares exceeding:

• for all the executive officers combined, 0.1% of the share capital (it being specified that a sub-limit on grants specific to the executive officers of 0.3% of the capital for 38 months was set by the Annual Shareholders’ Meeting on May 7, 2013);
• for each executive officer individually, on the basis of a valuation of the stock options in accordance with the IFRS standard, approximately the amount of the executive officer’s maximum gross annual remuneration for the same financial year.

In addition, the Board specifies that the executive officers are subject to an obligation to retain, until the end of their duties, a defined minimum quantity of shares resulting from each exercise of stock options, corresponding to 50% of the capital gain on acquisition. In addition, the executive officers are also subject to an obligation to hold a number of shares equivalent to twice the amount of fixed gross annual remuneration for the Chairman and Chief Executive Officer and to the amount of fixed gross annual remuneration for the Senior Executive Vice-President. At its meeting on September 26, 2013, the Board of Directors recorded that this holding obligation is complied with by each of the executive officers at July 1, 2013.

The Company’s corporate governance practices and all the components of the remuneration of the executive officers are set out in detail in Air Liquide’s 2012 Reference Document.

Other beneficiaries

The Board of Directors decided to enlarge the number of beneficiaries of stock options, which is thus increased from 672 to 727.

2013 Plan for the Conditional Award of Shares to Employees

The conditional awards of shares to employees were made within the scope of plans providing for the following terms:

Length

France Plan: the length of the vesting period has been increased to 3 years and is followed by a 2-year holding period;

World Plan: the 4-year vesting period is maintained, without any holding obligation.

Performance conditions/condition of continued employment

For both plans, the Board has adopted the criterion of growth in recurring EPS, now calculated over a period of 3 financial years, which decreases on a straight-line basis, identical to that defined for stock options (see above). This performance condition applies to all the conditional shares awarded to employees. Accordingly, the number of shares that shall finally vest for the employees who are beneficiaries of the Conditional Share Award – ACAS – Plan will depend on the rate of achievement of the growth target, set by the Board, in respect of recurring EPS for financial year 2015 as compared to recurring EPS for 2012.

The Plan also provides for a condition of continued employment which must be met at the end of the vesting period.

Beneficiaries

The Board of Directors decided not to include any of the Company’s executive officers or any member of the Executive Committee in the list of beneficiaries of the 2013 Pl an for the Conditional Award of Shares to Employees. It confirmed that if one day such an award appears to be appropriate, if applicable, it would be made within the scope of a plan providing for a 3-year vesting period and performance conditions also covering a 3-year period, identical to those provided for in respect of stock options.

It was decided to enlarge the number of beneficiaries of conditional share awards, which has thus increased from 1,022 to 1,077.

May 7, 2013 General Meeting: precisions on #11 and #12 proposed resolutions

• The conditions for conditional grants of shares to employees (ACAS) are presently related to average growth in EPS excluding foreign exchange impact and exceptional items (other operating income and expenses) over a period of two years, and for Stock Options, average growth in EPS excluding foreign exchange impact and exceptional items and average growth in TSR over a period of three years. For the most recent Stock Option plans, the proportion represented by EPS was 65% while TSR represented 35%. The conditions applicable to the grant are defined by the Board of Directors at the time of each grant.
• As regards EPS, the objectives set are in line with historical growth and medium-term ambitions and also take account of the economic environment. Based on the objective set, the grant decreases on a straight-line basis and no grant is made if there is zero growth in EPS. Over the last three years, the objective was very close to growth in EPS as set out in the consolidated annual budgets presented to the Board of Directors.
• With regard to TSR, the objective is also in line with past performance and significantly higher than historical TSR performance for the reinvested CAC 40 index. As an example, over the last three years, the lower limit below which the condition is considered as not being met at all was also higher than this CAC 40 reference (3.3% on average over the period 2009-2012).
• The Group’s variable remuneration policy is aimed at fostering the loyalty of salaried staff members and executive officers of the Company and closely involving them with the Group’s development and its stock market performance over the long term and grants of stock options and ACAS are essential components of this system. 

At its meeting on September 27, 2012, the Board of Directors of Air Liquide adopted all the stock option plans and plans for the Conditional Grant of Shares to Employees (ACAS plans) for 2012, aimed, in addition to incentive and profit sharing schemes, to associate employees more closely with the company’s performance.

Within this framework, it pursued its policy of regular grants and enlargement of the plans to include an increasing number of beneficiaries within the company, in particular the inventors and this year, the innovators. The number of shares that finally vests for employees who are beneficiaries of the Plan for the Conditional Grant of Shares to Employees (ACAS plan) will depend on the percentage of achievement of a growth target, set by the Board, for recurring EPS for financial year 2013 as compared to Recurring EPS for the 2011 financial year.

The Board also allocated stock options to subscribe for shares in the Company to a certain number of employees, to Executive Committee members and to the executive officers for 2012 within the scope of a 10-year stock option plan. The exercise price is € 96,61. 88,000 and 50,000 stock options were thus allocated to Benoît Potier and Pierre Dufour respectively, amounts that have remained unchanged for the fifth year running for Benoît Potier and the third year running for Pierre Dufour.

The stock options allocated may only be exercised if the Company meets certain performance conditions, as was the case for 2011. Thus, the number of stock options that may be exercised out of the total number of stock options allocated under the 2012 plan will depend:

• partly on the rate of achievement of an objective, set by the Board, of growth in Group undiluted net earnings per share excluding foreign exchange impact and exceptional items (Recurring EPS) for financial year 2014 as compared to Recurring EPS for the 2011 financial year; and
• partly on a target compound annual growth rate, set by the Board, defined as the average annual growth rate of an investment in Air Liquide shares with respect to financial years 2012, 2013 and 2014.

These performance conditions apply to the members of the Executive Management and Executive Committee members for 100% of the stock options awarded to them, and to any other beneficiaries of more than 1,500 options, for 50% of the number of options allocated to them above such limit.

Furthermore, a condition of presence in the Group at the time of exercise of the options is also defined like in 2011.

For the executive officers, it should be noted that the total number of options granted each year may not grant entitlement to a number of shares exceeding:

• for all the executive officers combined, 0.1% of the share capital (remaining within the scope of the total overall amount of the allocation authorised for 3 years by the Shareholders’ Meeting: currently a total amount of 2% of the capital);
• for each executive officer taken individually, a specific multiple corresponding to approximately the amount of the executive officer’s maximum gross annual remuneration, the stock options being valued in accordance with IFRS.

Finally, the executive officers are subject to an obligation to retain a defined minimum quantity of shares resulting from each exercise of stock options, in accordance with the same rule in force since 2007, as described in the Company’s Reference Document, and restrictions on the exercise of stock options during the periods of publication of the financial statements, in compliance with the recommendations made in the AFEP-MEDEF Code of Corporate Governance.

The Company’s corporate governance practices and all the components of the remuneration of the executive officers are set out in detail in the Air Liquide Group’s 2011 Reference Document.

At its meeting on February 13, 2013, the Board of Directors of Air Liquide adopted the components of remuneration of the Executive Officers:

2012 financial year

On the basis of the financial statements drawn up for 2012, the Board of Directors set the variable remuneration due to the Executive Officers for 2012.

The total gross remuneration is therefore as follows:

On the basis of the financial statements drawn up for 2012, the Board of Directors set the variable remuneration due to the Executive Officers for 2012.

The total gross remuneration is therefore as follows:

It corresponds to a 2012/2011 variation of +1.6% for Benoît Potier and +1% for Pierre Dufour.

2013 financial year 

The Board determined the amounts of fixed remuneration and the applicable principles for determination of the variable remuneration of Benoît Potier and Pierre Dufour for 2013.

It was decided that the amounts of fixed remuneration in force since July 1, 2012 would remain unchanged:

The Board of Directors was informed that Pierre Dufour will receive a housing allowance amounting to €250,000 in the form of a benefit-in-kind from a Group subsidiary in 2013. The company ceased to provide Pierre Dufour with accommodation in December 2012.

The Board decided that the variable remuneration for 2013 will continue to be based on financial criteria that are identical to those applied for previous financial years, i.e. the increase in earnings per share (excluding foreign exchange impact and exceptional items), and the Company’s return on capital employed after tax (ROCE). In addition to this there will be personal objectives related notably to gradual implementation of the market focused organization, preserving the financial balances, pursuing Corporate Social and Environmental Responsibility policy particularly in terms of safety and human resources development.

The weighting formula for the various components making up the variable remuneration and the maximum percentage of variable remuneration as compared to the fixed remuneration in force since July 1, 2012 remain unchanged:

Neither Benoît Potier nor Pierre Dufour receives directors’ fees in respect of their duties as directors as long as they hold an executive office.

Medium-term remuneration

On the basis of the financial statements adopted for the 2012 financial year submitted for the approval of the next Annual Shareholders’ Meeting, the Board of Directors recorded that the performance conditions defined at the time of implementation of the stock option plan of June 28, 2010 and the ACAS plan for the conditional grant of shares to employees of October 14, 2011 were met. Accordingly, all the stock options awarded to Benoît Potier, Pierre Dufour and Executive Committee members under the 2010 stock option plan may be exercised. Similarly, the proportion of shares that are definitively acquired by the beneficiaries of the 2011 ACAS plan (which excluded members of the Executive Management and the Executive Committee) is equal to 100%.

Permitting grants of shares to the Executive Officers of the company, which is proposed within the scope of renewal of the authorisation submitted to the Annual Shareholders’ Meeting on May 7, 2013, would make it possible to have all the various remuneration tools available in line with the Group’s remuneration policy.

Stock ownership obligation

It is to be noted that, in February 2008, the Board of Directors set an internal rule imposing on the Executive Officers an obligation to hold a number of shares equivalent to double the annual gross fixed remuneration for the Chairman and Chief Executive Officer and to the annual gross fixed remuneration for the Senior Executive Vice-President. The Board noted that the valuation of the shares held at January 1, 2013 by the Chairman and Chief Executive Officer and by the Senior Executive Vice-President was higher than the required amounts and concluded that the stock ownership obligation is largely respected by each of the Executive Officers.

Life insurance

The Board of Directors authorised, in compliance with the regulated agreements procedure, the implementation of a collective life insurance scheme for the benefit of Benoît Potier and Pierre Dufour. This follows the partial closure of the defined-contribution scheme for senior managers and executives, from which they no longer benefit. Contributions for 2013 will be paid into this scheme which has been set up, at an unchanged cost for the company, for the purpose of good management.

These agreements will be put to the vote of the Annual Shareholders’ Meeting on May 7, 2013 in a specific resolution for each Executive Officer.

At its meeting on October 14, 2011, the Board of Directors of Air Liquide adopted all the stock option plans and plans for the Conditional Grant of Shares to Employees (ACAS plans) for 2011, aimed, in addition to incentive and profit sharing schemes, to associate employees more closely with the company’s performance.

Within this framework, it pursued its policy of regular grants and enlargement of the plans to include an increasing number of beneficiaries within the company. The number of shares that finally vests for employees who are beneficiaries of the Plan for the Conditional Grant of Shares to Employees (ACAS plan) (this plan does not apply to any members of the Executive Management and the Executive Committee) will depend on the percentage of achievement of a growth target, set by the Board, for recurring EPS for financial year 2012 as compared to Recurring EPS for the 2010 financial year.

The Board also allocated stock options to subscribe for shares in the Company to a certain number of employees, to Executive Committee members and to the executive officers for 2011 within the scope of a 10-year stock option plan. The exercise price is € 87 (€ 88 for Belgium).

88,000 and 50,000 stock options were thus allocated to Benoît Potier and Pierre Dufour respectively.

The stock options allocated may only be exercised if the Company meets certain performance conditions, as was the case for 2010. Thus, the number of stock options that may be exercised out of the total number of stock options allocated under the 2011 plan will depend:

• partly on the rate of achievement of an objective, set by the Board, of growth in Group undiluted net earnings per share excluding foreign exchange impact and exceptional items (Recurring EPS) for financial year 2013 as compared to Recurring EPS for the 2010 financial year; and
• partly on a target compound annual growth rate, set by the Board, defined as the average annual growth rate of an investment in Air Liquide shares with respect to financial years 2011, 2012 and 2013.

These performance conditions apply to executive officers, for 100% of the stock options awarded to them and to Executive Committee members and any other beneficiaries of more than 1,500 options, for 50% of the number of options allocated to them above such limit.

Furthermore, a condition of presence in the Group at the time of exercise of the options is also defined within the framework of the 2011 plan.

For the executive officers, it should be noted that the total number of options granted each year may not grant entitlement to a number of shares exceeding:

• for all the executive officers combined, 0.1% of the share capital within the scope of the total overall amount of the allocation authorised for 3 years by the Shareholders’ Meeting (currently a total amount of 2% of the capital);
• for each executive officer taken individually, a multiple determined on the basis of the fixed part of his remuneration, corresponding to approximately the amount of the executive officer’s maximum gross annual remuneration, the stock options being valued in accordance with IFRS.

Finally, the executive officers are subject to an obligation to retain a defined minimum quantity of shares resulting from each exercise of stock options, in accordance with the same rule in force since 2007, as described in the Company’s Reference Document, and restrictions on the exercise of stock options during the periods of publication of the financial statements, in compliance with the recommendations made in the AFEP-MEDEF Code of Corporate Governance.

The Company’s corporate governance practices and all the components of the remuneration of the executive officers are set out in detail in the Air Liquide Group’s 2010 Reference Document.

At its meeting on June 28, 2010, the Board of Directors of Air Liquide adopted all the stock option plans and plans for the Conditional Grant of Shares to Employees (ACAS plans) for 2010, aimed, in addition to incentive and profit sharing schemes the amounts of which have been increased this year, to associate employees more closely with the company’s performance.

Within this framework, stock options were also allocated to the corporate officers who are members of the executive management for 2010.

88 000 stock options were allocated to Benoît Potier and 50 000 to Pierre Dufour. The exercise price is € 83

The stock options allocated to the members of the executive management may only be exercised by them if the Company meets certain performance conditions. Thus, the number of stock options that may be exercised by each member of the executive management out of the total number of stock options allocated to him under the 2010 plan will depend:

• partly on the rate of achievement of an objective, set by the Board, of growth in Group undiluted net earnings per share excluding foreign exchange impact and exceptional items (Recurring EPS) for financial year 2012 as compared to Recurring EPS for the 2009 financial year; and
• partly on an objective of compound annual growth rate, set by the Board, defined as the average annual growth rate of an investment in Air Liquide shares with respect to financial years 2010, 2011 and 2012.

The same performance conditions apply to Group Executive Committee members and to any beneficiary of more than 1,500 options, for 50% of the number of options allocated to them above such limit.

The number of shares that finally vests for the employee beneficiaries of the Plan to Conditionally Award Shares to Employees – ACAS plan – (which exclude all the members of the executive management and the Executive Committee) will depend on the percentage of achievement of an objective of growth, set by the Board, in Recurring EPS for financial year 2011 as compared to Recurring EPS for the 2009 financial year.

It should be noted that the total number of options granted each year to the corporate officers who are members of the executive management may not grant entitlement to a total number of shares exceeding:

• for all the corporate officers combined, 0.1% of the share capital within the scope of the total overall amount of the allocation authorised for 3 years by the Shareholders’ Meeting (currently a total amount of 2% of the capital);
• for each corporate officer taken individually, a multiple determined on the basis of the fixed part of his remuneration, corresponding to approximately the amount of the corporate officer’s maximum gross annual remuneration, the stock options being valued in accordance with IFRS.

Finally, this allocation of stock options to the members of the executive management is also subject to obligations to retain a defined minimum quantity of shares resulting from each exercise of stock options, in accordance with the rule in force since 2007, as described in the Company’s Reference Document, and restrictions on the exercise of stock options during the periods of publication of the financial statements, in compliance with the recommendations made in the AFEP-MEDEF Code of Corporate Governance.

The Company’s corporate governance practices and all the components of the remuneration of the members of the executive management are set out in detail in the Air Liquide Group’s 2009 Reference Document.

Termination indemnities: Benoît Potier

The Board of Directors decides that, in the event of the forced departure, irrespective of its form (removal from office, non-renewal of his duties, request for resignation) of Mr Benoît Potier from his corporate offices as Chairman and Chief Executive Officer

• a) related to a change of strategy, or
• b) that takes place within 24 months following the acquisition of control of Air Liquide by a person acting alone or several persons acting in concert (the notion of control being understood within the meaning of this term as defined, as of the date hereof, by Article L. 233-3 of the French Commercial Code),

and subject to the conditions and limitations set out below, the Company undertakes to pay Mr Benoît Potier a fixed aggregate indemnity in full discharge equal to 24 months’ gross fixed and variable remuneration, the calculation being based on the average monthly amount of gross fixed and variable remuneration received by Mr Benoît Potier during the 24 months prior to departure. It is specified that in the case referred to in paragraph (b), the indemnity is due, whether or not the forced departure is related to a change in strategy, but without Mr Potier being able to receive such indemnity in conjunction with that due pursuant to paragraph (a).

In accordance with the provisions of Article L 225-42-1 of the French Commercial Code, payment of the indemnity due in respect of forced departure as provided for above is subject to compliance, as duly recorded by the Board of Directors at the time of termination of such office or thereafter, of conditions related to Mr Benoît Potier’s performance assessed in light of the Company’s own performance, defined as of the date hereof as follows:

Entitlement to the above indemnity will depend on, and the amount of the indemnity paid will be adjusted on the basis of, the average of the annual variance between the Return on capital employed after tax (ROCE) and the Weighted Average Cost of Capital (WACC) (assessed on the basis of net equity according to the financial statements), calculated (on the basis of the certified consolidated financial statements approved by the Annual Shareholders’ Meeting) with respect to the last 3 financial years prior to the financial year in which the departure occurs. For the purposes of this calculation, the variance between ROCE and WACC will be measured with regard to each financial year and the average of the three annual variances for the last 3 financial years prior to the financial year during which such departure takes place will be calculated.

* bp: basis points

These conditions will be re-examined by the Board of Directors and modified, where applicable, to take into account, in particular, any changes that have taken place in the company’s environment at the time of each renewal of Mr Potier’s term of office and, where applicable, during the course of his term of office.

The Board of Directors also decides that in the event that the above-mentioned forced departure takes place during the 24 months prior to the date on which the term of office of Mr Benoît Potier as Chairman and Chief Executive Officer terminates pursuant to the articles of association as he has reached the age limit stipulated, the amount of the indemnity due will be capped in any case at the number of months of gross remuneration, as defined above, for the period between the date of forced departure and the date on which the age limit will be reached. In any case, no indemnity will be paid if, at the date of forced departure, the beneficiary claims his pension entitlements.

After deliberation, in accordance with the provisions of Articles L 225-38 et seq. of the French Commercial Code, the Board of Directors authorises the aforementioned commitment effective at the close of the Annual Shareholders’ Meeting approving the financial statements for the 2013 financial year, on the condition precedent of the renewal of Mr Benoît Potier’s term of office as director and Chairman and Chief Executive Officer of the Company, for the length of his term of office as Chairman and Chief Executive Officer, thus renewed where applicable, with Mr Benoit Potier not taking part in the vote.

In accordance with the provisions of Article L 225-42-1 of the French Commercial Code, this decision and the decision by the Board of Directors making an assessment with regard to achievement of the performance conditions at the required time, will be made public in accordance with the terms and conditions and within the deadlines set by the regulations in force.

The above-mentioned decision will be submitted for the approval of the shareholders at such Annual Shareholders’ Meeting in a specific resolution for Mr Benoît Potier.

This decision cancels and supersedes the decision made by the Board of Directors on February 12, 2010 concerning the same subject as from the effective date.

Mr Benoit Potier gives his agreement with regard to the above-mentioned decision.

The Statutory Auditors will be informed of this authorisation.

Termination indemnities: Pierre Dufour

The Board of Directors decides that, in the event of the forced departure, irrespective of its form (removal from office, non-renewal of his duties, request for resignation) of Mr Pierre Dufour from his corporate office as Senior Executive Vice-President

• a) related to a change of strategy, or
• b) that takes place within 24 months following the acquisition of control of Air Liquide by a person acting alone or several persons acting in concert (the notion of control being understood within the meaning of this term as defined, as of the date hereof, by Article L. 233-3 of the French Commercial Code),

and subject to the conditions and limitations set out below, the Company undertakes to pay Mr Pierre Dufour a fixed aggregate indemnity in full discharge equal to 24 months’ gross fixed and variable remuneration, the calculation being based on the average monthly amount of gross fixed and variable remuneration received by Mr Pierre Dufour, on any basis whatsoever, from any company of the Air Liquide group (meaning all the companies included within the scope of the consolidated financial statements of L’Air Liquide SA: hereinafter the “Air Liquide Group), during the 24 months prior to departure. It is specified that in the case referred to in paragraph (b), the indemnity is due, whether or not the forced departure is related to a change in strategy, but without Mr Pierre Dufour being able to receive such indemnity in conjunction with that due pursuant to paragraph (a).

In accordance with the provisions of Article L 225-42-1 of the French Commercial Code, payment of the indemnity payable in respect of forced departure provided for above is subject to achievement, as duly recorded by the Board of Directors at the time of termination of such office or thereafter, of conditions related to Mr Pierre Dufour’s performance assessed in light of the Company’s own performance, defined as of the date hereof as follows:

Entitlement to the above indemnity will depend on, and the amount of such indemnity will be adjusted on the basis of, the average of the annual variance between the Return on capital employed after tax (ROCE) and the Weighted Average Cost of Capital (WACC) (assessed on the basis of net equity according to the financial statements), calculated (on the basis of the certified consolidated financial statements approved by the Annual Shareholders’ Meeting) with respect to the last 3 financial years prior to the financial year in which the departure occurs. For the purposes of this calculation, the variance between ROCE and WACC will be measured with regard to each financial year and the average of the three annual variances for the last 3 financial years prior to the financial year during which such departure takes place will be calculated.

* bp: basis points

These conditions will be re-examined by the Board of Directors and modified, where applicable, to take into account, in particular, any changes that have taken place in the company’s environment at the time of each renewal of Mr Pierre Dufour’s term of office as Senior Executive Vice-President and, where applicable, during the course of his term of office.

It is specified, as needs be, that any statutory or contractual indemnity or indemnity under the collective bargaining agreement that may be paid, where applicable, to Mr Pierre Dufour in respect of the termination of any other functions or duties performed within the Air Liquide Group, as well as any non-competition indemnity due in respect of this termination, are not subject to the above-mentioned conditions.

If the sum of (i) any statutory or contractual indemnity or indemnity under the collective bargaining agreement which may be paid to Mr Pierre Dufour where applicable on account of the termination of his other functions or duties within the Group prior to his forced departure as provided for above or concurrently with such departure, as well as any non-competition indemnity payable in respect of this termination or any other indemnity received on a similar basis from companies of the Air Liquide Group, and (ii) the indemnity payable to him pursuant to the foregoing, exceeds 24 months’ remuneration (calculated as specified above), this latter indemnity will be reduced such that the sum of the indemnities is equal to 24 months’ remuneration. In the event that such offices or functions are not terminated concurrently with the above-mentioned forced departure, if the sum of (i) the statutory or contractual indemnity and the indemnity under the collective bargaining agreement as well as the non-competition indemnity to which the beneficiary could claim entitlement as of such date had such functions or duties been terminated as of such date and (ii) the indemnity payable to him pursuant to the foregoing, exceeds 24 months’ remuneration (calculated as specified above), this latter indemnity will be reduced such that the sum of the indemnities is equal to 24 months’ remuneration.

The Board of Directors also decides that payment of the indemnity due to him pursuant to the foregoing will be excluded if, at the date of forced departure, the beneficiary has the possibility to claim his full pension entitlements in the short term.

This decision cancels and supersedes the decision made by the Board of Directors at its meeting of May 4, 2011 on the same subject as from the effective date thereof.

After deliberation, in accordance with the provisions of Articles L 225-38 et seq. of the French Commercial Code, the Board of Directors authorises the aforementioned commitment effective at the close of the Annual Shareholders’ Meeting approving the financial statements for the 2013 financial year, on the condition precedent of renewal by the Board of Mr Pierre Dufour’s term of office as the Company’s Senior Executive Vice-President, for the length of his term of office as Senior Executive Vice-President, thus renewed where applicable, with Mr Pierre Dufour not taking part in the vote.

In accordance with the provisions of Article L 225-42-1 of the French Commercial Code, this decision and the decision by the Board of Directors making an assessment with regard to achievement of the performance conditions at the required time, will be made public in accordance with the terms and conditions and within the deadlines set by the regulations in force.

The above-mentioned decision will be submitted for the approval of the shareholders at such Annual Shareholders’ Meeting in a specific resolution for Mr Dufour, renewed approval of the agreements by the Annual Shareholders’ Meeting being required for each renewal of the beneficiary’s term of office as Senior Executive Vice-President.

The Statutory Auditors will be informed of this authorisation.

Mr Pierre Dufour gives his agreement with regard to the above-mentioned decision.

Termination indemnities: Pierre Dufour

The Board of Directors decides that, in the event of the forced departure of Mr Dufour (removal from office, non-renewal of his duties, request for resignation) from his corporate office as Senior Executive Vice-President

a) related to a change of strategy, or

b) that takes place within 24 months following the acquisition of control of Air Liquide by a person acting alone or several persons acting in concert (the notion of control being understood within the meaning of this term as defined, as of the date hereof, by Article L. 233-3 of the French Commercial Code),

and subject to the conditions and limitations set out below, the Company undertakes to pay Mr Dufour a fixed aggregate indemnity in full discharge equal to 24 months’ gross fixed and variable remuneration, the calculation being based on the average monthly amount of gross fixed and variable remuneration received by Mr Dufour, on any basis whatsoever, during the 24 months prior to departure. It is specified that in the case referred to in paragraph (b), the indemnity is due, whether or not the forced departure is related to a change in strategy, but without Mr Dufour being able to receive such indemnity in conjunction with that due pursuant to paragraph (a).

In accordance with the provisions of Article L.225-42-1 of the French Commercial Code, payment of the indemnity due in respect of the above-mentioned forced departure is subject to compliance, as duly recorded by the Board of Directors at the time of termination of such office or thereafter, with conditions related to Mr Dufour’s performance assessed in light of the Company’s own performance, defined as of the date hereof as follows:

Entitlement to the above indemnity will depend on, and the amount of the indemnity paid will be adjusted on the basis of, the average of the annual variance between the Return on capital employed after tax (ROCE) and the Weighted Average Cost of Capital (WACC) (assessed on the basis of net equity according to the financial statements) calculated (on the basis of the certified consolidated financial statements approved by the annual shareholders meeting) with respect to the last 3 financial years prior to the financial year in which the departure occurs. For the purposes of this calculation, the variance between ROCE and WACC will be measured with regard to each financial year and will be calculated on the basis of the average of the three annual variances for the last 3 financial years prior to the financial year during which such departure takes place.

* bp: basis points

These conditions will be re-examined by the Board of Directors and modified, where applicable, to take into account, in particular, any changes that have taken place in the company’s environment at the time of each renewal of Mr Dufour’s term of office or, where applicable, during the course of his term of office.

If the sum of (i) any statutory indemnity or indemnity under the collective bargaining agreement which may be paid to Mr Dufour on account of the termination of his employment contract prior to his forced departure as provided for above or concurrently with such departure, as well as any non-competition indemnity payable in respect of this termination or any other indemnity received on a similar basis from subsidiaries, and (ii) the indemnity payable to him pursuant to the foregoing, exceeds 24 months’ remuneration (calculated as specified above), this latter indemnity will be reduced such that the sum of the indemnities is equal to 24 months’ remuneration. In the event that this employment contract is not terminated concurrently with the above-mentioned forced departure, if the sum of (i) the statutory indemnity and the indemnity under the collective bargaining agreement as well as the non-competition indemnity to which he could claim entitlement as of such date had his employment contract been terminated as of such date and (ii) the indemnity payable to him pursuant to the foregoing, exceeds 24 months’ remuneration (calculated as specified above), this latter indemnity will be reduced such that the sum of the indemnities is equal to 24 months’ remuneration.

It is specified, as needs be, that any statutory indemnity or indemnity provided for by the collective bargaining agreement that may be paid, where applicable, to Mr Dufour in respect of termination of his employment contract, and any non-competition indemnity due in respect of such termination, shall not be subject to the above-mentioned conditions.

The Board of Directors also decides that the payment of the indemnities to which he is entitled pursuant to the foregoing will be excluded if the beneficiary has the possibility to apply for a full-rate pension within a short time of the date of forced departure.

This decision cancels and supersedes the decision made by the Board of Directors at its meeting of February 13, 2009 on the same subject.

After deliberation, the Board of Directors authorises the aforementioned commitment in accordance with the provisions of Articles L 225-38 et seq. of the French Commercial Code. In accordance with the provisions of Article L 225-42-1 of the French Commercial Code, this decision and the decision by the Board of Directors making an assessment with regard to achievement of the performance conditions at the required time, will be made public in accordance with the terms and conditions and within the deadlines set by the regulations in force. The above-mentioned decision will be submitted for the approval of the shareholders within the scope of a specific resolution for Mr Dufour, a renewed approval of the agreements by the shareholders meeting being required for each renewal of the beneficiary’s term of office. The Statutory Auditors will be informed of this authorisation.

Mr Dufour gives his agreement with regard to the above-mentioned decision.

The Board of Directors decides that:

Termination indemnity: Benoît Potier

The Board of Directors decides that, in the event of the forced departure of Mr Potier (removal from office, non-renewal of his duties, request for resignation) from his corporate offices as Chairman and Chief Executive Officer

• a) related to a change of strategy, or
• b) that takes place within 24 months following the acquisition of control of Air Liquide by a person acting alone or several persons acting in concert (the notion of control being understood within the meaning of this term as defined, as of the date hereof, by Article L. 233-3 of the French Commercial Code), and subject to the conditions and limitations set out below, the Company undertakes to pay Mr Potier a fixed aggregate indemnity in full discharge equal to 24 months’ gross fixed and variable remuneration, the calculation being based on the average monthly amount of gross fixed and variable remuneration received by Mr Potier, during the 24 months prior to departure. It is specified that in the case referred to in paragraph (b), the indemnity is due, whether or not the forced departure is related to a change in strategy, but without Mr Potier being able to receive such indemnity in conjunction with that due pursuant to paragraph (a).

In accordance with the provisions of Article L 225-42-1 – 1 of the French Commercial Code, the Board of Directors decides that payment of the indemnity due in respect of the above-mentioned forced departure, is subject to compliance, as duly recorded by the Board of Directors at the time of termination of such office or thereafter, of conditions related to Mr Potier’s performance assessed in light of the Company’s own performance, defined as of the date hereof as follows:

Entitlement to the above-mentioned indemnity will depend on, and the amount of the indemnity paid will be adjusted on the basis of, the average of the annual variance between the Return on capital employed after tax (ROCE) and the Weighted Average Cost of Capital (WACC) (assessed on the basis of net equity according to the financial statements) calculated (on the basis of the certified consolidated financial statements approved by the annual shareholders’ meeting) with respect to the last 3 financial years prior to the financial year in which the departure occurs. For the purposes of this calculation, the variance between ROCE and WACC will be measured with regard to each financial year and will be calculated on the basis of the average of the three annual variances for the last 3 financial years prior to the financial year during which such departure takes place.

* bp: basis points

These conditions will be re-examined by the Board of Directors and modified, where applicable, to take into account, in particular, any changes that have taken place in the company’s environment at the time of each renewal of Mr Potier’s term of office and, where applicable, during the course of his term of office.

The Board of Directors also decides that, in the event that the above-mentioned forced departure were to take place within a period of 24 months prior to the date on which Mr Benoît Potier’s term of office as Chairman and Chief Executive Officer ends pursuant to the articles of association due to the fact that he has reached the statutory age limit, the amount of the indemnity due will in any event be capped at the number of months’ gross remuneration, as defined above, between the date of forced departure and the date on which the statutory age limit is reached. In any case, no indemnity shall be paid if M. Potier applies for his retirement pension at the time of forced departure.

After deliberation, in accordance with the provisions of Articles L 225-38 et seq. of the French Commercial Code, the Board of Directors authorises the above-mentioned commitment effective as from the close of the Annual Shareholders’ Meeting approving the financial statements for the 2009 financial year on the condition precedent of renewal of the term of office of Mr Benoît Potier as director and Chairman and Chief Executive Officer of the Company, for the length of his term of office as Chairman and Chief Executive Officer, thus renewed where applicable, with Mr Benoît Potier not taking part in the vote.

In accordance with the provisions of Article L 225-42-1 of the French Commercial Code, this decision and the decision by the Board of Directors making an assessment with regard to achievement of the performance conditions at the required time, will be made public in accordance with the terms and conditions and within the deadlines set by the regulations in force.

The above-mentioned decision will be subject to the approval of the shareholders at such Annual Shareholders’ Meeting, within the scope of a specific resolution for Mr Benoît Potier.

This decision cancels and supersedes the decision of the Board of Directors of February 13, 2009 relating to the same subject matter as from the effective date.

Mr Benoît Potier gives his agreement with regard to the above-mentioned decision.

Notice of this authorisation will be given to the statutory auditors.

Indemnity to compensate for the loss of pension rights in respect of his corporate office in favour of Benoît Potier

Concerning Mr Benoît Potier, who had accrued the right to a pension annuity within the scope of defined-benefit pension plan “S” in the event of removal from his corporate office or dismissal before he reaches 55 years of age, the Board of Directors decides that, in order to compensate for the loss of this right resulting from the change in the scheme, subject to what is set out below, an indemnity to compensate for the loss of his rights under the Company’s plan “S” will be paid to Mr Benoît Potier, in the event of termination of his corporate office before he reaches 55 years of age on the Company’s initiative and except in the event of gross misconduct or gross negligence,

This indemnity, corresponding to the pension annuity to which Mr Benoît Potier could claim entitlement in respect of plan S, will be paid in instalments, calculated and paid under the same conditions (except for the condition of presence in the Company at the time of retirement) and in accordance with the same rules as those established by the regulations of supplementary pension plan “S” as they are in force at the time when Mr Benoît Potier retires or those of any other defined benefit pension plan which may replace the above-mentioned plan.¹

In the event that, on the date of his removal from office, Mr Benoît Potier were nevertheless to be able to benefit from supplementary pension plan “S”, or any other defined-benefit pension scheme that may be substituted therefor, no indemnity will be due.

Performance conditions

Entitlement to the indemnity to compensate for the loss of pension rights described above and the amount of the indemnity paid will be adjusted on the basis of the average of the annual variance between the Return on capital employed after tax (ROCE) and the Weighted Average Cost of Capital (WACC) (assessed on the basis of net equity according to the financial statements) calculated (on the basis of the certified consolidated financial statements approved by the annual shareholders’ meeting) with respect to the last 7 financial years prior to the financial year in which the departure occurs.

For the purposes of this calculation, the variance between ROCE and WACC will be measured with regard to each financial year and will be calculated on the basis of the average of the seven annual variances for the last seven financial years prior to the financial year during which such departure takes place.

* bp: basis points

These conditions will be re-examined by the Board of Directors and modified, where applicable, to take into account, in particular, any changes that have taken place in the company’s environment at the time of each renewal of Mr Benoît Potier’s term of office and, where applicable, during the course of his term of office. In any event, the commitment relating to the indemnity to compensate for the loss of pension rights will lapse on Mr Benoît Potier’s 55th birthday.

After deliberation, in accordance with the provisions of Articles L 225-38 et seq. of the French Commercial Code, the Board of Directors authorises the aforementioned commitment effective as from the close of the Annual Shareholders’ Meeting approving the financial statements for the 2009 financial year on the condition precedent of renewal of the term of office of Mr Benoît Potier as director and Chairman and Chief Executive Officer of the Company, for the length of his term of office as Chairman and Chief Executive Officer, thus renewed where applicable (it being specified that in any case this commitment will lapse in 2012 on the date of Mr Benoît Potier’s 55^th birthday), with Mr Benoît Potier not taking part in the vote.

In accordance with the provisions of Article L 225-42-1 of the French Commercial Code, this decision and the decision by the Board of Directors making an assessment with regard to achievement of the performance conditions at the required time, will be made public in accordance with the terms and conditions and within the deadlines set by the regulations in force.

The above-mentioned decision will be subject to the approval of the shareholders at such Annual Shareholders’ Meeting, within the scope of a specific resolution for Mr Benoît Potier.

This decision cancels and supersedes the decision of the Board of Directors of February 14, 2008 relating to the same subject matter.

Mr Benoît Potier gives his agreement with regard to the above-mentioned decision.

Notice of this authorisation will be given to the statutory auditors.

¹In the event of the death of Mr Potier, an indemnity will be paid to his surviving spouse under the same conditions and according to the same rules as those defined in the regulations for supplementary pension plan “S “or any equivalent clause on the date of Mr Potier’s retirement.

Termination indemnities: Benoît Potier

The Board decides that, in the event of the forced departure of Mr Schmieder (removal from office, non-renewal of his duties, request for resignation) from his corporate office as Senior Executive Vice-President which takes place within a period of 24 months following the acquisition of the control of Air Liquide by a person acting alone or several persons acting in concert, the Company undertakes to pay Mr Schmieder an indemnity equal to 12 months’ gross fixed and variable remuneration, the calculation being based on the average monthly amount of gross fixed and variable remuneration received by Mr Schmieder, on any basis whatsoever, during the 24 months prior to departure. The acquisition of control is to be understood within the meaning of this term as defined, as of the date hereof, by Article L. 233-3 of the French Commercial Code.

In accordance with the provisions of Article L 225-42-1 of the French Commercial Code introduced by French Law No. 2007-1223 of August 21, 2007 to promote work, employment and purchasing power, the Board of Directors decides that payment of the indemnity in respect of forced departure provided for above, is subject to compliance, as duly recorded by the Board of Directors at the time of termination of such duties or thereafter, of conditions related to Mr Schmieder’s performance assessed in light of the Company’s own performance, defined as of the date hereof as follows:

Entitlement to the indemnity will depend on, and the amount of such indemnity will be adjusted on the basis of, the average of the annual variance between the Return on capital employed after tax (ROCE) and the Weighted Average Cost of Capital (WACC) (assessed on the basis of net equity according to the financial statements) calculated (on the basis of the certified consolidated financial statements approved by the annual shareholders’ meeting) with respect to the last 3 financial years prior to the financial year in which the departure occurs. For the purposes of this calculation, the variance between ROCE and WACC will be measured with regard to each financial year and will be calculated on the basis of the average of the three annual variances for the last 3 financial years prior to the financial year during which such departure takes place.

* bp: basis points

These conditions will be re-examined by the Board of Directors and modified, where applicable, to take into account, in particular, any changes that have taken place in the company’s environment at the time of each renewal of Mr Schmieder’s term of office or, where applicable, during the course of his term of office.

Any amounts, where applicable, that may be paid in accordance with the terms of the employment contract in the event that the salaried duties covered by such contract were also to be concurrently terminated will be added to the payment of such indemnity, without the combined payments made in respect of the employment contract and the forced departure set out above being able to exceed 24 months’ fixed and variable remuneration (calculated as set out above). If this limit is reached, the amount paid in respect of termination of the corporate office would be reduced accordingly for such amount.

It is specified, as needs be, that any statutory indemnity or indemnity provided for by the collective bargaining agreement that may be paid, where applicable, to Mr Schmieder in respect of termination of his employment contract, and any non-competition indemnity due in respect of such termination, shall not be subject to the above-mentioned conditions.

This decision cancels and supersedes the decision made by the Board of Directors at its meeting of February 14, 2008, as restated by the Board of Directors on May 7, 2008 on the same subject.

After deliberation, the Board of Directors authorises the aforementioned commitment in accordance with the provisions of Articles L 225-38 et seq. of the French Commercial Code. In accordance with the provisions of Article L 225-42-1 of the French Commercial Code, this decision and the decision by the Board of Directors making an assessment with regard to achievement of the performance conditions at the required time, will be made public in accordance with the terms and conditions and within the deadlines set by the regulations in force. The above-mentioned agreement will be submitted for the approval of the shareholders within the scope of a specific resolution for Mr Schmieder, a renewed approval of the agreements by the shareholders’ meeting being required for each renewal of the beneficiary’s term of office. The Statutory Auditors will be informed of this authorisation.

Mr Schmieder gives his agreement with regard to the above-mentioned decision.

Termination indemnities: Pierre Dufour

The Board of Directors decides that, in the event of the forced departure of Mr Dufour (removal from office, non-renewal of his duties, request for resignation) from his corporate office as Senior Executive Vice-President

a) related to a change of strategy, or

b) that takes place within 24 months following the acquisition of control of Air Liquide by a person acting alone or several persons acting in concert (the notion of control being understood within the meaning of this term as defined, as of the date hereof, by Article L. 233-3 of the French Commercial Code),

and subject to the conditions set out below, the Company undertakes to pay Mr Dufour a fixed aggregate indemnity in full discharge equal to 24 months’ gross fixed and variable remuneration, the calculation being based on the average monthly amount of gross fixed and variable remuneration received by Mr. Dufour, on any basis whatsoever, during the 24 months prior to departure. It is specified that in the case referred to in paragraph (b), the indemnity is due, whether or not the forced departure is related to a change in strategy, but without Mr Dufour being able to receive such indemnity in conjunction with that due pursuant to paragraph (a).

Payment of the indemnity provided for above is subject to achievement, as duly recorded by the Board of Directors at the time of termination of such office or thereafter, of conditions related to Mr Dufour’s performance assessed in light of the Company’s own performance, defined as of the date hereof as follows:

Entitlement to the indemnity will depend on, and the amount of such indemnity will be adjusted on the basis of, the average of the annual variance between the Return on capital employed after tax (ROCE) and the Weighted Average Cost of Capital (WACC) (assessed on the basis of net equity according to the financial statements) calculated (on the basis of the certified consolidated financial statements approved by the annual shareholders’ meeting) with respect to the last 3 financial years prior to the financial year in which the departure occurs. For the purposes of this calculation, the variance between ROCE and WACC will be measured with regard to each financial year and will be calculated on the basis of the average of the three annual variances for the last 3 financial years prior to the financial year during which such departure takes place.

* bp: basis points

These conditions will be re-examined by the Board of Directors and modified, where applicable, to take into account, in particular, any changes that have taken place in the company’s environment at the time of each renewal of Mr Dufour’s term of office or, where applicable, during the course of his term of office.

If the sum of (i) any statutory indemnity or indemnity under the collective bargaining agreement which may be paid to Mr Dufour on account of the termination of his employment contract prior to his forced departure as provided for above or concurrently with such departure, as well as any non-competition indemnity payable in respect of this termination or any other indemnity received on a similar basis from subsidiaries, and (ii) the indemnity payable to him pursuant to the foregoing, exceeds 24 months’ remuneration (calculated as specified above), this latter indemnity will be reduced such that the sum of the indemnities is equal to 24 months’ remuneration. In the event that this employment contract is not terminated concurrently with the above-mentioned forced departure, if the sum of (i) the statutory indemnity and the indemnity under the collective bargaining agreement as well as the non-competition indemnity to which he could claim entitlement as of such date had his employment contract been terminated as of such date and (ii) the indemnity payable to him pursuant to the foregoing, exceeds 24 months’ remuneration (calculated as specified above), this latter indemnity will be reduced such that the sum of the indemnities is equal to 24 months’ remuneration.

It is specified, as needs be, that any statutory indemnity or indemnity provided for by the collective bargaining agreement that may be paid, where applicable, to Mr Dufour in respect of termination of his employment contract, and any non-competition indemnity due in respect of such termination, shall not be subject to the above-mentioned conditions.

This decision cancels and supersedes the decision made by the Board of Directors at its meeting of February 14, 2008, as restated by the Board of Directors on May 7, 2008 on the same subject.

After deliberation, the Board of Directors authorises the aforementioned commitment in accordance with the provisions of Articles L 225-38 et seq. of the French Commercial Code. In accordance with the provisions of Article L 225-42-1 of the French Commercial Code, this decision and the decision by the Board of Directors making an assessment with regard to achievement of the performance conditions at the required time, will be made public in accordance with the terms and conditions and within the deadlines set by the regulations in force. The above-mentioned agreement will be submitted for the approval of the shareholders within the scope of a specific resolution for Mr Dufour, a renewed approval of the agreements by the shareholders’ meeting being required for each renewal of the beneficiary’s term of office. The Statutory Auditors will be informed of this authorisation.

Mr Dufour gives his agreement with regard to the above-mentioned decision.

Klaus Schmieder

At the time of the renewal of Klaus Schmieder’s term of office as Senior Executive Vice-President, the Board of Directors decided that the entitlement to an indemnity, subject to performance conditions, granted to Klaus Schmieder in the event of removal from office or non-renewal of his corporate office under the terms defined by the decision of the Board of Directors on February 14, 2008 was restated, such decision being made in accordance with the provisions of Articles L 225-38 and L 225-42-1 of the French Commercial Code.

Pierre Dufour

At the time of the extension of the length of Pierre Dufour’s term of office as Senior Executive Vice-President, the Board of Directors decided that the entitlement to an indemnity, subject to performance conditions, granted to Pierre Dufour in the event of removal from office or non-renewal of his corporate office under the terms defined by the decision of the Board of Directors on February 14, 2008 was restated, such decision being made in accordance with the provisions of Articles L 225-38 and L 225-42-1 of the French Commercial Code.

Benoît Potier

In 2006, the Board of Directors granted Benoît Potier, in the event of revocation or non-renewal of his terms of office as Chairman and Chief Executive Officer, except for gross negligence, a final and lump-sum fixed amount determined by applying the provisions of the collective bargaining agreement covering all Company executives, by (i) taking into account the number of years of seniority acquired from the beginning as salaried employee and company officer and (ii) using the total fixed and variable average monthly remuneration for the 24 months preceding termination of the term of office as the basis of calculation.

Application of the formula under the above-mentioned provisions of the collective bargaining agreement  limit, in any case, the maximum amount of the aforementioned payment to 20 months’ remuneration. This amount includes any payment that could be due in the event of termination of the employment contract.

Moreover, in the event the term of office is revoked or not renewed in the 24 months following a change in control of Air Liquide, the payment would be increased by 12 months’ remuneration, as defined above.

As this is a related party agreement, this decision was approved by the Shareholders’ Meeting of May 9, 2007.

Pursuant to the new provisions of Article L. 225-42-1 of the French Commercial Code introduced by the law of August 21, 2007, the Board of Directors decided that in order to receive the indemnity provided for under  the above- mentioned agreement, the beneficiary would have to comply August 21, 2007, the Board of Directors decided that in order to receive the indemnity provided for under  the above- mentioned agreement, the beneficiary would have to comply with certain performance conditions assessed in relation to the Company’s performance (see below “Performance conditions - Termination indemnities ”). This agreement, which is presented in the statutory auditors’ special report (on page 228 of the 2007 reference document), is submitted to the Shareholders’ Meeting of May 7, 2008 for approval as part of a specific resolution concerning Benoît Potier.

The Board of Directors took due note that in connection with  amendments to the defined contribution plan described on page 75 (of the 2007 reference document), the Company intends to undertake to grant to all employees concerned by such plan and who are less than 55 and who have at least 20 years of seniority, in the event of early termination of their employment contracts at the Company’s initiative except in case of  serious misconduct or gross negligence , benefits equivalent to those obtained under the plan in the form of a  compensating indemnity  . Concerning Benoît Potier, whose employment contract has been suspended, and who had acquired this right to an annuity as part of the aforementioned plan in the event of removal from his corporate office or dismissal  before the age of 55, the Board of Directors, in order to compensate  for the loss of this right, decided to authorize the commitment undertaken by the Company to pay Benoît Potier,  in the event of a termination in his term of office prior to age of 55 at the Company’s initiative, except for serious or gross negligence, and since   he has acquired at least 20 years of seniority, an indemnity to compensate for the loss of  pension rights, paid in instalments , calculated in accordance with the defined benefit plan mentioned on page 75 (of the 2007 reference document). This commitment will automatically become null and void when Benoît Potier reaches 55.

Pursuant to the new provisions of Article L 225-42-1 of the French Commercial Code introduced by the law of August 21, 2007, the Board of Directors decided that in order to receive the indemnity provided for under the above-mentioned  commitment, the beneficiary would have to comply with certain performance conditions assessed in relation to the Company’s performance (see below “Performance conditions-Indemnity to compensate for the loss of pension rights in respect of term of office”). This commitment, which is presented in the statutory auditors’ special report (on page 228  of the 2007 refernce document), is submitted to the Shareholders’ Meeting of May 7, 2008 for approval as part of a specific resolution concerning Benoît Potier.

Klaus Schmieder

<p>Should the Company unilaterally terminate his employment contract before the age of 60, except in the case of serious negligence and incapacity, Mr. Klaus Schmieder would receive a termination payment equal to the lower of 18 months of the fixed portion of remuneration or the number of months of the fixed portion of his remuneration between such date and his 60th birthday.</p>

<p>In 2006, the Board of Directors granted in favor of Klaus Schmieder, with respect to his duties as Senior Executive Vice-President, in the event of revocation or non-renewal of his term of office, except for serious negligence, a final and lump-sum fixed payment equal to the lower of 18 months of the fixed portion of remuneration in his capacity as Senior Executive Vice-President or the number of months of the fixed portion of his remuneration between such date and his 60th birthday (October 2008). The payment is cumulative with that due with respect to his employment contract in the event of the concomitant termination of the latter.</p>

<p>Moreover, should the revocation or non-renewal occur in the 24 months following a change in control of Air Liquide, this payment would be increased by 12 months’ remuneration, the total fixed and variable average monthly remuneration received in the capacity of salaried employee and company officer for the 24 preceding months serving as the basis of calculation.</p>

<p>As this is a related party agreement, this decision was approved by the Shareholders’ Meeting of May 9, 2007.</p>

<p>Pursuant to the new provisions of Article L 225-42-1 of the French Commercial Code introduced by the law of August 21, 2007, the Board of Directors decided that in order to receive the indemnity provided for under the above-mentioned agreement, the beneficiary would have to comply with certain performance conditions assessed in relation to the Company’s performance (see below “Performance conditions - Termination indemnities”). This agreement, which is presented in the statutory auditors’ special report (on page 228 of the 2007 reference document), is submitted to the Shareholders’ Meeting of May 7, 2008 for approval in connection with a specific resolution concerning Klaus Schmieder.</p>

Pierre Dufour

The Board of Directors granted Pierre Dufour, in the event of revocation or non-renewal of his term of office as Senior Executive Vice-President, except for serious or gross negligence, a final and lump-sum fixed amount determined by applying the provisions of the collective bargaining agreement covering all Company executives, without such payment amounting to less than 12 months’ remuneration, calculated using the total fixed and variable average monthly remuneration for the 24 months preceding termination of the term of office.

Application of the formula under the above-mentioned provisions of the collective bargaining agreement limit, in any case, the maximum amount of the aforementioned payment to 20 months’ remuneration. This amount includes any payment that could be due in the event of termination of the employment contract.

Moreover, in the event the term of office is revoked or not renewed in the 24 months following a change in control of Air Liquide, the payment would be increased by 12 months’ remuneration, as defined above.

Pursuant to the new provisions of Article L 225-42-1 of the French Commercial Code introduced by the law of August 21, 2007, the Board of Directors decided that in order to receive the indemnity provided for under the above-mentioned agreement, the beneficiary would have to comply with certain performance conditions assessed in relation to the Company’s performance (see below “Performance conditions-Termination indemnities”). This agreement, which is presented in the statutory auditors’ special report (on page 228 of the 2007 reference document), is submitted to the Shareholders’ Meeting of May 7, 2008 for approval in connection with a specific resolution concerning Pierre Dufour.

Performance conditions

Termination indemnities

The Board of Directors decided that (i) the payment of termination indemnities concerning Benoît Potier, Klaus Schmieder and Pierre Dufour mentioned above (excluding however the statutory indemnity and that provided for by the collective bargaining agreement that may be due on account of termination of the employment contract) and for Benoît Potier (ii) the inclusion of his seniority as Chairman and Chief Executive Officer in the calculation of his statutory indemnity and that provided for by the collective bargaining agreement that may be due on account of termination of his employment contract are subject to compliance, duly acknowledged by the Board of Directors at the time or subsequent to the termination of duties, to conditions relating to the beneficiary’s performance assessed in relation to the Company’s performance, defined as follows:

The right to benefit from the rights referred to in (i) and for Benoît Potier in (ii) above will depend on the average of the variance between the Return on capital employed after tax (ROCE) and the Weighted Average Cost of Capital (WACC) (assessed on the basis of net equity according to the financial statements) calculated (on the basis of the certified consolidated financial statements approved by the Annual Shareholders’ Meeting) with respect to the last 3 financial years prior to the financial year in which the departure occurs.

These conditions will be reviewed by the Board of Directors and, where applicable, modified to take account of changes in the corporate environment at each time the beneficiary’s term of office is renewed and, where applicable, during his term of office.

Indemnity to compensate for the loss of pension rights in respect of term of office

The right for Benoît Potier to receive the indemnity to compensate for the loss of pension rights described above (except for, if applicable, the indemnity to compensate for the loss of pension rights which could be received under Mr Potier’s employment contract), will depend on the average of the variance between the Return on capital employed after tax (ROCE) and the Weighted Average Cost of Capital (WACC) assessed on the basis of net equity according to the financial statements, calculated (on the basis of the certified consolidated financial statements approved by the Annual Shareholders’ Meeting) with respect to the last 7 financial years preceding the financial year during which he leaves the Company.

These conditions will be reviewed by the Board of Directors and, where applicable, modified to take account of changes in the corporate environment each time that Benoît Potier’s term of office is renewed, or where applicable, during his term. In any case, the commitment relating to indemnity to compensate for the loss of pension rights will become null and void when Benoît Potier reaches 55.