5.  A stock option is not a share of stock !  It provides the opportunity to exercise a right to buy a share of stock at a defined price (or « call » in finance).  Stock options generate no value on their own.  2 types: Purchase Option of Shares and Subscription Option of Shares  Grant price is in general the average of the opening price during the 20 days preceding the grant.  A minimum acquisition period of 4 years (vesting) to respect for French tax resident.

7. Vesting period Expiration date The date of expiration from which options are no longer exercisable 6 years 4 years Grant date Grant to an individual of a specific number of options at a given price Vesting begins Vesting period completed Vesting period ends 100% of options are available to exercise Exercise period Taxes to be paid on exercises 10 years (Stock option maximum grant life)

9. Stock Option Term Vesting Period No potential gain Potential gain Grant Date Stock Price Example : Assuming 200 options with a grant price of 45€ and a stock price of 80€ when exercised. 45 € (Strike) 80 € (Spot) − −

10.  A share is a certificate of ownership in a firm.  A share is quoted on the stock market and its price changes over time.  Shares are bought, sold and can generate income through dividends and/or through capital gain.  2 minimum legal periods to respect: acquisition period (2 years ) for all and a holding period ( 2 years ) for French tax resident.

11.  Thales: French tax residents Vesting period (Legal minimum = 2 years) Holding period Required by the French law Shares not available to be sold Availability to sale the shares (When sold: Taxes and Social contributions) 2 years 4 years for Thales Preferential tax treatment Shares property transfer

12. Vesting period No Holding period for the non french tax residents Availability to sale the shares 4 years  Thales: Non french tax residents Shares property transfer Taxes and Social contributions on that date

14. Qualified plan: specific personnal income tax and social security rate. (≠ unqualified plan) Stock optionsFree shares Taxes on the gain of Acquisition (Qualified Plan/Approved Plan) Below 152 500 € : 18% + 12.3% social tax Beyond 152 500 € : 30% + 12.3% social tax 30 % and 12.3% Social tax Taxes on the gain of Acquisition (Unqualified Plan/Approved Plan) Below 152 500 € : 30% + 12.3% social tax Beyond 152 500 € : 41% + 12.3% social tax Taxes on the Disposal gain (Qualified Plan or not) 19% and 12.3% Social tax

15.  « Code de commerce »  AFEP/MEDEFs’ code  Stock option / Free shares Plan

16. Example: Grant of 300 performance shares the 21th November 2011. Validation process (3 equal thirds of 100 shares) Performance attainment Third validation Shares validated Boards of Directors validate 2012 results (first quarter 2013) 1 st third= 100 shares 120% 100% 100 Boards of Directors validate 2013 results (first quarter 2014) 2 nd third = 100 shares 90% 90 Boards of Directors validate 2014 results (first quarter 2015) 3 rd third = 100 shares 30% 30