MAIN DIFFERENCES BETWEEN U.S. AND SPANISH CORPORATE GOVERNANCE PRACTICES

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Lambert Franklin Sherman
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1 MAIN DIFFERENCES BETWEEN U.S. AND SPANISH CORPORATE GOVERNANCE PRACTICES The corporate governance principles set under Spanish legislation may differ significantly from the general corporate governance standards that are to be followed by U.S. NASDAQ-listed companies. Under NASDAQ s applicable corporate governance rules ( NASDAQ Rules ), foreign private issuers ( FPIs ) 1, such as Grifols, S.A. ( Grifols ) are allowed in certain circumstances to follow home country corporate governance practices, in lieu of NASDAQ s Rules. NASDAQ requires that FPIs disclose in their annual reports, including Form 20-F, which of the NASDAQ governance requirements have not been applied and the alternative home country practices that they have followed. Set forth below is a summary of the significant differences between the corporate governance practices followed by Grifols under Spanish law and those followed by NASDAQ-listed U.S. domestic issuers under NASDAQ Rules. A. CORPORATE GOVERNANCE Under NASDAQ Rules, U.S. domestic issuers are required to establish a quorum as specified in its bylaws for any meeting of the holders of common stock, provided, however, that such quorum is not permitted to be less than 33 1/3% of the outstanding shares of common voting stock. Grifols bylaws provide that, on the first call of the general shareholders meetings, a duly constituted meeting requires a quorum of at least 25% of the subscribed share capital with voting rights, and, if a quorum is not obtained on the first call, a meeting is validly convened on the second call regardless of the share capital in attendance. However, certain major corporate actions (such as issuing additional ordinary shares, increasing or decreasing the share capital, issuing debt securities, amending the bylaws or approving merger transactions) require shareholder approval at a meeting at which at least 50% of the subscribed share capital with voting rights is present or represented on the first call or at least 25% of the share capital with voting rights present or represented on the second call. However, when the number of shareholders attending a meeting represents less than 50% of the subscribed share capital with voting rights, resolutions on any of these major corporate actions must be adopted by the affirmative vote of at least two-thirds of the share capital present or represented at such meeting. In addition, all acts described in Article 6 Bis of Grifols bylaws, which are considered to affect the economic rights of Grifols non-voting shares, must be approved at a shareholders meeting by the holders of at least a majority of non-voting shares. Under NASDAQ Rules, U.S. domestic issuers are required to solicit proxies, provide proxy statements for all shareholders meetings and provide copies of such proxy materials to NASDAQ. As a FPI, Grifols is generally exempt from the Securities and Exchange Commission ( SEC ) rules governing the solicitation of shareholder proxies. However, under Spanish law and as per its bylaws, Grifols is required to publish a "calling of the meeting" with at least one month in advance to the date set for the meeting and in at least the following: (i) the Official Gazette of the Commercial Registry (Boletin Oficial de Registro Mercantil) or one of the newspapers of wider circulation in Spain; (ii) Spanish National Securities Commission website (Comisión Nacional del Mercado de Valores - CNMV); and (iii) Grifols' website ( setting forth the matters to be voted upon at said shareholders meeting. 1 A FPI is defined as a non-u.s. issuer (other than a foreign governmental issuer), unless, as of the last business day of its most recently completed second fiscal quarter, (i) more than 50% of its outstanding voting securities of such issuer are directly or indirectly held of record by residents of the United States and (ii) any one of the following exists: (A) the majority of its executive officers or directors are U.S. citizens or residents, (B) more than 50% of its assets are located in the United States or (C) its business is administered principally in the United States. FPIs must assess their status once a year, on the last business day of their second fiscal quarter. If a FPI determines that, as of the assessment date, it no longer qualifies for such status, then it will have until the first day of the following fiscal year to comply with all of the reporting and listing requirements prescribed for U.S. domestic issuers. -1-

2 Grifols distributes a copy of the notice of the meeting and a form of proxy to our U.S. shareholders and also makes these materials available through its website in advance of such meeting. Under NASDAQ Rules, shareholders of U.S. domestic issuers must be given the opportunity to vote on equity compensation plans and material revisions thereto, with limited exceptions set forth in the NASDAQ Marketplace Rules, including an exception for FPIs who follow the laws of their home country. Under Spanish law, equity compensation plans involving the issuance of our securities require prior shareholder approval. Additionally, equity compensation plans in which Grifols' officers and employees participate can be approved by the board of directors without shareholder approval. However, the establishment of equity compensation plans in which members of the board of directors participate, must be authorized in the bylaws and requires the shareholders prior approval at a shareholders meeting. Under NASDAQ Rules, shareholders of U.S. domestic issuers must approve the issuance of securities when such issuance would result in a change in control of such issuer. Under Spanish law, any issuance of securities, regardless of whether such issuance would result in a change of control, requires prior shareholder approval. In Spain, companies with securities listed on a Spanish stock exchange are: (i) (ii) (iii) (iv) recommended to follow the provisions of the Spanish Unified Good Governance Code for Listed Companies (Código Unificado de Buen Gobierno de las Sociedades Cotizadas); required by law to publish an Annual Report on Corporate Governance as well as corporate governance information on their websites (on Grifols website at required by law to publish an Annual Report on Remuneration of the members of the board on their websites (on Grifols website at and required by law to comply with the regulations regarding the Audit Committee and the Appointments and Remuneration Committee set forth in the Spanish Companies Act (Ley de Sociedades de Capital). B. BOARD PRACTICES Responsibilities and Terms Under Spanish Law, the board of directors of a Spanish corporation is responsible for management, administration and representation in all matters concerning the business, subject to the provisions of the bylaws and the powers conferred at the general shareholders' meeting. Pursuant to Grifols bylaws, directors are elected by the shareholders to serve for a term of five years. A director may be re-elected to serve for an unlimited number of terms, except in case of independent directors who, according to the provisions of the law, shall not serve as such for more than twelve years. If a director ceases to hold office prior to the expiration of his or her term, the board of directors may fill the vacancy by appointing a replacement director to serve until the next general shareholders meeting, at which the appointment shall be ratified or rejected. In accordance with the NASDAQ Rules, all candidates must be proposed or recommended by independent directors. Pursuant to the provisions of Grifols' board regulations, the board of directors may recommend to the general shareholders meeting the appointment or reelection of directors or appoint them directly, by virtue of the cooptation authorities that it has pursuant to the Law, based on prior recommendations of the Appointments and Remuneration Committee, in case of independent directors, or the report of the Appointments and Remuneration Committee in case of the other categories of directors. All members of the board of directors and the Appointments and Remuneration Committee, whether independent or not, may participate in the drafting of such recommendations and reports. A director may resign or be removed (with or without cause) from office by a majority vote of the shareholders at a general shareholders meeting. -2-

3 Under Spanish law, the board of directors may delegate its powers either to an executive committee (Comisión Ejecutiva) or to one or more chief executive officers, unless the shareholders, through a meeting, have specifically delegated certain powers to the board and have not authorized the delegation of such powers to others. Spanish Companies Act provides that resolutions appointing an executive committee, any chief executive officer or authorizing the permanent delegation of all, or part of, the board of director s powers, requires a two-thirds majority of the members of such board of directors. Certain powers provided in Spanish Companies Act (such as the drafting of the financial statements) may not be delegated. The position of Chief Executive Officer in Grifols is held by Mr. Víctor Grifols, who is vested with all the delegable powers of the board of directors. Independence of Directors In accordance with the NASDAQ Rules, the board of directors must be composed of a majority of independent directors, the independence of whom is determined in accordance with highly detailed rules promulgated by NASDAQ. As a FPI Grifols is exempt from such requirement, and Spanish law does not contain any such requirements. Spanish law establishes the category of directors and the indispensable requirements to determine their independence. The regulations of the board of directors of Grifols, consistent with Spanish law, recognize, two main categories of directors: (i) executive directors and (ii) external directors, who can be divided into three subcategories: (a) directors nominated by an individual shareholder based on the extent of his/her shareholding ( proprietary directors ), (b) independent directors and (c) other directors who cannot be considered proprietary or independent. Article 6.4 of the regulations of the board of directors sets out that the Appointments and Remuneration Committee, by exercising its powers of recommendation, and the board of directors, by exercising its powers of recommendation and cooptation, with the aim to establish a reasonable balance between proprietary directors and independent directors, will take into consideration the ownership structure of Grifols in such a way that the relationship between each class of directors reflects the relationship between stable capital and floating capital. We have not determined whether or not the directors of Grifols would be considered as independent under the NASDAQ Rules, except for those directors who are also members of the Audit Committee and as such must meet the NASDAQ independence criteria. According to the definition of independent director provided by the Spanish Companies Act, and article 6 of the regulations of the board of directors of Grifols, the following persons may not be recommended or appointed as independent directors: (i) (ii) (iii) (iv) Employees or executive directors of any of the Grifols Group companies, unless three or five years have elapsed, respectively, since the termination of the relationship. Persons that have received some payment from Grifols, or from the Grifols group in addition to their directors remuneration, and unless the amount involved is not significant to the director. Dividends or pension supplements received by a Director for prior employment or professional services are excluded, provided that such payments are non-contingent (i.e., the paying company has no discretionary power to suspend, modify or revoke the payment). Persons that have been, during the last three years, partners of the external auditors or the firm responsible for the audit report, whether with respect to the audit of Grifols or any other company in the Grifols group for those years. Executive directors or senior officers of other companies in which any executive director or senior officer of Grifols is an external director of such company. -3-

4 (v) Persons that have or had, during the last year, material business relationships with Grifols or with any other company of the Grifols Group, whether in their own name or as a significant shareholder, director or senior officer of a company that has or had such a relationship. For purposes of paragraph (v) above, business relationships means any relationship with suppliers of goods or services, including financial, advisory and consultancy services. (vi) (vii) (viii) (ix) (x) Significant shareholders, executive directors or senior officers of an entity which receives or has received, during the last three years, significant donations from Grifols or the Grifols group. This provision does not apply to those who are merely trustees of a foundation receiving donations. Spouses or related persons maintaining an analogous relationship or close relatives of one of Grifols executive directors or senior officers. Any person not proposed for appointment or renewal by the Nomination and Compensation Committee. Persons in any of the situations set out in (i), (v), (vi) or (vii) above with regard to a significant shareholder or a shareholder with board representation. In the case of the family relations set out in (vii) above, the limitation applies not only in connection with the shareholder but also with proprietary directors of Grifols. Persons that have been directors for twelve consecutive years. The proprietary directors, who lose this status as a consequence of the sale of the shareholding by the shareholder they represent, can only be re-elected as independent directors when such shareholder has sold the total amount of its shares. Finally, any member of the board that owns Grifols shares can be considered independent, as long as its shareholding is not significant and satisfies all the above-mentioned conditions. As of this date, six out of the twelve members of Grifols' board of directors are independent directors in accordance with the regulations of the board of directors and the Spanish Companies Act. Of the remaining directors, two are executive directors, one is a proprietary director and three are considered external directors. Furthermore, Grifols follows the Spanish Companies Act, which does not, unlike NASDAQ Rules, require independent directors to hold meetings where only such independent directors are present. Audit Committee Responsibilities and Terms.- Grifols' Audit Committee, which we established in 2006, may be comprised of a minimum of three and a maximum of five members. Currently, Grifols' Audit Committee is comprised of three directors that were appointed by the board of directors. The members of this Committee are Mr. Steven F. Mayer, Ms. Belén Villalonga Morenés and Ms. Carina Szpilka Lázaro, all of whom are independent in accordance with NASDAQ Rules. The chairman of the Audit Committee is Ms. Belén Villalonga Morenés. According to NASDAQ Rules, Grifols' Audit Committee is in charge of the appointment, compensation, retention and oversight of the services of any registered public accounting firm engaged for the purpose of preparing and issuing any audit report, or for performing other audit reviews or related services for Grifols. Notwithstanding the above, Spanish laws provides our shareholders with the authority to appoint and replace the independent auditor at a general shareholders' meeting. Independence of the Directors of the Audit Committee.- According to NASDAQ Rules, Grifols must follow the requirement that provides that all the members of the Audit Committee shall meet the -4-

5 independence criteria set out in such NASDAQ Rules. All members of our Audit Committee meet such criteria. In addition to the requirements mentioned above, the Spanish companies Act requires that (a) the Audit Committee be composed exclusively of external directors (at least two of them being independent and one of the appointed due to his or her knowledge and experience in accounting and/or auditing matters) and (b) the chairman of the Audit Committee be an independent director. Internal Audit Department.- Grifols has an Internal Audit Department responsible for internal audit matters and for ensuring the efficiency of the internal audit control process of the different business units. This Internal Audit Department reports directly to the Audit Committee, supporting the adequate performance of all its functions. Appointments and Remuneration Committee The Appointments and Remuneration Committee, which was established in 2006, may be comprised of a minimum of three and a maximum of five directors. Currently, Grifols' Appointments and Remuneration Committee is comprised of three directors that were appointed by the board of directors. The members of this Committee are Ms. Marla E. Salmon, Mr. Luis Isasi Fernández de Bobadilla and Mr. Raimon Grifols Roura. The chairman of the Appointments and Remuneration Committee is Ms. Marla E. Salmon. According to NASDAQ Rules, FPIs such as Grifols are exempted from the requirement regarding independent appointments and remuneration committees, pursuant to which all listed companies must have an appointments and remuneration committee and all its members must meet the independence criteria set out in the NASDAQ Rules. Instead FPIs are permitted to follow their home country corporate governance practice in this respect. Under Spanish law it is mandatory that there be an Appointments and Remuneration Committee, and that such a committee is composed exclusively of external directors, at least two of them being independent. The chairman of the Appointments and Remuneration Committee must be an independent director. Grifols fully complies with these legal requirements as its Appointments and Remunerations Committee is comprised exclusively of external directors and is chaired by an independent director. C. CODE OF CONDUCT AND BUSINESS ETHICS AND WHISTLEBLOWER POLICY Code of Conduct and Business Ethics Under NASDAQ Rules, Grifols is required to adopt a code of business conduct and ethics applicable to all directors, officers and employees, which should be publicly available. Furthermore, under Spanish law, Grifols is required to adopt an internal code of conduct for securities markets, in order to prevent insider trading and misconduct, and to control possible conflicts of interest. In order to comply with the Spanish Law requirement, in 2006, Grifols adopted an internal code of conduct for securities markets issues. Additionally, the regulations of the board of directors of Grifols set out in detail the directors main obligations relating to conflicts of interest concerning business opportunities, use of Grifols assets, confidentiality and non-competition. Both the internal code of conduct for securities markets issues and the internal regulations of the board of directors are publicly available through Grifols website ( Although not mandatory under Spanish laws, the board of directors of Grifols also approved the Code of Ethics for Grifols Executives and the Code of Conduct for Grifols Employees, which are available through Grifols' website. Whistleblower Policy -5-

6 Under NASDAQ Rules, Grifols is required, in accordance with Section 301 of the Sarbanes Oxley Act, to establish a whistleblower policy to establish procedures for: (a) the receipt, retention and treatment of complaints received by us regarding accounting, internal controls or auditing matters; and (b) the submission by employees of Grifols, on a confidential and anonymous basis, of good faith concerns regarding questionable accounting or auditing matters. In 2011, Grifols adopted a whistleblower policy, in accordance with Section 301 of the Sarbanes Oxley Act. -6-

ANNEX 1 ANNUAL REPORT ON REMUNERATION OF THE BOARD MEMBERS OF LISTED PUBLIC LIMITED COMPANIES ISSUER IDENTIFICATION DATA

ANNEX 1 ANNUAL REPORT ON REMUNERATION OF THE BOARD MEMBERS OF LISTED PUBLIC LIMITED COMPANIES ISSUER IDENTIFICATION DATA REFERENCED TO THE YEAR ENDED 31/12/2016 C.I.F. A-58389123 CORPORATE NAME GRIFOLS,