TECHNICOLOR_REGISTRATION_DOCUMENT_2017

- 6 FINANCIAL STATEMENTS

Notes to the consolidated financial statements

This IFRS discount of €6 million will be charged to interest over the remaining life of the Term Loan Debt using the effective interest rate method. The current weighted average effective interest rate of the Term Loan Debt is 3.67%. Financial covenants and other limitations 8.3.3.5. In respect of the: term Loan Debt Agreement entered into in December 2016 as ■ amended in March 2017; the RCF entered into in December 2016; and ■ the EIB Loan signed in December 2016 and drawn in January 2017. ■ together the “Debt instruments”, the Group is required to meet financial covenants and is subject to several limitations described below. SECURITY PACKAGE Technicolor granted security interests to secure the Debt Instruments with the pledge of the shares of the main subsidiaries of Technicolor SA and of certain intra-group loans and material cash pooling bank accounts. EARLY REPAYMENT AND MANDATORY PREPAYMENTS In case of default or change of control of Technicolor, creditors will have the ability to immediately demand payment of all or a portion of the outstanding amounts. The events of default apply in whole or in part to Technicolor SA. The events of defaults include among other things and subject to certain exceptions, thresholds and grace periods: failure by Technicolor SA to meet the payment dates of the Debt ■ Instruments or of any other financial indebtedness or to comply with material obligations related to the Debt Instruments; any auditor’s report qualification made to the Technicolor SA’s ■ ability to continue as a going concern or the accuracy of the information given. Under the mandatory prepayment terms of the Debt Instruments, the Group is required to apply funds towards the repayment of outstanding amounts of the loans under the Debt Instruments in certain circumstances, including the following: asset disposals: the net proceeds in respect of any disposal of any of ■ its assets to an unaffiliated third party will be applied, subject to a minimum threshold, to repay the outstanding amounts of the term loans unless the proceeds are reinvested in assets useful for its business within 365 days; excess cash flow: a percentage of the Company’s excess cash flow ■ will be applied to prepay the term loans. The applicable percentage

depends on the leverage ratio of the Group, and ranges from 25% to 50%. The percentage steps down to 0% if certain levels of leverage ratio are reached. Excess cash flow is defined for purposes of the term loans prepayments, as the aggregate of net cash from operating and investing activities, subject to certain adjustments and minus the total funding costs, which comprise all voluntary or mandatory prepayments of the term loans during the year; other: net proceeds in respect of payments related to a casualty ■ event (giving rise to insurance reimbursements or condemnation awards) shall be applied to the repayment of the debt under the Debt Instruments, subject to certain minimum thresholds and with certain carve-outs. Technicolor can also, at its election, prepay all or part of its outstanding Term Loan Debt without penalty, and the EIB Loan. COVENANTS The EIB Loan contains a single affirmative financial covenant which requires that the total gross debt be no more than 4.00 times Adjusted EBITDA on a trailing twelve-month basis (“Leverage covenant”) on June 30 and December 31 of each financial year. The RCF contains the same financial covenant but this covenant is only applicable if there is an outstanding drawing of more than 40% of the RCF amount on June 30 or December 31 of each financial year. The $125 million credit line agreement signed with Wells Fargo in November 2017 contains the same financial covenant but this covenant is only applicable if outstanding availability under the line is less than $20 million on June 30 or December 31 of each financial year. The €35 million credit line agreement signed with Crédit Agricole d’Ile de France in July 2017 contains the same financial covenant but this covenant is only tested on December 31 of each financial year. The Term Loan Debt does not contain a financial affirmative covenant. The total gross debt and Adjusted EBITDA are calculated on the basis of the entire group perimeter. Therefore, the variance of €80 million between the Adjusted EBITDA determined in respect of the leverage covenant definition and the Adjusted EBITDA is equal to the Adjusted EBITDA in the discontinued activities. Likewise, the variance of €2 million between the gross debt determined in respect of the leverage covenant definition and the gross debt from continuing operations is equal to the debt in the discontinued activities. See note 12 for more information about the discontinued operations.

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TECHNICOLOR

REGISTRATION DOCUMENT 2017