Exhibit 10.4
CANADIAN
RECEIVABLES PURCHASE AGREEMENT
Dated as of July 13, 2007
among
POLYONE FUNDING CANADA CORPORATION,
as the Seller,
POLYONE CORPORATION,
as the Servicer,
THE BANKS AND OTHER FINANCIAL INSTITUTIONS PARTY HERETO,
as Purchasers,
CITICORP USA, INC.,
as the Agent,
and
NATIONAL CITY BUSINESS CREDIT, INC.,
as the Syndication Agent

 

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TABLE OF CONTENTS

                      Page  
 
            ARTICLE I DEFINITIONS     1  
Section 1.01.
  Certain Defined Terms     1  
Section 1.02.
  Other Terms     21  
Section 1.03.
  Computation of Time Periods     21  
 
            ARTICLE II AMOUNTS AND TERMS OF THE PURCHASES     21  
Section 2.01.
  Commitment     21  
Section 2.02.
  Making the Purchase and Capital Increases     21  
Section 2.03.
  Swing Increases     23  
Section 2.04.
  [Deleted]     25  
Section 2.05.
  Termination or Reduction of the Commitments     25  
Section 2.06.
  Receivable Percentage     25  
Section 2.07.
  Non-Liquidation Settlement Procedures     25  
Section 2.08.
  Liquidation Settlement Procedures     26  
Section 2.09.
  General Settlement Procedures     27  
Section 2.10.
  Payments and Computations, Etc     28  
Section 2.11.
  Yield and Fees     29  
Section 2.12.
  Special Provisions Governing Capital Investments at the Citicorp LIBO Rate    
30  
Section 2.13.
  Increased Capital     31  
Section 2.14.
  Taxes     32  
Section 2.15.
  Sharing of Payments, Etc     33  
Section 2.16.
  Conversion/Continuation Option     33  
 
            ARTICLE III CONDITIONS OF PURCHASES     34  
Section 3.01.
  Conditions Precedent to the Effectiveness of this Agreement     34  
Section 3.02.
  Conditions Precedent to All Purchases, All Capital Increases and Reinvestments
    37  
Section 3.03.
  Conditions Precedent to Initial Purchase     37  
Section 3.04.
  Financing Statement Terminations and Releases     38  
 
            ARTICLE IV REPRESENTATIONS AND WARRANTIES     38  
Section 4.01.
  Representations and Warranties of the Seller     38  
Section 4.02.
  Representations and Warranties of the Servicer     41  

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TABLE OF CONTENTS
(continued)

                      Page  
 
            ARTICLE V GENERAL COVENANTS OF THE SELLER AND THE SERVICER     42  
Section 5.01.
  Affirmative Covenants of the Seller     42  
Section 5.02.
  Reporting Requirements of the Seller     45  
Section 5.03.
  Negative Covenants of the Seller     45  
Section 5.04.
  Affirmative Covenants of the Servicer     48  
Section 5.05.
  Reporting Requirements of the Servicer     50  
Section 5.06.
  Negative Covenants of the Servicer     51  
Section 5.07.
  Affirmative Financial Covenants of the Servicer     53  
Section 5.08.
  Negative Financial Covenants of the Servicer     53  
 
            ARTICLE VI ADMINISTRATION AND COLLECTION     54  
Section 6.01.
  Designation of Servicer     54  
Section 6.02.
  Duties of Servicer     55  
Section 6.03.
  Rights of the Agent     56  
Section 6.04.
  Responsibilities of the Seller     56  
Section 6.05.
  Further Action Evidencing Purchases     57  
 
            ARTICLE VII EVENTS OF TERMINATION     57  
Section 7.01.
  Events of Termination     57  
 
            ARTICLE VIII THE AGENT     59  
Section 8.01.
  Authorization and Action     59  
Section 8.02.
  Agent's Reliance, Etc     60  
Section 8.03.
  Citicorp and Affiliates     60  
Section 8.04.
  Purchase Decisions     60  
Section 8.05.
  Indemnification     61  
Section 8.06.
  Posting of Approved Electronic Communications     61  

            ARTICLE IX ASSIGNMENT OF RECEIVABLE INTERESTS     62  
Section 9.01.
  Purchaser’s Assignment of Rights and Obligations     62  
 
            ARTICLE X INDEMNIFICATION     64  
Section 10.01.
  Indemnities     64  
Section 10.02.
  Currency     66  
 
            ARTICLE XI MISCELLANEOUS     66  
Section 11.01.
  Amendments, Etc     66  

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TABLE OF CONTENTS
(continued)

                      Page  
 
           
Section 11.02.
  Notices, Etc     68  
Section 11.03.
  Binding Effect; Assignability     69  
Section 11.04.
  Costs and Expenses     69  
Section 11.05.
  Confidentiality     69  
Section 11.06.
  Governing Law     70  
Section 11.07.
  Jurisdiction, Etc     70  
Section 11.08.
  Execution in Counterparts     71  
Section 11.09.
  Intent of the Parties     71  
Section 11.10.
  Entire Agreement     71  
Section 11.11.
  Severability of Provisions     71  
Section 11.12.
  No Liability of Syndication Agent     72  
Section 11.13.
  Waiver of Jury Trial     72  

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EXHIBITS

     
 
   
EXHIBIT A
  Form of Assignment and Acceptance
 
   
EXHIBIT B-1
  Form of Seller Report
 
   
EXHIBIT B-2
  Form of Receivables Report
 
   
EXHIBIT C
  Form of Lock-Box Agreement
 
   
EXHIBIT D
  Form of Canadian Receivables Sale Agreement
 
   
EXHIBIT E
  Form of Canadian Consent and Agreement
 
   
EXHIBIT F
  Form of Notice of Purchase
 
   
EXHIBIT G
  Form of Swing Increase Request
 
   
EXHIBIT H
  [deleted]
 
   
EXHIBIT I
  Form of Notice of Conversion or Continuation
 
   
EXHIBIT J
  Form of Opinion of Gowling LaFleur Henderson LLP, Counsel to the Seller and
the Canadian Originator

 

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SCHEDULES

     
 
   
SCHEDULE I
  Lock-Box Banks and Lock-Box Accounts
 
   
SCHEDULE II
  Credit and Collection Policy
 
   
SCHEDULE III
  Jurisdiction of Incorporation, Organizational Identification Number and
Location of the Seller’s Principal Place of Business, Chief Executive Office and
Office Where Records are Kept
 
   
SCHEDULE IV
  Forms of Invoices
 
   
SCHEDULE V
  Changes in Financial Conditions or Operations
 
   
SCHEDULE VI
  PPSA Filing Jurisdictions
 
   
SCHEDULE VII
  Commitments

 

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CANADIAN RECEIVABLES PURCHASE AGREEMENT
     This CANADIAN RECEIVABLES PURCHASE AGREEMENT, dated as of July 13, 2007
(this “Agreement”), among POLYONE FUNDING CANADA CORPORATION, a Canadian
corporation (the “Seller”), POLYONE CORPORATION, an Ohio corporation
(“PolyOne”), as the Servicer (as hereinafter defined), the banks and other
financial institutions listed on the signature pages hereof, as the Initial
Purchasers (the “Initial Purchasers”), CITICORP USA, INC., a Delaware
corporation (“Citicorp”), as administrative agent (the “Agent”) for the
Purchasers and the other Owners (as hereinafter defined), and NATIONAL CITY
BUSINESS CREDIT, INC., an Ohio corporation (“NCBC”), as the syndication agent
(the “Syndication Agent”).
PRELIMINARY STATEMENTS:
     (1) The Seller will from time to time purchase or otherwise acquire from
the Canadian Originator Pool Receivables which the Seller intends to sell
hereunder.
     (2) The Purchasers may at any time purchase such Pool Receivables from the
Seller and from time to time make Capital Increases.
     (3) In consideration of the reinvestment in Pool Receivables of daily
Collections (other than with regard to accrued Yield and any fees), the Seller
will sell to the Agent on behalf of the Owners additional Pool Receivables until
such reinvestment is terminated.
     (4) PolyOne has been requested and is willing to act as the Servicer.
     (5) Citicorp has been requested and is willing to act as the Agent.
     (6) NCBC has been requested and is willing to act as the Syndication Agent.
     (7) Certain terms which are capitalized and used throughout this Agreement
(in addition to those defined above) are defined in Article I of this Agreement.
     NOW, THEREFORE, in consideration of the premises, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms.
     As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
     “Adjusted EBITDA” means, with respect to any Person, EBITDA of such Person
and its Subsidiaries plus any net cash received from Equity Affiliates, minus
any net cash paid to Equity Affiliates, minus any income from Equity Affiliates
plus any income to Equity Affiliates.
     “Adjusted LIBO Rate” means, with respect to any Yield Period for any
Capital Investment, an interest rate per annum equal to the rate per annum
obtained by dividing (a) the LIBO Rate by (b) a percentage equal to (i) 100%
minus (ii) the reserve percentage applicable 2 Business Days before the first

 

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day of such Yield Period under regulations issued from time to time by the
Federal Reserve Board for determining the maximum reserve requirement (including
any emergency, supplemental or other marginal reserve requirement) for a member
bank of the Federal Reserve System in New York City with respect to liabilities
or assets consisting of or including Eurocurrency Liabilities (or with respect
to any other category of liabilities that includes deposits by reference to
which the LIBO Rate is determined) having a term equal to such Yield Period.
     “Adverse Claim” means any mortgage, deed of trust, pledge, hypothecation,
assignment, charge, deposit arrangement, encumbrance, lien (statutory or other),
security interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever intended to assure
payment of any Debt or the performance of any other obligation, including any
conditional sale or other title retention agreement, the interest of a lessor
under a capital lease and any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of any financing
statement under the PPSA or comparable law of any jurisdiction naming the owner
of the asset to which such Adverse Claim relates as debtor.
     “Affiliate” means as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by or is under common control with
such Person. The term “control” means the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise.
     “Agent’s Account” means the Deposit Account of the Agent (account number
30537802, ABA 021000089, Reference: CUSA f/a/o PolyOne Concentration) maintained
with CNA at its office at 399 Park Avenue, New York, New York 10043, Attention:
Hien Nugent, or such other account as the Agent shall specify in writing to the
Seller, the Servicer and the Purchasers.
     “Agent’s Fee” means those agency fees set forth in the Second Amended and
Restated Fee Letter.
     “Alternate Base Rate” means, for any period, a fluctuating interest rate
per annum as shall be in effect from time to time, which rate per annum shall be
equal at all times to the highest of the following:
     (a) the rate of interest announced publicly by CNA in New York, New York,
from time to time, as CNA’s base rate (or equivalent rate otherwise named);
     (b) the sum (adjusted to the nearest 0.25% or, if there is no nearest
0.25%, to the next higher 0.25%) of (i) 0.5% per annum, (ii) the rate per annum
obtained by dividing (A) the latest three-week moving average of secondary
market morning offering rates in the United States for three-month certificates
of deposit of major United States money market banks, such three-week moving
average being determined weekly on each Monday (or, if any such day is not a
Business Day, on the next succeeding Business Day) for the three-week period
ending on the previous Friday by CNA on the basis of such rates reported by
certificate of deposit dealers to and published by the Federal Reserve Bank of
New York or, if such publication shall be suspended or terminated, on the basis
of quotations for such rates received by CNA from 3 New York certificate of
deposit dealers of recognized standing selected by CNA, by (B) a percentage
equal to 100% minus the average of the daily percentages specified during such
three-week period by the Federal Reserve Board for determining the maximum
reserve requirement (including any emergency, supplemental or other marginal
reserve requirement) for CNA in respect of liabilities consisting of or
including (among other liabilities) three-month U.S. dollar nonpersonal time
deposits in the United States and (iii) the average during such three-week
period of the maximum annual assessment rates estimated by CNA for determining
the then current annual assessment

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payable by CNA to the Federal Deposit Insurance Corporation (or any successor)
for insuring U.S. Dollar deposits in the United States; and
     (c) 0.5% per annum plus the Federal Funds Rate.
     “Amended and Restated Projections” means those financial projections, dated
April, 2007, covering the Fiscal Years ending in December 2007 through
December 2011 inclusive, to be delivered to the Purchasers by PolyOne.
     “Applicable Margin” means (a) for an initial period commencing on the
Effective Date and ending on the first day of the month immediately following
the month in which the Servicer delivers PolyOne’s financial statements for the
Fiscal Period ending June 30, 2007, (i) in the case of Capital Investments
having a Yield determined with reference to the Alternate Base Rate, 0.50% per
annum and, (ii) in the case of Capital Investments having a Yield determined
with reference to the Adjusted LIBO Rate, 1.50% per annum and (b) thereafter, as
of any date of determination, a per annum rate equal to the rate set forth below
opposite the then applicable Average Monthly Excess Availability (determined on
the last day of the most recently concluded calendar month):

                  Average Monthly Excess Availability   Alternate Base Rate  
Adjusted LIBO Rate
Greater than $120,000,000
    0.25 %     1.25 %
Less than or equal to $120,000,000 and greater than $60,000,000
    0.50 %     1.50 %
Less than or equal to $60,000,000
    0.75 %     1.75 %

provided, however, that upon the occurrence and during the continuance of an
Event of Termination, the “Applicable Margin” shall be the sum of the highest
rate set forth in the table above (as may be converted pursuant to Section 2.16)
plus 2.00% per annum. Changes in the Applicable Margin resulting from a change
in the Average Monthly Excess Availability for any month shall become effective
as to all Capital Investments on the first day of the next consecutive calendar
month.
     “Applicable Reserve” means, at any date, an amount equal to (NRPB x RP)
plus such reserves as mutually agreed upon, with adjustments effective upon at
least three Business Days’ notice by the Agent, where:
NRPB = the Net Receivables Pool Balance at the close of business of the Servicer
on such date.
RP = the Reserve Percentage at the close of business of the Servicer on such
date.
     “Approved Electronic Communications” means each notice, demand,
communication, information, document and other material that the Seller or
Servicer is obligated to, or otherwise chooses to, provide to the Agent pursuant
to any Transaction Document or the transactions contemplated therein, including
any financial statement, financial and other report, notice, request,
certificate and other information material; provided, however, that “Approved
Electronic Communication” shall exclude (x) any Notice of Purchase,

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Swing Increase Request, Notice of Conversion or Continuation, and any other
notice, demand, communication, information, document and other material relating
to a request for a new, or a conversion of an existing, Purchase, (ii) any
notice relating to the payment due under any Transaction Document prior to the
scheduled date therefor, (iii) any notice of any Potential Event of Termination
or Event of Termination and (iv) any notice, demand, communication, information,
document and other material required to be delivered to satisfy any of the
conditions set forth in Article III or any other condition to any Purchase
hereunder or any condition precedent to the effectiveness of this Agreement.
     “Approved Electronic Platform” has the meaning specified in Section 8.06.
     “Assignee” means in the case of any assignment of any rights and
obligations pursuant to Section 9.01, any Eligible Assignee as the assignee of
such rights and obligations.
     “Assignment and Acceptance” means an assignment and acceptance, in
substantially the form of Exhibit A hereto, entered into by any Purchaser and an
Assignee pursuant to Section 9.01.
     “Available Capital” means, at any time, (a) the lesser of (i) the then
effective Total Commitments and (ii) (x) the Net Receivables Pool Balance at
such time minus (y) any Applicable Reserve in effect at such time, minus (b) the
Capital at such time.
     “Average Monthly Excess Availability” has the meaning set out in the U.S.
RPA.
     “Business Day” means any day (other than a Saturday or Sunday) on which
(i) banks are not authorized or required to close in Toronto, Ontario, Canada,
New York, New York or the State of Ohio and (ii) if the term “Business Day” is
used in connection with the Adjusted LIBO Rate, dealings in United States
dollars are carried on in the London interbank market.
     “Canadian Consent and Agreement” means the Canadian Consent and Agreement,
dated as of the Effective Date, in substantially the form of Exhibit E hereto,
duly executed by the Seller and the Canadian Originator.
     “Canadian Dollars” means the lawful currency of Canada.
     “Canadian Dollar Receivables” means any Receivable in Canadian Dollars.
     “Canadian Insolvency Statutes” means collectively, the Companies’ Creditors
Arrangement Act (Canada), the Bankruptcy and Insolvency Act (Canada), the
Assignments and Preferences Act (Ontario) and the Fraudulent Conveyances Act
(Ontario).
     “Canadian Originator” means PolyOne Canada, Inc. and its successors.
     “Canadian Receivables Sale Agreement” means the Canadian Receivables Sale
Agreement, dated as of July 13, 2007, in substantially the form of Exhibit D
hereto, among the Canadian Originator, the Seller and PolyOne as the Buyer’s
Servicer thereunder, as the same may from time to time be amended, supplemented
or otherwise modified with the prior written consent of the Required Purchasers.
     “Canadian Subordinated Note” has the meaning specified in the Canadian
Receivables Sale Agreement.
     “Capital” means, at any time, the sum of all Capital Investments
outstanding at such time.

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     “Capital Expenditures” means, with respect to any Person, expenditures
(whether paid in cash or other consideration or accrued as a liability) for
fixed or capital assets (excluding any capitalized interest and any such asset
acquired in connection with normal replacement and maintenance programs to the
extent properly charged to current operations and excluding any replacement
assets to the extent acquired with the proceeds of insurance) made by such
Person, all as determined in accordance with GAAP.
     “Capital Increase” means any increase in the aggregate outstanding Capital
hereunder pursuant to Sections 2.01 and 2.02, other than in connection with the
initial Purchase.
     “Capital Investment” means, in respect of the initial Purchase or any
Capital Increase (including any Swing Increase), the original amount paid to the
Seller on account of Capital at the time thereof, pursuant to Sections 2.01,
2.02 or 2.03, reduced from time to time by Collections received and distributed
on account of such Capital pursuant to Section 2.07 or 2.08; provided, however,
that if such Capital Investment shall have been reduced by any distribution of
any portion of Collections and thereafter such distribution is rescinded or must
otherwise be returned for any reason, such Capital Investment shall be increased
by the amount of such distribution, all as though such distribution had not been
made.
     “Cash Management Obligation” means, as applied to the Seller, any direct or
indirect liability, contingent or otherwise, of the Seller in respect of cash
management services (including treasury, depository, overdraft, credit or debit
card, electronic funds transfer and other cash management arrangements) provided
after the date hereof (regardless of whether these or similar services were
provided prior to the date hereof by the Agent, any Purchaser or any Affiliate
or any of them) by the Agent in connection with this Agreement or any
Transaction Document, including obligations for the payment of fees, interest,
charges, expenses, reasonable legal fees and disbursements in connection
therewith.
     “Change of Control” means the occurrence of any of the following: (a) any
Person or 2 or more Persons acting in concert, other than a trustee or other
fiduciary holding securities under an employee benefit plan of PolyOne or a
corporation owned, directly or indirectly, by PolyOne or by the stockholders of
PolyOne in substantially the same proportions as their ownership of stock of
PolyOne (e.g., a holding company reorganization), shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934), directly or indirectly,
of Voting Interests of PolyOne (or other securities convertible into such Voting
Interests of PolyOne) representing 25% or more of the combined voting power of
all Voting Interests of PolyOne; or (b) any Person or 2 or more Persons acting
in concert shall have acquired by contract or otherwise, or shall have entered
into a contract or arrangement that, upon consummation, will result in its or
their acquisition of the power to exercise, directly or indirectly, a
controlling influence over the management or policies of PolyOne; or
(c) PolyOne, or a corporation owned, directly or indirectly, by the stockholders
of PolyOne in substantially the same proportions as their ownership of stock of
PolyOne, shall cease to own, directly or indirectly, 100% of the Equity
Interests in the Seller, PolyOne or the Canadian Originator, or (d) any “Change
of Control” under and as defined in the Senior Note Indenture.
     “Citicorp” has the meaning assigned to such term in the recital of parties
hereto.
     “Citicorp Base Rate” for any period for any Capital Investment, an interest
rate per annum equal to the sum of (a) the Alternate Base Rate in effect from
time to time plus (b) the Applicable Margin.
     “Citicorp LIBO Rate” for any Yield Period for any Capital Investment, an
interest rate per annum equal to the sum of (a) the Adjusted LIBO Rate for such
Yield Period plus (b) the Applicable Margin.

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     “Citicorp Rate” means (a) for any Capital Investment (other than Swing
Increases), at the Seller’s election upon written notice to the Agent, given not
later than 11:00 A.M. (New York City time) on the third Business Day prior to
such Capital Investment (in the case of the Citicorp LIBO Rate) or the Business
Day prior to such Capital Investment (in the case of the Citicorp Base Rate),
either the Citicorp LIBO Rate or the Citicorp Base Rate, as applicable, and
(b) for any Capital Investment that is a Swing Increase and for each other
obligation hereunder, the Citicorp Base Rate.
     “CNA” means Citibank, N.A., a national association, and its successors.
     “Code” means the Internal Revenue Code of 1986, as amended from time to
time.
     “Collections” means, with respect to any Pool Receivable, all cash
collections and other cash proceeds of such Pool Receivable, including, without
limitation, (i) all cash proceeds of the Related Security with respect to such
Pool Receivable and (ii) any Collections of such Pool Receivable deemed to have
been received, and actually paid, pursuant to Section 2.09(a).
     “Commitment” means from and after the Effective Date, in respect of each
Purchaser party to this Agreement on the Effective Date after giving effect to
this Agreement, the commitment of such Purchaser to make Purchases and acquire
other Capital Investments in the aggregate principal amount set forth as the
“Commitment” of such Purchaser on Schedule VII and in respect of each other
Purchaser that became a Purchaser by entering into an Assignment and Acceptance
from and after the Effective Date, the amount set forth as the “Commitment” for
such Purchaser in the Register maintained by the Agent pursuant to
Section 9.01(c); in the case of clauses (i) and (ii), as each such amount may be
reduced from time to time as the result of any assignment of any Commitment or
any portion thereof pursuant to Section 9.01 or as such amount may be reduced
from time to time pursuant to Section 2.05.
     “Commitment Termination Date” means the fifth anniversary of the Effective
Date.
     “Consolidated” means, with respect to any Person, the consolidation of
accounts of such Person and its Subsidiaries in accordance with GAAP.
     “Consolidated Interest Expense” means, with respect to any Person for any
period, (a) cash interest expense of such Person and its Subsidiaries determined
on a Consolidated basis in accordance with GAAP (including, in the case of
PolyOne, the cash interest expense (including, but not limited to, Yield payable
hereunder) of the Seller determined in accordance with GAAP), in each case,
including interest capitalized during such period and net costs under all
interest rate swap, cap, collar or similar agreements and interest rate
insurance for such period minus (b) Consolidated net gains of such Person and
its Subsidiaries (including, in the case of PolyOne, the Seller) under all
interest rate swap, cap, collar or similar agreements and interest rate
insurance for such period and minus (c) the Consolidated interest income of such
Person and its Subsidiaries (including, in the case of PolyOne, the Seller) for
such period.
     “Consolidated Net Income” means, for any Person for any period, the net
income (or loss) of such Person and its Subsidiaries for such period, determined
on a Consolidated basis in conformity with GAAP.
     “Contract” means an agreement between the Canadian Originator and an
Obligor in any written form acceptable to the Canadian Originator, or in the
case of any open account agreement as evidenced by one of the forms of invoices
set forth in Schedule IV hereto or otherwise approved by the Agent from time to
time (which approval shall not be unreasonably withheld), pursuant to or under
which such Obligor shall be obligated to pay for goods.

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     “Credit and Collection Policy” means those credit and collection policies
and practices in effect on the date hereof relating to Contracts and Receivables
and described in Schedule II hereto, as modified from time to time in compliance
with Section 5.03(c).
     “Debt” means, without duplication, (i) indebtedness for borrowed money,
(ii) obligations evidenced by bonds, debentures, notes or other similar
instruments, (iii) obligations to pay the deferred purchase price of property or
services other than accounts payable arising in the ordinary course of business
that are not outstanding for more than 60 days after first becoming due,
(iv) obligations as lessee under leases which shall have been or should be, in
accordance with GAAP, recorded as capital leases, (v) indebtedness of others
secured by liens, and (vi) obligations under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in clauses
(i) through (iv) above.
     “Deposit Account” has the meaning set forth in Article 9 of the UCC.
     “Designated Obligor” means, at any time, each Obligor; provided, however,
that any Obligor shall cease to be a Designated Obligor upon 3 Business Days’
notice by the Agent to the Seller given in accordance with the Agent’s then
current credit guidelines and with the consent or at the request of the Required
Purchasers.
     “Dollar Equivalent” of any amount means, at the time of determination
thereof, (a) if such amount is expressed in U.S. Dollars, such amount and (b) if
such amount is expressed in Canadian Dollars, the equivalent of such amount in
U.S. Dollars determined by using the rate of exchange quoted by Citibank in New
York, New York at 11:00 a.m. (New York time) on the date of determination (or,
if such date is not a Business Day, the most recent Business Day prior thereto)
to prime banks in New York for the spot purchase in the New York foreign
exchange market of such amount of U.S. Dollars with Canadian Dollars.
     “EBITDA” means, with respect to any Person for any period, an amount equal
to (a) Consolidated Net Income of such Person for such period plus (b) the sum
of, in each case to the extent included as a deduction in the calculation of
such Consolidated Net Income of such Person for such period in accordance with
GAAP, but without duplication, (i) any provision for income taxes,
(ii) Consolidated Interest Expense, (iii) loss from extraordinary items, (iv)
depreciation, depletion and amortization of intangibles or financing or
acquisition costs, and (iv) all other non-cash charges and non-cash losses for
such period, including the amount of any compensation deduction as the result of
any grant of Stock or Stock Equivalents to employees, officers, directors or
consultants, other than charges representing accruals of future cash expenses
minus (c) the sum of, in each case to the extent included in the calculation of
Consolidated Net Income of such Person for such period in accordance with GAAP,
but without duplication, (i) any credit for income tax, (ii) gains from
extraordinary items for such period, (iii) any aggregate net gain (but not any
aggregate net loss) from the sale, exchange or other disposition of capital
assets by such Person, (iv) cash payments for previously reserved charges and
(v) any other non-cash gains which have been added in determining Consolidated
Net Income, including any reversal of a charge referred to in clause (b)(iv)
above by reason of a decrease in the value of any Stock or Stock Equivalent.
     “Effective Date” means July 13, 2007.
     “Eligible Assignee” means (i) each Initial Purchaser or any of its
Affiliates, and (ii) any commercial bank, finance company, insurance company or
other financial institution or any other Person,

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in each case approved by the Agent and the Seller (which approval shall not
(x) be unreasonably withheld or delayed or (y) required following the occurrence
and during the continuance of an Event of Termination); provided, however, that
neither the Canadian Originator nor the Seller nor any of their respective
Affiliates may be an Eligible Assignee.
     “Eligible Receivable” means each Pool Receivable arising out of the sale of
merchandise or, goods in the ordinary course of business by the Canadian
Originator to a Person that is not an Affiliate of the Canadian Originator;
provided, however, that a Pool Receivable shall not be an “Eligible Receivable”
if any of the following shall be true:
     (a) any warranty contained in this Agreement or any other Transaction
Document with respect to such specific Receivable is not true and correct with
respect to such Receivable; or
     (b) the Obligor on such Receivable has disputed liability or made any claim
with respect to such Receivable or any other Receivable due from such Obligor to
the Seller or the Canadian Originator but only to the extent of such dispute or
claim; or
     (c) the Obligor in respect of such Receivable or any of its Affiliates is
also a supplier to or creditor of the Seller or the Canadian Originator unless
such supplier or creditor has executed a no-offset letter satisfactory to the
Agent, in its sole discretion; provided, however, in the event no such no-offset
letter has been executed, such Receivable shall be ineligible pursuant to this
clause (c) only to the extent of an amount equal to 150% of the aggregate amount
of accounts payable or other Debt owing by the Canadian Originator to such
Obligor or any of its Affiliates as at such date; or
     (d) the sale represented by such Receivable is to an Obligor located
outside the United States or Canada, unless the sale is on letter of credit or
acceptance terms acceptable to the Agent, in its sole discretion; or
     (e) the sale to such Obligor on such Receivable is on a bill-and-hold,
guaranteed sale, sale-and-return, sale-on-approval or consignment basis; or
     (f) such Receivable is subject to an Adverse Claim in favor of any Person
other than the Agent; or
     (g) such Receivable is subject to any deduction, offset, counterclaim,
return privilege or other conditions other than volume sales discounts given in
the ordinary course of the Canadian Originator’s business; provided, however,
such Receivable shall be ineligible pursuant to this clause (g) only to the
extent of such deduction, offset, counterclaim, return privilege or other
condition; or
     (h) the Obligor on such Receivable is located in any jurisdiction requiring
the holder of such Receivable, as a precondition to commencing or maintaining
any action in the courts of such jurisdiction either to (i) receive a
certificate of authorization to do business in such jurisdiction or be in good
standing in such jurisdiction or (ii) file a Notice of Business Activities
Report with the appropriate office or agency of such jurisdiction, in each case
unless the holder of such Receivable has received such a certificate of
authority to do business, is in good standing or, as the case may be, has duly
filed such a notice in such jurisdiction; or

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     (i) the Obligor on such Receivable is a Governmental Authority, unless the
Canadian Originator and the Seller have each assigned its rights to payment of
such Receivable to the Agent pursuant to the Assignment of Claims Act of 1940,
as amended, in the case of a federal U.S. Governmental Authority, and pursuant
to applicable law, if any, in the case of any other Governmental Authority, and
such assignment has been accepted, acknowledged and where required to create an
effective assignment thereof, consented to by the appropriate government
officers; or
     (j) 50% or more of the outstanding Receivables of the Obligor are not, or
have been determined by the Agent, in accordance with the provisions hereof, not
to be, Eligible Receivables; or
     (k) the payment obligation represented by such Receivable is denominated in
a currency other than U.S. Dollars or Canadian Dollars; or
     (l) such Receivable is not evidenced by an invoice or other writing in form
acceptable to the Agent, in its sole discretion; or
     (m) the Canadian Originator, the Seller or any other Person, in order to be
entitled to collect such Receivable, is required to deliver any additional goods
or merchandise to, perform any additional service for, or perform or incur any
additional obligation to, the Person to whom or to which it was made; or
     (n) the total Receivables of such Obligor to the Canadian Originator (taken
as a whole) represent more than 15% (or such lesser percentage with respect to
certain Obligors as the Agent may determine in its sole discretion in accordance
with its customary criteria) of the Eligible Receivables of the Canadian
Originator at such time, but only to the extent of such excess; or
     (o) such Receivable is more than (i) 60 days past due according to the
original terms of sale, or (ii) 91 days past the original invoice date thereof;
provided, however, that a Receivable with extended original terms not in excess
of 90 days which are acceptable to the Agent, in accordance with its customary
criteria, may be an “Eligible Receivable” provided such Receivable is not more
than 120 days past the original invoice date thereof; or
     (p) the Obligor on such Receivable has (i) filed a petition for bankruptcy
or any other relief under the Bankruptcy Code, the Bankruptcy and Insolvency
Act, any other Canadian Insolvency Statutes or any other law relating to
bankruptcy, insolvency, arrangement, reorganization or relief of debtors,
(ii) made an assignment for the benefit of creditors, (iii) had filed against it
any petition or other application for relief under the Bankruptcy Code or any
such other law, (iv) failed, suspended business operations, become insolvent,
called a meeting of its creditors for the purpose of obtaining any financial
concession or accommodation or (v) had or suffered a receiver or a trustee to be
appointed for all or a significant portion of its assets or affairs; or
     (q) consistent with the Credit and Collection Policy, such Receivable
should be written off the Seller’s or the Canadian Originator’s books as
uncollectible; or

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     (r) at any time following the 60th day after the date hereof (or such later
date to which the Agent may consent in writing) such Receivable shall not be
payable into a Lock-Box Account which is the subject of a Lock-Box Agreement; or
     (s) such Receivable shall not arise under a Contract which has been duly
authorized and which, together with such Receivable, is in full force and effect
and constitutes the legal, valid and binding obligation of the Obligor of such
Receivable enforceable against such Obligor in accordance with its terms; or
     (t) such Receivable, together with the Contract related thereto, shall
contravene in any material respect any laws, rules or regulations applicable
thereto (including, without limitation, laws, rules and regulations relating to
usury, consumer protection, truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices and privacy)
or with respect to which any party to the Contract related thereto is in
violation of any such law, rule or regulation in any material respect; or
     (u) such Receivable shall not (i) satisfy all applicable requirements of
the Credit and Collection Policy or (ii) comply with such other reasonable
criteria and requirements (other than those relating to the collectibility of
such Receivable) as the Agent may from time to time specify to the Seller upon
30 days’ notice; or
     (v) such Receivable shall not constitute an “account” within the meaning of
the PPSA;
     (w) such Receivable arises under a Contract which contains a legally
enforceable provision either requiring the Obligor thereunder to consent to the
transfer, sale or assignment of the right to payment thereunder unless a written
consent of the Obligor has been obtained, or otherwise restricting the right of
the Canadian Originator to sell or transfer such Receivable;
     (x) PST is payable in connection with such Receivable or any Obligor
thereof is an individual; or
     (y) the Agent, in accordance with its customary criteria, determines, in
its sole discretion, that such Receivable might not be paid or is otherwise
ineligible.
For the avoidance of doubt, it is acknowledged and agreed that any calculation
of ineligibility made pursuant to more than one clause above shall be made
without duplication.
     “Equity Affiliate” means, with respect to any Person, any corporation,
partnership, limited liability company or other business entity of which an
aggregate of less than 50% of the Voting Interests is, at the time, directly or
indirectly, owned or controlled by such Person or one or more Subsidiaries or
Equity Affiliates of such Person and which such Person accounts for in its
consolidated financial statements on an equity basis pursuant to GAAP.
     “Equity Interest” means, with respect to any Person, shares of capital
stock of (or other ownership or profit interests in) such Person, warrants,
options or other rights for the purchase or other acquisition from such Person
of shares of capital stock of (or other ownership or profit interests in) such
Person, securities convertible into or exchangeable for shares of capital stock
of (or other ownership or profit interests in) such Person or warrants, rights
or options for the purchase or other acquisition from such Person of such shares
(or such other interests), and other ownership or profit interests in such
Person

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(including, without limitation, partnership, member or trust interests therein),
whether voting or nonvoting, and whether or not such shares, warrants, options,
rights or other interests are authorized or otherwise existing on any date of
determination.
     “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
     “ERISA Affiliate” means any Person that for purposes of Title IV of ERISA
is a member of the Seller’s controlled group, or under common control with the
Seller, within the meaning of Section 414 of the Code.
     “Eurocurrency Liabilities” has the meaning assigned to that term in
Regulation D of the Federal Reserve Board.
     “Events of Termination” has the meaning specified in Section 7.01.
     “Fair Market Value” means (a) with respect to any asset or group of assets
(other than a marketable security) at any date, the value of the consideration
obtainable in a sale of such asset at such date assuming a sale by a willing
seller to a willing purchaser dealing at arm’s length and arranged in an orderly
manner over a reasonable period of time having regard to the nature and
characteristics of such asset, and, with respect to the sale of assets with a
book value in excess of $25,000,000, as such sale is reasonably approved by the
Board of Directors of PolyOne or, if such asset shall have been the subject of a
relatively contemporaneous appraisal by an independent third party appraiser,
the basic assumptions underlying which have not materially changed since its
date, the value set forth in such appraisal and (b) with respect to any
marketable security at any date, the closing sale price of such security on the
Business Day next preceding such date, as appearing in any published list of any
national securities exchange in the U.S. or the NASDAQ Stock Market or, if there
is no such closing sale price of such Security, the final price for the purchase
of such security at face value quoted on such Business Day by a financial
institution of recognized standing regularly dealing in securities of such type
and selected by the Agent.
     “Federal Funds Rate” means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
     “Fiscal Period” means a calendar month, a fiscal quarter or a Fiscal Year.
     “Fiscal Year” means each twelve-month period ending on December 31.
     “Fixed Charge Coverage Ratio” means, at any date of determination, the
ratio of (i) Adjusted EBITDA of PolyOne less Consolidated Capital Expenditures
of PolyOne and its Subsidiaries to (ii) Consolidated Interest Expense of PolyOne
and its Subsidiaries plus scheduled repayments of principal on Debt to be made
by PolyOne or its Subsidiaries during the immediately succeeding four fiscal
quarter period plus Restricted Payments, plus net cash payment of taxes to the
extent included in the calculation of EBITDA, in each case (other than in the
case of scheduled repayments of principal on Debt) for the

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four fiscal quarter period ending on such date or, if such date is not the last
day of a fiscal quarter, for the immediately preceding four fiscal quarter
period.
     “GAAP” means generally accepted accounting principles in the United States,
or with respect to the Canadian Originator and the Seller, generally accepted
accounting principles in Canada, in each case consistently applied and in effect
from time to time.
     “Governmental Authority” means any nation, sovereign or government, any
state, province or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including any central bank.
     “GST” means all goods and services tax payable under Part IX of the Excise
Tax Act (Canada), all QST and all harmonized sales tax in the Provinces of Nova
Scotia, Newfoundland and New Brunswick payable under the Excise Tax Act
(Canada), as such statutes may be amended, modified, supplemented or replaced
from time to time, including any successor statute.
     “Indemnified Amounts” has the meaning specified in Section 10.01.
     “Indemnified Party” means any or all of the Purchasers, the Assignees and
the Agent and their respective Affiliates and successors and assigns and their
respective officers, directors, managers, managing members, partners and
employees.
     “Intercreditor Agreement” means the amended and restated intercreditor
agreement, dated June 6, 2006, between the Agent, Citicorp USA, Inc, as agent
for the beneficiaries under the Guarantee and Agreement (as defined therein)
and, U.S. Bank Trust National Association, not in its individual capacity but
solely as collateral trustee (the “Corporate Trustee”).
     “Investment” in any Person means any loan or advance to such Person, any
purchase or other acquisition of any capital stock or other ownership or profit
interest, warrants, rights, options, obligations or other securities of such
Person, any capital contribution to such Person or any other investment in such
Person.
     “LIBO Rate” means, with respect to any Yield Period for any Capital
Investment made at the Citicorp LIBO Rate, the rate determined by the Agent to
be the offered rate for deposits in U.S. Dollars for the applicable Yield Period
appearing on the MoneyLine Telerate Page 3750 as of 11:00 a.m., London time, on
the second full Business Day next preceding the first day of each Yield Period.
In the event that such rate does not appear on the MoneyLine Telerate Page 3750
(or otherwise on the MoneyLine screen), the LIBO Rate for the purposes of this
definition shall be determined by reference to such other comparable publicly
available service for displaying eurodollar rates as may be selected by the
Agent, or, in the absence of such availability the LIBO Rate shall be the rate
of interest determined by the Agent to be the rate per annum at which deposits
in U.S. Dollars are offered by the principal office of CNA in London to major
banks in the London interbank market at 11:00 a.m. (London time) 2 Business Days
before the first day of such Yield Period in an amount substantially equal to
the Capital Investment of CNA for a period equal to such Yield Period.
     “Liquidation Cost” has the meaning set forth in Section 2.12.
     “Liquidation Day” means each day which occurs on or after the Termination
Date.

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     “Lock-Box Account” means a Deposit Account (including, without limitation,
any concentration account) maintained at a Lock-Box Bank for the purpose of
receiving Collections and subject to a valid Lock-Box Agreement.
     “Lock-Box Agreement” means an agreement, in substantially the form of
Exhibit C hereto (with such modifications thereto as consented to by the Agent),
between the Canadian Originator or the Seller, as the case may be, the Agent,
and a Lock-Box Bank.
     “Lock-Box Bank” means any of the banks specified on Schedule I hereof and
any other bank specified as a “Lock-Box Bank” in accordance with this Agreement,
in each case holding one or more Lock-Box Accounts.
     “Material Adverse Change” means a material adverse change in any of (a) the
condition (financial or otherwise), business, performance, prospects,
operations, contingent liabilities, material obligations, or properties of the
Seller, PolyOne, the Canadian Originator, or PolyOne and its Subsidiaries taken
as a whole, (b) the collectibility of the Pool Receivables, or the ability of
the Servicer (if PolyOne or any of its Affiliates) to collect Pool Receivables,
(c) the legality, validity or enforceability of any Transaction Document,
(d) the ability of the Seller, the Servicer, PolyOne or any Subsidiaries of
PolyOne to perform their respective obligations under the Transaction Documents
or (e) the rights and remedies of the Seller, Agent or the Purchasers under the
Transaction Documents.
     “Material Adverse Effect” means an effect that results in or causes, or
could reasonably be expected to result in or cause, a Material Adverse Change.
     “Multiemployer Plan” means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which the Seller or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any of the
preceding five plan years made or accrued an obligation to make contributions.
     “Multiple Employer Plan” means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the Seller
or any ERISA Affiliate and at least one Person other than the Seller and the
ERISA Affiliates or (b) was so maintained and in respect of which the Seller or
any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in
the event such plan has been or were to be terminated.
     “Net Receivables Pool Balance” means at any time the Outstanding Balance of
the Eligible Receivables in the Receivables Pool as at such time reduced by
Unapplied Cash and Credits, volume rebates, credits in past due, offsets and
other dilution and such other reductions as the Agent in its sole discretion
deems appropriate.
     “Notice of Conversion or Continuation” has the meaning specified in
Section 2.16(a).
     “Notice of Purchase” has the meaning specified in Section 2.02(a).
     “Obligor” means a Person obligated to make payments pursuant to a Contract.
     “Other Taxes” has the meaning specified in Section 2.14(b).
     “Outstanding Balance” of any Receivable at any time means the Dollar
Equivalent of the then outstanding principal balance thereof, as of the date of
determination, excluding any PST, but including any GST or QST owing in
connection therewith.

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     “Owner” means any of the Purchasers or the Swing Purchaser, as the case may
be, who has made all or a portion of the initial Purchase or any Capital
Increase; provided, however, that, upon any assignment of their interests
hereunder pursuant to Article IX, the Assignee thereof shall be an Owner
thereof.
     “Person” means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
     “Plan” means a Single Employer Plan or a Multiple Employer Plan.
     “PolyOne Canada” means PolyOne Canada, Inc., a corporation organized under
the laws of Canada and a wholly owned Subsidiary of PolyOne.
     “Pool Receivable” means a Receivable in the Receivables Pool.
     “Potential Event of Termination” means any event that, with the giving of
notice or the passage of time or both, would constitute an Event of Termination.
     “PPSA” means the Personal Property Security Act (Ontario), as amended from
time to time, and any regulations promulgated thereunder.
     “PST” means all taxes payable under the Retail Sales Tax Act (Ontario) or
any similar statute of another jurisdiction of Canada, but in any event,
excluding any GST.
     “Purchase” means a purchase by the Agent on behalf of the Purchasers of the
Purchased Property from the Seller pursuant to Article II, and any such purchase
in consideration of the remittance by the Servicer to the Seller of Collections
of Pool Receivables pursuant to Section 2.07, and for greater certainty,
includes any reinvestment pursuant to Section 2.07 and any purchase under
Section 2.02(f) whether or not there is a reinvestment on such day.
     “Purchased Property” means (a) at any time prior to the Termination Date,
(i) all then outstanding Receivables, (ii) all Related Security relating to such
Receivables and (iii) all Collections with respect to, and other proceeds of,
Receivables and (b) at all times on and after the Termination Date, (i) all
Receivables outstanding as of the close of business of the Servicer on the date
preceding the Termination Date, (ii) all Related Security related to such
Receivables and (iii) all Collections with respect to, and other proceeds of,
such Receivables.
     “Purchasers” means the Initial Purchasers and each Assignee that shall
become a party hereto pursuant to Section 9.01.
     “QST” means the Quebec sales tax imposed pursuant to An Act respecting the
Quebec sales tax.
     “Receivable” means the indebtedness (whether constituting accounts or
intangibles or chattel paper or otherwise) of any Obligor under a Contract, and,
subject to the following, includes the right to payment of any interest or
finance charges and other obligations of such Obligor with respect thereto;
provided that for Receivables in respect of which the Obligor is Canadian
(unless otherwise agreed by the Agent), any such interest or finance charges as
well as any PST owing in connection therewith shall be excluded, but GST and QST
shall be included.

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     “Receivable Percentage” means, at any time, a percentage computed as:
C + AR
NRPB
where:
C = the outstanding Dollar Equivalent of the Capital Investments made at the
time of such computation;
AR = the Dollar Equivalent of the aggregate Applicable Reserve at the time of
such computation;
NRPB = the Net Receivables Pool Balance at the time of such computation.
The Receivable Percentage shall be determined from time to time pursuant to the
provisions of Section 2.06.
     “Receivables Excess Availability” has the meaning set out in the U.S. RPA.
     “Receivables Pool” means at any time the aggregation of the Dollar
Equivalent of each then outstanding Receivable in respect of which the Obligor
is a Designated Obligor or, as to any Receivable in existence on such date, was
a Designated Obligor on the date of the initial creation of an interest in such
Receivable under this Agreement.
     “Receivables Report” means a report, in substantially the form of Exhibit
B-2 hereto, furnished by the Servicer to the Agent for the Owners pursuant to
Section 2.09.
     “Records” means, with respect to any Receivable, all Contracts and other
documents, books, records and other information (including, without limitation,
computer programs, tapes, disks, punch cards, data processing software and
related property and rights) relating to such Receivable and the related
Obligor.
     “Register” has the meaning specified in Section 9.01(c).
     “Related Security” means with respect to any Receivable:
     (i) all of the Seller’s interest in the goods (including returned goods),
if any, relating to the sale which gave rise to such Receivable;
     (ii) all other security interests or liens and property subject thereto
from time to time purporting to secure payment of such Receivable, whether
pursuant to the Contract related to such Receivable or otherwise, together with
all financing statements signed by an Obligor describing any collateral securing
such Receivable;
     (iii) all letter of credit rights, guarantees, insurance and other
agreements or arrangements of whatever character from time to time supporting or
securing payment of such Receivable, whether pursuant to the Contract related to
such Receivable or otherwise;
     (iv) all Records relating to such Receivable;

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     (v) all of the Seller’s right, title and interest in and to the following:
the Canadian Receivables Sale Agreement, including, without limitation, (i) all
rights to receive moneys due and to become due under or pursuant to the Canadian
Receivables Sale Agreement, (ii) all rights to receive proceeds of any
indemnity, warranty or guaranty with respect to the Canadian Receivables Sale
Agreement, (iii) claims for damages arising out of or for breach of or default
under the Canadian Receivables Sale Agreement, and (iv) the right to perform
under the Canadian Receivables Sale Agreement and to compel performance and
otherwise exercise all remedies thereunder; and
     (vi) all proceeds of any and all of the foregoing (including, without
limitation, proceeds which constitute property of the types described in clause
(v) above).
     “Required Net Receivables Pool Balance” means, at any time, the sum of
(i) the aggregate outstanding Capital at such time plus (ii) the aggregate
Applicable Reserve at such time.
     “Required Purchasers” means at any time Purchasers holding more than 50% of
the aggregate Commitments of the Purchasers.
     “Requirement of Law” means, with respect to any Person, the common law and
all federal, state, provincial, local and foreign laws, rules and regulations,
orders, judgments, decrees and other determinations of any Governmental
Authority or arbitrator, applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
     “Reserve Percentage” means 15%, provided that the Reserve Percentage may,
upon at least one Business Day’s notice by the Agent to the Seller and the
Servicer, be increased or decreased by the Agent at any time and in its
discretion in accordance with its then current credit guidelines and provided,
further, that the Reserve Percentage may not be decreased to less than 15% by
the Agent at any time except with the written consent or at the written request
of all of the Purchasers in accordance with Section 11.01.
     “Responsible Officer” means, with respect to any Person, the chief
executive officer, the president, the chief financial officer, vice president,
corporate controller, treasurer, assistant treasurer, secretary, assistant
secretary, managing members or general partners of such Person but, in any
event, with respect to financial matters, the chief financial officer, treasurer
or controller of such Person.
     “Restricted Payment” means, with respect to the Servicer, (a) any dividend,
distribution or any other payment whether direct or indirect, on account of any
Stock or Stock Equivalent of the Servicer now or hereafter outstanding (other
than dividends or distributions payable solely in common Stock of the Servicer)
and (b) any redemption, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any Stock or Stock
Equivalent of the Servicer now or hereafter outstanding.
     “Second Amended and Restated Fee Letter” has the meaning set out in the
U.S. RPA.
     “Second Amended and Restated Parent Undertaking” has the meaning set out in
the U.S. RPA.
     “Seller Report” means a report, in substantially the form of Exhibit B-1
hereto, furnished by the Servicer to the Agent for each Owner pursuant to
Section 2.09.
     “Seller’s Account” means a deposit account of the Seller to be established
not later than the time of the initial Purchase at a financial institution to be
agreed to between the Agent and the Seller.

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     “Senior Note Indenture” means the Indenture, dated as of May 6, 2003,
between PolyOne Corporation and The Bank of New York, as Trustee governing the
105/8% Senior Notes, as such indenture may be amended, restated or otherwise
modified with the prior written consent of the Agent (except for modifications
that do not materially adversely affect the interests of the Purchasers under
the Transaction Documents or in the Receivables with respect to which no written
consent shall be required).
     “Servicer” has the meaning specified in Section 6.01.
     “Servicer Fee” has the meaning specified in Section 2.11.
     “Single Employer Plan” means a single employer plan, as defined in Section
4001(a) (15) of ERISA, that (a) is maintained for employees of the Seller or any
ERISA Affiliate and no Person other than the Seller and the ERISA Affiliates or
(b) was so maintained and in respect of which the Seller or any ERISA Affiliate
could have liability under Section 4069 of ERISA in the event such plan has been
or were to be terminated.
     “Solvent” means, with respect to any Person as of any date of
determination, that, as of such date, (a) the value of the assets of such Person
(both at fair value and present fair saleable value) is greater than the total
amount of liabilities (including contingent and unliquidated liabilities) of
such Person, (b) such Person is able to pay all liabilities of such Person as
such liabilities mature and (c) such Person does not have unreasonably small
capital. In computing the amount of contingent or unliquidated liabilities at
any time, such liabilities shall be computed at the amount that, in light of all
the facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability.
     “Stock” means shares of capital stock (whether denominated as common stock
or preferred stock), beneficial, partnership or membership interests,
participations or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity,
whether voting or non-voting.
     “Stock Equivalents” means all securities convertible into or exchangeable
for Stock and all warrants, options or other rights to purchase or subscribe for
any Stock, whether or not presently convertible, exchangeable or exercisable.
     “Subsidiary” means, with respect to any Person, any corporation,
partnership, limited liability company or other business entity of which an
aggregate of more than 50% of the Voting Interests is, at the time, directly or
indirectly, owned or controlled by such Person or one or more Subsidiaries of
such Person.
     “Super-Majority Purchasers” means at any time Purchasers holding at least
80% of the aggregate Commitments of the Purchasers.
     “Swing Increase” has the meaning specified in Section 2.03.
     “Swing Increase Request” has the meaning specified in Section 2.03(b).
     “Swing Increase Sublimit” means US$5,000,000.

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     “Swing Purchaser” means Citicorp or any other Purchaser that becomes the
Agent or agrees, with the approval of the Agent and the Seller, to act as the
Swing Purchaser hereunder, in each case in its capacity as the Swing Purchaser
hereunder.
     “Taxes” has the meaning specified in Section 2.14(a).
     “10 5/8% Senior Notes” means the 10 5/8% Senior Notes due May 6, 2010
issued by PolyOne.
     “Termination Date” means the earlier of (i) the Commitment Termination
Date, and (ii) the date of termination in whole of the aggregate Commitments
pursuant to Section 2.05 or 7.01.
     “Total Commitment” means $25,000,000 as such amount may be reduced from
time to time pursuant to Section 2.05.
     “Total Excess Availability” has the meaning set out in the U.S. RPA.
     “Transaction Documents” means this Agreement, the Canadian Receivables Sale
Agreement, the Canadian Subordinated Notes, the Second Amended and Restated
Parent Undertaking, the Lock-Box Agreements, the Canadian Consent and Agreement,
the Second Amended and Restated Fee Letter, the Quebec Assignment and each
certificate, agreement or document executed by the Seller, the Servicer, or the
Canadian Originator and delivered to the Agent or any Purchaser in connection
with or pursuant to any of the foregoing.
     “Transfer” means sell, assign, convey, set-over and transfer, or, depending
upon the context, sale, assignment, conveyance, set-over and transfer, and
“Transferred” shall be interpreted accordingly.
     “UCC” means, at any time, the Uniform Commercial Code as from time to time
in effect in the State of New York at such time.
     “Unapplied Cash and Credits” means, at any time, the Dollar Equivalent of
the aggregate amount of Collections or other cash or credits then held by or for
the account of the Servicer, the Canadian Originator or the Seller in respect of
the payment of Pool Receivables, but not yet applied or reinvested pursuant to
Section 2.07 or applied pursuant to Section 2.08.
     “United States” and “U.S.” each means United States of America.
     “Unused Commitment” means, with respect to any Purchaser at any time,
(a) such Purchaser’s Commitment at such time minus (b) that aggregate
outstanding Capital paid by such Purchaser pursuant to Section 2.02 and not
reduced by the Dollar Equivalent of Collections received and distributed to such
Purchaser on account of such Capital pursuant to Section 2.07 or 2.08.
     “Unused Commitment Fee” has the meaning specified in Section 2.11.
     “Unused Commitment Fee Rate” means (i) for an initial period commencing on
the Effective Date and ending on the first day of the month immediately
following the month in which the Servicer delivers PolyOne’s financial
statements for the Fiscal Period ending June 30, 2007, 0.250% per annum, and
(ii) thereafter, as of any date of determination, a per annum rate equal to the
rate set forth below opposite the then applicable Average Monthly Excess
Availability (determined on the last day of the most recently concluded calendar
month for which financial statements have been delivered):

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          Average Monthly Excess Availability   Unused Commitment Fee Rate
Greater than $120,000,000
    0.375 %
Less than or equal to $120,000,00 and greater than $60,000,000
    0.250 %
Less than or equal to $60,000,000
    0.250 %

provided, however, that upon the occurrence and during the continuance of an
Event of Termination, the “Unused Commitment Fee Rate” shall be the highest rate
set forth in the table above. Changes in the Unused Commitment Fee Rate
resulting from a change in the Average Monthly Excess Availability for any month
shall become effective on the first day of the next consecutive calendar month.
     “U.S. Buyer” means PolyOne Funding Corporation, a Delaware corporation.
     “U.S. Dollars” and “$” each means the lawful currency of the United States.
     “U.S. RPA” means the Second Amended and Restated Receivables Purchase
Agreement dated as of June 26, 2007 (as the same may from time to time be
amended, restated, supplemented or otherwise modified from time to time) among
the U.S. Buyer, PolyOne, as Servicer thereunder, the Purchasers (as defined
therein), Citicorp USA, Inc., as administrative agent for the Purchasers and any
other owners of Receivable Interests (as defined therein), Citibank, N.A. and
National City Bank, as issuing banks, and National City Business Credit, Inc.,
as the syndication agent.
     “Voting Interests” means shares of capital stock issued by a corporation,
or equivalent Equity Interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the election
of directors (or persons performing similar functions) of such Person, even if
the right so to vote has been suspended by the happening of such a contingency.
     “Welfare Plan” means a welfare plan, as defined in Section 3(1) of ERISA.
     “Yield” means (a) for each Capital Investment made at the Citicorp LIBO
Rate, for any Yield Period:
CR x C x ED + LC
        360

         
 
       
where:
       
 
       
CR
  =   the Citicorp LIBO Rate for such Capital Investment for such Yield Period;
 
       
C
  =   the amount of such Capital Investment;
 
       
ED
  =   the actual number of days elapsed during such Yield Period; and
LC
  =   all Liquidation Costs, if any, for such Capital Investment for such Yield
Period; and

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     (b) for each Capital Investment made at the Citicorp Base Rate for any
period of time:
CR x C x ED
        360

         
 
       
where:
       
 
       
CR
  =   the Citicorp Base Rate from time to time;
 
       
C
  =   the amount of such Capital Investment; and
 
       
ED
  =   the actual number of days elapsed;

provided, that no provision of this Agreement shall require the payment or
permit the collection of Yield in excess of the maximum permitted by applicable
law; provided, further, that Yield for any Capital Investment shall not be
considered paid by any distribution to the extent that at any time all or a
portion of such distribution is rescinded or must otherwise be returned for any
reason.
     “Yield Payment Date” means, (a) in respect of Capital Investments made at
the Citicorp Base Rate (including but not limited to the Swing Increases)
(i) the first Business Day of each calendar month, commencing on the first such
day following the making of such Capital Investment and (ii) if not previously
paid in full, on the Termination Date, (b) in respect of Capital Investments
made at the Citicorp LIBO Rate, (i) the last day of each Yield Period applicable
to such Capital Investment and, if such Yield Period has a duration of more than
one month, on each day during such Yield Period occurring every month from the
first day of such Yield Period, (ii) upon the payment or prepayment thereof in
full or in part and (iii) if not previously paid in full, on the Termination
Date, (c) in respect of the Unused Commitment Fee, (i) the first Business Day of
each calendar month and (ii) if not previously paid in full, on the Termination
Date, and (d) with respect to all other obligations of the Seller hereunder, on
demand by the Agent from and after the time such obligation becomes due and
payable (whether by acceleration or otherwise).
     “Yield Period” means, in the case of any Capital Investment made at the
Adjusted LIBO Rate, (a) initially, the period commencing on the date such
Capital Investment is made or on the date of conversion of a Capital Investment
made at the Alternate Base Rate to a Capital Investment made at the Adjusted
LIBO Rate and ending one, two, or three months thereafter, as selected by the
Seller in its Notice of Purchase and (b) thereafter, if such Capital Investment
is continued, in whole or in part, as a Capital Investment made at the Adjusted
LIBO Rate, a period commencing on the last day of the immediately preceding
Yield Period therefor and ending one, two, or three months thereafter, as
selected by the Seller in its Notice of Conversion or Continuation given to the
Agent; provided, however, that all of the foregoing provisions relating to Yield
Periods in respect of Capital Investment made at the Adjusted LIBO Rates are
subject to the following:
     (i) if any Yield Period would otherwise end on a day that is not a Business
Day, such Yield Period shall be extended to the next succeeding Business Day,
unless the result of such extension would be to extend such Yield Period into
another calendar month, in which event such Yield Period shall end on the
immediately preceding Business Day;
     (ii) any Yield Period that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Yield Period) shall end on the last Business
Day of a calendar month;

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     (iii) the Seller may not select any Yield Period that ends after the
Commitment Termination Date; and
     (iv) there shall be outstanding at any one time no more than 7 Yield
Periods in the aggregate.
     Section 1.02. Other Terms.
     All accounting terms not specifically defined herein shall be construed in
accordance with GAAP. All terms used in the PPSA and not specifically defined
herein are used herein as defined in the PPSA. Any reference to a dollar amount
herein, shall be a reference to such amount in U.S. Dollars, unless otherwise
expressly stated.
     Section 1.03. Computation of Time Periods.
     Unless otherwise stated in this Agreement, in the computation of a period
of time from a specified date to a later specified date, the word “from” means
“from and including” and the words “to” and “until” each means “to but
excluding”.
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
     Section 2.01. Commitment.
     (a) On the terms and conditions herein set forth, each Purchaser severally
agrees to make the initial Purchase, and to make Capital Increases from time to
time, (i) after the Effective Date on any Business Day during the period from
the Effective Date to the Termination Date and (ii) in an aggregate amount of
Capital for such Purchaser not to exceed at any time outstanding such
Purchaser’s Commitment; provided, however, that no Purchaser shall be obligated
to make the initial Purchase or any Capital Increase if, after giving effect to
such Purchase or such Capital Increase, (A) the sum of the Capital then
outstanding would exceed (B) the lesser of (x) the Total Commitment and (y)(i)
the Net Receivables Pool Balance minus (ii) the Applicable Reserve. The initial
Purchase and each Capital Increase shall be made by the Purchasers
simultaneously and ratably in accordance with their respective Commitments.
     (b) On the terms and conditions hereinafter set forth, the Agent on behalf
of the Owners shall, at the request of the Seller, have the Collections
attributable to any reduction of Capital reinvested pursuant to Section 2.07 in
additional Purchased Property.
     Section 2.02. Making the Purchase and Capital Increases.
     (a) The initial Purchase and each Capital Increase by the Purchasers shall
be made on notice from the Seller to the Agent, given not later than 11:00 a.m.
(New York City time) (i) on the third Business Day before the date of such
Purchase or Capital Increase if Yield in respect thereof is initially calculated
at the Citicorp LIBO Rate and (ii) on the Business Day before the date of such
Purchase or Capital Increase if Yield in respect thereof is initially calculated
at the Citicorp Base Rate. Each such notice of a proposed Purchase or Capital
Increase (a “Notice of Purchase”) shall be by telephone (confirmed promptly
thereafter in writing) or facsimile, in substantially the form of Exhibit F
hereto, and shall specify the requested aggregate amount of Capital for such
Purchase or Capital Increase to be paid

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to the Seller and the requested Business Day of such Purchase or Capital
Increase. If Yield in respect of the initial Purchase or any Capital Increase is
initially calculated at the Citicorp LIBO Rate, such Purchase or Capital
Increase shall be in an aggregate amount of not less than $10,000,000 or an
integral multiple of $1,000,000 in excess thereof and if Yield in respect of the
initial Purchase or any Capital Increase is initially calculated at the Citicorp
Base Rate, such Purchase or Capital Increase shall be in an aggregate amount of
not less than $1,000,000 or an integral multiple of $1,000,000 in excess
thereof.
     (b) The Agent shall give each Purchaser prompt notice of such notice of
such proposed Purchase or Capital Increase, the date of such Purchase or Capital
Increase, and the amount of Capital to be paid by such Purchaser in connection
with such Purchase or Capital Increase, by telephone or telefax. On the date of
such Purchase or Capital Increase, each Purchaser shall, upon satisfaction of
the applicable conditions set forth in Article III, make available to the Agent
its ratable share of the aggregate amount of Capital in respect of such Purchase
or Capital Increase by deposit of such ratable share in same day funds to the
Agent’s Account, and, after receipt by the Agent of such funds, the Agent shall
cause such funds to be made immediately available to the Seller at the Seller’s
Account.
     (c) Each Notice of Purchase delivered pursuant to Section 2.02(a) shall be
irrevocable and binding on the Seller. The Seller shall indemnify each Purchaser
against any actual loss or expense incurred by such Purchaser as a result of any
failure to fulfill on or before the date of the proposed initial Purchase or
Capital Increase (as to which a Notice of Purchase has been given pursuant to
Section 2.02(a)) the applicable conditions set forth in Article III, including,
without limitation, any actual loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such
Purchaser to fund its ratable portion of such proposed Purchase or Capital
Increase when such Purchase or Capital Increase, as a result of such failure, is
not made on such date.
     (d) Unless the Agent shall have received notice from a Purchaser prior to
the date of such Purchase or Capital Increase that such Purchaser will not make
available to the Agent such Purchaser’s ratable portion of the Capital for such
Purchase or Capital Increase, the Agent may assume that such Purchaser has made
such portion available to the Agent on the date of such Purchase or Capital
Increase in accordance with Section 2.02(b), and the Agent may, in reliance upon
such assumption, make available to the Seller on such date a corresponding
amount. However, if the Agent has received such notice from such Purchaser, the
Agent may not make such assumption and may not make available to the Seller on
such date such corresponding amount. If and to the extent that such Purchaser
(other than a Purchaser that has delivered to the Agent a notice of the type
described in the two immediately preceding sentences) shall not have made such
ratable portion available to the Agent and the Agent has made such ratable
portion available to the Seller, such Purchaser and the Seller severally agree
to pay (to the extent not repaid by the Seller or such Purchaser, respectively)
to the Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Seller until the date such amount is repaid to the Agent, at (i) in the case
of the Seller, the Yield applicable to such amount and (ii) in the case of such
Purchaser, the Federal Funds Rate. If such Purchaser shall repay to the Agent
such corresponding amount, such amount so repaid shall constitute such
Purchaser’s ratable portion of such Purchase or Capital Increase for purposes of
this Agreement.
     (e) The failure of any Purchaser to make available such Purchaser’s ratable
portion of any Purchase or Capital Increase shall not relieve any other
Purchaser of its obligation, if any, hereunder to make available such other
Purchaser’s ratable portion of such Purchase or Capital Increase on the date of
such Purchase or Capital Increase, but no Purchaser shall be responsible for the
failure of any other Purchaser to make available such other Purchaser’s ratable
portion of such Purchase or Capital Increase on the date of any Purchase or
Capital Increase. Nothing herein shall prejudice any rights that the Seller may
have against any Purchaser as a result of any default by such Purchaser
hereunder.

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     (f) Effective upon the date of the initial Purchase, the date of each
reinvestment under Section 2.07, the date on which any reinvestment would have
been made but for a requested reduction of Capital under Section 2.05 and the
date of each Capital Increase, the Seller hereby Transfers to the Agent on
behalf of the Purchasers (to the extent not then already Transferred to and held
by the Agent on behalf of the Purchasers prior to any such effective date)
(i) each Receivable then existing, (ii) all Related Security with respect to
such Receivables, and (iii) all Collections with respect to, and other proceeds
of, such Receivables and Related Security. The interest of each Owner at any
time in the Purchased Property shall be its ratable share thereof, based on its
Capital Investment at such time as compared to the Capital Investments of all
Owners at such time.
     (g) The aggregate purchase price for all of the Purchased Property is the
aggregate of the amounts payable to the Seller on account of Capital under
Sections 2.01, 2.02 or 2.03, the amounts payable to the Seller as reinvestments
in Purchased Property and amounts payable to the Seller or applied to discharge
amounts owed by the Seller pursuant to Sections 2.07(a)(i)(C) or (v) or 2.08(i),
(ii), (iii), (v) or (vi).
     Section 2.03. Swing Increases
     (a) On the terms and subject to the conditions contained in this Agreement,
the Swing Purchaser may, in its sole discretion, make, in U.S. Dollars, Capital
Increases (each a “Swing Increase”) otherwise committed to the Seller hereunder
from time to time on any Business Day during the period from the date hereof
until the Termination Date in an aggregate principal amount at any time
outstanding (together with the aggregate outstanding principal amount of any
other Capital Increase made by the Swing Purchaser hereunder in its capacity as
the Swing Purchaser) not to exceed the Swing Increase Sublimit; provided,
however, that at no time shall the Swing Purchaser make any Swing Increase to
the extent that, after giving effect to such Swing Increase, (A) the sum of the
Capital then outstanding, would exceed (B) the lesser of (x) the Total
Commitment and (y)(i) the Net Receivables Pool Balance minus (ii) the Applicable
Reserve.
     (b) In order to request a Swing Increase, the Seller shall telecopy (or
forward by electronic mail or similar means) to the Agent a duly completed
request in substantially the form of Exhibit G, setting forth the requested
amount and date of such Swing Increase (a “Swing Increase Request”), to be
received by the Agent not later than 12:00 p.m. (New York City time) on the day
of the proposed purchase. The Agent shall promptly notify the Swing Purchaser of
the details of the requested Swing Increase. Subject to the terms of this
Agreement, the Swing Purchaser may make the Capital Investment in connection
with such Swing Increase available to the Agent and, in turn, the Agent shall
make such amounts available to the Seller on the date of the relevant Swing
Increase Request. The Swing Purchaser shall not make any Swing Increase in the
period commencing on the first Business Day after it receives written notice
from the Agent or any Purchaser that one or more of the conditions precedent
contained in Section 3.02 shall not on such date be satisfied, and ending when
such conditions are satisfied. The Swing Purchaser shall not otherwise be
required to determine that, or take notice whether, the conditions precedent set
forth in Section 3.02 have been satisfied in connection with the making of any
Swing Increase. Each Swing Increase shall be in an aggregate amount of not less
than $100,000.
     (c) The Swing Purchaser shall notify the Agent in writing (which writing
may be a telecopy or electronic mail) weekly, by no later than 10:00 a.m. (New
York City time) on the first Business Day of each week, of the aggregate
principal amount of its Capital Investment in connection with Swing Increases.

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     (d) The Swing Purchaser may demand at any time that each Purchaser pay to
the Agent, for the account of the Swing Purchaser, in the manner provided in
clause (e) below, such Purchaser’s ratable portion of all or a portion of the
Swing Purchaser’s Capital outstanding in connection with Swing Increases, which
demand shall be made through the Agent, shall be in writing and shall specify
the outstanding principal amount of the Capital demanded to be so reduced.
     (e) The Agent shall forward each notice referred to in clause (c) above and
each demand referred to in clause (d) above to each Purchaser on the day such
notice or such demand is received by the Agent (except that any such notice or
demand received by the Agent after 2:00 p.m. (New York City time) on any
Business Day or any such demand received on a day that is not a Business Day
shall not be required to be forwarded to the Purchasers by the Agent until the
next succeeding Business Day), together with a statement prepared by the Agent
specifying the amount of each Purchaser’s ratable portion of the aggregate
principal amount of the Capital in connection with Swing Increases stated to be
outstanding in such notice or demanded to be paid pursuant to such demand, and,
notwithstanding whether or not the conditions precedent set forth in
Section 3.02 and 2.01 shall have been satisfied (which conditions precedent the
Purchasers hereby irrevocably waive), each Purchaser shall, before 11:00 a.m.
(New York City time) on the Business Day next succeeding the date of such
Purchaser’s receipt of such notice or demand, make available to the Agent, in
immediately available funds, for the account of the Swing Purchaser, the amount
specified in such statement; provided, however, that notwithstanding anything to
the contrary in the foregoing, no Purchaser shall be obligated to purchase a
ratable portion of, or otherwise pay any sum in respect of, a Swing Increase if
the purchase by such Purchaser of a ratable portion of, or payment of other sum
in respect of, such Swing Increase would cause such Purchaser’s aggregate
Capital Investment to exceed its Commitment. Upon such purchase by a Purchaser,
such Purchaser shall, except as provided in clause (f), be deemed to have made a
Capital Increase with a Capital Investment equal to the amount actually paid by
such Purchaser. The Agent shall use such funds to reduce the Swing Purchaser’s
Capital in respect of Swing Increases.
     (f) Upon the occurrence of an Event of Termination under Section 7.01(f),
each Purchaser shall acquire, without recourse or warranty, an undivided
participation in each Swing Increase otherwise required to be repaid by such
Purchaser pursuant to clause (e) above, which participation shall be in a
principal amount equal to such Purchaser’s ratable portion of such Swing
Increase, by paying to the Swing Purchaser on the date on which such Purchaser
would otherwise have been required to make a payment in respect of such Swing
Increase pursuant to clause (e) above, in immediately available funds, an amount
equal to such Purchaser’s ratable portion of such Swing Increase. If all or part
of such amount is not in fact made available by such Purchaser to the Swing
Purchaser on such date, the Swing Purchaser shall be entitled to recover any
such unpaid amount on demand from such Purchaser together with interest accrued
from such date at the Federal Funds Rate for the first Business Day after such
payment was due and thereafter at the Citicorp Base Rate.
     (g) From and after the date on which any Purchaser (i) is deemed to have
made a Capital Increase pursuant to clause (e) above with respect to any Swing
Increase or (ii) purchases an undivided participation interest in a Swing
Increase pursuant to clause (f) above, the Swing Purchaser shall promptly
distribute to such Purchaser such Purchaser’s share of all payments of Capital
of and Yield received by the Swing Purchaser on account of such Swing Increase
other than those received from a Purchaser pursuant to clause (e) or (f) above.

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     Section 2.04. [Deleted]
     Section 2.05. Termination or Reduction of the Commitments.
     The Seller may, upon at least 5 Business Days’ notice to the Agent, and so
long as, after giving effect to a proposed reduction, no Event of Termination or
Potential Event of Termination, including, without limitation, by reference to
Section 5.07(b), would exist, terminate in whole or reduce in part, the unused
portions of the Commitments of the Purchasers; provided, however, that for
purposes of this Section 2.05, the unused portions of the Commitments of the
Purchasers shall be computed as the excess of (i) the aggregate of the
Commitments of the Purchasers immediately prior to giving effect to such
termination or reduction over (ii) the aggregate Capital outstanding at the time
of such computation; provided, further, that each such partial reduction of the
unused portions of the Commitments (i) shall be in an amount equal to at least
$5,000,000 and shall be an integral multiple of $1,000,000 in excess thereof,
(ii) shall be made ratably among the Purchasers in accordance with their
respective Commitments and (iii) shall reduce the Total Commitment in an amount
equal to each such reduction.
     Section 2.06. Receivable Percentage.
     The Receivable Percentage shall be initially computed as of the opening of
business of the Servicer on the date of the initial Purchase and the date of
each Capital Increase. Thereafter until the Termination Date, the Receivable
Percentage shall be automatically recomputed as of the close of business of the
Servicer on each day (other than a Liquidation Day). The Receivable Percentage
shall remain constant from the time as of which any such computation or
recomputation is made until the time as of which the next such recomputation, if
any, shall be made. The Receivable Percentage, as computed as of the day
immediately preceding the Termination Date, shall remain constant at all times
on and after the Termination Date. Such Receivable Percentage shall become zero
at such time as the Owners shall have irrevocably received the accrued Yield for
their Capital, shall have irrevocably recovered the related Capital Investment,
and shall have irrevocably received payment of all other amounts payable by the
Seller to the Owners, and the Servicer shall have received the accrued Servicer
Fee, if any.
     Section 2.07. Non-Liquidation Settlement Procedures.
     (a) On each day (other than a Liquidation Day) the Agent shall, out of
Collections of Pool Receivables received on such day:
     (i) first, set aside and hold in trust for the Servicer and the Owners an
amount in U.S. Dollars equal to the sum of (A) the Servicer Fee, if any, accrued
through such day and not so previously set aside, (B) the aggregate Yield, the
Unused Commitment Fee, the Agent’s Fee and any other fees accrued hereunder
through such day and not so previously set aside, and (C) the aggregate of any
other amounts then accrued or owed hereunder by the Seller to such Owners and
not so previously set aside;
     (ii) second, distribute an amount in U.S. Dollars equal to the aggregate
Capital Investments made in respect of Swing Increases to the Swing Purchaser,
to be applied to reduce the Capital of such Swing Increases;
     (iii) third, if such day is the second Business Day of the week, distribute
to the Owners an amount in U.S. Dollars equal to that amount, if any, which
would be required to reduce Capital so that the Receivable Percentage would not,
after giving effect to the Collections of Pool Receivables and the addition of
new Pool Receivables on such day and the resulting

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recomputation of the Receivable Percentage pursuant to Section 2.06 as of the
end of such day, exceed 100%;
     (iv) fourth, set aside the remainder of such Collections in an amount not
greater than the aggregate Capital then outstanding, for the benefit, on a pari
passu basis, of the Owners; and
     (v) fifth, to the extent of any further remaining Collections and subject
to Sections 2.10(f) and 11.09(b) , return the remainder of such Collections to
the Seller.
     (b) On each applicable Yield Payment Date, the Agent shall distribute the
amounts set aside as described in clause (i) of Section 2.07(a) above (other
than the Agent’s Fee), first, to the Servicer in payment of the accrued Servicer
Fee, if any, payable, to the Owners in payment of the accrued Yield and the
Unused Commitment Fees, pari passu, and second, in payment of any other amounts
then owed by the Seller hereunder (including, without limitation, all fees
payable hereunder and not paid above except for the Servicer Fee). On each day,
the Agent shall distribute the amounts set aside as described in clause (iv) of
Section 2.07(a) above to the Seller as reinvestment in Purchased Property, for
the benefit of the Owners.
     (c) On each anniversary of the Effective Date, the Agent shall distribute
the amounts set aside as described in clause (i) of Section 2.07(a) with respect
to the Agent’s Fee to the Agent in payment of the Agent’s Fee for the
twelve-month period then commencing.
     (d) In the case of Collections of Canadian Dollar Receivables, the Agent
shall convert such Collections to U.S. Dollars in accordance with Agent’s normal
practices and procedures and all distributions set forth in clauses (a) and
(b) above will be in U.S. Dollars.
     (e) Any application of Collections to amounts owing by the Seller is
without limitation to the obligation of the Seller to pay such amounts and made
pursuant to the rights of the Agent and the Owners under Sections 2.10(f) and
11.09(b).
     Section 2.08. Liquidation Settlement Procedures.
     (a) On each Liquidation Day, the Agent shall, out of the Collections of
Pool Receivables received on such day, deposit to the Agent’s Account the
Collections of Pool Receivables received on such day and shall apply them as
follows:
     (i) first, to pay obligations of the Seller to the Agent under any
Transaction Document in respect of any expense reimbursements, Cash Management
Obligations or indemnities then due to the Agent;
     (ii) second, to pay obligations of the Seller to the Owners under any
Transaction Document in respect of any expense reimbursements or indemnities
then due to such Persons;
     (iii) third, to the Servicer in payment of the accrued Servicer Fee, if
any, then payable, to the Owners in payment of the accrued Yield, Unused
Commitment Fees and the aggregate of any other amounts then accrued or owed
hereunder by the Seller to such Owners;
     (iv) fourth, to the Owners in reduction (to zero) of the Capital of each
Owner;

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     (v) fifth, to the Owners in ratable payment of any other amounts owed by
the Seller hereunder or under any Transaction Document (including, without
limitation, all fees payable hereunder and not paid above except for the
Servicer Fee); and
     (vi) sixth, subject to Sections 2.10(f) and 11.09(b), to the Seller;
provided, however, that if sufficient funds are not available to fund all
payments to be made in respect of any obligation described in any of clauses
first, second, third, fourth and fifth above, the available funds being applied
with respect to any such obligations (unless otherwise specified in such clause)
shall be allocated to the payment of the obligations referred to in such clause
ratably, based on the proportion of the Servicer’s, the Agent’s, or the Owners’
interest in the aggregate outstanding obligations described in such clause.
     (b) In the case of Collections of Canadian Dollar Receivables, the Agent
shall convert such Collections to U.S. Dollars in accordance with Agent’s normal
practices and procedures and all payments set forth in clause (a) above will be
in U.S. Dollars.
     (c) Any application of the Collections to amounts owing by the Seller is
without limitation to the obligation of the Seller to pay such amounts and made
pursuant to the rights of the Agent and the Owners under Sections 2.10(f) and
11.09(b).
     Section 2.09. General Settlement Procedures.
     (a) If on any day the Outstanding Balance of a Pool Receivable is either
(i) reduced as a result of any defective, rejected or returned goods or
services, any discount, or any adjustment by the Seller or the Canadian
Originator, or (ii) reduced or cancelled as a result of a setoff in respect of
any claim by the Obligor thereof against the Seller or the Canadian Originator
(whether such claim arises out of the same or a related transaction or an
unrelated transaction), the Seller shall be deemed to have received on such day
a Collection of such Receivable in the amount of such reduction or cancellation
and shall make the payment required to be made by it in connection with such
Collection on the day required by, and otherwise pursuant to, Section 5.01(g).
If on any day any of the representations or warranties in Section 4.01(h) is no
longer true with respect to any Pool Receivable, the Seller shall be deemed to
have received on such day a Collection in full of such Pool Receivable and shall
make the payment required to be made by it in connection with such Collection on
the day required by, and otherwise pursuant to, Section 5.01(g). Except as
stated in the preceding sentences of this Section 2.09(a) or as otherwise
required by law or the underlying Contract, all Collections received from an
Obligor of any Receivable shall be applied to Receivables then outstanding of
such Obligor in the order of the age of such Receivables, starting with the
oldest such Receivable, except if payment is designated by such Obligor for
application to specific Receivables. If at any time any Obligor is required to
pay interest or finance charges in connection with any Receivable or the related
Contract, then all payments made by such Obligor in connection with such
Receivable shall, unless otherwise expressly provided for in the applicable
Contract, be applied on account of the Outstanding Balance of such Receivable
and not on account of such interest or finance charges, until such time as the
Outstanding Balance thereof has been fully repaid.
     (b) On or prior to the tenth Business Day of each calendar month, the
Servicer shall prepare and furnish to the Agent for each Owner:
     (i) a Seller Report relating to each Owner and the Capital Investment
thereof, as of the close of business of the Servicer on the last day of the
immediately preceding calendar month,

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     (ii) a listing of the ten Obligors owing the greatest Dollar Equivalent
amount of Pool Receivables, together with a report setting forth (A) the name of
such Obligor, (B) the balance of the Pool Receivables owing by such Obligor as
of such date, and (C) a summary of credit terms applicable to such Pool
Receivables under the applicable Contract,
     (iii) a listing by Obligor of all Pool Receivables, together with an
analysis as to the aging of such Receivables, as of such last day, and
     (iv) such other information as shall be reasonably requested from time to
time by the Agent or by the Agent at the request of the Required Purchasers.
     (c) Within 10 days after the end of each calendar month (or more frequently
if (x) requested by the Agent or (y) Total Excess Availability shall be less
than $50,000,000, but, in the case of clauses (x) and (y), in no event more
frequently than once each Business Day) by no later than 12:00 noon (New York
City time), the Servicer shall prepare and furnish to the Agent for the Owners a
Receivables Report relating to each Owner and the Capital Investment thereof as
at the end of the last calendar day of the immediately preceding month (or such
shorter period, not earlier than the immediately preceding Business Day, if
requested by Agent) stating (i) the aggregate amount of the Net Receivables Pool
Balance as of the end of the immediately preceding reporting period, in such
detail as shall be satisfactory to the Agent, (ii) the aggregate amount of the
Collections from the Pool Receivables received by or on behalf of the Servicer
as of the end of the immediately preceding reporting period, in such detail as
shall be satisfactory to the Agent, (iii) the aggregate of sales and billings of
the Canadian Originator as of the end of the immediately preceding reporting
period, and (iv) such other information as shall be specified from time to time
by the Agent or by the Agent at the request of the Required Purchasers.
     (d) The Servicer shall promptly notify the Agent in writing in the event
that at any time the Servicer receives or otherwise gains knowledge that any of
the following is true: (i) the Net Receivables Pool Balance is less than 90% of
the Net Receivables Pool Balance reflected in the most recent Receivables Report
delivered pursuant to Section 2.09(c) above, or (ii) the Net Receivables Pool
Balance is less than 105% of the Required Net Receivables Pool Balance, or
(iii) the outstanding Capital exceeds the Net Receivables Pool Balance as a
result of a decrease therein, in which case such notice shall also include the
amount of such excess.
     Section 2.10. Payments and Computations, Etc.
     (a) All amounts to be paid or deposited by the Seller or the Servicer
hereunder shall be paid or deposited in accordance with the terms hereof no
later than 12:00 noon (New York City time) on the day when due in U.S. Dollars
in same day funds to the Agent’s Account. The Agent shall promptly thereafter
cause to be distributed (i) like funds relating to the payment out of
Collections in respect of Capital, Yield, Servicer Fee or other amounts payable
out of Collections, to the Owners (ratably in accordance with their respective
interests) and the Servicer in accordance with the provisions of Section 2.07 or
2.08, as applicable, and (ii) like funds relating to the payment by the Seller
of fees and other amounts payable by the Seller hereunder, to the parties hereto
for whose benefit such funds were paid (and if such funds are insufficient, such
distribution shall be made, subject to Section 2.07 or 2.08, as applicable,
ratably in accordance with the respective amounts thereof). Upon the Agent’s
acceptance of an Assignment and Acceptance and recording of the information
contained therein in the Register pursuant to Section 9.01(c), from and after
the effective date specified in such Assignment and Acceptance, the Agent shall
make all payments hereunder in respect of the interest assigned thereby to the
Assignee thereunder, and the parties to such Assignment and Acceptance shall
make all appropriate adjustments in such payments for periods prior to such
effective date directly between themselves.

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     (b) The Seller shall, to the extent permitted by law, pay to the Agent
interest on all amounts not paid or deposited when due hereunder (except for
those amounts with respect to which Yield accrues) at 2.00% per annum above the
Alternate Base Rate in effect from time to time, payable on demand, provided,
however, that such interest rate shall not at any time exceed the maximum rate
permitted by applicable law. Such interest shall be for the account of, and
distributed by the Agent to, the applicable Owners ratably in accordance with
their respective interests in such overdue amount.
     (c) All computations of interest and all computations of Yield, Unused
Commitment Fee and other per annum fees hereunder shall be made on the basis of
a year of 360 days for the actual number of days (including the first but
excluding the last day) elapsed. For purposes of the Interest Act (Canada),
where in this Agreement a rate of interest is to be calculated on the basis of a
period of less than one year, the yearly rate of interest to which the said rate
is equivalent is the said rate divided by the actual number of days in the
period for which such calculation is made and multiplied by 365 days (or
366 days in the case of a leap year).
     (d) The Seller hereby authorizes each Owner, if and to the extent payment
owed by the Seller to such Owner is not made to the Agent when due hereunder, to
charge from time to time against any or all of the Seller’s accounts with such
Owner any amount so due.
     (e) Unless the Agent shall have received notice from the Servicer or the
Seller prior to the date on which any payment is due to the Owners hereunder
that the Servicer or the Seller, as the case may be, will not make such payment
in full, the Agent may assume that the Servicer or the Seller, as the case may
be, has made such payment in full to the Agent on such date and the Agent may,
in reliance upon such assumption, cause to be distributed to each Owner on such
due date an amount equal to the amount then due such Owner. If and to the extent
the Servicer or the Seller, as the case may be, shall not have so made such
payment in full to the Agent, each Owner shall repay to the Agent forthwith on
demand such amount distributed to such Owner together with interest thereon, for
each day from the date such amount is distributed to such Owner until the date
such Owner repays such amount to the Agent, at the Federal Funds Rate.
     (f) The Seller hereby irrevocably and unconditionally waives and
relinquishes to the fullest extent it may legally do so any right of setoff,
counterclaim, recoupment, defense and other right or claim which the Seller may
have against the Agent or any Owner as a result of or arising out of the failure
of the Agent or any Owner to pay any amount owing hereunder or in connection
herewith. The Agent may set-off and apply against, or deduct from, any amount
payable to the Seller or the Servicer by the Agent (or by the Servicer on its
behalf), any amounts then due and owing by the Seller or Servicer hereunder to
any Owner or to the Agent or any other Indemnified Party, and may instruct any
Servicer to do so on its behalf out of any amounts then or thereafter held by
such Servicer that otherwise would have been paid to a Seller or Servicer on
behalf of an Owner or the Agent.
     Section 2.11. Yield and Fees.
     (a) All Capital Investments and the outstanding amount of all other
obligations hereunder shall bear a Yield, in the case of Capital Investments, on
the principal amount thereof from the date such Capital Investments are made
and, in the case of such other obligations, from the date such other obligations
are due and payable until, in all cases, paid in full, at the Citicorp Rate.
     (b) The Seller shall pay to the Agent such fees as are set forth in the
Second Amended and Restated Fee Letter.

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     (c) The Seller shall pay to the Agent for remittance to the Servicer (at
any time that it is not PolyOne or an Affiliate of PolyOne) from the later of
the date of the initial Purchase hereunder and the date on which such Person
becomes Servicer hereunder until the later of the Termination Date or the date
on which Capital is reduced to zero, a fee (the “Servicer Fee”) equal to the
lesser of (i) 1% per annum on the average daily amount of Capital, and (ii) 120%
of the costs and expenses referred to in Section 6.02(c), such fee payable in
arrears on the Yield Payment Date for each Yield Period; provided, however,
that, so long as the Servicer is PolyOne or an Affiliate of PolyOne, the
Servicer shall not be paid any Servicer Fee hereunder, it being acknowledged and
agreed by PolyOne that any amounts owing to PolyOne or any such Affiliate in
consideration for such services shall be the responsibility of and paid by the
Canadian Originator. Any Servicer Fee shall be payable only from Collections
pursuant to, and subject to the priority of payment set forth in, Sections 2.07
and 2.08.
     (d) The Seller shall pay to the Agent for the account of each Purchaser, an
unused commitment fee (an “Unused Commitment Fee”) equal to the product of
(i) the Unused Commitment Fee Rate and (ii) the average daily Unused Commitment
of such Purchaser. The Unused Commitment Fee will be payable monthly in arrears
and on the Termination Date.
     Section 2.12. Special Provisions Governing Capital Investments at the
Citicorp LIBO Rate.
     (a) Increased Costs. If, due to either (i) a change after the date hereof
in Regulation D of the Board of Governors of the Federal Reserve System (to the
extent any cost incurred pursuant to such regulation is not included in the
calculation of Adjusted LIBO Rate), (ii) the introduction of or any change after
the date hereof in or in the interpretation of any law or regulation (other than
any law or regulation relating to taxes, as to which Section 2.14 shall govern)
or (iii) the compliance with any guideline or request issued or made after the
date hereof from any central bank or other governmental authority (whether or
not having the force of law), there shall be any increase in the cost to (or, in
the case of Regulation D of the Board of Governors of the Federal Reserve
System, there shall be imposed a cost on) any Indemnified Party of agreeing to
make or making any Purchase or Capital Increase or any interest therein
hereunder, then the Seller shall from time to time, upon demand and delivery to
the Seller of the certificate referred to in the last sentence of this
Section 2.12(a) by such Indemnified Party (or by the Agent for the account of
such Indemnified Party) (with a copy of such demand and certificate to the
Agent), pay to the Agent for the account of such Indemnified Party additional
amounts sufficient to compensate such Indemnified Party for such increased or
imposed cost. Each Indemnified Party hereto agrees to use reasonable efforts
promptly to notify the Seller of any event referred to in clause (i), (ii) or
(iii) above, provided that the failure to give such notice shall not affect the
rights of any Indemnified Party under this Section 2.12(a). Each Indemnified
Party agrees that it shall use reasonable efforts to designate another
applicable office of such Indemnified Party to hold its interest in the
Purchased Property if the amounts payable to it under this Section 2.12(a) would
thereby be reduced and if the making, funding or maintenance of its interest in
the Purchased Property through such other applicable office would not otherwise
adversely affect such interest or such Indemnified Party. A certificate in
reasonable detail as to the basis for and the amount of such increased cost,
submitted to the Seller and the Agent by such Indemnified Party (or by the Agent
for the account of such Indemnified Party) shall be conclusive and binding for
all purposes, absent manifest error.
     (b) Interest Rate Unascertainable, Inadequate or Unfair. In the event that
(i) the Agent determines that adequate and fair means do not exist for
ascertaining the applicable interest rates by reference to which the Adjusted
LIBO Rate then being determined is to be fixed or (ii) the Required Purchasers
notify the Agent that the Adjusted LIBO Rate for any Yield Period will not
adequately reflect the cost to the Purchasers of making a Capital Investment or
maintaining such Capital Investment for such

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Yield Period, the Agent shall forthwith so notify the Seller and the Purchasers,
whereupon the Citicorp Rate for such Capital Investment shall automatically, on
the last day of the current Yield Period for such Capital Investment, convert
into the Citicorp Base Rate and the obligations of the Purchasers to make a
Capital Investment or maintain a Capital Investment at the Citicorp LIBO Rate
shall be suspended until the Agent shall notify the Seller that the Required
Purchasers have determined that the circumstances causing such suspension no
longer exist.
     (c) Illegality. Notwithstanding any other provision of this Agreement, if
any Purchaser determines that the introduction of, or any change in or in the
interpretation of, any law, treaty or governmental rule, regulation or order
after the date of this Agreement shall make it unlawful, or any central bank or
other Governmental Authority shall assert that it is unlawful, for any Purchaser
to make a Capital Investment or maintain a Capital Investment at the Citicorp
LIBO Rate, then, on notice thereof and demand therefor by such Purchaser to the
Seller through the Agent, (i) the obligation of such Purchaser to make a Capital
Investment or maintain a Capital Investment at the Citicorp LIBO Rate shall be
suspended, and each such Purchaser shall make Capital Investments at the
Citicorp Base Rate and (ii) if the affected Capital Investments at the Citicorp
LIBO Rate are then outstanding, the Seller shall immediately convert each such
Capital Investment into a Capital Investment at the Citicorp Base Rate. If, at
any time after a Purchaser gives notice under this Section 2.12(c), such
Purchaser determines that it may lawfully make Capital Investments at the
Citicorp LIBO Rate, such Purchaser shall promptly give notice of that
determination to the Seller and the Agent, and the Agent shall promptly transmit
the notice to each other Purchaser. The Seller’s right to request, and such
Purchaser’s obligation, if any, to make Capital Investments at the Citicorp LIBO
Rate shall thereupon be restored.
     (d) Liquidation Costs. In addition to all amounts required to be paid by
the Seller hereunder, the Seller shall compensate each Purchaser, upon demand,
for all losses, expenses and liabilities (including any loss or expense incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by such Purchaser to fund or maintain such Purchaser’s Capital Investments at
the Citicorp LIBO Rate but excluding any loss of the Applicable Margin on the
relevant Capital Investments) (each, a “Liquidation Cost”) that such Purchaser
may sustain (i) if for any reason a proposed Capital Investment, conversion into
or continuation of Capital Investments at the Citicorp LIBO Rate does not occur
on a date specified therefor in a Notice of Purchase given by the Seller or in a
telephonic request by it for Purchase or a successive Yield Period does not
commence after notice therefor is given hereunder, (ii) if for any reason any
Capital Investment at the Citicorp LIBO Rate is reduced (including mandatorily
pursuant to Section 2.07) on a date that is not the last day of the applicable
Yield Period, (iii) as a consequence of a required conversion of a Capital
Investment at the Citicorp LIBO Rate to Capital Investment at the Citicorp Base
Rate as a result of any of the events indicated in Section 2.12(c) above or (iv)
as a consequence of any failure by the Seller to reduce Capital Investment at
the Citicorp LIBO Rate when required by the terms hereof. The Purchaser making
demand for such compensation shall deliver to the Seller concurrently with such
demand a written statement as to such losses, expenses and liabilities, and this
statement shall be conclusive as to the amount of compensation due to such
Purchaser, absent manifest error.
     Section 2.13. Increased Capital.
     If any Indemnified Party determines that either the introduction of or any
change in or in the interpretation of any law or regulation after the date
hereof or the compliance with any guideline or request issued or made after the
date hereof from any central bank or other governmental authority (whether or
not having the force of law) affects or would affect the amount of capital
required or expected to be maintained by such Indemnified Party or any
corporation controlling such Indemnified Party and that the amount of such
capital is increased by or based upon the existence of such Indemnified Party’s

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commitment, if any, to make Capital Investments, or to maintain such Capital
Investments hereunder, then, upon demand and delivery to the Seller of the
certificate referred to in the last sentence of this Section 2.13 by such
Indemnified Party (or by the Agent for the account of such Indemnified Party)
(with a copy of such demand and certificate to the Agent) the Seller shall pay
to the Agent for the account of such Indemnified Party from time to time, as
specified by such Indemnified Party, additional amounts sufficient to compensate
such Indemnified Party or such corporation in the light of such circumstances,
to the extent that such Indemnified Party reasonably determines such increase in
capital to be allocable to the existence of any such commitment. Each
Indemnified Party hereto agrees to use reasonable efforts promptly to notify the
Seller of any event referred to in the first sentence of this Section 2.13,
provided that the failure to give such notice shall not affect the rights of any
Indemnified Party under this Section 2.13. A certificate in reasonable detail as
to the basis for, and the amount of, such compensation submitted to the Seller
and the Agent by such Indemnified Party (or by the Agent for the account of such
Indemnified Party) shall be conclusive and binding for all purposes, absent
manifest error.
     Section 2.14. Taxes.
     (a) Any and all payments by the Seller hereunder or deposits from
Collections hereunder shall be made, in accordance with Section 2.10, free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Indemnified Party, (i) taxes that are
imposed on its overall net income by the United States and (ii) taxes that are
imposed on its overall net income, assets or net worth (and franchise taxes
imposed in lieu thereof) by the state or foreign jurisdiction under the laws of
which such Indemnified Party is organized or qualified to do business or in
which such Indemnified Person holds any assets in connection with this Agreement
or, in each case, any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities in
respect of payments hereunder or deposits from Collections hereunder being
hereinafter referred to as “Taxes”). If the Seller or the Servicer or the Agent
or any Obligor shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or deposit from Collections hereunder to any
Indemnified Party, (i) the sum payable by Seller shall be increased as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.14) such Indemnified
Party receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Seller or the Servicer or the Agent shall make
such deductions and (iii) the Seller or the Servicer or the Agent shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
     (b) In addition, the Seller shall pay any present or future sales, stamp,
documentary, excise, property or similar taxes, charges or levies that arise
from any payment made hereunder or deposit from Collections hereunder or from
the execution, delivery or registration of, performing under, or otherwise with
respect to, this Agreement, the Canadian Receivables Sale Agreement, the
Canadian Consent and Agreement or the Second Amended and Restated Fee Letter
(hereinafter referred to as “Other Taxes”).
     (c) The Seller shall indemnify each Indemnified Party for and hold it
harmless against the full amount of Taxes and Other Taxes (including, without
limitation, taxes of any kind imposed by any jurisdiction on amounts payable
under this Section 2.14) imposed on or paid by such Indemnified Party and any
liability (including penalties, additions to tax, interest and expenses) arising
therefrom or with respect thereto whether or not such Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be made within 30 days
from the date such Indemnified Party makes written demand therefor (with a copy
to the Agent).

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     (d) Within 30 days after the date of any payment of Taxes, the Seller shall
furnish to the Agent and each applicable Purchaser, at its address referred to
in Section 11.02, the original or a certified copy of a receipt evidencing such
payment.
     (e) [deleted].
     (f) [deleted].
     Section 2.15. Sharing of Payments, Etc.
     If any Purchaser shall obtain any payment (whether voluntary, involuntary,
through the exercise of any right of set-off or otherwise) on account of the
Purchases made by it (other than with respect to payments due to such Purchaser
pursuant to Section 2.12, 2.13 or 2.14) in excess of its ratable share of
payments on account of the Purchases obtained by all the Purchasers, such
Purchaser shall forthwith purchase from the other Purchasers such interests in
the Capital Investments made by them as shall be necessary to cause such
Purchaser to share the excess payment ratably with each of them; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from such Purchaser, such purchase from each other Purchaser shall be
rescinded and such other Purchaser shall repay to the Purchaser the purchase
price to the extent of such recovery together with an amount equal to such other
Purchaser’s ratable share (according to the proportion of (i) the amount of such
other Purchaser’s required repayment to (ii) the total amount so recovered from
the Purchaser) of any interest or other amount paid or payable by the Purchaser
in respect of the total amount so recovered. The Seller agrees that any
Purchaser so purchasing an interest in the Capital Investments made by another
Purchaser pursuant to this Section 2.15 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of set-off) with
respect to such interest in such Capital Investments as fully as if such
Purchaser were the direct creditor of the Seller in the amount of such Capital
Investments made by them.
     Section 2.16. Conversion/Continuation Option.
     (a) The Seller may elect (i) at any time on any Business Day, to convert
Capital Investments in respect of which Yield is calculated at the Citicorp Base
Rate (other than Swing Increases) or any portion thereof to Capital Investments
in respect of which Yield is calculated at the Citicorp LIBO Rate and (ii) at
the end of any applicable Yield Period, to convert Capital Investments in
respect of which Yield is calculated at the Citicorp LIBO Rate or any portion
thereof into Capital Investments in respect of which Yield is calculated at the
Citicorp Base Rate or to continue such Capital Investments in respect of which
Yield is calculated at the Citicorp LIBO Rate or any portion thereof for an
additional Yield Period; provided, however, that the aggregate amount of the
Capital Investments in respect of which Yield is calculated at the Citicorp LIBO
Rate for each Yield Period must be in an amount of at least $10,000,000 or an
integral multiple of $2,500,000 in excess thereof. Each conversion or
continuation shall be allocated among the Capital Investments of each Purchaser
in accordance with such Purchaser’s ratable share of the aggregate Capital
Investments. Each such election shall be in substantially the form of Exhibit I
(a “Notice of Conversion or Continuation”) and shall be made by giving the Agent
at least 3 Business Days’ prior written notice specifying (A) the amount and
type of Capital Investment being converted or continued, (B) in the case of a
conversion to or a continuation of Capital Investments in respect of which Yield
is calculated at the Citicorp LIBO Rate, the applicable Yield Period and (C) in
the case of a conversion, the date of such conversion.
     (b) The Agent shall promptly notify each Purchaser of its receipt of a
Notice of Conversion or Continuation and of the options selected therein.
Notwithstanding the foregoing, no conversion in whole or in part of Capital
Investments in respect of which Yield is calculated at the Citicorp Base Rate to

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Capital Investments in respect of which Yield is calculated at the Citicorp LIBO
Rate and no continuation in whole or in part of Capital Investments in respect
of which Yield is calculated at the Citicorp LIBO Rate upon the expiration of
any applicable Yield Period shall be permitted at any time at which (i) a
Potential Event of Termination or an Event of Termination shall have occurred
and be continuing or (ii) the continuation of, or conversion into, a Capital
Investment in respect of which Yield is calculated at the Citicorp LIBO Rate
would violate any provision of Section 2.12. If, within the time period required
under the terms of this Section 2.16, the Agent does not receive a Notice of
Conversion or Continuation from the Seller containing a permitted election to
continue any Capital Investments in respect of which Yield is calculated at the
Citicorp LIBO Rate for an additional Yield Period or to convert any such Capital
Investments, then, upon the expiration of the applicable Yield Period, such
Capital Investments shall be automatically converted to Capital Investments in
respect of which Yield is calculated at the Citicorp Base Rate. Each Notice of
Conversion or Continuation shall be irrevocable.
ARTICLE III
CONDITIONS OF PURCHASES
     Section 3.01. Conditions Precedent to the Effectiveness of this Agreement.
     The effectiveness of this Agreement is subject to the satisfaction of the
following conditions precedent:
     (a) The Agent and the Syndication Agent shall have received all fees and
expenses (including, but not limited to, reasonable fees and expenses of
counsel) required to be paid on the Effective Date, pursuant to the terms of
this Agreement and the Second Amended and Restated Fee Letter.
     (b) The Agent shall have received on or before the Effective Date, the
following, each (unless otherwise indicated) dated as of the Effective Date, in
form and substance satisfactory to the Agent:
     (i) This Agreement, duly executed and delivered by the Seller and the
Servicer;
     (ii) The Second Amended and Restated Parent Undertaking, dated June 26,
2007 duly executed and delivered by PolyOne;
     (iii) The Canadian Receivables Sale Agreement, duly executed by the Seller,
PolyOne and the Canadian Originator, together with:
               (A) [deleted];
               (B) Completed PPSA and other personal property security searches,
dated on or a date reasonably near to the Effective Date listing all effective
financing statements or similar filings which name the Canadian Originator
(under its present name and any previous name used by such Person) as debtor and
which are filed in the jurisdictions set forth in Schedule VI, together with
copies of such financing statements or similar filings (none of which, except
those naming the Canadian Originator as debtor, the Seller as secured party and
Citicorp, as Agent, as assignee, and those subject to the termination and
releases

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to be obtained pursuant to Section 3.04 below, shall cover any Receivables,
Related Security, Collections or Contracts);
               (C) The Canadian Consent and Agreement, duly executed by the
parties thereto; and
               (D) The Canadian Subordinated Notes, in substantially the form of
Exhibit B to the Canadian Receivables Sale Agreement, payable to the order of
the Canadian Originator, and duly executed by the Seller.
     (iv) [deleted]
     (v) Certified copies, dated as of a recent date, of the charter or
articles, by-laws or code of regulations (as the case may be), as amended, of
the Seller, the Servicer and the Canadian Originator, respectively.
     (vi) Good standing certificates (or its equivalent), dated as of a recent
date, issued by the Secretary of State of the jurisdiction of incorporation of
the Seller, the Servicer and the Canadian Originator, with respect to the
Seller, the Servicer and the Canadian Originator, respectively.
     (vii) Certified copies of the resolutions of the Board of Directors of each
of the Seller and the Canadian Originator, approving the Transaction Documents
to be delivered by it hereunder and the transactions contemplated hereby and
thereby.
     (viii) A certificate, dated on or a date reasonably near to the Effective
Date, of an officer of each of the Seller, the Servicer and the Canadian
Originator, certifying the names and true signatures of its officers authorized
to sign the Transaction Documents and the other documents to be delivered by it
hereunder.
     (ix) Proper financing statements naming the Seller as debtor and Citicorp,
as Agent, as secured party, and other applicable filings, to be filed under the
UCC, PPSA or other comparable law of all jurisdictions that the Agent may deem
necessary or desirable in order to perfect the ownership interests created or
purported to be created hereby.
     (x) Proper financing statement terminations or releases, if any, necessary
to release all security interests and other rights of any Person in the
Receivables, Contracts, Related Security or Collections previously granted by
the Seller.
     (xi) Completed PPSA and other personal property security searches, dated on
or a date reasonably near to the Effective Date, listing all effective financing
statements filed in the jurisdictions referred to in subsection (b)(ix) above
that name the Seller as debtor, together with copies of such other financing
statements (none of which, except those subject to the termination and releases
described in subsection (x) above, shall cover any Receivables, Related
Security, Collections or Contracts).
     (xii) Favorable opinions of Gowling LaFleur Henderson LLP, Canadian counsel
to the Canadian Originator, the Servicer and the Seller, in substantially the
form of Exhibit J hereto as to such other matters as the Agent may reasonably
request, including without limitation (1) a “true sale” opinion with respect to
the sale of Receivable Assets under and as defined in the Canadian

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Receivables Sale Agreement from the Canadian Originator to the Seller and the
future sale of Purchased Property hereunder, (2) an opinion with respect to the
non-substantive consolidation of the Seller with the Canadian Originator, and
(3) an opinion relating to the enforceability of the Transaction Documents,
compliance with all laws and regulations, the perfection of all ownership and
other interests purported to be granted under the Transaction Documents (with
the exception of the perfection opinion to be given under Section 3.03(c)
below), and no conflicts with material agreements.
     (xiii) A favorable opinion of Weil, Gotshal & Manges LLP, counsel to the
Agent, as the Agent may reasonably request; and
     (xiv) A certificate of the chief financial officer or treasurer, in the
case of the Seller and the Canadian Originator, stating that each of the Seller
and the Canadian Originator is Solvent after giving effect to the transactions
contemplated hereunder and under the other Transaction Documents, and also
satisfies the other tests set out in Section 3.01(v) of the Canadian Receivables
Sale Agreement.
     (c) Each of the Seller, the Canadian Originator, the Servicer and its
Subsidiaries shall have received all necessary governmental and third party
consents and approvals necessary in connection with the Transaction Documents
and the transactions contemplated thereby (without the imposition of any
conditions that are not reasonably acceptable to the Purchasers) and shall
remain in effect, and all applicable governmental filings shall have been made
and all applicable waiting periods shall have expired without in either case any
action being taken by any competent authority; and no law or regulation shall be
applicable in the judgment of the Purchasers that restrains, prevents or imposes
materially adverse conditions upon the Transaction Documents or the transactions
contemplated thereby.
     (d) The Agent shall have received the Second Amended and Restated Fee
Letter dated June 26, 2007, duly executed by the parties thereto.
     (e) A certificate of an officer of each of the Seller and the Canadian
Originator certifying that there exists no action, suit, investigation,
litigation or proceeding pending or, to its knowledge, threatened in any court
or before any arbitrator or governmental instrumentality that (i) could
reasonably be expected to result in a Material Adverse Change or (ii) restrains,
prevents or imposes or can reasonably be expected to impose materially adverse
conditions on the transactions contemplated hereunder.
     (f) The Servicer and the Seller shall have each delivered to the Purchasers
a pro forma consolidated balance sheet for itself and its Subsidiaries, if any,
which shall be in form and substance satisfactory to the Agent and each
Purchaser, and there shall not occur as a result of the funding hereunder, a
default (or any event which with the giving of notice or lapse of time or both
would be a default) under any of the Seller’s, the Canadian Originator’s or
their respective Subsidiaries’ debt instruments and other material agreements.
     (g) The Agent shall have received evidence that after giving effect to the
Purchases occurring on the Effective Date, both hereunder and under the U.S.
RPA, Receivables Excess Availability is not less than $60,000,000.
     (h) All conditions to the effectiveness of the U.S. RPA shall have been
satisfied.

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     Section 3.02. Conditions Precedent to All Purchases, All Capital Increases
and Reinvestments.
     Each Purchase (including the initial Purchase by each Purchaser) hereunder
and the right of the Servicer to reinvest in Pool Receivables those Collections
attributable to a reduction of Capital pursuant to Section 2.07, and each
Capital Increase shall be subject to the further conditions precedent that:
     (a) with respect to any such Purchase or Capital Increase, on or prior to
the date of such Purchase or Capital Increase, the Servicer shall have delivered
to the Agent, in form and substance satisfactory to the Agent:
     (i) a completed Seller Report, dated within 31 days prior to the date of
such Purchase, together with a listing by Obligor of all Pool Receivables,
     (ii) a completed Receivables Report effective as of the end of the last
Business Day of the then immediately preceding week, and
     (iii) such additional information as may be reasonably requested by the
Agent; and
     (b) on the date of such Purchase or reinvestment or Capital Increase the
following statements shall be true (and the acceptance by the Seller of the
proceeds of such Purchase or reinvestment or Capital Increase shall constitute a
representation and warranty by the Seller that on the date of such Purchase or
reinvestment or Capital Increase such statements are true):
     (i) the representations and warranties contained in Section 4.01 of this
Agreement and in Section 3.01 of the Canadian Receivables Sale Agreement are
correct in all material respects on and as of the date of such Purchase or
reinvestment or Capital Increase, before and after giving effect to such
Purchase or reinvestment or Capital Increase and to the application of the
proceeds therefrom, as though made on and as of such date, other than any such
representations and warranties that, by their terms, refer to a specific date
other than the date of said Purchase or reinvestment or Capital Increase, in
which case as of such dates;
     (ii) no event has occurred and is continuing, or would result from such
Purchase or reinvestment or Capital Increase or from the application of the
proceeds therefrom, which constitutes an Event of Termination or a Potential
Event of Termination;
     (iii) such Purchase or reinvestment or Capital Increase shall not violate
any requirement of law and shall not be enjoined, temporarily, preliminarily or
permanently; and
     (c) the Agent shall have received such other approvals, opinions or
documents as the Agent may reasonably request.
     Section 3.03. Conditions Precedent to Initial Purchase
     The initial Purchase by each Purchaser hereunder shall be subject to the
further conditions precedent that:
     (a) The Seller shall have satisfied the obligation in Section 3.04 below;

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     (b) The Seller shall deliver to the Agent an assignment, similar in form
and substance to the Quebec Assignment, assigning all of the Seller’s right,
title and interest to and in all of the Purchased Assets, and shall have
completed registration of same in order to perfect the ownership interests
created or purported to be created hereby; and
     (c) The Agent shall have received on or before the date of such initial
Purchase, in form and substance satisfactory to the Agent, a favorable opinion
of Gowling LaFleur Henderson LLP, Canadian counsel to the Canadian Originator,
the Servicer and the Seller, in substantially the form of Exhibit J which
includes (1) a “true sale” opinion with respect to the sale of the Purchased
Property hereunder, and (2) an opinion relating to the perfection of all
ownership and other interests purported to be granted under the assignment in
paragraph (b) above.
     Section 3.04. Financing Statement Terminations and Releases
     Within the 60 days following the Effective Date, Seller shall obtain and
provide to the Agent, in form and substance satisfactory to the Agent, proper
financing statement terminations or releases necessary to release all security
interests and other rights of any Person in the Receivables, Related Security,
Collections or Contracts previously granted by the Canadian Originator.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
     Section 4.01. Representations and Warranties of the Seller.
     The Seller represents and warrants, as of the date hereof and as of the
date of each Purchase and each Capital Increase, before and after giving effect
to such Purchase or Capital Increase and to the application of the proceeds
therefrom, as though made on and as of such date, other than any such
representations and warranties that, by their terms, refer to a specific date
other than the date of said Purchase or Capital Increase, in which case as of
such dates, as follows:
     (a) The Seller is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction indicated at the beginning of
this Agreement, and is duly qualified to do business, and is in good standing,
in every jurisdiction where the nature of its business requires it to be so
qualified, except to the extent that any failure to be so qualified or in good
standing as a foreign entity could not reasonably be expected to have a Material
Adverse Effect. The Seller has no Subsidiaries. All of the outstanding shares of
stock of the Seller are owned by PolyOne Canada.
     (b) The execution, delivery and performance by the Seller of the
Transaction Documents to which it is a party and the other documents delivered
by it hereunder, and the transactions contemplated hereby and thereby, including
the Seller’s use of the proceeds of Purchases, reinvestments and Capital
Increases, are within the Seller’s corporate powers, have been duly authorized
by all necessary corporate action, do not (i) contravene the Seller’s articles
or by-laws, (ii) violate any applicable law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award, or (iii) breach or result
in a default under, or result in the acceleration of (or entitle any party to
accelerate) the maturity of any obligation of the Seller under, or result in or
require the creation of any lien upon or security interest in any property of
the Seller pursuant to the terms of, any Contract or any other agreement or
instrument (other than any Transaction Document) binding on or affecting the
Seller or any of its properties.

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     (c) No authorization or approval or other action by, and no notice to or
filing with, any Governmental Authority is required for the due execution,
delivery and performance by the Seller of any Transaction Document to which it
is a party or any other agreement or document delivered hereunder or for the
perfection of or the exercise by any Indemnified Party of its rights and
remedies under the Transaction Documents and such other agreements or documents,
except for the filings of the financing statements referred to in Article III.
     (d) This Agreement has been, and each other Transaction Document to which
the Seller is a party when delivered will have been, duly executed and delivered
by the Seller. This Agreement is, and the other Transaction Documents to which
the Seller is or will be a party when delivered hereunder will be, the legal,
valid and binding obligations of the Seller enforceable against the Seller in
accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and to general equitable principles.
     (e) Since December 31, 2006, there has been no Material Adverse Change and
there have been no events or developments that, in the aggregate, have had a
Material Adverse Effect.
     (f) There is no action, suit, investigation, litigation or proceeding
pending or, to the knowledge of the Seller, threatened in any court or before
any arbitrator or governmental instrumentality that (i) could reasonably be
expected to result in a Material Adverse Change or (ii) restrains, prevents or
imposes or can reasonably be expected to impose materially adverse conditions
upon the Transaction Documents or the transactions contemplated thereby.
     (g) No proceeds of any Purchase or reinvestment or Capital Increase will be
used to acquire any security in any transaction which is subject to Sections 13
and 14 of the Securities Exchange Act of 1934.
     (h) Immediately prior to the time of the initial Purchase, the Seller is
the legal and beneficial owner of the Pool Receivables and Related Security with
respect thereto, in each case free and clear of any Adverse Claim. Upon each
Purchase or reinvestment, the Seller shall Transfer to the Agent on behalf of
the Owners (and the Agent on behalf of the Owners shall acquire) a valid 100%
ownership interest in each Pool Receivable then existing or thereafter arising
and in the Related Security and Collections with respect thereto, free and clear
of any Adverse Claim, which ownership interest shall be a perfected first
priority ownership interest upon the filing of the financing statements referred
to in Section 3.01(b) (ix). No effective financing statement or other instrument
similarly in effect covering any Contract or any Pool Receivable or Related
Security or Collections with respect thereto is on file in any recording office,
except those filed in favor of the Agent relating to this Agreement or in favor
of the Seller and the Agent relating to the Canadian Receivables Sale Agreement.
     (i) Each Seller Report, Receivables Report (if prepared by the Seller or
one of its Affiliates, or to the extent that information contained therein is
supplied by the Seller or any Affiliate thereof), information, exhibit,
financial statement, or other report or document furnished or to be furnished at
any time by or on behalf of the Seller to the Agent or any Owner in connection
with this Agreement is and will be accurate in all material respects as of its
date or as of the date so furnished, and no such report or document contains, or
will contain, as of its date of delivery or the date so furnished, any untrue
statement of a material fact or omits to state, or will omit to state, as of its
date of delivery or the date so furnished, a material fact necessary in order to
make the statements contained therein, in the light of the circumstances under
which they were made, not misleading.

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     (j) The jurisdiction of incorporation, organizational identification number
(if any), and the address(es) of the principal place of business and chief
executive office of the Seller and the office where the Seller keeps its Records
concerning the Receivables, are as set forth in Schedule III hereto (or, by
notice to the Agent in accordance with Section 5.01(c), at such other locations
in jurisdictions, within Canada, where all actions required by Section 6.05(a)
have been taken and completed).
     (k) The names and addresses of all the Lock-Box Banks, together with the
lock-box numbers related to, and the account numbers and owners (the Seller or
the Canadian Originator) of, the Lock-Box Accounts at such Lock-Box Banks, are
specified in Schedule I hereto (or such other Lock-Box Banks and/or such other
Lock-Box Accounts as have been notified to the Agent in accordance with
Section 5.03(d)).
     (l) Since the date of its formation, the Seller has not engaged in any
activity other than as contemplated by the Transaction Documents or entered into
any commitment or incurred any Debt other than pursuant to, or as permitted
under the Transaction Documents.
     (m) The Seller has not maintained, contributed to or incurred or assumed
any obligation with respect to any Plan, Multiemployer Plan or Welfare Plan.
     (n) The Seller has not sold, assigned, transferred, pledged or hypothecated
any interest in any Pool Receivable or the Collections with respect thereto to
any Person other than as contemplated by this Agreement or that has been
released by the Agent from the Receivables Pool.
     (o) The Seller has complied with the Credit and Collection Policy in all
material respects and since the date of this Agreement there has been no change
in the Credit and Collection Policy except as permitted hereunder.
     (p) The Seller has not extended or modified the terms of any Pool
Receivable or the Contract under which any such Pool Receivable arose, except in
accordance with the Credit and Collection Policy.
     (q) Except under the Lock-Box Agreements, the Seller has not granted any
Person dominion or control of any Lock-Box Account, or the right to take
dominion or control over any Lock-Box Account at a future time or upon the
occurrence of a future event.
     (r) With respect to each Transfer to it of any Pool Receivables, the Seller
has either (i) purchased such Pool Receivables from the Canadian Originator in
exchange for payment (made by the Seller to the Canadian Originator in
accordance with the provisions of the Canadian Receivables Sale Agreement) in an
amount which constitutes fair consideration and approximates fair market value
for such Pool Receivables and in a sale the terms and conditions of which
(including, without limitation, the purchase price thereof) reasonably
approximate an arm’s-length transaction between unaffiliated parties or
(ii) acquired such Pool Receivables from the Canadian Originator as a capital
contribution in accordance with the provisions of the Canadian Receivables Sale
Agreement. No such sale, and no such contribution, has been made for or on
account of an antecedent debt owed by the Canadian Originator to the Seller and
no such sale or contribution is or may be voidable or subject to avoidance under
any section of the U.S. Bankruptcy Code or any Canadian Insolvency Statute (as
defined in the Canadian Receivables Sale Agreement).
     (s) The Seller has filed, or caused to be filed or be included in, all tax
reports and returns (federal, state, provincial, local and foreign), if any,
required to be filed by it and paid, or caused to be paid, all amounts of taxes,
including interest and penalties, required to be paid by it, except for such
taxes

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(i) as are being contested in good faith by proper proceedings and (ii) against
which adequate reserves shall have been established in accordance with and to
the extent required by GAAP, but only so long as the proceedings referred to in
clause (i) above would not subject the Agent or any other Indemnified Party to
any civil or criminal penalty or liability or involve any material risk of the
loss, sale or forfeiture of any property, rights or interests covered hereunder
or under the Canadian Receivables Sale Agreement.
     (t) The Seller is not an “investment company” or an “affiliated person” of,
or “promoter” or “principal underwriter” for, an “investment company”, as such
terms are defined in the Investment Company Act of 1940, as amended.
     (u) Both before and after giving effect to (i) each Purchase to be made on
the Effective Date or such other date as Purchases requested hereunder are made,
(ii) the disbursement of the proceeds of any Capital Investment, (iii) the
consummation of each other transaction contemplated by the other Transaction
Documents and (iv) the payment and accrual of all transaction costs in
connection with the foregoing, the Seller is Solvent, and also satisfies the
other tests set out in Section 3.01(v) of the Canadian Receivables Sale
Agreement.
     Section 4.02. Representations and Warranties of the Servicer.
     The Servicer represents and warrants as follows:
     (a) The Servicer is a corporation duly incorporated, validly existing and
in good standing under the laws of the jurisdiction indicated at the beginning
of this Agreement, and is duly qualified to do business, and is in good
standing, in every jurisdiction where the nature of its business requires it to
be so qualified, except to the extent that any failure to be so qualified or in
good standing as a foreign entity could not reasonably be expected to have a
Material Adverse Effect.
     (b) The execution, delivery and performance by the Servicer of the
Transaction Documents to which it is a party and the other documents to be
delivered by it hereunder, and the transactions contemplated hereby and thereby,
are within the Servicer’s corporate powers, have been duly authorized by all
necessary corporate action, do not (i) contravene the Servicer’s charter or code
of regulations, (ii) violate any applicable law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award, or (iii) breach or result
in a default under, or result in the acceleration of (or entitle any party to
accelerate) the maturity of any obligation of the Servicer under, or result in
or require the creation of any lien upon or security interest in any property of
the Servicer pursuant to the terms of, any Contract or any other agreement or
instrument (other than any Transaction Document) binding on or affecting the
Servicer or any of its properties.
     (c) No authorization or approval or other action by, and no notice to or
filing with, any Governmental Authority is required for the due execution,
delivery and performance by the Servicer of any Transaction Document to which it
is a party.
     (d) This Agreement has been, and each other Transaction Document to which
the Servicer is a party when delivered will have been, duly executed and
delivered by the Servicer. This Agreement is, and the other Transaction
Documents to which the Servicer is party when delivered hereunder will be, the
legal, valid and binding obligations of the Servicer enforceable against the
Servicer in accordance with their respective terms, subject to bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors generally and to general equitable principles.

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     (e) Since December 31, 2006, there has been no Material Adverse Change and
there have been no events or developments that, in the aggregate, have had a
Material Adverse Effect.
     (f) There is no action, suit, investigation, litigation or proceeding
pending or, to the knowledge of the Servicer, threatened in any court or before
any arbitrator or governmental instrumentality that (i) could reasonably be
expected to result in a Material Adverse Change or (ii) restrains, prevents or
imposes or can reasonably be expected to impose materially adverse conditions
upon the Transaction Documents or the transactions contemplated thereby.
     (g) Each Seller Report and Receivables Report (if prepared by the Servicer
or one of its Affiliates, or to the extent that information contained therein is
supplied by the Servicer or any Affiliate thereof), information, exhibit,
financial statement, or other report or document furnished or to be furnished at
any time by or on behalf of the Servicer to the Agent or any Owner in connection
with this Agreement is and will be accurate in all material respects as of its
date or as of the date so furnished, and no such report or document contains, or
will contain, as of its date of delivery or the date so furnished, any untrue
statement of a material fact or omits to state, or will omit to state, as of its
date of delivery or the date so furnished, a material fact necessary in order to
make the statements contained therein, in the light of the circumstances under
which they were made, not misleading.
     (h) Since December 31, 2006, the Servicer has complied with the Credit and
Collection Policy in all material respects and since the date of this Agreement
there has been no change in the Credit and Collection Policy except as permitted
hereunder.
     (i) The Servicer has not extended or modified the terms of any Pool
Receivable or the Contract under which any such Pool Receivable arose, except in
accordance with the Credit and Collection Policy or in accordance with
Section 6.02(b).
ARTICLE V
GENERAL COVENANTS OF THE SELLER AND THE SERVICER
     Section 5.01. Affirmative Covenants of the Seller.
     Until the later of (i) the Termination Date and (ii) the date upon which no
Capital Investment shall be existing and no Yield, fees or other amounts remain
unpaid under this Agreement, the Seller will:
     (a) Compliance with Laws, Etc. Comply in all material respects with all
applicable laws, rules, regulations and orders with respect to it and all Pool
Receivables and related Contracts, Related Security and Collections with respect
thereto.
     (b) Preservation of Corporate Existence. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction where the failure to preserve and
maintain such qualification would materially adversely affect the interests of
the Owners or the Agent hereunder or in the Pool Receivables and Related
Security, or the ability of the Seller or the Servicer to perform their
respective obligations hereunder or the ability of the Seller to perform its
obligations under the Contracts.
     (c) Offices, Records and Books of Accounts. (i) Keep its principal place of
business and chief executive office and the offices where it keeps its Records
concerning the Pool Receivables at the address of the Seller referred to in
Section 4.01(j) or, upon at least 30 days’ prior written notice to the

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Agent, at any other location in a jurisdiction where all actions required by
Section 6.05(a) shall have been taken, and (ii) maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing Pool Receivables in the event of the
destruction of the originals thereof), and keep and maintain all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Pool Receivables (including, without limitation, records
adequate to permit the daily identification of each Pool Receivable, the
Outstanding Balance of each Pool Receivable and the dates which payments are due
thereon and all Collections of and adjustments to each existing Pool
Receivable).
     (d) Performance and Compliance with Contracts and Credit and Collection
Policy. At its expense, timely and fully (i) perform, or cause to be performed,
and comply in all material respects with, or cause to be complied with in all
material respects, all provisions, covenants and other promises required to be
observed by it under the Contracts related to the Pool Receivables, and timely
and fully comply in all material respects with the Credit and Collection Policy
in regard to the Pool Receivables and the related Contracts and (ii) as
beneficiary of any Related Security, enforce such Related Security as reasonably
requested by the Agent.
     (e) Examination of Records; Audits.
     (i) From time to time upon 2 Business Days’ prior notice (except that
during the continuance of an Event of Termination, no such notice shall be
required) and during regular business hours as requested by the Agent and at the
expense of the Seller, permit the Agent, or its agents or representatives,
(A) to examine and make copies of and abstracts from all Records in the
possession or under the control of the Seller, or the agents of the Seller,
relating to Pool Receivables and the Related Security, including, without
limitation, the related Contracts, and (B) to visit the offices and properties
of the Seller, or the agents of the Seller, for the purpose of examining such
materials described in clause (A) above, and to discuss matters relating to Pool
Receivables and the Related Security or the Seller’s performance hereunder or
under the Contracts with any of the officers or employees of the Seller having
knowledge of such matters.
     (ii) At any time and from time to time, upon the Agent’s request (at its
own election or upon the request of the Required Purchasers) and at the expense
of the Seller, the Seller shall cause independent public or chartered
accountants or others satisfactory to the Agent to furnish to the Agent reports
showing reconciliations, aging and test verifications of, and trial balances
for, the Receivables and/or a written report of an audit conducted by such
accountants with respect to the Pool Receivables, Credit and Collection Policy,
Lock-Box Account activity and the Seller’s performance of its obligations under
this Agreement and the Canadian Receivables Sale Agreement on a scope and in a
form reasonably requested by the Agent for such audit; provided, however, that
unless a Event of Termination or Potential Event of Termination shall be
continuing, the Agent shall request no more than one such report during any
calendar year.
     (iii) The Seller shall conduct, or shall cause to be conducted, at its
expense and upon request of the Agent (at its own election or upon the request
of the Required Purchasers), and present to the Agent for approval, such
appraisals, investigations and reviews as the Agent shall request for the
purpose of determining the Net Receivables Pool Balance, all upon notice and at
such times during normal business hours and as often as may be reasonably
requested. The Seller shall furnish to the Agent any information that the Agent
may reasonably request regarding the determination and calculation of the Net
Receivables Pool Balance including correct and complete copies of any invoices,
underlying agreements, instruments or other documents and the identity of all
Obligors in respect of Receivables referred to therein.

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     (f) Keeping of Records and Books of Account. (i) Keep, or cause to be kept,
proper books of record and account, which shall be maintained or caused to be
maintained by the Seller and shall be separate and apart from those of any
Affiliate of the Seller, in which full and correct entries shall be made of all
financial transactions and the assets and business of the Seller in accordance
with GAAP, (ii) to the extent Records are in written form, segregate such
Records in file cabinets or storage containers and appropriately label such file
cabinets or storage containers to reflect that the Purchased Property has been
conveyed to the Agent on behalf of the Owners, and (iii) to the extent such
Records constitute computer programs and other non-written Records,
appropriately legend such Records to reflect that the Purchased Property has
been conveyed to the Agent on behalf of the Owners.
     (g) Deposits to Lock-Box Accounts. Not later than 60 days following the
date hereof (or such later date to which the Agent shall consent in writing),
instruct, or cause the Servicer to instruct, all Obligors to make payments in
respect of Pool Receivables to a Lock-Box Account and, if the Seller or the
Canadian Originator shall otherwise receive any Collections (including, without
limitation, any Collections deemed to have been received by the Seller pursuant
to Section 2.09), segregate and hold in trust such Collections and, if received
after such 60th or later day, deposit such Collections, or cause such
Collections to be deposited, to a Lock-Box Account within 2 Business Days
following such receipt and if received prior thereto but at the time of or after
the first Purchase hereunder, pay such Collections to the Agent within two
(2) Business Days following such receipt.
     (h) Maintenance of Separate Existence. Do all things necessary to maintain
its corporate existence separate and apart from the Canadian Originator and
other Affiliates of the Seller, including, without limitation, (i) maintaining
proper corporate records and books of account separate from those of such
Affiliates; (ii) maintaining its assets, funds and transactions separate from
those of such Affiliates, reflecting such assets, funds and transactions in
financial statements separate and distinct from those of such Affiliates, and
evidencing such assets, funds and transactions by appropriate entries in the
records and books referred to in clause (i) above, and providing for its own
operating expenses and liabilities from its own assets and funds other than
certain expenses and liabilities relating to basic corporate overhead which may
be allocated between the Seller and such Affiliates; (iii) holding such
appropriate meetings or obtaining such appropriate consents of its Board of
Directors as are necessary to authorize all the Seller’s corporate actions
required by law to be authorized by its Board of Directors, keeping minutes of
such meetings and of meetings of its stockholders and observing all other
customary corporate formalities (and any successor Seller not a corporation
shall observe similar procedures in accordance with its governing documents and
applicable law); (iv) at all times entering into its contracts and otherwise
holding itself out to the public under the Seller’s own name as a legal entity
separate and distinct from such Affiliates; and (v) conducting all transactions
and dealings between the Seller and such Affiliates on an arm’s-length basis.
     (i) Compliance with Opinion Assumptions and Charter and By-Laws. Without
limiting the generality of subsection (h) above, maintain in place all policies
and procedures, and take and continue to take all actions, described in the
assumptions as to facts set forth in, and forming the basis of, the opinions set
forth in the opinion delivered to the Agent pursuant to subclause (xii)(C) of
Section 3.01(b), and comply with, and cause compliance with, the provisions of
the articles and by-laws of the Seller delivered to the Agent pursuant to
Section 3.01 as the same may, from time to time, be amended, supplemented or
otherwise modified with the prior written consent of the Agent.
     (j) Purchase of Pool Receivables from Canadian Originator. With respect to
each Pool Receivable acquired from the Canadian Originator by the Seller, pay to
the Canadian Originator (in accordance with the Canadian Receivables Sale
Agreement) an amount which constitutes fair consideration and approximates fair
market value for such Pool Receivable and in a sale the terms and

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conditions of which (including, without limitation, the purchase price thereof)
reasonably approximates an arm’s-length transaction between unaffiliated
parties.
     (k) Nature of Business and Permitted Transactions. Engage solely in the
businesses and transactions authorized by its articles.
     (l) Transaction Documents. At its expense, timely and fully perform and
comply in all material respects with all provisions, covenants and other
promises required to be observed by it under each of the Transaction Documents,
maintain each of the Transaction Documents in full force and effect, enforce in
accordance with its terms, take all such action to such end as may be from time
to time reasonably requested by the Agent, and make to any party to each of the
Transaction Documents such demands and requests for information and reports or
for action as the Seller is entitled to make thereunder and as may be from time
to time reasonably requested by the Agent.
     Section 5.02. Reporting Requirements of the Seller.
     Until the later of (i) the Termination Date and (ii) the date upon which no
Capital Investment for any Owner shall be existing and no Yield, fees or other
amounts remain unpaid under this Agreement, the Seller will furnish to the Agent
for distribution to the Purchasers:
     (a) Monthly Reports. Within 35 days after the end of each of the first 11
fiscal months in each Fiscal Year, financial information regarding the Seller
consisting of unaudited balance sheets as of the close of such month and the
related statements of income and cash flow for such month and that portion of
the current Fiscal Year ending as of the close of such month, in each case
certified by a chief financial officer or treasurer of the Seller as fairly
presenting the financial position of the Seller as at the dates indicated and
the results of its operations and cash flow for the periods indicated and
recorded in accordance with GAAP (subject to the absence of footnote disclosure
and normal year-end audit adjustments) and in form reasonable acceptable to the
Agent and the Required Purchasers.
     (b) Annual Reports. Within 95 days after the end of each Fiscal Year,
financial information regarding the Seller consisting of balance sheets of the
Seller as of the end of such year and related statements of income and cash
flows of the Seller for such Fiscal Year, all prepared in conformity with GAAP.
     (c) Notice of Event of Termination. As soon as possible and in any event
within 2 Business Days after a Responsible Officer of the Seller first becomes
aware of each Event of Termination or Potential Event of Termination continuing
on the date of such statement, a statement of a Responsible Officer of the
Seller setting forth details of such Event of Termination or Potential Event of
Termination and the action which the Seller has taken and proposes to take with
respect thereto.
     (d) Other. Upon demand, such other information, documents, records or
reports respecting the Receivables, the Related Security, the Contracts or the
condition or operations, financial or otherwise, of the Seller as the Agent may
from time to time reasonably request.
     Section 5.03. Negative Covenants of the Seller.
     Until the later of (i) the Termination Date and (ii) the date upon which no
Capital Investment for any Owner shall be existing and no Yield, fees or other
amounts remain unpaid under this Agreement, the Seller will not:

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     (a) Sales, Adverse Claims, Etc.
     Except as otherwise provided herein, sell, assign (by operation of law or
otherwise) or otherwise dispose of, or grant any option with respect to, or
create or suffer to exist any Adverse Claim upon or with respect to, the
Seller’s undivided interest in any Pool Receivable or Related Security or
Collections in respect thereof, or upon or with respect to any related Contract
or any Deposit Account to which any Collections of any Pool Receivable are sent
(including, without limitation, any Lock-Box Account), or assign any right to
receive income in respect thereof.
     (b) Extension or Amendment of Receivables.
     Except as otherwise permitted in Section 6.02, extend, amend or otherwise
modify the terms of any Pool Receivable, or amend, modify or waive any term or
condition of any Contract related thereto.
     (c) Change in Business or Credit and Collection Policy.
     Make any change in the character of its business or in the Credit and
Collection Policy that would, in either case, be reasonably likely to impair the
collectibility of the Pool Receivables.
     (d) Change in Payment Instructions to Obligors.
     Add or terminate any bank as a Lock-Box Bank or any Deposit Account as a
Lock-Box Account from those listed in Schedule I, or make any change in the
instructions to Obligors regarding payments to be made to any Lock-Box Account,
unless the Agent shall have received at least 20 days’ prior written notice of
such addition, termination or change and shall have received, with respect to
each new Lock-Box Account, a Lock-Box Agreement executed by the Lock-Box Bank
that maintains such Lock-Box Account and the Seller or the Canadian Originator,
as applicable.
     (e) Deposits to Lock-Box Accounts.
     Deposit or otherwise credit, or cause or permit to be so deposited or
credited, to any Lock-Box Account cash or cash proceeds other than Collections
of Pool Receivables.
     (f) Change of Name, Etc.
     Change its name, identity, form of legal structure, chief executive office
or jurisdiction of organization, unless, prior to the effective date of any such
change, the Seller delivers to the Agent (i) PPSA and other applicable financing
statements necessary to reflect such change and to continue the perfection of
the ownership interests in the Purchased Property contemplated by this Agreement
and (ii) if the identity or structure of the Seller has changed and such change
adversely affects the rights of the Agent under then existing Lock-Box
Agreements with the Seller to take control of the Lock-Box Accounts pursuant to
Section 6.03(a), new Lock-Box Agreements executed by the Seller and the Lock-Box
Banks, to the extent necessary to reflect such changes and to continue to enable
the Agent to exercise such rights.
     (g) Debt.
     Except as otherwise provided herein or in the Canadian Receivables Sale
Agreement, create, incur, assume or suffer to exist any indebtedness, other than
(i) indebtedness of the Seller representing fees, expenses and indemnities
arising hereunder or under the Canadian Receivables Sale Agreement for

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the purchase price of the Receivables under the Canadian Receivables Sale
Agreement, and (ii) other indebtedness of the Seller incurred in the ordinary
course of its business in an amount not to exceed $9,500 at any time
outstanding.
     (h) Lease Obligations.
     Create, incur, assume or suffer to exist any obligations as lessee for the
rental or lease of real or personal property, other than for the lease or rental
of an office space or office equipment for use by the Seller in the ordinary
course of its business.
     (i) ERISA.
     Adopt, maintain, contribute to or incur or assume any obligation with
respect to any Plan, Multiemployer Plan or Welfare Plan.
     (j) Investments in Other Persons.
     Except as otherwise provided herein or in the Canadian Receivables Sale
Agreement, make or hold any Investment in any Person.
     (k) Sales, Etc., of Assets.
     Except as contemplated or otherwise permitted by this Agreement, sell,
lease, transfer or otherwise dispose of any assets.
     (l) Merger, Etc.
     Consolidate or amalgamate with or merge into any other Person.
     (m) Organizational Documents.
     Amend, supplement or otherwise modify its articles or by-laws, in each case
furnished to the Agent pursuant to clause (v) Section 3.01(b).
     (n) Accounting.
     Account for (including for accounting and tax purposes) or otherwise treat
the transactions contemplated by the Canadian Receivables Sale Agreement in any
manner other than as sales of Receivables by the Canadian Originator to the
Seller, or account for (including for tax purposes) or otherwise treat the
transactions contemplated by this Agreement in any manner other than as sales of
the Purchased Property by the Seller to the Agent for the account of the
Purchasers, or otherwise change its (i) accounting treatment and reporting
practices or tax reporting treatment, except as required by GAAP or any
Requirement of Law and disclosed to the Purchasers and the Agent or (ii) fiscal
year.
     (o) Canadian Receivables Sale Agreement.
     (i) Cancel or terminate the Canadian Receivables Sale Agreement or consent
to or accept any cancellation or termination thereof, (ii) amend, supplement or
otherwise modify any term or condition of the Canadian Receivables Sale
Agreement or give any consent, waiver or approval thereunder, (iii) waive any
default under or breach of the Canadian Receivables Sale

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Agreement or (iv) take any other action under the Canadian Receivables Sale
Agreement not required by the terms thereof that would impair the value of any
Receivable Assets (as defined therein) or the rights or interests of the Seller
thereunder or of the Agent or any Owner or Indemnified Party hereunder or
thereunder.
     (p) Adverse Claims on the Capital Stock of the Seller. Create or suffer to
exist, any Adverse Claim upon or with respect to any of the Stock of the Seller.
     Section 5.04. Affirmative Covenants of the Servicer.
     Until the later of (i) the Termination Date and (ii) the date upon which no
Capital Investment for any Owner shall be existing and no Yield, fees or other
amounts remain unpaid under this Agreement, the Servicer will:
     (a) Compliance with Laws, Etc.
     Comply in all material respects with all applicable laws, rules,
regulations and orders with respect to it and all Pool Receivables and related
Contracts, Related Security and Collections with respect thereto.
     (b) Preservation of Corporate Existence.
     Preserve and maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and remain
qualified in good standing as a foreign corporation in each jurisdiction where
the failure to preserve and maintain such qualification would materially
adversely affect the interests of the Owners or the Agent hereunder or in the
Pool Receivables and Related Security, or the ability of the Servicer to perform
its obligations hereunder.
     (c) Books of Accounts.
     Maintain and implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing Pool Receivables
in the event of the destruction of the originals thereof), and keep and maintain
all documents, books, records and other information reasonably necessary or
advisable for the collection of all Pool Receivables (including, without
limitation, records adequate to permit the daily identification of each Pool
Receivable, the Outstanding Balance of each Pool Receivable and the dates which
payments are due thereon and all Collections of and adjustments to each existing
Pool Receivable).
     (d) Performance and Compliance with Contracts and Credit and Collection
Policy.
     At its expense, timely and fully (i) perform, or cause to be performed, and
comply in all material respects with, or cause to be complied with in all
material respects, all provisions, covenants and other promises required to be
observed by it under the Contracts related to the Pool Receivables, and timely
and fully comply in all material respects with the Credit and Collection Policy
in regard to the Pool Receivables and the related Contracts and (ii) as
beneficiary of any Related Security, enforce and cause the Canadian Originator
to enforce such Related Security as reasonably requested by the Agent.
     (e) Examination of Records; Audits.
     (i) From time to time upon 2 Business Days’ prior notice (except that
during the continuance of an Event of Termination, no such notice shall be
required) and during regular

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business hours as requested by the Agent and at the expense of the Servicer,
permit the Agent, or its agents or representatives, (A) to examine and make
copies of and abstracts from all Records in the possession or under the control
of the Canadian Originator, the Servicer, their respective Affiliates (other
than the Seller) or the agents of the Canadian Originator, the Servicer or their
respective Affiliates, relating to Pool Receivables and the Related Security,
including, without limitation, the related Contracts, and (B) to visit the
offices and properties of the Canadian Originator, the Servicer, their
respective Affiliates (other than the Seller) or the agents of the Canadian
Originator, the Servicer, or their respective Affiliates, for the purpose of
examining such materials described in clause (A) above, and to discuss matters
relating to Pool Receivables and the Related Security or the Servicer’s
performance hereunder or under the Contracts with any of the officers or
employees of the Servicer having knowledge of such matters.
     (ii) The Agent may (at its own election or at the request of the Required
Purchasers), at the Servicer’s sole cost and expense, make test verifications of
the Receivables in any manner and through any medium that the Agent considers
advisable, and the Servicer shall furnish all such assistance and information as
the Agent may require in connection therewith.
     (iii) At any time and from time to time, upon the Agent’s request (at its
own election or at the request of the Required Purchasers) and at the expense of
the Servicer, the Servicer shall cause independent public chartered accountants
or others satisfactory to the Agent to furnish to the Agent reports showing
reconciliations, aging and test verifications of, and trial balances for, the
Receivables and/or a written report of an audit conducted by such accountants
with respect to the Pool Receivables, Credit and Collection Policy, Lock-Box
Account activity and the Servicer’s performance of its obligations under this
Agreement and the Canadian Receivables Sale Agreement on a scope and in a form
reasonably requested by the Agent for such audit; provided, however, that unless
a Event of Termination or Potential Event of Termination shall be continuing,
the Agent shall request no more than 4 such reports during any calendar year.
     (iv) The Servicer shall conduct, or shall cause to be conducted, at its
expense and upon request of the Agent (at its own election or at the request of
the Required Purchasers), and present to the Agent for approval, such
appraisals, investigations and reviews as the Agent shall request for the
purpose of determining the Net Receivables Pool Balance, all upon notice and at
such times during normal business hours and as often as may be reasonably
requested. The Servicer shall furnish to the Agent any information that the
Agent may reasonably request regarding the determination and calculation of the
Net Receivables Pool Balance including correct and complete copies of any
invoices, underlying agreements, instruments or other documents and the identity
of all Obligors in respect of Receivables referred to therein.
     (f) Keeping of Records and Books of Account.
     (i) Keep, or cause to be kept, proper books of record and account, in which
full and correct entries shall be made of all financial transactions and the
assets and business of the Servicer in accordance with GAAP, (ii) to the extent
Records are in written form, segregate such Records in file cabinets or storage
containers and appropriately label such file cabinets or storage containers to
reflect that the Purchased Property has been conveyed to the Agent on behalf of
the Owners, and (iii) to the extent such Records constitute computer programs
and other non-written Records, appropriately legend such Records to reflect that
the Purchased Property has been conveyed to the Agent on behalf of the Owners.

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     (g) Deposits to Lock-Box Accounts.
     Not later than 60 days following the date hereof (or such later date to
which the Agent shall consent in writing), instruct all Obligors to make
payments in respect of Pool Receivables to a Lock-Box Account and, if the
Servicer shall otherwise receive any Collections (including, without limitation,
any Collections deemed to have been received by the Seller pursuant to
Section 2.09), segregate and hold in trust such Collections and, if received
after such 60th or later day, deposit such Collections, or cause such
Collections to be deposited, to a Lock-Box Account within 2 Business Days
following such receipt, and if received prior thereto but at the time of or
after the first Purchase hereunder, pay such Collections to the Agent within two
(2) Business Days following such receipt.
     Section 5.05. Reporting Requirements of the Servicer.
     Until the later of (i) the Termination Date and (ii) the date upon which no
Capital Investment for any Owner shall be existing and no Yield, fees or other
amounts remain unpaid under this Agreement, the Servicer will furnish to the
Agent for distribution to the Purchasers:
     (a) Monthly Reports. Within 35 days after the end of each of the first two
fiscal months in each fiscal quarter, financial information regarding PolyOne
and its Subsidiaries consisting of Consolidated unaudited balance sheets as of
the close of such month and the related statements of income and cash flow for
such month and that portion of the current Fiscal Year ending as of the close of
such month, setting forth in comparative form the figures contained in the
Amended and Restated Projections or, if applicable, the latest business plan
provided pursuant to clause (e) below for the current Fiscal Year, in each case
certified by the chief financial officer, treasurer or other Responsible Officer
acceptable to the Agent of PolyOne as fairly presenting the Consolidated
financial position of PolyOne and its Subsidiaries as at the dates indicated and
the results of their operations and cash flow for the periods indicated and
recorded in accordance with GAAP (subject to the absence of footnote disclosure
and normal year-end audit adjustments) and in form reasonably acceptable to the
Agent and the Required Purchasers.
     (b) Quarterly Reports. Within 50 days after the end of each of the first 3
fiscal quarters of each Fiscal Year, financial information regarding PolyOne and
its Subsidiaries consisting of Consolidated unaudited balance sheets as of the
close of such quarter and the related statements of income and cash flow for
such quarter and that portion of the Fiscal Year ending as of the close of such
quarter, setting forth in comparative form the figures contained in the Amended
and Restated Projections or, if applicable, the latest business plan provided
pursuant to clause (e) below for the current Fiscal Year in each case certified
by the chief financial officer, treasurer or other Responsible Officer
acceptable to the Agent of PolyOne as fairly presenting the Consolidated
financial position of PolyOne and its Subsidiaries as at the dates indicated and
the results of their operations and cash flow for the periods indicated in
accordance with GAAP (subject to the absence of footnote disclosure and normal
year-end audit adjustments) and in form reasonably acceptable to the Agent and
the Required Purchasers.
     (c) Annual Reports. Within 95 days after the end of each Fiscal Year,
financial information regarding PolyOne and its Subsidiaries consisting of
Consolidated balance sheets of PolyOne and its Subsidiaries as of the end of
such year and related statements of income and cash flows of PolyOne and its
Subsidiaries for such Fiscal Year, all prepared in conformity with GAAP and
certified, in the case of such Consolidated financial statements, without
qualification, including, but not limited to, as to the scope of the audit or as
to PolyOne being a going concern by PolyOne’s independent public accountants,
together with the report of such accounting firm stating that (i) such financial
statements fairly present the Consolidated financial position of PolyOne and its
Subsidiaries as at the dates indicated and the results of

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their operations and cash flow for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years (except for changes with which
PolyOne’s independent public accountants shall concur and that shall have been
disclosed in the notes to the financial statements) and (ii) the examination by
PolyOne’s independent public accountants in connection with such Consolidated
Financial Statements has been made in accordance with generally accepted
auditing standards, and accompanied by a certificate stating that in the course
of the regular audit of the business of PolyOne and its Subsidiaries such
accounting firm has obtained no knowledge that an Event of Termination or a
Potential Event of Termination has occurred and is continuing, or, if in the
opinion of such accounting firm, a Potential Event of Termination or Event of
Termination has occurred and is continuing, a statement as to the nature
thereof.
     (d) Notice of Event of Termination. As soon as possible and in any event
within 2 Business Days after a Responsible Officer of the Servicer, PolyOne or
the Canadian Originator first becomes aware of each Event of Termination or
Potential Event of Termination continuing on the date of such statement, a
statement of the chief financial officer or treasurer of the Servicer setting
forth details of such Event of Termination or Potential Event of Termination and
the action which the Seller has taken and proposes to take with respect thereto.
     (e) Business Plan. Not later than the earlier of (i) 15 days after PolyOne
has received the approval of its board of directors therefor and (ii) 90 days
after the commencement of each Fiscal Year: (A) the annual business plan of
PolyOne and its Subsidiaries for such Fiscal Year approved by the Board of
Directors of PolyOne, (B) forecasts prepared by management of PolyOne for each
fiscal month in such Fiscal Year and (C) forecasts prepared by management of
PolyOne for such Fiscal Year and each of the succeeding Fiscal Years through the
Commitment Termination Date, including, in each instance described in clauses
(B) and (C) above, (x) a projected year-end Consolidated balance sheet and
income statement and statement of cash flows, (y) a statement of all of the
material assumptions on which such forecasts are based and (z) containing the
types of financial information contained in the Amended and Restated
Projections.
     (f) Public and Creditors’ Reports. Promptly after the sending or filing
thereof, copies of (a) all reports PolyOne sends to its security holders
generally, (b) all reports and registration statements that PolyOne or any of
its Subsidiaries files with the Securities and Exchange Commission or any
national or foreign securities exchange or the National Association of
Securities Dealers, Inc., (c) all press releases and all other statements
concerning material changes or developments in the business of PolyOne made
available by PolyOne or any of its domestic Subsidiaries to the public or any
other creditor.
     (g) Other. Upon demand, such other information, documents, records or
reports respecting the Receivables, the Related Security, the Contracts or the
condition or operations, financial or otherwise, of PolyOne as the Agent may
from time to time reasonably request.
     Section 5.06. Negative Covenants of the Servicer.
     Until the later of (i) the Termination Date and (ii) the date upon which no
Capital Investment for any Owner shall be existing and no Yield, fees or other
amounts remain unpaid under this Agreement, the Servicer will not:
     (a) Extension or Amendment of Receivables.
     Except as otherwise permitted in Section 6.02, extend, amend or otherwise
modify the terms of any Pool Receivable, or amend, modify or waive any term or
condition of any Contract related thereto.

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     (b) Change in Business or Credit and Collection Policy.
     Make any change in the character of its business or in the Credit and
Collection Policy that would, in either case, be reasonably likely to impair the
collectibility of the Pool Receivables.
     (c) Change in Payment Instructions to Obligors.
     Add or terminate any bank as a Lock-Box Bank or any Deposit Account as a
Lock-Box Account from those listed in Schedule I, or make any change in the
instructions to Obligors regarding payments to be made to any Lock-Box Account,
unless the Agent shall have received at least 20 days’ prior written notice of
such addition, termination or change and shall have received, with respect to
each new Lock-Box Account, a Lock-Box Agreement executed by the Lock-Box Bank
that maintains such Lock-Box Account and the Seller or the Canadian Originator,
as applicable.
     (d) Deposits to Lock-Box Accounts.
     Deposit or otherwise credit, or cause or permit to be so deposited or
credited, to any Lock-Box Account cash or cash proceeds other than Collections
of Pool Receivables.
     (e) Accounting. Change its (i) accounting treatment and reporting practices
or tax reporting treatment, except as required by GAAP or any Requirement of Law
and disclosed to the Purchasers and the Agent or (ii) fiscal year.
     (f) Asset Sales. Sell, convey, transfer, lease or otherwise dispose of, any
of its assets or any interest therein (including the sale or factoring at
maturity or collection of any accounts), whether in a single transaction, or a
series of related transactions, to any Person, or permit or suffer any other
Person to acquire any interest in any of its assets except:
     (i) sales pursuant to the Prior Sale Agreement (as defined in the U.S. RPA)
or the Canadian Receivables Sale Agreement;
     (ii) the sale or other disposition of inventory in the ordinary course of
business;
     (iii) [Intentionally Deleted]
     (iv) the sale or other disposition of assets or any interest therein having
a Fair Market Value that is less than (x) $250,000 individually and (y)
$2,000,000 in the aggregate for all such dispositions; and
     (v) dispositions of assets or interests therein not otherwise permitted
above so long as (w) no Potential Event of Termination or Event of Termination
is continuing or would result therefrom, (x) such sale or other transfer is for
Fair Market Value, (y) if such asset or interest has a Fair Market Value of
$10,000,000 or more, or if when aggregated with all such assets or interest
previously sold, conveyed, transferred, leased or disposed at any time after the
Effective Date, $25,000,000 or more, 50% of the proceeds of such sale or
transfer (or such series of related sales or transfers) are payable in cash to
the Servicer upon the consummation of each such sale or transfer, and (z) if the
Fair Market Value of such asset is in excess of $25,000,000, the Board of
Directors of the Servicer has approved such sale.

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     (g) Adverse Claims on the Capital Stock of the Seller. Create or suffer to
exist, any Adverse Claim upon or with respect to any of the Stock of the Seller.
     Section 5.07. Affirmative Financial Covenants of the Servicer.
     Until the later of the Termination Date and the date upon which no Capital
Investment for any Owner shall be existing and no Yield, fees or other amounts
remain unpaid under this Agreement, the Servicer will, so long as the Servicer
shall be PolyOne or an Affiliate thereof:
     (a) Minimum Fixed Charge Coverage Ratio. Maintain as of the end of any
fiscal quarter during which Total Excess Availability (calculated using the
average Total Excess Availability for each day during such fiscal quarter) is
less than $40,000,000, a Fixed Charge Coverage Ratio of not less than 1:1.
     (b) Minimum Excess Availability. Maintain on each day Receivables Excess
Availability in an amount not less than $10,000,000 and Total Excess
Availability in an amount not less than $15,000,000.
     Section 5.08. Negative Financial Covenants of the Servicer.
     Until the later of the Termination Date and the date upon which no Capital
Investment for any Owner shall be existing, and no Yield, fees or other amounts
shall remain unpaid under this Agreement, the Servicer (so long as the Servicer
shall be PolyOne or an Affiliate thereof) will not:
     (a) Capital Expenditures. Make or incur, or permit its Subsidiaries to make
or incur, Capital Expenditures during each their respective Fiscal Years in an
aggregate amount in excess of $90,000,000.
     (b) Restricted Payments. (A) Directly or indirectly, declare, order, pay,
make or set apart any sum for any Restricted Payment unless, (i) such Restricted
Payment, together with all Restricted Payments made in the then current Fiscal
Year, does not exceed $20,000,000 and Total Excess Availability (calculated on a
pro forma basis and using the average Total Excess Availability for each day
during the preceding calendar month) is at least $50,000,000; or (ii) Total
Excess Availability (calculated on a pro forma basis and using the average Total
Excess Availability for each day during the preceding calendar month) is at
least $75,000,000 and the Fixed Charge Coverage Ratio for PolyOne and its
Consolidated Subsidiaries for the then most recently ended four fiscal quarter
period is at least 1.5 to 1.00; or (iii) Total Excess Availability (calculated
on a pro forma basis and using the average Total Excess Availability for each
day during the preceding calendar month) is at least $100,000,000 and the Fixed
Charge Coverage Ratio for PolyOne and its Consolidated Subsidiaries for the then
most recently ended four fiscal quarter period is at least 1.0 to 1.0. (B) The
Servicer may apply up to 70% of the net cash proceeds received by the Servicer
from the sale of any assets in accordance with the requirements of
Section 5.06(f) (as certified to the Agent by a Responsible Officer of the
Servicer), to the extent not used to prepay or redeem the 105/8% Senior Notes
pursuant to Section 5.08(c)(v), to make Restricted Payments; provided, that,
both before and after giving effect to any such Restricted Payment, (x) each of
the representations and warranties contained in Article IV (Representations and
Warranties) of this Agreement or the other Transaction Documents (or the
comparable provisions of the U.S. RPA) is true and correct in all material
respects as if made on and as of such date and except to the extent that such
representations and warranties specifically relate to a specific date, in which
case such representations and warranties shall be true and correct in all
material respects as of such specific date, (y) no Potential Event of
Termination or Event of Termination shall have occurred and be continuing on and
as of such date and (z) such Restricted Payments made under this Section 5.08(B)
and asset sales under Section 5.06(f)

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together with Restricted Payments and asset sales made under the corresponding
provisions of the U.S. RPA do not exceed $80,000,000 in the aggregate during the
term of this Agreement.
     (c) Prepayment of Debt. Prepay, redeem, purchase, defease or otherwise
satisfy prior to the scheduled maturity thereof in any manner, or make any
payment in violation of any subordination terms of, any Debt and will not permit
any of its Subsidiaries to do any of the foregoing; provided, however, that the
Servicer or any Subsidiary of the Servicer may (i) prepay any obligations
hereunder in accordance with the terms of this Agreement, (ii) make regularly
scheduled or otherwise required repayments or redemptions of Debt, (iii) prepay
any Debt payable to the Servicer by any of its Subsidiaries, (iv) renew, extend,
refinance and refund Debt on terms no less favorable to the Servicer or its
Subsidiary obligated thereunder, including as to weighted average maturity and
final maturity, than the Debt being renewed, extended, refinanced or refunded,
(v) to the extent that the Servicer sells or otherwise disposes of any assets in
accordance with the requirements of Section 5.06(f) (as certified to the Agent
by a Responsible Officer of the Servicer), the Servicer may apply up to 70% of
the net cash proceeds received by the Servicer in connection with any such sale
or other disposition (as such amount shall be certified to the Agent by a
Responsible Officer of the Servicer) to prepay, redeem or otherwise purchase, at
the election of the Servicer, any 105/8% Senior Notes outstanding; provided,
that, both before and after giving effect to any such prepayment, redemption or
purchase, (x) each of the representations and warranties contained in Article IV
(Representations and Warranties) of this Agreement or the other Transaction
Documents is true and correct in all material respects as if made on and as of
such date and except to the extent that such representations and warranties
specifically relate to a specific date, in which case such representations and
warranties shall be true and correct in all material respects as of such
specific date and (y) no Potential Event of Termination or Event of Termination
shall have occurred and be continuing on and as of such date, and (vi) prepay
any other obligations on any Debt provided, that before and after giving effect
to such prepayment (a) Total Excess Availability (calculated on a pro forma
basis using the average Total Excess Availability for each day during the
preceding calendar month) is not less than $60,000,000, reduced by the amount of
any Restricted Payments made during such month and (b) the Fixed Charge Coverage
Ratio of the Servicer and its Subsidiaries for the then most recently ended four
fiscal quarter period is not less than 1.0 to 1.0
ARTICLE VI
ADMINISTRATION AND COLLECTION
     Section 6.01. Designation of Servicer.
     The Pool Receivables shall be serviced, administered and collected by the
Person (the “Servicer”) designated to do so from time to time in accordance with
this Section 6.01. Until the Agent designates a new Servicer, PolyOne is hereby
designated as, and hereby agrees to perform the duties and obligations of, the
Servicer pursuant to the terms hereof. The Agent may at any time designate as
Servicer any Person (including itself) to succeed PolyOne or any successor
Servicer, if such Person (other than itself) shall agree in writing to perform
the duties and obligations of the Servicer pursuant to the terms hereof. Subject
to Section 6.02(f), the Servicer may subcontract with the Canadian Originator as
an independent contractor to service, administer or collect the Pool Receivables
that the Canadian Originator creates, and may, with the prior consent of the
Agent, subcontract with any other Person as an independent contractor to
service, administer or collect the Pool Receivables, provided that the Canadian
Originator or other Person with whom the Servicer so subcontracts shall not
become the Servicer hereunder and the Servicer shall remain liable for the
performance of the duties and obligations of the Servicer pursuant to the terms
hereof.

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     Section 6.02. Duties of Servicer.
     (a) The Servicer shall take or cause to be taken all such commercially
reasonable actions as may be necessary or advisable to collect each Pool
Receivable from time to time, all in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Credit and Collection Policy. Each of the Seller, the Purchasers and the Agent
hereby appoints as its agent the Servicer, from time to time designated pursuant
to Section 6.01, to enforce its respective rights and interests in and under the
Pool Receivables, the Related Security and the related Contracts.
     (b) The Servicer shall set aside and hold in trust for the account of the
Seller and each Owner their respective allocable shares of the Collections of
Pool Receivables in accordance with Sections 2.07 and 2.08, but shall not be
required (unless otherwise requested by the Agent) to segregate the funds
constituting such portion of such Collections prior to the remittance thereof in
accordance with such Sections. If instructed by the Agent, the Servicer shall
segregate and deposit with a bank (which may be Citicorp) designated by the
Agent such allocable share of Collections of Pool Receivables set aside for each
Owner on the first Business Day following receipt by the Servicer of such
Collections. If no Event of Termination or Potential Event of Termination shall
have occurred and be continuing, PolyOne, while it is the Servicer, may, in
accordance with the Credit and Collection Policy, (i) extend the maturity or
adjust the Outstanding Balance of any Receivable (that is not an Eligible
Receivable) as PolyOne may determine to be appropriate to maximize Collections
thereof, (ii) extend the term of any Contract and (iii) adjust any other terms
and conditions of any Contract if, but only if (in the case of this clause
(iii)), the Servicer gives at least 2 Business Days’ prior written notice of
such adjustments to the Agent and the Agent agrees in writing to such
adjustments.
     (c) The Servicer shall administer the Collections in accordance with the
procedures described herein and in Section 2.09. The Servicer shall set aside
and hold in trust for the account of the Seller in accordance with
Section 6.02(b) above, (i) the Seller’s allocable share of the Collections of
Pool Receivables less all reasonable out-of-pocket costs and expenses of the
Servicer (if not PolyOne or any Affiliate thereof) of servicing, administering
and collecting the Pool Receivables to the extent not covered by the Servicer
Fee received by it and (ii) the Collections of any Receivable which is not a
Pool Receivable in accordance with Section 2.09. The Servicer shall, if not
PolyOne, as soon as practicable following receipt, turn over to the Seller any
cash collections or other cash proceeds received with respect to Receivables not
constituting Pool Receivables.
     (d) The Servicer shall hold in trust for the Seller and each Owner, in
accordance with their respective interests, all Records that evidence or relate
to the Pool Receivables. The Servicer shall, upon the occurrence and during the
continuance of any Event of Termination, and at the request of the Agent,
provide to the Agent the Records with respect to the Pool Receivables.
     (e) The Servicer shall, from time to time at the request of the Agent,
furnish to the Agent (promptly after any such request) a calculation of the
amounts set aside for each Owner pursuant to Section 2.07 or 2.08.
     (f) Notwithstanding anything to the contrary contained herein or in any
other Transaction Document, the Servicer may not delegate to PolyOne Canada the
right to, and PolyOne Canada shall not (and has no authority to) enter into
contracts or other agreements in the name of the Seller, the Agent, any Owner or
any Purchaser or otherwise act as agent therefor; and the Servicer (or any such
delegatee) is not permitted to (and has no authority to) establish an office or
other fixed place of business of the Seller, the Agent, any Owner or any
Purchaser in Canada. To the extent any responsibilities of the Servicer or
PolyOne Canada in respect of the Receivables and Related Security hereunder or
under any other

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Transaction Document involve or require the Servicer or PolyOne Canada to
contract for, or conclude a contract in the name of, the Seller, the Agent, any
Owner or any Purchaser, such servicing responsibility shall be fulfilled solely
by the Servicer (and not by PolyOne Canada) and the Servicer is authorized to
take such action, but only from a place of business in the United States.
Nonetheless, PolyOne Canada may engage in discussions with any Obligor regarding
such matters and negotiate the terms of any such arrangement subject to the
understanding that final approval of any such arrangement referred to in the
preceding portions of this Section 6.02(f) may only be made by the Servicer and
any such arrangement so negotiated by PolyOne Canada shall not be binding until
such final approval is so provided by the Servicer
     Section 6.03. Rights of the Agent.
     (a) The Seller and the Servicer each hereby Transfer to the Agent the
exclusive ownership, dominion and control of the Lock-Box Accounts to which the
Obligors of Pool Receivables shall make payments, and shall take any further
action that the Agent may reasonably request to effect such Transfer. Further,
the Agent may notify at any time and at the Seller’s expense the Obligors of
Pool Receivables, or any of them, of the ownership of the Purchased Property by
the Owners.
     (b) At any time:
     (i) The Agent may direct the Obligors of Pool Receivables, or any of them,
to make payment of all amounts due or to become due to the Seller under any Pool
Receivable directly to the Agent or its designee.
     (ii) The Seller and the Servicer each shall, at the Agent’s request and at
the Seller’s and the Servicer’s expense, give notice of such ownership to such
Obligors and direct them to make such payments directly to the Agent or its
designee.
     (iii) The Seller and the Servicer each shall, at the Agent’s request,
(A) assemble all of the Records which evidence or relate to the Pool
Receivables, and the related Contracts and Related Security, or which are
otherwise necessary or desirable to collect the Pool Receivables, and shall make
the same available to the Agent at a place reasonably selected by the Agent or
its designee, and (B) segregate all cash, checks and other instruments received
by it from time to time constituting Collections or other proceeds of Pool
Receivables in a manner reasonably acceptable to the Agent and shall, promptly
upon receipt, remit all such cash, checks and instruments, duly endorsed or with
duly executed instruments of Transfer, to the Agent or its designee.
     (iv) The Agent may take any and all commercially reasonable steps in the
Seller’s or the Servicer’s name and on behalf of the Seller and the Owners
necessary or desirable, in the determination of the Agent, to collect all
amounts due under any and all Pool Receivables, including, without limitation,
endorsing the Seller’s or the Servicer’s name on checks and other instruments
representing Collections or other proceeds of Pool Receivables, enforcing such
Pool Receivables and the related Contracts, and adjusting, settling or
compromising the amount or payment thereof, in the same manner and to the same
extent as the Seller or PolyOne might have done.
     Section 6.04. Responsibilities of the Seller.
     Anything herein to the contrary notwithstanding:

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     (a) The Seller shall perform all of its obligations under the Contracts
related to the Pool Receivables to the same extent as if the Purchased Property
had not been sold hereunder and the exercise by the Agent of its rights
hereunder shall not release the Seller from such obligations or its obligations
with respect to Pool Receivables or under the related Contracts; and
     (b) Neither the Agent nor the Owners shall have any obligation or liability
with respect to any Pool Receivables or related Contracts, nor shall any of them
be obligated to perform any of the obligations of the Seller or the Canadian
Originator thereunder.
     Section 6.05. Further Action Evidencing Purchases.
     (a) The Seller and the Servicer each agrees that from time to time, at its
expense, it will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary, or that the Agent
may reasonably request, in order to perfect, protect or more fully evidence the
ownership of the Purchased Property purchased by the Owners hereunder, or to
enable any of them or the Agent to exercise and enforce any of their respective
rights and remedies hereunder. Without limiting the generality of the foregoing,
the Seller and the Servicer each will upon the request of the Agent, in order to
perfect, protect or evidence such ownership of the Purchased Property:
(i) execute and file such financing or continuation statements, or amendments
thereto or assignments thereof, and such other instruments or notices, as may be
necessary, or as the Agent may reasonably request; (ii) mark conspicuously each
invoice evidencing each Pool Receivable and the related Contract with a legend,
acceptable to the Agent, evidencing that the Purchased Property has been sold in
accordance with this Agreement; and (iii) mark its master data processing
records evidencing such Pool Receivables and related Contracts with such legend.
     (b) The Seller hereby authorizes the Agent to file one or more financing or
continuation statements, and amendments thereto and assignments thereof,
relating to all or any of the Contracts, or Pool Receivables and the Related
Security and Collections with respect thereto, now existing or hereafter
arising, without the signature of the Seller where permitted by law. A photocopy
or other reproduction of this Agreement or any financing statement covering all
or any of the Contracts, or Pool Receivables and the Related Security and
Collections with respect thereto shall be sufficient as a financing statement
where permitted by law.
     (c) If the Servicer or the Seller fails to perform any agreement contained
herein, then after notice to the Servicer or the Seller, as applicable, the
Agent may itself perform, or cause performance of, such agreement, and the
reasonable costs and expenses of the Agent incurred in connection therewith
shall be payable by the Seller under Section 10.01 or Section 11.04, as
applicable.
ARTICLE VII
EVENTS OF TERMINATION
     Section 7.01. Events of Termination.
     If any of the following events (“Events of Termination”) shall occur and be
continuing:
     (a) The Seller or the Servicer shall fail to make any payment or deposit to
be made by it hereunder when due and such failure remains unremedied for 3 days;
or

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     (b) Any representation or warranty made or deemed made by the Seller or the
Canadian Originator or the Servicer (or any of their respective officers) under
or in connection with this Agreement or any other Transaction Document or in any
Seller Report, or Receivables Report or any other written report, certificate or
information delivered by or on behalf of the Seller or the Canadian Originator
or the Servicer (or any of their respective officers) pursuant hereto or
thereto, shall prove to have been incorrect in any material respect when made or
deemed made or delivered; or
     (c) (i) The Seller or the Servicer shall fail to perform or observe any
term, covenant or agreement contained in Section 5.01(e), 5.01(g), 5.02, 5.03,
5.04(e), 5.04(g), 5.05 or 5.06 of this Agreement, (ii) the Canadian Originator
shall fail to perform or observe any term, covenant or agreement contained in
Section 4.01(g), 4.01(i), 4.01(j)(iii) or 4.02 of the Canadian Receivables Sale
Agreement; or (iii) the Seller, the Servicer, PolyOne (other than in its
capacity as Servicer) or the Canadian Originator shall fail to perform or
observe any other term, covenant or agreement contained in any Transaction
Document on its part to be performed or observed and any such failure shall
remain unremedied for 3 Business Days after the earlier of (A) the date on which
a Responsible Officer of PolyOne becomes aware of such failure and (B) the date
on which written notice thereof shall have been given to the Seller by the Agent
or any Purchaser; or
     (d) The Seller or PolyOne shall fail to pay any principal of, or premium or
interest on, any of its Debt that is outstanding in a principal amount of at
least $9,500, in the case of the Seller, and $15,000,000, in the case of PolyOne
or the Canadian Originator, when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise), and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Debt; or any other event shall
occur or condition shall exist under any agreement or instrument relating to any
such Debt and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the maturity of
such Debt; or any such Debt shall be declared to be due and payable, or required
to be prepaid (other than by a regularly scheduled required prepayment),
redeemed, purchased or defeased, or an offer to prepay, redeem, purchase or
defease such Debt shall be required to be made, in each case prior to the stated
maturity thereof; or
     (e) Any Purchase or any reinvestment pursuant to Section 2.07 shall for any
reason (other than pursuant to the terms hereof) cease to create, or the Owners
shall otherwise cease to hold, for any reason, a valid and perfected first
priority ownership interest in the Purchased Property, including each applicable
Pool Receivable and the Related Security and Collections with respect thereto;
or
     (f) The Seller, the Servicer or the Canadian Originator shall generally not
pay its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against the Seller,
the Servicer or the Canadian Originator seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency, arrangement or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it) that is being diligently
contested by it in good faith, either such proceeding shall remain undismissed
or unstayed for a period of 30 days, or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other similar
official for, it or for any substantial part of its property) shall occur; or
the Seller, the Servicer or the Canadian Originator shall take any corporate
action to authorize any of the actions set forth above in this subsection (f);
or

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     (g) The Net Receivables Pool Balance shall be less than the Required Net
Receivables Pool Balance for a period of 2 consecutive Business Days or more; or
     (h) Since December 31, 2006, there shall have been any Material Adverse
Change (other than to the extent expressly set forth on Schedule V hereto or
disclosed in any public filing prior to the date hereof with the Securities and
Exchange Commission); or
     (i) Any provision of any Transaction Document shall for any reason cease to
be a legal, valid and binding obligation of the Seller, the Servicer or the
Canadian Originator, as applicable, or the Seller, the Servicer or the Canadian
Originator, as applicable, shall so state in writing; or
     (j) A Change of Control shall occur;
     (k) The articles or by-laws of the Seller shall be amended, supplemented or
otherwise modified without consent of the Agent;
     (l) On the date which is 60 days prior to the final maturity date of the
10?% Senior Notes, the outstanding principal amount of the 10?% Senior Notes is
$40,000,000 or more;
     (m) Any Events of Termination (as defined in the U.S. RPA), shall occur and
be continuing;
     (n) After the date hereof, any Purchaser, Owner or the Agent shall
determine, acting reasonably, that it has or is deemed to have a permanent
establishment within Canada solely or primarily as a result of the transactions
contemplated hereby or any act or failure to act of the Seller, the Servicer or
PolyOne Canada,
then, and in any such event, the Agent shall, at the request, or may with the
consent, of the Required Purchasers, by notice to the Seller and the Servicer
declare the Termination Date to have occurred, whereupon the Termination Date
shall forthwith occur; provided, that, automatically upon the occurrence of any
event (without any requirement for the passage of time or the giving of notice,
or both) described in subsection (f) of this Section 7.01, the Termination Date
shall occur, and the Agent may replace the Servicer pursuant to Section 6.01.
Upon any such occurrence of the Termination Date, the Agent and each Owner shall
have, in addition to all other rights and remedies under this Agreement or
otherwise, all other rights and remedies provided under any and all applicable
laws, which rights shall be cumulative.
ARTICLE VIII
THE AGENT
     Section 8.01. Authorization and Action.
     Each Purchaser hereby appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers and discretion under this
Agreement and the other Transaction Documents and the other instruments and
documents delivered pursuant hereto as are delegated to the Agent by the terms
hereof and thereof, together with such powers and discretion as are reasonably
incidental thereto. The Agent agrees to give to each Purchaser copies of each
notice (including, without limitation, each report and financial statement
received hereunder or under any other Transaction Document) given to the Agent
by the Seller, the Servicer or the Canadian Originator pursuant to the terms of
this Agreement or any other Transaction Document. The Agent further agrees that
the Required

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Purchasers may compel the Agent to make any request that the Agent may but is
not required to make hereunder.
     Section 8.02. Agent’s Reliance, Etc.
     Neither the Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them as
Agent under or in connection with this Agreement or any other Transaction
Document or any other instrument or document delivered pursuant hereto
(including, without limitation, the Agent’s servicing, administering or
collecting Pool Receivables as Servicer pursuant to Section 6.01), except for
its or their own gross negligence or willful misconduct. Without limiting the
generality of the foregoing, except as otherwise agreed by the Agent and any
Owner, the Agent: (i) may consult with legal counsel (including counsel for the
Seller, the Servicer or the Canadian Originator), independent public accountants
and other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (ii) makes no warranty or representation to any
Owner and shall not be responsible to any Owner for any statements, warranties
or representations (whether written or oral) made in or in connection with this
Agreement or any other Transaction Document or any other instrument or document
delivered pursuant hereto; (iii) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement or any other Transaction Document or any other
instrument or document delivered pursuant hereto on the part of the Seller or
the Canadian Originator or to inspect the property (including the books and
records) of the Seller or the Canadian Originator; (iv) shall not be responsible
to any Owner for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other Transaction
Document or any other instrument or document furnished pursuant hereto, or the
perfection, priority or value of any ownership interest or security interest
created or purported to be created hereunder or under the Canadian Receivables
Sale Agreement; and (v) shall incur no liability under or in respect of this
Agreement or any other Transaction Document or any other instrument or document
delivered pursuant hereto by acting upon any notice (including notice by
telephone), consent, certificate or other instrument or writing (which may be by
telecopier, telegram, cable or telex) reasonably believed by it to be genuine
and signed or sent by the proper party or parties.
     Section 8.03. Citicorp and Affiliates.
     With respect to any Capital Investment owned by it, Citicorp shall have the
same rights and powers under this Agreement as any other Purchaser and may
exercise the same as though it were not the Agent. Citicorp and its Affiliates
may generally engage in any kind of business with the Seller or the Canadian
Originator or any Obligor, any of their respective Affiliates and any Person who
may do business with or own securities of the Seller or the Canadian Originator
or any Obligor or any of their respective Affiliates, all as if Citicorp were
not the Agent and without any duty to account therefor to the Purchasers.
     Section 8.04. Purchase Decisions.
     Each Purchaser acknowledges that it has, independently and without reliance
upon the Agent or any of its Affiliates or any other Purchaser and based on such
documents and information as it has deemed appropriate, made its own evaluation
and decision to enter into this Agreement and to purchase an interest on the
Purchased Property and make Capital Increases hereunder. Each Purchaser also
acknowledges that it shall, independently and without reliance upon the Agent,
any of its Affiliates or any other Purchaser and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
decisions in taking or not taking action under this Agreement.

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     Section 8.05. Indemnification.
     The Purchasers agree to indemnify the Agent (to the extent not promptly
reimbursed by the Seller), ratably according to their respective Capital
Investments at the relevant time (or, if no Capital Investments have been made
at that time by them, ratably according to their respective Commitments) from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by, or asserted against the
Agent in any way relating to or arising out of this Agreement or any other
Transaction Document or any other instrument or document furnished pursuant
hereto or any action taken or omitted by the Agent under this Agreement or any
other Transaction Document or any such instrument or document; provided that no
Purchaser shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent’s gross negligence or willful misconduct.
Without limitation of the foregoing, the Purchasers agree to reimburse the
Agent, ratably according to their respective Capital Investments at the relevant
time (or, if no Capital Investments have been made at that time by them, ratably
according to their respective Commitments), promptly upon demand for any costs
and expenses (including, without limitation, reasonable fees and disbursements
of counsel) payable by the Seller to the Agent under Section 11.04, to the
extent that the Agent is not promptly reimbursed for such costs and expenses by
the Seller.
     Section 8.06. Posting of Approved Electronic Communications.
     (a) Subject to Section 11.05 and certain limited exceptions in respect of
which the Company has delivered prior written notice to the Agent, each of the
Purchasers, the Servicer and the Seller agree, that the Agent may, but shall not
be obligated to, make the Approved Electronic Communications available to the
Purchasers by posting such Approved Electronic Communications on “e-Disclosure”,
the Agent’s internet delivery system that is part of Fixed Income Direct, Global
Fixed Income’s primary web portal, or successor electronic platform chosen by
the Agent to be its internet delivery system (the “Approved Electronic
Platform”).
     (b) Although the primary web portal is secured with a dual firewall and a
User ID/Password Authorization System and the Approved Electronic Platform is
secured through a single-user-per-deal authorization method whereby each user
may access the Approved Electronic Platform only on a deal-by-deal basis, each
of the Purchasers, the Servicer and the Seller acknowledges and agrees, that the
distribution of material through an electronic medium is not necessarily secure
and that there are confidentiality and other risks associated with such
distribution. In consideration for the convenience and other benefits afforded
by such distribution and for the other consideration provided hereunder, the
receipt and sufficiency of which is hereby acknowledged, each of the Purchasers,
the Servicer and the Seller hereby approves, and the Servicer shall cause each
other Originator to approve, distribution of the Approved Electronic
Communications through the Approved Electronic Platform and understands and
assumes the risks of such distribution.
     (c) The Approved Electronic Communications and the Approved Electronic
Platform are provided “as is” and “as available”. None of the Agent or any of
its Affiliates or any of their respective officers, directors, employees,
agents, advisors or representatives (the “Agent Affiliates”) warrant the
accuracy, adequacy or completeness of the Approved Electronic Communications and
the Approved Electronic Platform and each expressly disclaims liability for
errors or omissions in the Approved Electronic Communications and the Approved
Electronic Platform. No warranty of any kind, express, implied or statutory
(including, without limitation, any warranty of merchantability, fitness for a
particular purpose, non-infringement of third party rights or freedom from
viruses or other code defects) is made by the Agent Affiliates in connection
with the Approved Electronic Communications.

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ARTICLE IX
ASSIGNMENT OF RECEIVABLE INTERESTS
     Section 9.01. Purchaser’s Assignment of Rights and Obligations.
     (a) Each Purchaser may assign to any Eligible Assignee all or a portion of
its rights and obligations under this Agreement (including, without limitation,
all or a portion of its Commitment, the Capital Investments made by it and the
related rights in the Purchased Property); provided, however, that (i) each such
assignment shall be a constant, and not a varying, percentage of such
Purchaser’s rights and obligations under this Agreement and the Capital
Investments made by it, (ii) in the case of any assignment by any Purchaser that
is not assigning pursuant thereto all of its right and obligations under this
Agreement, (A) the amount of the Commitment (determined as of the date of the
applicable Assignment and Acceptance) being assigned pursuant to each such
assignment shall be at least $5,000,000, or (B) the aggregate amount of all
Commitments (determined as of the date of the applicable Assignments and
Acceptances) being assigned by such Purchaser on such date to two or more
Eligible Assignees that are Affiliates of each other shall be at least
$5,000,000, (iii) each such assignment shall be to an Eligible Assignee,
(iv) the parties to each such assignment shall execute and deliver to the Agent,
for its acceptance and recording in the Register, an Assignment and Acceptance,
together with a processing and recording fee of $3,500 and (v) the consent of
the Agent and the Seller (which consent shall not be unreasonably withheld or
delayed and shall not be required at all following an Event of Termination)
shall first have been obtained. Upon such execution, delivery and acceptance,
from and after the effective date specified in each Assignment and Acceptance,
which effective date shall be the later of (x) the date the Agent receives the
executed Assignment and Acceptance and (y) the date of such Assignment and
Acceptance, (1) the Assignee thereunder shall be a party hereto and shall have
all the rights and obligations of a Purchaser hereunder and (2) the assigning
Purchaser shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such assignment and acceptance, relinquish its rights
and be released from its obligations under this Agreement.
     (b) By executing and delivering an Assignment and Acceptance, the assigning
Purchaser and the Assignee thereunder confirm to and agree with each other and
the other parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, the assigning Purchaser makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
any other Transaction Document or any other instrument or document furnished
pursuant hereto or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other Transaction
Document or any other instrument or document furnished pursuant hereto, or the
perfection, priority or value of any ownership interest or security interest
created or purported to be created hereunder or under the Canadian Receivables
Sale Agreement; (ii) the assigning Purchaser makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Seller or the Canadian Originator or the performance or observance by the Seller
or the Canadian Originator of any of their respective obligations under this
Agreement or any other Transaction Document or any other instrument or document
furnished pursuant hereto; (iii) such Assignee confirms that it has received
copies of this Agreement and the other Transaction Documents, together with such
other documents and information as it has deemed appropriate to make its own
analysis and decision to enter into such Assignment and Acceptance; (iv) such
Assignee will, independently and without reliance upon the Agent, any of its
Affiliates, the assigning Purchaser or any other Purchaser and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own decisions in taking or not taking action under this Agreement and
the other Transaction Documents and the other instruments and documents

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furnished pursuant hereto; (v) such Assignee confirms that it is an Eligible
Assignee; (vi) such Assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers and discretion under
this Agreement and the other Transaction Documents and the other instruments and
documents furnished pursuant hereto as are delegated to the Agent by the terms
hereof and thereof, together with such powers and discretion as are reasonably
incidental thereto; (vii) such Assignee appoints as its agent the Servicer from
time to time designated pursuant to Section 6.01 to enforce its respective
rights and interests in and under the Pool Receivables and the Related Security
and Collections with respect thereto and the related Contracts; and (viii) such
Assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Purchaser.
     (c) The Agent shall maintain at its office referred to in Section 11.02 a
copy of each Assignment and Acceptance delivered to and accepted by it and a
register (the “Register”) for the recordation of the names and addresses of the
Purchasers and the Commitment of, and each Capital Investments made by, each
Purchaser from time to time, which Register shall be available for inspection by
the Seller at any reasonable time and from time to time upon reasonable prior
notice. The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and the Seller, the Servicer, the Purchasers
and the Agent may treat each Person whose name is recorded in the Register as a
Purchaser hereunder for all purposes of this Agreement. No Capital Investments,
nor any Assignment and Acceptance, shall be effective unless it is entered in
the Register in due course.
     (d) Upon its receipt of an Assignment and Acceptance executed by any
assigning Purchaser and an assignee representing that it is an Eligible
Assignee, the Agent shall, if such Assignment and Acceptance has been completed
and is in substantially the form of Exhibit A hereto, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the Register,
and (iii) give prompt notice thereof to the Seller and the Servicer.
     (e) Each Purchaser may sell participations to one or more Persons in or to
all or a portion of its rights and obligations under the Transaction Documents
(including all its rights and obligations with respect to Capital Investment).
The terms of such participation shall not, in any event, require the
participant’s consent to any amendments, waivers or other modifications of any
provision of any Transaction Documents, the consent to any departure by the
Seller, the Servicer or the Canadian Originator therefrom, or to the exercising
or refraining from exercising any powers or rights such Purchaser may have under
or in respect of the Transaction Documents (including the right to enforce the
obligations of the Seller, the Servicer or the Canadian Originator), except if
any such amendment, waiver or other modification or consent would reduce the
amount, or postpone any date fixed for, any amount (whether of Capital, Yield or
fees) payable to such participant under the Transaction Documents, to which such
participant would otherwise be entitled under such participation. In the event
of the sale of any participation by any Purchaser, (w) such Purchaser’s
obligations under the Transaction Documents shall remain unchanged, (x) such
Purchaser shall remain solely responsible to the other parties for the
performance of such obligations, (y) such Purchaser shall remain the holder of
such Capital for all purposes of this Agreement and (z) the Seller, the Agent
and the other Purchasers shall continue to deal solely and directly with such
Purchaser in connection with such Purchaser’s rights and obligations under this
Agreement. Each participant shall be entitled to the benefits of
Sections 2.12(a), 2.13 and 2.14 as if it were a Purchaser; provided, however,
that anything herein to the contrary notwithstanding, the Seller shall not, at
any time, be obligated to make under Section 2.12(a), 2.13 or 2.14 to the
participants in the rights and obligations of any Purchaser (together with such
Purchaser) any payment in excess of the amount the Seller would have been
obligated to pay to such Purchaser in respect of such interest had such
participation not been sold.

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ARTICLE X
INDEMNIFICATION
     Section 10.01. Indemnities.
     Without limiting any other rights that any Indemnified Party may have
hereunder or under applicable law, and whether or not any of the transactions
contemplated hereby are consummated, the Seller hereby agrees to indemnify each
Indemnified Party from and against, and hold each thereof harmless from, any and
all claims, losses, liabilities, costs and expenses of any kind whatsoever
(including, without limitation, reasonable legal fees and expenses on a full
indemnity basis) (all of the foregoing being collectively referred to as
“Indemnified Amounts”) arising out of, or resulting from, in whole or in part,
one or more of the following: (a) this Agreement or any other Transaction
Document or any other agreement or document delivered or to be delivered in
connection with this Agreement; (b) the use of proceeds of any Purchase or
reinvestment or Capital Increase; (c) the interest of any Owner in any
Receivable, any Contract or any Related Security; or (d) any transaction
contemplated by this Agreement or any other Transaction Document or any other
agreement or document delivered or to be delivered in connection with this
Agreement; excluding, however, Indemnified Amounts to the extent resulting from
either (x) the gross negligence or willful misconduct on the part of such
Indemnified Party, or (y) the failure to collect amounts in respect of a Pool
Receivable, to the extent such failure results from a discharge of the Obligor
with respect thereto in a proceeding in respect of such Obligor under applicable
bankruptcy laws or otherwise results from the Obligor’s financial inability to
pay such amounts. Without limiting or being limited by the foregoing and whether
or not any of the transactions contemplated hereby are consummated, the Seller
shall pay on demand to each Indemnified Party any and all amounts necessary to
indemnify such Indemnified Party from and against any and all Indemnified
Amounts which relate to or result from, or which would not have occurred but
for, one or more of the following:
     (i) any Receivable becoming a Pool Receivable which is not at the date of
the initial creation of an interest therein hereunder an Eligible Receivable;
     (ii) any representation or warranty or statement made or deemed made by the
Seller (or any of its officers) under or in connection with this Agreement or
any other Transaction Document or any Seller Report or Receivables Report or
other document delivered or to be delivered in connection herewith or with any
other Transaction Document being incorrect in any material respect when made or
deemed made or delivered;
     (iii) the failure by the Seller to comply with any applicable law, rule or
regulation with respect to any Pool Receivable or the related Contract or any
Related Security with respect thereto, including Privacy Laws (as defined in the
Canadian Receivables Sale Agreement); or the failure of any Pool Receivable or
the related Contract or any Related Security with respect thereto to conform to
any such applicable law, rule or regulation;
     (iv) the failure to vest in the Agent on behalf of the Owners a first
priority perfected ownership interest in each Receivable in, or purported to be
in, the Receivables Pool and the Related Security and Collections in respect
thereof, free and clear of any Adverse Claim; or the failure of the Seller to
have obtained a first priority perfected ownership interest in the Pool
Receivables and the Related Security and Collections with respect thereto
Transferred or purported to be Transferred to the Seller under the Canadian
Receivables Sale Agreement, free and clear of any Adverse Claim;

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     (v) the failure of the Seller to have filed, or any delay by the Seller in
filing, financing statements or other similar instruments or documents under the
PPSA or other applicable laws with respect to any Receivable in, or purported to
be in, the Receivables Pool and the Related Security and Collections in respect
thereof, whether at the time of any Purchase or reinvestment or at any
subsequent time unless such failure results directly and solely from the Agent’s
failure to take appropriate action;
     (vi) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of any Obligor to the payment of any Receivable in,
or purported to be in, the Receivables Pool (including, without limitation, any
defense based on the fact or allegation that such Receivable or the related
Contract is not a legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms), or any other claim
resulting from the sale of the goods or services related to such Receivable or
the furnishing or failure to furnish such goods or services;
     (vii) any failure of the Seller to perform its duties or obligations in
accordance with the provisions of this Agreement or any other Transaction
Document or to perform its duties or obligations under any Contract;
     (viii) any product liability, personal injury, copyright infringement,
theft of services, property damage, or other breach of contract, antitrust,
unfair trade practices or tortious claim arising out of or in connection with
the subject matter of any Contract or out of or in connection with any
transaction contemplated by this Agreement, any other Transaction Document or
any other instrument or document furnished pursuant hereto or such Contract;
     (ix) the commingling by the Seller of Collections of Pool Receivables at
any time with other funds;
     (x) any action or omission by the Seller, reducing or impairing the rights
of any Owner under this Agreement, any other Transaction Document or any other
instrument or document furnished pursuant hereto or thereto or with respect to
any Pool Receivable;
     (xi) any cancellation or modification of a Pool Receivable, the related
Contract or any Related Security, whether by written agreement, verbal
agreement, acquiescence or otherwise;
     (xii) any investigation, litigation or proceeding related to or arising
from this Agreement, any other Transaction Document or any other instrument or
document furnished pursuant hereto or thereto, or any transaction contemplated
by this Agreement or any Contract or the use of proceeds from any Purchase or
reinvestment pursuant to this Agreement, or the ownership of, or other interest
in, any Receivable, the related Contract or Related Security;
     (xiii) the existence of any Adverse Claim against or with respect to any
Pool Receivable, the related Contract or the Related Security or Collections
with respect thereto;
     (xiv) any failure by the Seller to pay when due any taxes, including
without limitation sales, excise, GST, PST or other personal property taxes,
payable by the Seller in connection with any Receivable or the related Contract
or any Related Security with respect thereto;
     (xv) any claim brought by any Person other than an Indemnified Party
arising from any activity of the Seller in servicing, administering or
collecting any Pool Receivable;

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     (xvi) any failure by any Lock-Box Bank to comply with the terms of the
Lock-Box Agreement to which it is a party;
     (xvii) any present or future Taxes, all interest and penalties thereon or
with respect thereto, and all out-of-pocket costs and expenses, including the
reasonable fees and expenses of counsel in defending against the same, which may
arise by reason of the purchase or ownership of the Purchased Property, the
financing of such purchase or ownership by the Owners or any other Indemnified
Party or the servicing of the Pool Receivables, including without limitation,
any withholding taxes that are imposed by Canada or any political subdivision
thereof on any Indemnified Party or that are withheld from any Collections or
other payments made hereunder, and any Taxes that are imposed on any Indemnified
Party as a result of such Indemnified Party acquiring a permanent establishment
in Canada as a result of the transactions contemplated hereby or by the Canadian
Receivables Sale Agreement; or
     (xviii) to the extent not covered by the foregoing clauses, the occurrence
and continuance of any Event of Termination other than an Event of Termination
arising under Section 7.01(f).
     Section 10.02. Currency
     (a) If, for the purpose of obtaining judgment in any court, it is necessary
to convert a sum owing hereunder in one currency into another currency, each
party hereto agrees, to the fullest extent that it may effectively do so, that
the rate of exchange used shall be that provided for in the definition of Dollar
Equivalent.
     (b) The obligations of the Seller in respect of any sum due to any party
hereto (or their respective assigns) or any holder of the obligations owing
hereunder (the “Applicable Creditor”) shall, notwithstanding any judgment in a
currency (the “Judgment Currency”) other than the currency in which such sum is
stated to be due hereunder (the “Agreement Currency”), be discharged only to the
extent that, on the Business Day following receipt by the Applicable Creditor of
any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor
may in accordance with normal banking procedures in the relevant jurisdiction
purchase the Agreement Currency with the Judgment Currency; if the amount of the
Agreement Currency so purchased is less than the sum originally due to the
Applicable Creditor in the Agreement Currency, the Seller agrees, as a separate
obligation and notwithstanding any such judgment, to indemnify the Applicable
Creditor against such loss.
ARTICLE XI
MISCELLANEOUS
     Section 11.01. Amendments, Etc.
     No amendment or waiver of any provision of this Agreement, and no consent
to any departure by the Seller or the Servicer therefrom, shall be effective
unless in a writing signed by the Agent and the Required Purchasers and, in the
case of any such amendment, the Seller and the Servicer, and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given; provided, however, that no
amendment, waiver or consent shall:

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     (a) without the prior written consent of each Purchaser,
     (i) amend the definitions of “Eligible Receivable”, “Net Receivables Pool
Balance”, “Required Net Receivables Pool Balance”, “Reserve Percentage”,
“Required Purchasers” or “Super-Majority Purchasers”, or
     (ii) amend, modify or waive any provision of this Agreement in any way
which would
     (A) reduce the amount of a Capital Investment or Yield that is payable on
account of any Capital Investment or delay any scheduled date for payment
thereof or change the order of application of Collections to the payment
thereof, or
     (B) impair any rights expressly granted to such Purchaser or such Owner
under this Agreement, or
     (C) reduce fees payable by the Seller to or for the account of such
Purchaser hereunder or delay the dates on which such fees are payable, or
     (iii) amend or waive the Event of Termination contained in Section 7.01(f)
relating to the bankruptcy of the Seller, the Servicer, or the Canadian
Originator, or amend or waive the Event of Termination contained in
Section 7.01(g) relating to the Net Receivables Pool Balance, or
     (iv) change the percentage of Commitments, or the number of Owners or
Purchasers, which shall be required for the Purchasers or any of them to take
any action hereunder, or
     (v) amend this Section 11.01, or
     (vi) extend the Commitment Termination Date, or
     (vii) increase the amount of the Total Commitment;
     (b) without the consent of the applicable Purchaser, increase the
Commitment of such Purchaser, subject such Purchaser to any additional
obligations, or decrease the ownership interest of such Purchaser in the
Purchased Property; and
     (c) without the prior written consent of the Super-Majority Purchasers,
amend Section 5.07(b) or the definition of “Total Excess Availability” or
“Receivables Excess Availability”,
provided, however, that the Agent shall not, without the prior written consent
of the Required Purchasers, either agree to any amendment or waiver of any
provision of the Intercreditor Agreement or consent to any departure from the
Intercreditor Agreement by any party thereto, and provided further, that (x) no
amendment, waiver or consent shall, unless in writing and signed by the Agent in
addition to the Purchasers required above to take such action, affect the rights
or duties of the Agent under this Agreement or the other Transaction Documents,
and (y) no amendment, waiver or consent shall, unless in writing and signed by
the Swing Purchaser in addition to the Purchasers required above to take such
action, affect the rights or duties of the Swing Purchaser under this Agreement
or the other Transaction Documents.

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     (d) If, in connection with any proposed amendment, modification, waiver or
termination (a “Proposed Change”) requiring the consent of all affected
Purchasers, the consent of Required Purchasers is obtained but the consent of
other Purchasers whose consent is required is not obtained (any such Purchaser
whose consent is not obtained as described in this being referred to as a
“Non-Consenting Purchaser”), then, as long as the Purchaser acting as the Agent
is not a Non-Consenting Purchaser, at the Seller’s request, any Eligible
Assignee acceptable to the Agent shall have the right with the Agent’s consent
and in the Agent’s sole discretion (but shall have no obligation) to purchase
from such Non-Consenting Purchaser, and such Non-Consenting Purchaser agrees
that it shall, upon the Agent’s request, sell and assign to the Purchaser acting
as the Agent or such Eligible Assignee, all of the Commitments, Capital
Investments and interests in the Purchased Property of such Non-Consenting
Purchaser for an amount equal to the Capital Investment represented by the
interest held by the Non-Consenting Purchaser and all accrued and unpaid Yield
and fees with respect thereto through the date of sale; provided, however, that
such purchase and sale shall not be effective until (x) the Agent shall have
received from such Eligible Assignee an agreement in form and substance
satisfactory to the Agent and the Seller whereby such Eligible Assignee shall
agree to be bound by the terms hereof, (y) such Non-Consenting Purchaser shall
have received payments of all interests held by it in the Purchased Property and
all accrued and unpaid Yield and fees with respect thereto through the date of
the sale and (z) such purchase and sale has been recorded in the Register
maintained by the Agent. Each Purchaser agrees that, if it becomes a
Non-Consenting Purchaser, it shall execute and deliver to the Agent an
Assignment and Acceptance to evidence such sale and purchase subject to such
Assignment and Acceptance; and provided, further, however, that the failure of
any Non-Consenting Purchaser to execute an Assignment and Acceptance shall not
render such sale and purchase (and the corresponding assignment) invalid.
     (e) No failure on the part of any Purchaser or the Agent to exercise, and
no delay in exercising, any right hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right. Without
limiting the foregoing, each Purchaser is hereby authorized by the Seller upon
the occurrence and during the continuance of an Event of Termination, to the
fullest extent permitted by law, to setoff and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Purchaser to or for the credit or
the account of the Seller against any and all of the obligations of the Seller
now or hereafter existing under this Agreement to such Purchaser or, if such
Purchaser is Citicorp, to the Agent or any Affiliate thereof, irrespective of
whether or not any formal demand shall have been made under this Agreement and
although such obligations may be unmatured. Each Purchaser agrees promptly to
notify the Seller after any such setoff and application; provided, however, that
the failure to give such notice shall not affect the validity of such setoff and
application. The rights of each Purchaser under this Section 11.01 are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which such Purchaser may have.
     Section 11.02. Notices, Etc.
     All notices and other communications hereunder shall, unless otherwise
stated herein, be given in writing or by any telecommunication device capable of
creating a written record (including electronic mail), (i) to each of the
Seller, the Servicer, the Agent and the Initial Purchasers, at its address set
forth under its name on the signature pages hereof, (ii) to each Purchaser other
than the Initial Purchasers, at its address specified on the Assignment and
Acceptance pursuant to which it became a Purchaser hereunder or (iii) to any
party hereto at such other address as shall be designated by such party in a
notice to the other parties hereto given as provided herein. All such notices
and communications shall be effective when received.

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     Section 11.03. Binding Effect; Assignability.
     This Agreement shall be binding upon and inure to the benefit of the
Seller, PolyOne, the Agent, the Swing Purchaser and each Purchaser and their
respective successors and assigns, except that neither the Seller nor PolyOne
(other than in its capacity as Servicer hereunder) shall have the right to
assign its rights or obligations hereunder or any interest herein without the
prior written consent of all Purchasers. This Agreement shall create and
constitute the continuing obligation of the parties hereto in accordance with
its terms, and shall remain in full force and effect until such time, after the
Termination Date, as no Capital Investment or any obligation of the Seller,
PolyOne, the Canadian Originator or the Servicer under any Transaction Document
shall be outstanding; provided, however, that rights and remedies with respect
to the provisions of Sections 2.12, 2.13, 2.14, 10.01, 11.04, 11.06, and 11.07
shall be continuing and shall survive any termination of this Agreement.
     Section 11.04. Costs and Expenses.
     The Seller agrees to pay, upon receipt of a written invoice, all costs and
expenses in connection with the preparation, execution, delivery and
administration (including periodic auditing of Receivables) of, and searches and
filings in respect of, this Agreement, the other Transaction Documents and the
other documents and agreements to be delivered hereunder and thereunder,
including, without limitation, the reasonable fees and disbursements of (a) on a
full indemnity basis, counsel for the Agent with respect thereto and advising
the Agent as to its rights and remedies hereunder and (b) internal and external
auditors. The Seller further agrees to pay on demand all costs and expenses, if
any (including, without limitation, reasonable counsel fees and disbursements on
a full indemnity basis), of each Owner, the Agent or any Affiliate thereof, in
connection with the enforcement (whether through negotiations, legal proceedings
or otherwise) of this Agreement, the other Transaction Documents and the other
documents and agreements to be delivered in connection herewith or therewith.
Each written invoice shall set forth the basis therefor in reasonable detail and
shall be conclusive and binding absent manifest error.
     Section 11.05. Confidentiality.
     (a) The Seller, the Servicer, PolyOne, the Purchasers and the Agent hereby
agree that each of the Servicer, PolyOne, the Seller, the Purchasers and the
Agent (and each of their respective, and their respective Affiliates, employees,
officers, directors, agents and advisors) is, and has been from the commencement
of discussions with respect to the receivables program established hereunder,
permitted to disclose to any and all Persons, without limitation of any kind,
the structure and tax aspects (as such terms are used in Code Sections 6011,
6111 and 6112 and the regulations promulgated thereunder) of the receivables
program established hereunder, and all materials of any kind (including opinions
or other tax analyses) that are or have been provided to the Servicer, PolyOne,
the Seller, such Purchasers or the Agent related to such structure and tax
aspects. In this regard, each of the Servicer, PolyOne, the Seller, the
Purchasers and the Agent acknowledges and agrees that its disclosure of the
structure or tax aspects of the receivables program established hereunder is not
limited in any way by an express or implied understanding or agreement, oral or
written (whether or not such understanding or agreement is legally binding).
Furthermore, each of the Servicer, PolyOne, the Seller, the Purchasers and the
Agent acknowledges and agrees that it does not know or have reason to know that
its use or disclosure of information relating to the structure or tax aspects of
the receivables program established hereunder is limited in any other manner
(such as where the receivables program established hereunder is claimed to be
proprietary or exclusive) for the benefit of any other Person. To the extent
that disclosure of the structure or tax aspects of the receivables program
established hereunder by the Servicer, PolyOne, the Seller, the Agent or the
Purchasers is limited by any existing agreement between the Servicer, PolyOne,
the Seller, the Agent or the Purchasers, such limitation is agreed to be void ab
initio and such agreement

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is hereby amended to permit disclosure of the structure and tax aspects of the
receivables program established hereunder as provided in this clause (a).
     (b) Subject to clause (a) of this Section 11.05, neither the Agent nor any
Purchaser may disclose to any Person any confidential, proprietary or non-public
information of the Canadian Originator or the Seller furnished to the Agent or
the Purchasers by either the Canadian Originator or the Seller (such information
being referred to collectively herein as the “Originator’s Information”), except
that each of the Agent and each of the Purchasers may disclose the Canadian
Originator’s Information (i) to its and its Affiliates’ employees, officers,
directors, agents and advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of the
Canadian Originator’s Information and instructed to keep the Canadian
Originator’s Information confidential on substantially the same terms as
provided herein), (ii) to the extent requested by any regulatory authority,
(iii) to the extent required by applicable laws or regulations or by any
subpoena or similar legal process, (iv) to any other party to this Agreement,
(v) if reasonably necessary in connection with the exercise of any remedies
hereunder or under any other Transaction Document or any suit, action or
proceeding relating to this Agreement or any other Transaction Document or the
enforcement of rights hereunder or thereunder, (vi) subject to an agreement
containing provisions substantially the same as those of this Section 11.05 to
any assignee of or participant in, or any prospective assignee of or participant
in, any of its rights or obligations under this Agreement, (vii) to the extent
the Canadian Originator’s Information (A) is or becomes generally available to
the public on a non-confidential basis other than as a result of a breach of
this Section 11.05 by the Agent or such Purchaser, or (B) is or becomes
available to the Agent or such Purchaser on a non-confidential basis from a
source other than the Canadian Originator, the Servicer, PolyOne or the Seller,
and (viii) with the prior written consent of the Servicer, PolyOne or the
Seller.
     (c) Subject to clause (a) of this Section 11.05, none of the Servicer,
PolyOne or the Seller may disclose to any Person the amount or terms of any fees
payable to the Agent or any Purchaser (such information being collectively
referred to herein as the “Program Information”), except that the Servicer,
PolyOne or the Seller may disclose the Program Information (i) to its and its
respective Affiliates’ employees, officers, directors, agents and advisors who
have a need to know the Program Information in connection with this Agreement
and the transactions contemplated hereby or (ii) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process.
     Section 11.06. Governing Law.
     THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE PROVINCE OF ONTARIO AND THE LAWS OF CANADA APPLICABLE THEREIN.
     Section 11.07. Jurisdiction, Etc.
     (a) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York State court or Federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or any of the other
Transaction Documents to which it is a party, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such New York State court or, to
the extent permitted by law, in such Federal court. Each of the parties hereto
hereby agrees that service of process in any such action or proceeding may be
effected by mailing a summons and complaint to it at its address specified in
Section 11.02 by registered mail, return receipt requested, or in any other
manner permitted by applicable law.

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Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that any party may otherwise have to bring any
action or proceeding relating to this Agreement or any of the other Transaction
Documents in the courts of any other jurisdiction.
     (b) Each of the parties hereto irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any action or proceeding
arising out of or relating to this Agreement or any of the other Transaction
Documents to which it is a party in any New York State or Federal court. Each of
the parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
     Section 11.08. Execution in Counterparts.
     This Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and all of which when taken
together shall constitute one and the same agreement. Delivery by telecopier of
an executed counterpart of a signature page to this Agreement shall be effective
as delivery of an original executed counterpart of this Agreement.
     Section 11.09. Intent of the Parties.
     (a) It is the intention of the parties hereto that each Purchase and
reinvestment shall convey to the Agent on behalf of the Owners, a 100% ownership
interest in the Pool Receivables and the Related Security and Collections in
respect thereof and that such transaction shall constitute a purchase and sale
and not a secured loan for all purposes.
     (b) In addition to any ownership interest which the Agent or any Owner may
from time to time acquire pursuant hereto and without limiting the foregoing,
the Seller hereby grants to the Agent for the benefit of itself and each such
Owner a valid and perfected security interest in all of the Seller’s right,
title and interest in, to and under any Pool Receivables and the Related
Security and Collections in respect thereof and any cash collateral under this
Agreement not sold hereunder, free and clear of Adverse Claims and to secure the
prompt and complete payment of all amounts payable hereunder by the Seller (in
any capacity hereunder), including fees and indemnity payments. After the
occurrence and during the continuation of an Event of Termination, the Agent and
the Owners shall have, in addition to the rights and remedies that they may have
under this Agreement, all other rights and remedies provided to a secured
creditor after default under the PPSA and other applicable law, which rights and
remedies shall be cumulative.
     Section 11.10. Entire Agreement.
     This Agreement and the other Transaction Documents contain a final and
complete integration of all prior expressions by the parties hereto with respect
to the subject matter hereof and shall constitute the entire agreement and
understanding among the parties hereto with respect to the subject matter hereof
and supersede all prior agreements and understandings, written or oral, relating
to the subject matter hereof.
     Section 11.11. Severability of Provisions.
     Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without

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invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
     Section 11.12. No Liability of Syndication Agent.
     The Syndication Agent in its capacity as such shall not have any duties or
responsibilities or shall incur any liability under this Agreement or any of the
other Transaction Documents.
     Section 11.13. Waiver of Jury Trial.
     Each of the parties hereto irrevocably waives, to the fullest extent
permitted by law, all right to trial by jury in any action, proceeding or
counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to this Agreement or any of the other Transaction Documents, the
Purchases or the actions of the Agent or any Indemnified Party in the
negotiation, administration, performance or enforcement hereof or thereof.

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     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date above
written.

            POLYONE FUNDING CANADA CORPORATION,
     as Seller
      By:           Name:   John Rastetter        Title:   President

    Address:  940 Chippawa Creek Road
P.O. Box 1026
Niagara Falls, Ontario
Canada L2E 6V9

    Attention:   President

    Telephone No.:   (440) 930-3105     Telecopier No.:  (440) 930-1839    
e-mail:  John.Rastetter@Polyone.com   

 

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            POLYONE CORPORATION,
     as Servicer
      By:           Name:   John Rastetter        Title:   Treasurer

    Address:  33587 Walker Road
Avon Lake, Ohio 44012

    Attention:  Treasurer

    Telephone No.:   (440) 930-3105     Telecopier No.:  (440) 930-1839
    e-mail:   John.Rastetter@Polyone.com   

 

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            AGENT

CITICORP USA, INC.,
     as Agent
      By:           Name:   David Jaffe        Title:   Vice President/Director
      Address:   388 Greenwich Street
19th Floor
New York, New York 10013
      Attention:  David Jaffe

    Telephone No.:  (212) 816-2329       Telecopier No.:  (212) 816-2613      
e-mail:   david.jaffe@citigroup.com    

 

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            SYNDICATION AGENT

NATIONAL CITY BUSINESS CREDIT, INC.,
     as Syndication Agent
      By:           Name:           Title:  
      Address:  1965 East 6th Street,
Suite 400
Cleveland, Ohio, 44114
      Attention:          Telephone No.:  (216) 222-9918      Telecopier No.: 
(216) 222-9555      e-mail:       

 

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            PURCHASERS:

CITICORP USA, INC.,
     as Agent
      By:           Name:   David Jaffe        Title:   Vice President/Director
      Address:  388 Greenwich Street
19th Floor
New York, New York 10013

    Attention:  David Jaffe

    Telephone No.:  (212) 816-2329      Telecopier No.:  (212) 816-2613     
e-mail:  david.jaffe@citigroup.com      

            NATIONAL CITY BUSINESS CREDIT, INC.,
     as an Initial Purchaser
      By:           Name:           Title:  
      Address:  1965 East 6th Street
Suite 400
Cleveland, Ohio 44114
      Attention:          Telephone No.:        Telecopier No.:        e-mail: 
   

 

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            WEBSTER BUSINESS CREDIT CORPORATION
      as an Initial Purchaser
      By:           Name:           Title:           Address:  One State Street
New York, New York 10004
      Attention:          Telephone No.:        Telecopier No.:        e-mail: 
   

 

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            BANK OF AMERICA, N.A.,
      as an Initial Purchaser
      By:           Name:           Title:  
      Address:  200 Glastonbury Blvd
Glastonbury, CT 06033
      Attention:          Telephone No.:        Telecopier No.:        e-mail: 
     
     with a copy to:
      Address:  200 Glastonbury Blvd
Glastonbury, CT 06033
      Attention:          Telephone No.:        Telecopier No.:        e-mail: 
   

 

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            PNC BANK, N.A.,
      as an Initial Purchaser
      By:           Name:           Title:           Address:  1600 Market
Street
31st Floor
Philadelphia, Pennsylvania 19103
      Attention:          Telephone No.:        Telecopier No.:        e-mail: 
   

 

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            THE CIT GROUP/BUSINESS CREDIT, INC.,
     as an Initial Purchaser
      By:           Name:           Title:  
      Address:  1211 Avenue of the Americas
New York, New York 10036
      Attention:          Telephone No.:        Telecopier No.:        e-mail: 
   

 

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            U. S. BANK NATIONAL ASSOCIATION,
     as an Initial Purchaser
      By:           Name:           Title:  
      Address:  U.S. Bank Business Credit
425 Walnut Street
14th Floor
CN-OH-W14S
Cincinnati, Ohio 45202
      Attention:          Telephone No.:        Telecopier No.:        e-mail: 
   

 

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            MERRILL LYNCH CAPITAL,
     a division of Merrill Lynch Business
     Financial Services, Inc.
     as an Initial Purchaser
      By:           Name:           Title:  
      Address:  225 Liberty Street
5th Floor
New York, New York 10281
      Attention:          Telephone No.:        Telecopier No.:        e-mail: