EX-10.3



 




Exhibit
10.3





SECOND AMENDED AND RESTATED




RECEIVABLES SALE AGREEMENT




Dated as of June [26], 2007




among




POLYONE CORPORATION




as the Seller,




 






and




POLYONE FUNDING CORPORATION




as the Buyer




 






and




POLYONE CORPORATION




as the Buyer’s Servicer




 






 









 





TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	ARTICLE I DEFINITIONS	 	 	1	 
	SECTION 1.01.
	 	Certain Defined Terms	 	 	1	 
	SECTION 1.02.
	 	Other Terms	 	 	4	 
	SECTION 1.03.
	 	Computation of Time Periods	 	 	4	 
	ARTICLE II SALE OF SELLER RECEIVABLES	 	 	4	 
	SECTION 2.01.
	 	Sale of Seller Receivables	 	 	4	 
	SECTION 2.02.
	 	Terms of Sales	 	 	5	 
	SECTION 2.03.
	 	General Settlement Procedures	 	 	6	 
	SECTION 2.04.
	 	Payments and Computations, Etc	 	 	6	 
	SECTION 2.05.
	 	Buyer's Servicer Fee	 	 	7	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES	 	 	7	 
	SECTION 3.01.
	 	Representations and Warranties of Seller	 	 	7	 
	ARTICLE IV GENERAL COVENANTS OF THE SELLER	 	 	11	 
	SECTION 4.01.
	 	Affirmative Covenants of Seller	 	 	11	 
	SECTION 4.02.
	 	Negative Covenants of Seller	 	 	16	 
	ARTICLE V ADMINISTRATION AND COLLECTION	 	 	18	 
	SECTION 5.01.
	 	Designation of Buyer's Servicer	 	 	18	 
	SECTION 5.02.
	 	Rights of the Buyer and the Agent	 	 	19	 
	SECTION 5.03.
	 	Responsibilities of the Seller	 	 	19	 
	SECTION 5.04.
	 	Further Actions Evidencing Purchases	 	 	20	 
	ARTICLE VI INDEMNIFICATION	 	 	20	 
	SECTION 6.01.
	 	Indemnities by the Seller	 	 	20	 
	ARTICLE VII MISCELLANEOUS	 	 	23	 
	SECTION 7.01.
	 	Amendments, Etc	 	 	23	 
	SECTION 7.02.
	 	Notices, Etc	 	 	23	 
	SECTION 7.03.
	 	Binding Effect; Assignability	 	 	23	 
	SECTION 7.04.
	 	Costs, Expenses and Taxes	 	 	23	 
	SECTION 7.05.
	 	Non-Business Days	 	 	24	 
	SECTION 7.06.
	 	Confidentiality	 	 	24	 
	SECTION 7.07.
	 	Governing Law	 	 	25	 
	SECTION 7.08.
	 	Consent to Jurisdiction	 	 	25	 
	SECTION 7.09.
	 	Execution in Counterparts	 	 	26	 






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TABLE
OF CONTENTS
(continued)







	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	SECTION 7.10.
	 	Intent of the Parties, etc	 	 	26	 
	SECTION 7.11.
	 	Entire Agreement	 	 	26	 
	SECTION 7.12.
	 	Severability of Provisions	 	 	26	 
	SECTION 7.13.
	 	Waiver of Jury Trial	 	 	26	 
	SECTION 7.14.
	 	No Proceedings	 	 	27	 






	 	 	 
	EXHIBITS
	 	 
	 
	 	 
	EXHIBIT A

	 	Form of Receivables Activity Report
	EXHIBIT B

	 	Form of Second Amended and Restated Subordinated Note
	 
	 	 
	SCHEDULES
	 	 
	 
	 	 
	SCHEDULE I

	 	Lock-Box Banks and Lock-Box Accounts
	SCHEDULE II

	 	Description of Credit and Collection Policy
	SCHEDULE III

	 	Forms of Invoices
	SCHEDULE IV

	 	Jurisdiction of Incorporation, Organizational Identification Number, and Location
of Principal Place of Business, Chief Executive Office and Office Where Records
are Kept
	SCHEDULE V

	 	Trade or other names for Seller






ii









 






SECOND AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT




          SECOND AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT dated as of June ___, 2007 (this
“Agreement”) among POLYONE CORPORATION, an Ohio corporation (“PolyOne” or, the
“Seller”), POLYONE FUNDING CORPORATION, a Delaware corporation (the “Buyer”), and
PolyOne, as the Buyer’s Servicer.




PRELIMINARY STATEMENTS:




          (1) The Seller in the ordinary course of business generates, and will generate from time to
time, Receivables (as defined in the Second Amended and Restated Receivables Purchase Agreement, as
defined below) from time to time owing to it.




          (2) The Seller wishes to sell to the Buyer from time to time hereunder all present and future
Receivables in respect of each of which, on the date of the sale of such Receivable to the Buyer
hereunder, the Obligor is a Designated Obligor (as defined in the Second Amended and Restated
Receivables Purchase Agreement, as defined below) (such Receivable being a “Seller
Receivable”), together with the Related Security and Collections (as hereinafter defined) with
respect thereto.




          (3) The Buyer wishes concurrently to sell interests, to the extent of the Receivable Interests
(as defined in the Second Amended and Restated Receivables Purchase Agreement referred to below)
sold from time to time by it to the Purchasers (as defined in the Second Amended and Restated
Receivables Purchase Agreement referred to below), in each of the present and future Seller
Receivables, together with the Related Security and Collections with respect thereto, pursuant to
the Second Amended and Restated Receivables Purchase Agreement dated as of June [___], 2007 (as the
same may from time to time be amended, restated, supplemented or otherwise modified from time to
time, the “Second Amended and Restated Receivables Purchase Agreement”) among the
Buyer, PolyOne, as Servicer thereunder, the Purchasers (as defined below), Citicorp USA, Inc.
(“Citicorp”), as administrative agent (the “Agent”) for the Purchasers and any
other owners of Receivable Interests, Citibank, N.A. and National City Bank, as issuing banks (the
“Issuing Banks”), and National City Business Credit, Inc., as the syndication agent (the
“Syndication Agent”).




          NOW, THEREFORE, in consideration of the premises, the parties hereto agree as follows:




ARTICLE I




DEFINITIONS




          SECTION
1.00. Certain Defined Terms.




          Terms defined in the Second Amended and Restated Receivables Purchase Agreement and not
otherwise defined herein are used in this Agreement as defined in the Second Amended and Restated
Receivables Purchase Agreement. In addition, as used in this Agreement and unless otherwise stated
herein, 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):




          “Agent” has the meaning specified in Preliminary Statement (3).




          “Buyer’s Servicer” has the meaning specified in Section 5.01.




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          “Buyer’s Servicer Fee” has the meaning specified in Section 2.05.




          “Citicorp” has the meaning specified in Preliminary Statement (3).




          “Collections” means, with respect to any Seller Receivable, all cash collections and
other cash proceeds of such Seller Receivable, including, without limitation, (i) all cash proceeds
of the Related Security with respect to such Seller Receivable and (ii) any Collections of such
Seller Receivable deemed to have been received, and actually paid, pursuant to Section 2.03.




          “Contract” means an agreement between the Seller and an Obligor, in any written form
acceptable to the Seller, or in the case of any open account agreement as evidenced by one of the
forms of invoices set forth in Schedule III 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 or services from time to time.




          “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 4.02(c).




          “Indemnified Amounts” has the meaning specified in Section 6.01.




          “Indemnified Party” means any or all of the Buyer, the Issuing Banks, the Purchasers
and the other Owners under the Second Amended and Restated Receivables Purchase Agreement, the
Agent and their respective Affiliates and successors and assigns.




          “Initial Purchase Price” has the meaning specified in Section 2.02(a).




          “Issuing Banks” has the meaning specified in Preliminary Statement (3).




          “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 or the Buyer, (b) the collectibility of the
Seller Receivables, or the ability of the Buyer’s Servicer (if PolyOne or any of its Affiliates) to
collect Seller Receivables, (c) the legality, validity or enforceability of any Transaction
Document, (d) the ability of the Seller to perform its obligations under the Transaction Documents
or the Contracts or (e) the rights and remedies of the Buyer, the Agent, the Purchasers or the
Issuing Banks 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.




          “Obligor” means any Person obligated to make payments pursuant to a Contract.




          “Other Taxes” has the meaning specified in Section 7.04(b).




          “Program” means the receivables program established pursuant to this Agreement and the
Second Amended and Restated Receivables Purchase Agreement.




          “Purchase Price” has the meaning specified in Section 2.02(b).




          “Purchasers” means the Initial Purchasers and each Assignee that shall become a party
to the Second Amended and Restated Receivables Purchase Agreement pursuant to Section 9.01 thereof.




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          “Receivable Assets” has the meaning specified in Section 2.01(a).




          “Receivables Activity Report” means a report prepared by the Seller, pursuant to
Section 2.03(c), in substantially the form attached hereto as Exhibit A.




          “Reimbursement Obligations” means all matured reimbursement or repayment obligations
of the Seller to the Buyer with respect to amounts drawn under Letters of Credit.




          “Related Security” means with respect to any Receivable:





     (i) all of the Seller’s right, title and interest in, under and to all security
agreements or other agreements that relate to such Receivable;




     (ii) all of the Seller’s interest in the goods (including returned goods), if
any, relating to the sale which gave rise to such Receivable;




     (iii) 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 or authenticated by an Obligor describing any collateral securing
such Receivable;




     (iv) all rights in respect of lock-boxes and accounts to which Collections are
sent or deposited, and all funds and investments therein;




     (v) all letter of credit rights, guaranties, insurance and other agreements or
arrangements of whatever character from time to time supporting or securing payment
of such Receivables whether pursuant to the Contract related to such Receivable or
otherwise; and




     (vi) all Records relating to such Receivable.



          “Second Amended and Restated Letter of Credit Agreement” means the Second Amended and
Restated Letter of Credit Agreement dated as of June ___, 2007 among PolyOne and the Buyer, as the
same may from time to time be amended, restated, supplemented or otherwise modified from time to
time.




          “Second Amended and Restated Receivables Purchase Agreement” has the meaning specified
in Preliminary Statement (3).




          “Second Amended and Restated Subordinated Note” means each subordinated promissory
note, in substantially the form of Exhibit B hereto, executed by the Buyer to the order of the
Seller.




          “Seller Receivable” has the meaning specified in Preliminary Statement (2).




          “Solvent” means, with respect to any Person on a particular date, that on such date
(a) the fair value of the property of such Person is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such Person, (b) the present fair salable
value of the assets of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and matured, (c) such Person
does not intend to, and does not believe that it will, incur debts or liabilities beyond such
Person’s ability to pay such debts and liabilities as they

3









 







mature and (d) such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person’s property would constitute an
unreasonably small capital. The amount of contingent liabilities at any time shall be computed as
the amount that, in the 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.




          “Syndication Agent” has the meaning specified in Preliminary Statement (3).




          “Termination Date” means the Termination Date under and as defined in the Second
Amended and Restated Receivables Purchase Agreement.




          “Transaction Documents” means this Agreement, the Second Amended and Restated
Receivables Purchase Agreement, the Second Amended and Restated Subordinated Notes, the Lock-Box
Agreements, the Second Amended and Restated Parent Undertaking, [the Intercreditor Agreement,] the
Second Amended and Restated Consent and Agreement, the Second Amended and Restated Letter of Credit
Agreement and the Second Amended and Restated Fee Letter.




          SECTION
2.00. Other Terms.




          All accounting terms not specifically defined herein shall be construed in accordance with
GAAP. All terms used in Article 9 in the UCC in the State of New York and not specifically defined
herein are used herein as defined in such Article 9.




          SECTION
3.00. 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 each of
the words “to” and “until” means “to but excluding”.




ARTICLE II




SALE OF SELLER RECEIVABLES




          SECTION
1.00. Sale of Seller Receivables.




          ( ) The Seller hereby sells, transfers and assigns, without recourse (except as expressly
provided herein), to the Buyer, on the terms and subject to the conditions specifically set forth
herein, all of the Seller’s right, title and interest in, to and under all Seller Receivables
existing on the date hereof and hereafter created from time to time until the Termination Date, all
Related Security and Collections with respect thereto and all proceeds of the foregoing, together
with all of the Seller’s rights, remedies, powers and privileges with respect to such Seller
Receivables (collectively, the “Receivable Assets”).




          ( ) The parties to this Agreement intend that the transactions contemplated hereby shall be,
and shall be created as, a purchase by the Buyer and a sale by the Seller of Receivable Assets and
not as a lending transaction. The foregoing sales, transfers and assignments do not constitute and
are not intended to result in a creation or assumption by the Buyer of any obligation or liability
with respect to any Seller Receivable or Contract, nor shall the Buyer be obligated to perform or
otherwise be responsible for any obligation of the Seller or any other Person in connection with
any Receivable Assets or under any agreement or instrument relating thereto.




4









 








          ( ) In connection with the foregoing sales, transfers and assignments, the Seller agrees to
record and file, at its own expense, proper financing statements (and proper continuation
statements with respect to such financing statements when applicable) with respect to the
Receivable Assets now and hereafter from time to time acquired by the Buyer under this Agreement,
in such manner and in such jurisdictions as are necessary to perfect the sales, transfers and
assignments of the Receivable Assets to the Buyer hereunder, and to deliver copies of such
financing statements to the Buyer and the Agent on or prior to the initial Purchase under the
Second Amended and Restated Receivables Purchase Agreement. Such financing statements shall name
the Seller as debtor/seller, the Buyer as secured party/buyer and the Agent as assignee.




          SECTION
2.00. Terms of Sales.




          ( ) The Buyer and PolyOne hereby confirm that on May 6, 2003, the Buyer accepted from PolyOne
and PEFI, and PolyOne and PEFI sold, transferred and assigned to the Buyer, all of PolyOne’s and
PEFI’s respective right, title and interest in, to and under those Receivable Assets that were
outstanding on such date. As consideration for such sale, transfer and assignment of Receivable
Assets on such date, the Buyer paid (or caused to be paid) to PolyOne and PEFI on such date an
amount (PolyOne’s or PEFI’s, as applicable, “Initial Purchase Price”) agreed upon prior to
such date, between PolyOne or PEFI and the Buyer to be reasonably equivalent value for such
Receivable Assets as of such date. The Buyer and PolyOne hereby confirm that on May 6, 2003, the
Buyer paid to PolyOne and PEFI as part of the total Initial Purchase Price the total amount which
the Purchasers paid to the Buyer in Capital on such date under the Prior Sale Agreement.




          ( ) The Buyer and PolyOne hereby confirm that on each Business Day after May 6, 2003 through
the date of this Agreement, the Buyer has accepted from PolyOne and PEFI, and PolyOne and PEFI
sold, transferred and assigned to the Buyer, all of PolyOne’s and PEFI’s right, title and interest
in, to and under those Receivable Assets that were created on such Business Day. The Buyer and
PolyOne hereby confirm that, as consideration for such continuing sales, transfers and assignments
of Receivable Assets, the Buyer paid (or caused to be paid) to PolyOne and PEFI an amount equal to
the purchase price therefor agreed upon prior to the date of such sale, transfer and assignment,
between PolyOne and PEFI and the Buyer to be reasonably equivalent value for such Receivable Assets
as of the date of such sale, transfer and assignment.




          ( ) On each Business Day after the date hereof until the Termination Date the Buyer shall
accept from the Seller, and the Seller shall sell, transfer and assign to the Buyer, all of the
Seller’s right, title and interest in, to and under those Receivable Assets that are created on
such Business Day. As consideration for such continuing sale, transfer and assignment of
Receivable Assets after the date hereof, the Buyer shall pay (or cause to be paid) to the Seller an
amount (the “Purchase Price”) agreed upon prior to the date of such sale, transfer and
assignment, between the Seller and the Buyer to be reasonably equivalent value for such Receivable
Assets as of the date of such sale, transfer and assignment.




          ( ) The Purchase Price other than the Seller’s Initial Purchase Price, and the balance, if
any, of the Seller’s Initial Purchase Price to be so paid by the Buyer on the date hereof, in
accordance with the last sentence of subsection (a) of this Section 2.02, shall be paid in any of
the following ways:





     ( ) in cash paid to the Seller in U.S. Dollars in same day funds on or before the next
occurring Yield Payment Date or the date hereof; or




     ( ) upon the agreement of the Seller and the Buyer, by means of indebtedness owed by
the Buyer to the Seller evidenced by, and payable with interest pursuant to, a Second
Amended and Restated Subordinated Note payable to the order of the Seller; or



5









 






     ( ) a combination of the above.



          ( ) In addition to the methods of payment specified in subsection (d) of this Section 2.02 the
Purchase Price may be paid in any of the following ways:





     ( ) upon the agreement of PolyOne and the Buyer, by means of capital contributed by
PolyOne to the Buyer in the form of Receivable Assets sold, transferred and assigned during
such Yield Period or on the date hereof, as the case may be, and the Purchase Price, or such
balance of the Initial Purchase Price, as the case may be, shall be considered paid in full
by reflecting such contribution as an addition to surplus of the Buyer at an appropriate
value; or




     ( ) a combination of any of the payment methods set forth above or in subsection (d)
of this Section 2.02.



          SECTION
3.00. General Settlement Procedures.




          ( ) If on any day the Outstanding Balance of a Seller 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 (ii) reduced or canceled as a result of a setoff in respect of any claim by the
Obligor thereof against the Seller or any Affiliate thereof other than the Buyer (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 4.01(i). If on any day
any of the representations or warranties in Section 3.01(f) is no longer true with respect to any
Seller Receivable, the Seller shall be deemed to have received on such day a Collection in full of
such Seller 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 4.01(i). Except as stated in
the preceding sentences of this Section 2.03 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.




          ( ) The Buyer’s Servicer shall immediately advise the Buyer and the Agent of each Liquidation
Day.




          ( ) At least two Business Days before each Yield Payment Date, the Buyer’s Servicer shall
prepare and forward to the Buyer and the Agent a Receivables Activity Report of the Buyer’s
Servicer, as of the close of business of the Buyer’s Servicer on the last day of the immediately
preceding Yield Period, setting forth the calculation of the actual Purchase Price for each
Receivable Asset sold, transferred and assigned during such Yield Period, and the reconciliation of
how the Purchase Price has been paid reflecting the cash advanced from the Buyer to the Seller
during such Yield Period, the adjustments to and current balance, if any, due from the Buyer to the
Seller under its Second Amended and Restated Subordinated Note, and the amount of additional cash,
if any, to be paid by the Buyer to the Seller on such Yield Payment Date.




          SECTION
4.00. Payments and Computations, Etc.




          ( ) All amounts to be paid or deposited by the Seller or the Buyer’s Servicer hereunder shall
be paid or deposited in accordance with the terms hereof no later than 11:00 a.m. (New York City
time) on the day when due in U.S. Dollars, in same day funds to the Buyer as directed by the



6









 








Buyer to the Seller or the Buyer’s Servicer in writing. The Seller shall, to the extent
permitted by law, pay to the Buyer 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.




          ( ) All computations of interest and 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.




          ( ) [Reserved].




          ( ) The Seller hereby irrevocably and unconditionally waives and relinquishes to the fullest
extent it may legally do so (i) any express or implied vendor’s lien, and any other lien, security
interest, charge or encumbrance, which would otherwise be imposed on or affect any Seller
Receivable or any Receivable Asset on account of any unpaid amount of the Seller’s Initial Purchase
Price or any Purchase Price therefor or on account of any other unpaid amounts otherwise payable by
the Buyer under or in connection with this Agreement or the Second Amended and Restated
Subordinated Note payable to the order of the Seller or otherwise and (ii) with respect to the
obligations of the Seller to make payments or deposits under this Agreement (including, without
limitation, payments under Sections 2.03 and 6.01), any setoff, counterclaim, recoupment, defense
and other right or claim which the Seller may have against the Buyer as a result of or arising out
of the failure of the Buyer to pay any amount on account of the Seller’s Initial Purchase Price or
any Purchase Price under Sections 2.01 and 2.02 or any other amount payable by the Buyer to the
Seller under this Agreement or the Second Amended and Restated Subordinated Note payable to the
order of the Seller or otherwise.




          SECTION
5.00. Buyer’s Servicer Fee.




          The Buyer shall pay to the Buyer’s Servicer a collection fee (the “Buyer’s Servicer
Fee”) from the date hereof until the Termination Date, payable on each Yield Payment Date, in
an amount equal to the amount payable to the Servicer under the Second Amended and Restated
Receivables Purchase Agreement or such other amount calculated on an arm’s-length basis for
services performed as a subcontractor on terms common to collection agency arrangements in
comparable asset sale transactions; provided, however, that the Buyer shall be
given a credit against the Buyer’s Servicer Fee payable under this Agreement equal to the full
amount of the Servicer Fee paid under the Second Amended and Restated Receivables Purchase
Agreement.




ARTICLE III




REPRESENTATIONS AND WARRANTIES




          SECTION
1.00. Representations and Warranties of Seller.




          The Seller represents and warrants, as of the date hereof and the date of each transfer of
Seller Receivables hereunder, before and after giving effect to such transfer, 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 transfer, in which case, as of such date, as
follows:




          ( ) The Seller is a corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation 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

7









 








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 execution, delivery and performance by the Seller of the Transaction Documents to
which it is a party and the other documents to be delivered by it thereunder, and the transactions
contemplated hereby and thereby, including the Seller’s use of the proceeds of the sales, transfers
and assignments of Receivable Assets hereunder, are within the Seller’s corporate powers, have been
duly authorized by all necessary corporate action, do not (i) contravene the Seller’s charter,
articles, by-laws 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 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.




          ( ) 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 to be delivered
thereunder, or for the perfection of or the exercise by any Indemnified Party of its rights and
remedies under such Transaction Document and such other agreements or documents, except for the
filings of the financing statements referred to in Section 2.01(c) and in Article III of the Second
Amended and Restated Receivables Purchase Agreement.




          ( ) 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.




          ( ) 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.




          ( ) Immediately prior to each sale, transfer and/or assignment by the Seller of any Receivable
Assets hereunder, the Seller is the legal and beneficial owner of such Receivable Assets, free and
clear of any Adverse Claim. Upon each sale, transfer and/or assignment by the Seller of each
Receivable Asset hereunder, the Buyer shall have a valid and perfected first priority undivided
100% ownership interest or security interest in such Receivable Asset free and clear of any Adverse
Claim except as created by this Agreement and the Second Amended and Restated Receivables Purchase
Agreement. No effective financing statement or other filing or instrument similarly in effect
covering any Contract or any Receivable Assets is on file in any recording office, except those
filed in favor of the Buyer and the Agent relating to this Agreement or the Prior Sale Agreement or
in favor of the Agent and relating to the Second Amended and Restated Receivables Purchase
Agreement or the Prior Agreement.




          ( ) No proceeds of any sale, transfer and/or assignment by the Seller of any Seller Receivable
hereunder 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, as amended.




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          ( ) No proceeds of any sale, transfer and/or assignment by the Seller of any Seller Receivable
hereunder will be used to purchase or carry any “margin stock” (as defined or used in the
regulations of the Board of Governors of the Federal Reserve System) in contravention of the
requirements of Regulation T, U or X promulgated by the Board of Governors of the Federal Reserve
System from time to time. The Buyer is not engaged in the business of extending credit for the
purpose of purchasing or carrying any margin stock.




          ( ) Each Receivables Activity Report, Seller Report and 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 Buyer or the
Agent or any Owner in connection with this Agreement or the Second Amended and Restated Receivables
Purchase Agreement is or 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.




          ( ) 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 Receivable Assets, are as set forth in
Schedule IV hereto (or, by notice to the Buyer and the Agent in accordance with Section 4.01(e), at
such other locations in jurisdictions, within the United States, where all actions required by
Section 5.04(a) have been taken and completed).




          ( ) 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 Buyer or the Seller) of, the Lock-Box Accounts
of the Seller 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 Buyer and the Agent in
accordance with Section 4.02(d)).




          ( ) Except as set forth on Schedule V hereto, the Seller has not changed its name within the
last five years, and has no trade names, fictitious names, assumed names or “doing business as”
names.




          ( ) The Purchase Price payable on each Yield Payment Date pursuant to Section 2.02(b) for the
Seller’s Receivable Assets created after such date constitutes fair consideration and approximates
fair market value for such Receivable Assets, and the terms and conditions (including, without
limitation, such Purchase Price therefor, and the terms of the Second Amended and Restated
Subordinated Notes, if applicable) of the sale, transfer and assignment of such Receivable Assets
pursuant to Sections 2.01 and 2.02 reasonably approximate an arm’s-length transaction between
unaffiliated parties. No such sale, transfer or assignment has been made for or on account of an
antecedent debt owed by the Seller to the Buyer and no such sale, transfer or assignment, at the
time such sale, transfer or assignment is made, is or may be voidable or subject to avoidance under
any section of the U.S. Bankruptcy Code.




          ( ) The Seller has filed, or caused to be filed or be included in, all tax reports and returns
(federal, state, 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 (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

9









 







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 Second
Amended and Restated Receivables Purchase Agreement.




          ( ) The consolidated audited balance sheet of PolyOne and its subsidiaries as at December 31,
2006, and the related consolidated audited statements of income and retained earnings and of cash
flows of PolyOne and its Subsidiaries for the fiscal year then ended, fairly present the
consolidated financial condition of PolyOne and its Subsidiaries as at such date, and the
consolidated results of the operations and cash flows of PolyOne and its Subsidiaries for the
periods ended on such date, all in accordance with generally accepted accounting principles applied
on a consistent basis.




          ( ) The Seller is in compliance in all material respects with the presently applicable
provisions of ERISA and the Code.




          ( ) The Seller has not sold, assigned, transferred, pledged or hypothecated any interest in
any Receivable Assets 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.




          ( ) 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.




          ( ) 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.




          ( ) The Seller has not extended or modified the terms of any Seller Receivable or the Contract
under which any such Seller Receivable arose, except in accordance with the Credit and Collection
Policy and in accordance with Section 6.02(b) of the Second Amended and Restated Receivables
Purchase Agreement.




          ( ) 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.




          ( ) The Seller is Solvent.




          ( ) The Seller is not (i) a party to any contractual obligation the compliance with one or
more of which would have, in the aggregate, a Material Adverse Effect or the performance of which,
either unconditionally or upon the happening of an event, would result in the creation of a Lien
(other than a Lien created by, arising under or relating to the 105/8% Senior Notes, or a Lien
created by, arising under or relating to this Agreement, the Second Amended and Restated
Receivables Purchase Agreement, or any other Transaction Document) on the assets of the Seller or
(ii) subject to one or more charter or corporate restrictions that would, in the aggregate, have a
Material Adverse Effect. The Seller is not in default under or with respect to any contractual
obligation owed by it other than those defaults that, in the aggregate, would not have a Material
Adverse Effect.




          ( ) No Event of Termination or Potential Event of Termination has occurred and is continuing.




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          ( ) The Seller is not (a) 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 or (b) a “holding company” or an “affiliate” or a
“subsidiary company” of a “holding company”, as each such term is defined and used in the Public
Utility Holding Company Act of 2005, enacted as part of the Energy Policy Act of 2005, Pub. L. No.
109-58 as codified at §§ 1261 et seq., and the regulations adopted thereunder, as amended.




          ( ) The proceeds of the sale of the Receivable Assets under this Agreement will be used for
general corporate purposes.




          ( ) All policies of insurance of any kind or nature of the Seller, including policies of
life, fire, theft, product liability, public liability, property damage, other casualty, employee
fidelity, workers’ compensation and employee health and welfare insurance, are in full force and
effect and are of a nature and provide such coverage as is sufficient and as is customarily carried
by businesses of the size and character of such Person. The Seller has not been refused insurance
for any material coverage for which it had applied or had any policy of insurance terminated (other
than at its request).




          ( ) There are no strikes, work stoppages, slowdowns or lockouts pending or, to the Seller’s
knowledge, threatened against or involving the Seller, other than those that, in the aggregate,
would not have a Material Adverse Effect. There are no unfair labor practices, grievances,
complaints or arbitrations pending, or, to the Seller’s knowledge, threatened, against or involving
the Seller, other than those that, in the aggregate, would not have a Material Adverse Effect.




          ( ) The operations of the Seller have been and are in compliance with all environmental laws,
including obtaining and complying with all required environmental, health and safety permits, other
than non-compliances that, in the aggregate, would not have a Material Adverse Effect. Neither the
Seller nor any real property currently or, to the knowledge of the Seller, previously owned,
operated or leased by or for the Seller is subject to any pending or, to the knowledge of the
Seller, threatened, claim, order, agreement, notice of violation, notice of potential liability or
is the subject of any pending or threatened proceeding or governmental investigation under or
pursuant to any such laws, to the knowledge of the Seller, other than those that, in the aggregate,
would not have a Material Adverse Effect.




          ( ) The Seller owns or licenses or otherwise has the right to use all licenses, permits,
patents, patent applications, trademarks, trademark applications, service marks, trade names,
copyrights, copyright applications, Internet domain names, franchises, authorizations and other
intellectual property rights that are necessary for the operations of its business, without
infringement upon or conflict with the rights of any other Person with respect thereto, including
all trade names set forth on Schedule V hereto. To the Seller’s knowledge, no license, permit,
patent, patent application, trademark, trademark application, service mark, trade name, copyright,
copyright application, Internet domain name, franchise, authorization, other intellectual property
right, slogan or other advertising device, product, process, method, substance, part or component,
or other material now employed, or now contemplated to be employed, by the Seller infringes upon or
conflicts with any rights owned by any other Person, and no claim or litigation regarding any of
the foregoing is pending or, to the knowledge of the Seller, threatened.




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ARTICLE IV




GENERAL COVENANTS OF THE SELLER




          SECTION
1.00. Affirmative Covenants of Seller .




          Until the later of (i) the Termination Date and (ii) the date upon which no Capital Investment
for any Receivable Interest shall be existing and no Yield, Letter of Credit Obligations, fees or
other amounts remain unpaid under this Agreement and the Second Amended and Restated Receivables
Purchase Agreement, the Seller shall, unless the Buyer and the Agent (with the consent of the
Required Purchasers) shall otherwise consent in writing:




          ( ) Compliance with Laws, Etc. Comply in all material respects with all applicable
laws, rules, regulations and orders with respect to it and all Receivable Assets and related
Contracts, Related Security and Collections with respect thereto.




          ( ) Payment of Taxes, Etc. Pay and discharge, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon
its property and (ii) all lawful claims that, if unpaid, might by law become a lien upon its
property; provided, however, that the Seller shall not be required to pay or
discharge any such tax, assessment, charge or claim that is being contested in good faith and by
appropriate proceedings and as to which appropriate reserves are being maintained.




          ( ) Maintenance of Insurance. Maintain insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks as is usually carried
by companies engaged in similar businesses and owning similar properties in the same general areas
in which the Seller operates with such deductibles or self-insured retentions as are in accordance
with normal industry practice.




          ( ) Preservation of Corporate Existence, Etc. 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 Buyer, the Owners or the Agent hereunder, under the Second Amended and Restated Receivables
Purchase Agreement or in the Receivable Assets and Related Security, or the ability of the Seller
or the Buyer’s Servicer to perform their respective obligations hereunder, under the Second Amended
and Restated Receivables Purchase Agreement or under the Contracts; provided,
however, that the Seller may consummate any amalgamation, merger or consolidation permitted
under Section 4.02(i).




          ( ) Offices, Records and Books of Accounts.





     ( ) Keep its principal place of business and chief executive office and the offices
where it keeps its Records concerning the Receivable Assets at the address of the Seller
referred to in Section 3.01(j) or, upon at least thirty days’ prior written notice to the
Buyer and Agent, at any other location in a jurisdiction where all action required by
Section 5.04(a) shall have been taken, and




     ( ) maintain and implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Seller 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 Seller
Receivables



12









 






(including, without limitation, records adequate to permit the daily identification of
each Seller Receivable, the Outstanding Balance of each Seller Receivable and the dates
which payments are due thereon and all Collections of and adjustments to each existing
Seller Receivable).



          ( ) 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 Seller Receivables,
and timely and fully comply in all material respects with the Credit and Collection Policy in
regard to the Seller Receivables and the related Contracts and (ii) as beneficiary of any Related
Security, enforce such Related Security as reasonably requested by the Agent.




          ( ) Examination of Records; Audits.





     ( ) From time to time upon two (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 Buyer or the Agent and at the expense of the Seller,
permit the Buyer or the Agent, or their respective 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, its Affiliates or the agents of the Seller or its 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 Seller, its Affiliates or the agents of
the Seller or its 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 Seller’s performance hereunder or under the Contracts with any of the
officers or employees of the Seller having knowledge of such matters.




     ( ) At any time and from time to time, upon the Buyer’s or the Agent’s request and at
the expense of the Seller, the Seller shall cause independent public accountants or others
satisfactory to the Buyer and the Agent, to furnish to the Buyer and the Agent, reports
showing reconciliations, aging and test verifications of, and trial balances for, the Seller
Receivables and/or a written report of an audit conducted by such accountants with respect
to the Seller Receivables, Credit and Collection Policy, Lock-Box Account activity and the
Seller’s performance of its obligations under this Agreement and the Second Amended and
Restated Receivables Purchase Agreement on a scope and in a form reasonably requested by the
Buyer or the Agent, as the case may be, for such audit; provided, however,
that unless an Event of Termination or Potential Event of Termination shall be continuing,
the Buyer or the Agent shall request no more than one (1) such report during any calendar
year.




     ( ) The Seller shall conduct, or shall cause to be conducted, at its expense and upon
request of the Buyer or the Agent, and present to the Buyer and the Agent for approval, such
appraisals, investigations and reviews as the Buyer and 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 Buyer and the Agent any information that the Buyer and 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.



13









 






     ( ) Keeping of Records and Books of Account.




     ( ) 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;




     ( ) 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 Receivable Assets have been conveyed to the Buyer; and




     ( ) to the extent such Records constitute computer programs and other non-written
Records, appropriately legend such Records to reflect that the Receivable Assets have been
conveyed to the Buyer.



          ( ) Deposits to Lock-Box Accounts. Instruct, or cause the Buyer’s Servicer to
instruct, all Obligors to make payments in respect of Seller Receivables to a Lock-Box Account and,
if the Seller shall otherwise receive any Collections (including, without limitation, any
Collections deemed to have been received by the Seller pursuant to Section 2.03), segregate and
hold in trust such Collections and deposit such Collections, or cause such Collections to be
deposited, to a Lock-Box Account within two (2) Business Days following such receipt.




          ( ) Reporting Requirements. Until the later of (x) the Termination Date and (y) the
date upon which no Capital Investment for any Receivable Interest shall be existing and no Yield,
Letter of Credit Obligations, fees or other amounts remain unpaid under this Agreement and the
Second Amended and Restated Receivables Purchase Agreement, the Seller will, unless the Buyer and
the Agent (with the consent of the Required Purchasers) shall otherwise consent in writing, furnish
to the Buyer and the Agent:





     ( ) 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 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, in each case certified by the
chief financial officer, treasurer or other Responsible Officer acceptable to the Agent of
such Seller as fairly presenting the Consolidated financial position of the Seller 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.




     ( ) Annual Reports. Within 95 days after the end of each Fiscal Year,
financial information regarding the Seller and its Subsidiaries consisting of Consolidated
balance sheets of the Seller and its Subsidiaries as of the end of such year and related
statements of income and cash flows of the Seller 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, without limitation, as to the scope
of the audit or as to the Seller being a going concern by the Seller’s independent public
accountants, together with the report of such accounting firm stating that (A) such
financial statements fairly present the Consolidated financial position of the Seller and
its Subsidiaries as at the dates indicated and the results of 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 the Seller’s independent public accountants shall
concur



14









 







and that shall have been disclosed in the notes to the financial statements) and (B)
the examination by the Seller’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 the Seller and its Subsidiaries such accounting firm has
obtained no knowledge that a Potential Event of Termination or 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.




     ( ) Notice of Event of Termination. As soon as possible and in any event
within two (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.




     ( ) Proceedings. Promptly after the commencement thereof, notice of all
actions and proceedings before any court or governmental agency or arbitrator or other
authority affecting the Seller of the type described in Section 3.01(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 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.




     ( ) Public and Creditors’ Reports. Promptly after the sending or filing
thereof, copies of (A) all reports the Seller sends to its security holders generally, (B)
all reports and registration statements that the Seller 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 other
statements concerning material changes or developments in the business of the Seller made
available by the Seller or any of its domestic Subsidiaries to the public or any other
creditor.




     ( ) Other. Upon demand, such other information, documents, records or reports
respecting the Seller Receivables, the Related Security, the Contracts or the condition or
operations, financial or otherwise, of the Seller as the Buyer or the Agent may from time to
time reasonably request.



          ( ) Subsidiaries. Maintain the status of each of PolyOne Canada, each other
Originator (if any) and the Buyer as wholly owned subsidiaries of PolyOne.




          ( ) Conduct of Business. Conduct its business consistent with past practice and use
its reasonable efforts, in the ordinary course and consistent with past practice, to preserve its
business and the goodwill and business of its customers, advertisers, suppliers and others having
business relations

15









 








with the Seller, except where the failure to do so would not, in the aggregate, have a
Material Adverse Effect.




          ( ) 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 to which it is
a party in full force and effect, enforceable 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
2.00. Negative Covenants of The Seller .




          Until the later of (i) the Termination Date and (ii) the date on which no Capital Investment
of any Receivable Interest shall be existing and no Yield, Letter of Credit Obligations, fees or
other amounts remain unpaid under this Agreement or the Second Amended and Restated Receivables
Purchase Agreement, the Seller shall not, without the prior written consent of the Buyer and the
Agent (with the consent of the Required Purchasers):




          ( ) 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, any Receivable Asset, or upon
or with respect to any related Contract or any deposit account to which any Collections of any
Seller Receivables are sent (including, without limitation, any Lock-Box Account), or assign any
right to receive income in respect thereof; provided, however, that the Seller
may, with the prior written consent of the Agent, sell or assign such Receivable Asset, related
Contract or deposit account in respect thereof for consideration consisting solely of cash.




          ( ) Extension or Amendment of Receivables. Except as otherwise permitted in the
Second Amended and Restated Receivables Purchase Agreement, extend, amend or otherwise modify the
terms of any Seller Receivable, or amend, modify or waive any term or condition of any Contract
related thereto.




          ( ) 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 Seller Receivables.




          ( ) 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.




          ( ) 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 Seller Receivables.




          ( ) Change of Name, Etc. Change its name, identity, form of legal structure or
jurisdiction of its organization, unless, prior to the effective date of any such change, the
Seller delivers to the Buyer and the Agent (i) UCC financing statements necessary to reflect such
change and to continue

16









 








the perfection of the Buyer’s ownership interests in the Receivable Assets sold, transferred
and assigned hereunder, 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.




          ( ) Accounting of Purchases. Account for (including for accounting and tax purposes)
or otherwise treat the transactions contemplated by this Agreement or prepare any financial
statements which shall account for the transactions contemplated hereby, in each case, in any
manner other than the sale of the Receivable Assets by the Seller to the Buyer or in any other
respect account for or treat the transactions contemplated hereby (including but not limited to
accounting purposes, but excluding tax reporting purposes) in any manner other than as a sale of
the Receivable Assets by the Seller to the Buyer.




          ( ) Voluntary Petitions. Cause the Buyer to file a voluntary petition under the U.S.
Bankruptcy Code or any other bankruptcy or insolvency laws so long as the Buyer is not “insolvent”
within the meaning of the U.S. Bankruptcy Code, and unless, and only unless, such filing has been
authorized in accordance with the Buyer’s charter and by-laws.




          ( ) Mergers, Etc. Enter into a transaction of consolidation, merger or amalgamation
with any Person unless (i) before and after giving effect on a pro forma basis to such
consolidation, merger or amalgamation, no event shall have occurred and be continuing, or would
result from such consolidation, merger or amalgamation, that constitutes an Event of Termination or
Potential Event of Termination and (ii) such Person is not the Buyer and either (A) the Seller
shall survive such consolidation or merger or (B) such other corporation or entity formed by such
consolidation or into which the Seller shall be merged or amalgamated shall assume, in a writing on
terms reasonably satisfactory to the Buyer and the Agent, all of the Seller’s rights, obligations
and liabilities under the Transaction Documents and all the other instruments or documents
delivered or to be delivered thereunder.




          ( ) Maintenance of Separate Existence. Take any action, or omit to take any action,
if the effect is to cause the Buyer to fail to perform or observe in any material respect the
covenants contained in Sections 5.01(h) and (i) of the Second Amended and Restated Receivables
Purchase Agreement or to otherwise cause the Buyer not to be considered as legal entity separate
and distinct from the Seller.




          ( ) Organization. Change its capital structure (including, without limitation,
redeeming, repurchasing or changing the terms of, its outstanding Stock) or otherwise amend its
charter, code of regulations or by-laws; or cause or permit the Buyer’s charter or by-laws to be
amended, supplemented or otherwise modified.




          ( ) Capital Stock. Cause or permit to be issued to, or cause or permit to be
transferred to, any Person (other than the Seller or any wholly-owned direct or indirect
Subsidiary thereof) any shares of the Buyer’s Stock; or create or suffer to exist any Lien upon or
with respect to any of the Buyer’s Stock.




          ( ) 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.




17









 








          ( ) Asset Sales. Except as otherwise provided herein, 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 single transactions, 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:





     ( ) the sale or other disposition of inventory in the ordinary course of business;




     ( ) 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




     ( ) 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 at any time after the Amendment and Restatement
Effective Date, conveyed, transferred, leased or disposed, $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.



          ( ) Liens, Etc. Create or suffer to exist any Lien upon or with respect to any of its
respective properties or assets, whether now owned or hereafter acquired, or assign, or permit any
of its Subsidiaries (other than the Buyer) to assign, any right to receive income, except for the
following:





     ( ) Liens created by, pursuant to, arising under or relating to this Agreement, the
Second Amended and Restated Receivables Purchase Agreement or any other Transaction
Document;




     ( ) [subject to the Intercreditor Agreement, Liens created by, arising under or
relating to the 105/8% Senior Notes;]




     ( ) Liens existing on the date hereof; provided, however, that such Liens shall not
be permitted with respect to any Receivable Assets unless such Liens arise under, were
created by or were incurred pursuant to any of the Prior Sale Agreement, the Prior
Agreement, this Agreement, the Second Amended and Restated Receivables Purchase Agreement or
any other Transaction Document; and




     ( ) statutory liens and other liens created in the ordinary course of business.



          ( ) Transactions with Affiliates. Except as otherwise contemplated by this Agreement,
the Second Amended and Restated Receivables Purchase Agreement, or any Transaction Document: (i)
make any Investment in an Affiliate of the Seller that is not a Subsidiary of the Seller; (ii)
transfer, sell, lease, assign or otherwise dispose of any asset to any Affiliate of the Seller that
is not a Subsidiary of the Seller; (iii) merge into or consolidate or amalgamate with or purchase
or acquire assets from any Affiliate of the Seller that is not a Subsidiary of the Seller; or (iv)
prepay any Indebtedness to any Affiliate of the Seller that is not a Subsidiary of the Seller.




          ( ) Speculative Transactions. Engage in any transaction involving hedging contracts
or other similar speculative transactions except for the sole purpose of hedging in the normal
course of business and consistent with industry practices.




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ARTICLE V




ADMINISTRATION AND COLLECTION




          SECTION
1.00. Designation of Buyer’s Servicer.




          The Seller Receivables shall be serviced, administered and collected by the Person (the
“Buyer’s Servicer”) designated from time to time to perform the duties of the Servicer
under the Second Amended and Restated Receivables Purchase Agreement in accordance with Section
6.01 of the Second Amended and Restated Receivables Purchase Agreement, and shall be serviced,
administered and collected by the Buyer’s Servicer in the manner set forth in Section 6.02 of the
Second Amended and Restated Receivables Purchase Agreement (including by subcontracting to any
Originator pursuant to Section 6.01 of the Second Amended and Restated Receivables Purchase
Agreement. Until the Agent designates a new Servicer in accordance with Section 6.01 of the Second
Amended and Restated Receivables Purchase Agreement, PolyOne is hereby designated to act as, and
PolyOne hereby agrees to perform the duties and obligations of, the Buyer’s Servicer hereunder.




          SECTION
2.00. Rights of the Buyer and the Agent.




          ( ) Each of the Buyer and the Agent acting together or alone may notify the Obligors of Seller
Receivables, at any time and at the Seller ‘s expense, of the Buyer’s interest in the Seller
Receivables and the ownership of Receivable Interests by the Owners. The Seller hereby transfers
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.




          ( ) At any time:





     ( ) Each of the Buyer and the Agent acting together or alone may, at the expense of the
Seller, direct the Obligors of the Seller Receivables, or any of them, to make payment of
all amounts due or to become due to the Seller under Seller Receivables directly to the
Agent or its designee.




     ( ) The Seller shall, at the Buyer’s or the Agent’s request and at the Seller’s
expense, give notice of such ownership to such Obligors and direct them to make such
payments directly to the Agent or its designee.




     ( ) The Seller shall, at the Buyer’s or the Agent’s request and at the Seller’s
expense, (A) assemble all of the Records that evidence or relate to the Receivable Assets,
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 of Seller Receivables in a manner reasonably
acceptable to the Agent and, 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.




     ( ) The Agent may take any and all reasonably commercial steps in the name of the
Seller and on behalf of the Seller, the Buyer and the Owners that are necessary or
desirable, in the determination of the Agent, to collect amounts due under the Seller
Receivables, including, without limitation, endorsing the Seller’s name on checks and other
instruments representing Collections of Seller Receivables and enforcing the Seller
Receivables and the Related Security



19









 







and related contracts, and adjusting, settling or compromising the amount or payment
thereof, in the same manner and to the same extent as the Seller might have done.



          SECTION
3.00. Responsibilities of the Seller.




          Anything herein to the contrary notwithstanding:




          ( ) The Seller shall perform its obligations under the Contracts related to the Seller
Receivables to the same extent as if the Receivable Assets had not been sold and the exercise by
the Buyer or the Agent of its rights hereunder or under the Second Amended and Restated Receivables
Purchase Agreement shall not release the Buyer’s Servicer or the Seller from any of its duties or
obligations with respect to any Seller Receivables or under the related Contracts; and



          ( ) Neither the Buyer nor the Agent nor the Owners nor any other Indemnified Party shall have
any obligation or liability with respect to any Seller Receivables or related Contracts, nor shall
any of them be obligated to perform any of the obligations of the Seller thereunder.



          SECTION
4.00. Further Actions Evidencing Purchases.




          ( ) The Seller 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 Buyer or the Agent may reasonably request, to perfect, protect or more fully evidence
the sale, transfer and assignment of Receivable Assets by the Seller to the Buyer hereunder and the
Receivable Interests purchased by the Owners under the Second Amended and Restated Receivables
Purchase Agreement, or to enable any of them or the Agent to exercise and enforce their respective
rights and remedies hereunder or under the Second Amended and Restated Receivables Purchase
Agreement. Without limiting the foregoing, the Seller will, upon the request of the Buyer or the
Agent, in order to perfect, protect or evidence such sales, transfers and assignments and such
Receivable Interests: (i) execute, authenticate and/or file such financing or continuation
statements or amendments thereto, and such other instruments and documents, that may be necessary,
or that the Buyer or the Agent may reasonably request; (ii) mark conspicuously each invoice
evidencing each Seller Receivable and the related Contract with a legend, acceptable to the Buyer
or the Agent, as applicable, evidencing that such Seller Receivables have been sold, transferred
and assigned to the Buyer in accordance with this Agreement; and (iii) mark its master data
processing records evidencing such Seller Receivables and related Contracts with such legend.




          ( ) The Seller hereby authorizes each of the Buyer and the Agent acting together or alone
(upon prior written notice to the Seller) to file one or more financing or continuation statements
and amendments thereto relating to all or any of the Receivable Assets without the signature of the
Seller where permitted by law. A photocopy or other reproduction of this Agreement shall be
sufficient as a financing statement or other applicable filing where permitted by law.




          ( ) If PolyOne in its capacity as Buyer’s Servicer fails to perform any of its obligations
hereunder, the Buyer or the Agent may, upon prior written notice to PolyOne, itself perform, or
cause performance of, such obligation, and the reasonable costs and expenses of the Agent or the
Buyer incurred in connection therewith shall be payable by the Seller under Section 6.01 or 7.04,
as applicable.




20









 








ARTICLE VI




INDEMNIFICATION




          SECTION
1.00. Indemnities by the Seller.




          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 attorneys’ fees and expenses) (all of the foregoing
being collectively referred to as “Indemnified Amounts”) arising out of, or resulting from,
in whole or in part, the activities of the Seller in connection herewith or with any other
Transaction Document or the use of proceeds of sales, transfers and assignments of Receivable
Assets hereunder; excluding, however, Indemnified Amounts to the extent resulting
solely and directly 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 Seller 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:





     ( ) any Receivable becoming a Seller Receivable which is not at the date of its sale,
transfer and assignment hereunder an Eligible Receivable;




     ( ) 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 Receivables Activity Report, Seller Report, Receivables Report or other
document delivered or to be delivered by the Seller in connection herewith or with any other
Transaction Document being incorrect in any material respect when made or deemed made or
delivered;




     ( ) the failure by the Seller to comply with any applicable law, rule or regulation
or the related Contract or any Related Security with respect thereto; or the failure, as a
result of any action or omission of the Seller, of any Seller Receivable or the related
Contract or any Related Security with respect thereto to conform to any such applicable law,
rule or regulation;




     ( ) the failure by any action or inaction of the Seller to vest in the Buyer a first
priority perfected 100% ownership interest in each Seller Receivable and the Related
Security and Collections in respect thereof, free and clear of any Adverse Claim;




     ( ) 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 UCC of any
applicable jurisdiction or other applicable laws with respect to any Seller Receivable and
the Related Security and Collections in respect thereof, whether at the time of the initial
sale, transfer and assignment hereunder or at any subsequent time;




     ( ) any dispute, claim, offset or defense (other than discharge in bankruptcy of the
Obligor) of any Obligor with or against the Seller to the payment of any Seller Receivable



21









 






(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 by the Seller of the goods or services related to such Receivable or the
Seller’s furnishing or failure to furnish such goods or services;




     ( ) any failure of PolyOne, as Buyer’s Servicer, Servicer, or otherwise, to perform
its duties, obligations or covenants under and in accordance with this Agreement or any
other Transaction Document or to perform its duties or obligations under any Contract;




     ( ) 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 any action or omission of the Seller and
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;




     ( ) the commingling by the Seller of Collections of Seller Receivables at any time
with other funds;




     ( ) any action or omission by the Seller, whether as Servicer or otherwise, reducing or
impairing the rights of the Buyer hereunder or of any Owner of a Receivable Interest under
the Second Amended and Restated Receivables Purchase Agreement, any other Transaction
Document or any other instrument or document furnished pursuant hereto or thereto or with
respect to any Seller Receivable;




     ( ) any cancellation or modification of a Seller Receivable originally owed to the
Seller, the related Contract or any Related Security, whether by written agreement, verbal
agreement, acquiescence or otherwise;




     ( ) (A) any investigation, litigation or proceeding related to or arising from this
Agreement, any other Transaction Document or any other instrument or document furnished
pursuant thereto, or any transaction contemplated by this Agreement or any Contract, or the
ownership of, or other interest in, any Seller Receivable the related Contract or Related
Security, excluding, however, Indemnified Amounts to the extent resulting
from a claim of any Indemnified Party that does not arise out of or result from any action
or omission of the Seller or (B) the use by the Seller of proceeds of any sale, transfer and
assignment of any Receivable Asset hereunder;




     ( ) the existence of any Adverse Claim against or with respect to any Seller
Receivable the related Contract, Related Security or Collections and resulting from any act
or omission of the Seller;




     ( ) any failure by the Seller to pay when due any taxes, including without limitation
sales, excise, or personal property taxes, payable by the Seller in connection with any
Seller Receivable or the related Contract or any Related Security with respect thereto;




     ( ) any claim brought by any Person other than an Indemnified Party arising from any
action or omission of by the Seller or any Affiliate of the Seller (other than the Buyer) in
servicing, administering or collecting any Seller Receivable;



22









 






     ( ) any failure by any Lock-Box Bank holding a Lock-Box Account in the name of the
Seller to comply with the terms of the Lock-Box Agreement to which such Lock-Box Bank is a
party; or




     ( ) to the extent not covered by the foregoing clauses, the occurrence and
continuance of any Event of Termination resulting from an act or omission of the Seller
other than an Event of Termination arising under Section 7.01(f) of the Second Amended and
Restated Receivables Purchase Agreement.



ARTICLE VII




MISCELLANEOUS




          SECTION
1.00. Amendments, Etc.




          No amendment or waiver of any provision of this Agreement or consent to any departure by the
Seller or the Buyer therefrom shall be effective unless in a writing and signed by the Agent
pursuant to the terms of the Second Amended and Restated Receivables Purchase Agreement and, in the
case of any such waiver or consent, the party against which the waiver or consent is to be enforced
or, in the case of any such amendment, the Buyer and the Seller, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose for which given. No
failure on the part of the Buyer, any Owner 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.




          SECTION
2.00. Notices, Etc.




          All notices and other communications hereunder shall, unless otherwise stated herein, be in
writing (including telegraphic, telecopy or telex communication) and mailed, telegraphed,
telecopied, telexed or delivered, to each party hereto, at its address set forth under its name on
the signature pages hereof or at such other address as shall be designated by such party in a
written notice to the other parties hereto. All such notices and communications shall, when
mailed, telegraphed, telecopied or telexed, be effective when received by the Buyer or the Agent,
as applicable.




          SECTION
3.00. Binding Effect; Assignability.




          This Agreement shall become effective when it shall have been executed by the Seller
(including PolyOne as the Buyer’s Servicer) and the Buyer and acknowledged by the Agent, and
thereafter shall be binding upon and inure to the benefit of the Seller, the Buyer, the Agent, and
each other Indemnified Party and their respective successors and assigns, except that the Seller
shall not have the right to assign its rights or obligations hereunder or any interest herein
without the prior written consent of the Buyer and the Agent and each Purchaser, and the Buyer
shall not have the right to assign its rights or obligations hereunder or any interest herein
except pursuant to the Second Amended and Restated Consent and Agreement. 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 the Termination Date; provided,
however, that rights and remedies with respect to the provisions of Article VI and Sections
2.03, 7.04, 7.05, 7.06 and 7.14 shall be continuing and shall survive any termination of this
Agreement.




23









 








          SECTION
4.00. Costs, Expenses and Taxes




          ( ) In addition to the rights of indemnification granted under this Agreement, the Seller
agrees to pay on demand 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 or thereunder, and costs and expenses, if any, incurred by the
Buyer under Section 11.04 of the Second Amended and Restated Receivables Purchase Agreement,
including, without limitation, in each case, the reasonable fees and disbursements of counsel for
the Agent and the Purchasers with respect thereto and advising the Agent as to its rights and
remedies hereunder. The Seller further agrees to pay on demand all costs and expenses, if any
(including, without limitation, reasonable counsel fees and disbursements) 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
instruments and documents to be delivered in connection herewith or therewith.




          ( ) In addition, the Seller agrees to pay any present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies that arise from any payment made
hereunder or from the execution, delivery or registration of, or otherwise with respect to, this
Agreement, any other Transaction Document, or any other document or instrument delivered in
connection herewith or therewith (but excluding income taxes, such non-excluded taxes being
hereinafter referred to as “Other Taxes”). The Seller shall indemnify each Indemnified
Party for and hold it harmless against the full amount of Other Taxes (including, without
limitation, any taxes imposed by any jurisdiction on amounts payable under this Section 7.04(b))
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 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).




          SECTION
5.00. Non-Business Days.




          In any case where any payment or action is due under this Agreement on a day which is not a
Business Day, such payment or action may be made on the next succeeding Business Day, but such
extension of time shall in such case be included in the computation of payment of interest or fees,
as the case may be.




          SECTION
6.00. Confidentiality.




          ( ) Each of the Seller and the Buyer hereby agrees that each of the Seller and Buyer (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 each of the Seller and Buyer related to such structure and tax aspects. In this
regard, each of the Seller and Buyer 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 Seller and Buyer 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

24











 








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 each of the Seller or Buyer is limited by any existing agreement between the Seller
or Buyer, such limitation is agreed to be void ab initio and such agreement is hereby amended to
permit disclosure of the structure and tax aspects of the receivables program established hereunder
as provided in this clause (a).




          ( ) Subject to clause (a) of this Section 7.06, except to the extent otherwise required by
applicable law, rule, regulation or judicial process, each of the parties hereto agrees to maintain
the confidentiality of this Agreement, the Second Amended and Restated Receivables Purchase
Agreement, the Second Amended and Restated Consent and Agreement, the Second Amended and Restated
Letter of Credit Agreement, the Second Amended and Restated Fee Letter (and all drafts thereof) and
all non-public information delivered in connection herewith in communications with third parties
and otherwise; provided, however, that (i) in the case of the Second Amended and
Restated Receivables Purchase Agreement, such information may be disclosed to third parties to the
extent such disclosure is (A) limited in scope to the provisions of Article V, VII and X of the
Second Amended and Restated Receivables Purchase Agreement and, to the extent defined terms are
used in Article V, VII and X, such terms defined in Article I of the Second Amended and Restated
Receivables Purchase Agreement and (B) made pursuant to a written agreement of confidentiality in
form and substance reasonably satisfactory to the Agent and (ii) in the case of this Agreement, the
Second Amended and Restated Consent and Agreement, the Second Amended and Restated Letter of Credit
Agreement, the Second Amended and Restated Fee Letter (and all drafts thereof) and all non-public
information delivered in connection herewith in communications with third parties and otherwise,
such information may be disclosed to third parties to the extent such disclosure is made pursuant
to a written agreement of confidentiality in form and substance reasonably satisfactory to the
Agent; provided, further, that this Agreement, the Second Amended and Restated
Receivables Purchase Agreement, the Second Amended and Restated Consent and Agreement, the Second
Amended and Restated Letter of Credit Agreement and the Second Amended and Restated Fee Letter (and
all drafts thereof) may be disclosed (A) to each party’s, the Agent’s and each Owner’s legal
counsel, accountants and auditors on a confidential basis, (B) to any rating agency, (C) to any
regulatory authority having jurisdiction over the Seller , the Buyer, the Agent or an Owner and (D)
pursuant to court order or subpoena; provided, further, that each party shall have
no obligation of confidentiality in respect of any information which may be generally available to
the public or becomes available to the public through no fault of such party.




          SECTION
7.00. Governing Law.




          THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK.




          SECTION
8.00. Consent to Jurisdiction.




          ( ) Each of the Seller and the Buyer 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 Seller and the Buyer 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 Seller
and the Buyer 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 7.02 by
registered mail, return receipt requested, or in any other

25









 







manner permitted by applicable law. Each of the Seller and the Buyer agrees that a final,
non-appealable, 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.




          ( ) Each of the Seller and the Buyer 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 suit, 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
9.00. 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
10.00. Intent of the Parties, etc.




          As provided in Section 2.01(b), the parties to this Agreement intend that the transaction
contemplated by this Agreement shall be, and shall be treated as, a purchase by the Buyer and a
sale by the Seller of Receivable Assets and not as a lending transaction. Recognizing the risk
that, notwithstanding the parties’ intent, a court deciding the issue might recharacterize the
Receivable Asset transfers contemplated hereby as a secured lending transaction, it is the
intention of the parties hereto, in the event of such recharacterization, that this Agreement shall
constitute a security agreement under applicable law, and that the Seller shall be deemed to have
granted to the Buyer a duly perfected first priority security interest in all of the Seller’s
right, title and interest in such Receivable Assets, whether now owned or hereafter acquired, and
all cash and non-cash proceeds in respect thereof, free and clear of Adverse Claims. In
contemplation of such risk (but only for such purpose), (a) the Seller hereby grants to the Buyer
a duly perfected first priority security interest in all of the Seller’s right, title and interest
in, to and under the Receivable Assets, whether now owned or hereafter acquired, and all cash and
non-cash proceeds in respect thereof and (b) if the Seller shall have taken any action, or suffered
any event to occur, of the type described in Section 7.01(f) of the Second Amended and Restated
Receivables Purchase Agreement, all of the obligations of the Seller under this Agreement shall
automatically become and be due and payable, without presentment, demand, protest or any notice of
any kind, all of which are hereby expressly waived by the Seller.




          SECTION
11.00. Entire Agreement.




          This Agreement and the other Transaction Documents to which the parties hereto are party
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.




26









 








          SECTION
12.00. 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 invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.




          SECTION
13.00. Waiver of Jury Trial.




          Each of the parties hereto irrevocably waives 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 or the actions of the Agent or
any Indemnified Party in the negotiation, administration, performance or enforcement hereof or
thereof.




          SECTION
14.00. No Proceedings.




          ( ) The Seller hereby agrees that it will not institute against the Buyer or the Purchasers
any proceeding of the type referred to in Section 7.01(f) of the Second Amended and Restated
Receivables Purchase Agreement so long as there shall not have elapsed one year plus one day since
the later of the (i) the Termination Date and (ii) the date upon which no Capital Investment for
any Receivable Interest shall be existing and no Yield, Letter of Credit Obligations, fees or other
amounts remain unpaid under this Agreement and the Second Amended and Restated Receivables Purchase
Agreement.




          ( ) Each of the Seller and the Buyer hereby agrees that, in connection with this Agreement
and the other Transaction Documents and the transactions contemplated hereby and thereby, none of
the Indemnified Parties shall be liable to the Seller or the Buyer (except to the extent of such
Indemnified Party’s own gross negligence or willful misconduct) or have any liability for any
special, indirect, consequential or punitive damages.




[Remainder of page intentionally left blank.]




27









 








          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 CORPORATION,

as Buyer’s Servicer and the Seller

 	 
	 	By:  	
 	 
	 	 	Name:  	John Rastetter 	 
	 	 	Title:  	Treasurer 	 
	 



33587 Walker Road

Avon Lake, Ohio 44012




Attention:
Treasurer



Telephone No.: (440) 930-3105

Telecopier No.: (440) 930-1839




 









 





	 	 	 	 	 
	 	POLYONE FUNDING CORPORATION,

as Buyer

 	 
	 	By:  	

 	 
	 	 	Name:  	John Rastetter 	 
	 	 	Title:  	President 	 
	 



33587 Walker Road

Avon Lake, Ohio 44012




Attention:  President




Telephone No.:  (440) 930-3105

Telecopier No.:  (440) 930-1839




 









 





Acknowledged as of the date first above written:




	 	 	 	 	 
	CITICORP USA, INC., 

        as Agent

 	 	 
	By:  	
 	 	 
	 	Name:  	David Jaffe 	 	 
	 	Title:  	Vice President/Director


 	 	 
	 	

388 Greenwich Street

19th Floor

New York, New York  10013




Attention:  David Jaffe



Telephone No.:  (212) 816-2329

Telecopier No.:  (212) 816-2613