Proposed Merger

On October 23, 2012, PolyOne Merger Sub, Merger LLC, and Spartech entered into a Merger Agreement pursuant to which Spartech will be merged with and into Merger Sub, with Spartech to be the surviving corporation in the Merger and a wholly owned subsidiary of PolyOne.

Pursuant to the terms of the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of Spartech common stock will be canceled and converted into the right to receive consideration equal to $2.67 in cash and 0.3167 PolyOne common shares. In the aggregate, PolyOne will issue approximately 9.9 million of its common shares and pay approximately $84,000,000 in cash to Spartech shareholders.

The closing of the Merger is expected to occur during the first calendar quarter of 2013, subject to the satisfaction of customary closing conditions, including, among other things: (1) the adoption and approval of the Merger Agreement and the Merger by Spartech's stockholders; (2) receipt of required regulatory approvals; (3) the absence of certain legal impediments preventing the consummation of the Merger; (4) the effectiveness of the registration on Form S-4 to be filed by PolyOne relating to the PolyOne common shares to be issued in the Merger; (5) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (6) the approval by the New York Stock Exchange of the listing of PolyOne common shares issuable to Spartech stockholders under the Merger Agreement; and (7) the delivery of opinions from counsel to PolyOne and counsel to Spartech to the effect that the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. Early termination of the required waiting period under Hart-Scott-Rodino Antitrust Improvements Act was granted on November 21, 2012.

Each of PolyOne and Spartech has made representations, warranties and covenants in the Merger Agreement. Spartech's covenants and agreements include, among other things: (1) subject to certain conditions, to conduct its business in the ordinary course of business during the period between the execution of the Merger Agreement and the completion of the Merger; and (2) not to solicit or initiate discussions with third parties regarding alternative transactions and to respond to proposals regarding such alternative transactions only in accordance with the terms of the Merger Agreement. PolyOne's covenants and agreements include, among other things: (1) to conduct its business in the ordinary course of business during the period between the execution of the Merger Agreement and the completion of the Merger, subject to certain conditions; and (2) to prepare and file with the SEC a registration statement on Form S-4 to register the securities issuable to Spartech stockholders under the Merger Agreement.

Spartech is required to conduct its business in the ordinary course of business and within certain defined restrictions between the date of signing the agreement to the closing date. Spartech is required to manage within these restrictions or obtain consent in writing from PolyOne to conduct certain activities.

In conjunction with the definitive merger agreement, the Company has incurred various costs triggered by and directly related to the merger transaction. In the fourth quarter of 2012, Spartech recognized merger and transaction costs as follows:



	2012
Merger and Transaction Costs:
Stock compensation expense from accelerated vesting	$	4,865
Legal and financial advisor fees	1,888
Other merger and transaction costs	148
Total merger and transaction costs	6,901
Income tax benefit	(2,415		)
Impact on net earnings from continuing operations	$	4,486

Upon closing of the proposed merger transaction, an amount related to the make-whole on the Company's Senior Notes of $11.9 million as of November 3, 2012 would be required to be paid in conjunction with the transaction along with $4.2 million to the Company's financial advisors. If the merger does not close, the Merger Agreement provides that Spartech is required to pay a termination fee of $8.8 million if the Merger Agreement is terminated under certain circumstances, including if we terminate to accept an alternative acquisition proposal.