“Kronstadt Pre-petition Debt” means the secured loans and advances made by SHP to, or guaranteed by, the Debtors in the original principal sum of approximately $5.2 million, together with all interest, costs of collection (including attorney’s fees), and all other sums chargeable to the Debtors under the promissory notes and other instruments evidencing such indebtedness.

“Debtors” means, collectively, Axion International Holdings, Inc., and its affiliates, including but not limited to Axion International, Inc. and Axion Recycled Plastics Incorporated.

“Designated Contracts” means those executory contracts and unexpired leases to be assumed by and assigned to the Stalking Horse Purchaser, as determined by SHP in connection with the closing of the Transaction (including post-closing to the extent permitted by law and/or court order).

“DIP Facility” means that Debtor-in-Possession term loan funded by SHP to the Debtors in contemplation of the Transaction as part of the Debtors’ bankruptcy cases filed in the District of Delaware, on substantially the terms and conditions set forth in Exhibit A hereto.

“Real Property Leases” means all of the unexpired leases of real property of the Debtors.

The purchase price (the “Purchase Price”) for the purchase, sale, assignment and conveyance of the Debtors' right, title and interest in, to and under the Acquired Assets (as defined below), free and clear of all interests, claims, liens and encumbrances pursuant to section 363(f) of the Bankruptcy Code, shall consist of:

(a)  Credit Bid: At least $3.5 million of the Kronstadt Pre-Petition Debt (as a credit bid against all assets as to which the Kronstadt Pre-Petition Debt is secured by liens and security interests senior to all creditors other than the DIP Lender);

(b)  Debt Assumption: the assumption by the Stalking Horse Purchaser of certain liabilities set forth in the Stalking Horse Agreement (including so much of the DIP Facility and the Kronstadt Prepetition Debt (as determined by SHP in its discretion) as has not been used by SHP as a credit bid to purchase the Acquired Assets;

(c)  Cure Costs: the payment of the Cure Costs (as defined below) relating to the Designated Contracts on terms ordered by the Court or negotiated by SHP and the contract counterparties; and

(d)  Cash for Certain Assets: cash totaling $500,000 (to be allocated between the two secured lenders, the State of Ohio and The Community Bank) to acquire all assets as to which the liens and security interests of Kronstadt Pre-Petition Debt and the DIP Loan are not in a first-priority perfected position (which cash shall be used by the Debtors to satisfy the senior liens secured by such assets).

The parties will agree on a tax allocation of the Purchase Price which addresses the Debtors’ obligations to the Internal Revenue Service (“IRS”).

The Stalking Horse Purchaser shall, effective as of the closing date, assume those liabilities and obligations arising from events occurring on or after the closing date under any Designated Contracts, subject to applicable caps on assumed liabilities, as mutually acceptable to SHP and any third-parties.

The Stalking Horse Purchaser also shall be responsible for payment of Cure Costs (as defined below).

The Stalking Horse Purchaser shall be responsible for so much of the DIP Facility and Kronstadt Pre-petition Debt as it agrees to assume (as determined in its sole and absolute discretion) pursuant to written instruments executed by the Stalking Horse Purchaser.

The material conditions and contingencies for the Stalking Horse Purchaser’s obligations to close include:

(a)          The Debtors shall have performed, satisfied and complied in all material respects with all obligations and covenants required by the Stalking Horse Agreement to be performed or complied with by them on or prior to the closing date.

(b)          The Debtors shall have executed and delivered to the Stalking Horse Purchaser the Assignment and Assumption and Bill of Sale, dated and effective as of the closing date.

(c)          The Debtors shall have delivered to the Stalking Horse Purchaser all other documents required to be delivered by them under the Stalking Horse Agreement and all such documents shall have been properly executed by each of them.

(d)          The Stalking Horse Purchaser shall have received any third party consents, the requirements of which have not been negated by an order of the Bankruptcy Court, and governmental approvals, in form and substance satisfactory to SHP in its sole and absolute discretion, effective as of the closing date.

(e)          The Stalking Horse Purchaser shall have entered into new or modified contracts, acceptable to SHP in its sole discretion, effective as of closing, with all persons identified by SHP prior to the closing, including critical vendors and suppliers and applicable labor unions.

(f)           There shall not have occurred any Event of Default (as described in Exhibit A hereto) which has not been waived by the DIP lender.

(g)          The Debtors shall have delivered all schedules and exhibits attached to or otherwise required by the Stalking Horse Agreement.

(h)          The Bankruptcy Court shall have entered the Sale Order and the Sale Order shall have become final and non-appealable.

(i)           All of the Designated Contracts shall have been validly assumed and assigned to the Stalking Horse Purchaser under section 365 of the Bankruptcy Code pursuant to the Sale Order.

(j)           The Sale Order shall be in a customary form for Section 363 sales, and shall provide that the sale of the Acquired Assets is (w) pursuant to section 363(f) of the Bankruptcy Code free and clear of all liens, claims, encumbrances, interests, and rights of set-off, whether known or unknown, disputed, contingent, actual, or otherwise, arising prior to closing, (x) to a good faith purchaser, and (y) to SHP with no successor liability. The Sale Order and Bidding Procedures Order shall provide that SHP may credit bid under Section 363(k) of the Bankruptcy Code, at face value, so much of the DIP Facility and Kronstadt Pre-Petition Debt as the SHP determines in its sole discretion; and that the SHP may assume so much of such indebtedness that has not been credit bid as SHP may determine in its sole discretion.

(k)          SHP shall not have received any notice pursuant to the applicable section of the Stalking Horse Agreement that, individually or in the aggregate, could be reasonably expected to be materially adverse to the condition (financial or otherwise), properties, assets, liabilities, businesses, operations, results of operations or prospects of the business or the Acquired Assets.

(l)          No event shall have occurred that, individually or in the aggregate, could be reasonably expected to result in a material adverse change in the condition (financial or otherwise), properties, assets, liabilities, businesses, operations, results of operations or prospects of the business or the Acquired Assets.

(m)          As of the closing, acceptable written and executed agreements (including but not limited to new or amended and restated leases acceptable to SHP in its sole discretion and/or assumption and assignment agreements and orders acceptable, to SHP in its sole discretion) will be in effect with respect to all Real Property Leases.

(n)          SHP shall have received all consents and contract modifications which SHP may require, with all Bankruptcy Court approvals required for the same, including, without limitation, leases of key equipment, other agreements, and utility contracts.

In consideration of the significant costs and efforts to be expended and risks assumed by SHP in negotiating the Transaction described in this Term Sheet, the Stalking Horse Agreement will provide for a break-up fee payable by SHA to SHP in the amount of $550,000 (the “Breakup Fee”), plus reimbursement of all reasonable expenses incurred in connection with SHP’s efforts to negotiate and consummate the Transaction capped at $250,000 (“Expense Reimbursement”) in the event the Stalking Horse Agreement is terminated as a result of either (i) an Event of Default by a Debtor under the DIP Loan, or (ii) a breach by a Debtor of a material term of, or failure to timely satisfy a condition to closing that is a Debtor’s obligation under, the Stalking Horse Agreement; provided that, if SHP, in its sole discretion, elects to seek specific performance of the Stalking Horse Agreement, then SHP shall not be entitled to the Breakup Fee or Expense Reimbursement. The Breakup Fee and Expense Reimbursement shall constitute administrative expense claims pursuant to section 503(b) of the Bankruptcy Code and shall have priority over all other administrative expense claims.

If the Stalking Horse Agreement is terminated because of a superior bid, then the Breakup Fee and Expense Reimbursement shall be payable from the proceeds of a replacement DIP financing or from the proceeds of an alternative transaction whereby the assets contemplated to be sold to SHP are, instead, sold to a third party.