Exhibit 10.4

    

American Power Group Corporation
7 Kimball Lane, Building A
Lynnfield, MA 01940

June 2, 2015

Matthew Van Steenwyk
2747 Paradise Road, Suite 3604
Las Vegas, NV 89109

Dear Matt:

American Power Group Corporation (the “Company”) is issuing this letter
agreement (this “Agreement”) pursuant to the terms of that certain Convertible
Note Purchase Agreement dated as of June 2, 2015 among the Company, Arrow, LLC
(“Arrow”) and the other parties thereto (as amended from time to time, the
“Purchase Agreement”) to confirm certain agreements concerning the Company’s
Board of Directors (the “Board”).

1.Upon and from time to time after the consummation of the transactions
contemplated by the Purchase Agreement, including the purchase by Arrow of a
Note (as defined in the Purchase Agreement) in the original principal amount of
$1,500,000, and until such time as Arrow and its affiliates cease to own either
the Note or any of the shares of Series C Stock (as defined in the Note) issued
upon conversion of the Note, the Company shall take such actions as are
necessary to cause up to two persons designated in writing by you to be
appointed or elected to the Board within ten days after written notice
designating such person(s). In the event Arrow and its affiliates cease to own
either the Note or any of the Shares of Series C Stock, then the Company shall
take such actions as are necessary to cause (i) up to two persons designated in
writing by you to be appointed or elected to the Board, if Arrow and its
affiliates own not less than 10% of the shares of Common Stock of the Company
(“Common Stock”), and (ii) one person designated in writing by you to be
appointed or elected to the Board if Arrow and its affiliates own not less than
5% of the shares of Common Stock, in each case within ten days after written
notice designating such person(s) (if not previously designated). For purposes
of determining the ownership of shares of Common Stock owned by Arrow and its
affiliates, all shares of Common Stock beneficially owned by Arrow and its
affiliates (as defined in Rule 13d-3 promulgated under the Securities Exchange
of 1934, as amended) plus all shares of Common Stock which Arrow and its
affiliates may acquire pursuant to the exercise of any right or agreement to
acquire Common Stock, or the conversion of any convertible security, even if
those shares of Common Stock would not be deemed to be beneficially owned
pursuant to Rule 13d-3, and otherwise the percentage ownership of Arrow and its
affiliates shall be determined as set forth in Rule 13d-3.

2.The foregoing right to designate members of the Board shall not apply to, and
the Company shall not be required to take any action with respect to, the
appointment or election to the Board of (i) any person described in clauses (i)
through (viii) of Rule 506 of Regulation D, promulgated by the Securities and
Exchange Commission (the “Commission”), as in effect on the date of this
Agreement and as amended from time to time thereafter (or any successor rule),
or (ii) any person reasonably deemed by the Board to be a Competitor of the
Company. For purposes of this Agreement, “Competitor” means any person engaged,
directly or indirectly (including as an owner, partner, employee, agent,
consultant, director, officer, stockholder (other than as the owner of less than
1% of the outstanding stock of a publicly traded corporation), lender or in any
other capacity or manner whatever) in any business or enterprise competitive
with the Company’s business, as described in its periodic reports filed from
time to time with the Commission, including but not limited to any business or
enterprise that develops, manufactures, markets, sells or licenses any product
or service that competes with the Company’s external fuel delivery enhancement
systems that convert diesel engines into engines that can run on combinations of
diesel fuel, natural gas, liquefied natural gas, pipeline gas, well-head gas,
bio-methane and/or similar fuels.

--------------------------------------------------------------------------------

3.During any period in which you have the right to designate one or more persons
to be appointed or elected to the Board pursuant to paragraph 1 of this
Agreement but in which you are not, individually, a member of the Board, you
shall have the right to attend all meetings of the Board in a nonvoting observer
capacity and, in this respect, the Company shall give you copies of all notices,
minutes, consents, and other materials that it provides to its directors;
provided, however, that (i) as a condition to the receipt of such information
and your attendance at such meetings, you shall execute a mutually acceptable
confidentiality agreement; and (ii) the Company reserves the right to withhold
any information and to exclude you from any meeting or portion thereof if access
to such information or attendance at such meeting could adversely affect the
attorney-client privilege between the Company and its counsel or result in
disclosure of trade secrets or a conflict of interest.

4.The Company acknowledges and agrees that any default by the Company in the
performance of its obligations under this Agreement shall constitute an Event of
Default under the Note, subject only to the notice requirement set forth
therein.

5.The Company acknowledges that you will be irreparably damaged in the event any
of the provisions of this Agreement are not performed by the Company in
accordance with their specific terms or are otherwise breached. Accordingly, the
Company agrees that you shall be entitled to an injunction to prevent breaches
of this Agreement and to specific enforcement of this Agreement and its terms
and provisions in any action instituted in any court of the United States or any
state having subject matter jurisdiction.

6.All remedies, either under this Agreement or by law or otherwise afforded to
any party, shall be cumulative and not alternative.

7.All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be determined in accordance with the
provisions of the Purchase Agreement.

8.IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT UNDER THIS
AGREEMENT, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND
EXPRESSLY WAIVE FOREVER TRIAL BY JURY.

Sincerely yours,

AMERICAN POWER GROUP CORPORATION

By: /s/ Charles E. Coppa
Charles E. Coppa
Chief Financial Officer

Accepted and Agreed:

/s/ Matthew Van Steenwyk
Matthew Van Steenwyk