Document:

Exhibit 10.27 Promissory Note dated December 19, 2013

PROMISSORY NOTE
 

	
								
	Principal
	Loan Date
	Maturity
	Loan No
	Call / Coll
	Account
	Officer
	Initials

	$2,500,000
	12-19-2013
	04-01-2015
	 
	 
	 
	JMW
	 

	References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.
Any item above containing “***” has been omitted due to text length limitations.

Borrower:    American Power Group, Inc.
           2503 East Poplar
          Algona, IA  50511
 

Lender:      Iowa State Bank
          Main Office
          5 E Call St
         Algona, IA  50511

Principal Amount:  $2,500,000.00
PURPOSE OF LOAN. Revolving Line of Credit.
 
Date of Note:  December 19, 2013

PROMISE TO PAY.  American Power Group, Inc. ("Borrower") promises to pay to Iowa State Bank ("Lender"), or order, in lawful money of the United States of America, the principal amount of Two Million Five Hundred Thousand& 00/100   Dollars ($2,500,000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on April 1, 2015.   In addition, Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginningFebruary1, 2014, with all subsequent interest payments to be due on the same day of each month after that.    Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid interest; then to principal; and then to any escrow or reserve account payments as required under any mortgage, deed of trust,  or other security instrument or security agreement securing this Note.   Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an independent index which is the base rate on corporate loans posted by at least 70% of the 10 largest U.S. banks known as The Wall Street Journal U.S. Prime Rate (the "Index").  The Index is not necessarily the lowest rate charged by Lender on its loans.   If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower.  Lender will tell Borrower the current Index rate upon Borrower's request.  The interest rate change will not occur more often than each day.   Borrower understands that Lender may make loans based on other rates as well.   The Index currently is 3.250% per annum. Interest on the unpaid principal balance of this Note will be calculated as described in  the  "INTERESTCALCULATIONMETHOD" paragraph using  a rate  of  3.000   percentage points  over  the  Index,  adjusted if necessary for  any  minimum and  maximum rate  limitations described below,   resulting in  an  initial  rate  of  7.000%.    NOTICE:  Under no circumstances will the interest rate on this Note be less than 7.000% per annum or more than the maximum rate allowed by applicable law.
INTEREST CALCULATION METHOD. Interest on this  Note is computed on a 365/360    basis; that  is, by  applying the ratio  of the interest rate over  a year  of  360  days,  multiplied by  the  outstanding principal balance, multiplied by  the  actual  number of  days the  principal balance is outstanding. All interest payable under this Note is computed using this method.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed earlier than it is due.   Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments of accrued unpaid interest.  Rather, early payments will reduce the principal balance due.   Borrower agrees not to send Lender payments marked "paid in full", “without recourse", or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes "payment in full” of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: lowa State Bank. Main Office, 5 E Call St, Algona, IA  50511.
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, the interest rate on this Note shall be increased by adding an additional 3.800 percentage point margin ("Default Rate Margin").  The Default Rate Margin shall also apply to each succeeding interest rate change that would have applied had there been no default.  However, in no event will the interest rate exceed the maximum interest rate limitations under applicable law.
DEFAULT. Each of the following shall constitute an event of default ("Event of Default") under this Note: Payment Default. Borrower fails to make any payment when due under this Note.
Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.
Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit,  security agreement, purchase or sales agreement, or any other  agreement, in favor  of any other creditor or person that  may materially affect  any of Borrower's property or Borrower's ability to repay this Note or perform Borrower's obligations under this Note or any of the related documents.
False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Note or the related documents is false or misleading in any material respect, either  now or at the time made or furnished or becomes false or misleading at any time thereafter.
Insolvency. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for  any  part  of  Borrower's  property, any  assignment for  the  benefit   of  creditors, any  type   of  creditor workout,  or  the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Borrower's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs  with  respect to any guarantor, endorser, surety,  or accommodation party of  any of  the  indebtedness or any guarantor, endorser, surety,  or  accommodation party  dies  or becomes incompetent, or  revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note.
Change In Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.
Adverse Change.  A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance of this Note is impaired.
Insecurity. Lender in good faith believes itself insecure.
LENDER’S RIGHTS.  Upon default, Lender may declare the entire unpaid principal balance under this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount.
ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay.   Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit, including without limitation all attorneys' fees and legal expenses for bankruptcy proceedings(including efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law.

JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other.
GOVERNING LAW.  This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Iowa without regard to its conflicts of law provisions. This Note has been accepted by Lender in the State of Iowa.
RIGHT OF  SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrowers’ accounts with Lender (whether

PROMISSORY NOTE
(Continued)                                                                                                                                                  Page 2

checking, savings, or some other account).   This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future.   However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law.   Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the debt against any and all such accounts.

COLLATERAL. Borrower acknowledges this note is secured by SECURITY AGREEMENT(S) DATED
09-18-13, 02-05-2013, 12-05-2012, 02-25-2011, 03-04-2010, 1-4-2010, 1-4-2010, 10-21-2009, 9-21-2009, 9-9-2009,
11-9-2010

Secured Guaranty from GreenMan Technologies, Inc. dated 11-9-2010
Assignment of Deposit dated 11-9-52010 ($300,000.00 C.D.)
Security Agreements(s) dated 7-27-2009, 7-24-2009
Stock Transfer Agreement dated 3-4-2011 from Lew F. Boyd, Maurice E. Needham, Lyle Jensen and Charles E Coppa (Officers and Directors, 250,000 shares of GMTI)
Stock Transfer Agreement dated 6-14-2011 from Lew F. Boyd, Maurice E. Needham, Lyle Jensen and Charles E Coppa (Officers and Directors, 250,000 shares of GMTI)
Stock Transfer Agreement dated 12-19-2011 from GreenMan Technologies, Inc. Officers and Directors (2,000,000 shares of GMIT).

Business Loan Agreement dated December 19, 2013
Commitment letter dated December 17, 2013

This note is considered cross-collateralized/cross-defaulted with all existing and future collateral/notes of American Power Group.  Inc.  and GreenMan Technologies, Inc.

LINE OF CREDIT.  This Note evidences a revolving line of credit.    Advances under this Note may be requested either orally or in writing by Borrower or as provided in this paragraph. Lender may, but need not, require that all oral requests be confirmed in writing.   All communications, instructions, or directions by telephone or otherwise to Lender are to be directed to Lender’s office shown above.   The following   person or persons are authorized to request  advances and authorize  payments under the line of credit  until  Lender receives from  Borrower, at Lender's address shown  above, written  notice of revocation of such authority:   Upon request by the borrower  and with  the approval of the lender.   Such advances are not to be made for capital purchases.  Borrower  agrees to  be liable for  all sums either:   (AJ  advanced in accordance with  the instructions of an authorized person or   (B)  credited  to any of  Borrower's accounts  with  Lender.   The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including daily computer print-outs.
SUCCESSOR INTERESTS. The  terms  of  this  Note  shall  be  binding  upon  Borrower, and  upon  Borrower's heirs,  personal  representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note.   Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them.   Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor.   Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor. Accommodation maker or endorser shall be released from liability.    All such parties  agree that  Lender may renew  or extend  (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect  Lender's security  interest  in the collateral; and take any other action deemed necessary by Lender without  the consent of or notice  to anyone.   All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made.  The obligations under this Note are joint and several.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.  BORROWER AGREES TO THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE AND ALL OTHER DOUCMENTS RELATING TO THIS DEBT.
BORROWER:

AMERICAN POWER GROUP, INC.

By: /s/  Charles E. Coppa                                                                                  
      Charles E. Coppa, CFO of American Power Group, Inc.      

LENDER:

IOWA STATE BANK

X    /s/ Jason Wartick
     Jason Wartick, Vice President12.31.2013 Exhibit 10.1

EXHIBIT 10.1

AMENDMENT AND RESTATEMENT OF THE
EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN
DON TRACY AND MGP INGREDIENTS, INC.

WHEREAS, MGP Ingredients, Inc. (“Company”) previously entered into that certain Executive Employment Agreement with Don Tracy (“Executive”) effective as of the 8th day of August, 2013 (“Prior Agreement”);

WHEREAS, the Company and the Executive reserved the right to amend the Prior Agreement pursuant to Section 10.3 thereof;

WHEREAS, the Company recently terminated the employment of Tim Newkirk, who had served as Chief Executive Officer of the Company;

WHEREAS, the Company desires to appoint the Executive as the Interim Co-Chief Executive Officer of the Company until a permanent Chief Executive Officer of the Company is appointed; and

WHEREAS, the Company desires to modify certain other provisions in the Prior Agreement.

NOW, THEREFORE, effective the seventeenth (17th) day of December, 2013, the Prior Agreement is amended and restated in its entirety to read as follows:

AMENDED AND RESTATED
MGP INGREDIENTS, INC.
EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”) is effective as of December 17, 2013 by and between MGP Ingredients, Inc. (“Company”) and Don Tracy (“Executive”). 
WHEREAS, Executive desires to serve as the Interim Co-Chief Executive Officer of the Company and in exchange for the protection and other consideration set forth in this Agreement, is willing to give the Company, under certain circumstances, his covenant not to compete, and the Company desires to so employ Executive.
NOW, THEREFORE, in consideration of the promises and the mutual agreements contained herein, the Company and Executive hereby agree as follows:
ARTICLE I
Definitions
1.1    Definitions.  As used herein, the following terms shall have the following meanings.
		
	(a)
	“Board” means the board of directors of the Company.

		
	(b)
	“Cause” means (i) conviction of Executive by a court of competent jurisdiction of a felony; (ii) engaging by Executive in willful fraud in connection with his performance of the business of Company; or (iii) Employee’s failure to cooperate in good faith with any internal, governmental, or regulatory investigation involving or in any way related to the Company or its operations.

		
	(c)
	“Change in Control” means any of the following:

		
	a.
	The closing of an acquisition by any person, entity or “group” within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) of Beneficial Ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of at least 50% of the then outstanding shares of common stock of the Company or 50% of the then outstanding shares of preferred stock of the Company;

		
	b.
	Individuals who, as of July 15, 2013 (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to July 15, 2013 whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office occurs either eight months prior to or eight months following an actual or threatened election contest relating to the election of the directors of the Company), shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board;

    
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	c.
	Approval by the Company of a reorganization, merger, consolidation, in each case, pursuant to which persons who were the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own collectively as a group more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged, or consolidated company’s then outstanding voting securities; or

		
	d.
	The liquidation or dissolution of the Company or of the Company’s approval of the sale of more than 50% of the assets of the Company over no greater than an 18 month period measured as of the effective date of the first such sale.

		
	(d)
	“Code” means the Internal Revenue Code of 1986, as amended.

		
	(e)
	“Confidential Information” shall mean all confidential information: 

(i) of the Company, or 
(ii) which is learned or acquired by the Company from others with whom the Company has a business relationship in which, and as a result of which, similar information is revealed to the Company, 
Confidential Information shall also include all such confidential information, whether patentable or not, which is of a confidential, trade secret and/or proprietary character and which is either developed by Executive (alone or with others) or to which Executive shall have had access during the Employment Period as defined herein.  Confidential Information shall include (among other things) all confidential data, designs, plans, notes, memoranda, work sheets, formulas, processes, and Customer and supplier lists.  The term Confidential Information shall be interpreted to the broadest extent possible under Kansas law as well as the Kansas Trade Secrets Act, and shall be deemed to encompass, without limitation, all (i) trade secrets and intellectual property, (ii) information concerning products/services and the development, manufacturing, marketing, distribution and pricing of products/services; (iii) information concerning customers, customers, customer lists and suppliers; (iv) credit and financial data concerning the Company and its customers and suppliers.
		
	(f)
	“Good Reason” means (i) a material reduction of Executive’s Base Salary or annual cash bonus opportunity; (ii) a requirement that Executive provide services to the Company at a location more than 60 miles from Atchison, Kansas, (iii) a material reduction in Executive’s authority, duties, or responsibilities; or (iv) any other action or inaction that constitutes a material breach by the Company of this Agreement.  Notwithstanding the foregoing, Good Reason shall not be deemed to exist unless, (i) the Executive notifies the Company in writing of the condition allegedly giving rise to such Good Reason within 90 days of the initial existence of such condition, (ii) the Company does not cure such condition within 30 days of such notice, and (iii) Executive terminates employment with the Company as a result of such Good Reason within 120 days of the initial existence of such condition.  Notwithstanding the foregoing, in no event will Good Reason be deemed to exist if the Executive’s employment as Interim Co-Chief Executive Officer of the Company and the Company’s obligations under this Agreement terminate in accordance with Section 2.4(h) herein.

    
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	(g)
	“Prior Agreement” means that certain Executive Employment Agreement between the Executive and the Company, dated as of August 8, 2013, and amended and restated herein in its entirety.

ARTICLE II
Employment
		
	2.1
	Employment.  The Executive’s term of employment under this Agreement shall begin on December 17, 2013 (“Start Date”) and end as provided in Section 2.4 of this Agreement (“Employment Period”).

		
	2.2
	Position and Duties.  

		
	(a)
	Commencing on the Start Date and continuing during the Employment Period, Executive shall serve as Interim Co-Chief Executive Officer of the Company or in such other capacity as the Board may determine.  As the Interim Co-Chief Executive Officer of the Company, the Executive shall perform such duties that has been customarily performed by the Chief Executive Officer of the Company.  The Interim Co-Chief Executive Officer shall also remain the Chief Financial Officer of the Company and perform such duties of the Chief Financial Officer as have been customarily performed by the Chief Financial Officer of the Company.

		
	(b)
	Executive shall devote his best efforts and his full business time and attention to the business and affairs of the Company.  The Executive shall perform his duties and responsibilities to the best of his abilities in a diligent, trustworthy, businesslike and efficient manner.  In the performance of his duties hereunder, Executive shall at all times report and be subject to the lawful direction of the Board and perform his duties hereunder subject to and in accordance with the resolutions or any other determinations of the Board and the by-laws of the Company and applicable law.  During the Employment Period, Executive shall not become an employee of any person or entity other than the Company.  This section shall not be construed to prohibit Executive from serving on the board of directors of one or more other entities (with the consent of the Board).

		
	2.3
	Base Salary, Bonus and Benefits.  Subject to the terms of this Agreement, in consideration of Executive’s agreements contained herein, during the Employment Period:

		
	(a)
	Executive’s Base Salary shall be $229,750 per annum (“Base Salary”), which shall be payable in equal installments during the year in accordance with the Company’s normal payroll schedule and shall be subject to deductions for customary withholdings, including, without limitation, federal and state withholding taxes and payroll taxes.  The Company may increase, but not decrease, the Executive’s Base Salary at any time.

		
	(b)
	On the last regularly schedule payroll date of each month during which the Executive is engaged as the Interim Co-Chief Executive Officer of the Company or Co-Chief Executive Officer of the Company (either for the entirety or a portion of such month), the Company shall pay to the Executive an amount equal to $15,000, less applicable withholding.  For the avoidance of doubt, the payments described in this Section 2.3(b) shall (i) not be paid following the Executive’s termination of employment with the Company, (ii) not be paid upon the Company’s appointment of a permanent Chief Executive Officer in replacement of the Executive, as described in Section 2.4(h) below, and (iii) shall not be taken into account 

    
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for purposes of determining the Executive’s entitlement to severance pay under Sections 2.4(c)(2) and 2.4(d)(2) below.
		
	(c)
	Executive shall be entitled to participate in any performance bonus plan that the Company may maintain from time to time, subject to all terms and conditions of such plan and the terms of any applicable award thereunder.  For purposes of the MGP Ingredients, Inc. Short-Term Incentive Plan (“Plan”), the Executive’s target bonus for each plan year in which he serves a as Co-CEO of the Company on the first day of such plan year shall be 100% of his Base Salary, provided that such target bonus shall be subject to adjustment as otherwise described in the Plan, further provided that the Executive shall continue to have a target bonus of 100% of his Base Salary under the Plan for the remainder of the plan year in which the Company appoints a permanent Chief Executive Officer in replacement of the Executive, as described in Section 2.4(h).

		
	(d)
	Executive shall be entitled to participate in all retirement, disability, pension, savings, health, medical, dental, insurance and other fringe benefits or plans of the Company generally available to executive employees of the Company, in accordance with and subject to the terms thereof.

		
	(e)
	Executive shall be entitled to participate in any equity compensation program that the Company may maintain from time to time, subject to all terms and conditions of such plan and the terms of any applicable award thereunder.

		
	(f)
	Upon Executive’s submission of proper substantiation, the Company shall reimburse Executive for all reasonable business expenses actually and necessarily paid or incurred by him in the course of and pursuant to the business of the Company, in accordance with Company policies relating to the reimbursement of business expenses.

		
	(g)
	The Company shall maintain directors and officers liability insurance in commercially reasonable amounts (as determined by the Board), and Executive shall be covered under such insurance to the same extent as other executives of the Company (“D&O Insurance Policies”).  Executive shall be eligible for indemnification by the Company to the extent provided for in the Company by-laws in effect from time to time.  The provisions of this Section 2.3(f) shall survive termination of this Agreement.

2.4    Term.
		
	(a)
	General Term.  This Agreement shall commence on the Start Date and terminate on the second anniversary of the Start Date (“Initial Term”) unless extended or sooner terminated as provided herein.  The Initial Term shall automatically be extended for successive additional one-year periods (each, a “Renewal Period”), unless either party to this Agreement provides the other party with notice of termination of this Agreement at least 30 days prior to the expiration of the Initial Term or any Renewal Period thereafter.  Notwithstanding the foregoing, in the event of a Change in Control of the Company, the term of this agreement shall be deemed extended for a Renewal Period that begins on the effective date of such Change in Control and ends on the third anniversary of such effective date.

		
	(b)
	Termination for Cause, Voluntary Termination, Termination at End of Term.  If (i) Executive is terminated by the Company at the end of the Initial Term or any Renewal Period by timely and proper notice, at any time by the Company for Cause, or voluntarily by the Executive 

    
5

other than for Good Reason, Executive shall be entitled only to his Base Salary through the date of termination and shall not be entitled to any further Base Salary or any applicable bonus, benefits or other compensation for that year or any future year, except as may be provided in an applicable benefit plan or program, or to any severance compensation of any kind, nature or amount.
		
	(c)
	Involuntary Termination Without Cause or Good Reason Termination.  If Executive’s employment with the Company is terminated by the Company without Cause (other than by reason of the Company’s election and timely notice to terminate Executive’s employment at the end of the Initial Term or any Renewal Period in accordance with Section 2.4(a) hereof or by reason of death or disability) or Executive terminates his employment with the Company or its successor for Good Reason, Executive shall, subject to satisfaction of the Release Condition described in Section 2.4(e) below, be entitled to:

		
	(1)
	all previously earned and accrued but unpaid Base Salary up to the date of such termination;

		
	(2)
	severance pay in an amount equal to 12 months of Base Salary paid in equal installments on the dates on which Executive’s Base Salary would otherwise have been paid in accordance with the Company’s normal payroll dates in effect as of the date of Executive’s termination of employment as if Executive’s employment had continued for such period, provided that the delay of the payment of any such amounts pending satisfaction of the Release Condition described in Section 2.4(e) below shall be accumulated and paid on the first of the Company’s first such scheduled payroll date following satisfaction of the Release Condition;

		
	(3)
	a lump sum payment equal to the mean of payment obligations incurred (but not necessarily paid) under any short-term incentive or annual bonus plan maintained by the Company with respect to each of the three completed fiscal years or fiscal determination periods prior to the fiscal year in which such termination occurs (or fewer fiscal years or fiscal determination periods if the Executive has not been a participant in the Company’s annual or short-term incentive bonus plan for the entirety of each such three prior fiscal years or fiscal determination periods), payable as soon as practicable following the Executive’s termination of employment, provided that in no event shall such lump-sum payment occur later than March 15 of the year following the year in which such termination occurs, and further provided that if the three fiscal years prior to the fiscal year in which such termination occurs includes a fiscal year or fiscal determination period that was less than 12 months in duration (i.e., a transition fiscal year), the payments described under this Section 2.4(c)(4) for such fiscal year or fiscal determination period shall, for purposes of this Section 2.4(c)(4), be annualized by multiplying the payout for such year or period by a fraction, the numerator of which is 12 and the denominator of which is the number of whole months during such year or period; and

		
	(4)
	for the 12 month period following the Executive’s termination of employment or such shorter period of time that Executive or any of Executive’s dependents is eligible for and elects COBRA continuation coverage (in accordance with Section 4980B of the Code), Executive’s cost of coverage shall be the employee contribution rate that would have applied if Executive had remained in active employment with 

    
6

the Company during such period, provided that any amounts payable to Executive in connection with this Section 2.4(c)(3) shall be paid on an after tax basis on the first regularly scheduled payroll date of each month for which such amount is payable.
		
	(d)
	Change in Control Termination.  Notwithstanding Section 2.4(c) above, if prior to but in connection with a Change in Control or during the 18 month period following a Change in Control (i) Executive’s employment with the Company or its successor is terminated by the Company or its successor  without Cause (other than by reason of the Company’s or its successors election and timely notice to terminate Executive’s employment at the end of the Initial Term or any Renewal Period in accordance with Section 2.4(a) hereof or by reason of death or disability), or (ii) Executive terminates his employment with the Company or its successor for Good Reason, Executive shall, subject to satisfaction of the Release Condition described in Section 2.4(e) below, be entitled to:

		
	(1)
	all previously earned and accrued but unpaid Base Salary up to the date of such termination; 

		
	(2)
	severance pay in an amount equal to 18 months of Base Salary paid in equal installments on the dates on which Executive’s Base Salary would otherwise have been paid in accordance with the Company’s normal payroll dates in effect as of the date of Executive’s termination of employment as if Executive’s employment had continued for such period, provided that the delay of the payment of any such amounts pending satisfaction of the Release Condition described in Section 2.4(e) below shall be accumulated and paid on the first of the Company’s first such scheduled payroll date following satisfaction of the Release Condition;

		
	(3)
	a lump sum payment equal to one and one-half times the mean of payment obligations incurred (but not necessarily paid) under any short-term incentive or annual bonus plan maintained by the Company with respect to each of the three completed fiscal years or fiscal determination periods prior to the fiscal year in which such termination occurs (or fewer fiscal years or fiscal periods if the Executive has not been a participant in the Company’s annual or short-term incentive bonus plan for the entirety of each such three prior fiscal years or fiscal determination periods), payable as soon as practicable following the Executive’s termination of employment, provided that in no event shall such lump-sum payment occur later than March 15 of the year following the year in which such termination occurs, and further provided that if the three fiscal years prior to the fiscal year in which such termination occurs includes a fiscal year or fiscal determination period that was less than 12 months in duration (i.e., a transition fiscal year), the payments described under this Section 2.4(c)(4) for such fiscal year or fiscal determination period shall, for purposes of this Section 2.4(c)(4), be annualized by multiplying the payout for such year or period by a fraction, the numerator of which is 12 and the denominator of which is the number of whole months during such year or period

		
	(4)
	for such period of time that Executive or any of Executive’s dependents is eligible for and elects COBRA continuation coverage (in accordance with Section 4980B 

    
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of the Code), Executive’s cost of coverage shall be the employee contribution rate that would have applied if Executive had remained in active employment with the Company during such period, provided that any amounts payable to Executive in connection with this Section 2.4(d)(4) shall be paid on an after tax basis on the first regularly scheduled payroll date of each month for which such amount is payable.  
All payments shall be subject to deductions for customary withholdings, including, without limitation, federal and state withholding taxes and payroll taxes.
		
	(e)
	Release Condition and Severance Forfeiture.  Executive agrees that Executive shall be entitled to the amounts and benefits set forth in Sections 2.4(c)(2) – (4) and 2.4(d)(2) – (4) only if (i) Executive executes a release of all claims against the Company (other than indemnity claims the Executive may have against the Company that arise under the Company’s by-laws or the D&O Insurance Policies) in such reasonable form as the Company may reasonably prescribe and has not materially breached, as of the date of termination, Section 2.5 or 2.6 of this Agreement and does not materially breach such provisions at any time during the period for which such payments are to be made, and (ii) such release becomes effective and irrevocable no later than 60 days following the date of Executive’s termination of employment (“Release Condition”).  If the Executive materially breaches Section 2.5 or 2.6 of this Agreement, the Company shall have no obligation to make any severance, other payment, or provide any benefit under this Agreement during the period in which such amounts are otherwise payable or such benefits are otherwise to be provided, but only to the extent such that the value of such foregone severance, other payment, or other benefits does not exceed the actual damages sustained by the Company with respect to such material breach.

		
	(f)
	No Additional Severance.  Executive hereby agrees that no severance compensation of any kind, nature or amount shall be payable to Executive, except as expressly set forth in this Section 2.4, and Executive hereby irrevocably waives any claim for any other severance compensation.

		
	(g)
	Death or Disability.  The Company’s obligation under this Agreement terminates on the last day of the month in which Executive’s death occurs or on the date as of which Executive first becomes entitled to receive disability benefits under the Company’s long-term disability plan.  The Company shall pay to Executive or Executive’s estate all previously earned and accrued but unpaid Base Salary up to such date.  Thereafter, Executive or his estate shall not be entitled to any further Base Salary, bonus, benefits or other compensation for that year or any subsequent year, except as may be provided in an applicable benefit plan or program

		
	(h)
	Modification Upon Appointment of Chief Executive Officer.  On the date that the Company appoints a permanent Chief Executive Officer in replacement of the Executive, and except as provided in Section 2.3(c) and this Section 2.4(h), this Agreement shall automatically be deemed amended and restated such that it is identical to the terms of the Prior Agreement, provided that for purposes of such amendment and restatement Sections 2.4(c) and (d) in such Prior Agreement shall be deemed to be replaced with Sections 2.4(c) and (d) herein.

    
8

2.5    Confidential Information.
		
	(a)
	Executive shall use best efforts and diligence both during and after employment with the Company, regardless of how, when or why Executive’s employment ends, to protect the confidential, trade secret and/or proprietary character of all Confidential Information.  Executive shall not, directly or indirectly, use (for the benefit of Executive or any other person) or disclose any Confidential Information, for so long as it shall remain proprietary or protectible as confidential or trade secret information, except as may be necessary for the performance of Executive’s duties for the Company.

		
	(b)
	Executive shall promptly deliver to the Company, at the termination of the Employment Period or at any other time at the Company’s request, without retaining any copies, all documents, information and other material in Executive’s possession or control containing, reflecting and/or relating, directly or indirectly, to any Confidential Information.

		
	(c)
	Executive’s obligations under this Section 2.5 shall also extend to the confidential, trade secret and proprietary information learned or acquired by Executive during the Employment Period from others with whom the Company has a business relationship.

		
	(d)
	Executive’s breach of Section 2.5 of this Agreement shall relieve Company of its obligations (if any) to pay any further severance benefits under this Agreement but only to the extent such benefits do not exceed the actual damages sustained by the Company as a result of the breach.

2.6    Competitive Activity.
		
	(a)
	Executive covenants and agrees that during the Employment Period and for a period ending on the date that is 18 months following the date of termination of his employment with the Company (12 months in the case of a termination other than as described in Section 2.4(d) above), including without limitation termination by the Company for Cause or without Cause, Executive shall not, in the United States of America, or in any other country of the world in which the Company or any of its subsidiaries has done business at any time during the last two (2) years prior to termination of Executive’s employment with the Company, engage, directly or indirectly, whether as principal or as agent, officer, director, employee, consultant, shareholder, or otherwise, alone or in association with any other person, corporation or other entity, in any Competing Business.  For purposes of this Agreement, the term “Competing Business” shall mean any person, corporation or other entity which sells or attempts to sell any products or services which are the same as or similar to the products and services (i) sold by the Company or any of its subsidiaries at any time and from time to time during the last two (2) years prior to termination of the Employment Period, or (ii) being developed by the Company or any of its subsidiaries during the Employment Period, no matter what stage of development was achieved during the Employment Period, and even if the idea was abandoned during the Employment Period.

		
	(b)
	Executive shall continue to be obligated under Section 2.5 of this Agreement not to use or to disclose Confidential Information so long as it shall remain proprietary or protectible as confidential or trade secret information.

    
9

		
	(c)
	Following termination of Executive’s employment with the Company for any reason, Executive agrees to advise the Company of his new employer, work location and job responsibilities within three (3) days after accepting new employment.

		
	(d)
	Executive understands that the intention of Sections 2.5 and 2.6 of this Agreement is not to prevent Executive from earning a livelihood and Executive agrees nothing in this Agreement would prevent Executive from earning a livelihood utilizing his general skills in any of the companies which are not directly or indirectly in competition with the Company.

		
	(e)
	Executive agrees that during the Employment Period, Executive shall not, directly or indirectly, solicit the trade of, or trade with, any customer, prospective customer or supplier of the Company or any of its subsidiaries for any business purpose other than for the benefit of the Company or such subsidiaries.  Executive further agrees that for 18 months following termination of the Employment Period for whatever reason (12 months in the case of a termination other than as described in Section 2.4(d) above), including without limitation termination by the Company for Cause or without Cause, Executive shall not, directly or indirectly, solicit for any Competing Business the trade of, or trade with, any customers or suppliers, or prospective customers or suppliers, of the Company or any of its subsidiaries.

		
	(f)
	Executive agrees that, during his employment with the Company and for 18 months following termination of the Employment Period for whatever reason (12 months in the case of a termination other than as described in Section 2.4(d) above),  Executive shall not, directly or indirectly, solicit, hire or induce, or attempt to solicit, hire or induce, any employee of the Company or any of its subsidiaries to leave the Company or any of its subsidiaries for any reason whatsoever or hire any employee of the Company or any of its subsidiaries.

		
	(g)
	Executive’s breach of Section 2.6 of this Agreement shall, to the extent provided in Section 2.4(e) above, relieve Company of its obligations (if any) to pay severance or separation pay benefits under this Agreement.  The Company’s obligation to make such payments will be cancelled upon the occurrence of any such material breach during the severance period, Executive shall not receive any further severance or separation pay benefits under Section 2.4 except to the extent provided in Section 2.4(e).

		
	(h)
	Notwithstanding any provision in this Section 2.6 to the contrary, during the period in which this Section 2.6 serves to restrict the Executive the Company shall, within ten business days of its receipt of a written request from the Executive, inform the Executive whether any proposed activity by the Executive would be viewed by the Company as a violation of a this Section 2.6, and if the Company determines that such activity does not constitute a violation of this Section 2.6, such determination shall be conclusive and binding on the Company following the date of such determination.  

		
	(i)
	Notwithstanding any provision in this Section 2.6 to the contrary, if the Company determines that any activity undertaken by the Executive during the period in which this Section 2.6 serves to restrict the Executive violates this Section 2.6, it shall provide the Executive with written notice of such determination within ten business days of such determination and shall reasonably provide the Executive with ten business days to cure any such violation.  If the Executive cures such violation within ten days of such notice of determination, the Company shall not seek to enforce this Section 2.6 with respect to such cured violation.

    
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2.7    Change in Control Restrictions.
		
	(a)
	In the event any payment(s) or the value of any benefit(s) received or to be received by Executive in connection with Executive’s termination of employment or contingent upon a change in control (whether received or to be received pursuant to the terms of this Agreement or of any other plan, arrangement or agreement of the Company, its successors, any person whose actions result in a change in control, or any person affiliated with any of them (or which, as a result of the completion of the transaction(s) causing a change in control, will become affiliated with any of them) (collectively, the “Payments”)), are determined, under the provisions of Subsection 2.7(c), to be subject to an excise tax imposed by Code Section 4999 (any such excise tax, together with any interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), as determined in this Section 2.7(a), then the Company shall reduce the aggregate amount of the Payments payable to the Executive such that the value of such Payments (determined in accordance with Section 280G of the Code or any successor provision thereto) are, after such reduction, no greater than 95% of the Executive’s “base amount” as of the date of such change in control and such that no Excise Tax shall be payable by the Executive, and the Payments shall not cease to be deductible by the Company by reason of Section 280G of the Code (or any successor provision thereto).

		
	(b)
	If there is a determination that the Payments payable to Executive must be reduced pursuant to the immediately preceding paragraph, the Company shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof and of the amount to be reduced. Executive may then elect which and how much of the Payments shall be eliminated or reduced as long as (i) the first such Payments to be reduced are not considered “deferred compensation” within the meaning of Code Section 409A (if any), (ii) if Payments described in (i) are exhausted and additional reductions are necessary, any cash Payments described in this Agreement not previously reduced are reduced next, and (iii) after such election the aggregate present value of the Payments equals the largest amount that would both (A) not cause any Excise Tax to be payable by Executive, and (B) not cause any Payments to become nondeductible by the Company by reason of Section 280G of the Code (or any successor provision thereto). Executive shall advise the Company in writing of Executive’s election within ten (10) days of Executive’s receipt of such notice from the Company.  Notwithstanding the foregoing, if no election is made by Executive within the ten-day period, the Company may elect which and how much of the Payments shall be eliminated or reduced as long (i) the first such payments to be reduced are not considered “deferred compensation” within the meaning of Section 409A of the Code (if any), (ii) if Payments described in (i) are exhausted and additional reductions are necessary, any cash Payments described in this Agreement not previously reduced are reduced next, and (iii) after such election the aggregate present value of the Payments equals the largest amount that would both (A) not cause any Excise Tax to be payable by Executive, and (B) not cause any Payments to become nondeductible by the Company by reason of Section 280G of the Code (or any successor provision thereto).  For purposes of this paragraph, present value shall be determined in accordance with Code Section 280G(d)(4).

		
	(c)
	All determinations required to be made under this Section 2.7, including whether the aggregate amount of Payments shall be reduced, and the assumptions to be utilized in arriving at such determinations, unless otherwise set forth in this Agreement, shall be made by a nationally recognized certified public accounting firm selected by the Company and reasonably acceptable to Executive (the “Accounting Firm”).  The Company shall cause the 

    
11

Accounting Firm to provide detailed supporting calculations to the Company and Executive within fifteen (15) business days after notice is given by Executive to the Company that any or all of the Payments have occurred, or such earlier time as is requested by the Company.  Within two (2) business days after such notice is given to the Company, the Company shall instruct the Accounting Firm to timely provide the data required by this Section 2.7(c) to Executive.  All fees and expenses of the Accounting Firm shall be paid in full by the Company.  If the Accounting Firm determines that there is substantial authority (within the meaning of Section 6662 of the Code) that no Excise Tax is payable by Executive, the Company shall take commercially reasonable action so that the Accounting Firm shall furnish Executive with a written opinion that failure to disclose or report the Excise Tax on Executive’s federal income tax return will not constitute a substantial understatement of tax or be reasonably likely to result in the imposition of a negligence or any other penalty.  Any determination by the Accounting Firm shall be binding upon the Company and Executive in the absence of material mathematical or legal error.
ARTICLE III
Miscellaneous  
3.1    Executive's Representations.  Executive hereby represents and warrants to the Company that (i) Executive’s execution, delivery and performance of this Agreement do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which he is bound, (ii) Executive is not a party to or bound by any employment agreement, noncompete agreement or confidentiality agreement with any other person or entity, and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance with its terms.  Executive hereby acknowledges and represents that he fully understands the terms and conditions contained herein.
3.2    Survival.  Sections 2.5 and 2.6 and Sections 3.2 through 3.14 shall survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period.
3.3    Notices.  All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally, mailed by certified or registered mail, return receipt requested and postage prepaid, or sent via a nationally recognized overnight courier, or sent via facsimile to the recipient.  Such notices, demands and other communications will be sent to the address indicated below:
To the Company:
MGP Ingredients, Inc.
Cray Business Plaza
100 Commercial Street
P.O. Box 130
Atchison, Kansas 66002
To Executive:
7930 Loneoak Court
Cincinnati, OH 45243

    
12

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.
3.4    Severability.  Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law.  If any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, (a) the parties agree that such provision(s) will be enforced to the maximum extent permissible under the applicable law, and (b) any invalidity, illegality or unenforceability of a particular provision will not affect any other provision of this Agreement.
3.5    Successors and Assigns.  Except as otherwise provided herein, all covenants and agreements contained in this Agreement shall bind and inure to the benefit of and be enforceable by the Company and its successors and assigns.  This Agreement is personal to Executive and except as otherwise specifically provided herein, this Agreement, including the obligations and benefits hereunder, may not be assigned to any party by Executive.  
3.6    Descriptive Headings.  The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
3.7    Counterparts.  This Agreement may be executed in one or more identical counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
3.8    Waiver.  Neither any course of dealing nor any failure or neglect of either party hereto in any instance to exercise any right, power or privilege hereunder or under law shall constitute a waiver of such right, power or privilege or of any other right, power or privilege or of the same right, power or privilege in any other instance.  All waivers by either party hereto must be contained in a written instrument signed by the party to be charged therewith, and, in the case of the Company, by its duly authorized officer.
3.9    Entire Agreement.  This instrument constitutes the entire agreement of the parties in this matter and shall supersede any other agreement between the parties, oral or written, concerning the same subject matter including, but not limited to, any prior employment and severance agreements, including the Prior Agreement.  Notwithstanding the foregoing, this Agreement is not intended to amend or supersede any employee benefit plan or program (including incentive compensation or equity compensation programs) maintained by the Company or its affiliates under which the Executive has any legally binding right to compensation or other benefits.
3.10    Amendment.  Except as provided in Section 2.4(h) herein, this Agreement may be amended only by a writing which makes express reference to this Agreement as the subject of such amendment and which is signed by Executive and by a duly authorized officer of the Company.  Notwithstanding the foregoing, the Company may, with or without the consent of the Executive, waive enforcement of all or a portion of Sections 2.5 or 2.6 of this Agreement, provided that its decision to waive enforcement of such provisions shall not be deemed to constitute the waiver of enforcement of any other provision pursuant to the terms of this Agreement, including, without limitation, the portions of Section 2.5 and 2.6 not so waived.
3.11    Governing Law.  All questions concerning the construction, validity and interpretation of this Agreement will be governed by and construed in accordance with the domestic law of the State of Kansas, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Kansas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Kansas.  Any litigation relating to or arising out of this Agreement shall be filed and litigated exclusively in the state or federal courts of Kansas.

    
13

3.12    Remedies.  Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including reasonable attorneys' fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor.  The parties agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement, including, without limitation, Sections 2.5 and 2.6 hereof, and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement.
3.13    Exit Interview.  To ensure a clear understanding of this Agreement, Executive agrees, at the time of termination of Employee's employment, to engage in an exit interview with the Company at a time and place designated by the Company and at the Company's expense.  Executive  understands and agrees that during said exit interview, Executive may be required to confirm that he will comply with his on-going obligations under this Agreement.  The Company may elect, at its option, to conduct the exit interview by telephone.
3.14    Future Employment.  Executive shall disclose the existence of this Agreement to any new employer or potential new employer which offers products or services that compete with the Company’s Business if such new employment commences within 18 months following Executive’s termination of employment with the Company (12 months in the case of a termination other than as described in Section 2.4(d) above).  Executive consents to the Company informing any subsequent employer of Executive, or any entity which the Company in good faith believes is, or is likely to be, considering employing Executive, of the existence and terms of this Agreement if such subsequent employment commences (or is expected to commence) within 18 months following Executive’s termination of employment with the Company (12 months in the case of a termination other than as described in Section 2.4(d) above).
3.15    Withholding Taxes.  The Company may withhold from any and all amounts payable under this Agreement such Federal, state, local and any other applicable taxes as may be required to be withheld pursuant to any applicable law or regulation.
3.16    Code Section 409A Compliance.

		
	(a)
	It is intended that this Agreement shall comply with the provisions of Code Section 409A, or be exempt from the application of Code Section 409A.  For purposes of Code Section 409A, the right to a series of installment payments hereunder, including any salary continuation, shall be treated as a right to a series of separate payments.  In no event may the Executive, directly or indirectly, designate the calendar year of any payment under this Agreement.  

		
	(b)
	Notwithstanding anything to the contrary in this Agreement, all taxable reimbursements provided under this Agreement that are subject to Code Section 409A shall be made in accordance with the requirements of Code Section 409A.  The amount of taxable expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year.  Reimbursement of a taxable eligible expense shall be made in accordance with the Company’s policies and practices and as otherwise provided herein, provided, that, in no event shall reimbursement be made after the last day of the year following the year in which the expense was incurred.  The right to reimbursement of a taxable expense is not subject to liquidation or exchange for another benefit.

    
14

		
	(c)
	Notwithstanding any other provision of this Agreement to the contrary, if Executive is considered a “specified employee” for purposes of Code Section 409A, any payment that constitutes “deferred compensation” within the meaning of Code Section 409A that is otherwise due to the Executive as a result of such Executive’s “separation from service” under this Agreement during the six-month period immediately following Executive’s “separation from service” shall be accumulated and paid to the Executive on the first day of the seventh month following such “separation from service” (“Delayed Payment Date”), provided that if the Executive dies prior to the payment of such amounts, such amounts shall be paid to the personal representative of his estate on the first to occur of the Delayed Payment Date or 10 days following the date of Executive’s death.

		
	(d)
	Notwithstanding any provision in this Agreement to the contrary, any references to termination of employment or date of termination shall mean and refer to “separation from service” and the date of such “separation from service” as that term is defined in Code Section 409A.

[the remainder of this page is left intentionally blank; signature page follows]

    
15

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement this 17th day of December, 2013 and effective as of the date first written above.
    
	
		
	COMPANY

	 
	 

	By:
	/s/ David E. Rindom

	Name:
	David E. Rindom

	Title:
	Vice President, Human Relations

	
		
	EXECUTIVE

	 
	 

	 
	/s/ Donald P. Tracy

	Name:
	Don Tracy

    
16

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