Document:

Form8-K-Exhibit102

Exhibit 10.2

[Letterhead]

October 21, 2014

American Power Group, Inc.
Chuck Coppa
P.O. Box 187
Algona, lA 50511

Dear Chuck:

Iowa State Bank is pleased to commit the following loans outlined below to American Power Group, Inc. The commitment will expire on 11/30/14.

Note A:             $2,717,407.14 (Term Note)

		
	Payments: 
	Monthly P&l payments based on a 7-year amortization.

Maturity:             7-years from the date of the note.

Rate:                 Variable rate at New York Prime + 4.0% with a floor of 8.00%.

		
	Collateral: 
	General Business Security Agreement, Assignment of the $300,000 certificate of deposit, all existing collateral (vehicles and equipment) and an Assignment of the Dual Fuel Technology Licensing Agreement.

The note will also be secured by an additional 2,500,000 shares in the form of a pledge agreement from American Power Group Corp Officers and Directors

This new note will be cross-collateralized/cross­defaulted with the existing notes to American Power Group, Inc. and American Power Group Corp.

Note B:     $500,000.00

Payments:     Monthly interest payments.

Maturity:     15-months for the date of the note.

Rate:                 Variable rate at New York Prime + 4.0% with a floor of 8.00%.

Collateral:     General Business Security Agreement, Assignment of the $300,000 certificate of deposit, all existing collateral (vehicles and equipment) and an Assignment of the Dual Fuel Technology Licensing Agreement.

The note will also be secured by an additional 2,500,000 shares in the form of a pledge agreement from American Power Group Corp Officers and Directors

This new note will be cross-collateralized/cross­defaulted with the existing notes to American Power Group, Inc. and American Power Group Corp.
            
Terms:     Advances against the line of credit will be governed by a monthly borrowing base. Advance rates will be 70% of Eligible Accounts Receivable less receivables greater than 90 days, 50% of inventory (valued at cost) less any prior liens,100% of the certificate of deposit.

Eligible Accounts Receivable includes:
		
	•
	All domestic Receivables

		
	•
	International Receivables supported by an Irrevocable Letter of Credit from an International Bank approved by Iowa State Bank.

		
	•
	Iowa State Bank at its sole discretion may include International Receivables for customers that are publicly traded and have updated financial information available to analyze. Including these receivables will be an exception vs. the norm.

The borrowing base will be supported by monthly income statement, balance sheet, A/R aging, A/P aging, inventory listing, fixed assets listing and any other reports that the bank deems necessary.

Other Terms and Conditions
		
	A
	Commitment Fee of $30,000.00 will be collected at the time of closing.

		
	B.
	American Power Group Corp. will guaranty all of the American Power Group, Inc. debt.

		
	C.
	Iowa State Bank will lower the rate by 100 basis points on both notes if the Directors of American Power Group provide guaranties.

		
	D. 
	American Power Group, Inc. agrees to provide a (consolidated) balance sheet, income statement, borrowing base, A/R aging, A/P aging and inventory listing prior to the 30th of every month. Borrower also agrees to provide a copy of the YE opinion audit and upon completion no later then 90 days after YE.

h
		
	E.
	American Power Group, Inc. will maintain a current ratio of 1.00x monitored monthly.

		
	F. 
	American Power Group, Inc. will maintain a debt/worth ratio of 2.5x or better monitored monthly. When calculating the debt/worth ratio, ISB will allow GMTI to add back the $31,000,000 of accumulated net operating loss derived from Green Tech Products.

		
	G.
	American Power Group, Inc. will provide the monthly documentation for the borrowing base and loan covenants by the 30th of every month. Failure to meet the above loan covenants may result in the loan being called.

		
	H. 
	All capital raised will be maintained in deposit/investment accounts with Iowa State Bank only. At no other time may any of the funds be deposited into any other financial institutions without written consent of Iowa State Bank.

This letter is a conditional commitment and is made in good faith to complete the arrangements for the loan. The final terms of the loan shall be set forth in the Loan Agreements, Notes, and Security Documents. By accepting this letter, you acknowledge that the Bank is still in the process of obtaining all the necessary legal analysis to complete the transaction. The Bank's obligation to make advance under the loans, which are the subject of this commitment letter, will be based upon the Bank's determination, in its sole and absolute discretion of the financial condition of the borrowers and the lien position of the Bank at the time any advance is requested by the borrowers.

We appreciate the opportunity to meet your loan needs. Please let me know if you have any questions.

Sincerely,

/s/ Jason Wartick, VP
Jason Wartick
Vice President/Business Banking

By signing below, I/we agree to the terms and conditions outlined above and authorize the Bank to begin the loan closing process.

/s/ Charles E. Coppa
Chuck Coppa, CFO
 
Date:Form8-K-Exhibit103

Exhibit 10.3

PROMISSORY NOTE

	
								
	Principal
$2,746,752.43
	Loan Date
10-27-2014
	Maturity
10-15-2021
	Loan No
	Call/ Coll
	Account
	Officer
***
	Initials

	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: $2,746,752.43                              Date of Note: October 27, 2014
PURPOSE OF LOAN. Amortize LOC.
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 Seven Hundred Forty-six Thousand Seven Hundred Fifty-two & 43/100 Dollars ($2,746,752.43), together with interest on the unpaid principal balance from October 27, 2014, until paid in full.
PAYMENT. Subject to any payment changes resulting from changes in the Index, Borrower will pay this loan in 82 payments of $44,223.42 each payment. Borrower's first payment is due January 15, 2015, and all subsequent payments are due on the same day of each month after that. Borrower's final payment will be due on October 15, 2021, and will be for all principal and all accrued interest not yet paid. Payments include principal and interest. 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 "INTEREST CALCULATION METHOD" paragraph using a rate of 4.000 percentage points over the Index, adjusted if necessary for any minimum and maximum rate limitations described below, resulting in an initial rate of 8.000%. NOTICE: Under no circumstances will the interest rate on this Note be less than 8.000% per annum or more than the maximum rate allowed by applicable law. Whenever increases occur in the interest rate, Lender, at its option, may do one or more of the following: (A) increase Borrower's payments to ensure Borrower's loan will pay off by its original final maturity date, (B) increase Borrower's payments to cover accruing interest, (C) increase the number of Borrower's payments, and (D) continue Borrower's payments at the same amount and increase Borrower's final payment.
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 under the payment schedule. Rather, early payments will reduce the principal balance due and may result in Borrower's making fewer payments. 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: Iowa 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 

PROMISSORY NOTE
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Page 2

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 tor 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.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Default shall also exist if any loan proceeds are used for a purpose that will contribute to excessive erosion of highly erodible land or to the conversion of wetland to produce or to make possible the production of an agricultural commodity, further explained in 7 CFR Part 1940. Subpart G, Exhibit M

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.
ADDITIONAL FEES TO BE PAID BY BORROWER. Abstracting fees, attorney fees, appraisal fee, recording fees and flood determination fees as well as any additional fees commensurate, customary or appropriate for this loan.
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 Borrower's accounts with Lender (whether 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 indebtedness against any and all such accounts.
COLLATERAL. Borrower acknowledges this Note is secured by SECURITY AGREEMENT(S) DATED
10-27-14, 09-18-13, 02-05-2013, 12-05-2012, 02-25-2011' 03-04-2010, 1-4-2010, 1-4-2010, 1 0-21·2009, 9-21-2009, 9-9-2009, 11 -9-2010
Secured Guaranty from GreenMan Technologies, Inc. dated 11-9-2010
Assignment of Deposit dated 11-9-2010 ($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 GMTI/APG). 
Business Loan Agreement dated October 27, 2014.
Commitment letter dated October 21, 2014.

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

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 DOCUMENTS RELATING TO THIS DEBT.

BORROWER:

AMERICAN POWER GROUP, INC.

By: /s/ Charles E. Coppa 
Charles E. Coppa, Chief Financial Officer of
American Power Group, Inc.

LENDER:

IOWA STATE BANK

{M0700744.1 }    

PROMISSORY NOTE
(Continued)
Page 3

X /s/ Jason Wartick
Jason Wartick, Vice President

{M0700744.1 }

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