PROMISSORY NOTE

FOR VALUE RECEIVED, the undersigned, American Power Group, Inc., an Iowa corporation with its principal address located at 2502 Poplar Street, Algona, Iowa 50511 (the “Company”), hereby promises to pay to the order of GreenMan Alternative Energy, Inc., an Iowa corporation, with its principal address located in care of GreenMan Technologies, Inc., 7 Kimball Lane, Building A, Lynnfield, Massachusetts 01940 (“GAE”), the principal sum of Five Hundred Thirty One Thousand Five Hundred Dollars ($531,500), together with interest from the date hereof computed on the basis of a 365-day year on the unpaid principal balance hereof from time to time outstanding at the rate of 5.5% per annum until paid in full.

Interest on this Note shall be due and payable quarterly in arrears on each September 30, December 31, March 31 and June 30 until this Note shall have been repaid in full. The principal balance of this Note and any accrued but unpaid interest under this Note shall be due and payable in a single balloon payment on July 27, 2013.   Notwithstanding the foregoing, the Company agrees that GreenMan Technologies, Inc. (“GreenMan”), GAE’s parent company and the licensee under that certain Exclusive Patent License Agreement dated as June 17, 2009 between GreenMan and the Company (the “Patent License”), shall be entitled to pay over to GAE 7% of each royalty payment with respect to Net Sales and 7% of all Sublicense Income (as such terms are defined in the Patent License) otherwise due to the Company, and such payments to GAE shall be deemed to be payments by the Company of the principal amount of this Note. This Note constitutes an amendment to the Patent License to the extent necessary to permit GreenMan to make such payments to GAE rather than to the Company.

Except as set forth in the preceding paragraph, principal and interest shall be payable in lawful money of the United States of America, in immediately available funds, at the principal office of GAE set forth above or at such other place as GAE may designate from time to time in writing to the Company. This Note may be prepaid at any time or from time to time, in whole or in part, without any premium or penalty.

Notwithstanding the foregoing, the outstanding balance of this Note, together with all accrued but unpaid interest under this Note, shall be rendered immediately due and payable, without notice or demand to the Company, in case any of the following events (each, an “Event of Default”) shall occur: