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Exhibit 10.32
 
COLLABORATION AGREEMENT
 

 

 
BY AND BETWEEN
 

 
ZBB Energy Corporation
 

 
AND
 

 
Honam Petrochemical Corporation

 
3/25/11
 
 
 
Confidential                                                              
 HONAM – ZBB V3 Battery Project
 
 
 

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COLLABORATION AGREEMENT

Index
 
 

Article 1 – Definitions 2 
 
Article 2 – The Project, Project Plan and Project Responsibility
 
5
 
Article 3 – Background Technology and Improvements
 
6 
 
Article 4 – Grant of Research License
 
6
 
Article 5 – The Program Technology
 
7 
 
Article 6 – Payments
 
9 
 
Article 7 – Confidentiality
 
10 
 
Article 8 – Termination
 
12 
 
Article 9 – Indemnities, Liability
 
14 
 
Article 10 - Insurance
 
15
 
Article 11 – U.S. Export Administration Regulation
 
15
 
Article 12 – Assignment & Change of Control
 
15
 
Article 13 – Law and Settlement of Disputes
 
15
 
Article 14 – Publication and Press Releases
 
16
 
Article 15 – Force Majeure
 
16
 
Article 16 – Pre-Existing Agreements
 
17
 
Article 17 – Address for Notices
 
18
 
Article 18 - Miscellaneous
 
18

 
 
 
 
 
Confidential                                                               HONAM
– ZBB V3 Battery Project                         i
 
 
 

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COLLABORATION AGREEMENT

 
                      THIS AGREEMENT, effective the 25th day of March, 2011 (the
“Effective Date”), is by and between HONAM PETROCHEMICAL CORPORATION (“HONAM”),
a division of LOTTE Petrochemical,  __________ company having its place of
business at The LOTTE Tower Building, 395-67, Shindaebang-Dong, Dongjak-Gu,
Seoul, 156-711 Korea, and ZBB ENERGY CORPORATION (“ZBB”), a Wisconsin
Corporation having its place of business at N93 W14475 Whittaker Way, Menomonee
Falls, Wisconsin, USA.
 
RECITALS
 
1.  
ZBB possesses expertise and is active in the development of large format Zinc
Bromide flow batteries and power control systems.

 
2.  
Honam possesses expertise and is active in manufacture of petrochemicals.

 
3.  
Honam Petrochemical has identified energy storage as a priority business and
seeks strategic partnership in the chemical flow battery (CFB) business.

 
4.  
Honam and ZBB wish to co-operate on further technical development of the Version
3 Zinc Bromide flow battery (as defined herein below) via a cooperative project
(the “Project”) and, if such development is successful, wish to commercialize
the same.

 
NOW THEREFORE IT IS AGREED AS FOLLOWS:
 
ARTICLE 1 – DEFINITIONS
 
1.1  
The following expressions shall have the meanings specified:

 
(a)  
“Affiliate of HONAM” means

 
 
(1)
Lotte Group and any company (other than HONAM) which is from time to time
directly or indirectly affiliated with Honam; and

 
 
(2)
any company which is managed or operated by HONAM or a company as defined in (1)
and/or has an operating agreement with HONAM and/or a company as defined under
(1), which operating agreement gives HONAM or such company the right to manage
the operations of all or part of such first company.

 
For the purpose of this definition a particular company is (i) directly
affiliated with another company or companies if that latter company beneficially
owns or those latter companies together beneficially own fifty per cent or
more of the voting rights attached to the ownership interest of the particular
company; and (ii) is indirectly affiliated with company or companies if a series
of companies can be specified, beginning with that latter company or companies
and ending with the first mentioned company, so related that each company of the
series (except the latter company or companies) is directly affiliated with one
or more of the companies earlier in the series.
 
 
HONAM – ZBB Project                                 2

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(b)  
“Affiliate of ZBB” means any company controlling, controlled by or under common
control with ZBB, wherein, for the purposes of this definition, “control” shall
mean the ownership of more than fifty percent (50%) of the outstanding voting
securities of the company in question.

 
(c)  
 “Background Technology” means the Intellectual Property and Patent Rights
owned, developed or acquired by a Party, as further described in Appendix B
hereto, and any other Intellectual Property owned, developed or acquired by a
Party or its Affiliates prior to the Project which has application in the Field.
Background Technology shall be called “ZBB Background Technology” if owned or
controlled by ZBB or Affiliates of ZBB and “HONAM Background Technology” if
owned or controlled by HONAM or Affiliates of HONAM.

 
(d)  
“Commercialization” means that point in time when a Product developed pursuant
to the Project Plan is considered commercially viable, which shall be defined as
after “release to manufacturing” using ZBB Background Technology and/or ZBB
Improvements.

 
(e)  
“Confidential Information” means any technical or business information disclosed
by one Party to the other Party either directly or indirectly, orally, in
writing, by software, by drawings, samples, by visual inspection of equipment or
facilities, or in any other way and includes, but is not limited to, unpublished
Background Information and Intellectual Property (including unpublished
Background Information and Intellectual Property included in a Party’s
Improvements), financial and business information (including revenues, expenses,
profitability, taxes, business plans and contracts) and specific business and
technology concepts (including proposed business and financial structures,
product plans, models and partner relationships).  Confidential Information
shall be in a tangible form, or accompanied by a tangible form, marked as
“Confidential,” or if disclosed visually or orally, shall be identified at the
time of disclosure as Confidential Information and reduced to a writing marked
“Confidential” describing the nature of the information deemed to be
Confidential Information and transmitted in a tangible form to the Steering
Committee within thirty (30) days of the oral disclosure.

 
(f)  
 “Designated Countries” means the list of countries for which the Parties agree
that patent applications on Inventions should be filed.

 
(g)  
“Effective Date” means the date the latter Party to execute this Agreement so
executes.

 
(h)  
“Project Start Date” means January 1st, 2010

 
(i)  
“Field” means the development of ZBB’s third generation Zinc Bromide flow
battery module (V3).

 
(j)  
“Improvements” means any modifications, inventions and other enhancements based
upon the ZBB Background Technology and/or ZBB or HONAM Improvements, conceived,
developed or acquired by a Party not as part of the Project after the Project
Start Date and which have application in the Field.  Improvements shall be
called “HONAM Improvements” if conceived, developed or acquired by HONAM and
“ZBB Improvements” if conceived, developed or acquired by ZBB.

 
 
HONAM – ZBB Project                                 3

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(k)  
“Intellectual Property” means patents and any information, data, designs, ideas,
inventions, methods, processes, apparatus and equipment, material compositions,
formulas, software, trade secrets, know-how, works of authorship and
copyrightable materials, whether or not any of the foregoing are registered or
registerable, applications for patents on any of the foregoing and all rights to
apply to register any of the foregoing.  For avoidance of doubt, Intellectual
Property shall not include the trademarks and service marks of a Party or its
Affiliates.

 
(l)  
“Invention(s)” means patentable subject matter embodied in the Program
Technology.

 
(m)  
“Joint Product” means a product developed jointly during the Project by
representatives of both ZBB and HONAM.

 
(n)  
“Party” or “Parties” means as the context requires, either or both of ZBB and
HONAM.

 
(o)  
“Patent Rights” means

 
(i)  
as the term pertains to HONAM, patents and patent applications of HONAM or
Affiliates of HONAM, in any country, to the extent that (i) the claims cover
HONAM Improvements; and (ii) HONAM is entitled to grant licenses thereunder,
subject to any condition which HONAM may be required to impose; and

 
(ii)  
as the term pertains to ZBB, patents and patent applications of ZBB or
Affiliates of ZBB, in any country, to the extent that (i) the claims cover the
Zinc Bromide battery, ZBB Background Technology or ZBB Improvements; and (ii)
ZBB is entitled to grant licenses thereunder, subject to any condition which ZBB
may be required to impose

 
(p)  
 “Program Technology” means the Intellectual Property arising from the Project,
including but not limited to improvements to the Background Technology and/or
Improvements which are conceived or developed by employees, contractors and
consultants of either Party or its Affiliates as part of the Project.  In no
event shall Background Technology or Improvements be considered Program
Technology, even if incorporated or embedded in Program Technology.

 
(q)  
 “Project” means a cooperative project for the development of a commercially
viable product in the Field using ZBB Background Technology, ZBB Improvements,
Program Technology and/or, possibly, HONAM Improvements, as further defined in
the written Project Plan.

 
(r)  
“Project Plan” means the program of work set forth in writing and attached
hereto as Appendix A, which may be amended from time to time by written
agreement of the Parties in accordance with Article 2.

 
 
HONAM – ZBB Project                                 4

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(s)  
“Project Term” means the period for performing the Project, as further defined
in Article 8.1.

 
1.2  
The following Appendices are made a part of this Agreement:

 
Appendix A – The Project Plan
 
Appendix B – Background Technology
 
Appendix C - Technical Information, including Know-How
 
Appendix D – Commercialization License Terms
 
1.3  
The words "hereof, "herein", and "hereunder" and words of similar import, when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.

 
1.4  
The terms defined in the singular shall have a comparable meaning when used in
the plural, and vice versa.

 
1.5  
Whenever the Parties have agreed that any approval or consent shall not be
“unreasonably withheld,” such phrase shall also include the Parties’ agreement
that the approval or consent shall not be unreasonably delayed or conditioned.

 
 
ARTICLE 2 – THE PROJECT, PROJECT PLAN AND PROJECT RESPONSIBILITY
 
2.1  
ZBB agrees that, during the Project Term,  it will not conduct a research
program in the Field with another storage customer or supplier.  ZBB is free
enter into an agreement with a third party to design and build flow battery
modules that are larger than 500 kWh in size using the V3 Program Technology.
Honam is free enter into an agreement with a third party to design and build
flow battery modules that are larger than 500 kWh in size using the V3 Program
Technology at the time all project payments are completed.

 
2.2  
During the Project Term, each Party shall carry out those parts of the Project
assigned to it in accordance with standards no less stringent than those
generally applied by that Party when carrying out development work.  In
particular, the Parties shall exercise reasonable care to avoid developing
technology that, if exploited, would infringe the Intellectual Property rights
of any third party.  ZBB and HONAM shall each be considered as acting as an
independent contractor in the conduct of the Project and the performance of all
other obligations under this Agreement and the Project Plan.

 
2.3  
Each Party shall remain responsible for providing the staffing resources which
it deems necessary, in its own discretion, to carry out its obligations under
the Project.  Each Party shall be free, in such manner as the Party sees fit, to
dispose of such portion of its entire time, energy and skill as that Party is
not obligated to devote to the Project hereunder, so long as same does not
create a breach of Article 2.1.

 
2.4  
Staff of a Party assigned to work on the Project shall continue to be employed
by their present employer even if assigned to carry out work at the premises of
the other Party.

 
2.5  
The Parties shall establish a committee (the “Steering Committee”) to oversee
the implementation, progress and results of the Project.  Each Party shall
appoint two (2) persons to the Steering Committee, one of which will be a
business representative, one of which will be a technical person who has IP
knowledge.  The technical representative from each Party shall be responsible
for coordinating the tasks assigned to the Party in question and reporting of
progress and Program Technology to the other Party (“Project Manager”).

 
 
HONAM – ZBB Project                                 5

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Each Party will provide the other Party with the names and contact information
of its initial Steering Committee members within thirty (30) days after the
Effective Date.  Either Party may change any of its Steering Committee
representatives with written notice to the other Party.
 
2.6  
The Steering Committee shall direct the Project Plan and may modify it to the
extent necessary to complete the Project but shall have no authority to modify
the Project Plan to the extent such change would result in a change to the terms
of this Agreement; e.g., a change to Field or any grant herein.

 
2.7  
Any changes to the scope or milestones of the Project Plan shall be pursuant to
unanimous decision of the Steering Committee and shall require the written
agreement of authorized management of each Party before they are implemented.

 
2.8  
During the Project Term, each Party shall regularly keep the other informed of
progress of its work under the Project Plan and of the Program Technology it has
obtained.  To that end, progress meetings will be held by the Steering
Committee, and attended by such other representatives of ZBB and HONAM as are
deemed appropriate, once every month or at such greater frequency as either of
the Parties deems necessary.  Such meetings shall review progress made and
Program Technology generated since the previous meeting and review the effect
(if any) such Program Technology might have on the remainder of the Project, as
well as any other factors, concerns or issues that might affect the
implementation of the Project Plan.  The Steering Committee meeting held in or
around the anniversary of the Effective Date each year shall take the form of an
annual review of all aspects of the Project.

 
2.9  
Promptly upon completion of the current Project Plan, the Parties, through the
Steering Committee, shall jointly prepare a written report detailing the work
carried out, the Program Technology obtained, whether the products were
successful or, if not successful, recommendations on the next steps that might
be taken (which may include a recommendation to extend the Project).  Consistent
with Article 8.1, the Parties will negotiate an extension of the current Project
Plan as necessary to enable HONAM to reach a next phase decision.

 
 
ARTICLE 3 – BACKGROUND TECHNOLOGY AND IMPROVEMENTS
 
3.1  
Background Technology to be made available for use in the Project is detailed in
Appendix B.  If either Party decides during the Project to make any other
Background Technology (including and Background Technology that was
inadvertently omitted from Appendix B as of the Project Start Date) available
for the Project, the nature and scope of such Background Technology  will be
documented in a signed amendment to Appendix C. The Steering Committee will
decide which Technology in Appendix C will become either Background Technology
or Program Technology. Background Technology and the Intellectual Property
therein will continue to be owned by the Party, or the Party’s Affiliate(s),
that brings it to the Project.

 
 
HONAM – ZBB Project                                 6

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3.2  
If a Party determines that disclosure of certain of its Confidential Information
relative to Improvements would be useful for furtherance of the Project, such
Party shall describe, in a non-confidential manner, the general nature and scope
of the information to be disclosed to the other Party via the Steering Committee
and the other Party shall, in its sole discretion, agree or decline to receive
such Confidential Information pursuant to the terms of Article 7.  Any
disclosures of Confidential Information shall be provided to the Steering
Committee.

 
3.3  
ZBB may request HONAM grant ZBB a license, with the right to grant sublicenses
to licensees of ZBB Background Technology and ZBB Improvements, to use HONAM’
Background Technology and any such license shall be at HONAM’ sole discretion
and, if granted, shall be nonexclusive and at commercially reasonable license
terms.

 
 
ARTICLE 4 – GRANT OF RESEARCH LICENSE
 
4.1  
ZBB hereby grants HONAM a worldwide, non-exclusive, non-transferable (except as
provided herein below), license and right (without the right to grant
sublicenses) to use ZBB’s Background Technology, together with a non-exclusive,
non-transferable (except as provided herein below), license and right (without
the right to grant sublicenses) under Patent Rights in ZBB Improvements
developed or acquired prior to the termination date, both licenses solely for
HONAM’ internal research in the Field.  This license and right is extendable to
Affiliates of HONAM only.

 
4.2  
These research licenses and rights shall become fully vested upon

 
(i)  
the day HONAM makes final payment, or

 
(ii)  
the first day of the twelfth (12th) month from the Effective Date, provided the
all the payments in Article 6.2 have been made.

 
4.3  
Notwithstanding any of the foregoing, the licenses and rights of this Article
4.1 shall terminate as to any Affiliate of HONAM at such time as it no longer
qualifies as an Affiliate.  HONAM agrees, and shall procure the agreement of
Affiliates of HONAM which do research, to inform ZBB if, during the Project
Term, HONAM or such Affiliates conduct a structured research program outside the
Project based upon ZBB’s Background Technology and/or Patent Rights in ZBB
Improvements.  For purposes of this Article 4.3, a structured research program
is defined as a research activity in which more than eighty (80) hours of labor
are expended in experimental research during any contiguous three (3) month
period or for which the total cost of manpower and materials exceeds $20,000
during any contiguous three (3) month period.

 
4.4  
HONAM hereby grants, and shall cause its Affiliates to grant, to ZBB a
worldwide, irrevocable, nonexclusive, royalty-free license and right under the
claims of HONAM’s or its Affiliates’ (as the case may be) Patent Rights in HONAM
Improvements developed or acquired prior to termination date to conduct internal
research;

 
4.5  
Each Party agrees, until the termination date, to use commercially reasonable
efforts to provide notice to the other Party, via the Steering Committee, when a
patentable Improvement is made.

 
 
HONAM – ZBB Project                                 7

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ARTICLE 5 – THE PROGRAM TECHNOLOGY
 
5.1  
Each Party shall provide the other Party with the Program Technology developed
by it or its Affiliates as part of the Project and shall inform the other Party
of any patentable invention it has made or conceived in the course of carrying
out the Project.

 
5.2  
All non-patented Program Technology (including know-how and trade secrets in
those instances where the parties decide not to pursue patent protection) shall
be considered jointly owned by the Parties and, except as otherwise provided in
Article 5 for Inventions, each Party may use, exploit and further develop the
Program Technology, jointly or solely, without accounting to the other regarding
any economic benefit realized or the need to seek approval from the other Party
for its disclosure or use (except to the extent such disclosure incorporates the
Confidential Information of the other Party), and may authorize or license third
parties to do any of the foregoing.

 
5.3  
ZBB and HONAM shall have the full right, title and interest in respect of
Inventions as follows:

 
(a)  
Both Parties have joint ownership in Program Technology as defined in 1.1 (o)
and in the Project as defined in 1.1 (p).   Both Parties have the right to
utilize the Program Technology subject to the limitations contained herein with
no charge.  No  party may license the Program Technology to any third party
without the prior written permission of the other party.

 
(b)  
The Steering Committee will decide which party will proceed with patent
application.

 
5.4  
The Party designated in Article 5.3 (the “patenting Party”) shall have the
exclusive right to file patent applications in respect of such Program
Technology for its own benefit as assignee and to the extent allowed by local
law in its own name (or the name of its Affiliate, provided such does not change
the rights or obligations of a Party under this Agreement) and at its own
expense in such countries as it deems appropriate, and to assign such rights for
any country to any of its Affiliates.
 
Upon request of the patenting Party, the other Party shall give all reasonable
assistance to the patenting Party in prosecuting any patent applications and
shall execute, and cause such Party’s employees, agents and/or subcontractors to
execute, any instrument reasonably necessary to enable the patenting Party to
obtain a patent on any such application, including but not limited to oaths,
declarations, assignments and affidavits.

 
5.5  
Each Party will notify the other Party at least sixty (60) days prior to the
filing of each first-to-be-filed patent application on an Invention and provide
a copy of the proposed application.  The other Party will inform the first Party
within thirty (30) days of such notice if the other Party believes that the
filing must be coordinated with a filing by the other Party, and the Parties
will cooperate to coordinate such filings.

 
5.6  
Each of ZBB and HONAM grants the other a perpetual, irrevocable, world-wide,
non-exclusive, royalty-free license under any patents issuing from the patent
applications filed pursuant to Article 5.4

 
(a)  
to conduct internal research;

 
 
HONAM – ZBB Project                                 8

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(b)  
to make and have made, use or have used, sell, offer for sale, import and export
products and materials made from such production facilities; and

 
(c)  
to license to Affiliates and other third parties the right to conduct internal
research; (ZBB agrees that, during the Project Term, it will not conduct a
research program in the Field with another storage customer or supplier except
as provided in Section 2.1, above).

 
Such licenses and rights are extendable by the Parties to their Affiliates.
 
In the event the patenting Party, or its Affiliates, no longer desires to
maintain a patent or patent application resulting from Program Technology, the
patenting Party will first offer to assign to the non-patenting Party all of the
patenting Party’s right, title and interest in and to such patent or patent
application, at no cost other than the assumption by the acquiring Party of the
responsibility and cost of continuing prosecution of such patent application
and/or the payment of maintenance fees on such issued patent.  Upon the request
of the assignor Party, the assignee Party agrees to negotiate in good faith
commercially reasonable license terms for a non-exclusive, worldwide,
royalty-bearing license under the patent rights referred to in this Article.
 
5.7  
It is the intent of the Parties to file patent applications on Program
Technology in no less than the Designated Countries.  If the patenting Party
does not desire to file patent applications in some of the Designated Countries,
or if the other Party requests that the patenting Party file in countries in
addition to the Designated Countries and the patenting Party does not agree with
such request, the other Party may offer to pay for filings in such countries
and, if so offered, the patenting Party will file in such countries.  The other
Party shall be entitled to recover its costs for the filing, prosecution,
issuance and maintenance in such other countries by receiving a commensurate
adjustment in royalties for commercial activities in such country until all such
costs are recovered.

 
5.8  
Either Party may request that the other Party institute legal action against a
third party for infringement of any Program Technology patent such other Party
owns pursuant to this Article 5, but the Party owning such patent (the “owning
Party”) shall have the sole right to determine whether or not to bring such
action.  Unless otherwise agreed by the Parties, the owning Party shall bear the
entire cost of such legal action, and shall be entitled to retain the entire
amount of any recovery.  Either Party may request that the other Party, as the
owning Party, agree to be joined to enable the requesting party to bring an
infringement action at its own expense, but the owning Party shall not obligated
to agree to be so joined.

 
5.9  
In any suit or legal action to enforce and/or defend a Program Technology
patent, the Party not owning such patent, at the reasonable request of the
owning Party, shall cooperate in all respects and, to the extent reasonably
possible, have its employees testify when request and make available relevant
records, papers, information, samples, specimens, and the like.  Unless
otherwise agreed by the Parties, the costs for any such cooperation shall be at
the expense of the Party bringing suit.

 
 
ARTICLE 6 – PAYMENTS
 
6.1  
HONAM shall pay to to ZBB the total sum of Three Million  US Dollars ($
3,000,000) in the four(4) installments according to the process:

 
 
HONAM – ZBB Project                                 9

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(i)   
One million US$ ($ 1,000,000) shall be due within ten (10) days after Effective
Date.

 
(ii)  
 Five hundred thousand US$ ($ 500,000) shall be due within ten (10) days after
June 20th, 2011.

 
(iii)  
 One million two hundred thousand US$ ($ 1,200,000) shall be due within ten(10)
days after September 30, 2011

 
(iv)  
Three hundred thousand US$ ($ 300,000) shall be due within ten(10) days after on
the date that V3 single stack is set up at HONAM R&D Center

 
 
6.2  
HONAM will approve payment to ZBB based on progress milestones made on the
Project and payments made per figure 3 in Appendix A.

 
6.3  
ZBB will invoice HONAM for each of the above payments no later than twenty (20)
days before such payment is due.

 
6.4  
Except as otherwise provided in this Article 6, each Party shall be solely
responsible for its internal costs.

 
 
ARTICLE 7 – CONFIDENTIALITY
 
7.1  
Each Party agrees to treat the Program Technology in the same manner as it
treats its own proprietary and confidential information, but no less than a
reasonable degree of care.  Except as otherwise provided in this Article 7, each
Party will only disclose Program Technology to third parties under terms of
confidentiality and limited use which, at a minimum, will preserve the
patentability of any Inventions.

 
7.2  
ZBB and HONAM each agree, other than in respect of its own Background
Technology, Improvements or Confidential Information, and except as otherwise
provided in this Agreement,

 
(a)  
not to disclose to any third party any Background Technology, Improvements,
Confidential Information or the terms of this Agreement subject to Article
7.4(b);

 
(b)  
not to use any Background Technology or Confidential Information for any purpose
other than to carry out the Projects and/or exercise the license and rights
granted to it herein; and

 
(c)  
to use all adequate means to preserve the secrecy of Background Technology,
Improvements and Confidential Information.

 
7.3  
The undertakings of Article 7.1 shall not apply to any Background Technology,
Improvements or Confidential Information which, at the time it is received or
obtained by the receiving Party,

 
(a)  
is lawfully known by the receiving Party without binder of secrecy as
demonstrated by the written record; or

 
(b)  
is publicly available

 
 
HONAM – ZBB Project                                 10

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and shall cease to apply to any Background Technology, Improvements or
Confidential Information which, after it is received or obtained by the
receiving Party,

 
(c)  
is received or obtained by the receiving Party without restriction on disclosure
from a source free to disclose it other than the disclosing Party and/or any of
its Affiliates;

 
(d)  
becomes, through no act or omission of the receiving Party, publicly available;
or

 
(e)  
is independently developed by or for a Party by persons without reference to the
Background Information, Improvements or Confidential Information of the other
Party.

 

 
Information shall only be within the foregoing exceptions to the extent that the
receiving Party can prove the facts.

 
7.4  
Notwithstanding the provisions of Article 7.1:

 
(a)  
each Party is authorized by the other Party to disclose to those Affiliates to
whom such first Party delegates its rights or obligations pursuant to Article
12.2 such of the other Party’s Background Technology, Improvements and
Confidential Information as is necessary for the conduct of the Project and/or
exercise of the license and rights granted to the first Party herein, provided
that before such Background Technology or Confidential Information is disclosed
to them, those Affiliates have agreed to be bound by terms of secrecy and
non-use no less stringent than those assumed by the first Party hereunder;

 
(b)  
each Party is authorized by the other Party to disclose to its contractors and
consultants such of the other Party’s Background Technology, Improvements and
Confidential Information as is necessary for the conduct of the Project,
provided that before such Background Technology, Improvements or Confidential
Information is disclosed to them, provided that such third parties have
undertaken written obligations of confidentiality and restrictions on use with
the disclosing Party commensurate with the obligations placed upon such Party
herein;

 
(c)  
either Party may disclose Program Technology or the other Party’s Improvements
to a third party to the extent necessary for the exercise of the license and
rights granted in this Agreement; provided that such third parties have
undertaken written obligations of confidentiality and restrictions on use with
the disclosing Party to protect the Program Technology and Improvements as
contemplated in this Agreement.

 
7.5  
Notwithstanding the provisions of Article 7.1, a Party seeking patent protection
on Inventions as permitted by Section 5.3 of this Agreement may disclose the
Background Technology, Improvements, Program Technology and/or Confidential
Information of the other Party as required by such Party to  file a patent
application, but only after first notifying the other Party of the nature and
scope of the information to be disclosed and providing the other Party a
reasonable opportunity to respond within sixty (60) days with any reasons such
other Party may conclude that the information is not properly disclosed for
these purposes.

 
 
HONAM – ZBB Project                                 11

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7.6  
If a Party receives a subpoena, order, notice, process or other legal process
seeking disclosure of Confidential Information of the other Party, the first
Party shall immediately notify the other Party in order to allow the other Party
the opportunity to oppose the order, notice, or process, or seek a protective
order.  If requested by the other Party, the first Party shall cooperate fully
with the other Party in contesting such disclosure.  Except as such demand shall
have been timely limited, quashed or extended,  the first Party may thereafter
comply with such demand, but only to the extent required by law.  Where a
protective order is obtained by the other Party, nothing in this Article 7.6
shall be construed to authorize the first Party to use in any manner or disclose
Confidential Information to parties other than such governmental or judicial
agency or body or beyond the scope of the protective order.

 
7.7  
Upon termination of this Agreement, the non-breaching Party, at its option, can
request the other Party to destroy or return promptly to the non-breaching
Party, or its nominee, all tangible records containing Confidential Information
or excerpts or portions thereof, or other information derived from the tangible
records which are in the possession or control of the breaching Party with the
exception of one (1) legal file copy which may be retained solely for the
determination of the breaching Party's legal obligations under this
Agreement.  Either party may make a similar request in the event the Project is
terminated pursuant to Article 8.1.

 
 
ARTICLE 8 – TERMINATION
 
8.1  
The Project Term shall be effective as of the Project Start Date and shall
continue for two and half (2.5) years and can renew for an additional period
upon mutual written agreement. , unless earlier terminated by mutual written
agreement of the Parties or as otherwise provided herein.  HONAM shall provide
notice to ZBB, at least thirty (30) days before each of the payments in Article
6.2 is due, if HONAM intends to terminate the Project.

 
Following the payment pursuant to Article 6.1 but before the end of the first
three month period from the Effective Date, the Steering Committee will meet to
determine if the Project should be extended, and define the scope of any such
extension, including a budget required for the continued research.  Any
recommendation to extend the Project will be presented to authorized management
of the Parties and must be approved in writing before the Project may be
extended.
 
Thereafter, the Steering Committee will meet to determine if the Project should
be extended, and define the scope of any such extension.  Any recommendation to
further extend the Project will be presented to authorized management of the
Parties and must be approved in writing before the Project may be further
extended.
 
8.2  
If HONAM fails to make the payment referred to in Article 6.2 and does not cure
such failure to pay within thirty (30) days after HONAM has received notice from
ZBB of such failure or otherwise provides notice under Article 8.1 of its intent
to terminate the Project, then ZBB shall be at liberty, by giving notice in
writing to HONAM, to terminate the Project and/or this Agreement with immediate
effect, subject to Article 8.6 and Honam shall have no rights to the Program
Technology thereafter.

 
8.3  
Subject to Article 8.6, ZBB may terminate the Project and/or this Agreement with
immediate effect by giving notice in writing to HONAM if HONAM brings a
challenge to the validity of any of ZBB’s Patent Rights licensed to HONAM
pursuant to this Agreement.  In the event that HONAM or any of its Affiliates
brings a challenge to the validity of any of ZBB’s Patent Rights licensed to
HONAM pursuant to this Agreement and ZBB does not terminate the Project and/or
this Agreement, then HONAM and its Affiliates agree to continue to pay all
royalties due under this Agreement during the period of such challenge, which
royalties will be non-refundable by ZBB regardless of the outcome of the
validity challenge.

 
 
HONAM – ZBB Project                                 12

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8.4  
For purposes of the question of completion of a Party’s deliverables as
stipulated in the Project Plan only, if either Party considers that the other
Party has failed to make material progress in completion of its deliverables as
stipulated in the Project Plan, and such failure is not due to the other Party’s
material breach of its obligations under this Agreement or the Project Plan or
force majeure pursuant to Article 15, and such other Party does not commence to
cure such failure within thirty (30) days after such other Party has received
notice from the first Party of such failure, the Parties shall schedule an
executive mediation process in a mutually agreed neutral location, such
executive mediation to commence within sixty (60) days of the aforementioned
notice.  If the dispute is not resolved within thirty (30) days from the date
mediation begins, and the other Party has not cured the failure within sixty
(60) days after such Party has received notice from the first Party of such
failure, then

 
(a)  
if HONAM is the aggrieved Party, (i) HONAM shall be at liberty, by giving notice
in writing to ZBB, to delay payments pursuant to Article 6.2 without effect
until the failure of ZBB is cured and (ii) if not already irrevocable, the
research license granted in Article 4.1 shall immediately become
irrevocable.  If ZBB continues for an additional one hundred and twenty (120)
days to fail to make material progress in completion of its deliverables as
stipulated in the Project Plan, then HONAM shall be at liberty, by giving notice
in writing to ZBB, to terminate the Project with immediate effect.  Upon such
termination (i) HONAM may continue the Project on its own.

 
(b)  
if ZBB is the aggrieved Party, ZBB shall be at liberty, by giving notice in
writing to HONAM, to  terminate.  Except as provided in Section 2.1, above, ZBB
agrees that, during the Project Term,  it will not conduct a research program in
the Field with another storage customer or supplier.   If HONAM continues for an
additional ninety (90) days to fail to make material progress in completion of
its deliverables as stipulated in the Project Plan, then ZBB:

 
(i)  
Shall be at liberty, by giving notice in writing to HONAM, to terminate the
Project and/or this Agreement with immediate effect, subject to Article 8.6.

 
8.5  
Either Party may terminate the Project by giving notice in writing with
immediate effect to the other Party in the event the other Party:

 
-  
unlawfully repudiates this Agreement; or

 
-  
goes into liquidation, either compulsory or voluntary (save for the purpose of
reconstruction, amalgamation and/or Chapter 11 reorganization) or a receiver,
administrative receiver or administrator is appointed in respect of the whole or
any part of that Party’s assets.

 
 
HONAM – ZBB Project                                 13

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(a)  
If HONAM is the terminating Party, (i) HONAM may continue the Project on its own
or with third parties, provided such third party’s practice of ZBB Background
Technology and ZBB Improvements shall be limited to performance of the project
with HONAM; (ii) if not already irrevocable, the research license granted in
Article 4.1 shall immediately become irrevocable.

 
(b)  
If ZBB is the terminating Party, ZBB shall be at liberty, by giving notice in
writing to HONAM, to terminate the Project and/or this Agreement with immediate
effect,

 
8.6  
Survival.

 
(a)  
The provisions of Articles 4.3, 5, 7, 8, 9, 11, 13 and 14 shall survive the
termination of this Agreement.

 
 
ARTICLE 9 – INDEMNITIES, LIABILITY
 
9.1  
Each Party shall be liable for and shall hold harmless and indemnify the other
Party for all claims, damages, expenses, losses or liability, arising from any
claim for (1) bodily injuries, including fatal injury or disease, to the
indemnifying Party’s employees and (2) damage to tangible real or personal
property of the indemnifying Party and its employees arising from or in
connection with the performance of the Project and this Agreement except to the
extent that the cause of the injuries, loss or damage was the negligence of the
indemnified Party or the its representatives, in which event there shall be no
obligation of indemnity hereunder.

 
9.2  
Neither Party shall be liable to the other Party (or its Affiliates) for any
loss or damage incurred by such other Party (or its Affiliates) arising out of
or in relation to the use by such Party (or its Affiliates) of any Background
Technology, Program Technology or Improvements.  Nothing in this Agreement shall
be deemed to be a  representation or warranty by either Party on the accuracy,
safety, usefulness, merchantability, fitness for particular purpose, or the
non-infringement of such Party’s patent rights with respect to the Background
Technology, the Program Technology, the Improvements, the Confidential
Information and/or any technical information related to any of the foregoing,
which shall be provided under this Agreement “as is” and all such warranties
will be expressly disclaimed.

 
9.3  
Under no circumstances shall either Party be liable to the other Party under
this Agreement for any consequential, indirect, special, incidental, punitive or
exemplary loss or damage, including, without limitation, business interruption,
cost of capital, loss of anticipated revenues and profits, loss of goodwill or
increased operating costs whether arising from contract, warranty, tort, strict
liability or otherwise regardless of whether the possibility of such losses or
damages have been made known to the first Party, and each Party hereby expressly
waives all such rights and remedies.

 
9.4  
Any performance of any obligation on behalf of a Party under article 12.2 shall
be deemed to be performance or rendering by that Party.  The other Party
accordingly releases all affiliates or agents of the first Party and any
director or employee of the first party or its affiliates from any liability,
including liability for negligence, connected with any such performance or
rendering.

 
 
HONAM – ZBB Project                                 14

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ARTICLE 10 - INSURANCE
 
10.1  
At all times and at ZBB’s sole cost, ZBB shall maintain at least the minimum
types and limits of insurance in compliance with all applicable laws.

 
10.2  
If requested by HONAM, ZBB shall furnish HONAM with certificates of insurance
which evidence the insurance required hereunder and provide that the insurer
shall endeavor to provide thirty (30) days’ written notice to HONAM before the
coverage is materially altered or canceled.

 
 
ARTICLE 11 – U.S. EXPORT ADMINISTRATION REGULATION
 
Each Party acknowledges that it is familiar with the United States Department of
Commerce regulations concerning the export or re-export of United States source
technical data, or the direct product thereof, to unauthorized destinations and
each Party agrees to abide by all such regulations in respect of all information
supplied by or on behalf of the other Party hereunder.
 
 
ARTICLE 12 – ASSIGNMENT & CHANGE OF CONTROL
 
12.1  
Neither Party shall assign any of its rights and obligations arising from this
Agreement without the prior written consent of the other Party.  Notwithstanding
this provision, either Party may assign this Agreement and all or any of its
rights and/or obligations to an Affiliate or to a successor in interest to or an
entity acquiring substantially all the business to which this Agreement pertains
without receiving written consent to the other Party, provided that prior to any
such assignment the assignee agrees in writing to be bound by all of the terms,
conditions and provisions contained herein.

 
12.2  
Either Party shall be free to arrange for any of its obligations under the
Project to be performed on behalf of such Party by one or more of its
Affiliates, provided that the Affiliate agrees to terms of confidentiality and
limited use commensurate with those contained herein and further providing that
no such arrangement shall relieve the delegating Party of its obligations to the
other Party hereunder.

 
 
ARTICLE 13 – LAW AND SETTLEMENT OF DISPUTES
 
13.1  
This Agreement shall be construed, and the rights of HONAM and ZBB shall be
determined (with respect both to the interpretation of the Agreement and its
performance), according to the laws of the State of Wisconsin, USA, without
regard to its conflict of law principles.

 
13.2  
Except as provided in Article 8.3, any controversy or claim (“Dispute”), whether
based on contract, tort, statute or other legal or equitable theory (including
but not limited to any claim of fraud. misrepresentation or fraudulent
inducement or any question of validity or effect of this Agreement, including
this Article 13.2) arising out of or related to this Agreement (including any
amendments, annexations or extensions) or the breach thereof shall be settled by
consultation between the Parties initiated by written notice of the Dispute by
one Party to the other Parties.  In the event such consultation does not settle
the Dispute within thirty (30) days after written notice of such Dispute, then
the Dispute may be submitted to and shall be settled by binding arbitration in
accordance with the then current ICC Rule for Dispute Resolutions and this
provision.  The arbitration shall be governed by the United States Arbitration
Act, 9. U.S.C. §§ 1-16 to the exclusion of any provision of state law
inconsistent therewith or which would produce a different result.  Judgment upon
the award rendered by the arbitrator may be entered by any court having
jurisdiction.  The arbitration shall be held in Singapore unless otherwise
agreed to in writing by the parties.  There shall be one arbitrator.  Neither
Party may unreasonably withhold consent of the selection of the arbitrator and
the Parties will share the costs of the arbitration equally. The arbitrator
shall determine the substance of the claim(s) of the parties and render a final
award in accordance with the substantive law of the State of Wisconsin,
excluding the conflicts provisions of such law.  The arbitrator shall set forth
the reasons for the award in writing.  The terms hereof shall not limit any
obligations of a Party to defend, indemnify or hold harmless another Party
against court proceedings or other claims, losses, damages or expenses.  It is
expressly agreed that the arbitrator shall have no authority to award treble,
exemplary or punitive damages of any type under and circumstances regardless of
whether such damages may be available under the applicable law.

 
 
HONAM – ZBB Project                                 15

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ARTICLE 14 – PUBLICATION AND PRESS RELEASES
 
14.1  
Neither Party shall publish Program Technology without the consent of the other
Party.  Notwithstanding the foregoing, a Party may publish Program Technology
without consent to the extent necessary to exercise its rights to patent under
Article 5.3, provided that such publication does not in any way prejudice the
Background Technology or patent rights of the other Party.

 
14.2  
Neither party shall use any trademark, trade name, logo or any contraction,
abbreviation, or simulation of the trademark or name of the other party in
advertising, publicity, or otherwise, unless the parties mutually agree to a
separate trademark license.

 
14.3  
Except to the extent required by law or as otherwise permitted in accordance
with this Article 14, neither Party shall make any public announcements
concerning the Project or this Agreement or the terms hereof without the prior
written consent of the other Party and the Parties shall agree on the content
and timing of any such public announcement.  However, either Party may, without
the prior written approval of the other, describe the Program Technology and the
activities related to and the purpose of the Project to potential licensees,
acquiring entities in an offering memorandum, public filings and additional
stock offerings, to its directors and shareholders, or to a governmental
administrative agency in response to a lawful requirement, subpoena, or order;
provided, in each case, a suitable confidentiality obligation is put in place
with the receiving party (to the extent possible in cases where the material is
disclosed to a government administrative agency). The disclosing Party shall
provide the other Party a right to review such disclosure prior to its
submission to the potential acquiring entity or governmental administrative
agency.  If the reviewing Party has reason to believe the disclosure discloses
proprietary or sensitive information, such Party shall immediately notify the
other Party of the same and the other Party shall edit the disclosure to delete
the proprietary or sensitive information.  Either Party may require that the
other Party promptly provide a copy of any disclosure made by other Party under
this Article 14.3.

 
 
ARTICLE 15 – FORCE MAJEURE
 
15.1  
If the performance of a Party  is delayed, interrupted, prevented, restricted or
interfered with by reason of any:

 
(a)  
fire, explosion, epidemic, storm, flood, drought or other act of God;

 
 
HONAM – ZBB Project                                 16

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(b)  
breakdown of unit, plant or facility, strike, lock-out, labor dispute, casualty
or accident;

 
(c)  
inability to obtain sources of supply of labor, fuel, utilities, supplies, raw
materials or transportation;

 
(d)  
riot, war, revolution, national emergency, acts of public enemies, blockade,
embargo, invasion or terrorism;

 
(e)  
any law, order, proclamation, regulation, ordinance, demand or requirement of
any government or of any subdivision, authority or representative of any such
government; or

 
(f)  
any other cause whatsoever, whether similar or dissimilar to those above
enumerated, beyond the reasonable control of the Party so affected,

 
then the Party so affected shall be excused, except for the payment of money,
from performing hereunder to the extent of such delay, interruption, prevention,
restriction or interference.  The Party claiming an event of force majeure shall
promptly provide the other Party notice of the claim, including details
regarding all facts and circumstances related to or giving rise to such an
event, the expected duration of the event, and actions being taken to overcome
or resolve the event.  The Party claiming an event of force majeure shall take
any and all commercially reasonable measures to overcome or resolve the event.
 
 
ARTICLE 16 – PRE-EXISTING AGREEMENTS
 
16.1  
Except as provided in Section 16.2, below, each Party warrants and represents
that there are no pre-existing agreements, commitments or other arrangements
with any third party, including the United States government or any agency
thereof, which will inhibit or restrict such Party from carrying out the terms
of this Agreement including the granting of rights to the other Party under
Article 3, Article 4 and Article 5 hereof.  Further, each Party agrees that it
will carry out the Project and this Agreement in a manner and under such
circumstances that will not provide any third party, including the United States
government or any agency thereof, any claim to rights relating to the Program
Technology and shall not enter into any agreements, commitments or other
arrangement with any third party, including the United States government or any
agency thereof, that would inhibit or restrict the other Party from complying
with the terms of this Agreement including the granting of rights to the other
Party under Article 3, Article 4 and Article 5 hereof.

 
16.2  
ZBB represents and warrants as of the date of its signature of this Agreement
that it has disclosed to HONAM copies of, or informed HONAM in writing of the
existence of, all agreements ZBB has executed with any third party in respect of
the Flow batteries and/or ZBB’s Background Technology that would (a) materially
affect the obligations of ZBB hereunder; or (b) materially affect the rights
granted by ZBB to HONAM hereunder; or (c) give a third party any rights to the
Program Technology; or (d) give rise to an obligation of HONAM to pay a third
party any royalty in respect of commercial exploitation of the Program
Technology.

 
 
HONAM – ZBB Project                                 17

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ARTICLE 17 – ADDRESS FOR NOTICES
 
17.1  
Any notice provided for by this Agreement and any other notice, demand or
communication which a Party may wish to send to the other Party relating to the
subject matter of this Agreement shall be in writing and either delivered by
recognized overnight courier delivery service (such as United Parcel Service or
Federal Express), hand-delivered, or sent by certified mail, return receipt
requested, postage prepaid, and addressed to the Party for which such notice,
demand, or communication is intended at such Party’s addresses as set forth
below:

 
If to ZBB:
 
ZBB Energy Corporation
N93 W14475 Whittaker Way
Menomonee Falls, Wisconsin 53051
Attention: Dan Nordloh
 
If to HONAM:
 
HONAM Petrochemical Corporation
24-1, Jang-Dong
Yuseong-Gu
Daejeon, 305-726 Korea
 
with a copy, for matters relating to legal issues, to:
 
                HONAM Petrochemical Corporation
The LOTTE Tower Building
395-67 Shindaebang Dong
Dongjak-Gu
Seoul, 156-711 Korea

17.2  
Either Party may change its address for notice hereunder to any other address by
giving written notice of such new address to the other Party in accordance with
this Article 17.  Any notice, demand, or other communication shall be deemed
given and effective as of the date of delivery in person or receipt set forth on
the return receipt.

 
 
ARTICLE 18 - MISCELLANEOUS
 
18.1  
Relationship of the Parties.  The Parties shall perform their obligations under
the Project and this Agreement as independent contractors and nothing contained
in this Agreement shall be construed to make either ZBB or HONAM partners, joint
venturers, principals, representatives or employees of the other.  Neither Party
is eligible to participate in or receive any benefits from any of the benefit
plans of the other Party , including without limitation, retirement or welfare
plans as defined under the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any fringe benefit plan or any other benefits
extended to the employees of the other Party.  Neither Party shall have any
right, power or authority, express or implied, to bind the other.  HONAM and ZBB
agree that this Agreement shall not constitute a partnership for tax
purposes.  In the event, however, that this Agreement were so construed, then
HONAM and ZBB agree to be excluded from the provisions of Subchapter K of the
United States Internal Revenue Code of 1986, as amended.

 
 
HONAM – ZBB Project                                 18

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18.2  
Entire Agreement. This Agreement constitutes the entire agreement between the
parties in respect of its subject matter and supersedes any agreements,
contracts, representations and understandings, oral or written made prior to or
at the signing of this Agreement; provided, however, that disclosures made
pursuant to the certain Secrecy Agreement by and between the Parties, shall
continue to be governed by such agreement.

 
18.3  
Amendments.  The modification or amendment of any provisions of this Agreement,
including its Appendices shall only be valid and effective if it is in writing,
refers specifically to this Agreement and is signed by both Parties.

 
18.4  
Waivers.  The Parties agree that the waiver by either Party of a provision or of
a particular breach by the other Party of any obligation, or the failure of
either Party at any particular time to exercise any of its rights herein
provided, shall not be deemed to constitute a waiver of any other provision or
subsequent breach or to prejudice the exercise in future of any right.

 
18.5  
Severability.  Should any provision of this Agreement be, or be declared, null
and void, the validity of this Agreement shall not be affected thereby. The
Parties agree to replace any void provision by a valid provision to achieve the
nearest possible commercial effect.

 
18.6  
 Headings.  The headings of the Articles of this Agreement are inserted for
convenience only and shall not affect the meaning or operation of this
Agreement.

 

           AS WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized representatives in duplicate original on the
dates specified below.

 
 
HONAM Petrochemical Corporation
 
 
ZBB Energy Corporation.
 
 
By:  /s/ Chong, Bum Shick
 
By:  /s/ Eric Apfelbach
 
Name: Chong, Bum Shick 
 
Name: Eric Apfelbach 
 
Title: President & CEO
 
Title: President & CEO 
 
Date:                                   Date:                                  

 
Agreed Effective Date
April 8, 2011
 
 
HONAM – ZBB Project                                 19
 

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