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Exhibit 10.2

LIMITED LIABILITY COMPANY AGREEMENT

OF

ZBB POWERSAV HOLDINGS LIMITED

BY AND BETWEEN
ZBB CAYMAN CORPORATION
AND
POWERSAV INC.

(August __, 2011)

LIMITED LIABILITY COMPANY AGREEMENT
OF
ZBB POWERSAV HOLDINGS LIMITED
 
 
 
 
 
 
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TABLE OF CONTENTS
 
Page
 

1. DEFINITIONS 1           1.1  Certain Definitions 1   1.2  Other Definitions
 3         2. GENERAL HONG KONG HOLDCO INFORMATION  3           2.1 Hong Kong
Holdco, Generally  3   2.2 Investors, Generally  3         3. COMPANY STRUCTURE
 3         3.1 Purpose  3   3.2 Structure  4   3.3 Limitations on Liability and
Capital Contributions  4         4. OWNERSHIP OF HONG KONG HOLDCO  4         4.1
Registered Capital  4   4.2 Use of Registered Capital  4   4.3 Payment Schedule
of Initial Registered Capital Contributions  4   4.4 Additional Capital
Contributions  5   4.5 Distribution of Net Profits  5   4.6 Distribution of Fees
Received under the Company Services Agreement  5         5. OPERATIVE
AGREEMENTS; VOTING AGREEMENT 5         5.1 Other Operative Agreements  5   5.2
Voting Agreement; Operation of Hong Kong Holdco  6         6. BOARD OF DIRECTORS
 6           6.1 Composition of the Board of Directors  6   6.2 Removal;
Reappointment of Directors 6   6.3 Board Meetings  6   6.4 Board Quorum;
Resolutions  7   6.5 Action by the Board without a Meeting  7   6.6 Board
Unanimous Approval Rights  7   6.7 Deadlock  8         7. INVESTORS  8          
7.1 Meetings  8   7.2 Voting Rights; Actions of the Investors; Quorum  9   7.3
Action by the Investors without a Meeting  9

 

 
 
 
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7.4
Investor Unanimous Approval Rights  9  
7.5
Investor Supermajority Rights  9   7.6 Deadlock  10        
8.
OFFICERS
 10          
8.1
Appointment and Term of Office
 10   8.2 Removal  10   8.3 Vacancies  10   8.4 Compensation  10   8.5 Powers
and Duties  10        
9.
ANNUAL BUDGETS; FINANCIAL AND OTHER RECORDS
 11        
9.1
Annual Budgets
 11  
9.2
Accounting and Management Information Systems
 11  
9.3
Financial Statements, Accounting and Other Reports
 11   9.4 Right of Inspection  12         10. INSURANCE; INDEMNIFICATION  12    
     
10.1
Liability
 12   10.2  Indemnification of Directors and Officers  12   10.3 
Indemnification of the Investors  13   10.4  Advancement  14   10.5  Insurance
 15         11. COMPLIANCE WITH LAWS  15           11.1  General  15   11.2 
Anti-Corruption  15         12. TRANSFERS AND SALES OF INTERESTS  16          
12.1  Transfers of Interests  16   12.2  Unauthorized Transfers  16   12.3 
Withdrawal of an Investor  16   12.4  Transfers Pursuant to a Bona Fide Offer;
Rights of First Refusal  16   12.5  Acknowledgment of Liquidity  17   12.6 
Buy/Sell Provisions  17         13.    18         14.   19           14.1 
Warranties of the Investors  19   14.2  Representations and Warranties of
PowerSav  21         15.    21           15.1  Term  21   15.2  Termination  21
  15.3  Survival  21   15.4  Continuing Liability  21   15.5  Effect of
Termination  22

 

 

 
 
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16.
GOVERNING LAW; DISPUTE RESOLUTION
 22          
16.1
Governing Law
 22  
16.2
Discussions and Arbitration
 23        
17.
GENERAL PROVISIONS
 23          
17.1
Assignment
 23  
17.2
Non-Competition; Non-Solicitation; Business Opportunities
 23  
17.3
Notices and Other Communications
 24  
17.4
Severability
 25  
17.5
References to this Agreement; Headings
 25  
17.6
Further Assurances
 26   17.7
No Waiver
 26   17.8
Entire Agreement; Amendments
 26  
17.9
Expenses
 26  
17.10
Currency
 26  
17.11
No Agency
 26  
17.12
No Third Party Beneficiaries
 26  
17.13
Incidental and Consequential Damages
 27  
17.14
Counterparts
 27  
17.15
Execution by Hong Kong Holdco
 27

 
 
 
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ZBB POWERSAV HOLDINGS LIMITED
 
LIMITED LIABILITY COMPANY AGREEMENT
 
This LIMITED LIABILITY COMPANY AGREEMENT (the “Agreement”) is made and entered
into as of August __, 2011 (the “Effective Date”), by and between (i) ZBB CAYMAN
CORPORATION, a Cayman Islands exempted company (“ZBB Energy”), and (ii) POWERSAV
INC., a Cayman Islands exempted company (“PowerSav”).  ZBB Energy and PowerSav
sometimes are referred to collectively herein as the “Parties” and individually
as a “Party.”
 
STATEMENT OF PURPOSE
 
ZBB Energy designs and manufactures advanced energy storage and power control
platforms.  PowerSav provides renewable energy solutions to the marketplace in
China.
 
The Parties desire to form a Hong Kong limited liability company (“Hong Kong
Holdco”) for the purposes of forming and investing in Anhui MeiXin Store Energy
Co., Ltd. (or such other name given to the entity), a Sino – foreign equity
joint venture company (the “Company”).
 
The Parties desire to enter into this Agreement for the purposes of setting
forth the rights and obligations of the Parties (including their rights and
obligations as Investors, as defined below) with respect to Hong Kong Holdco.
 
NOW THEREFORE, in consideration of the aforesaid Statement of Purpose, the
mutual terms, provisions, covenants and agreements set forth herein, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
 
AGREEMENT
 
1. DEFINITIONS.
 
1.1 Certain Definitions.  For the purposes of this Agreement, the following
capitalized terms have the respective meanings set forth below:
 
“Accounting Principles” means generally accepted accounting principles (“GAAP”)
in the United States (or any other country which the Investors may agree to in
writing) as set forth in pronouncements of the Financial Accounting Standards
Board (and its predecessors) and the American Institute of Certified Public
Accountants, as consistently applied.
 
“Affiliate” means, as to any Person, any other Person that directly, or
indirectly through one or more intermediaries, (i) Controls, (ii) is Controlled
by or (iii) is under common Control with such Person.
 
 
 

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“Applicable Law” means, as to any Person, any statute, law, rule, regulation,
directive, treaty, judgment, order, decree or injunction of any Governmental
Authority that is applicable to or binding upon such Person.
 
“Approval Authority” means the Ministry of Commerce of the People’s Republic of
China (or its local branch office with competent authority and jurisdiction) and
the Wuhu City, Anhui Province government (and its relevant departments).
 
“Board” means the Board of Directors of Hong Kong Holdco.
 
“Business Day” means a day on which commercial banks in Hong Kong generally are
open to conduct their regular banking business.
 
“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person (whether
through the ownership of securities, by contract, or otherwise).
 
“Director” means a member of the Board.
 
“Effective Date” means the date set forth in the first paragraph of this
Agreement.
 
“Encumbrance” means any lien, mortgage, deed of trust, pledge, collateral
assignment, security interest, hypothecation, option, right of first refusal or
other encumbrance.
 
“Entity” means a corporation, partnership, limited liability company, firm or
other business association or entity.
 
“Fiscal Year” means the twelve (12) month period ending June 30 of each year, or
such other fiscal year as the Board may designate from time to time.
 
“Governmental Authority” means any domestic or foreign government, governmental
authority, court, tribunal, agency or other regulatory, administrative or
judicial agency, commission or organization, and any subdivision, branch or
department of any of the foregoing.
 
“Interests” means the equity interests of Hong Kong Holdco.
 
“IPO” means an initial public offering on a nationally recognized securities
exchange.
 
“Investor” means a Person that owns Interests in Hong Kong Holdco.  A list of
the initial Investors is set forth on Exhibit A, which may be amended from time
to time.
 
“Joint Venture Agreement” means that certain Joint Venture Agreement entered
into by (i) Hong Kong Holdco and (ii) Anhui Xinrui Investment Co., Ltd. a
Chinese limited liability company.
 
“Party” and “Parties” are defined in the opening paragraph of this Agreement.
 
 
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“Percentage Ownership Interest” means the percentage of Interests of Hong Kong
Holdco owned by a particular Investor, as set forth on Exhibit A, as may be
amended from time to time.
 
“Person” means a natural individual, Governmental Authority or Entity.
 
“PowerSav Change of Control” means any one, or a series of any one, of the
following: (i) a merger, consolidation, security exchange, issuance or sale of
equity securities or other reorganization of, or involving, PowerSav pursuant to
which PowerSav’s interest holders (determined immediately prior to the time at
which such transaction is effected) collectively have beneficial ownership of
less than 51% of the total outstanding ownership interest of PowerSav, or
comparable equity securities of the surviving entity if PowerSav is not the
surviving entity, immediately following such transaction; (ii) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions), of all or substantially all of the assets of PowerSav; (iii) the
interest holders’ or board’s approval of any plan or proposal for the
liquidation or dissolution of PowerSav or (iv) PowerSav’s submission or becoming
subject to any bankruptcy proceeding, the appointment of a trustee, custodian or
conservator or any other similar voluntary or involuntary creditors’ right
proceeding.
 
“Pro Rata” means in proportion to the Investors’ respective Percentage Ownership
Interests.
 
“Transfer” means, as a noun, the transfer of legal, beneficial or equitable
ownership by sale, exchange, assignment, gift, donation, grant or other transfer
of any kind, whether voluntary or involuntary, including transfers by operation
of law or legal process.  As a verb, the term means the act of making any
Transfer.
 
1.2 Other Definitions.  Terms not otherwise defined, but used, herein that are
defined in the Joint Venture Agreement shall have the same meaning as in the
Joint Venture Agreement when used in this Agreement, unless the context
otherwise requires.
 
2. GENERAL HONG KONG HOLDCO INFORMATION.
 
2.1 Hong Kong Holdco, Generally.  The name of Hong Kong Holdco is ZBB PowerSav
Holdings Limited.  Hong Kong Holdco’s principal office shall be located in such
location as may be determined, from time to time, by the Board.
 
2.2 Investors, Generally.  Exhibit A hereto, which may be amended from time to
time by the Board, as required, sets forth the following information pertaining
to each of the initial Investors: (i) the name of the Investor, (ii) the address
of the principal office of the Investor, (iii) information for the legal
representative of the Investor, (iv) the committed registered capital of the
Investor and (v) the Percentage Ownership Interest of the Investor.
 
3. COMPANY STRUCTURE.
 
3.1 Purpose.  The purpose of Hong Kong Holdco is to engage in any lawful
business for which a limited liability company may be organized under Applicable
Laws, as determined from time to time by the Investors; provided, however, that
any such business must be conducted in accordance with the terms and conditions
of this Agreement.
 
 
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3.2 Structure.  Hong Kong Holdco shall be formed as a Hong Kong limited
liability company.  The liability of any Investor with respect to Hong Kong
Holdco shall be limited to the amount of such Investor’s respective registered
capital contribution made to Hong Kong Holdco pursuant to this Agreement and no
Investor shall have any liability to Hong Kong Holdco or any third party in
excess of such Investor’s registered capital contribution.  The Investors shall
share the profits, risks and losses in proportion to their respective registered
capital contributions, which are set forth on Exhibit A.
 
3.3 Limitations on Liability and Capital Contributions.  Except as otherwise
provided herein, required by Applicable Laws or provided in a prior written
consent of all Investors that specifically references this Section 3.3, no
Investor (or former Investor), as such, shall be (a) bound by, or be personally
liable for, the liabilities or obligations of Hong Kong Holdco or other
Investors or (b) required to lend any funds to, or provide any guarantees or
credit enhancements on behalf of, Hong Kong Holdco.  No Investor shall have any
obligation to make contributions to the capital of Hong Kong Holdco, except
capital contributions required pursuant to the provisions hereof.
 
4. OWNERSHIP OF HONG KONG HOLDCO.
 
4.1 Registered Capital.  The initial registered capital of Hong Kong Holdco
shall be Three Million Two Hundred Thousand US Dollars (USD $3,200,000)
(“Registered Capital”), which will be contributed by the Parties in the amounts
set forth on Exhibit A.  The Parties agree that (i) adjustments may need to be
made to the amount of the initial registered capital to be contributed by each
Party based on the currency exchange rate in effect at the time of the Parties’
respective contributions and (ii) such adjustments shall not affect the
Percentage Ownership Interests of the Investors, as set forth on Exhibit A.
 
4.2 Use of Registered Capital.  The registered capital of Hong Kong Holdco shall
be used for making capital contributions to the Company, as agreed by Hong Kong
Holdco through the approval of the Board pursuant to Section 6.6(iii) hereof,
and such other purposes as deemed appropriate by the Board, from time to time.
 
4.3 Payment Schedule of Initial Registered Capital Contributions.  Each of the
Investors shall pay its corresponding portion of the initial registered capital
of Hong Kong Holdco as follows:
 
(a) First Installment.  The Investors shall contribute the respective amounts
listed below within thirty (30) days following the issuance of the Business
License to the Company by the Approval Authority:
 
(i)  
ZBB Energy (1) shall contribute to Hong Kong Holdco an aggregate amount in cash
of Two Hundred Thousand US Dollars (USD $200,000) and (2) for the purposes of
this Agreement and calculating the Percentage Ownership Interests of the
Investors hereunder only, will be credited with an additional contribution of
Four Million Three Hundred Thousand US Dollars (USD $4,300,000) for the
intellectual property rights granted to the Company by ZBB Energy Corporation, a
Wisconsin corporation that is an Affiliate of ZBB Energy; and

 
(ii)  
PowerSav shall contribute to Hong Kong Holdco an aggregate amount in cash of One
Million Five Hundred Thousand US Dollars (USD $1,500,000).

 
 
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(b) Second Installment.  PowerSav shall contribute to Hong Kong Holdco an
aggregate amount in cash of One Million Five Hundred Thousand US Dollars (USD
$1,500,000) no later than June 1, 2012; provided, however, that if the Board
determines in accordance with the terms hereof that such second installment (or
portion thereof) is needed prior to June 1, 2012, PowerSav shall make such
second installment (or portion thereof) to Hong Kong Holdco as directed by the
Board.
 
4.4 Additional Capital Contributions.  In addition to the capital contributions
referenced in Section 4.3 above, the Investors agree to make additional capital
contributions to Hong Kong Holdco, on a Pro Rata basis, to Hong Kong Holdco in
such amounts as the Board unanimously determines to be necessary, from time to
time, in order to conduct Hong Kong’s business, maintain Hong Kong Holdco’s
assets or discharge Hong Kong Holdco’s liabilities.
 
4.5 Distribution of Net Profits.  Subject to any restrictions imposed by
Applicable Law, Hong Kong Holdco will distribute the net profits Hong Kong
Holdco receives to the Investors on a Pro Rata basis.  The distribution of net
profits, in each instance, will be subject to (a) the approval of the Board, (b)
the establishment of reasonable reserves and (c) the payment of any associated
fees and taxes.
 
4.6 Distribution of Fees Received under the Company Services Agreement.  Hong
Kong Holdco and the Company intend to enter into a management services agreement
(the “Company Services Agreement”) as soon as commercially practicable, under
the terms of which Hong Kong Holdco (a) receives a service fee in an amount
equal to five percent (5%) of the net sales revenue of the Company and (b) such
percentage is reduced to three percent (3%) if the Company does not conclude an
IPO within the first five (5) years immediately following the effective date of
the Company Services Agreement.  The Investors agree that all amounts paid to
Hong Kong Holdco under the Company Services Agreement will be distributed to the
Investors on a Pro Rata basis (except as otherwise determined by the Board
pursuant to Section 6.6 of this Agreement); provided, however, that if the
Company does not conclude an IPO within the first five (5) years immediately
following the effective date of the Company Services Agreement, then all such
amounts paid to Hong Kong Holdco by the Company under the Company Services
Agreement shall be distributed solely to ZBB Energy.
 
5. OPERATIVE AGREEMENTS; VOTING AGREEMENT.
 
5.1 Other Operative Agreements.  As of the Effective Date, Hong Kong Holdco and
ZBB Energy shall enter into that certain Management Services Agreement, as set
forth on Exhibit B hereto.
 
 
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5.2 Voting Agreement; Operation of Hong Kong Holdco.  Each Investor agrees (a)
to hold all of the Interests of Hong Kong Holdco registered in its name or
beneficially owned by such Investor as of the Effective Date (and any and all
other Interests of Hong Kong Holdco legally or beneficially acquired by such
Investor after the Effective Date) in accordance with the terms and conditions
of this Agreement; (b) to vote such Interests in accordance with the provisions
of this Agreement and (c) to cause the Directors nominated by such Investor,
within the bounds of the fiduciary duties of the Directors to Hong Kong Holdco
under this Agreement or Applicable Law, to vote to effect the terms hereof.
 
6. BOARD OF DIRECTORS.
 
6.1 Composition of the Board of Directors.
 
(a) Initial Composition; Term.  Hong Kong Holdco shall be managed by the Board
in accordance with this Agreement and Applicable Law.  The Board shall initially
consist of three (3) Directors, of which (i) ZBB Energy shall appoint two (2)
Directors and (ii) PowerSav shall appoint one (1) Director.  The initial
Directors appointed by the Parties are set forth on Exhibit C.  Any change to
the number, or representative composition, of Directors shall require the
unanimous vote of the Investors, as set forth in Section 7.4.  The Directors
shall serve for such term, or terms, as the Investors shall determine, from time
to time.
 
(b) Removal; Vacancies.  Each Director shall remain in office until such
Director’s death, disability, retirement resignation or removal.  In the event
of a vacancy on the Board (as a result of the death, disability, retirement,
resignation or removal of the Director, or otherwise), the Investor that
appointed such Director shall be entitled to appoint a replacement Director.  At
any time the Investors must elect a Director, the Investors shall vote all of
their respective Interests so as to elect the Director appointed by the
applicable Investor in accordance herewith.
 
6.2 Removal; Reappointment of Directors.  Any Director may be removed for cause
in accordance with the applicable provisions of this Agreement and Applicable
Law; provided, however, that any Investor proposing to remove any Director for
cause shall first consult with the other Investors so that the Investors may, in
good faith, attempt to resolve the matter without a formal vote.  In addition,
any vote taken to remove any Director elected pursuant to Section 6.1, or to
fill any vacancy created by the death, disability, retirement, resignation or
removal of a Director elected pursuant to Section 6.1, shall also be subject to
the provisions of this Section 6.2.  In the event of the death, disability,
retirement, resignation or removal of any Director (a “Former Director”), and
pending the replacement of such Former Director, the remaining members of the
Board shall give effect to the vote of the other Directors appointed by the same
Investor as if the Former Director still served on the Board and had cast such
Director’s vote in the same way as such other Directors.
 
6.3 Board Meetings.
 
(a) Convention of Meetings.  Any single Director shall have the authority to
convene a meeting of the Board.  The Board shall meet at least monthly (or as
often as the business may require) and written notice of each Board meeting
shall be given no less than thirty (30) Business Days in advance of the proposed
meeting (which period may be waived by Directors sufficient to represent a
quorum under the terms hereof, either through a written waiver or by actual
attendance, without objection, at such Board meeting).
 
 
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(b) Participation by Other Means.  Members of the Board may participate in any
meeting of the Board, or any committee of the Board, by any means permitted
under Applicable Law, including by videoconference or teleconference.
 
(c) Conduction of Meetings.  Board meetings shall be conducted in English and
minutes of each meeting shall be prepared by Hong Kong Holdco in English and
distributed to each Director promptly following such meeting.  Proposals or
reports brought before any Board meeting for information or action (including,
without limitation, Hong Kong Holdco’s financial statements) shall be prepared
in English.  ZBB Energy shall designate a Director to serve as the “Chairman” of
the Board, who shall preside over all meetings of the Board.  The initial
Chairman of the Board is the person so appointed and set forth on Exhibit C.
 
(d) Reimbursements.  Each Director shall be reimbursed by Hong Kong Holdco for
coach class airfare, hotel and food expenses related to such Director’s
attendance at Board meetings; provided, that such expenses shall be properly
documented, with receipts provided to Hong Kong Holdco, and the associated
reimbursements shall be subject to such policies as may be imposed by the Board,
from time to time.
 
6.4 Board Quorum; Resolutions.  A quorum shall be deemed to exist for the
purposes of Board action as long as at least two (2) of the members of the Board
are present, including at least one (1) Director appointed by each Investor;
provided, that all Directors have received notice of such meeting as is required
by Applicable Law and the terms of Section 6.3.  Except as provided herein,
including in Section 6.6, any action, determination or resolution of the Board
shall require the affirmative vote of a majority of the Directors at a duly
constituted meeting of the Board.
 
6.5 Action by the Board without a Meeting.  Any action required or permitted to
be taken at a meeting of the Board may be taken without a meeting, if a proposed
written consent, setting forth the action so taken or to be taken (i) is sent to
all Directors, (ii) is signed by the number of Directors needed to approve such
action and (iii) once signed, is delivered to the Board.  Action taken under
this Section shall be effective when all of the Directors needed to approve such
action have signed the proposed written consent or counterpart thereof, unless
the written consent specifies that it is to be effective as of an earlier or
later date and time.  Such a written consent shall have the same force and
effect as if the subject matter was voted upon at a duly called and constituted
meeting of the Board and may be described as such in any document or instrument.
 
6.6 Board Unanimous Approval Rights.  Notwithstanding any other provision of
this Agreement, the affirmative vote of all of the members of the Board shall be
required for any of the following Hong Kong Holdco actions:
 
(i)  
the borrowing of or the incurrence of any indebtedness by Hong Kong Holdco or
the granting by Hong Kong Holdco of any liens (other than those arising by the
operation of law) or Encumbrances on a material amount of Hong Kong Holdco’s
assets;

 
 
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(ii)  
amendment of the constitutive documents of Hong Kong Holdco;

 
(iii)  
additional capital contributions to be made by Hong Kong Holdco to the Company;

 
(iv)  
increase, decrease or transfer of the registered capital of Hong Kong Holdco;

 
(v)  
merger of Hong Kong Holdco with another Entity;

 
(vi)  
reorganization of Hong Kong Holdco into several Entities;

 
(vii)  
the issuance of additional Interests, or securities convertible into shares, in
Hong Kong Holdco; or

 
(viii)  
the filing of a voluntary winding up petition by, or the liquidation or
dissolution of, Hong Kong Holdco.

 
6.7 Deadlock.  In the event that (a) the Board is deadlocked with an equal
number of votes in favor and opposed on any matter requiring majority approval,
or (b) any action requiring unanimous approval of the Board fails to pass and
such action is necessary for the immediate continued operation of Hong Kong
Holdco or the Company, then the chief executive officers of ZBB Energy and
PowerSav shall confer over a thirty (30) day period in an attempt to resolve the
deadlock.  If such discussions do not resolve the deadlock, then the Parties
shall proceed with the dispute resolution procedures set forth in Section 16.2
below; provided, however, that either Party may elect alternatively to exercise
its rights pursuant to Section 12.6(c) if such mediation is unsuccessful within
a succeeding sixty (60) day period.
 
7. INVESTORS.
 
7.1 Meetings.
 
(a) Convention of Meetings.  The Board may call for meetings of the Investors at
such times as it determines to be necessary or appropriate and shall call a
meeting upon the written request of any single Investor.  An Investor requesting
a meeting must sign the request, deliver the same to the Board and specify
therein the purposes of the proposed meeting.  There shall be no requirement
that annual or other periodic meetings of the Investors be held.  The Board
shall give all Investors notice stating the date, time and place of a meeting of
the Investors, which date shall not be less than fifteen (15) Business Days
after the date such notice is given (which period may be waived by the Investors
sufficient to represent a quorum under the terms hereof, either through a
written waiver or by actual attendance, without objection, at such meeting of
the Investors).
 
 
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(b) Participation by Other Means.  Investors may participate in any meeting of
the Investors, by any means permitted under Applicable Law, including by
videoconference or teleconference.
 
(c) Conduction of Meetings.  Meetings of the Investors shall be conducted in
English and minutes of each meeting shall be prepared by Hong Kong Holdco in
English and distributed to each Investor and the Board promptly following such
meeting.  Proposals or reports brought before any meeting of the Investors for
information or action (including, without limitation, Hong Kong Holdco’s
financial statements) shall be prepared in English.  The Chairman of the Board
shall preside over meetings of the Investors.
 
7.2 Voting Rights; Actions of the Investors; Quorum.  Each Investor shall be
entitled to vote, and to cast a number of votes equal to the product of (i) one
hundred (100) multiplied by (ii) that Investor’s Percentage Ownership Interest
(for the avoidance of doubt, the Investors have an aggregate of one hundred
(100) votes) on any matter submitted to a vote of the Investors in accordance
with applicable provisions of this Agreement and Applicable Law.  A quorum shall
be deemed to exist for purposes of Investor action as long as two (2) individual
Investors are present.  Except as provided herein, any action, determination or
resolution of the Investors shall require the majority vote of the Investors at
a duly constituted meeting of the Investors.
 
7.3 Action by the Investors without a Meeting.  Any action required or permitted
to be taken at a meeting of the Investors may be taken without a meeting, if a
proposed written consent, setting forth the action so taken or to be taken (i)
is sent to all Investors, (ii) is signed by the Investors holding the number of
Interests needed to approve the action and (iii) once signed, is delivered to
the Board.  Action taken under this Section shall be effective when all of the
Investors needed to approve such action have signed the proposed written consent
or counterpart thereof, unless the written consent specifies that it is to be
effective as of an earlier or later date and time.  Such a written consent shall
have the same force and effect as if the subject matter was voted upon at a duly
called and constituted meeting of the Investors and may be described as such in
any document or instrument.
 
7.4 Investor Unanimous Approval Rights.  Notwithstanding any other provision of
this Agreement, the affirmative vote of all of the Interests held by the
Investors shall be required to change the number (or representative composition)
of Directors on the Board of Directors.
 
7.5 Investor Supermajority Rights.  Notwithstanding any other provision of this
Agreement, the affirmative vote of Investors holding at least eighty (80) votes
(as described in Section 7.2 hereof) shall be required for any of the following
Hong Kong Holdco actions:
 
(i)  
the borrowing of or the incurrence of any indebtedness by Hong Kong Holdco or
the granting by Hong Kong Holdco of any liens (other than those arising by the
operation of law) or Encumbrances on a material amount of Hong Kong Holdco’s
assets;

 
(ii)  
the amendment of the constitutive documents of Hong Kong Holdco;

 
 
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(iii)  
the issuance of additional Interests, or securities convertible into shares, in
Hong Kong Holdco; or

 
(iv)  
the filing of a voluntary winding up petition by, or the liquidation or
dissolution of, Hong Kong Holdco.

 
7.6 Deadlock.  In the event that (a) the Investors are deadlocked with an equal
number of votes in favor and opposed on any matter requiring majority approval,
or (b) any action requiring supermajority or unanimous approval of the Investors
fails to pass and such action is necessary for the immediate continued operation
of Hong Kong Holdco or the Company, then the chief executive officers of ZBB
Energy and PowerSav shall confer over a thirty (30) day period in an attempt to
resolve the deadlock.  If such discussions do not resolve the deadlock, then the
Parties shall proceed with the dispute resolution procedures set forth in
Section 16.2 below provided, however, that either Party may elect alternatively
to exercise its rights pursuant to Section 12.6(c) if such mediation is
unsuccessful within a succeeding sixty (60) day period.
 
8. OFFICERS.
 
8.1 Appointment and Term of Office.  The officers of the Company (a) shall
consist of the chief executive officer, chief financial officer and secretary
and (b) may consist of other officers, all as may be appointed from time to time
by the Board.  Such officers will hold office until the earlier of that
officer’s death, resignation, retirement, disqualification, or removal from
office by the Board and until that officer’s successor has been duly elected and
qualified.  The same person may hold two or more offices.
 
8.2 Removal.  Any officer appointed hereunder may be removed from office at any
time by the Board, with or without cause.  Such removal will be without
prejudice to the contract rights, if any, of the person so removed.  Election or
appointment of an officer will not of itself create contract rights.
 
8.3 Vacancies.  Any vacancy in an officer position shall be filled by the Board.
 
8.4 Compensation.  The compensation of all officers of Hong Kong Holdco shall be
determined by the Board and may be altered by the Board from time to time,
except as otherwise provided by contract, and no officer shall be prevented from
receiving such compensation by reason of the fact such officer is also a
Director.  All officers shall be entitled to be paid or reimbursed for all costs
and expenditures incurred in conjunction with carrying out Hong Kong Holdco’s
business.
 
8.5 Powers and Duties.  Officers shall have such powers and duties as are
provided herein and as may otherwise be established or delegated to them, from
time to time, by the Board.  The officers of Hong Kong Holdco shall possess such
powers and duties as customarily are associated with their respective offices,
subject to the general direction and supervision of the Board.  Such powers and
duties will include the following:
 
(a) Chief Executive Officer.  Except as otherwise provided herein, Hong Kong
Holdco’s day-to-day operations will be managed by the chief executive officer of
Hong Kong Holdco.  The person holding the office of chief executive officer also
shall perform, under the direction and subject to the control of the Board, such
other duties as may be assigned by the Board, from time to time.
 
 
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(b) Chief Financial Officer.  The chief financial officer shall be the principal
accounting and financial officer of Hong Kong Holdco and will have active
control of, and shall be responsible for, all matters pertaining to the accounts
and finances of Hong Kong Holdco.  The chief financial officer will have charge
of Hong Kong Holdco funds and securities and will keep a record of the property
and indebtedness of Hong Kong Holdco.  The chief financial officer shall be
prepared at all times to give information as to the condition of Hong Kong
Holdco and shall make a detailed annual report of the entire business and
financial condition of Hong Kong Holdco.  The person holding the office of chief
financial officer shall also perform, under the direction and subject to the
control of the Board, such other duties as may be assigned by the Board, from
time to time.
 
(c) Secretary.  The secretary shall give notice to, attend, and keep the minutes
of all of the proceedings at all meetings of the Board and the Investors and
will be the custodian of such minutes and all other legal records of Hong Kong
Holdco.  The secretary will see that all notices required to be given to the
Directors and the Investors are duly given in accordance with this Agreement or
as required by Applicable Law.  It shall also be the duty of the secretary to
keep a ledger, in which shall be correctly recorded all transactions pertaining
to the Interests of Hong Kong Holdco.  The person holding the office of
secretary also shall perform, under the direction and subject to the control of
the Board, such other duties as may be assigned by the Board, from time to time.
 
(d) Other Officers.  The Board may appoint such other officers, with such
titles, powers, duties and compensation, as they may deem necessary for the
conduct of the business of Hong Kong Holdco.  In addition, the Board may
authorize the chief executive officer or other officers to appoint such agents
or employees, as the Board deems necessary for the conduct of the business of
Hong Kong Holdco.
 
9. ANNUAL BUDGETS; FINANCIAL AND OTHER RECORDS.
 
9.1 Annual Budgets.  The Parties shall agree upon annual budgets for Hong Kong
Holdco not later than (i) with respect to the first annual budget of Hong Kong
Holdco, prior to the formation of Hong Kong Holdco and (ii) with respect to each
set of subsequent annual budgets, not later than thirty (30) days prior to the
start of the next fiscal year of Hong Kong Holdco.
 
9.2 Accounting and Management Information Systems.  In the conduct of its
business, Hong Kong Holdco shall pursue a policy of adopting and maintaining
accounting and management information systems that facilitate Hong Kong Holdco’s
compliance with the Reporting Requirements (as defined below), the Accounting
Principles and are otherwise consistent with sound business practices and
corporate governance in the context of Hong Kong Holdco’s business and
operations.
 
9.3 Financial Statements, Accounting and Other Reports.  Hong Kong Holdco shall
cause the following financial statements to be prepared in accordance with the
Accounting Principles and provided to each Investor (the following requirements
being referred to collectively as the “Reporting Requirements”):
 
 
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(a) Annual Financial Statements.  As soon as available, but in any event within
forty five (45) days after the end of each Fiscal Year, a copy of the annual
financial statements of Hong Kong Holdco, prepared in accordance with the
Accounting Principles, including, a balance sheet, income statement, statement
of cash flows and statement of the Investors’ equity as of the end of the Fiscal
Year, setting forth in each case in comparative form the figures for the
previous year, and audited and certified by Hong Kong Holdco’s accounting firm.
 
(b) Quarterly Financial Statements.  As soon as available, but in any event
within thirty (30) days after the end of each fiscal quarter, a copy of Hong
Kong Holdco’s unaudited financial statements for such fiscal quarter including a
balance sheet, income statement, statement of cash flows and statement of the
Investors’ equity as of the end of such quarter, setting forth in comparative
form the figures for the corresponding quarter in the previous Fiscal Year, and
certified by the chief financial officer of Hong Kong Holdco as being fairly
stated in all material respects (subject to normal year-end audit adjustments).
 
(c) Quarterly Management Reports.  On a quarterly basis, Hong Kong Holdco’s
management shall report to the Board: (i) Hong Kong Holdco’s current business
objectives and compliance with any business plan then in effect, (ii) notice of
any new clients, and (iii) such other reasonable information as the Board may
request.
 
9.4 Right of Inspection.  During the regular office hours at the location of
Hong Kong Holdco, and upon reasonable notice to Hong Kong Holdco, each Investor
shall have (a) full access to all properties, books of account and records of
Hong Kong Holdco; (b) the right to make copies from such books and records at
such Investor’s own expense and (c) the right to discuss with Hong Kong Holdco’s
executive officers the affairs, finances and accounts of Hong Kong Holdco.  Any
information obtained by an Investor through exercise of rights granted under
this Section shall, to the extent constituting Confidential Information
hereunder, be subject to the confidentiality provisions set forth in Section
13.  Any Investor having rights under this Section shall also have the right to
confer, upon reasonable notice and during normal business hours, with the
auditors of Hong Kong Holdco, and with the accounting firm which has prepared or
is preparing any of the financial statements required to be delivered by Hong
Kong Holdco, as a part of the Reporting Requirements and Hong Kong Holdco shall
grant, or use commercially reasonable efforts to provide for, any permission
requested by such auditors to permit such conferences to take place.
 
10. INSURANCE; INDEMNIFICATION.
 
10.1 Liability.  To the fullest extent permitted by Applicable Law, each
Director and officer of Hong Kong Holdco shall not be personally liable to Hong
Kong Holdco or the Investors for monetary damages for breach of any duty owed as
a Director or officer of Hong Kong Holdco, and Hong Kong Holdco’s constitutive
documents shall so provide.
 
10.2 Indemnification of Directors and Officers.
 
 
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(a) Generally.  Except to the extent limited hereunder, each Director or officer
of Hong Kong Holdco (each a “Company Representative”)who is made a party or is
threatened to be made a party to or is involved in any proceeding by reason of
the fact that such Company Representative, or the legal representative of such
Company Representative, is or was a Company Representative, shall be indemnified
and held harmless by Hong Kong Holdco to the fullest extent authorized by
Applicable Law, as the same exists or may hereafter be amended (but, in case of
any such amendment, only to the extent that such amendment permits Hong Kong
Holdco to provide broader indemnification rights than said law permitted Hong
Kong Holdco to provide prior to such amendment), against all expense, liability
and loss (including attorneys’ fees, judgments, fines, excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith and such indemnification shall continue as
to a person who has ceased to be a Company Representative, and shall inure to
the benefit of such Company Representative’s heirs, executors and
administrators.  The right to indemnification conferred herein shall be a
contract right based upon an offer from Hong Kong Holdco, which offer shall be
deemed to be accepted by such person’s service or continued service as a Company
Representative.  Hong Kong Holdco may, by action of the Board, provide
indemnification to employees or agents of Hong Kong Holdco, to the extent
permitted by Applicable Law, with the same scope and effect as the foregoing
indemnification of Company Representatives.
 
(b) Limitations.  Notwithstanding the foregoing, the provisions of 10.2(a) shall
not eliminate or limit the liability of, or provide indemnity to, a Company
Representative for or in connection with any act, inaction or omission of such
Company Representative that (i) constitutes a breach by Company Representative
of that Company Representative’s duties of loyalty or care to Hong Kong Holdco
or the Investors (other than as expressly excepted under this Agreement; (ii)
was detrimental to Hong Kong Holdco and not in good faith; (iii) involved
intentional misconduct or a knowing violation of the law; (iv) clearly was in
conflict with the interests of Hong Kong Holdco or (v) results in such Company
Representative deriving an improper personal benefit.  The right to
indemnification conferred in this Section 10.2 shall not be exclusive of any
other right that a Company Representative may have or hereafter acquire under
law or equity, provision of this Agreement or otherwise.
 
10.3 Indemnification of the Investors.
 
(a) Generally.  To the extent permitted by law, Hong Kong Holdco will indemnify
and hold harmless each Investor, the partners, officers and directors of each
Investor and each person, if any, who Controls such Investor (each an
“Indemnified Party”) against all liability, loss, damage, penalty, action,
claim, judgment, settlement, cost and expense of any kind or nature whatsoever
(including all reasonable attorneys’ fees) (collectively referred to as
“Losses”) that arise under applicable securities laws, that in any way relate
to, or arise out of, or are alleged to relate to or arise out of any of the
following statements, omissions or violations (collectively a “Violation”) by
Hong Kong Holdco: (i) any untrue statement or alleged untrue statement of a
material fact contained in any registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or otherwise; (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or otherwise, or
necessary to make the statements therein not misleading; or (iii) any violation
or alleged violation by Hong Kong Holdco of any applicable securities laws; and
Hong Kong Holdco will pay to each such Indemnified Party any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such Loss; provided, however, that the indemnity
agreement contained in this Section 10.3 shall not apply to amounts paid in
settlement of any such Loss if such settlement is effected without the consent
of Hong Kong Holdco, which consent shall not be unreasonably withheld, nor shall
Hong Kong Holdco be liable in any such case for any such Loss to the extent that
it arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in connection
with any registration of Hong Kong Holdco’s Interests by such Indemnified Party.
 
 
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(b) Indemnity Claims. Promptly after receipt by an Indemnified Party under this
Section 10.3 of notice of the commencement of any action (including any
governmental action), such Indemnified Party will, if a claim in respect thereof
is to be made against Hong Kong Holdco under this Section 10.3, deliver to Hong
Kong Holdco a written notice of the commencement thereof and Hong Kong Holdco
shall have the right to participate in, and, to the extent Hong Kong Holdco so
desires, to assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an Indemnified Party shall have the right to
retain its own counsel, with the fees and expenses to be paid by Hong Kong
Holdco, if representation of such Indemnified Party by the counsel retained by
Hong Kong Holdco would be inappropriate due to actual or potential differing
interests between such Indemnified Party and Hong Kong Holdco.  The failure to
deliver written notice to Hong Kong Holdco within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve Hong Kong Holdco of any liability to the
Indemnified Party under this Section 10.3, but the omission so to deliver
written notice to Hong Kong Holdco will not relieve it of any liability that it
may have to any Indemnified Party otherwise than under this Section 10.3.
 
(c) Unavailability of Indemnification.  If the indemnification provided for
under this Section 10.3 is held by a court of competent jurisdiction or by an
arbitral tribunal to which an Indemnified Party has submitted the matter to be
unavailable to an Indemnified Party with respect to any Losses referred to
herein, Hong Kong Holdco, in lieu of indemnifying such Indemnified Party
thereunder, shall to the extent permitted by Applicable Law contribute to the
amount paid or payable by such Indemnified Party as a result of such Loss in
such proportion as is appropriate to reflect the relative fault of Hong Kong
Holdco on the one hand and of the Indemnified Party on the other in connection
with the Violations that resulted in such Loss, as well as any other relevant
equitable considerations.  The relative fault of Hong Kong Holdco and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by Hong Kong
Holdco or by the Indemnified Party and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission; provided, that in no event shall any contribution by an Investor
hereunder exceed the registered capital contributed by such Investor.
 
10.4 Advancement.  Hong Kong Holdco shall reimburse, promptly following request
therefor, all reasonable expenses incurred by a Person indemnified by Hong Kong
Holdco pursuant to Section 10.2 or 10.3 hereof (an “Indemnitee”) in connection
with any threatened, pending or completed action, suit, arbitration,
investigation or other proceeding (“Claim”) arising out of, or relating to the
matters identified in this Article 10; provided, however, that prior to such
advancement, the Indemnitee shall have agreed in writing (determined to be
sufficient by the Board to protect the interests of Hong Kong Holdco) to repay
such advancement in connection with acts, conduct or omissions as to which it
shall be determined by a court of competent jurisdiction or an arbitrator that
such Indemnitee engaged in intentional misconduct or in a knowing and culpable
violation of the law.
 
 
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10.5 Insurance.  Hong Kong Holdco shall obtain and maintain, and will continue
to maintain at all times during the terms of this Agreement, the insurance
listed below, in commercially reasonable amounts, at its own expense, from an
insurer that is A.M. Best Company rated A- or higher.  Any such policy shall be
endorsed to name specifically each of the Parties and their respective
subsidiaries, affiliates, successors and assigns as additional insureds.  Hong
Kong Holdco shall provide any certificate of insurance to the Parties upon
request and all such certificates shall indicate that thirty (30) days prior
written notice to the Parties of cancellation or non-renewal is required:
 
(a) General liability insurance;
 
(b) Product liability insurance;
 
(c) Errors & omissions insurance; and
 
(d) Director & officer insurance, to protect Hong Kong Holdco and its Directors
and officers, against any such expense, liability or loss, whether or not Hong
Kong Holdco would have the power to indemnify such person against such expense,
liability or loss under this Agreement.
 
11. COMPLIANCE WITH LAWS.
 
11.1 General.  In the conduct of its business, Hong Kong Holdco shall comply
with all Applicable Laws and maintaining all franchises, permits, licenses and
similar authorities necessary for the conduct of its business; provided further,
that Hong Kong Holdco shall comply with all statutes, laws, rules, regulations,
directives, treaties, judgments, orders, decrees or injunctions of any
Governmental Authority that are applicable to ZBB Energy Corporation, a
Wisconsin corporation that is the parent of ZBB Cayman Corporation, as a
publicly-traded U.S. company, including without limitation relevant provisions
of the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002 and the
Dodd–Frank Wall Street Reform and Consumer Protection Act, to the extent
reasonably requested by ZBB Energy.
 
11.2 Anti-Corruption.  Neither Hong Kong Holdco, nor any of its Directors,
officers, employees, agents or other Person associated with or acting for or on
behalf of Hong Kong Holdco, will take any action that would cause Hong Kong
Holdco to be in violation of the Foreign Corrupt Practices Act of 1977, as
amended, or any similar state or local Applicable Law, the Anti-Kickback Act of
1986 or any state or local/municipality anti-kickback Applicable Law, Applicable
Laws restricting the payment of contingent fee arrangements, or any Applicable
Laws of similar effect.
 
 
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12. TRANSFERS AND SALES OF INTERESTS
 
12.1 Transfers of Interests

 
(a) General Restriction on Transfers.  Except to the extent otherwise explicitly
provided in this Section 12 or Section 17.1, no Investor shall Transfer (or
create or suffer to exist any Encumbrance against) all or any portion of that
Investor’s Interest, except with the advance approval of all Investors.  Such
approval may specify the rights and obligations the transferee shall have,
including whether the proposed transferee is to be admitted as a full
substituted Investor.  The grant or denial of an Investor’s approval for a
proposed Transfer or Encumbrance may be made in such Investor’s sole and
absolute discretion.
 
(b) Rights and Obligations of Substituted Investor.  A substituted Investor
shall have all the rights and powers, and shall be subject to all the
restrictions and liabilities, of the Transferring Investor (as defined below),
relative to such transferred Interest.
 
(c) Continuing Obligations of Transferor.  Any Transferring Investor (as defined
below) who Transfers all of such Investor’s Interest shall cease to be an
Investor; provided, however, that such Transfer, without more, shall not release
the Transferring Investor from any liability with respect to the transferred
Interest or any other obligation that such Transferring Investor may have to
Hong Kong Holdco.
 
12.2 Unauthorized Transfers.  Any purported Transfer or Encumbrance of an
Interest of any Investor that does not comply with the conditions set forth in
this Section 12 shall be null, void and of no effect.
 
12.3 Withdrawal of an Investor.  An Investor shall have no right to withdraw,
dissociate withdraw such Investor’s registered capital from Hong Kong Holdco.
 
12.4 Transfers Pursuant to a Bona Fide Offer; Rights of First Refusal.
 
(a) Notice of Bona Fide Offer.  Notwithstanding the general restrictions on
Transfers in Section 12.1, if an Investor desires to Transfer all or any portion
of that Investor’s Interest pursuant to a Bona Fide Offer (as defined below)
made to that Investor by a third-party, and such Investor is unable to obtain
the approval of the other Investors to such Transfer, as provided in Section
12.1(a) above, then such Investor desiring to so transfer (a “Transferring
Investor”) shall give written notice thereof (which shall include a copy of such
bona fide offer) to the other Investors (the “Receiving Investors”).  As used
herein, the term “Bona Fide Offer” means a legally binding offer made in good
faith (in writing) by a third party, who the Transferring Investor reasonably
believes has the financial means to consummate the proposed Transfer, which
offer includes (i) the Interests to be transferred; (ii) the name and address of
the proposed transferee; (iii) in the case of a proposed transferee that is an
entity (i.e., not a natural Person), the identity of all direct and indirect
owners of the proposed transferee; (iv) the proposed consideration for the
Transfer and (v) the other terms of the proposed Transfer.
 
(b) Receiving Investors’ Right of First Refusal.  The Receiving Investors shall
have the right to purchase all, but not less than all, of the subject Interest
from the Transferring Investor on the terms and conditions contained in the Bona
Fide Offer.
 
 
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(c) Exercise of Right of First Refusal; Closing. The Receiving Investors shall
have sixty (60) calendar days from the date of receipt of the notice referenced
in Section 12.4(a) (the “Election Period”) to elect to exercise their purchase
rights by sending written notice thereof to the Transferring Investor.  Those
Receiving Investors exercising said purchase right (the “Electing Investors”)
may divide the Interests to be purchased by them in any amounts or proportions
that they may mutually agree upon.  In the event that they cannot or do not
agree upon the Interests to be purchased by each, then each such Electing
Investor shall purchase that percentage of the subject Interests proportionate
to that Electing Investor’s respective Interest relative to the aggregate
Interests of all Electing Investors.  The Electing Investors must purchase all
of the Interests described in the Bona Fide Offer.  The closing of such a
purchase shall occur at a date, time and place determined by the Electing
Investors, which date shall be no later than thirty (30) days following the end
of the Election Period.
 
(d) Transfer to Third-Party Transferee.  If the Receiving Investors do not elect
to purchase all of the Interests within the Election Period, then the Receiving
Investors shall have no right to purchase any of the Interests, and the
Transferring Investor may Transfer, within a period of thirty (30) calendar days
beginning at the end of the Election Period, all of the Interests described in
the Bona Fide Offer to the proposed third-party transferee on the terms and
conditions contained in the Bona Fide Offer; provided, however, that the
proposed third-party transferee must have delivered to Hong Kong Holdco, prior
to such Transfer, an agreement, in form and substance reasonably satisfactory to
the Investors, duly executed by the proposed third-party transferee, under the
terms of which such third-party transferee joins in the execution of this
Agreement, becomes a substituted Investor and agrees to be bound by all of the
terms and provisions of this Agreement.  If the Transferring Investor does not
Transfer such Interests by the end of such thirty (30) day period, the subject
Interests, and the Interest represented thereby, shall again become subject to
the restrictions of this Agreement, as though they had never been so offered.
 
12.5 Acknowledgment of Liquidity.  The Investors (a) acknowledge and agree that
the provisions of this Agreement provide reasonable methods of exiting Hong Kong
Holdco and an adequate means for obtaining liquidity with respect to their
investment in Hong Kong Holdco and (b) agree not to assert any claim in any
legal proceeding that the provisions of this Section 12 are unreasonable,
unlawful or unenforceable.
 
12.6 Buy/Sell Provisions.
 
(a) ZBB Energy’s Put and Call Rights.  Notwithstanding the foregoing, ZBB Energy
shall have the right, at any time following any of the circumstances listed
below upon written notice to PowerSav, to require PowerSav to (1) sell
PowerSav’s Interests in Hong Kong Holdco to ZBB Energy or (2) purchase ZBB
Energy’s Interests in Hong Kong Holdco:
 
(i)  
a PowerSav Change of Control; or

 
(ii)  
a material breach or default of this Agreement by PowerSav (a “PowerSav
Breach”).

 
 
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(b) PowerSav’s Put and Call Rights.  Notwithstanding the foregoing, PowerSav
shall have the right, at any time at any time following a material breach or
default of this Agreement by ZBB Energy (a “ZBB Energy Breach”), upon written
notice to ZBB Energy, to require ZBB Energy to (1) sell ZBB Energy’s Interests
in Hong Kong Holdco to PowerSav or (2) purchase PowerSav’s Interests in Hong
Kong Holdco.
 
(c) Additional Put Right for Both Parties.  Either Party (the “Selling Party”)
may require the other Party, upon written notice, to purchase the Selling
Party’s Interest in Hong Kong Holdco following any of the following
circumstances:
 
(i)  
in the event of a deadlock by the Board that cannot be resolved or a failure to
approve an action requiring a unanimous vote of the Directors, in any case with
respect to a matter that seriously impairs Hong Kong Holdco or the Company’s
operations; or

 
(ii)  
in the event of a deadlock on an Investor vote that cannot be resolved or a
failure to approve an action requiring a supermajority or unanimous vote of the
Investors, in any case with respect to a matter that seriously impairs Hong Kong
Holdco or the Company’s operations.

 
(d) Buy/Sell Arrangements.  The value of the Interests in Hong Kong Holdco being
purchased under this Section 12.6 shall be determined as follows:
 
(i)  
In the event that either ZBB Energy or PowerSav exercises its put right due to a
PowerSav Breach or a ZBB Energy Breach, respectively, an amount equal to (i) one
and one half (1.50) multiplied by (ii) the Interest Value (as defined below);

 
(ii)  
In the event that either ZBB Energy or PowerSav exercises its call right due to
a PowerSav Breach or a ZBB Energy Breach, respectively, an amount equal to (i)
one half (.5) multiplied by (ii) the Interest Value (as defined below); or

 
(iii)  
In all other cases (for example, if ZBB Energy exercises its put right due to a
PowerSav Change in Control), an amount equal to the Interest Value.  For
purposes hereof, the “Interest Value” shall mean the amount equal to the
appraised value of Hong Kong Holdco, as determined by an independent third party
mutually selected by the Parties, multiplied by a fraction equal to the
percentage of equity interest represented by the Interest being sold.

 
The closing of any purchase or sale pursuant to this Section 12.6 shall occur at
a date, time and place determined by the Investor initiating the same, which
date shall be no later than thirty (30) days following the determination of the
Interest Value.
 
13. CONFIDENTIALITY
 
 
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Each Party (the "Receiving Party") undertakes to retain in confidence the terms
of this Agreement and all other non-public information, technology, materials
and know-how of the other Party (“Disclosing Party”) disclosed or acquired by
the Receiving Party pursuant to or in connection with this Agreement that is
either designated as proprietary and/or confidential or, by the nature of the
circumstances surrounding disclosure, ought in good faith to be treated as
proprietary and/or confidential ("Confidential Information"); provided, that
each Party may disclose the terms and conditions of this Agreement to its
immediate legal and financial consultants in the ordinary course of its
business.  Neither Party may use any Confidential Information with respect to
which it is the Receiving Party for any purpose other than to carry out the
activities contemplated by this Agreement.  Each Party agrees to use
commercially reasonable efforts to protect Confidential Information of the other
Party, and in any event, to take precautions at least as great as those taken to
protect its own confidential information of a similar nature.  Each Party will
also notify the other promptly in writing if such Party learns of any
unauthorized use or disclosure of any Confidential Information that it has
received from the other Party, and will cooperate in good faith to remedy the
occurrence to the extent reasonably possible.  The restrictions set forth in
this Section do not apply to any information that: (a) was known by the
Receiving Party without obligation of confidentiality prior to disclosure
thereof by the other Party; (b) was in or entered the public domain through no
fault of the Receiving Party; (c) is disclosed to the Receiving Party by a third
party legally entitled to make the disclosure without violation of any
obligation of confidentiality; (d) is required to be disclosed by applicable
laws or regulations (but in that event, only to the extent required to be
disclosed, and provided that the Disclosing Party is given the opportunity to
review and redact the Agreement prior to disclosure); or (e) is independently
developed by the Receiving Party without reference to any Confidential
Information of the other Party.  Upon request of the Disclosing Party, the
Receiving Party will return to the Disclosing Party all materials, in any
medium, that contain or reveal all or any part of any Confidential Information
of the Disclosing Party.  Each Party acknowledges that breach of this provision
by it would result in irreparable harm to the other Party, for which money
damages would be an insufficient remedy, and therefore that the other Party will
be entitled to seek injunctive relief to enforce the provisions of this Section.
 
14. REPRESENTATIONS AND WARRANTIES.
 
14.1 Warranties of the Investors.  Each of the Investors hereby represents and
warrants that, as of the date of the execution and delivery hereof, the
following statements are true and correct:
 
(a) Organization; Good Standing.  The Investor is a legal entity, organized and
validly existing under the laws of the applicable jurisdiction, with full power
to own its assets and conduct its business as conducted and as proposed to be
conducted.  The Investor is registered or qualified to do business and in good
standing in each jurisdiction in which it owns or leases property or transacts
business and where the failure to be so qualified would have a material adverse
effect on the ability of the Investor or Hong Kong Holdco to consummate the
transactions contemplated by this Agreement or the Related Agreements, and no
proceeding has been instituted in any such jurisdiction, revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and authority or
qualification.  Each of the Investors will provide, upon request of any other
Investor, a copy of its formation and governing documents, as are then currently
in effect.
 
 
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(b) Authorization.  The Investor has all requisite corporate power and authority
to execute and deliver this Agreement, to perform fully its obligations
hereunder and to consummate the transactions contemplated by this Agreement or
the Related Agreements.  All corporate action on the part of the Investor
necessary for the authorization, execution and delivery of this Agreement and
for the performance of all of its obligations hereunder has been taken, and this
Agreement when fully executed and delivered shall constitute a valid, legally
binding and enforceable obligation of the Investor (except as the enforceability
thereof may be limited by any laws affecting creditors’ rights generally, by
general principles of equity, regardless of whether such enforceability is
considered in equity or at law).
 
(c) Government and Other Consents.  No consent, authorization, license, permit,
registration or approval of, or exemption or other action by, any Governmental
Authority, or any other Person, is required in connection with the Investor’s
execution, delivery and performance of this Agreement, or if any such consent is
required, the Investor has satisfied the applicable requirement, except for any
matters that would not have a material adverse effect on the ability of the
Investor or Hong Kong Holdco to consummate the transactions contemplated by this
Agreement or the Related Agreements.
 
(d) Effect of Agreement.  The Investor’s execution, delivery and performance of
this Agreement, and the consummation of the transactions contemplated hereby
will not result in a breach or violation of any of the terms, conditions or
provisions of, or constitute a default (or with notice or lapse of time or both
constitute) or require the consent of any other Person under (i) any indenture,
mortgage, agreement or other instrument or arrangement to which the Investor is
a party; (ii) any of the terms or provisions of the formation or governing
documents of the Investor or any provision of Applicable Law; (iii) any
judgment, order, writ, injunction or decree applicable to the Investor; or (iv)
or have any effect on the compliance by the Investor with, any applicable
licenses, permits or authorizations, except in each case under clauses (i),
(ii), (iii) or (iv) where such breach, violation or default would not have a
material adverse effect on the ability of the Investor or Hong Kong Holdco to
consummate the transactions contemplated by this Agreement or the Related
Agreements.
 
(e) Proceedings.  There is no action, suit or proceeding at law or in equity or
otherwise in, before or by any Governmental Authority or, to the Investor’s
knowledge, threatened by or against the Investor which question the validity of,
or which question the Investor’s right to enter into or perform this Agreement,
or which would prevent or restrict its ability to enter into and perform its
obligations under this Agreement, except where such action, suit or proceeding
could not reasonably be expected to have a material adverse effect on the
ability of the Investor or Hong Kong Holdco to consummate the transactions
contemplated by this Agreement or the Related Agreements.
 
(f) Anti-Corruption.  Neither the Investor, nor any of its directors, officers,
employees, agents or other Person associated with or acting for or on behalf of
the Investor, has taken, or will take, any action that would cause the Investor
or Hong Kong Holdco to be in violation of the Foreign Corrupt Practices Act of
1977, as amended, or any similar state or local Applicable Law, the
Anti-Kickback Act of 1986 or any state or local/municipality anti-kickback
Applicable Law, Applicable Laws restricting the payment of contingent fee
arrangements, or any Applicable Laws of similar effect.
 
 
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14.2 Representations and Warranties of PowerSav.  PowerSav hereby represents and
warrants that, as of the date of the execution and delivery hereof, the
following statements are true and correct:
 
(a) PowerSav’s interest in Hong Kong Holdco is not, and will not be,
beneficially owned by any person or entity other than PowerSav and that no
competitor of ZBB Energy Corporation, financial sponsor or private equity fund
beneficially owns, or will beneficially own, any interest in PowerSav or any of
PowerSav’s interest in Hong Kong Holdco or the Company;
 
(b) PowerSav is the sole beneficial owner of all intellectual property claimed
to be owned by PowerSav; and
 
(c) No person or entity other than PowerSav has any rights in PowerSav’s
products or intellectual property.
 
15. TERM AND TERMINATION.
 
15.1 Term.  This Agreement shall be effective as of the Effective Date and shall
continue in effect until the earlier of (a) the expiration of the Agreement on
the tenth (10th) anniversary of the Effective Date or (b) upon the date of
termination of this Agreement pursuant to Section 15.2 (the “Term”).
 
15.2 Termination.  This Agreement shall terminate:
 
(i)  
Upon the mutual written agreement of the Investors;

 
(ii)  
Upon the material breach (or default in the performance of the terms) of this
Agreement by a Party; provided, that such breach (to the extent susceptible of
cure) remains uncured for more than thirty (30) days after the non-breaching
Party provides the breaching Party written notice of the same;

 
(iii)  
As to any Investor, upon the permitted Transfer of all Interests of Hong Kong
Holdco held by such Investor;

 
(iv)  
If the Approval Authority has not issued a business license to the Company by
December 31, 2011; or

 
(v)  
Upon the termination of the Joint Venture Agreement.

 
15.3 Survival.  The rights and obligations of the Parties under Section 14
(Confidentiality), Section 15.4 (Continuing Liability), Section 16 (Governing
Law and Dispute Resolution) and Section 17 (General Provisions) (except for
Section 17.6 (Further Assurances)) shall survive any termination of this
Agreement.
 
15.4 Continuing Liability.  Termination of this Agreement for any reason shall
not release a Party from any liability or obligation which has already accrued
as of the effective date of such termination, and shall not constitute a waiver
or release of, or otherwise be deemed to prejudice or adversely affect, any
rights, remedies or claims, whether for damages or otherwise, which a Party may
have hereunder, at law, equity or otherwise or which may arise out of or in
connection with such termination.
 
 
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15.5 Effect of Termination.  Upon termination of this Agreement pursuant to
Subsections (i), (ii), (iv) or (v) of Section 15.2 (provided, that neither Party
has exercised its rights pursuant to Section 12.6), Hong Kong Holdco shall
continue solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets and satisfying the claims of its creditors and the
Investors.  Under such circumstances, the Board shall not take any action that
is inconsistent with, or not necessary or advisable for, the winding up of Hong
Kong Holdco’s affairs.  The Board shall be responsible for overseeing the
winding up and liquidation of Hong Kong Holdco and, in connection therewith,
shall take full account of Hong Kong Holdco’s liabilities and assets, cause Hong
Kong Holdco’s assets to be liquidated as promptly as is consistent with
obtaining the fair value thereof and cause the proceeds therefrom, to the extent
sufficient therefor, to be applied in the following order and priority:

(a) Creditors.  First, to the payment of all of Hong Kong Holdco’s debts and
liabilities owed to the creditors of Hong Kong Holdco (including any Directors
or Investors who are creditors) in the order of priority provided by contract or
law, with the Board making reasonable provision for their payment or
satisfaction (which may include the setting up of such reserves as the Board may
deem necessary for the payment of any obligations or contingent liabilities of
Hong Kong Holdco).  The Board may hold such reserves for such period that they
reasonably deem advisable for the payment of such obligations and liabilities as
they become due and, at the expiration of such period, the balance of such
reserves, if any, shall be distributed as provided in Section 15.5(b);
 
(b) Return of Registered Capital.  Second, to each of the Investors in the
amount of their respective registered capital, as set forth on Exhibit A, as may
be amended from time to time; provided, that if Hong Kong Holdco does not have
sufficient assets to return all such registered capital to the Investors, any
such amounts will be distributed to the Investors on a pro rata basis in a ratio
that corresponds to (i) the quotient of (A) the Investor’s committed registered
capital divided by (B) the aggregate registered capital set forth on Exhibit A,
as may be amended from time to time; and
 
(c) Liquidating Distributions.  The balance, if any, to the Investors in
accordance with and in proportion to their respective Percentage Ownership
Interest.
 
The costs and expenses relating to the winding up of Hong Kong Holdco shall be
borne by Hong Kong Holdco.  Unless otherwise approved by the Investors, no
Investor shall receive compensation for any services performed pursuant to this
Section 15.5.

16. GOVERNING LAW; DISPUTE RESOLUTION.
 
16.1 Governing Law.  The validity, construction and enforceability of this
Agreement shall be governed by and construed in accordance with the laws of Hong
Kong.
 
 
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16.2 Discussions and Arbitration.  The Parties will discuss and finally settle
all disputes between them, and among them and Hong Kong Holdco, arising out of
this Agreement (including with respect to this Section 16), in accordance with
the Domestic Arbitration Rules of Hong Kong International Arbitration
Centre.  Hong Kong Holdco shall at all times maintain authorized agents in each
of the United States and Wuhu City, Anhui Province, the People’s Republic of
China to receive, for and on its behalf service of any summons, complaint or
other legal process.
 
17. GENERAL PROVISIONS.
 
17.1 Assignment.  Either Party may Transfer all of its Interest in Hong Kong
Holdco to its wholly owned subsidiary; provided, that (i) such Party provides
the other Party prior written notice of such Transfer; (ii) such assignment
occurs within one (1) month of the execution of this Agreement and (iii) such
subsidiary agrees in writing to be subject to all of the terms and conditions of
the Agreement, including those applying specifically to the original Party
Transferring its Interest; provided, however, that ZBB Energy may Transfer
freely, at any time during the Term of this Agreement, its interest in Hong Kong
Holdco to an Affiliate of ZBB Energy upon prior written notice to PowerSav.  Any
Transfer or purported Transfer not made in accordance with this Section and
Section 12, as applicable, shall be void and of no force and effect.
 
17.2 Non-Competition; Non-Solicitation; Business Opportunities.
 
(a) Non-Competition.  The Investors agree that, as applicable, they will not
(and will cause Hong Kong Holdco and their respective Affiliates and members not
to) compete, either directly or indirectly, with ZBB Energy Corporation or its
Affiliates, or with Hong Kong Holdco, with respect to the sourcing, production,
marketing and distribution of any products sourced, produced, marketed or
distributed by ZBB Energy Corporation or its Affiliates or Hong Kong Holdco, as
applicable, during the Term of this Agreement and for five (5) years thereafter,
anywhere in the world, except as explicitly provided herein.
 
(b) Non-Solicitation.  Each of the Parties and their respective Affiliates
(other than Hong Kong Holdco and the Company, as applicable) agree not to
solicit or hire any employee of the other Party or any employee of Hong Kong
Holdco or the Company.  Hong Kong Holdco shall not solicit or hire any employee
of ZBB Energy, PowerSav or their respective Affiliates (other than Hong Kong
Holdco) unless Hong Kong Holdco receives the written consent of the applicable
Party.  This covenant will extend for the Term of this Agreement and for five
(5) year thereafter.
 
(c) Business Opportunities.  The Investors agree that each will cause Hong Kong
Holdco and the Directors and officers of Hong Kong Holdco to refer any new
business opportunities within the scope of this Agreement to the Investors for
determination as to whether those opportunities are best explored in Hong Kong
Holdco or through one or more of the Investors or their respective Affiliates.
 
(d) Opportunities outside the Agreement.  The fact that an Investor or Affiliate
takes advantage of an opportunity that is not within the scope of this Agreement
(either alone or with other Persons, including Entities in which such Investor
or Affiliate has an interest) and does not offer such opportunity to Hong Kong
Holdco or to the other Investors shall not subject such Investor or Affiliate to
liability to Hong Kong Holdco or to the other Investors on account of any lost
opportunity.
 
 
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(e) Exceptions.  Notwithstanding the foregoing, Hong Kong Holdco will renounce,
and not accept or be involved in, any interest or expectancy in any business
opportunity presented to, or which came to the attention of, any Director who
also is an employee or director of ZBB Energy Corporation or its Affiliates
(other than Hong Kong Holdco, the Parties or PowerSav) in the course of
performing such Person’s official duties for ZBB Energy Corporation or its
Affiliates.
 
17.3 Notices and Other Communications.  Any and all notices, requests, demands
and other communications required by or otherwise contemplated to be made under
this Agreement or Applicable Law shall be in writing and in English and shall be
provided by one or more of the following means and shall be deemed to have been
duly given (a) if delivered personally, when received; (b) if transmitted by
facsimile, on the date of transmission with receipt of a transmittal
confirmation or (c) if by international courier service, on the fourth (4th)
Business Day following the date of deposit with such courier service, or such
earlier delivery date as may be confirmed in writing to the sender by such
courier service. All such notices, requests, demands and other communications
shall be addressed as follows:
 
If to Hong Kong Holdco:
 
____________________________________
____________________________________
____________________________________
____________________________________
____________________________________

 
with a copy (which copy shall not constitute notice) to:
 
____________________________________
____________________________________
____________________________________
____________________________________
____________________________________
 
 
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If to ZBB Energy:
 
____________________________________
____________________________________
____________________________________
____________________________________
____________________________________
with a copy (which copy shall not constitute notice) to:
 
Mr. Mark Busch and Mr. Eliab Erulkar
K&L Gates LLP
Hearst Tower, 47th Floor
214 North Tryon Street
Charlotte, North Carolina, USA 28202

If to PowerSav:
 
____________________________________
____________________________________
____________________________________
____________________________________
____________________________________
with a copy (which copy shall not constitute notice) to:
 
____________________________________
____________________________________
____________________________________
____________________________________
____________________________________
or to such other address or facsimile number as a Party may specify to the other
Party from time to time in writing.
 
17.4 Severability.  If any provision in this Agreement shall be found or be held
to be invalid or unenforceable then the meaning of said provision shall be
construed, to the extent feasible, so as to render the provision enforceable,
and if no feasible interpretation would save such provision, it shall be severed
from the remainder of this Agreement which shall remain in full force and
effect.  In such event, the Parties shall use their respective best efforts to
negotiate in good faith a substitute, valid and enforceable provision or
agreement that most nearly affects the Parties’ intent in entering into this
Agreement.
 
17.5 References to this Agreement; Headings.  Unless otherwise indicated,
references to sections and exhibits herein are to sections of, and exhibits to,
this Agreement.  Words such as “herein,” “hereby,” “hereinafter,” “hereof,”
“hereto,” and “hereunder” refer to this Agreement as a whole, unless the context
otherwise requires.  The subject headings of the sections of this Agreement are
for reference only, and shall not affect the construction or interpretation of
any of the provisions of this Agreement.
 
 
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17.6 Further Assurances.  The Parties shall each perform such acts, execute and
deliver such instruments and documents, and do all such other things as may be
reasonably necessary to carry out the provisions of this Agreement.
 
17.7 No Waiver.  No waiver of any term or condition of this Agreement shall be
valid or binding on a Party unless the same shall have been set forth in a
written document, specifically referring to this Agreement and duly signed by
the waiving Party.  The failure of a Party to enforce at any time any of the
provisions of this Agreement, or the failure to require at anytime performance
by the other Party of any of the provisions of this Agreement, shall in no way;
be construed to be a present or future waiver of such provisions, nor in any way
affect the ability of a Party to enforce each and every such provision
thereafter.
 
17.8 Entire Agreement; Amendments.  The terms and conditions contained in this
Agreement and the Related Agreements (including the exhibits hereto and thereto)
constitute the entire agreement between the Parties and supersede all previous
agreements and understandings, whether oral or written, between the Parties with
respect to the subject matter hereof and thereof.  No agreement or understanding
amending this Agreement shall be binding upon any Party unless set forth in a
written document which expressly refers to this Agreement and which is signed
and delivered by duly authorized representatives of each Party.
 
17.9 Expenses.  Hong Kong Holdco shall reimburse the Parties for any of their
respective reasonable and documented out-of-pocket expenses incurred in
connection with the formation and development of Hong Kong Holdco including,
without limitation, related professional service provider fees (e.g., legal and
accounting costs).
 
17.10 Currency.  For the purposes of calculating any amounts payable to, or by,
the Parties or Hong Kong Holdco hereunder, the Parties shall use, as necessary,
the applicable exchange rate in effect as of the last day of the calendar month
immediately preceding the date on which the same becomes payable (as published
in The Wall Street Journal, Asia Edition).
 
17.11 No Agency.  The authority of each Party hereunder is limited to that which
explicitly is set forth herein.  Neither Party has, and shall not hold itself
out as having, any right, power or authority in any manner, (i) to accept, any
offer, proposal or negotiated terms solicited by that Party pursuant to the
terms hereof on behalf of the other Party, or otherwise commit or bind the other
Party, without the other Party’s advance written consent, (ii) to otherwise
create any contract or obligation, either express or implied, on behalf of, in
the name of, or binding upon the other Party or (iii) to accept legal process on
behalf of the other Party.
 
17.12 No Third Party Beneficiaries.  This Agreement is made solely and
specifically between and for the benefit of the Parties and their respective
successors and assigns, and no other Person, unless express provision is made
herein to the contrary, shall have any rights, interests or claims hereunder or
be entitled to any benefits under or on account of this Agreement as a third
party beneficiary or otherwise.
 
 
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17.13 Incidental and Consequential Damages.  No Party will be liable to any
other Party under any contract, negligence, strict liability or other theory for
any indirect, incidental or consequential damages (including without limitation
lost profits) with respect to a breach of this Agreement.
 
17.14 Counterparts.  This Agreement may be executed in any number of
counterparts, and each counterpart shall constitute an original instrument, but
all such separate counterparts shall constitute one and the same instrument.
 
17.15 Execution by Hong Kong Holdco.  Each of the Parties shall cause (i) Hong
Kong Holdco to be formed as a limited liability company and (ii) Hong Kong
Holdco to enter into any agreements to which it is contemplated to be a party
hereunder as soon as possible after its formation.
 
[SIGNATURES APPEAR ON NEXT PAGE]
 
 
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IN WITNESS WHEREOF, the Parties have caused their respective duly authorized
representatives to execute this Agreement as of the Effective Date.
 
 
“ZBB Energy”
“PowerSav”
 
ZBB Cayman Corporation
 
PowerSav Inc.
    By:  ______________________  By:  ______________________          Name: 
        Name: 
        Title:
        Title:

 
 

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