Exhibit
10.1

    January
7, 2010

    Mr. Eric
C. Apfelbach

    5804
Ivanhoe Circle

    Madison,
WI  53711

    


    Dear
Eric:

    


    On behalf
of the Board of Directors of ZBB Energy Corporation (“ZBB”), I am delighted to
invite you to join our company as its President and Chief Executive Officer, and
as a member of our Board of Directors.  This letter agreement sets
forth the terms your employment.

    


    
      	
              1.

            	
              Position:

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              You
      will serve as ZBB’s President and Chief Executive Officer and report to
      ZBB’s Board of Directors.  Your services to ZBB will be
      performed in Menomonee Falls, Wisconsin.  You acknowledge,
      however, that you may be required to travel extensively in connection with
      the performance of your duties
hereunder.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              During
      your employment by ZBB, you may accept a position on the board of
      directors of any company that does not directly compete with the business
      of ZBB, provided such position is approved in advance by ZBB’s Board of
      Directors.  It is understood that you are currently a member of
      the board of directors of the for-profit companies and a member of the
      board of directors or advisory board for the non-profit and other industry
      or economic associations previously disclosed to ZBB, which memberships
      shall not be prohibited by the terms hereof, provided that such
      memberships will not interfere in any way with the fulfillment of your
      duties as President and Chief Executive Officer and as a director of
      ZBB.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              Nothing
      contained in this letter will be construed as conferring upon you any
      right to remain employed by ZBB or any of its subsidiaries or affiliates
      or affect the right of ZBB or any of its subsidiaries or its affiliates to
      terminate your employment at any time for any reason or no reason, subject
      to the obligations of ZBB as set forth
herein.

            


    

    


    
      	
              2.

            	
              Salary:

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              You
      will be entitled to an annual salary of $250,000, payable in accordance
      with ZBB’s normal salaried payroll practices; provided, however, that for
      calendar year 2010, $62,500 of your annual salary shall be paid on the
      date of your appointment and the balance of $187,500 shall be paid ratably
      over the remainder of the year in accordance with ZBB’s normal payroll
      practices.  The Board of Directors will review, at least
      annually, your overall compensation with a view to increasing it if, in
      the sole judgment of the Board of Directors, the performance of ZBB or
      your services merit such an
increase.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              ZBB
      shall be entitled to withhold from amounts to be paid to you hereunder any
      federal, state, or local withholding or other taxes or charges which it is
      required to withhold under applicable
law.

            


    

    


    
      
        	
                N93
      W14475 Whittaker Way

              	 
      	
                PO
      Box 2047

              
	
                Menomonee
      Falls WI  53051

              	 
      	
                Kardinya
      WA 6163

              
	
                Tel:  (262)
      253 9800 Fax:  (262) 253 9822

              	 
      	
                240
      Barrington Street

              
	
                Email:  hbrown@zbbenergy.com

              	 
      	
                Bibra
      Lake WA 6163

              
	 
      	 
      	
                Tel:  (08)
      9494 2055 Fax:  (08) 9494 2066

              
	 
      	
                  

              	
                Email:  info@zbbenergy.com

              


      

    

    www.zbbenergy.com


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    

    


    
      	
              3.

            	
              Options:

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              Effective
      as of the date of your appointment, you will receive two option
      awards.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              You
      will be granted an option to purchase 400,000 shares with an exercise
      price equal to the closing price of ZBB’s common stock on the NYSE Amex on
      the date of your appointment.

            


    

    
      	
               
      

            	
              o

            	
              Vesting
      will be over 3 years with the first 1/3 vesting one year from the start of
      your employment and the remaining 2/3 vesting in 24 equal monthly
      installments as of the end of each calendar month beginning on January 31,
      2011 and ending on December 31,
2012.

            


    

    
      	
               
      

            	
              o

            	
              This
      option will immediately vest upon a “Change of Control” of
      ZBB.  The definition of “Change of Control” is attached as an
      exhibit to this letter.

            


    

    
      	
               
      

            	
              o

            	
              The
      option will not be exercisable as to any portion thereof after the fifth
      anniversary of the date on which such portion
  vests.

            


    

    
      	
               
      

            	
              o

            	
              The
      option will have such other terms and conditions specified in the form of
      option agreement previously provided to
you.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              You
      will also be granted an option to purchase 100,000 shares with the same
      exercise price specified above.

            


    

    
      	
               
      

            	
              o

            	
              The
      option will vest in two equal installments upon the Compensation
      Committee’s confirmation that certain performance targets are met, which
      confirmation will occur as soon as practicable after June 30, 2010 and
      December 31, 2010.

            


    

    
      	
               
      

            	
              o

            	
              The
      option will not be exercisable as to any portion thereof after the fifth
      anniversary of the date on which such portion
  vests.

            


    

    
      	
               
      

            	
              o

            	
              The
      option will have such other terms and conditions specified in the form of
      option agreement previously provided to
you.

            


    

    


    
      	
              4.

            	
              Commuting and Other
      Expenses:

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              We
      will reimburse your commuting expenses to and from ZBB’s corporate offices
      in the following manner:

            


    

    
      	
               
      

            	
              o

            	
              IRS
      mileage reimbursement for miles that exceed 60 miles round trip to and
      from your home to ZBB’s corporate
offices.

            


    

    
      	
               
      

            	
              o

            	
              This
      reimbursement will not exceed $10,000 per
year.

            


    

    
      	
               
      

            	
              o

            	
              The
      previous CEO returned a lease vehicle to ZBB which, if you deem
      appropriate, may be used in lieu of the mileage reimbursement
      above.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              Expenses
      for other company travel will be reimbursed in accord with ZBB’s travel
      policy.

            


    

    


    
      	
              5.

            	
              Benefits:

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              During
      the term of your employment by ZBB, ZBB will provide you with, and you
      will be eligible for, all benefits of employment generally made available
      to the senior executives of ZBB (collectively, the “Benefit Plans”),
      subject to and on a basis consistent with the terms, conditions and
      overall administration of such Benefit Plans. You will be considered for
      participation in Benefit Plans which by the terms thereof are
      discretionary in nature (such as stock option plans) on the same basis as
      other executive personnel of ZBB of similar
      rank.  Notwithstanding the foregoing, you may elect either to
      participate in ZBB’s health Benefit Plan or obtain other health
      insurance.  If you elect to obtain other health insurance, ZBB
      will pay the monthly premiums for such insurance up to an amount equal to
      $900 per month paid either directly by ZBB to the insurance provider, or
      reimbursed to you on a monthly basis as soon as practicable following your
      submission to ZBB of proof of payment of each monthly premium
      payment.  You will be solely responsible for the payment of
      monthly premiums in excess of this amount.  ZBB’s payment of
      such premiums shall constitute an “accident or health plan” for the
      purposes of Section 106 of the Internal Revenue Code of 1986, as
      amended.

            


    


    
      
         


      

      
        2

        
          

        

      

      
         


      

    

    


    
      	
               
      

            	
              Ÿ

            	
              On
      a pre-tax basis, ZBB will provide a policy or reimburse you for the
      payment of premiums for a long-term disability insurance policy from an
      insurance carrier mutually acceptable to ZBB and you, provided that the
      annual premiums for such policy are not in excess of $7,000 per
      year.  To the extent ZBB reimburses you for the payment of
      premiums, such premiums will be paid either directly by ZBB to the
      insurance provider, or reimbursed to you as soon as practicable following
      your submission to ZBB of proof of payment of each premium
      payment.  You will be solely responsible for the payment of
      annual premiums in excess of this amount.  ZBB’s payment of such
      premiums shall constitute an “accident or health plan” for the purposes of
      Section 106 of the Internal Revenue Code of 1986, as
    amended.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              We
      also offer you four weeks of vacation per calendar
  year.

            


    

    


    
      	
              6.

            	
              Benefits Upon
      Termination:

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              Without
      giving effect to the timing of the payment of your base salary for 2010 as
      set forth in Section 2, above, you will be entitled to a severance payment
      in an amount equal to six months of your annual base salary as then in
      effect paid in accordance with ZBB’s normal salaried payroll practices as
      then in effect in the event (a) ZBB terminates your employment for any
      reason other than “Cause” or “Disability”, (b) you terminate your
      employment with ZBB for “Good Reason”, or (c) you die.  In the
      event your employment with ZBB is terminated due to “Disability,” you will
      be entitled to a severance payment in an amount equal to your base salary
      as then in effect from the date of termination through the date on which
      benefits under the long-term disability policy begin, but in no event
      longer than 90 days, paid in accordance with ZBB’s normal salaried payroll
      practices as then in effect.  The definitions of “Cause”,
      “Disability” and “Good Reason” are attached as an exhibit to this
      letter.  In each case, this severance benefit will be contingent
      on your execution of a release in a form acceptable to ZBB which is not
      withdrawn or otherwise revoked within the applicable statutory and/or
      regulatory time periods or otherwise.  You will also be entitled
      to all accrued and unpaid benefits under any Benefit Plans in which you
      participate through the date of
termination.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              If
      you terminate your employment with ZBB for “Good Reason”, and if you elect
      to continue your health insurance coverage under the Consolidated Omnibus
      Budget Reconciliation Act (“COBRA”) following such termination, then ZBB
      shall pay your monthly premium under COBRA until the earlier of:  (i)
      the last day of the six month period following such termination or (ii)
      the date on which you are offered or obtain health insurance coverage in
      connection with new employment or self-employment.  If you are
      not eligible for COBRA coverage because you have waived health insurance
      coverage, then, suject to the dollar limits above, ZBB shall pay your
      monthly premium for long-term disability conversion coverage until the
      earlier of:  (i) the last day of the six month period following such
      termination or (ii) the date on which you are offered or obtain long-term
      disability insurance coverage in connection with new employment or
      self-employment.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              If
      you terminate your employment with ZBB other than for “Good Reason” or ZBB
      terminates your employment for “Cause”, you will be entitled to the
      payment of any accrued but unpaid base salary through the date of
      termination, plus all accrued and unpaid benefits under any Benefit Plans
      in which you participate through the date of termination.  In
      either case, you will not be entitled to any severance payment and you
      will not be entitled to the payment of the premiums specified
      above.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              As
      a condition to your appointment, you will be required to enter into a
      restrictive covenant agreement.  If you breach the provisions of
      the restrictive covenant agreement, then you shall forfeit any unpaid
      severance payments and COBRA and long-term disability conversion coverage
      premiums as of the time of ZBB’s determination of the breach, and you
      shall repay to ZBB any severance payments and COBRA and long-term
      disability conversion coverage premiums you have received as of the time
      of ZBB’s determination of the breach as soon as practicable after ZBB
      provides a written demand for payment to
you.

            


    


    
      
         


      

      
        3

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              Ÿ

            	
              As
      a condition to your appointment, you will be required to provide a
      resignation from the Board of Directors in the form previously provided to
      you.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              You
      hereby represent and warrant that you are not bound by any employment or
      confidentiality agreement or other obligation or commitment, whether
      contractual or otherwise, that would be inconsistent, or place you in a
      position of conflict, with your position as President and CEO of ZBB or
      this letter agreement.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              As
      a condition to your appointment, you will also be required to submit to a
      formal background check and a drug test and the results must be
      satisfactory to ZBB's Board of
Directors.

            


    

    


    
      	
              7.

            	
              Timing; Miscellaneous
      Provisions:

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              The
      date of your appointment as President and Chief Executive Officer of ZBB
      will be January 7, 2010.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              This
      letter agreement shall be binding upon any successor (whether direct or
      indirect and whether by purchase, lease, merger, consolidation,
      liquidation or otherwise) to all or substantially all of ZBB’s business
      and/or assets.  For all purposes under this Agreement, the term
      “ZBB” shall include any successor to ZBB’s business and/or assets which
      becomes bound by this letter
agreement.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              This
      letter agreement and all of your rights hereunder shall inure to the
      benefit of, and be enforceable by, your personal or legal representatives,
      executors, administrators, successors, heirs, distributees, devisees and
      legatees.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              Notices
      and all other communications contemplated by this letter agreement shall
      be in writing and shall be deemed to have been duly given when personally
      delivered or when mailed by overnight courier or U.S. registered or
      certified mail, return receipt requested and postage
      prepaid.  In the case of notices to you, notices shall be
      addressed to you at the home address which you most recently communicated
      to ZBB in writing.  In the case of notices to ZBB, notices shall
      be addressed to its corporate headquarters, and all notices shall be
      directed to the attention of its
Secretary.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              No
      provision of this letter agreement shall be modified, waived or discharged
      unless the modification, waiver or discharge is agreed to in writing and
      signed by you and by an authorized officer of ZBB (other than
      you).  No waiver by either party of any breach of, or of
      compliance with, any condition or provision of this letter agreement by
      the other party shall be considered a waiver of any other condition or
      provision or of the same condition or provision at another
      time.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              No
      other agreements, representations or understandings (whether oral or
      written and whether express or implied) which are not expressly set forth
      or referenced in this letter agreement have been made or entered into by
      either party with respect to the subject matter hereof.  This
      letter agreement and the other agreements, representations and
      understandings expressly set forth or referenced herein contain the entire
      understanding of the parties with respect to the subject matter
      hereof.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              Any
      termination of this letter agreement shall not release either ZBB or you
      from our respective obligations to the date of termination nor from the
      provisions of this letter agreement which, by necessary or reasonable
      implication, are intended to apply after termination of this letter
      agreement.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              The
      validity, interpretation, construction and performance of this letter
      agreement shall be governed by the laws of the State of Wisconsin (other
      than provisions governing the choice of
law).

            


    


    
      
         


      

      
        4

        
          

        

      

      
         


      

    

    


    
      	
               
      

            	
              Ÿ

            	
              The
      invalidity or unenforceability of any provision or provisions of this
      letter agreement shall not affect the validity or enforceability of any
      other provision hereof, which shall remain in full force and
      effect.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              This
      letter agreement and all your rights and obligations hereunder are
      personal to you and may not be transferred or assigned by you at any
      time.  ZBB may assign its rights under this letter agreement to
      any entity that assumes ZBB’s obligations hereunder in connection with any
      sale or transfer of all or a substantial portion of ZBB’s assets to such
      entity.

            


    

    


    
      	
               
      

            	
              Ÿ

            	
              This
      letter agreement may be executed in two or more counterparts, each of
      which shall be deemed an original, but all of which together shall
      constitute one and the same
instrument.

            


    

    


    We feel
that this offer is exceptionally attractive and reflects the confidence we have
in your ability to guide the growth of ZBB and to achieve a significant
enhancement of shareholder value.  We very much look forward to having
you join us as our President and Chief Executive Officer.  If you
agree to the terms of this letter agreement, please execute the letter agreement
below.

    


    
      
        
          
            	 	
                    With
      warm regards,

                  
	 	 
      
	 	
                    ZBB
      ENERGY CORPORATION

                  
	 	 
      
	 	
                    /S/Paul
      Koeppe

                  
	 	
                    Interim
      Chief Executive Officer

                  
	 	
                    Chairman,
      Search Committee

                  


          

        

      

    

    


    Agreed
and accepted as of January 7, 2010.

    


    
      
        	
                   

              
	
                /S/
      Eric C. Apfelbach

              


      

    


    
      
         


      

      
        5