| 1. | Position: |
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|   | 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 dutieshereunder. |
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|   | 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. |
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|   | 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 forthherein. |
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| 2. | Salary: |
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|   | 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 anincrease. |
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|   | 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 applicablelaw. |
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| N93      W14475 Whittaker Way                                      |         | PO      Box 2047                                                   |
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| 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                               |

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| 3. | Options: |
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|   | Ÿ | Effective      as of the date of your appointment, you will receive two option      awards. |
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|   | 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. |
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|   | 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. |
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|   | 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. |
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|   | o | The      option will not be exercisable as to any portion thereof after the fifth      anniversary of the date on which such portion  vests. |
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|   | o | The      option will have such other terms and conditions specified in the form of      option agreement previously provided toyou. |
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|   | Ÿ | You      will also be granted an option to purchase 100,000 shares with the same      exercise price specified above. |
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|   | 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. |
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|   | o | The      option will not be exercisable as to any portion thereof after the fifth      anniversary of the date on which such portion  vests. |
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|   | o | The      option will have such other terms and conditions specified in the form of      option agreement previously provided toyou. |
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| 4. | Commuting and Other      Expenses: |
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|   | Ÿ | We      will reimburse your commuting expenses to and from ZBB’s corporate offices      in the following manner: |
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|   | o | IRS      mileage reimbursement for miles that exceed 60 miles round trip to and      from your home to ZBB’s corporateoffices. |
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|   | o | This      reimbursement will not exceed $10,000 peryear. |
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|   | 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. |
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|   | Ÿ | Expenses      for other company travel will be reimbursed in accord with ZBB’s travel      policy. |
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| 5. | Benefits: |
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|   | 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. |
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|   | 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. |
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|   | Ÿ | We      also offer you four weeks of vacation per calendar  year. |
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| 6. | Benefits Upon      Termination: |
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|   | 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 oftermination. |
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|   | 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. |
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|   | 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. |
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|   | 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 toyou. |
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|   | 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. |
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|   | 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. |
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|   | 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 ofDirectors. |
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| 7. | Timing; Miscellaneous      Provisions: |
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|   | Ÿ | The      date of your appointment as President and Chief Executive Officer of ZBB      will be January 7, 2010. |
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|   | 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 letteragreement. |
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|   | 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. |
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|   | 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 itsSecretary. |
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|   | 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. |
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|   | 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. |
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|   | 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. |
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|   | 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 oflaw). |
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|   | 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. |
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|   | 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. |
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|   | 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 sameinstrument. |
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|   | With      warm regards,              |
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|   |                                 |
|   | ZBB      ENERGY CORPORATION          |
|   |                                 |
|   | /S/Paul      Koeppe                  |
|   | Interim      Chief Executive Officer |
|   | Chairman,      Search Committee      |

|             |
|----------------------------|
| /S/      Eric C. Apfelbach |

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