Document:

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                             2002 STOCK OPTION PLAN

                                       OF

                             ZBB ENERGY CORPORATION

                                    ARTICLE I

                      Establishment and Purpose of the Plan

     1.1 Establishment of Plan. ZBB Energy Corporation (the "Corporation")
hereby establishes the 2002 Stock Option Plan of ZBB Energy Corporation (the
"Plan"). The effective date of this Plan shall be February 4, 2002.

     1.2 Purpose of Plan. The purpose of the Plan is to promote the growth and
development of the Corporation by providing certain key employees of the
Corporation and non-employee members of the Board of Directors of the
Corporation with an opportunity to purchase shares of the Corporation's common
stock (the "Common Stock") in gratitude for their past service to the
Corporation and to serve as an incentive to advance the interests of the
Corporation and to otherwise facilitate the efforts of the Corporation to obtain
and retain employees of outstanding ability.

                                   ARTICLE II

                                Legal Compliance

     It is the intent of the Corporation that all options granted under this
Plan (the "Options") shall be non-qualified stock options. It is the further
intent of the Corporation that the Plan conform in all respects with the
requirements of Rule 16b-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended ("Rule 16b-3"). To the extent that
any aspect of the Plan or its administration shall at any time be viewed as
inconsistent with the requirements of Rule 16b-3, as the same shall be amended
from time to time, such aspect shall be deemed to be modified, deleted or
otherwise changed as necessary to ensure continued compliance with such
provisions.

                                   ARTICLE III

                                 Administration

     This Plan shall be administered by the Option Committee of the Board of
Directors of the Corporation (the "Committee"); provided, however, that this
Plan shall be administered in accordance with the provisions hereinafter set
forth, and provided that if any proposed participant in this Plan is also a
member of the Board of Directors of the Corporation then the number of Options
and the other terms in relation to such Options will be determined by the Board
of Directors of the Corporation and not the Committee.

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                                   ARTICLE IV

                            Stock Subject to the Plan

     4.1 Aggregate Shares. The aggregate number of shares of Common Stock which
may be issued upon the exercise of Options granted at any time under this Plan
shall be five million (5,000,000) shares

     4.2 Availability. The shares of Common Stock to be issued or delivered upon
the exercise of Options shall be made available, at the discretion of the
Committee, either from authorized but unissued shares or shares issued and
reacquired by the Corporation.

     4.3 Nonacquired Shares. In the event any Option shall, for any reason,
terminate or expire or be surrendered without having been exercised in full, the
shares subject to such Option but not acquired thereunder shall again be
available for Options to be granted under this Plan.

                                    ARTICLE V

                            Eligibility of Recipients

     5.1 Eligibility. Participation under this Plan will be limited to persons
who are key salaried employees, including officers, of the Corporation, or
non-employee members of the Board of Directors of the Corporation.

     5.2 Designation of Participants. The participants under this Plan shall be
those eligible employees of the Corporation or non-employee members of the Board
of Directors of the Corporation who are from time to time designated by the
Committee (the "Participants"). Options shall be awarded to the Participants
under Article VI, below, and the designation as a Participant does not ensure
that any particular Participant will be awarded Options hereunder. Each
Participant shall be notified in writing of his designation as a Participant
and, in connection therewith, each Participant shall be required to execute an
acknowledgment in the form attached hereto as EXHIBIT A.

                                   ARTICLE VI

                                 Grant of Option

     The Committee shall from time to time determine the Options to be granted
to the Participants hereunder, it being understood that Options may be granted
at different times to the Participants. In addition, the Committee shall
determine (a) the number of shares subject to each Option, (b) the time or times
when the Options will be granted, and (c) the criteria for earning the Options
based upon the Corporation's financial performance, which criteria shall be
communicated in writing to the Participants.

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                                   ARTICLE VII

                         Purchase Price of Option Shares

     The exercise price per share of Common Stock for each Option granted
hereunder shall be an amount determined by the Committee in good faith in its
sole discretion.

                                  ARTICLE VIII

                               Exercise of Option

     8.1 Notice of Exercise. A Participant electing to exercise an Option then
exercisable shall give written notice to the Corporation of such election and of
the number of shares of Common Stock such Participant has elected to purchase.
An Option may be exercised at any time or times after the date such Option has
vested in accordance with the terms of Article X, below. An Option may be
exercised with respect to all, or any portion of the shares of Common Stock
subject to such Option. Written notice by a Participant of the exercise of an
Option shall be irrevocable and shall bind such Participant to purchase, and
require the Corporation to sell the shares for the consideration and in the
manner specified in this Plan.

     8.2 Payment of Option Price. The exercise price of an Option shall be paid
in full to the Corporation at the time of the exercise in cash or other
immediately available funds, or by the offset of any undisputed, liquidated,
non-contingent obligations then owed by the Corporation to the Participant, or
subject to the approval of the Committee, in whole or in part by any other
lawful consideration.

     8.3 No Delivery Until Payment in Full. The Corporation shall have no
obligation to deliver shares of Common Stock pursuant to the exercise of any
Option, in whole or in part, until payment in full of the purchase price
therefor is received by the Corporation.

                                   ARTICLE IX

                                 Term of Option

     9.1 Expiration of Option. No Option shall be exercisable after it expires.
Each Option shall expire upon the earlier of:

          (a) the five (5) year anniversary of the date the Option vests
     pursuant to the provisions of Article X, below; or

          (b) the date stipulated in Paragraph 9.2 or 9.3, below, as the case
     may be, in the case of a Participant whose employment with or membership on
     the Board of Directors of the Corporation ceases.

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     9.2 Termination of Service. In the case of a Participant whose employment
with or membership on the Board of Directors of the Corporation is terminated by
reason of death, Disability, or by the Corporation (or its shareholders in the
case of a Director that is not also an employee of the Corporation) without
Cause (all as hereinafter defined), or voluntarily by the Participant at the
request of the Committee or voluntarily by the Participant after the Participant
has attained age sixty-five (65) or such earlier age as may be approved by the
Committee, each Option shall expire as provided in Paragraph 9.1(a), above. For
purposes hereof, the terms "Disability" and "Cause" shall be defined as follows:

          (a) The term "Disability" shall be defined as in the then current
     written employment agreement, if any, between the Participant and the
     Corporation approved by the Board of Directors of the Corporation, and if
     there is no such written employment agreement, the term "Disability" shall
     be determined pursuant to the Corporation's disability insurance plan, and
     if there is no such insurance plan in effect, "Disability" shall be defined
     as the inability of the Participant to perform his normal duties as a
     full-time employee of the Corporation or member of the Board of Directors
     of the Corporation for a period of one hundred eighty (180) consecutive
     days by reason of physical or mental illness or incapacity, or for periods
     of physical or mental illness or incapacity aggregating two hundred ten
     (210) days in any consecutive twelve (12) month period. A physical or
     mental disability shall be deemed to include the written direction by a
     physician that the Participant shall, for medical reasons, terminate or
     substantially reduce his service to the Corporation or as a member of the
     Board of Directors of the Corporation. If there is any dispute as to
     whether the termination of the Participant's employment or membership on
     the Board of Directors of the Corporation was due to his physical or mental
     illness or incapacity, such question shall be submitted to a licensed
     physician for the purpose of making such determination. An examination of
     the Participant shall be made within thirty (30) days after written notice
     by the Corporation or the Participant. The Participant shall submit to such
     examination and provide such information that such physician may request.
     The determination of such physician as to the question of the Participant's
     physical or mental condition shall be binding and conclusive on all parties
     concerned for purposes of this Agreement. A Disability shall be deemed to
     be continuing unless the Participant performs his regular duties for the
     Corporation or as a member of the Board of Directors of the Corporation for
     a continuous period of one (1) month. For purposes hereof, the date of
     Disability shall be the earlier of either (i) the date the Corporation and
     the Participant agree that the Participant is disabled or (ii) the
     expiration of the one hundred eighty (180) or two hundred ten (210) day
     period, as applicable.

          (b) The term "Cause" shall be defined as in the then current written
     employment agreement, if any, between the Participant and the Corporation
     approved by the Board of Directors of the Corporation. If there is no such
     written employment agreement between the Corporation and the Participant,
     then "Cause" shall be defined as the Participant's termination by the
     Corporation (or its shareholders in the case of a Director that is not also
     an employee of the Corporation) upon the commission of any of the
     following:

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               (i) The continued failure of the Participant to substantially
          perform his duties for the Corporation or as a member of the Board of
          Directors of the Corporation (other than by reason of illness or
          Disability) after a demand for performance is delivered to the
          Participant that specifically identifies the manner in which the
          Corporation (or the other Directors in the case of a Director that is
          not also an employee of the Corporation) believes the Participant has
          failed to perform his duties, and the Participant fails to resume
          substantial performance of his duties within fourteen (14) days
          (thirty (30) days in the case of a Director that is not also an
          employee of the Corporation) of receiving such demand.

               (ii) Use of alcohol or drugs by the Participant in such a manner
          as to interfere with the performance of the Participant's duties for
          the Corporation or for the Board of Directors of the Corporation.

               (iii) Willful conduct by the Participant which is demonstrably
          and materially injurious to the Corporation, monetarily or otherwise.

               (iv) Conviction of the Participant of a felony or misdemeanor
          which, in the reasonable judgment of the Committee (or the other
          Directors in the case of a Director that is not also an employee of
          the Corporation), is likely to have a material adverse effect upon the
          business or reputation of the Participant or the Corporation, or which
          substantially impairs the Participant's ability to perform his duties
          for the Corporation or for the Board of Directors of the Corporation.

               (v) Breach by the Participant of any agreement with the
          Corporation concerning noncompetition, nonsolicitation or the
          confidentiality of trade secrets or proprietary or other information.

     9.3 Other Termination. In the case of a Participant whose employment with
or membership on the Board of Directors of the Corporation is terminated for any
reason other than as set forth in Paragraph 9.2, above, each Option which has
not vested in accordance with the provisions of Article X, below, shall
immediately be forfeited, and each Option which has vested in accordance with
the provisions of Article X, below, shall expire as provided in Paragraph
9.1(a), above..

     9.4 Dispute. Any questions as to whether and when there has been a
cessation of employment or service and the reason therefor shall be determined
by the Committee (or the other Directors in the case of a Director that is not
also an employee of the Corporation) in its sole discretion, and any such
determination shall be final and binding upon the parties.

                                    ARTICLE X

                                     Vesting

     Each Option granted hereunder shall not be considered earned, vested or
exercisable as of the date of such grant. Unless otherwise vested earlier or
terminated pursuant to the provisions

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of the Plan, an Option shall be deemed vested only upon the terms and conditions
contained in EXHIBIT B attached hereto.

                                   ARTICLE XI

                         Adjustments - Change in Shares

     In the event that the outstanding shares of Common Stock of the Corporation
are hereafter increased or decreased, or changed into or exchanged for a
different number or kind of shares or other securities of the Corporation or of
another corporation, by reason of a recapitalization, reclassification, merger,
or consolidation in which the Corporation is the surviving parent corporation,
stock split, reverse stock split, combination of shares, or dividend or other
distribution payable in capital stock, appropriate adjustment shall be made by
the Committee in the number and kind of shares for which Options may be granted
under the Plan. In addition, the Committee shall make appropriate adjustments in
the number and kind of shares as to which outstanding and unexercised Options
shall be exercisable, to the end that the proportionate interest of the holder
of the Option shall, to the extent practicable, be maintained as before the
occurrence of such event. Such adjustment in outstanding Options shall be made
without change in the total price applicable to the unexercised portion of the
Option but with a corresponding adjustment to the exercise price per share.

                                   ARTICLE XII

                           Transferability of Options

     An Option granted under the Plan may not be transferred except by will or
the laws of descent and distribution and, except as specifically set forth
herein, may be exercised during the lifetime of a Participant only by him or by
his guardian or legal representative. The Option and any rights and privileges
pertaining thereto shall not, except as described above, be transferred,
assigned, pledged or hypothecated by him in any way whether by operation of law
or otherwise and shall not be subject to execution, attachment or similar
process. Notwithstanding the foregoing, a Participant may, during his lifetime,
transfer an Option to a member or members of a group consisting of his issue or
a trust consisting of his issue created for the primary benefit of himself and
his issue (a "Permitted Transferee"); provided, however, that all provisions of
this Plan, including those relating to forfeiture, expiration and vesting of
options shall continue to apply to such Permitted Transferee; provided further
that such Permitted Transferee shall agree to be bound by the terms of this Plan
by executing an acknowledgment substantially in the form attached hereto as
EXHIBIT A.

                                  ARTICLE XIII

                                Withholding Taxes

     Pursuant to applicable federal and state laws, the Corporation may be
required to collect withholding taxes upon the exercise of an Option granted
under the Plan. The Corporation may require, as a condition to the exercise of
an Option, that the Participant concurrently pay to the Corporation (either in
cash or, at the request of the Participant, but in the discretion of the

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Committee and subject to such rules and regulations as the Committee may adopt
from time to time, in shares of the Corporation's Common Stock) the entire
amount or a portion of any taxes which the Corporation is required to withhold,
in such amount as the Committee or the Corporation in is discretion may
determine.

                                   ARTICLE XIV

                                 Administration

     14.1 The Committee. The Committee shall have the authority to establish,
adopt or revise such rules and regulations as it deems necessary or appropriate
for administration of the Plan, provided that such rules and regulations are not
inconsistent with the provisions or original intent of the Plan.

     14.2 Amendment or Discontinuance. The Committee may, at any time, without
the approval of the stockholders of the Corporation, alter, amend, modify,
suspend or discontinue the Plan, but may not, without the consent of the
Participant or holder, make any alteration which would adversely affect an
Option previously granted under the Plan.

     14.3 Determination of the Committee. All determinations of the Committee,
irrespective of their character or nature, including, but not limited to, all
questions of construction and interpretation of the Plan, shall be final,
binding and conclusive upon all parties.

     14.4 Advice of Counsel. The Corporation and the Committee may each consult
with legal counsel with respect to their obligations and duties hereunder or
with respect to any action or proceeding or any other question of law and shall
not be liable for any action taken or omitted by it in good faith pursuant to
the advice of such counsel.

     14.5 Books and Records. The Secretary of the Corporation shall be
responsible for maintaining the books and records for the Plan. Such books and
records shall only be open for examination by a Participant or his duly
designated beneficiary.

     14.6 No Personal Liability. Neither the Committee, any member thereof, or
the Corporation, nor any other person who is acting on behalf of the Committee,
any member thereof, or the Corporation shall be liable for any act or failure to
act hereunder except for willful misconduct or fraud.

                                   ARTICLE XV

                 Certain Rights and Obligations of Participants

     15.1 Copies of Plan. Each Participant shall be entitled to receive a copy
of the Plan upon his designation as a Participant.

     15.2 No Right to Employment. The designation of an employee of the
Corporation as a Participant under the Plan shall not be construed as conferring
upon such employee any right to remain in the employ of the Corporation. The
right of the Corporation to discipline or discharge

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an employee shall not be affected in any manner by reason of the designation of
such employee as a Participant under the Plan.

                                   ARTICLE XVI

                                 Indemnification

     Each person who is a member of the Committee shall be indemnified and held
harmless by the Corporation against and for any loss, cost, liability or expense
that may be imposed upon him or reasonably incurred by him in connection with or
resulting from any claim, action, suit or proceeding to which he may be a party
or in which he may be involved by reason of any action taken or failure to act
under the Plan and against and from any and all amounts paid by him in
settlement thereof, with the Corporation's approval, or paid by him in
satisfaction of any judgment in any such action, suit or proceeding against him,
provided that he shall give the Corporation an opportunity, at its own expense,
to handle and defend the same before he undertakes to handle and defend it on
his own behalf. The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such person shall be entitled under
the Corporation's Articles of Incorporation or By-laws or as a matter of law or
otherwise or any power that the Corporation may have to indemnify him and hold
him harmless.

                                  ARTICLE XVII

                                  Miscellaneous

     17.1 Expenses. All expenses of administering the Plan shall be paid by the
Corporation, except as expressly provided herein to the contrary.

     17.2 Governing Law. The Plan shall be construed, administered and governed
in all respects under and by the internal laws of the State of Wisconsin.

     17.3 Use of Words. Wherever the context so requires, words in the masculine
gender include the feminine and words in the feminine include the masculine, and
the definition of any terms in the singular may include the plural and the
plural may include the singular.

     17.4 Binding Effect. In consideration of the benefits conferred hereunder,
each Participant shall be conclusively presumed to have agreed to be bound by
all of the terms and conditions of the Plan as presently constituted and as it
may be amended from time to time.

     17.5 Independence of Plan. It is intended that the Plan be construed and
administered independent of any and all other employee benefit plans, fringe
benefit programs or compensation arrangements of the Corporation. Accordingly,
except as otherwise determined by the Committee, neither the Plan nor any of the
benefits payable hereunder shall be construed, administered or considered so as
to have any effect on any existing or future pension, profit sharing, incentive
compensation or other employee benefit program or plan of the Corporation and no
such program or plan of the Corporation shall be construed or administered to
have any effect on the Plan.

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                                    EXHIBIT A

                          ACKNOWLEDGMENT OF PARTICIPANT

     The purpose of this form is to obtain your acknowledgment of your receipt
of a copy of the 2002 Stock Option Plan of ZBB Energy Corporation (the "Plan")
and information regarding your participation in the Plan, and your agreement to
the terms and conditions of the Plan. As a designated "Participant" under the
Plan, you are entitled to receive a copy of the Plan.

     By completing this acknowledgment form, you are acknowledging or agreeing
as follows:

     (a)  that, prior to or on the date set forth opposite your signature below,
          you received and reviewed a copy of the Plan which, pursuant to
          Article X of the Plan, sets forth the vesting schedule applicable to
          the Options granted to you under the Plan;

     (b)  that, effective as of __________,____, you have been designated as a
          Participant in the Plan;

     (c)  that, you have been granted Options to purchase _______________ shares
          of Common Stock under the Plan;

     (d)  that, the exercise price per share of Common Stock for each Option
          granted is equal to __________;

     (e)  that, the Options granted to you under the Plan will be subject to
          expiration under Article IX of the Plan and a vesting schedule
          pursuant to Article X of the Plan; and

     (f)  that, in consideration of the benefits conferred upon you under the
          Plan, you shall be bound by the terms and conditions thereof.

Date: _____________________             ________________________________________

                                        ____________________________(Print Name)

Acknowledged and agreed to this
_____ day of ______________, _______.

ZBB ENERGY CORPORATION

By:
    ---------------------------------
               (Title)

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                                    EXHIBIT B

                             CONDITIONS FOR VESTING

1.   Employment Agreement

     In accordance with any specific terms and conditions with respect to the
     vesting of the Options contained in any agreement regarding the employment
     of the Participant by the Corporation approved by the Board of Directors of
     the Corporation (an "Employment Agreement").

2.   Grant by the Committee

     If the Participant is not a party to an Employment Agreement containing any
     such terms and conditions with respect to the vesting of the Options, then
     in accordance with the terms and conditions with respect to the vesting of
     the Options determined by the Committee and delivered in writing to the
     Participant at the time of the grant of the Options.

3.   No Specific Terms

     If the Participant is not a party to an Employment Agreement containing any
     such terms and conditions with respect to the vesting of the Options, and
     the Committee did not specify any such terms and conditions with respect to
     the vesting of the Options at the time of the grant of the Options, then
     the terms and conditions with respect to the vesting of the Options shall
     be as follows:

     (a)  Death of a participant

     Upon the death of the Participant, all Options granted to such Participant
     which would vest in the fiscal year of such Participant's death shall
     immediately vest.

     (b)  Disability of Participant

     Upon the Disability of the Participant, all Options granted to such
     Participant which would vest in the fiscal year of such Participant's
     Disability shall immediately vest.

     (c)  Termination of Participant Without Cause

     Upon the termination of employment or service of the Participant without
     Cause, all Options granted to such Participant which would vest in the
     fiscal year of such Participant's termination of employment or service
     without Cause shall immediately vest.

     (d)  Termination of Participant for Cause

     Upon the termination of employment or service of the Participant with
     Cause, all unvested Options granted to such Participant shall be
     immediately forfeited.

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     (e)  Resignation of the Participant

     Upon the resignation of the Participant prior to attaining age sixty-five
     (65) or such earlier age as may be approved by the Committee, all unvested
     Options granted to the Participant shall be immediately forfeited.

                                       11<PAGE>

                              EMPLOYMENT AGREEMENT

                  THIS AGREEMENT, made and entered into as of this 4th day of
October, 2006 by and between ZBB ENERGY CORPORATION, a Wisconsin corporation,
hereinafter referred to as the "CORPORATION," and GEOFFREY DAVID HANN,
hereinafter referred to as the "EMPLOYEE."

                              W I T N E S S E T H:

                  WHEREAS, the Employee desires to be continued by the
Corporation in the capacity of Chief Financial Officer; and

                  WHEREAS, the Corporation and the Employee desire to set forth
in this Agreement the terms and conditions under which the Employee is to
continue to be employed by the Corporation and intend to hereby replace in its
entirety, the previous Employment Agreement between the parties, as amended.

                  NOW, THEREFORE, the Corporation and the Employee, in
consideration of the mutual promises hereinafter set forth, do hereby promise
and agree as follows:

                                    ARTICLE I

                                      Term

                  The term of the Employee's employment under this Agreement
shall commence effective as of the date set forth in Section I of Exhibit A
attached hereto and shall, except as it may otherwise be subject to termination
hereunder, continue thereafter for a period of time as set forth in Section I of
Exhibit A. The Corporation and the Employee acknowledge and agree that the term
of the Employee's employment hereunder shall be automatically extended from year
to year thereafter upon the same terms and conditions, unless terminated by
either party hereto upon ninety (90) days written notice given prior to the
expiration of the original term of this Agreement or any extension thereof.

                                   ARTICLE II

                                Employment Duties

                  During the term of the Employee's employment hereunder, the
Corporation shall employ the Employee and the Employee shall serve the
Corporation as a full-time employee in such capacity and with such powers and
duties as are set forth in Section II of Exhibit A. The Board of Directors of
the Corporation may from time to time prescribe amended duties for the Employee.
The Employee shall devote his entire working time and efforts to the business
affairs of the Corporation and shall faithfully and to the best of his ability
perform his duties hereunder.
<PAGE>

                                   ARTICLE III

                                  Compensation

                  3.1. Salary and Benefits. During the term of the Employee's
employment hereunder, the Employee shall be entitled to receive the salary and
fringe benefits set forth in Section III of Exhibit A. The Employee acknowledges
that he shall have no vested rights in any such fringe benefit programs except
as expressly provided under the terms thereof and that such programs may be
terminated as well as supplemented.

                  3.2. Withholding Taxes. The Corporation shall deduct from all
payments to the Employee hereunder any federal, state or local withholding or
other taxes or charges which the Corporation is from time to time required to
deduct under applicable law, and all amounts payable to the Employee hereunder
are stated herein before any such deductions. The Corporation shall have the
right to rely upon written opinion of legal counsel, which may be independent
legal counsel or legal counsel regularly employed by the Corporation, if any
questions should arise as to any such deductions.

                                   ARTICLE IV

                            Termination of Employment

                  4.1. Causes for Termination. Notwithstanding the term set
forth in Article I, above, the Employee's employment hereunder shall be
terminated prior to the expiration of such term upon the occurrence of any of
the following events:

                  4.1.1. In the event of the Employee's death.

                  4.1.2. In the event of the disability of the Employee. For
purposes of this Agreement, the term "disability" shall be defined as the
inability of the Employee to perform his normal duties as a full-time employee
of the Corporation for a period of ninety (90) consecutive days by reason of
physical or mental illness or incapacity, or for periods of physical or mental
illness or incapacity aggregating one hundred twenty (120) days in any
consecutive twelve (12) month period. A physical or mental disability shall be
deemed to include the written direction by a physician that the Employee shall,
for medical reasons, terminate or substantially reduce his services to the
Corporation. If there is any dispute as to whether the termination of the
Employee's employment was due to his physical or mental illness or incapacity,
such question shall be submitted to a licensed physician for the purpose of
making such determination. An examination of the Employee shall be made within
thirty (30) days after written notice by the Corporation or the Employee to the
other by a licensed physician agreeable to the Corporation. The Employee shall
submit to such examination and provide such information that such physician may
request and the determination of such physician as to the question of the
Employee's physical or mental condition shall be binding and conclusive on all
parties concerned for purposes of this Agreement. no information that is not
specifically authorized by the Employee to be disclosed by the physician need to
be disclosed. A disability shall be deemed to be continuing unless the Employee
performs his regular duties for the Corporation for a continuous period of one
(1) month.

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<PAGE>

                  4.1.3. Upon the commission of any of the following acts:

                           (a) The failure of the Employee to perform his duties
         for the Corporation (other than by reason of illness) after being given
         written notice specifying the breach and actions to be taken to cure
         such material breach and giving Employee reasonable time (not under 20
         days) to cure such breach.

                           (b) Willful misconduct by the Employee which is
         demonstrably and materially injurious to the Corporation, monetarily or
         otherwise (for the avoidance of debt, any actions taken in good faith
         as an officer or director shall not be deemed misconduct).

                           (c) Conviction of the Employee of a felony or
         misdemeanor which, in the reasonable judgment of the Board of Directors
         of the Corporation, is likely to have a material adverse effect upon
         the business or reputation of the Corporation, or which substantially
         impairs the Employee's ability to perform his duties for the
         Corporation.

                           (d) Breach by the Employee of any agreement with the
         Corporation concerning noncompetition or the confidentiality of trade
         secrets or proprietary or other information after a notice of breach
         has been given specifying the actions to be taken and given opportunity
         to take cure such breach.

                  4.2. Consequences of Termination. If the Employee's employment
with the Corporation is terminated, the following shall occur:

                  (a) If the Employee's employment is terminated prior to the
         expiration of this Agreement pursuant to any of the provisions of
         Section 4.1.1 or 4.1.2, above, (1) the Corporation shall pay to the
         Employee or the Employee's estate, as the case may be, all compensation
         accrued under Article III, above, to the date of termination, (ii) the
         Corporation shall pay to the Employee or the Employee's estate, as the
         case may be, an amount equal to the Employee's annual salary paid to
         him in the one (1) year period immediately prior to his termination of
         employment which shall be payable in 12 equal consecutive monthly
         installments commencing upon the Employee's termination, (iii) the
         Employee or the Employee's estate, as the case may be shall be entitled
         to receive for a one (1) year period following the date of termination
         all benefits the Employee was receiving on the date of termination
         pursuant to Article III above, all in accordance with the terms of such
         plans including, without limitation, any forfeiture provisions set
         forth in such plans, and (iv) the Corporation shall cause all unvested
         benefits, if any, awarded to the Employee prior to the termination of
         his employment under any equity, stock or other option program of the
         Corporation (collectively the "Option Plans") to vest and become
         immediately exercisable by the Employee.

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<PAGE>

                  (b) If the Employee's employment is terminated prior to the
         expiration of this Agreement pursuant to the provisions of Section
         4.1.3, above, (i) the Corporation shall pay to the Employee all
         compensation accrued under Article III, above, to the date of
         termination, (ii) the Employee shall be entitled to receive all
         benefits accrued to the date of termination of the Employee's
         employment with the Corporation, all in accordance with the terms of
         such plans including, without limitation, any forfeiture provisions set
         forth in such plans, and shall have all rights to COBRA or similar
         benefits and (iii) all vested benefits, if any, held by the Employee on
         the date of his termination of employment under the Option Plans shall
         become immediately exercisable by the Employee and all unused options
         or benefits shall be terminated as provided in such agreements or
         plans.

                  (c) If (i) the Corporation terminates the Employee's
         employment prior to the expiration of the Agreement for any reason
         other than as set forth in Section 4.1.3, above, or (ii) the Employee
         voluntarily terminates his employment with the Corporation because the
         Corporation materially adversely modifies or reduces the nature or
         scope of the Employee's authority or responsibility or the Corporation
         fails to pay the Employee amounts due under the Agreement, then (A) the
         Corporation shall continue to pay the Employee his annual base salary
         which he received pursuant to Article III, above, in the year
         immediately preceding the date of his termination of employment with
         the Corporation, for the greater of eighteen (18) months or the
         remaining, (B) the Employee shall be entitled to receive all benefits
         the Employee was receiving on the date of his termination of employment
         pursuant to Article III, above, for the greater of eighteen (18) months
         or the remaining term of the Agreement, and (C) all vested or unvested
         benefits, if any, which the Employee was entitled to receive during the
         term of this Agreement under the Option Plans shall vest and become
         immediately exercisable, PROVIDED THAT the provisions of paragraphs (A)
         and (B) shall not apply unless and until the common stock of the
         Corporation is listed for trading on the American Stock Exchange (the
         "AMEX") or any other U.S. market place similar or superior and the
         Corporation's securities known as CUFS (CHESS Units of Foreign
         Securities) cease trading or, and the Corporation is no longer subject
         to the rules of, on the Australian Stock Exchange Ltd (the "ASX").

         4.3 Expiration of Term. Except as set forth in Section 4.2, above, upon
the expiration of the term of this Agreement, the Corporation shall pay to the
Employee an amount equal to the Employee's annual base salary paid to him
pursuant to Article III, above, in the eighteen (18) month period immediately
prior to the expiration of the term of this Agreement, in eighteen (18) equal
consecutive monthly installments commencing upon the date of such expiration,
PROVIDED THAT the provisions of this section 4.3 shall not apply unless and
until the common stock of the Corporation is listed for trading on the AMEX or
any other similar or superior U.S. market and the Corporation's securities known
as CUFS (CHESS Units of Foreign Securities) cease trading on the ASX and the
Corporation is no longer subject to the rules of the ASX.

                                       4
<PAGE>

                                    ARTICLE V

                    Covenant Not to Compete; Confidentiality

                  5.1. Restrictions. The Employee agrees that he shall not, at
any time while he is employed by the Corporation or at any time during the
eighteen (18) month period following the termination of his employment with the
Corporation for any reason, either directly or indirectly, whether as agent,
stockholder (except as the holder of not more than five percent (5%) of the
stock of a publicly held company, provided the Employee does not participate in
the business of such company or render advice or assistance to it), employee,
officer, director, trustee, partner, consultant, proprietor or otherwise:

                           (a) Acquire an ownership interest in, work for or
         render advice or assistance to any business, incorporated or otherwise,
         operating within a fifty (50) mile radius of the Corporation's offices
         which is engaged in the sale, marketing and/or distribution of products
         or services sold or offered by the Corporation as of the date hereof or
         during the period in which the Employee is employed by the Corporation.

                           (b) Except on behalf of the Corporation, contact,
         sell or solicit to sell, or attempt to contact, sell or solicit to
         sell, products or services competitive with those offered or sold by
         the Corporation to any customer of the Corporation.

                           (c) For purposes of this Article V, the following
         definitions shall apply:

                                    (i) During the term of the Employee's
                  employment, the term "customer" shall mean those persons or
                  entities to whom the Corporation or its predecessor entity has
                  sold, or solicited to sell, products or services during the
                  term of the Employee's employment.

                                    (ii) During the period following the
                  termination of the Employee's employment, the term "customer"
                  shall mean any entity or person to whom the Corporation or its
                  predecessor entity has sold, or solicited to sell, products or
                  services during the two (2) year period prior to the
                  termination of the Employee's employment.

                  5.2. Confidential Information. The Employee agrees that he
shall not at any time while he is employed by the Corporation, and for a period
of three years after termination of his employment with the Corporation for any
reason, except on behalf of the Corporation, either directly or indirectly,
disclose to any person other than an employee or agent of the Corporation having
the need to know such information in the ordinary course of business, or to a
person to whom such disclosure has been authorized by the Board of Directors of
the Corporation, any "confidential information." The term "confidential
information" shall mean: (A) all technical information relating to the
Corporation's or its predecessor's business; (B) any information concerning any
product or service under development by, or being tested by, the Corporation but

                                       5
<PAGE>

not yet offered for sale; (C) any information concerning the pricing policies of
the Corporation, the prices charged by the Corporation to any customer, the
volume of orders of any customer, any bids or negotiations being submitted by or
being conducted by the Corporation and all other information concerning the
transactions of the Corporation with any customer or proposed customer; (D) any
information concerning the marketing programs or strategies of the Corporation;
(E) any financial information concerning the Corporation or its substitutes or
predecessors; (F) any information concerning the salaries or wages paid to, the
work records of or any other personnel information relating to any employee of
the Corporation; and (G) any other information determined by the Corporation to
be confidential and proprietary and which is identified as such prior to or at
the time of its disclosure to the Employee. Notwithstanding the foregoing, no
information shall be considered to be confidential information which (i) is
disclosed or published without the fault of the Employee, or (ii) is or becomes
general public information without disclosure by the Employee. The Employee
acknowledges and agrees that the provisions of this Section 5.2 shall not be
construed to constitute: (a) a waiver by the Corporation of any of its rights in
or to protect specific items of its proprietary information which constitutes
trade secrets, or (b) a release of or a limit on the Employee's legal obligation
not to disclose or misappropriate any trade secrets of the Corporation during or
after his employment with the Corporation. Notwithstanding the foregoing,
Employee shall be permitted to disclose any confidential information that was
requested under subpoena, court order or regulatory requirements or enforcement
proceedings of any governmental agency or such regulatory agency.

                  5.3. Surrender of Records. The Employee agrees upon
termination of his employment with the Corporation immediately to surrender to
the Corporation all correspondence, letters, contracts, manuals, mailing lists,
customer lists, marketing data, ledgers, supplies, corporate checks and all
other materials or records of any kind relating to the Corporation, its
predecessor or their business then in his possession or under his control, as
well as all copies of any of the foregoing.

                  5.4. Remedies. The Employee recognizes that irrevocable injury
may result to the Corporation, its business and its property, in the event of a
breach by him of the restrictions imposed by this Article V and that the
Employee's acceptance of such restrictions was a material factor in the
Corporation's decision to provide employment to the Employee. The Employee
agrees that if he shall engage in any acts in violation of this Article V, the
Corporation shall be entitled, in addition to such other remedies and damages as
may be available to it, to an injunction prohibiting him from engaging in any
such acts.

                  5.5. Notice to Subsequent Employers. The Employee agrees to
fully disclose the terms of this Agreement to any person, firm, corporation or
other entity by which or with whom he may hereafter become employed, or to which
he may hereafter render services, prior to accepting any such employment or
performing any such services and further agrees that the Corporation may, if it
desires, send a copy of this Agreement to, or otherwise make the provisions
hereof known, to any such employer.

                                       6
<PAGE>

                                   ARTICLE VI

               Assignment and Disclosure of Inventions and Patents

                  The Employee hereby sells, assigns and transfers to the
Corporation all of his right, title and interest in and to any and all
Inventions (as hereinafter defined) and agrees that all Inventions are or shall
become the sole and exclusive property of the Corporation and that only the
Corporation shall have the right to use, sell, license, assign or otherwise
exploit such Inventions and products, articles, commodities, methods or
processes employing them. The Employee shall make a full and complete written
disclosure of any and all Inventions to the Corporation and shall promptly
execute and deliver to the Corporation all documents which the Corporation may
deem necessary or appropriate to effect a valid assignment of the Employee's
right and title to any Invention to the Corporation or to prepare, file or
prosecute any domestic or foreign patent application in connection therewith.
The Employee further agrees to fully cooperate with the Corporation and to take
such actions as the Corporation may request, including testimony in patent or
other legal proceedings, in connection with the protection, establishment and/or
enforcement of the Corporation's rights to any such Invention and/or to permit
the Corporation to reduce the same to practice. The Corporation agrees to
reimburse the Employee for any out-of-pocket expenses expended by the Employee
in complying with the provisions of this Article VI. In addition thereto, the
Corporation shall pay to the Employee an amount equal to Two Hundred Fifty
Dollars ($250.00) for each patent application prepared and filed with respect to
an Invention conceived by the Employee and One Hundred Fifty Dollars ($150.00)
for each Invention conceived by the Employee which constitutes a trade secret of
the Corporation. For purposes hereof, an "Invention" shall mean any idea,
innovation, discovery, process, design, development, improvement, application,
technique or invention, whether patentable or not, which in any way affects or
relates to, or which is or may become capable of being used in the business of
the Corporation and which the Employee may, either wholly or in part, and either
solely or jointly with others, conceive, make or secure or may have conceived,
made or secured at any time during the period of time he is employed by the
Corporation or the Corporation's predecessor entity or during the six-month
period following termination of his employment with the Corporation.

                                   ARTICLE VII

                                    Expenses

                  During the term of the Employee's employment hereunder, the
Corporation shall pay or reimburse the Employee for all reasonable and necessary
business expenses incurred by the Employee in the interest of the Corporation in
accordance with the Corporation's reimbursement policies in effect from time to
time. The Employee shall be required to submit an itemized account of such
expenditures and such proof as may be necessary to establish to the satisfaction
of the Corporation that the expenses incurred by the Employee were ordinary and
necessary business expenses incurred on behalf of the Corporation.

                                       7
<PAGE>

                                  ARTICLE VIII

                                Waiver of Breach

                  The waiver by the Corporation of any breach of any provision
of this Agreement by the Employee shall not be deemed a waiver by the
Corporation of any subsequent breach.

                                   ARTICLE IX

                                     Notice

                  Any notice required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given and received in all
respects when personally delivered or three (3) days after when deposited in the
United States mail, certified mail, postage prepaid, return receipt requested
and addressed to the principal office of the Corporation or the residence of the
Employee, as the case may be.

                                    ARTICLE X

                                   Assignment

                  This Agreement shall not be assignable by the Corporation
without the written consent of the Employee, except that if the Corporation
shall merge or consolidate with or into, or transfer substantially all of its
assets, including goodwill, to another corporation or other form of business
organization, this Agreement shall be binding upon and inure to the benefit of
the successor of the Corporation resulting from such merger, consolidation or
transfer. The Employee may not assign, pledge or encumber any interest in this
Agreement or any part thereof without the written consent of the Corporation.

                                   ARTICLE XI

                          Complete Agreement; Amendment

                  This Agreement contains the full and complete understanding
and agreement of the parties hereto and supersedes all prior agreements or
understandings, whether oral or written, between the parties hereto with respect
to the subject matter hereof. This Agreement may not be modified, amended,
terminated or discharged orally.

                                   ARTICLE XII

                                  Governing Law

                  This Agreement and all questions of its interpretation,
performance, enforceability and the rights and remedies of the parties hereto
shall be governed by and determined in accordance with the internal laws of the
State of Wisconsin.

                                       8
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day, month and year first above written.

                                  CORPORATION:

                                  ZBB ENERGY CORPORATION

                                  By:
                                      ------------------------------
                                                 (Title)

                                  EMPLOYEE:

                                  ----------------------------------
                                  Geoffrey David Hann

                                       9
<PAGE>

                                    EXHIBIT A

SECTION I. TERM

         The term of the employee's employment under this agreement shall
commence effective as of July 1, 2006 and shall, except as it may otherwise be
subject to termination hereunder, continue thereafter for a period of three (3)
years.

SECTION II. POSITION AND DUTIES

         The employee shall be employed by the Corporation in the capacity of
Chief Financial Officer of the Corporation and in such capacity shall have
responsibility for the overall management and control of the financial
operations and reporting of the Corporation and its subsidiaries.

SECTION III. SALARY AND BENEFITS

         The corporation shall pay to the employee an annual salary and benefits
package equal to at least $160,000.00). The employee's salary shall be payable
in equal installments not less frequently than monthly and shall be subject to
increase in each year in an amount mutually agreed by the Employee and the
Corporation and in any event by an amount not less than the Increase in the
Consumer Price Index. As used herein, "Consumer Price Index" as of any date
means the index published most recently preceding such date by the Bureau of
Labor Statistics, United States Department of Labor, "Consumer Price Index, All
urban Consumers, All Items, Milwaukee, Wisconsin (1982-84 =100)".

         The employee shall also be entitled to participate in any individual or
group life insurance, health insurance, qualified pension or profit sharing plan
or any other fringe benefit program which the Corporation may from time to time
make available to its management employees. In addition thereto, the employee
shall be entitled to participate in a stock option benefit which shall be made
available to the Corporation's management team.

                                       10

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