Document:

Unassociated Document

    Exhibit
10.3

     

    January
21, 2011

     

    Mr.
Jeffrey Reichard

    W353
N6318 Marina Drive

    Oconomowoc,
WI  53066

     

    Dear
Jeff:

     

    On behalf
of the Board of Directors of ZBB Energy Corporation (“ZBB”), I am delighted to
invite you to join our family of companies as the Vice President of Electronics
Development of ZBB, as the President of DCDC Acquisition Company LLC (to be
renamed Tier Electronics LLC) (“Tier”), as a member of the Board of Directors of
ZBB and as a member of the Board of Directors of Tier.  This letter
agreement sets forth the terms your employment.

     

    
      	
              1.

            	
              Term of
      Employment:  ZBB will employ you for the period
      commencing as of January 21, 2011 and, subject to earlier termination
      as set forth herein, ending on January 21, 2014 (the “Term of
      Employment”).

            

    

     

    
      	
              2. 

            	
              Position:

            

    

     

    
      	
               
      

            	
              Ÿ

            	
              During
      the Term of Employment, you will serve as ZBB’s Vice President of
      Electronics Development and Tier’s President and report to the President
      and Chief Executive Officer of ZBB.  Until such time as the
      principal and interest balance under that certain Promissory Note (the
      “Note”) dated as of the date hereof in the original principal amount of
      $1,350,000 made by Tier for the benefit of Tier Electronics LLC (to be
      renamed TE Holdings Group, LLC) (“TE”) is paid in full, included in your
      duties as President of Tier will be all hiring and termination decisions
      with respect to Tier employees, subject to hiring and termination policies
      applicable to ZBB and Tier employees generally as communicated to you by
      ZBB’s President and Chief Executive Officer, and excluding hiring and
      termination decisions governed by the terms and conditions of employment
      agreements under which the applicable employee reports to a party or
      parties other than the President of Tier.  Your services to ZBB
      and Tier will be performed in Menomonee Falls, Wisconsin during the Term
      of Employment.  You acknowledge, however, that you may be
      required to travel in connection with the performance of your duties
      hereunder; provided, that
      you shall not be required to travel more than thirty (30) days during any
      calendar year or more than ten (10) days during any thirty (30) day
      period.

            

    

     

    
      	
               
      

            	
              Ÿ

            	
              During
      the Term of Employment, you may accept a position on the board of
      directors of any company that does not directly compete with the business
      of Tier or 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 for-profit companies and a member of
      the board of directors or advisory board for 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 Vice President of Electronics Development of ZBB, as President
      of Tier, as a director of ZBB and as a director
  Tier.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Mr.
Jeffrey Reichard

    January
21, 2011

    Page:
2

     

    
      	
               
      

            	
              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.

            

    

     

    3.        
   Salary:

     

    
      	
               
      

            	
              Ÿ

            	
              During
      the Term of Employment, you will be entitled to an annual salary of
      $200,000, payable in accordance with ZBB’s normal salaried payroll
      practices.  The Board of Directors of ZBB 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 Tier or
      your services merit such an increase.  Your salary will not be
      reduced during the Term of Employment without your prior written
      consent.

            

    

     

    
      	
               
      

            	
              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.

            

    

     

    4.       
    Options:

     

    
      	
               
      

            	
              Ÿ

            	
              Effective
      as of the date of your appointment set forth in Section 1, above, the
      vesting of the option to acquire 230,000 shares of the $.01 par value
      common stock of ZBB awarded to you pursuant to the terms and conditions of
      that certain stock option award agreement dated as of the date hereof
      between ZBB and you as an inducement for you to accept ZBB’s offer of
      employment shall commence in accordance with the vesting schedule set
      forth in such stock option award
agreement.

            

    

     

    5.      
     Travel
Expenses:

     

    
      	
               
      

            	
              Ÿ

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

            

    

     

    6.     
      Benefits:

     

    
      	
               
      

            	
              Ÿ

            	
              During
      the portion of the Term of Employment beginning on the effective date of
      your appointment set forth in Section 1, above, and ending on May 31,
      2011, ZBB will provide you with, and you will be eligible for, medical,
      dental, vision and life insurance benefits under UnitedHealthcare
      Insurance Company Policy Number G/GA779840BW as sponsored by TE
      immediately prior to such effective date and other employee benefits
      identical to those provided by TE to you immediately prior to such
      effective date; provided, that
      ZBB shall have the right, in its sole discretion, to limit such benefits
      in order to comply with all applicable laws and regulations governing the
      employee benefit plans of ZBB’s controlled group; and during the remainder
      of the Term of Employment, 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.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Mr.
Jeffrey Reichard

    January
21, 2011

    Page:
3

     

    
      	
               
      

            	
              Ÿ

            	
              On
      a pre-tax basis, ZBB will provide a policy comparable to other ZBB
      executives 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.  To the extent that 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 six (6) weeks of vacation per calendar
  year.

            

    

     

    7.       
    Benefits Upon
Termination:

     

    
      	
               
      

            	
              Ÿ

            	
              Without
      giving effect to the timing of the payment of your base salary for 2011 as
      set forth in Section 3, above, in the event that (a) ZBB terminates your
      employment for any reason other than “Cause” or “Disability”, or
      (b) you terminate your employment with ZBB for “Good Reason”, you
      will be entitled to a severance payment in an amount equal to the greater
      of (i) 12 months of your annual base salary as then in effect, or (ii) the
      remaining number of complete months in the scheduled term set forth in
      Section 1, above, 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 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 ZBB’s 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
      Exhibit A
      to this letter agreement.  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.  For purposes of this Section 7, as of the
      effective date of any termination of your employment described in clause
      (a) or clause (b) above, the greater of (A) 12 months following such date,
      or (B) the number of complete months remaining in the scheduled term set
      forth in Section 1, above, as of such date shall be referred to as the
      “Severance Period”.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Mr.
Jeffrey Reichard

    January
21, 2011

    Page:
4

     

    
      	
               
      

            	
              Ÿ

            	
              If
      you terminate your employment with ZBB for “Good Reason” or if ZBB
      terminates your employment without “Cause”, 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:  (a) the
      last day of Severance Period, or (b) 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, subject 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 Severance Period, 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.

            

    

     

    
      	
               
      

            	
              Ÿ

            	
              Upon
      the termination, for whatever reason, of your employment with ZBB, you
      will be entitled to keep the cell phone number used by you immediately
      prior to the effective date of such termination; provided, that
      you agree to pay when due all transfer fees and other costs associated
      with the transfer of such cell phone number to you
    personally.

            

    

     

    
      	
               
      

            	
              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 Vice President of Electronics
      Development of ZBB, your position as President of Tier or this letter
      agreement.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Mr.
Jeffrey Reichard

    January
21, 2011

    Page:
5

     

    
      	
               
      

            	
              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.

            

    

     

    8.           Miscellaneous
Provisions:

     

    
      	
               
      

            	
              Ÿ

            	
              You
      hereby covenant and agree, upon the termination, for whatever reason, of
      your employment with ZBB, to resign as a member of the Board of Directors
      of Tier, effective as of the effective date of such termination of
      employment.

            

    

     

    
      	
               
      

            	
              Ÿ

            	
              You
      hereby covenant and agree, upon the earlier to occur of (a) the first
      anniversary of the date of the payment in full of the principal and
      interest balance under the Note, or (b) the termination, for whatever
      reason, of your employment with ZBB, to resign as a member of the Board of
      Directors of ZBB, effective as of the effective date of such earlier
      occurrence, pursuant to the signed resignation attached hereto as Exhibit B.

            

    

     

    
      	
               
      

            	
              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.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Mr.
Jeffrey Reichard

    January
21, 2011

    Page:
6

     

    
      	
               
      

            	
              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).

            

    

     

    
      	
               
      

            	
              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.  This letter agreement
      may be executed in facsimile copy or by other electronic means with the
      same binding effect as the
original.

            

    

     

    [Intentionally left
blank]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Mr.
Jeffrey Reichard

    January
21, 2011

    Page:
7

     

    We feel
that this offer is exceptionally attractive and reflects the confidence we have
in your ability to guide the growth of Tier and to achieve a significant
enhancement of ZBB shareholder value.  We very much look forward to
having you join us as ZBB’s Vice President of Electronics Development and as
Tier’s President.  If you agree to the terms of this letter agreement,
please execute two (2) copies of the letter agreement below.

     

    
      
        	
                With
      warm regards,

              
	 
      
	
                ZBB
      ENERGY CORPORATION

              
	 
      
	
                /s/
      Eric C. Apfelbach

              
	 
      
	
                Eric
      C. Apfelbach

              
	
                President
      and Chief Executive Officer

              

      

    

     

    
      
        
          	
                  Agreed
      and accepted as of

                
	
                  January
      21, 2011.

                
	 
      
	
                    /s/ Jeffrey
      Reichard

                
	
                  Jeffrey
      Reichard

                

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
A

    DEFINITIONS

     

    
      Cause.  Termination
of your employment with ZBB for “Cause” shall mean termination of your
employment with ZBB due to (1) any failure by you to substantially perform
your duties with ZBB or Tier (other than by reason of illness) which occurs
after ZBB has delivered to you a demand for performance which specifically
identifies the manner in which ZBB believes you have failed to perform your
duties, and you fail to resume performance of your duties on a continuous basis
within fourteen (14) days after receiving such demand, (2) your
commission of a material violation of any law or regulation applicable to ZBB or
any of its affiliates or subsidiaries or your activities in respect of ZBB or
any of its affiliates or subsidiaries, (3) your commission of any material
act of dishonesty or disloyalty involving ZBB or any of its affiliates or
subsidiaries, (4) any violation by you of a ZBB or Tier policy of material
import after written notice and reasonable opportunity to cure, (5) any act by
you of moral turpitude which is likely to result in material discredit to or
material loss of business, reputation or goodwill of ZBB or Tier, (6) your
chronic absence from work other than by reason of a serious health condition,
(7) your commission of a crime which substantially relates to the
circumstances of your position with ZBB or any of its affiliates or subsidiaries
or which has material adverse effect on ZBB or any of its affiliates or
subsidiaries, or (8) the willful engaging by you in conduct which is
demonstrably and materially injurious to ZBB or any of its affiliates or
subsidiaries.  For purposes hereof, Tier shall be deemed an affiliate
of ZBB.

      

    

    
      Disability.  “Disability”
shall mean (1) you are unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months, or (2) you have been, by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than 12
months, receiving income replacement benefits for a period of not less than
three months under any accident, disability or health plan.

      

    

    
      Good
Reason.  Termination of your employment with ZBB for “Good
Reason” shall mean the termination of your employment with ZBB within thirty
(30) days after any of the following: (1) a change in your position or
authority with ZBB which materially reduces your level of responsibility and/or
a reduction in your base salary (except to the extent the base salaries of
substantially all of the executive officers of ZBB are reduced proportionately),
(2) a notification by ZBB to you that your principal place of employment will be
relocated to an office or location that is more than 20 miles from the office or
location at which you were principally employed immediately after the date of
your appointment as Vice President of Electronics Development of ZBB and
President of Tier and that is no closer to your principal residence, or (3) a
material breach by ZBB of any term of this letter agreement following written
notice thereof and the failure of ZBB to cure such breach within ten days of
such written notice.  Notwithstanding the above to the contrary, “Good
Reason” does not exist unless you object to any change, reduction, notification
or breach described above by written notice to ZBB within thirty (30) business
days after such change, reduction, notification or breach occurs, and ZBB fails
to cure such change, reduction or breach within ten (10) business days after
such notice is given.Unassociated Document

    Exhibit
10.4

     

    ZBB
ENERGY CORPORATION

     

    NONSTATUTORY
STOCK OPTION AGREEMENT

     

    This
Nonstatutory Stock Option Agreement (this “Agreement”) is executed as of
January  ___, 2011, by and between ZBB ENERGY CORPORATION, a Wisconsin
corporation (the “Company”), and ______________ (the “Grantee”).

     

    Statement of
Purpose

     

    On the
date hereof a wholly-owned subsidiary of Company (“Acquisition Sub”) is
entering into an Asset Purchase Agreement (the “Purchase Agreement”)
pursuant to which it is contemplated that Acquisition Sub will acquire
substantially all of the assets of Tier Electronics LLC (“Tier”).  Grantee
is a member of Tier and serves as its President.  It is a condition to
closing under the Purchase Agreement that Grantee enter into an employment
agreement with the Company pursuant to which following the closing under the
Purchase Agreement he will serve as President of Tier and as a member of its
Board of Directors. This Option is being made in accordance with the terms of
the Purchase Agreement and Grantee’s employment agreement.

     

    1. 
         Determinations by
Administrator.  The Administrator (as defined below) shall make all
interpretations, rules and regulations necessary to administer this Agreement,
and such determinations of the Administrator shall be binding upon
Grantee.  For purposes of this Agreement, the term “Administrator” shall
mean the Compensation Committee of the Board of Directors.

     

    2. 
         Option; Number of Shares;
Option Price.  The Option (as defined below) granted hereunder is
intended to be a nonstatutory stock option and therefore, shall not qualify as
an incentive stock option pursuant to Section 422 of the Internal Revenue Code
of 1986, as amended.  Grantee shall have the right and option to purchase
all or any part of an aggregate of [__________] shares of $0.01 par value common
stock of the Company (“Share(s)”) at the purchase price of $1.26 per Share (the
“Option”), which is equal to the Fair Market Value (as defined below) of a Share
as of the date of this Agreement.  For purposes of this Agreement, the term
“Fair Market Value” shall mean, as of any date, the closing price of a Share on
the NYSE Amex.

     

    3. 
         Vesting and
Expiration.  This Option shall vest (become exercisable) and remain
exercisable only in accordance with Annex 1 attached
hereto.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4. 
         Method of Exercising
Option.  Except as otherwise permitted by the Administrator, the
Option shall be exercisable by delivery to the Company (to the attention of its
Secretary), at its offices in Menomonee Falls, Wisconsin, of (i) written notice
identifying the Option and stating the number of Shares with respect to which it
is being exercised, (ii) payment in full of the exercise price of the Shares
then being acquired as provided in Section 5, below, and (iii) execution of such
other documentation as is determined to be necessary or appropriate by the
Administrator from time to time the form of which shall be provided to Grantee
at the time of execution and delivery of this Agreement.  The Company shall
have the right to delay the issue or delivery of any Shares to be delivered
hereunder until (i) the completion of such registration or qualification of such
Shares under federal, state, or foreign law, ruling, or regulation as the
Company shall deem to be necessary or advisable, and (ii) receipt from Grantee
of such documents and information as the Administrator may deem necessary or
appropriate in connection with such registration or qualification or the
issuance of Shares hereunder.

     

    5. 
         Payment of Exercise
Price.  If the Grantee elects to exercise the Option by submitting
an exercise notice under Section 4 of this Agreement, the aggregate
exercise price (as well as any applicable withholding or other taxes) may be
paid by any of the following methods, or a combination of them:

     

    (a)         cash
or check;

     

    (b)         a
“net exercise” under which the Company reduces the number of shares of Common
Stock issued upon exercise by the largest whole number of shares with a Fair
Market Value that does not exceed the aggregate Exercise Price and any
applicable withholding, or such other consideration received by the Company
under a cashless exercise program approved by the Company in connection with the
Plan;

     

    (c)         surrender
of other shares of Common Stock owned by the Grantee which have a Fair Market
Value on the date of surrender equal to the aggregate Exercise Price of the
exercised Shares and any applicable withholding; or

     

    (d)         any
other consideration that the Administrator deems appropriate and in compliance
with applicable law.

     

    For
purposes of the above, all Shares shall be valued per share at the Fair Market
Value (as defined above; provided, however, if a Share
is not susceptible to valuation by the above method, the term “Fair Market
Value” of a Share shall mean the fair market value of a Share as the
Administrator may determine in conformity with pertinent law) of a Share on the
business day immediately preceding the day on which such Shares are
delivered.

     

    6. 
         Prohibition Against
Transfer.  Unless otherwise provided by the Administrator and except
as provided below, the Option, and the rights and privileges conferred hereby,
may not be transferred by Grantee, and shall be exercisable during the lifetime
of Grantee only by Grantee.  The Option shall not be subjected to
execution, attachment or similar process.  Grantee shall have the right to
transfer the Option upon Grantee’s death, either to Grantee’s designated
beneficiary (such designation to be made in writing at such time and in such
manner as the Administrator shall approve or prescribe), or, if Grantee dies
without a surviving designated beneficiary, by the terms of Grantee’s will or
under the laws of descent and distribution, subject to any limitations set forth
in this Agreement and all such distributees shall be subject to all terms and
conditions of this Agreement to the same extent as Grantee would be if still
living.

     

    7. 
         Nature of
Option.  Grantee shall not have any interest in any fund or in any
specific asset or assets of the Company by reason of the Option granted
hereunder, or any right to exercise any of the rights or privileges of a
stockholder with respect to the Option until Shares are issued in connection
with any exercise.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    8. 
         Adjustment
Provisions.

     

    (a)          Share
Adjustments.  In the event of any stock dividend, stock split,
recapitalization, merger, consolidation, combination or exchange of shares of
Company stock, or the like, as a result of which shares of any class shall be
issued in respect of the outstanding Shares, or the Shares shall be changed into
the same or a different number of the same or another class of stock, or into
securities of another person, cash or other property (not including a regular
cash dividend), the number of Shares subject to the Option and the exercise
price applicable to the Option shall be appropriately adjusted in such equitable
and proportionate amount as determined by the Administrator.  No fractional
Share shall be issued under this Agreement resulting from any such adjustment
but the Administrator in its sole discretion may make a cash payment in lieu of
a fractional Share.

     

    (b)         Acquisitions. 
In the event of a merger or consolidation of the Company with another
corporation or entity, or a sale or disposition by the Company of all or
substantially all of its assets, the Administrator shall, in its sole
discretion, have authority to provide for (i) waiver in whole or in part of any
remaining restrictions or vesting requirements in connection with the Option
granted hereunder, (ii) the conversion of the outstanding Option into cash,
(iii) the conversion of the Option into the right to receive securities,
including options, of another person or entity upon such terms and conditions as
are determined by the Administrator in its sole discretion and/or (iv) the
lapse of the Option after notice in writing has been given that the Option may
be exercised within a set period from the date of such notice and that any
Option not exercised within such period shall lapse.

     

    (c)         Binding Effect. 
Without limiting the generality of what is provided in Section 1 hereof and for
avoidance of doubt, any adjustment, waiver, conversion or other action taken by
the Administrator under this Section 8 shall be conclusive and binding on
Grantee and the Company and any respective successors and assigns.

     

    9. 
         Notices.  Any
notice to be given to the Company under the terms of this Agreement shall be
given in writing to the Company at its offices in Menomonee Falls,
Wisconsin.  Any notice to be given to Grantee may be addressed to Grantee’s
address as it appears on the payroll records of the Company or any subsidiary
thereof.  Any such notice shall be deemed to have been duly given if and
when actually received by the party to whom it is addressed, as evidenced by a
written receipt to that effect.

     

    10. 
       Taxes.  The
Company may require payment or reimbursement of or may withhold any minimum tax
that it believes is required as a result of the grant or exercise of the Option,
and the Company may defer making delivery with respect to Shares or cash payable
hereunder or otherwise until arrangements satisfactory to the Company have been
made with respect to such withholding obligations.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    11. 
       Rights of
Grantee.  The Option, and any payments or other benefits received by
Grantee under the Option, is discretionary and shall not be deemed a part of
Grantee’s regular, recurring compensation for any purpose, including without
limitation for purposes of termination, indemnity, or severance pay law of any
country and shall not be included in, nor have any effect on, the determination
of benefits under any other employee benefit plan, contract or similar
arrangement provided to Grantee unless expressly so provided by such other plan,
contract or arrangement, or unless the Administrator expressly determines
otherwise.

     

    12. 
       Amendment.  The
Administrator may amend this Agreement; provided, however, that
Grantee’s consent to such action shall be required unless the Administrator
determines that the action, taking into account any related action, would not
materially and adversely affect Grantee.  However, notwithstanding any
other provision of the Agreement, the Administrator may not adjust or amend the
exercise price of the Option, whether through amendment, cancellation and
replacement grants, or any other means, except in accordance with Section 8
hereof.

     

    13. 
       No Right To
Employment.  This Agreement shall not confer upon Grantee any right
to continue employment with the Company, Acquisition Sub or any other of their
respective subsidiaries, nor shall it interfere in any way with the right of the
Company, Acquisition Sub or any such subsidiary to terminate Grantee’s
employment any time.

     

    14. 
       Severability. 
In the event any provision of this Agreement shall be held illegal or invalid
for any reason, the illegality or invalidity shall not affect the remaining
parts of the Agreement, and this Agreement shall be construed and enforced as if
the illegal or invalid provision had not been included.

     

    15. 
       Governing Law.  This Agreement and all
actions taken hereunder shall be governed by, and construed in accordance with,
the laws of the State of Wisconsin, applied without regard to the laws of any
other jurisdiction that otherwise would govern under conflict of law
principles.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the Company has caused these presents to be executed as of the
date and year first above written, which is the date of the granting of the
Option evidenced hereby.

    

    
      
        
          	
                  ZBB
      ENERGY CORPORATION

                
	 
      	 
      
	
                  By:

                	 
      
	 
      	
                  Name:

                
	 
      	
                  Title:

                

        

      

    

    

    The
undersigned Grantee hereby accepts the foregoing Option and agrees to the
several terms and conditions hereof.

    

    
      
        
          	 
      
	
                  Grantee

                

        

      

    

     

    [Option
Award Agreement]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Annex
1

     

    1. 
         Vesting. The Option
initially shall be 100% unvested.  So long as Grantee remains continuously
a Service Provider to the Company (as defined below) the Option shall become
vested and exercisable according to the schedule set forth below and Grantee may
exercise this Option as to any vested Shares: [insert vesting
terms].

     

    2. 
         Expiration.  To
the extent not previously exercised according to the terms hereof, each portion
of the Option shall expire on the fifth anniversary of the vesting date
applicable to such portion of the Option.

     

    3. 
         Exercise
Period.

     

    (a)         Disability.  Upon
Grantee’s Separation of Service due to a Disability (as defined in Grantee’s
employment agreement), Grantee shall have one (1) year from the date of such
separation to exercise any portion of the Option that was vested and unexercised
as of the date of such Separation from Service; provided, however, that this
Option shall not be exercisable subsequent to the expiration dates specified in
Section 2, above.

     

    (b)         Death.  Upon Grantee’s
Separation of Service due to death, any portion of the Option that was vested
and unexercised as of the date of such Separation from Service shall remain
exercisable:

     

    
      	
            	
              (i)

            	
              for
      one (1) year after Grantee’s death, but in no event subsequent to the
      expiration dates specified in Section 2 above;
  and

            

    

     

    
      	
               
      

            	
              (ii)

            	
              only
      (i) by the designated beneficiary of Grantee (such designation to be
      made in writing at such time and in such manner as the Administrator shall
      approve or prescribe), or, if Grantee dies without a surviving designated
      beneficiary, (ii) by the personal representative, administrator, or
      other representative of the estate of Grantee, or by the person or persons
      to whom the deceased rights of Grantee under the Option shall pass by will
      or the laws of descent and distribution.  Grantee may change the
      beneficiary designation at any time, by giving written notice to the
      Administrator, subject to such conditions and requirements as the
      Administrator may prescribe in accordance with applicable
    law.

            

    

     

    (c)         Other Terminations of
Employment.  Upon Grantee’s Separation of Service for any reason
other than those specified in this Section 3 (including without limitation
Section 3(d)(iii) below), Grantee shall have ninety (90) days from the date of
such separation to exercise any portion of the Option that was vested and
unexercised as of the date of such Separation from Service; provided, however, that the
Option shall not be exercisable subsequent to the expiration dates specified in
Section 2 above.

    
      
         

      

      
        1-1

        
          

        

      

      
         

      

    

    (d)          Cancellation. 
Notwithstanding the foregoing, to the extent the Option held by Grantee
is not effectively exercised prior thereto, it shall be cancelled in its
entirety immediately upon the occurrence of:

     

    
      	
               
      

            	
              (i)

            	
              A
      material misrepresentation or breach of any representation or warranty or
      representation made under the Purchase Agreement or any Ancillary
      Agreement by Seller or the Members (as such terms are defined in the
      Purchase Agreement);

            

    

     

    
      	
               
      

            	
              (ii)

            	
              A
      breach by Seller or any Member (as such terms are defined in the Purchase
      Agreement) of the restrictive covenants contained in Article X of the
      Purchase Agreement; or

            

    

     

    
      	
               
      

            	
              (iii)

            	
              Grantee’s
      Separation from Service for Cause (as defined in Grantee’s employment
      agreement).

            

    

     

    Following
the expiration of this Option in accordance with the preceding sentence, all
Grantee’s rights hereunder will be forfeited and canceled in their
entirety.

    

    (e)          Extension of Exercise
Period.  The Administrator may in its sole discretion extend the
period permitted for exercise of the Option upon Grantee’s Separation of Service
as otherwise provided in this Section 3 if allowable under applicable
law.

    
      
         

      

      
        1-2

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