Document:

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                                                                  Execution Copy

THIS AGREEMENT is made on 9 February 2006 BETWEEN

(1)  ZBB ENERGY CORPORATION a corporation registered in a Wisconsin and whose
     principal office is at N93 W14475 Whittaker Way, Menomonee Falls,
     Wisconsin, USA 53051 (THE "COMPANY"); and

(2)  MONTGOMERY CAPITAL PARTNERS L.P. a limited partnership registered in
     Delaware whose principal office is at 101 Hudson Street, Jersey City, NJ
     07302 USA (the "LENDER").

BACKGROUND

     On the terms as set out in this Agreement, the Lender has agreed to advance
     to the Company an amount of one million three hundred thousand Australian
     dollars (AUS$1,300,000) or such other amount of Australian dollars as,
     based on the Closing Date Exchange Rate, shall represent one million United
     States dollars (US$1,000,000).

IT IS AGREED:

1    DEFINITIONS

1.1  In this Agreement:

     "ASTC SETTLEMENT RULES" means the settlement rules from time to time
     published by ASX Settlement and Transfer Corporation Pty Limited.

     "ASX" means the Australian Stock Exchange Limited

     "ASX RULES" means the listing rules from time to time published by the ASX.

     "BLOOMBERG" means Bloomberg LP, a financial information provider.

     "BUSINESS DAYS" shall mean any day, other than Saturday, Sunday or any
     other day in which the national banks in either Australia or the United
     States shall not be open for business.

     "CASH PAYMENT" means any amount paid into the Lender's Bank Account in
     accordance with Clause 6.2 (or if applicable Clause 7.1).

     "CASH PAYMENT DATE" means the date of a Cash Payment Notice.

     "CASH PAYMENT DATE EXCHANGE RATE" means in relation to each Cash Payment
     Date the Australian dollar to US dollar spot exchange rate as quoted in the
     London edition of the Financial Times on such Cash Payment Date.

     "CASH PAYMENT NOTICE" has the meaning given to it in Clause 6.1.

     "CLOSING DATE" means a date that shall be the date on which the Company
     shall provide Lender with official notice of Shareholder Approval;
     provided, that such Closing Date shall be not later than twenty (20)
     Business Days following the date of this Agreement.

     "CLOSING DATE EXCHANGE RATE" means, at any point in time, the Australian
     dollar to US dollar spot exchange rate as quoted in the London edition of
     the Financial Times on the Closing Date.

     "COMMON SHARES" means the common stock of par value $0.01 per share each in
     the capital of the Company.

     "CONVERSION AMOUNT" has the meaning set out in Clause 5.1 of this
     Agreement.

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     "CONVERSION PRICE" means in respect of any Loan Notice Date (or for the
     purposes of Clause 7.4 the Financing Transaction Date) the lower of (i) the
     lowest VWAP reported during the 10 consecutive Trading Days prior to the
     Closing Date and (ii) 80% (eighty per cent) of the lowest VWAP for the 10
     consecutive Trading Days immediately prior to the Loan Notice Date (or for
     the purposes of Clause 7.4 the Financing Transaction Date).

     "CHESS" means the Clearing House Electronic Subregister System operated by
     ASX Settlement and Transfer Corporation Ply Limited (a wholly owned
     subsidiary of the ASX) under which securities may be held or transferred in
     uncertificated form.

     "CUFS" means CHESS Depositary Interests for Common Shares in the form of
     CHESS Units of Foreign Financial Products that permit trades in Common
     Shares to be settled in CHESS.

     "DELIVERY" in respect of any Lender's Shares means, at the sole option of
     the Lender, either:

     (a)  from and after the date that the Common Shares trade on any US Stock
          Exchange, the physical delivery of stock certificates evidencing such
          Lender's Shares registered in the name of the Lender or its
          nominee(s), or:

     (b)  whilst the Common Shares and/or CUFS maintain a Quotation on the ASX:

          (i)   the registration of CHESS Depository Nominees Pty Limited as
                holder of the legal title to such Lender's Shares;

          (ii)  the issue to the Lender of CUFS in respect of such Lender's
                Shares; and

          (iii) the issue of a holding statement in respect of the CUFS to the
                Lender,

          all In accordance with the ASTC Settlement Rules,

     and "DELIVER" shall be construed accordingly.

     "DELIVERY DATE" means the date on which Loan Shares are Delivered pursuant
     to a Loan Notice.

     "FINANCING TRANSACTION" means the collective reference to (a) the Pipe
     Transaction, or (b) any other public or private financing of debt or equity
     securities of the Company that provides the Company with sufficient net
     proceeds to repay the Loan in full (and all other amounts owed to the
     Lender) pursuant to Clause 6.

     "FINANCING TRANSACTION DATE" means the date upon which the PIPE Transaction
     or another Financing Transaction completes.

     "FINANCING TRANSACTION DATE EXCHANGE RATE" means in relation to any
     Financing Transaction Date the Australian dollar to US dollar exchange rate
     as quoted in the London edition of the Financial Times on such Financing
     Transaction Date.

     "FLOOR PRICE" shall in respect of a Loan Notice Date or a Subscription
     Notice Date mean six and one-quarter United States cents (US$0.0625) or the
     equivalent amount in Australian Dollars at the Loan Notice Date Exchange
     Rate, subject to adjustment as provided in Clause 10; PROVIDED, HOWEVER,
     that unless on or before 31 July 2006, the Company shall have tendered
     payment in full of the outstanding principal amount of the Loan and all
     interest thereon pursuant to clauses 6 or 7, and the Lender shall have
     either accepted such payment or converted the Loan in full into Loan Shares
     (as herein provided), from and after 1 August 2006, the Floor Price shall
     be zero (0).

     "GROUP" means the Company and its subsidiaries (as defined in s736
     Companies Act 1985) from time to time.

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     "LENDER'S BANK ACCOUNT" means the Lender's account with JP Morgan Chase
     Bank, 1166 Avenue of the Americas, New York, NY 10036, sort code ABA number
     021000021 account name Montgomery Equity Partners LP account number 957 201
     613 or such other bank and/or account information as Lender may advise the
     Company in writing.

     "LENDER'S SHARES" means any of the Common Shares or CUFS, including Loan
     Shares and Warrant Shares that may be issued to the Lender pursuant to this
     Agreement.

     "LOAN" means the amount of one million three hundred thousand Australian
     dollars (AUS$1,300,000) or such other amount of Australian dollars as,
     based on the Closing Date Exchange Rate, shall represent one million United
     States dollars (US$1,000,000) to be advanced pursuant to Clause 2, or the
     principal amount outstanding for the time being of that loan (including any
     interest compounded with the Loan pursuant to Clause 4.1).

     "LOAN NOTICE" has the meaning set out in Clause 5.1 of this Agreement.

     "LOAN NOTICE DATE" means the date of a Loan Notice.

     "LOAN NOTICE DATE EXCHANGE RATE" means in relation to each Loan Notice Date
     the Australian dollar to US dollar spot exchange rate as quoted in the
     London edition of the Financial Times on such Loan Notice Date.

     "LOAN SHARES" means Common Shares and/or CUFS issued to the Lender pursuant
     to this Agreement upon any one or more conversions of the Loan (other than
     pursuant to Clause 7).

     "PIPE SECURITIES" means the Common Shares, preferred or preference shares
     or notes or debentures that may be issued pursuant to the PIPE Transaction;
     provided, that, for purposes of this Agreement, the term "PIPE Securities"
     shall not mean Options or Warrants to purchase Common Shares.

     "PIPE TRANSACTION" means the proposed private investment in public equity
     (PIPE) transaction to be arranged by Empire Financial Group, Inc. or any
     other placement agent acceptable to the Company, whereby the Company will
     issue the PIPE Securities to accredited investors by way of a private
     placement or any other similar financing transaction which provides the
     Company with sufficient net proceeds to repay the Loan (and all other
     amounts owed to the Lender) pursuant to Clause 6.

     "QUOTATION" means official quotation by ASX and, if and when the Common
     Shares trade on a US Stock Exchange, as quoted on such US Stock Exchange
     and as reported by Bloomberg; and "Quote" or "Quoted" shall be construed
     accordingly.

     "REDUCTION NOTICE" has the meaning set out in Clause 8.4 of this Agreement.

     "REDUCTION NOTICE DATE" means the date of a Reduction Notice.

     "REGISTRATION RIGHTS AGREEMENT" means the agreement in substantially the
     form of Exhibit A hereto, between Lender and the Company, pursuant to which
     the Company shall agree, following the Quotation of its Common Shares on a
     US Stock Exchange, to register for resale under the US Securities Act of
     1933, as amended, all of the Lender's Shares.

     "REDUCTION NOTICE DATE EXCHANGE RATE" means in relation to each Reduction
     Notice Date the Australian dollar to US dollar spot exchange rate as quoted
     in the London edition of the Financial Times on such Reduction Notice Date.

     "SEC" means the United States Securities and Exchange Commission.

     "SHAREHOLDER APPROVAL" means the approval by the shareholders of the
     Company at the Shareholders Meeting of this Agreement and all of the
     transactions contemplated hereby, including the issuance of all of the
     Lender's Shares, CUFS and the Warrant pursuant to this

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     Agreement; in each case by the affirmative vote of the requisite number of
     outstanding Company Shares of the Company.

     "SHAREHOLDERS MEETING" shall mean the special meeting of shareholders of
     the Company to be conducted not later than fifteen (15) Business Days
     following the date of execution of this Agreement, pursuant to which the
     Company shall seek Shareholder Approval.

     "SUBSCRIPTION NOTICE" has the meaning set out in Clause 8.1 of this
     Agreement.

     "SUBSCRIPTION NOTICE DATE" means the date of the Subscription Notice.

     "TAXATION" means any of the following: (a) any tax, duty, impost or levy,
     past or present, of the United Kingdom or elsewhere, whether governmental,
     state, provincial, local governmental or municipal, including income tax
     (including income tax required to be deducted or withheld from or accounted
     for in respect of any payment under section 203 of the Taxes Act or
     otherwise), corporation tax, advance corporation tax, capital gains tax,
     inheritance tax, VAT, customs and other import or export duties, rates,
     stamp duty, stamp duty reserve tax, national insurance and social security
     contributions; and (b) any fine, penalty, surcharge, interest or other
     imposition relating to any tax, duty, impost or levy mentioned in
     paragraph(a) of this definition or to any account, record, form, return or
     computation required to be kept, preserved, maintained or submitted to any
     person for the purposes of any such tax, duty, impost or levy.

     "TRADING DAY" means any day during which ASX is open for business.

     "US STOCK EXCHANGE" means any one of the New York Stock Exchange, Inc., the
     American Stock Exchange Inc., the Nasdaq Stock Market, Inc., or the
     National Association of Securities Dealers ("NASD") OTC Bulletin Board.

     "VWAP" means on any date, the volume weighted average price of the Common
     Shares as Quoted on the ASX; PROVIDED, HOWEVER, if the Common Shares shall
     subsequently be listed for trading on a US Stock Exchange, the term VWAP in
     relation to any period on or after such listing on a US Stock Exchange
     occurs shall mean the LOWER of (a) the volume weighted average price (as
     reported by Bloomberg) of the Common Shares as Quoted on such US Stock
     Exchange, or (b) if also Quoted on the ASX, the volume weighted average
     price of the Common Shares as Quoted on the ASX.

     "WARRANT" means the subscription right or option held by the Lender to
     purchase Common Shares or CUFS, as contemplated by Clause 8 of this
     Agreement.

     "WARRANT SHARES" means the aggregate number of Common Shares or CUFS
     issuable upon exercise of the Warrant.

1.2  References in this Agreement to Clauses are to the clauses of this
     Agreement.

2    LOAN

2.1  Subject to Clause 12.3 and the Lender approving the use of proceeds
     information provided by the Company, on or before the third Trading Day
     after the Closing Date the Lender shall advance to the Company the amount
     of one million three hundred thousand Australian dollars (AUS$1,300,000) or
     such other amount of Australian dollars as, based on the Closing Date
     Exchange Rate, shall represent one million United States dollars
     (US$1,000,000).

3    REPAYMENT

     The Company shall pay or repay the Loan, together with all other amounts
     due to the Lender pursuant to this Agreement, on or before the second
     anniversary of the Closing Date. Any such payments or repayments shall be
     made as set out in this Agreement and in particular any payment or
     repayment in cash may only be made in accordance with Clause 6 or Clause 7.

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4    INTEREST

4.1  The Company shall pay interest to the Lender on the outstanding amount of
     the Loan at the rate of 10% (ten per cent) per annum to be compounded with
     the Loan monthly on the last day of each calendar month. Interest, as so
     compounded, shall be added to the principal amount of the Loan and shall be
     payable on the due date of the Loan; provided, that the Company may elect
     at any time to pay any one or more interest payments in cash on the last
     day of each calendar month.

4.2  If the Company fails to pay any amount payable by it under this Agreement
     on its due date, interest shall accrue on the overdue amount from the due
     date up to the date of actual payment (both before and after judgment) at
     the rate of 13% (thirteen per cent) per annum. Any interest accruing under
     this Clause 4.2 shall be immediately payable by the Company on demand by
     the Lender. Any such interest (if unpaid) arising on an overdue amount will
     be compounded daily with the overdue amount but will remain immediately due
     and payable.

5    ISSUE OF LOAN SHARES

5.1  The Company shall upon written notice (a "LOAN NOTICE") from the Lender at
     any time when any amounts are outstanding under this Agreement issue and
     Deliver to the Lender Loan Shares. The Loan Notice will specify the
     Australian dollar value of the Loan Shares to be issued pursuant to the
     Loan Notice (the "CONVERSION AMOUNT") which shall not exceed the total
     amount outstanding under this Agreement from time to time.

5.2  Unless the Company agrees otherwise or the Company notifies the Lender of a
     PIPE Transaction or other Financing Transaction pursuant to Clause 7.1, the
     Lender shall not, in any one period of seven consecutive days, be entitled
     to issue Loan Notices in respect of an aggregate Conversion Amount of more
     than AUS$130,000.

5.3  Subject to Clause 11.1 the number of Loan Shares to be issued and Delivered
     by the Company in respect of a Loan Notice shall be the Conversion Amount
     specified in that Loan Notice divided by the Conversion Price then in
     effect; provided that if the Conversion Price is lower than the Floor Price
     the Conversion Price shall be increased so that it is equal to the Floor
     Price. In the case of any fractional entitlements the number of Loan Shares
     to be issued shall be rounded up to the next whole number.

5.4  The amounts outstanding under this Agreement will be reduced on each
     Delivery Date by the Conversion Amount set out in the Loan Notice relating
     to that Loan Notice Date.

5.5  Notwithstanding any other provision of this Agreement the Lender may, in
     its sole discretion, elect to require the Company to satisfy in cash any
     amounts due to the Lender pursuant to either (i) Clause 4.2 or Clause 9.5,
     or (ii) any provision of this Agreement after this Agreement has been
     terminated in accordance with Clause 15.

5.6  Any payments received, or treated as being received pursuant to Clause 5.4,
     by the Lender shall be applied;

     (a)  firstly to pay any fees, expenses or other amounts due pursuant to
          this Agreement other than the amounts referred to in sub Clauses 5.6
          (b) and (c) below;

     (b)  secondly to pay any amounts due to the Lender in respect of interest
          pursuant to Clause 4.1 of this Agreement to the extent such interest
          has not been compounded with the Loan;

     (c)  thirdly to repay any amount of the Loan still outstanding.

6    OPTIONAL CASH PAYMENT

6.1  Subject to Clause 6.5, the Company shall be entitled at any time, or from
     time to time, to make a payment in cash in respect of all or any portion of
     any amount which is outstanding pursuant

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     to this Agreement by giving the Lender written notice no less than three
     Trading Days prior to the date of payment (a "Cash Payment Notice").

6.2  The Cash Payment Notice will specify the cash amount to be paid by the
     Company and the date of payment. Any amount to be so paid shall be
     transferred to the Lender's Bank Account.

6.3  Each Cash Payment shall, subject to Clause 11.2, be applied:

     (a)  firstly to pay any fees, expenses or other amounts due pursuant to
          this Agreement other than the amounts referred to in sub Clauses
          6.3(b) and (c) below;

     (b)  secondly to pay any amounts due to the Lender in respect of interest
          pursuant to Clause 4.1 of this Agreement to the extent such interest
          has not been compounded with the Loan;

     (c)  thirdly to repay any amount of the Loan still outstanding.

6.4  Any part of a Cash Payment which is applied pursuant to Clause 6.3(c) shall
     reduce the outstanding amount of the Loan as follows:

     (a)  if such Cash Payment is made less than 120 days after the Closing
          Date, by an amount equal to 100 divided by 107.5 multiplied by the
          amount of the Cash Payment applied pursuant to Clause 6.39(c);

     (b)  if such Cash Payment is made 120 days or more but not more than 180
          days, after the Closing Date, by an amount equal to 100 divided by 110
          multiplied by the amount of the Cash Payment applied pursuant to
          Clause 6.3(c); or

     (c)  if such Cash Payment is made 180 days or more after the Closing Date,
          by an amount equal to 100 divided by 120 multiplied by the amount of
          the Cash Payment applied pursuant to Clause 6.3(c).

6.5  If a Cash Payment Notice is issued after or on the same date as a Loan
     Notice then the Loan Notice will be treated as having been received first.
     The amounts received or treated as being received in respect of the Loan
     Notice will therefore be applied first (as set out in Clause 5) and then
     any amounts received or treated as being received in respect of the Cash
     Payment Notice will be applied (as set out in the preceding provisions of
     this Clause 6).

7    MANDATORY CASH PAYMENT

7.1  On the Financing Transaction Date, the Company shall be required to make a
     payment in cash in respect of all amounts that are outstanding pursuant to
     this Agreement, subject to any adjustment required pursuant to Clause 11.4.
     Such payment shall be deemed a Cash Payment and subject to the provisions
     of Clause 6.3 and 6.4. Any amount to be so paid shall be transferred to the
     Lender's Bank Account.

7.2  As soon as reasonably practicable and in any case not less that ten (10)
     Trading Days before the Financing Transaction Date, the Company shall
     notify the Lender of the proposed completion date of the Financing
     Transaction or PIPE Transaction (as the case may be) and keep the Lender
     informed as to the progress of the Financing Transaction or PIPE
     Transaction, as the case may be.

7.3  Prior to the Financing Transaction Date, the Lender shall notify the
     Company of the total amount which is outstanding pursuant to this Agreement
     as referred to in Clause 7.1 and, subject to any adjustment required
     pursuant to Clause 11.4 the total number of shares which must be Delivered
     to the Lender on the Financing Transaction Date pursuant to Clause 7.4.

7.4  Subject to clause 7.5, on the Financing Transaction Date, the Company shall
     issue and Deliver to the Lender such number of Common Shares and/or CUFS as
     is equal to 50% of the amount which is determined by dividing (a) the
     outstanding amount required to be repaid to the Lender

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     pursuant to this Agreement immediately prior to repayment pursuant to
     Clause 7.1, and (b) the applicable Conversion Price then in effect.

7.5  If the PIPE Securities do not rank pari passu in all respects with the
     Common Shares, then, at the option of the Lender, the Company shall issue
     and Deliver to the Lender PIPE Securities in lieu of Common Shares in order
     to discharge its obligation in Clause 7.4.

7.6  In respect of any payment in cash pursuant to either Clause 6 or 7, the
     Company, at its sole option, may elect to make such payment in US dollars
     or Australian dollars. If the Company elects to make a cash payment in US
     dollars, the US dollar to Australian dollar spot exchange rate (as quoted
     in the London edition of the Financial Times on the date of such cash
     payment is received by the Lender) shall be used for the purposes of
     calculating the equivalent amount of Australian dollars by which the
     outstanding amount of the Loan (and any other amounts outstanding under
     this Agreement) shall be reduced by. For the avoidance of doubt, such cash
     payment shall still be subject to increase due to exchange rate movements
     as provided for in clauses 11.2 and 11.4(a) (as applicable).

8    ADDITIONAL SUBSCRIPTION RIGHTS (WARRANTS)

8.1  The Company shall (in addition to the Loan Shares referred to above) upon
     receipt of one or more written notices (each a "Subscription Notice") from
     the Lender at any time after the Closing Date and on or prior to the fourth
     anniversary of the Closing Date, issue to the Lender, in accordance with
     this Clause 8 such number of Common Shares as are specified in the
     Subscription Notice.

8.2  The Lender shall be entitled to issue Subscription Notices in respect of up
     to 2,000,000 Warrant Shares less the number of Common Shares in respect of
     which Reduction Notices have been issued.

8.3  The Lender shall, within three Trading Days of any Common Shares being
     Delivered to the Lender pursuant to Clause 8.1, pay to the Company in
     respect of such Common Shares an amount per Common Share equal to the lower
     of (i) 80% of the VWAP on the 10 consecutive Trading Days prior to the
     Closing Date and (ii) 80% of the VWAP on the date of the relevant
     Subscription Notice provided that if the amount per Common Share is lower
     than the Floor Price such amount shall be increased so that it is equal to
     the Floor Price.

8.4  The Lender shall be entitled by notice in writing to the Company (a
     "Reduction Notice") to reduce the number of Common Shares in respect of
     which it may issue Subscription Notices. The Lender shall only be entitled
     to issue a Reduction Notice on or after the date which is 120 days after
     the Closing Date. During the period of one month immediately after the date
     which is 120 days after the Closing Date and during each period of one
     month immediately thereafter until the fourth anniversary of the Closing
     Date, the Lender shall be entitled to issue Reduction Notices in respect of
     up 10% of the Unexercised Warrants (as defined in Clause 8.6) in any one
     month.

8.5  The Company shall pay to the Lender an amount of AUS$0.10 (ten cents) for
     each Common Share in respect of which a Reduction Notice is issued. The
     Company shall, at its election either

     (a)  pay such amount (adjusted if applicable pursuant to Clause 11.3) in
          cash to the Lender (by transferring such amount to the Lender's Bank
          Account) within 2 Trading Days of the date of the relevant Reduction
          Notice; or

     (b)  issue Common Shares to the Lender in respect of such amount, in
          exactly the same way as if a Loan Notice had been issued on the date
          of the Reduction Notice for a Conversion Amount equal to the total
          amount due to the Lender in respect of that Reduction Notice.

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8.6  The Lender shall be entitled to issue Reduction Notices in respect of up to
     2,000,000 Common Shares less the number of Common Shares which have been
     validly issued pursuant to a Subscription Notice or have been subject to a
     Reduction Notice (the "Unexercised Warrants").

9    ISSUE OF SHARES OR CUFS

9.1  In respect of any Lender's Shares, to be issued to the Lender pursuant to
     this Agreement the Company shall make application for Quotation of the
     Lender's Shares, as soon as possible after receipt of a Loan Notice or
     Subscription Notice. Any such Quotation is expected to be on the third
     Trading Day after such application is made.

9.2  The Lender shall with each Loan Notice or Subscription Notice advise the
     Company whether the Lender's Shares to be Delivered pursuant to such Loan
     Notice or Subscription Notice shall be in the form of certificated Common
     Shares Quoted on a US Stock Exchange or in CUFS. The relevant number of
     Lender's Shares or CUFS (as the case may be) shall be Delivered within
     seven (7) Trading Days of the date on which the Loan Notice or as the case
     may be, Subscription Notice is received (or deemed to have been received,
     in accordance with Clause 18). Any breach of this Clause 9.1 will amount to
     a serious breach of this Agreement which the Company acknowledges may cause
     the Lender significant financial loss.

9.3  On or before the Trading Day immediately prior to the anticipated date of
     Quotation of the Lender's Shares the following shall occur:

     (a)  the Company shall, conditional only upon Quotation of the Lender's
          Shares, allot and issue the relevant Lender's Shares to the Lender;

     (b)  the Company shall do all acts and things necessary to procure
          Quotation of the relevant Lender's Shares on the next following
          Trading Day including, without limitation to the forgoing, if the
          Lender requests that such Lender's Shares are to be in the form of
          Common Shares to be traded on a US Stock Exchange, the Company shall
          do all acts and things necessary to procure the SEC's declaration that
          the Company's registration statement covering such Lenders' Shares is
          effective; and;

     (c)  the Company shall give all necessary directions and instructions to
          its registrars to procure that the relevant Lenders Shares or CUFS are
          Delivered to the Lender on the date of Quotation.

9.4  The Lender's Shares to be issued to the Lender under this Agreement shall
     be allotted and issued by the Company fully paid and free from all claims,
     charges, liens, encumbrances, equities and third party rights whatsoever
     and (save for any Common Shares that are issued pursuant to Clause 7.4)
     will rank pari passu in all respects with the existing issued Common Shares
     including the right to receive all dividends or other distributions
     declared, made or paid after the date of allotment.

9.5  If the Company fails to Deliver any Lender's Shares in breach of its
     obligations under this Agreement to do so and such Lender's Shares still
     have not been issued seven (7) Trading Days after the date of the relevant
     Loan Notice, then the Company shall, without prejudice to any other rights
     which the Lender may have under this Agreement, pay to the Lender an amount
     equal to two (2%) per cent of the then outstanding amount of the Loan each
     calendar month (or part of a calendar month) that such Lender's Shares are
     not Delivered. The parties agree that this represents a genuine
     pre-estimate of loss and is not in any way intended to be a penalty. Any
     such payment shall be made within three (3) days of the end of the calendar
     month during which such seven (7) Trading Day period expires and within
     three (3) days of the end of any subsequent calendar month (or part
     thereof) in which such Lender's Shares remain outstanding.

10   STOCK SPLITS AND ADJUSTMENT PROVISIONS

10.1 In the event that, at any time prior to Delivery of a Loan Notice or a
     Subscription Notice, the Company shall effect any forward split of its
     outstanding Common Shares, the Floor Price shall

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     be appropriately and equitably decreased and the aggregate number of
     Warrant Shares shall be appropriately and equitably increased.

10.2 In the event that, at any time prior to Delivery of a Loan Notice or a
     Subscription Notice, the Company shall effect any reverse split of its
     outstanding Common Shares, the Floor Price shall be appropriately and
     equitably increased and the aggregate number of Warrant Shares shall be
     appropriately and equitably decreased.

10.3 Except in connection with the contemplated PIPE Transaction or as otherwise
     consented to by the Lender, the Company shall not consummate any forward
     split or reverse split of its outstanding Common Shares at any time while
     the Loan shall be issued and outstanding.

10.4 In the event that the Company issues Common Shares (save in respect of
     options or warrants to purchase Common Shares) at any time on or after the
     Closing Date at a price below the Floor Price, the Floor Price shall be
     decreased to 100% of the lowest price at which Common Shares are issued by
     the Company.

11   EXCHANGE RATE MOVEMENTS

11.1 If on any Loan Notice Date, the Loan Notice Date Exchange Rate is less than
     the Closing Date Exchange Rate then the number of Loan Shares to be issued
     shall be increased by the same percentage as results from dividing the
     Closing Date Exchange Rate by the relevant Loan Notice Date Exchange Rate.
     By way of example, if the number of Loan Shares to be issued in respect of
     a particular Loan Notice would, but for this Clause 11.1, be 1,000 and if
     the Closing Date Exchange Rate is 1.80 and the relevant Loan Notice Date
     Exchange Rate is 1.75, then 1,029 Loan Shares will be issued in relation to
     that Loan Notice.

11.2 If on any Cash Payment Date, the Cash Payment Date Exchange Rate is less
     than the Closing Date Exchange Rate then the amount of cash required to
     satisfy the amounts due pursuant to Clause 6.3 shall be increased by the
     same percentage as results from dividing the Closing Date Exchange Rate by
     the relevant Cash Payment Date Exchange Rate.

     By way of example, if the amount of cash required to repay all amounts due
     pursuant to Clause 6.3(a) would, but for this Clause 11.2, be US$1,000 and
     if the Closing Date Exchange Rate is 1.80 and the relevant Cash Payment
     Notice Date Exchange Rate is 1.75 then the amount of cash from the Cash
     Payment required to repay all amounts due pursuant to Clause 6.3(a) will be
     US$1,028.57. Accordingly only the surplus over US$1,028.57 from such Cash
     Payment will be applied (again in the same manner) towards any amounts due
     pursuant to Clause 6.3(b) and if any amount of the Cash Payment remains
     after all amounts so due pursuant to Clause 6.3(b) have been paid then the
     surplus will be applied (again in the same manner and after the application
     of Clause 6.4) to pay amounts pursuant to Clause 6.3(c).

11.3 If in relation to a Reduction Notice an amount is to be paid pursuant to
     Clause 8.5(a) and if in relation to that Reduction Notice the Reduction
     Notice Date Exchange Rate is less than the Closing Date Exchange Rate then
     the amount of cash required to satisfy the amount due pursuant to Clause
     8.5(a) shall be increased by the same percentage as results from dividing
     the Closing Date Exchange Rate by the relevant Reduction Payment Date
     Exchange Rate. By way of example, if the amount of cash to be paid pursuant
     to Clause 8.5(a) would, but for this Clause 11.3, be US$1,000 and if the
     Closing Date Exchange Rate is 1.80 and the relevant Reduction Notice Date
     Exchange Rate is 1.75 then the amount of cash to be paid pursuant to Clause
     8.5(a)in respect of that Reduction Notice will be US$1,028.57.

11.4 If on any Financing Transaction Date, the Financing Transaction Date
     Exchange Rate on such date is less than the Closing Date Exchange Rate
     then:

     (a)  the amount of cash required to satisfy the amounts due pursuant to
          Clause 7.1 shall be increased by the same percentage as results from
          dividing the Closing Date Exchange Rate by the relevant Financing
          Transaction Date Exchange Rate.

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     (b)  the number of shares to be issued pursuant to Clause 7.4 shall be
          increased by the same percentage as results from dividing the Closing
          Date Exchange Rate by the Financing Transaction Date Exchange Rate.

12   PAYMENT OF COSTS, EXPENSES, FEES AND COMMISSIONS

12.1 Each of the parties shall pay its own fees and expenses (including the fees
     of any solicitors, accountants, or others engaged by such party) in
     connection with this Agreement and the transactions contemplated hereby,
     except that the Company will pay the fees and expenses of the solicitors to
     the Lender in the sum of US$20,000 (plus applicable VAT and expenses
     (including bank transfer fees)).

12.2 The Company shall pay to the Lender a due diligence fee of US$7,500, an
     arrangement fee of US$35,000 and a facility fee of US$20,000.

12.3 The legal fees and expenses referred to in Clause 12.1 and the arrangement
     fee referred to in Clause 12.2 shall be paid on or before the Closing Date
     and such amounts shall, if not already paid, be withheld from the advance
     of the Loan to be made pursuant to Clause 2.

13   SECURITY

     The Company shall not provide any additional security under this Agreement.

14   INDEMNITIES

14.1 The Company shall indemnify the Lender against any loss or liability, costs
     or expenses incurred by the Lender as a direct or indirect result of any
     breach by the Company of any of its obligations under this Agreement
     including any failure by the Company to issue Common Shares and/or CUFS or
     pay, to the Lender any amount due under this Agreement on its due date.

14.2 The Company shall, within three Trading Days of a demand from the Lender,
     pay to the Lender the amount of all costs and expenses (including legal
     fees and any disbursements) properly and reasonably incurred by the Lender
     in connection with the enforcement of, or the preservation of any of the
     Lender's rights under, this Agreement.

15   TERMINATION

15.1 The Lender shall be entitled to terminate this Agreement by notice to the
     Company immediately at any time if:

     (a)  the Company fails to obtain at the Shareholders Meeting to be held by
          a date that shall be not more than twenty (20) Business Days from the
          date of this Agreement, all necessary Shareholder Approval.

     (b)  the Company fails to pay any amount payable by it under this Agreement
          on its due date;

     (c)  the Company is in breach of any of its obligations or covenants under
          this Agreement,

     (d)  unless the Common Shares shall have been previously listed for trading
          on a US Stock Exchange, the Common Shares and/or CUFS cease to be
          Quoted on ASX or there shall occur any suspension of their Quotation
          on ASX;

     (e)  there shall occur any suspension or cessation of trading of the Common
          Shares on a US Stock Exchange or the Company is removed from the
          official list of the ASX or a US Stock Exchange while any amount is
          outstanding under this Agreement;

     (f)  the Company is or becomes unable to pay its debts as defined in
          section 123 of the Insolvency Act 1986;

                                       10

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     (g)  any petition, application or order is made or resolution proposed for
          the winding up or administration of the Company or any other member of
          the Group provided that this shall not apply to any such petition
          which is removed within 21 days of being made; or

     (h)  a receiver is appointed over all or any part of the assets or
          undertaking of the Company.

15.2 If this Agreement is terminated by the Lender in accordance with its terms
     then any part of the Loan which has not been advanced shall immediately be
     cancelled and any part of the Loan, together with accrued interest, and all
     other amounts accrued or outstanding under this Agreement shall become
     immediately due and payable.

16   COVENANTS

16.1 The Company covenants to the Lender that (otherwise than with the prior
     written consent of the Lender) it;

     (a)  will use all reasonable endeavours to obtain all necessary Shareholder
          Approval at the Shareholders Meeting;

     (b)  will use all reasonable endeavours to maintain the Quotation of the
          Common Shares and/or CUFS and CUFS on ASX;

     (c)  in connection with the contemplated Financing Transaction, will use
          all reasonable endeavours to register its Common Shares under the
          United States Securities and Exchange Act of 1934, as amended, and
          list its Common Shares for trading on a US Stock Exchange;

     (d)  subject to compliance with Section 16.1(a) above, will ensure on each
          day for so long as any amount remains outstanding under this
          Agreement, that it has the necessary shareholder authority to issue
          the requisite number of Lender's Shares required to satisfy a Loan
          Notice issued on that day in respect of a Conversion Amount equal to
          at least the then outstanding amount of the Loan including any
          interest capable of becoming due pursuant to Clause 4.1;

     (e)  will comply with its covenants set forth in Clause 10.3 above;

     (f)  will not, except in relation to a Financing Transaction, issue or
          agree to issue Common Shares or any other shares in the share capital
          of the Company other than (i) pursuant to this Agreement (ii) shares
          which are already issued at the date of this Agreement or which the
          Company at the date of this Agreement is contractually obliged to
          issue;

     (g)  will file in a timely manner all reports and other documents required
          of it under the Companies Act 1985, the ASX Rules and all other laws
          or regulations applicable to it;

     (h)  until such time as

          (A)  the Company shall have become a full reporting company under the
               Securities Exchange Act of 1934, as amended,

          (B)  the Common Shares shall have been approved for Quotation on a US
               Stock Exchange, and

          (C)  the SEC shall have declared effective the Company's registration
               statement covering the Lender's Shares, all as provided in the
               Registration Rights Agreement,

          the Company shall not take any action or file any document to
          terminate or suspend such registration or to terminate or suspend the
          Quotation of its Common Shares and/or CUFS on ASX or to have it
          removed from the official list of ASX and if seeking a listing

                                       11

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                                                                  Execution Copy

          on a US Stock Exchange, the Company will use all reasonable endeavours
          to procure completion of the steps set out in sub clauses 16.1(h)(A),
          (B) and (C) above;

     (i)  will take all steps reasonably necessary to preserve and continue the
          corporate existence of the Company;

     (j)  will immediately notify the Lender upon its becoming aware of:

          (A)  the suspension of the Common Shares and/or CUFS from Quotation on
               ASX or a US Stock Exchange;

          (B)  the Common Shares and/or CUFS ceasing to be Quoted on either ASX
               or a US Stock Exchange; or

          (C)  the Company being removed from the official list of the ASX.

     (k)  will not, at any time after the date hereof, until expiry of this
          Agreement effect any merger or consolidation of the Company whether by
          scheme of arrangement or otherwise with or into, or a transfer of all
          or any substantial part of the assets or undertaking of the Company to
          another entity (a "CONSOLIDATION EVENT") unless the resulting
          successor or acquiring entity (if not the Company) assumes by written
          instrument the obligation to deliver to the Lender such shares and/or
          securities as following such Consolidation Event the Lender is
          entitled to receive pursuant to this Agreement.

17   WITHHOLDING AND GROSSING-UP

17.1 Except as required by law, all payments due to the Lender under this
     Agreement will be made free and clear of all deductions and withholdings
     (whether in respect of Taxation, set- off, counter-claim or otherwise).

17.2 If any deduction or withholding is required by law to be made from any
     payment due to the Lender under this Agreement, the person who is obliged
     to make such payment will pay to the Lender such additional amount as is
     necessary to ensure that the Lender receives a net amount (after the
     deduction or withholding) equal to the amount which it would have received
     had the payment in question not been subject to the deduction or
     withholding.

17.3 If any payment received by the Lender under this Agreement from the Company
     (other than the fees and commissions referred to in Clause 12 is subject to
     Taxation, the person who is obliged to make such payment will pay to the
     Lender such additional amount as is necessary to ensure that the Lender
     receives and retains a net amount (after taking into account such Taxation
     and any Taxation payable in respect of such additional amount) equal to the
     full amount which it would have received and retained had the payment in
     question not been subject to Taxation.

18   NOTICES

18.1 Any demand, notice or other communication given or made under or in
     connection with this Agreement will be in writing and will, if otherwise
     given or made in accordance with this Clause 18 be deemed to have been duly
     given or made as follows:

     (a)  if sent by prepaid first class post, on the second Trading Day after
          the date of posting if posted in the UK for UK delivery and on the
          seventh Trading Day if posted for overseas delivery; or

     (b)  if delivered by hand, upon delivery; or

     (c)  if sent by facsimile or e-mail, on the day of transmission;

                                       12

<PAGE>

                                                                  Execution Copy

     provided however that, if it is delivered by hand or sent by facsimile or
     e-mail on a day which is not a Trading Day or after 4.00 pm London time on
     a Trading Day, it will instead be deemed to have been given or made on the
     next Trading Day.

     Any such demand, notice or other communication will, in the case of service
     by post or delivery by hand, be addressed (subject as provided in this
     Clause) to the recipient at the recipient's address stated in this
     Agreement or at such other address as may from time to time be notified in
     writing by the recipient to the sender as being the recipient's address for
     service.

18.2 Any such demand, notice or other communication will, in the case of service
     by facsimile or e-mail be sent to the recipient using the facsimile number
     or e-mail set out below.

     (a)  Fax the Company: (262) 253-9822

     (b)  E-mail the Company: rparry@zbbenergy.com or gdhahn@zbbenergy.com

     (c)  Fax the Lender: +1 305-932-3697 marked for the attention of Bob Press
          Esq.

     (d)  E-mail the Lender: bpress@m-equity.com

18.3 The provisions of this Clause 18 will not apply, in the case of service of
     court documents, to the extent that such provisions are inconsistent with
     Part 6 of the Civil Procedure Rules.

19   REMEDIES AND WAIVERS

     No failure to exercise, nor any delay in exercising, on the part of the
     Lender, any right or remedy under this Agreement shall operate as a waiver,
     nor shall any single or partial exercise of any right or remedy prevent any
     further or other exercise or the exercise of any other right or remedy. The
     rights and remedies provided in this Agreement are cumulative and not
     exclusive of any rights or remedies provided by law.

20   GOVERNING LAW AND JURISDICTION

     This Agreement is governed by and is to be construed in accordance with
     English law and the courts of England have exclusive jurisdiction to settle
     any dispute arising out of or in connection with this Agreement (including
     a dispute regarding the existence, validity or termination of this
     Agreement)

This Agreement has been entered into as a Deed on the date stated at the
beginning of this Agreement.

SIGNED as a deed by                 )
ZBB ENERGY CORPORATION              )
acting by                           )

/s/ Robert John Parry
-------------------------------------
Robert John Parry
Chief Executive Officer
                                        DIRECTOR

                                        DIRECTOR /SECRETARY

SIGNED as a deed by MONTGOMERY      )
CAPITAL PARTNERS, L.P               )
acting by                           )

                                       13

<PAGE>

                                                                  Execution copy

     provided however that, if it is delivered by hand or sent by facsimile or
     e-mail on a day which is not a Trading Day or after 4.00 pm London time on
     a Trading Day, it will instead be deemed to have been given or made on the
     next Trading Day.

     Any such demand, notice or other communication will, in the case of service
     by post or delivery by hand, be addressed (subject as provided in this
     Clause) to the recipient at the recipient's address stated in this
     Agreement or at such other address as may from time to time be notified in
     writing by the recipient to the sender as being the recipient's address for
     service.

18.2 Any such demand, notice or other communication will, in the case of service
     by facsimile or e-mail be sent to the recipient using the facsimile number
     or e-mail set out below.

     (a)  Fax the Company: (262) 253-9822

     (b)  E-mail the Company: rparry@zbbenergy.com or gdhahn@zbbenergy.com

     (c)  Fax the Lender: +1 305-932-3697 marked for the attention of Bob Press
          Esq.

     (d)  E-mail the Lender: bpress@m-equity.com

18.3 The provisions of this Clause 18 will not apply, in the case of service of
     court documents, to the extent that such provisions are inconsistent with
     Part 6 of the Civil Procedure Rules.

19   REMEDIES AND WAIVERS

     No failure to exercise, nor any delay in exercising, on the part of the
     Lender, any right or remedy under this Agreement shall operate as a waiver,
     nor shall any single or partial exercise of any right or remedy prevent any
     further or other exercise or the exercise of any other right or remedy. The
     rights and remedies provided in this Agreement are cumulative and not
     exclusive of any rights or remedies provided by law.

20   GOVERNING LAW AND JURISDICTION

     This Agreement is governed by and is to be construed in accordance with
     English law and the courts of England have exclusive jurisdiction to settle
     any dispute arising out of or in connection with this Agreement (including
     a dispute regarding the existence, validity or termination of this
     Agreement)

This Agreement has been entered into as a Deed on the date stated at the
beginning of this Agreement.

SIGNED as a deed by                 )
ZBB ENERGY CORPORATION              )
acting by                           )

                                        DIRECTOR

                                        DIRECTOR /SECRETARY

SIGNED as a deed by MONTGOMERY      )   /s/ ILLEGIBLE
CAPITAL PARTNERS, L.P               )   ----------------------------------------
acting by                           )   Portfolio Manager

                                       13<PAGE>

[LOGO]

 EMPIRE FINANCIAL GROUP, INC.
14 EAST 60TH STREET, 2ND FLOOR
       NY, NY 10022
       212-355-4849

                                                                November 9, 2005

Robert Parry
Chief Executive Officer
ZBB Energy Corporation
N93 W 14475 Whittaker Way
Menomonee Falls, WI 53051

Dear Mr. Parry:

This letter (the "AGREEMENT") constitutes the agreement between ZBB Energy
Corporation (the "Company") and Empire Financial Group, Inc. ("EMPIRE") that
Empire shall serve as the placement agent for the Company, in connection with a
proposed offer and private placement (the "Offering") of shares of the Company's
common stock and warrants to purchase additional shares of Company common stock
(the "SECURITIES"). Empire a validly registered and licensed broker-dealer; duly
authorized to act as a private placement agent and it is a member in good
standing of the NASD. It is currently contemplated that the Offering will raise
between $6-$12 million which is predicated on successful completion of the due
diligence investigation by Empire. Prior to the Offering of the Securities,
Empire will seek to obtain in a private placement a Bridge Loan of $1,100,000
for the Company. The contemplated terms and conditions of the Bridge Loan and
Offering of Securities shall be as set forth in the Summary of Proposed Terms
dated Friday, November 4, 2005, among the Company, Empire, Broadway Partners LLC
and Wharton Equity LLC, a copy of which is annexed hereto as Annex A and made a
part hereof (the "TERM SHEET").

        A. FEES AND EXPENSES. In connection with the services described above,
the Company shall pay to Empire the following:

                1. PLACEMENT AGENT'S FEE. As compensation for its services in
connection with the Offering and the Bridge Loan described below, the Company
agrees to pay Empire a nonrefundable retainer fee of $12,500 upon execution of
this letter agreement and an additional $12,500 upon completion of the Bridge
Loan referred to below. The Company shall pay to Empire a cash placement fee
equal to (i) $100,000 upon completion of the Bridge Loan described below, and
(ii) ten percent (10%) of the aggregate purchase price paid by each purchaser of
Securities that were placed in the Offering (collectively, the "PLACEMENT
AGENT'S FEE"). The Placement Agent's Fee will be deducted from the gross
proceeds of the Bridge Loan and the Securities sold at the Closing. The amount
of the retainer fee previously paid to Empire will be credited on a dollar for
dollar basis toward the cash portion of the Placement Agent's Fee.

<PAGE>

                2. EXPENSES. In addition to any fees payable to Empire hereunder
and regardless of whether an Offering is consummated, the Company hereby agrees
to reimburse Empire, within ten (10) days after written request therefor, all
reasonable travel and other actual and accountable out-of-pocket expenses
incurred in connection with Empire's engagement, including the reasonable fees
and expenses of Empire's counsel.

                3. WARRANTS: In addition to the Placement Agent's Fee, upon the
closing of the sale of securities in connection with the Offering, the Company
shall issue to the Placement Agent warrants to purchase shares of common stock
of the Company (the "WARRANTS") in an amount equal to 10% of the amount of
Securities issued or issuable by the Company in the Offering. The Warrants shall
be exercisable at 120% of the price of the Offering. The Warrants shall expire
five years from the date of issuance. The Warrants shall be in the same form,
including, without limitation, the same registration rights and anti-dilution
provisions, as the securities sold in the Offering; provided, however, the
Warrants shall include a "net issuance" exercise feature.

        B. NO-SHOP. Until the Offering contemplated hereby is completed, but no
later than 120 days from the date hereof (the "NO-SHOP PERIOD"), the Company
agrees that it will not negotiate with any other person relating to a possible
public or private offering or placement of the Company's securities; PROVIDED,
HOWEVER, that the No-Shop Period shall expire on December 15, 2005 and the
Company shall have the right to terminate this Agreement at any time after such
date in the event that the $1,100,000 Bridge Loan financing shall not have been
consummated by December 15, 2005.

        C. TERM AND TERMINATION OF ENGAGEMENT. Except as set forth below, the
term (the "TERM") of Empire's engagement will begin on the date hereof and end
on the earlier of the consummation of the Offering of the Securities or 10 days
after receipt by either Party hereto of written notice of termination; provided
that no such notice may be given by the Company during the No Shop Period,
subject to early termination as set forth in Paragraph B above. Notwithstanding
any such expiration or termination, Paragraphs D through N shall survive and
remain in full force and effect and be binding on the parties hereto, in
accordance with their terms.

        D. FEE TAIL. Empire shall be entitled to a Placement Agent's Fee,
calculated in the manner provided in Paragraph A, with respect to any securities
purchased in any subsequent offering ("SUBSEQUENT OFFERING") by investors whom
Empire had introduced to the Company during the Term if such Subsequent Offering
is consummated at any time within (i) the 24-month period following the
consummation of this Offering and (ii), if no Offering shall have been
consummated during the Term, the six month period following the expiration or
termination of this Agreement.

        E. FUTURE TRANSACTIONS. If, at any time during the Term, or within the
24-month period following consummation of the Offering of the Securities during
the Term, the Company or any of its subsidiaries (i) disposes of or acquires
business units or acquires any of its outstanding equity securities or makes any
exchange or tender offer or enters into a merger, consolidation or other
business combination or any recapitalization, reorganization, restructuring or
other similar transaction, including, without limitation, an extraordinary
dividend or distribution or a spin-off or split-off (each, a "TRANSACTION"), and
the Company decides to retain a financial advisor for such Transaction, Empire
shall have the right to act as one of the Company's financial advisors for any
such Transaction; or (ii) decides to finance or refinance any indebtedness using
a manager or agent, Empire (or any affiliate designated by Empire) shall have
the right to act as a manager, placement agent or lead agent with respect to
such financing or refinancing; or (iii) determines to raise funds by means of a
public offering or a Offering of equity or debt securities using an underwriter
or placement agent, Empire shall have the right to act as an underwriter,
initial purchaser or placement agent for such financing. In each case where
Empire so serves,

ZBB ENERGY CORPORATION                   2

<PAGE>

Empire shall be entitled to an allocation of such percentage of the total fees
paid in connection with the foregoing Transaction as shall be mutually
acceptable to the Company and the lead manager, agent or underwriter, provided,
that in no event shall Empire's percentage allocation be less than 20% of such
fees, unless otherwise agreed to in writing by it. If Empire or its affiliates
decides to accept any such engagement, the agreement governing such engagement
will contain, among other things, provisions for customary fees for Transactions
of similar size and nature and the provisions of this Agreement, including
indemnification, which are appropriate to such Transaction.

        F. USE OF INFORMATION. The Company will furnish Empire such written
information as Empire reasonably requests in connection with the performance of
its services hereunder. The Company understands, acknowledges and agrees that,
in performing its services hereunder, Empire will use and rely entirely upon
such information as well as publicly available information regarding the Company
and other potential parties to an Offering and that Empire does not assume
responsibility for independent verification of the accuracy or completeness of
any information, whether publicly available or otherwise furnished to it,
concerning the Company or otherwise relevant to an Offering, including, without
limitation, any financial information, forecasts or projections considered by
Empire in connection with the provision of its services.

        G. CONFIDENTIALITY. In the event of the consummation or public
announcement of any Offering, Empire shall have the right to disclose its
participation in such Offering, including, without limitation, the placement at
its cost of "tombstone" advertisements in financial and other newspapers and
journals. Empire agrees to keep confidential during the Term, and for five years
after the expiration or any termination, of this Agreement, all material
nonpublic information provided to it by the Company, except as required by law,
pursuant to an order of a court of competent jurisdiction or the request of a
regulatory authority having jurisdiction over Empire or its affiliates (a
"REGULATORY REQUEST"), or as contemplated by the terms of this Agreement,
provided Empire shall, if permitted by law, give notice to the Company of the
request or order (other than a Regulatory Request) to furnish the nonpublic
information. Notwithstanding any provision herein to the contrary, Empire may
disclose nonpublic information to its affiliates, agents and advisors whenever
Empire determines that such disclosure is necessary to provide the services
contemplated hereunder, provided that Empire advises such persons of the
obligation to maintain the confidentiality of such information and remains
liable under this Agreement for any breach of confidentiality by such
affiliates, agents and advisors. Notwithstanding any provision herein to the
contrary, this Section G shall not bar disclosure of, and Empire and the Company
and their respective representatives or agents may disclose, without limitation
of any kind, any information with respect to the "tax treatment" and "tax
structure" (in each case, within the meaning of Treasury Regulation Section
1.6011-4) of the Offering and related transactions and all materials of any kind
(including opinions or other tax analyses) that are provided to Empire or the
Company or such representatives or agents relating to such tax treatment and tax
structure, provided that with respect to any document or similar item, this
sentence shall only apply to such portions of the document or similar item that
relate to the tax treatment or tax structure of the Transactions.

        H. SECURITIES MATTERS. The Company shall be responsible for any and all
compliance with the securities laws applicable to it, including Regulation D and
the Securities Act of 1933, and Rule 506 promulgated thereunder, and unless
otherwise agreed in writing, all state securities ("blue sky") laws. Empire
agrees to cooperate with counsel to the Company in that regard.

        I. INDEMNITY. Empire and the Company agree to the indemnification
provisions as set forth in ANNEX B attached hereto.

ZBB ENERGY CORPORATION                 3

<PAGE>

        J. LIMITATION OF ENGAGEMENT TO THE COMPANY. The Company acknowledges
that Empire has been retained only by the Company, that Empire is providing
services hereunder as an independent contractor (and not in any fiduciary or
agency capacity) and that the Company's engagement of Empire is not deemed to
be on behalf of, and is not intended to confer rights upon, any shareholder,
owner or partner of the Company or any other person not a party hereto as
against Empire or any of its affiliates, or any of its or their respective
officers, directors, controlling persons (within the meaning of Section 15 of
the Act or Section 20 of the Securities Exchange Act of 1934), employees or
agents. Unless otherwise expressly agreed in writing by Empire, no one other
than the Company is authorized to rely upon this Agreement or any other
statements or conduct of Empire, and no one other than the Company is intended
to be a beneficiary of this Agreement. The Company acknowledges that any
recommendation or advice, written or oral, given by Empire to the Company in
connection with Empire's engagement is intended solely for the benefit and use
of the Company's management and directors in considering a possible Offering,
and any such recommendation or advice is not on behalf of, and shall not confer
any rights or remedies upon, any other person or be used or relied upon for any
other purpose. Empire shall not have the authority to make any commitment
binding on the Company. The Company, in its sole discretion, shall have the
right to reject any investor introduced to it by Empire.

        K. LIMITATION OF EMPIRE'S LIABILITY TO THE COMPANY. Empire and the
Company further agree that neither Empire nor any of its affiliates or any of
its their respective officers, directors, controlling persons (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act of 1934),
employees or agents shall have any liability to the Company, its security
holders or creditors, or any person asserting claims on behalf of or in the
right of the Company (whether direct or indirect, in contract, tort, for an act
of negligence or otherwise) for any losses, fees, damages, liabilities, costs,
expenses or equitable relief arising out of or relating to this Agreement or the
Services rendered hereunder, except for losses, fees, damages, liabilities,
costs or expenses that arise out of or are based on any action of or failure to
act by Empire and that are finally determined (by a court of competent
jurisdiction and after exhausting all appeals) to have resulted solely from the
gross negligence or willful misconduct of Empire. With respect to alleged
breaches of the Confidentiality provisions herein by Empire, the Company shall
have the right to pursue equitable relief in addition to any other remedy in
equity or law.

        L. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Any disputes which arise
under this Agreement, even after the termination of this Agreement, will be
heard only in the state or federal courts located in the City of New York, State
of New York. The parties hereto expressly agree to submit themselves to the
jurisdiction of the foregoing courts in the City of New York, State of New York.
The parties hereto expressly waive any rights they may have to contest the
jurisdiction, venue or authority of any court sitting in the City and State of
New York. In the event of the bringing of any action, or suit by a party hereto
against the other party hereto, arising out of or relating to this Agreement,
the party in whose favor the final judgment or award shall be entered shall be
entitled to have and recover from the other party the costs and expenses
incurred in connection therewith, including its reasonable attorneys' fees.

        M. NOTICES. All notices hereunder will be in writing and sent by
certified mail, hand delivery, overnight delivery or telefax, if sent to Empire,
to Empire Financial Group, Inc., 2170 West State Road 434 Suite #100 Longwood,
FL 32779 Attention Messrs. Steven M. Rabinovici and Donald Wojnowski, Jr., with
a copy to Morse, Zelnick, Rose & Lander, LLP, 405 Park Avenue, New York, NY
10022, Attention: Stephen A. Zelnick, Esq. and if sent to the Company, will be
mailed, delivered or telefaxed and confirmed to ZBB Energy Corporation, N93
W14475 Whittaker Way, Menomonee Falls, Wl 53051, with a copy to Gersten Savage,
LLP, 600 Lexington Avenue, New York, NY 10022, Attention: Stephen A. Weiss, Esq.
Notices sent by certified mail shall be deemed received five days

ZBB ENERGY CORPORATION                 4

<PAGE>

thereafter, notices sent by hand delivery or overnight delivery shall be deemed
received on the date of the relevant written record of receipt, and notices
delivered by telefax shall be deemed received as of the date and time printed
thereon by the telefax machine.

         N. MISCELLANEOUS. This Agreement shall not be modified or amended
except in writing signed by Empire and the Company. This Agreement shall not be
assigned without the prior written consent of Empire and the Company; provided,
however, that in the event of a Offering in which the Company is not the
surviving corporation or entity, the Company's remaining obligations (except
with respect to the Fee Tail and Future Offerings), if any, under this Agreement
shall remain in full force and effect and become obligations of the surviving
corporation or entity. This Agreement constitutes the entire agreement of Empire
and the Company with respect to the subject matter hereof and supersedes any
prior agreements. If any provision of this Agreement is determined to be invalid
or unenforceable in any respect, such determination will not affect such
provision in any other respect, and the remainder of the Agreement shall remain
in full force and effect. This Agreement may be executed in counterparts
(including facsimile counterparts), each of which shall be deemed an original
but all of which together shall constitute one and the same instrument.

        In acknowledgment that the foregoing correctly sets forth the
understanding reached by Empire and the Company, please sign in the space
provided below, whereupon this letter shall constitute a binding Agreement as of
the date indicated above,

                                         Very Truly Yours,
                                         EMPIRE FINANCIAL GROUP, INC..

                                         By: /s/ Don Vojnowski
                                             ------------------------------
                                             Don Vojnowski
                                             Chief Executive Officer

Confirmed and accepted as of
the 16 November 2005

ZBB ENERGY CORPORATION

By: Robert Parry
    ------------------------------
    Robert Parry
    Chief Executive Officer
    16 November 2005

ZBB ENERGY CORPORATION                 5

<PAGE>

                                     ANNEX A

                            SUMMARY OF PROPOSED TERMS

                             ZBB ENERGY CORPORATION

This Summary of Proposed Terms constitutes an indication of interest for
discussion purposes only and is subject to further due diligence, negotiations
and executed definitive agreements.

              PROPOSED TERM SHEET FOR FINANCINGS AND UNITED STATES
                              COMMON STOCK LISTING

           Unless otherwise indicated, all references to "dollars" or
                        "$" mean United States dollars.

                      THE BRIDGE LOAN  A (U.S.) $1,100,000 loan (the
                                       "BRIDGE LOAN") and 8,800,000 shares of
                                       common stock, $0.001 par value per share
                                       (the "COMMON STOCK") of ZBB Energy
                                       Corporation (the "COMPANY").

                                       The Bridge Loan will be evidenced by the
                                       Company's non-interest bearing
                                       convertible note (the "BRIDGE NOTE") due
                                       and payable (unless converted) on a date
                                       that shall be 18 months from the date of
                                       funding (the "MATURITY DATE"). The Bridge
                                       Note may be converted by the holder(s) at
                                       any time on or before the Maturity Date
                                       at a price per share (the "CONVERSION
                                       PRICE") equal to 50% of the volume
                                       weighted average price per share of the
                                       Company" (described below), as traded on
                                       a U.S. National Securities Exchange
                                       (defined as the New York Stock Exchange,
                                       the American Stock Exchange, the Nasdaq
                                       Stock Market, or the NASD
                                       Over-the-Counter Bulletin Board
                                       ("OTC-BB") or (if not then traded on such
                                       National Securities Exchange) on the
                                       over-the-counter pink sheets; in either
                                       case, for the 20 consecutive trading days
                                       immediately prior to the date that notice
                                       of conversion is given; provided,
                                       however, that in no event shall the
                                       Conversion Price be less than $0.50 per
                                       share (the "FLOOR PRICE").

                                       The Bridge Loan will be sold to Investors
                                       in units of securities (the "UNITS");
                                       each Unit consisting of a minimum of
                                       $25,000 of Bridge Notes and 200,000
                                       shares of Company Common Stock
                                       (pre-split). The Bridge Loan subscription
                                       agreement will contain covenants
                                       prohibiting Bridge Note holders or their
                                       affiliates from shorting Company Common
                                       Stock.

                            INVESTORS  Persons and/or institutional investors
                                       investing either individually or through
                                       a limited partnership or other entity
                                       formed for the sole purpose of investing
                                       in the Company.

U.S. REGISTRATION AND LISTING ON A     On or before consummation of the Bridge
NATIONAL SECURITIES EXCHANGE           Loan, the Company shall cause to be filed
                                       with the United States Securities and
                                       Exchange Commission ("SEC") a Form 10
                                       registration statement in order to
                                       register the publicly traded shares of
                                       Company common stock under The Securities
                                       Exchange Act of 1934, as amended (the
                                       "1934 Act"), In addition, the Company
                                       shall cause to be filed with the National
                                       Association of Securities Dealers, Inc.
                                       ("NASD"), a Form 15c-211 to cause the
                                       Company Common stock to be listed for
                                       trading on the

ZBB ENERGY CORPORATION                 6

<PAGE>

                                       OTC-BB.

                                       The Company shall use its best efforts to
                                       cause the Form 10 registration statement
                                       to be declared effective by the SEC and
                                       to have shares of Company Common Stock
                                       approved for trading on the OTC-BB or
                                       another National Securities Exchange (a
                                       "NATIONAL SECURITIES EXCHANGE LISTING")
                                       as soon as practicable.

WHARTON/BROADWAY                       The Company shall enter into a business
PARTNERS AGREEMENT                     development, marketing and financial
                                       consulting agreement (the "BUSINESS
                                       DEVELOPMENT AGREEMENT") with Wharton
                                       Equity Partners LLC ("WHARTON") and
                                       Broadway Partners LLC ("BROADWAY"). Such
                                       Business Development Agreement shall
                                       provide, inter alia, that Wharton and
                                       Broadway shall undertake for a period of
                                       two years to organize, initiate or
                                       otherwise provide the Company with
                                       potential joint venture partners,
                                       strategic alliances, marketing agreements
                                       and other financial assistance to enable
                                       the Company to develop its energy storage
                                       and related business (the "SERVICES"). It
                                       is contemplated that such Services shall
                                       include, without limitation, arranging
                                       for joint venture or related marketing
                                       agreements with business affiliates or
                                       associates engaged in (i) the
                                       development, engineering, production and
                                       marketing of thin film photovoltaic
                                       energy panels and equipment to
                                       manufacture such energy panels, (ii) the
                                       development of magnesium cell batteries,
                                       (iii) the marketing of the Company's
                                       energy storage systems in India and other
                                       developing countries.

                                       The Business Development Agreement shall
                                       provide that in sole consideration for
                                       such Services, the Company will issue to
                                       Wharton and Broadway in escrow, an
                                       aggregate of 16,000,000 shares of the
                                       Company's Common Stock (the "BUSINESS
                                       DEVELOPMENT STOCK"). Such shares of
                                       Business Development Stock shall provide
                                       that, for a period of 3D days, commencing
                                       12 months from the date of issuance (the
                                       "REDEMPTION PERIOD"), up to 90% of the
                                       shares of Business Development Stock
                                       shall be subject to redemption, for
                                       $0.001 per share, at the sole option of
                                       the Board of Directors of the Company if,
                                       in the exercise of the good faith
                                       discretion of the Board of Directors, the
                                       fair value of all of the Services
                                       actually provided by Wharton and Broadway
                                       to the Company during the 12 consecutive
                                       months following the date of the Business
                                       Development Agreement shall be less than
                                       $1.0 million; provided, however, if
                                       during such 12 month period:

                                              (a) the Company shall (in addition
                                       to the Bridge Financing) have been
                                       successful in completing a National
                                       Securities Exchange listing and one or
                                       more equity or equity type financings of
                                       not less than $6.0 million, all upon such
                                       terms and conditions as shall be
                                       satisfactory to the Board of Directors of
                                       the Company (the "Additional
                                       Financings"), none of the shares of
                                       Business Development Stock shall be
                                       subject to redemption; and

                                              (b) the Company shall have
                                       completed a National Securities Exchange
                                       Listing and shall have been successful in
                                       completing one

ZBB ENERGY CORPORATION                 7

<PAGE>

                                       or more Additional Financings on terms
                                       satisfactory to the Board of Directors of
                                       the Company of $3.0 million or more, only
                                       a maximum of 50% of the shares of
                                       Business Development Stock shall be
                                       subject to redemption. The Business
                                       Development Agreement shall also provide
                                       that to the extent that shares of
                                       Business Development Stock are issuable
                                       to Wharton, there shall be an appropriate
                                       pro-rata cutback in the number of shares
                                       of Company Common Stock and warrants
                                       issued to the members of Wharton Energy
                                       Partners LLC ("WHARTON ENERGY") in
                                       exchange for the acquisition of 100% of
                                       the members interest of Wharton Energy
                                       (the holder of $2.45 million of Series A
                                       convertible Preferred Stock of Idea One
                                       Inc.) pursuant to the letter of intent
                                       dated October 6, 2005 between the Company
                                       and Wharton Energy (the "IDEA ONE LOI");
                                       provided, however, in no event shall the
                                       members of Wharton Energy receive less
                                       than 40% of the number of shares of
                                       Company Common Stock and warrants
                                       contemplated by Idea One LOI.

                                       Unless otherwise agreed by the Board of
                                       Directors of the Company, the term
                                       "ADDITIONAL FINANCINGS" shall not mean or
                                       include any debt or related "mezzanine"
                                       financing obtained by the Company prior
                                       to March 31, 2006, unless the same shall
                                       consist of or include notes convertible
                                       into shares of Company Common Stock. If
                                       any financings, not constituting an
                                       Additional Financing, are obtained by or
                                       through Wharton, in lieu of the
                                       provisions of an October 6, 2005
                                       consulting agreement between Wharton and
                                       the Company, Wharton shall be entitled to
                                       a finders fee equal to 7% of the amount
                                       of such debt or related "mezzanine"
                                       financing obtained.

THE REVERSE STOCK SPLIT                At the time of consummation of the
                                       initial Additional Financing, based upon
                                       an initial Additional Financing at an
                                       assumed minimum per share price of $2.00
                                       per share, the Company shall consummate a
                                       one-for-eight reverse split of its
                                       outstanding common stock (the "REVERSE
                                       STOCK SPLIT"). Pursuant to the Reverse
                                       Stock Split, each outstanding share of
                                       Company Common Stock (including the
                                       Business Development Stock issued to
                                       Broadway and Wharton) and each share of
                                       Company Common Stock issuable (i) under
                                       any stock option plan, (ii) upon exercise
                                       of outstanding stock options or warrants
                                       to purchase Common Stock, or (iii) upon
                                       conversion into Common Stock of the
                                       Bridge Notes, shall represent 1/8 of a
                                       share of Company Common Stock or the
                                       right to purchase or receive 1/8 of a
                                       share of Company Common Stock; provided,
                                       that fractional shares shall be rounded
                                       to the nearest whole share.

                                       In the event that, for any reason, the
                                       Board of Directors of the Company shall
                                       elect to consummate an Additional
                                       Financing at a minimum per share price of
                                       less than $2.00 per share, then there
                                       shall be an appropriate pro rata
                                       reduction in the amount of the Reverse
                                       Stock Split.

ZBB ENERGY CORPORATION                 8
<PAGE>

THE ADDITIONAL FINANCING               Following completion of the Bridge Loan
                                       and the listing of the Company's Common
                                       Stock for trading on a National
                                       Securities Exchange, the Company will
                                       seek to consummate a private placement of
                                       between 3,000,000 and 6,000,000 shares of
                                       Common Stock (after giving effect to the
                                       1:8 Reverse Stock Split) at an assumed
                                       purchase price of $2.00 per share. Such
                                       Additional Financing may also include
                                       three year warrants to purchase up to 50%
                                       of the number of shaves of Common Stock
                                       sold in connection with the Additional
                                       Financing, at an exercise price of not
                                       less than 120% of the per share offering
                                       price of the Common Stock.

                                       Empire Financial Holding Company or one
                                       or more other investment bankers
                                       acceptable to the board of directors of
                                       the Company shall act as placement agent
                                       in connection with such Additional
                                       Financing. Empire and such other
                                       Placement Agents shall enter into a
                                       customary placement agency agreement with
                                       the Company that shall contain
                                       appropriate indemnification provisions
                                       for the placement agents and shall
                                       provide that such placement agents shall
                                       be entitled to receive customary
                                       compensation not to exceed 10% in cash
                                       and 10% in warrants.

CAPITALIZATION OF COMPANY              The Pro Forma Capitalization of the
                                       Company upon completion of the assumed
                                       1:8 Reverse Stock Split and the
                                       Additional Financing shall be as follows:

                                       (a) 10,245,578 shares of Company Common
                                       Stock owned by existing Company
                                       stockholders (based on 81,964,626
                                       currently outstanding shares);

                                       (b) approximately 3,000,000 shares of
                                       Company Common Stock issuable upon
                                       exercise of outstanding stock options
                                       (based on approximately 24,000,000
                                       currently outstanding options at exercise
                                       prices ranging from A$0.25 to US$0.50);
                                       provided, that (i) no outstanding options
                                       contain cashless exercise provisions, and
                                       (ii) except for approximately 6,500,000
                                       pre-split options (812,500 post split),
                                       all of such stock options are at exercise
                                       prices in excess of (U.S.) $0.25 ($2.00
                                       post-split), and approximately 5.4
                                       million (675,000 post split) of such "in
                                       the money" options expire on January 31,
                                       2006);

                                       (c) approximately 653,334 shares of
                                       Company Common Stock and 163,334 shares
                                       of Company Common Stock issuable upon
                                       exercise of warrants issued to acquire
                                       Wharton Energy under the Idea One LOI,
                                       and up to 653,334 contingent shares
                                       issuable upon commercialization of the
                                       Idea One magnesium cell battery
                                       technology;

                                       (d) a maximum of 2,000,000 shares of
                                       Company Common Stock held by Wharton and
                                       Broadway as Business Development Stock
                                       under the Business Development Agreement;

                                       (e) 1,000,000 shares of Company Common
                                       Stock held by the

ZBB ENERGY CORPORATION                 9

<PAGE>

                                       Investors in connection with the Bridge
                                       Loan and 1,000,000 additional shares of
                                       Company Common Stock issuable upon
                                       conversion of the Bridge Notes;

                                       (f) between 3,000,000 and 6,000,000 new
                                       shares of Company Common Stock issued at
                                       an assumed per share price of $2.00 in
                                       connection with the Additional
                                       Financings; and

                                       (g) between 1,500,000 and 3,000,000
                                       shares of Company Common Stock issuable
                                       at an assumed per share price of $2.40
                                       upon exercise of warrants that may be
                                       included in the Additional Financings.

CLOSING DATE OF BRIDGE LOAN            On or before November 21, 2005.

ESTIMATED TIMETABLE                    Filing of Form 10 Registration Statement
                                       with the SEC -November 30,2005;

                                       Application to list Common Stock of
                                       Company on OTC Bulletin Board - November
                                       30, 2005;

                                       Receipt of comments form SEC and NASD --
                                       January 5, 2006;

                                       Approval of Form 10 and Form 15C-211
                                       listing application - January 31, 2006;

                                       Completion of Private Placement
                                       Memorandum - January 31, 2006;

                                       Completion of Additional Financings
                                       -March 31, 2006.

DOCUMENTATION FOR BRIDGE LOAN          Subscription Agreement; Bridge Notes;
                                       Business Development Agreement;
                                       and Registration Rights Agreement
                                       All documentation to be in form
                                       acceptable to counsel to the Company
                                       and the Investors.

The foregoing represents the substance of our mutual intention at this time, but
in no way constitutes an agreement or an agreement to agree with respect to the
above contemplated financing. The legal rights and obligations of each of the
Company and the undersigned prospective Investor shall arise only pursuant to
the terms of a duty executed subscription agreement and exhibits thereto, which
shall be in form and substance satisfactory to each of the parties thereto and
their respective legal counsel.

The above term sheet is further subject to the approval of the Board of
Directors of the Company. This proposal shall remain open until the close of
business (5:00 P.M. New York time) on Friday, November 11, 2005; after which it
shall be null and void, unless approved by the Board of Directors of the
Company.

Subject to the foregoing, please indicate below your willingness, in principle,
to proceed with the above transaction.

Very Truly yours,

ZBB ENERGY CORPORATION                 10
<PAGE>

BROADWAY PARTNERS LLC                            WHARTON EQUITY LLC

By: s/ Robert M. Rubin                           By: s/ David Eisenberg
    -------------------------------------            ---------------------------
    Robert M. Rubin, Manager                         David Eisenberg, Manager

EMPIRE FINANCIAL GROUP INC.

By: s/ Ed Cabrera
    -------------------------------------
    Ed Cabrera, Head of Investment Banking

ACCEPTED AND AGREED TO SUBJECT
TO APPROVAL OF THE BOARD OF DIRECTORS:
DATED: THIS 4TH DAY OF NOVEMBER 2005:

ZBB ENERGY CORPORATION

By: /s/ Robert Parry
   ---------------------------------------
   Robert Parry, CEO

ZBB ENERGY CORPORATION                 11
<PAGE>

                                     ANNEX B

November 9, 2005

Empire Financial Group, Inc.
14 East 60th Street, 2nd Floor
NY, NY 10022

         Gentlemen:

         In connection with our engagement of Empire Financial Group, Inc.
("Empire") as our placement agent, we hereby agree to indemnify and hold
harmless Empire and its affiliates, and the respective controlling persons,
directors, officers, shareholders, agents and employees of any of the foregoing
(collectively the "Indemnified Persons"), from and against any and all claims,
actions, suits, proceedings (including those of shareholders), damages,
liabilities and expenses incurred by any of them (including the reasonable fees
and expenses of counsel), (collectively a "Claim"), which are (A) related to or
arise out of (i) any actions taken or omitted to be taken (including any untrue
statements made or any statements omitted to be made) by the Company, or (ii)
any actions taken or omitted to be taken by any Indemnified Person in connection
with our engagement of Empire, or (B) otherwise relate to or arise out of
Empire's activities on our behalf under Empire's engagement, and we shall
reimburse any Indemnified Person for all out-of-pocket expenses (including the
reasonable fees and expenses of counsel) incurred by such Indemnified Person in
connection with investigating, preparing or defending any such Claim to which
the Indemnified Person is, or is threatened to be made, a party. Notwithstanding
anything to the contrary set forth above, we will not be responsible for any
Claim, or for any reimbursement of any Indemnified Person's expenses in
connection with such Claim, which is finally judicially determined to have
resulted from the gross negligence or willful misconduct of any person seeking
indemnification for such Claim. We further agree that no Indemnified Person
shall have any liability to us for or in connection with our engagement of
Empire except for any Claim incurred by us as a result of such Indemnified
Person's gross negligence or willful misconduct.

         We further agree that we will not, without the prior written consent of
Empire, settle, compromise or consent to the entry of any judgment in any
pending or threatened Claim in respect of which indemnification may be sought
hereunder (whether or not any Indemnified Person is an actual or potential party
to such Claim), unless such settlement, compromise or consent includes an
unconditional, irrevocable release of each Indemnified Person hereunder from any
and all liability arising out of such Claim.

         Promptly upon receipt by an Indemnified Person of notice of any
complaint or the assertion or institution of any Claim with respect to which
indemnification is being sought hereunder, such Indemnified Person shall notify
us in writing of such complaint or of such assertion or institution but failure
to so notify us shall not relieve us from any obligation we may have hereunder,
except and only to the extent such failure results in the forfeiture by us of
substantial rights and defenses. If we so elect or are requested by such
Indemnified Person, we will assume the defense of such Claim, including the
employment of counsel reasonably satisfactory to such Indemnified Person and the
payment of the fees and expenses of such counsel. In the event, however, that
legal counsel to such Indemnified Person reasonably determines and provides
written correspondence to us, that having common counsel would

ZBB ENERGY CORPORATION                 12

<PAGE>

present such counsel with a conflict of interest or if the defendant in, or
target of, any such Claim, includes an Indemnified Person and us, and legal
counsel to such Indemnified Person reasonably concludes that there may be legal
defenses available to such Indemnified Person different from or in addition to
those available to us, then such Indemnified Person may employ its own separate
counsel to represent or defend it in any such Claim and we shall pay the
reasonable fees and expenses of such counsel. Notwithstanding anything herein to
the contrary, if we fail timely or diligently to defend, contest, or otherwise
protect against any Claim, the relevant Indemnified Party shall have the right,
but not the obligation, to defend, contest, compromise, settle, assert
crossclaims, or counterclaims or otherwise protect against the same, and shall
be fully indemnified by us therefor, in accordance with the terms of this
Agreement, including without limitation, for the reasonable fees and expenses of
its counsel and all amounts paid as a result of such Claim or the compromise or
settlement thereof. In addition, with respect to any Claim in which we assume
the defense, the Indemnified Person shall have the right to participate in such
Claim and to retain its own counsel therefor at its own expense.

         Empire agrees that it will indemnify and hold harmless the Company and
each of its directors and officers, employees, agents, stockholders and
affiliates against any Loss whatsoever (including, but not limited to, any and
all legal fees and other expenses) to which the Company or any such person or
entity may be subject solely as a result of statements made in the Private
Placement Memorandum based solely upon information supplied by Empire to the
Company in writing or based upon the gross negligence or willful misconduct of
Empire or any of its employees or agents in acting as Placement Agent for the
offering and sale hereunder.

         We agree that if any indemnity sought by an Indemnified Person
hereunder is held by a court to be unavailable for any reason then (whether or
not Empire is the Indemnified Person), we and Empire shall contribute to the
Claim for which such indemnity is held unavailable in such proportion as is
appropriate to reflect the relative benefits to us, on the one hand, and Empire
on the other, in connection with Empire's engagement referred to above, subject
to the limitation that in no event shall the amount of Empire's contribution to
such Claim exceed the amount of fees actually received by Empire from us
pursuant to Empire's engagement. We hereby agree that the relative benefits to
us, on the one hand, and Empire on the other, with respect to Empire's
engagement shall be deemed to be in the same proportion as (a) the total value
paid or proposed to be paid or received by us or our stockholders as the case
may be, pursuant to the Offering (whether or not consummated) for which you are
engaged to render services bears to (b) the fee paid or proposed to be paid to
Empire in connection with such engagement.

         Our indemnity, reimbursement and contribution obligations under this
Agreement shall be in addition to, and shall in no way limit or otherwise
adversely affect any rights that any Indemnified Party may have at law or at
equity.

         The validity and interpretation of this agreement shall be governed by
and construed and enforced in accordance with the laws of the State of New York
applicable to agreements made and to be fully performed therein (excluding the
conflicts of laws rules). Each of Empire and the Company hereby irrevocably
submits to the jurisdiction of any court of the State of New York, County of New
York or the United States District Court for the Southern District of New York
for the purpose of any suit, action or other proceeding arising out of this
agreement or the Offerings contemplated hereby, which is brought by or against
Empire or the Company and in connection therewith, each of Empire and the
Company (i) hereby irrevocably agrees that all claims in respect of any such
suit, action or proceeding may be heard and determined in any such court, (ii)
to the extent that it has acquired, or hereafter may acquire, any immunity from
jurisdiction of any such court or from any legal process therein, it hereby
waives, to the

ZBB ENERGY CORPORATION                 13

<PAGE>

fullest extent permitted by law, such immunity and (iii) agrees not to commence
any action, suit or proceeding relating to this agreement other that in any such
court. Each of Empire and the Company hereby waives and agrees not to assert in
any such action, suit or proceeding, to the fullest extent permitted by
applicable law, any claim that (a) it is not personally subject to the
jurisdiction of any such court, (b) it is immune from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to its property of (c) any suit,
action or proceeding is brought in an inconvenient forum.

         The provisions of this Agreement shall remain in full force and effect
following the completion or termination of Empire's engagement.

                                Very Truly Yours,

                                ZBB Energy Corporation

                                By:

                                /s/ Robert Parry
                                ----------------
                                Robert Parry

                                Chief Executive Officer
                                16 November 2005

Confirmed and agreed to:
EMPIRE FINANCIAL GROUP, INC.

By:

/s/ Don Wojnowski
-----------------
Don Wojnowski
Chief Executive Officer

Date:

ZBB ENERGY CORPORATION                 14

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