UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934


Date of report (Date of earliest event reported): July 13, 2015


ZBB Energy Corporation
      (Exact name of registrant as specified in charter)
 
 
Wisconsin
 
001-33540
 
39-1987014
(State or other jurisdiction
of incorporation)
 
(Commission
  file number)
 
(IRS Employer
Identification Number)
 
 
  N93 W14475 Whittaker Way, Menomonee Falls, Wisconsin    53051
 (Address of principal executive offices)    (Zip Code)
 
 
Registrant’s telephone number, including area code:      (262) 253-9800
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions.

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 
 
 
Item
1.01.
Entry Into a Material Definitive Agreement.
 
Closing of Transaction Contemplated by Securities Purchase Agreement
 
On April 17, 2015, ZBB Energy Corporation, a Wisconsin corporation (the “Company”), and Solar Power, Inc., a California corporation (“SPI”), entered into a Securities Purchase Agreement (the “Purchase Agreement”) pursuant to which the Company agreed to issue and sell to SPI for an aggregate purchase price of $33,390,000 a total of (i) 8,000,000 shares (the “Purchased Common Shares”) of the Company’s common stock (the “Common Stock”) and (ii) 28,048 shares (the “Purchased Preferred Shares”) of the Company’s Series C Convertible Preferred Stock (the “Series C Preferred Stock”).  The aggregate purchase price for the Purchased Common Shares was based on a purchase price per share of $0.6678 and the aggregate purchase price for the Purchased Preferred Shares was determined based on price of $0.6678 per common equivalent.  Pursuant to the Purchase Agreement, the Company also agreed to issue to SPI a warrant to purchase 50,000,000 shares of Common Stock for an aggregate purchase price of $36,729,000 and a per share exercise price equal to $0.7346 (the “Warrant”).  On July 13, 2015, the Company and SPI closed the transaction contemplated by the Purchase Agreement (the “Closing”) and the Company issued to SPI the Purchased Common Shares, the Purchased Preferred Shares and the Warrant.
 
The Purchased Preferred Shares were sold for $1000 per share and are convertible at a conversion price of $0.6678, prepaid at closing of the transaction; provided, that pursuant to the certificate of designation of preferences, rights and limitations of the Series C Preferred Stock (A) the first one-fourth of the Purchased Preferred Shares only become convertible upon the completion of five megawatts worth of solar projects in accordance with the Supply Agreement described below (the “Projects”), (B) the second one-fourth (the “Series C-2 Preferred Stock”) only become convertible upon the completion of 15 megawatts worth of Projects, (C) the third one-fourth (the “Series C-3 Preferred Stock”) only become convertible upon the completion of 25 megawatts worth of Projects and (D) the last one-fourth only become convertible upon the completion of 40 megawatts worth of Projects.  Upon any liquidation, dissolution or winding-up of the Company, SPI, as holder of the Purchased Preferred Shares, shall be entitled to receive, prior and in preference to the holders of Common Stock, an amount per Purchased Preferred Share equal to the higher of the purchase price of such Purchased Preferred Share and the amount payable to SPI if it had converted such Purchased Preferred Share into Common Stock immediately prior to such liquidation, dissolution or winding-up.  Except as provided in the certificate of designation of preferences, rights and limitations of the Series C Preferred Stock (the “Series C Certificate of Designation”) or otherwise required by law, the holders of Series C Preferred Stock do not vote together with the holders of Common Stock.  Pursuant to the Series C Certificate of Designation, the approval of holders of at least three-quarters of the shares of Common Stock and the Series C Preferred Stock (voting on an as-converted basis) is required to approve any amendment to the Company’s Articles of Incorporation.
 
The Warrant represents the right to acquire 50,000,000 shares of Common Stock at an exercise price equal to $0.7346.  The Warrant only becomes exercisable upon the completion of 40 megawatts worth of Projects.
 
The foregoing descriptions of the Series C Certificate of Designation and the Warrant do not purport to be complete and are qualified in their entirety by reference to the certificate of designation of preferences, rights and limitations of the Series C Preferred Stock and the Warrant, a copies of which are filed herewith as Exhibit 4.1 and 4.2, respectively, and are incorporated herein by reference.
 
 
 
 
 
 
 
 
Supply Agreement
 
On July 13, 2015, in connection with the Closing and pursuant to the Purchase Agreement the Company entered into a Supply Agreement with SPI pursuant to which the Company will sell and SPI will purchase certain products and services offered by the Company from time to time, including certain energy management system solutions for solar projects (the “Supply Agreement”).  The Supply Agreement provides that the Company will sell and SPI will purchase Products and related Services (each as defined in the Supply Agreement) that have an aggregated total of at least 40 megawatt of energy storage rated power output prior to the 48-month anniversary of the date of the Supply Agreement with certain lower megawatt thresholds being required to be met at the 12-month, 24-month and 36-month anniversaries of the Supply Agreement.
 
The Supply Agreement contains customary representations, warranties and covenants by the Company and SPI and prohibits the Company from selling lower quantities of its Products and Services (each as defined in the Supply Agreement) to other buyers at prices below those provided to SPI.  The Supply Agreement is terminable upon one year prior written notice by either party; however, neither party may terminate the Supply Agreement until all of the Purchased Preferred Shares have become convertible into shares of the Company’s Common Stock.  A copy of the Supply Agreement is filed herewith as Exhibit 10.1 and is incorporated herein by reference.  The foregoing description of the Supply Agreement does not purport to be complete and is qualified in its entirety by reference to the Supply Agreement, a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
 
 
Governance Agreement
 
On July 13, 2015, in connection with the Closing and pursuant to the Purchase Agreement the Company entered in to a Governance Agreement with SPI (the “Governance Agreement”).  Under the Governance Agreement, SPI is entitled to nominate one director to the Company’s board of directors for so long as SPI holds at least 10,000 Purchased Preferred Shares or 25 million shares of Common Stock or Common Stock equivalents (the “Requisite Shares”).  Additionally, for so long as SPI holds the Requisite Shares (1) following the time at which the Series C-2 Preferred Stock shall have become convertible in full, SPI shall be entitled to nominate a total of two directors and (2) following the time at which the Series C-3 Preferred Stock shall have become convertible in full, SPI shall be entitled to nominate a total of three directors; provided in no event shall SPI be entitled to nominate a number of directors to the Board that would represent a percentage of the Board greater than the percentage determined by dividing the number of Common Stock Equivalents held by SPI by the sum of (A) the total shares of the Company’s Common Stock outstanding and (B) the number of shares of Common Stock into which the Preferred Stock held by SPI is convertible.
 
The Governance Agreement provides that for so long as SPI holds the Requisite Shares, the Company will not take any of the following actions without the affirmative vote of SPI: (a) change the conduct by the Company’s business; (b) change the number or manner of appointment of the directors on the board; (c) cause the dissolution, liquidation or winding-up of the Company or the commencement of a voluntary proceeding seeking reorganization or other similar relief; (d) other than in the ordinary course of conducting the Company’s business, cause the incurrence, issuance, assumption, guarantee or refinancing of any debt if the aggregate amount of such debt and all other outstanding debt of the Company exceeds $10 million; (e) cause the acquisition, repurchase or redemption by the Company of any securities junior to the Purchased Preferred Shares; (f) cause the acquisition of an interest in any entity or the acquisition of a substantial portion of the assets or business of any entity or any division or line of business thereof or any other acquisition of material assets, in any such case where the consideration paid exceeds $2 million, or cause the Company to engage in certain other Fundamental Transactions (as defined in the certificate of designation of preferences, rights and limitations of the Series C Convertible Preferred Stock); (g) cause the entering into by the Company of any agreement, arrangement or transaction with an affiliate that calls for aggregate payments (other than payment of salary, bonus or reimbursement of reasonable expenses) in excess of $120,000; (h) cause the commitment to capital expenditures in excess of $7 million during any fiscal year; (i) cause the selection or replacement of the auditors of the Company; (j) enter into of any partnership, consortium, joint venture or other similar enterprise involving the payment, contribution, or assignment by the Company or to the Company of money or assets greater than $5 million; (k) amend or otherwise change its Articles of Incorporation or by-laws or equivalent organizational documents of the Company or any subsidiary in any manner that materially and adversely affects any rights of SPI; (l) amend or otherwise change the Articles of Incorporation or by-laws or equivalent organizational documents of any Subsidiary in any manner; (m) grant, issue or sell any equity securities (with certain limited exceptions); (n) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock; provided, however, that the dividends called for by Section 3(b) of the Certificate of Designation of Preferences, Rights and Limitations of the Company’s Series B Convertible Preferred Stock shall nonetheless continue to accrue and accumulate on each share of the Company’s Series B Convertible Preferred Stock; (o) reclassify, combine, split or subdivide, directly or indirectly, any of its capital stock; (p) permit any item of material intellectual property to lapse or to be abandoned, dedicated, or disclaimed, fail to perform or make any applicable filings, recordings or other similar actions or filings, or fail to pay all required fees and taxes required or advisable to maintain and protect its interest in such intellectual property; or (q) enter into any contract, arrangement, understanding or other similar agreement with respect to any of the foregoing.
 
 
 
 
 
 
 
Additionally, the Governance Agreement provides preemptive right to SPI in the case of certain issuances of equity securities.  The foregoing description of the Governance Agreement does not purport to be complete and is qualified in its entirety by reference to the Governance Agreement, a copy of which is filed herewith as Exhibit 10.2 and is incorporated herein by reference.
 
Item
3.02.
Unregistered Sales of Equity Securities.
 
The information contained in “Item 1.01 – Entry Into a Material Definitive Agreement” is incorporated herein by reference.
 
Item
5.02.
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
 
Appointment of Bradley Hansen as Chief Executive Officer.
 
Effective July 13, 2015, the board of directors of the Company appointed Bradley Hansen as Chief Executive Officer of the Company.  Since May 19, 2014, Mr. Hansen has served as Chief Executive Officer of Anhui Meineng Store Energy Co., Ltd., the Company’s China joint venture entity (the “JV Company”), and President and Chief Operating Officer of the Company.  Mr. Hansen will remain the Chief Executive Officer of the JV Company and keep his title as President of the Company.
 
In connection with his appointment as Chief Executive Officer, Mr. Hansen entered into an amendment to his employment agreement with the Company (the “Amendment”) pursuant to which his annual salary was increased to $300,000 per year and the initial term of his employment agreement was extended until June 30, 2019.  The Amendment provides that Mr. Hansen will be eligible to earn annual bonuses equal to 30% of his annual base salary.  Additionally, the Amendment provides that, subject to receipt of shareholder approval for any required increase in authorized shares under the Company’s articles of incorporation and/or equity plans, Mr. Hansen will receive a restricted stock unit award covering 1,500,000 shares of the Company’s Common Stock.  The restricted stock units will vest in full upon the completion of 40 megawatts worth of Projects; provided that upon Mr. Hansen’s termination without Cause, for Good Reason, Disability (each, as defined in Mr. Hansen’s employment agreement), or for death on or before June 30, 2019 a portion of the restricted stock units shall vest equal to the portion of the Purchased Preferred Shares that have become convertible on or before such termination.
 
 
 
 
 
 
 
A copy of the Amendment is filed with this Current Report on Form 8-K as Exhibit 10.3 and is hereby incorporated herein by reference. The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment.
 
Appointment of Eric Apfelbach as Vice Chairman of the Board of Directors.
 
In connection with Mr. Hansen’s appointment as Chief Executive Officer, effective July 13, 2015, Eric Apfelbach stepped down as Chief Executive Officer and was appointed Vice Chairman of the Board of Directors.  In connection with his appointment as Vice Chairman, Mr. Apfelbach received a stock option grant covering 75,000 shares of common stock that vests in three equal annual installments.  In addition, on July 13, 2015 Mr. Apfelbach’s employment was terminated and he entered into a Professional Services Agreement with the Company pursuant to which he will provide certain consulting services to the Company and will be paid at an hourly rate commensurate with the salary he was receiving under his employment agreement.
 
Appointment of Hoong Khoeng Cheong to the Board of Directors.
 
In connection with the Closing, effective July 13, 2015, the Company’s board of directors approved an increase in its size from seven to eight directors and appointed Hoong Khoeng Cheong to the board of directors of the Company in accordance with the Governance Agreement to fill the vacancy created by such increase.  Mr. Cheong will serve as a Class I director with a term expiring at the 2017   Annual Meeting of the Corporation’s shareholders.  Mr. Cheong is currently the Chief Operating Officer of SPI, and as such may be deemed to have a material interest in the transaction between the Company and SPI.  The information contained in “Item 1.01 – Entry Into a Material Definitive Agreement” is incorporated herein by reference.  Mr. Cheong is not expected to be named to any committees.
 
Item
5.03.
Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
 
In connection with the Closing, on July 9, 2015 the Company filed the certificate of designation of preferences, rights and limitations of the Series C Convertible Preferred Stock with the Office of the Secretary of State of Wisconsin.  The information disclosed in Item 1.01 of this Current Report on Form 8-K with respect to the certificate of designation of preferences, rights and limitations of the Series C Convertible Preferred Stock is incorporated by reference into this Item 5.03. The foregoing description of the certificate of designation of preferences, rights and limitations of the Series C Convertible Preferred Stock does not purport to be complete and is qualified in its entirety by reference to the certificate of designation of preferences, rights and limitations of the Series C Convertible Preferred Stock, a copy of which is filed herewith as Exhibit 4.1 and is incorporated herein by reference.
 
Item
5.07.
Submission of Matters to a Vote of Security Holders.
 
On July 9, 2015, the Company held a special meeting of shareholders (the “2015 Special Meeting”).  The certified results of the matters voted upon at the 2015 Special Meeting, each of which are more fully described in the Company’s Proxy Statement for the 2015 Special Meeting filed with the Securities and Exchange Commission on May 20, 2015, are as follows:
 
The Company’s shareholders approved the proposal to approve and ratify, for purposes of Section 713 of the Company Guide of the NYSE MKT, LLC, the issuance of securities of the Company under the terms of: (a) that certain Securities Purchase Agreement by and between the Company and Solar Power, Inc. dated as of April 17, 2015, which provides for the issuance of (i) 8,000,000 shares of the Company’s common stock, (ii) 28,048 shares of the Company’s Series C Convertible Preferred Stock (the “Series C Preferred Stock”) and (iii) a warrant to purchase 50,000,000 shares of the Company’s common stock (the “Warrant”); (b) the Certificate of Designation of Preferences, Rights and Limitations governing the Series C Preferred Stock; and (c) the Warrant, with the votes cast as follows:
 
 
 
 
 
 
 
For
Against
Abstain
15,721,910
530,865
83,923

The Company’s shareholders approved the proposal to approve an amendment to the Company’s articles of incorporation to change the name of the Company to EnSync, Inc., with the votes cast as follows:
 
For
Against
Abstain
16,857,218
499,457
49,276
 
Item
9.01. Financial Statements and Exhibits.
 
The exhibits required to be filed as a part of this Current Report on Form 8-K are listed in the Exhibit Index attached hereto and incorporated herein by reference.
 
 
 
 
 

 
SIGNATURES
 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
   ZBB Energy Corporation
   
 Dated:   July 14, 2015   By:       /s/ Bradley Hansen                                       
  Name: Bradley Hansen
  Title:   Chief Executive Officer
 

 
 
 
 
 
EXHIBIT INDEX
 
Exhibit No.
Exhibit Description
 
Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock
 
4.2
Form of Warrant (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on April 17, 2015)
 
10.1
Form of Supply Agreement (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on April 17, 2015)
 
Governance Agreement between ZBB Energy Corporation and Solar Power Inc. dated July 13, 2015
 
Amendment to Employment Agreement with Bradley Hansen dated July 13, 2015
 
 
 
 
Exhibit 4.1
 
 
ZBB ENERGY CORPORATION
 
CERTIFICATE OF DESIGNATION
OF PREFERENCES, RIGHTS AND LIMITATIONS
OF

SERIES C-1 CONVERTIBLE PREFERRED STOCK
 
SERIES C-2 CONVERTIBLE PREFERRED STOCK
 
SERIES C-3 CONVERTIBLE PREFERRED STOCK
 
SERIES C-4 CONVERTIBLE PREFERRED STOCK
 
Pursuant to Sections 180.1002 and 180.0602 of the Wisconsin Business Corporation Law
 
Pursuant to the authority granted to and vested in the Board of Directors (the “ Board of Directors ”) of ZBB Energy Corporation, a Wisconsin corporation (the “ Corporation ”), in accordance with the Articles of Incorporation of the Corporation, as amended, the following resolutions were duly adopted by the Board of Directors:
 
WHEREAS, the Articles of Incorporation of the Corporation provide for a class of its authorized stock known as preferred stock, comprised of Ten Million (10,000,000) shares, $0.01 par value per share, issuable from time to time in one or more series; and
 
WHEREAS, the Board of Directors is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of preferred stock and the number of shares constituting any series and the designation thereof, of any of them; and
 
WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to a series of the preferred stock, which shall consist of up to 28,048 shares of the preferred stock which the Corporation has the authority to issue, with stated value of $1000 per share, as follows:
 
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby adopt an amendment to the Articles of Incorporation to create a series of preferred stock that may be issued for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of preferred stock as follows:
 
 
 
 
 

 
TERMS OF PREFERRED STOCK

Section 1 .                       Definitions . For the purposes hereof, the following terms shall have the following meanings:

“ Affiliate ” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act.

“ Alternate Consideration ” shall have the meaning set forth in Section 7(b) .

“ Business Day ” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of Wisconsin are authorized or required by law or other governmental action to close.

“ Commission ” means the United States Securities and Exchange Commission.

“ Common Stock ” means the Corporation’s common stock, par value $0.01 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed.

“ Common Stock Equivalents ” means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“ Conversion Date ” shall have the meaning set forth in Section 6(a) .

“ Conversion Price ” shall have the meaning set forth in Section 6(b) .

“ Conversion Shares ” means the shares of Common Stock issuable upon conversion of the shares of Preferred Stock in accordance with the terms hereof.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“ Existing Preferred Stock ” means the outstanding shares of Series B Convertible Preferred Stock of the Corporation.

“ Fundamental Transaction ” shall have the meaning set forth in Section 7(b) .

“ Holders ” means the holders of shares of Preferred Stock (each, a “ Holder ”).
 
 
 
2
 

 
“ Junior Securities ” means the Common Stock and all other Common Stock Equivalents of the Corporation other than those securities which are explicitly senior or pari passu to the Preferred Stock in dividend rights or liquidation preference.

“ Liquidation ” shall have the meaning set forth in Section 5 .

“ Notice of Conversion ” shall have the meaning set forth in Section 6(a) .

“ Person ” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
 
“ Preferred Stock ” shall have the meaning set forth in Section 2 .

“ Purchase Agreement ” means the Securities Purchase Agreement, dated as of April 17, 2015, among the Corporation and the original Holder, as amended, modified or supplemented from time to time in accordance with its terms.

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“ Stated Value ” shall have the meaning set forth in Section 2 .

“ Successor Entity ” shall have the meaning set forth in Section 7(b) .

“ Trading Day ” means a day on which the principal Trading Market is open for trading, or if the Common Stock is not listed or quoted on any Trading Market, “Trading Day” means a “Business Day”.
 
“ Trading Market ” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

“ Transfer Agent ” means Computershare, the current transfer agent of the Company, with a mailing address of 2 North LaSalle Street, Chicago, IL 60602 and a facsimile number of 312-601-4348, and any successor transfer agent of the Company.
 
 
 
3
 
 
 
Section 2 .                       Designation, Amount and Par Value . The preferred stock shall be designated as follows.  7012 shares shall be designated as Series C-1 Convertible Preferred Stock (“ C-1 Preferred ”), 7012 shares shall be designated as Series C-2 Convertible Preferred Stock (“ C-2 Preferred ”), 7012 shares shall be designated as Series C-3 Convertible Preferred Stock (“ C-3 Preferred ”) and 7012 shares shall be designated as Series C-4 Convertible Preferred Stock (“ C-4 Preferred ”, and together with the C-1 Preferred, C-2 Preferred and C-3 Preferred, the “ Preferred Stock ”).  Each share of Preferred Stock shall have a par value of $0.01 per share and a stated value equal to $1000 (the “ Stated Value ”). Except with respect to when such shares shall become convertible pursuant to Section 6(a) below or as required by law, the relative rights, preferences and limitations of the C-1 Preferred, C-2 Preferred, C-3 Preferred and C-4 Preferred are identical in all respects.

Section 3 .                       Dividends .

a)            Dividends .  So long as any shares of Preferred Stock are outstanding, no dividends shall be paid or declared and set apart for payment upon the Junior Securities by the Corporation.

b)            Other Securities . So long as any Preferred Stock shall remain outstanding, the Corporation shall not redeem, purchase or otherwise acquire directly or indirectly more than a de minimis amount of any Junior Securities other than as to repurchases of Common Stock or Common Stock Equivalents from departing officers or directors, and provided that, while any of the Preferred Stock remains outstanding, such repurchases shall not exceed an aggregate of $100,000 in any fiscal year from all officers and directors.

Section 4 .                       Voting Rights .  Except as otherwise provided herein or as otherwise required by law, the Preferred Stock shall have no voting rights.  Provided however, as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the Holders of 50.1% or more of the then outstanding shares of the Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Preferred Stock or alter or amend this Certificate of Designation, (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a Liquidation (as defined in Section 5 ) senior to, or otherwise pari passu with, the Preferred Stock, (c) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the Holders, (d) increase the number of authorized shares of Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing. Except as required by law, holders of Series C-1 Preferred, C-2 Preferred, C-3 Preferred and C-4 Preferred shall not have any separate class voting rights.  Provided further, as long as any shares of Preferred Stock are outstanding, the Articles of Incorporation or by-laws of the Corporation shall be not amended, altered or repealed, and new Articles of Incorporation or by-laws may not be enacted, without the vote of at least three-quarters of the shares of Common Stock and the Preferred Stock (voting on an as-converted basis assuming all of the conditions for conversion under this Certificate of Designations for the Preferred Stock have been satisfied) voting together being cast at a meeting of the shareholders duly called for such purpose in favor of such action.  For the avoidance of doubt, the vote required by the preceding sentence is in addition to, and not in place of, the vote required by Article VIII of the Articles of Incorporation for such action.
 
 
 
4
 

 
Section 5 .                     Liquidation . Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “ Liquidation ”) or a Fundamental Transaction, the Holders shall be entitled to receive out of the assets of the Corporation an amount equal to higher of (a) the Stated Value and (b) the amount payable to the Holder if it had converted the Preferred Stock into Common Stock immediately prior to the Liquidation or Fundamental Transaction, as the case may be, for each share of Preferred Stock after any distribution or payment to the holders of the Existing Preferred Stock and before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Corporation shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be ratably distributed among the Holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.

Section 6 .                       Conversion .

a)            Conversions at Option of Holder . Shares of C-1 Preferred shall become convertible into shares of Common Stock after the Corporation receives final payment for energy storage systems with discharge time of two or more hours (“ Energy Storage Systems ”) for solar projects in accordance with the Supply Agreement between the Corporation and Solar Power, Inc. dated _______, 2015 (“ Solar Projects ”) with an aggregate power rating exceeding 5 megawatts.  Shares of C-2 Preferred shall become convertible into shares of Common Stock after the Corporation receives final payment for Energy Storage Systems for Solar Projects with an aggregate power rating exceeding a total of 15 megawatts.  Shares of C-3 Preferred shall become convertible into shares of Common Stock after the Corporation receives final payment for Energy Storage Systems for Solar Projects with an aggregate power rating exceeding a total of 25 megawatts.  Shares of C-4 Preferred shall become convertible into shares of Common Stock after the Corporation receives final payment for Energy Storage Systems for Solar Projects with an aggregate power rating exceeding a total of 40 megawatts.  Once convertible in accordance with the preceding sentence, shares of Preferred Stock may be converted at any time and from time to time at the option of the Holder thereof, and without any amount being paid by the Holder thereof, into that number of shares of Common Stock (subject to the limitations set forth in Section 6(d) ) determined by dividing the Stated Value of such share of Preferred Stock by the Conversion Price.  Holders shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as Annex A (a “ Notice of Conversion ”). Each Notice of Conversion shall specify the number of shares of Preferred Stock to be converted, the number of shares of Preferred Stock owned prior to the conversion at issue, the number of shares of Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date may not be prior to the date the applicable Holder delivers by facsimile such Notice of Conversion to the Corporation (such date, the “ Conversion Date ”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. To effect conversions of shares of Preferred Stock, a Holder shall not be required to surrender the certificate(s) representing the shares of Preferred Stock to the Corporation unless all of the shares of Preferred Stock represented thereby are so converted, in which case such Holder shall deliver the certificate representing such shares of Preferred Stock promptly following the Conversion Date at issue.  Shares of Preferred Stock converted into Common Stock or redeemed in accordance with the terms hereof shall be canceled and shall not be reissued.
 
 
 
5
 

 
b)            Conversion Price .  The conversion price for the Preferred Stock shall equal $0.6678 subject to adjustment herein (the “ Conversion Price ”). For the avoidance of doubt and notwithstanding anything to the contrary herein or in any other Transaction Document (as defined in the Purchase Agreement), no payment shall be required to be made by any Holder in connection with any conversion of any shares of Preferred Stock into shares of Common Stock in accordance with the terms hereof, in addition to the payment made by the original Holder at the Closing (as defined in the Purchase Agreement) of the Purchase Agreement. 

 
c)
Mechanics of Conversion

i.            Delivery of Certificate Upon Conversion . Certificates for Conversion Shares shall be transmitted by physical delivery to the address specified by the Holder in the Notice of Exercise by the date that is two (2) Trading Days after such Conversion Date.

ii.            Reservation of Shares Issuable Upon Conversion . The Corporation covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Preferred Stock as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Preferred Stock), not less than such aggregate number of shares of the Common Stock as shall be issuable (taking into account the adjustments and restrictions of Section 7 ) upon the conversion of the then outstanding shares of Preferred Stock.  The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable, free and clear of all liens.

iii.            Fractional Shares of Common Stock . No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Preferred Stock.   As to any fraction of a share which the Holder would otherwise be entitled to receive upon such conversion, the Corporation shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.

iv.            Obligation Absolute ; Partial Liquidated Damages .  The Corporation’s obligation to issue and deliver the Conversion Shares upon conversion of Preferred Stock in accordance with the terms hereof is absolute and unconditional, irrespective of any action or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by such Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of law by such Holder or any other person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to such Holder in connection with the issuance of such Conversion Shares; provided , however , that such delivery shall not operate as a waiver by the Corporation of any such action that the Corporation may have against such Holder. If the Corporation fails to deliver to the Holder such Conversion Shares on the second Trading Day after the Share Delivery Date applicable to such conversion, the Corporation shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $5,000 of Stated Value of Preferred Stock being converted, $50 per Trading Day (increasing to $100 per Trading Day on the third Trading Day and increasing to $200 per Trading Day on the sixth Trading Day after such damages begin to accrue) for each Trading Day after such second Trading Day after the Share Delivery Date until such Conversion Shares are delivered or Holder rescinds such conversion. Nothing herein shall limit the Holder’s right to pursue actual damages for the Corporation’s failure to deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.
 
 
 
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v.            Transfer Taxes .  The issuance of certificates for shares of the Common Stock on conversion of Preferred Stock shall be made without charge to the Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holders of such shares of Preferred Stock and the Corporation shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid.

Section 7 .                       Certain Adjustments .

a)            Stock Dividends and Stock Splits .  If the Corporation, at any time while Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of, or payment of a dividend on, Preferred Stock), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Corporation, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Corporation) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to this Section 7(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
 
 
 
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b)            D istributions . During such time as any Preferred Stock is outstanding, if the Corporation shall declare or make any dividend or other distribution of its assets (or   rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), then, in each such case, upon conversion the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the Conversion Shares, as applicable immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution. Such portion of the Distribution shall be held in abeyance for the benefit of the Holder until the Holder converts the Preferred Stock.
 
c)            Fundamental Transaction .  If, at any time while Preferred Stock is outstanding, (i) the Corporation, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Corporation with or into another Person, (ii) the Corporation, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Corporation, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) the Corporation, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “ Fundamental Transaction ”), then, upon any subsequent conversion of Preferred Stock, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the greater of (i) the amount the Holder would receive for such Conversion Share pursuant to Section  hereof and (ii) the number of shares of Common Stock of the successor or acquiring corporation or of the Corporation, if it is the surviving corporation, and any additional consideration (the “ Alternate Consideration ”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which Preferred Stock is convertible immediately prior to such Fundamental Transaction.  For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Corporation shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of Preferred Stock following such Fundamental Transaction.  To the extent necessary to effectuate the foregoing provisions, any successor to the Corporation or surviving entity in such Fundamental Transaction shall file a new Certificate of Designation with the same terms and conditions and issue to the Holders new preferred stock consistent with the foregoing provisions and evidencing the Holders’ right to convert such preferred stock into Alternate Consideration.  The Corporation shall cause any successor entity in a Fundamental Transaction in which the Corporation is not the survivor (the “ Successor Entity ”) to assume in writing all of the obligations of the Corporation under this Certificate of Designation and the other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions of this Section 7(b) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Preferred Stock, deliver to the Holder in exchange for this Preferred Stock a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Preferred Stock which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Preferred Stock (without regard to any limitations on the conversion of this Preferred Stock) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Preferred Stock immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Certificate of Designation and the Other Transaction Documents referring to the “Corporation” shall refer instead to the Successor Entity), and may exercise every right and power of the Corporation and shall assume all of the obligations of the Corporation under this Certificate of Designation and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Corporation herein.
 
 
 
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d)            Calculations .  All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.  For purposes of this Section 7 , the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the number of shares of Common Stock (excluding any treasury shares of the Corporation) issued and outstanding.
 
e)            Notice to the Holders .
 
i.            Adjustment to Conversion Price .  Whenever the Conversion Price is adjusted pursuant to any provision of this Section 7 , the Corporation shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

ii.            Notice to Allow Conversion by Holder .  If (A) the Corporation shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Corporation shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of this Preferred Stock, and shall cause to be delivered to each Holder at its last address as it shall appear upon the stock books of the Corporation, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice.  To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Corporation or any of the Subsidiaries, the Corporation shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.  The Holder shall remain entitled to convert any outstanding Preferred Stock (or any part hereof) during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
 
 
 
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Section 9 .                       Miscellaneous .

a)            Notices .  Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Corporation’s President or Chief Executive Officer at the Corporation’s principal place of business on file with the Wisconsin Department of Financial Institutions, or such facsimile number or other address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section 9 .  Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of such Holder appearing on the books of the Corporation.  Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second (2 nd ) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

b)            Lost or Mutilated Preferred Stock Certificate .  If a Holder’s Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.
 
 
 
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c)            Governing Law .  All questions concerning the construction, validity, enforcement and interpretation of this Certificate of Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of Wisconsin, without regard to the principles of conflict of laws thereof.
 
d)            Waiver .  Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designation or a waiver by any other Holders.  The failure of the Corporation or a Holder to insist upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation on any other occasion.  Any waiver by the Corporation or a Holder must be in writing.
 
e)            Severability .  If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.  If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law.

f)            Next Business Day .  Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

g)            Headings .  The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.

h)            Status of Converted or Redeemed Preferred Stock .  If any shares of Preferred Stock shall be converted, redeemed or reacquired by the Corporation, such shares shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Preferred Stock.

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RESOLVED, FURTHER, that the chairman, chief executive officer, president or any vice-president, and the secretary or any assistant secretary, of the Corporation be and they hereby are authorized and directed to prepare and file Articles of Amendment to the Articles of Incorporation of the Corporation including a Certificate of Designation of Preferences, Rights and Limitations of Series C-1 Convertible Preferred Stock, Series C-2 Convertible Preferred Stock, Series C-3 Convertible Preferred Stock, Series C-4 Convertible Preferred Stock setting forth the terms of the Preferred Stock, which upon effectiveness of such filing shall be deemed a part of the Articles of Incorporation in accordance with the foregoing resolution and the provisions of Wisconsin law.
 
 
 
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ANNEX A

NOTICE OF CONVERSION

(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF PREFERRED STOCK)

The undersigned hereby elects to convert the number of shares of Series C-[●] Convertible Preferred Stock indicated below into shares of common stock, par value $0.01 per share (the “ Common Stock ”), of ZBB Energy Corporation, a Wisconsin corporation (the “ Corporation ”), according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as may be required by the Corporation in accordance with the Purchase Agreement pursuant to which the Preferred Stock was issued. No fee will be charged to the Holders for any conversion, except for any such transfer taxes.

Conversion calculations:

Date to Effect Conversion: ______________________________________________
 
Number of shares of Preferred Stock owned prior to Conversion: _________________ 
 
Number of shares of Preferred Stock to be Converted: _________________________
 
Stated Value of shares of Preferred Stock to be Converted: _____________________
 
Number of shares of Common Stock to be Issued: ____________________________
 
Applicable Conversion Price:____________________________________________
 
Number of shares of Preferred Stock owned subsequent to Conversion: ____________
Address for Delivery: ______________________
 
[HOLDER]
 
By:___________________________________
     Name:
     Title:
 
 
 
 
 
Exhibit 10.2
 
GOVERNANCE AGREEMENT
 
THIS GOVERNANCE AGREEMENT (this “ Agreement ”), by and between ZBB Energy Corporation, a Wisconsin corporation (the “ Company ”), and Solar Power, Inc. and its affiliates (the “ Investor ”) is entered into as of this 13th day of July, 2015.
 
WHEREAS , on April 17, 2015, the Investor and the Company entered into a Securities Purchase Agreement (the “ Securities Purchase Agreement ”) pursuant to which the Investor agreed to acquire, and the Company agreed to issue, 8,000,000 shares of the Company’s common stock (the “ Common Shares ”), 42,000,000 shares of the Company’s Series C Convertible Preferred Stock (the “ Preferred Shares ”) and a warrant issued by the Company (the “ Warrant ”);
 
WHEREAS , the Preferred Shares are convertible into 42,000,000   shares of the Company’s common stock upon the achievement of certain milestones (the “ Conversion Shares ”), and the Warrant is exercisable by the holder thereof for issuance of up to 50,000,000 shares of the Company’s common stock upon the achievement of certain milestones (the “ Warrant Shares ”, and together with the Common Shares and the Conversion Shares, the “ Subject Shares ”); and
 
WHEREAS , as a condition and inducement to the willingness of the Company and the Investor to enter into the Securities Purchase Agreement, the Company and the Investor have agreed to enter into this Agreement;
 
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
 
1.             Definitions . In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings set forth in this Section.
 
(a)           “ Affiliate ” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.
 
(b)           “ Beneficially Own ” with respect to any securities means having “beneficial ownership” of such securities (as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, including without limitation, the 60-day provision in paragraph (d)(1)(i) thereof).  The terms “ Beneficial Ownership ” and “ Beneficial Owner ” have correlative meanings.
 
(c)           “ Board ” means the board of directors of the Company.
 
(d)           “ Director ” means a member of the Board.
 
(e)           “ Common Stock Equivalents ” means the sum of the Common Stock held by the Investor and the number of shares of Common Stock into which the Preferred Stock held by the Investor is convertible.
 
 
 
 
 
 
 
(f)           “ Equity Securities ” means any Common Stock or any rights, warrants or options to subscribe for or purchase Common Stock.
 
(g)           “ Junior Securities ” has the meaning ascribed thereto in the Certificate of Designations for the Preferred Stock.
 
(h)            “ Law ” means any federal, state, local or foreign Order, writ, injunction, judgment, settlement, award, decree, statute, law, rule or regulation, including common law.
 
(i)           “ Permitted Issuance ” means any issuance by the Company of Equity Securities (1) to officers, employees, directors or consultants of the Company and its subsidiaries pursuant to equity incentive plans approved by the Company’s Board (including an Investor Director (as defined below) if one is serving on the Board at the time such equity plan is approved by the Board) and the securities issued upon exercise of such grants, (2) pursuant to the conversion or exchange of any securities issued to the Investor pursuant to or in connection with the Securities Purchase Agreement or any other securities of the Company outstanding as of the date hereof into Capital Stock, or the exercise of any warrants or other rights issued to the Investor pursuant to or in connection with the Securities Purchase Agreement or any other warrants or rights outstanding as of the date hereof to acquire Capital Stock; (3) pursuant to a bona fide firm commitment underwritten public offering; (4) in connection with a joint venture, strategic alliance or other commercial relationship with any Person (including Persons that are customers, suppliers and strategic partners of the Company) relating to the operation of the Company’s business and for which a primary purpose thereof is not raising capital; or (5) in connection with any office lease or equipment lease or similar equipment financing transaction approved by the Board in which the Company obtains from a lessor or vendor the use of such office space or equipment for its business.
 
(j)           “ Person ” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
 
(k)           “ Pro Rata Share ” means the quotient of (i) the number of shares of Common Stock Beneficially Owned by the Investor (the “ Numerator Shares ”) divided by, (ii) the number of shares of Common Stock outstanding at such time of determination minus any shares of Common Stock outstanding at such time held by the Investor plus the Numerator Shares.
 
2.             Investor Director .  For so long as the Investor holds in excess of 10,000 Preferred Shares or 25 million shares of Common Stock (including Conversion Shares) (the “ Requisite Shares ”), the Investor shall be entitled to nominate one (1) director to the Board. For so long as the Investor holds the Requisite Shares and following the time at which the Series C-2 Convertible Preferred Stock shall have become convertible in full, the Investor shall be entitled to nominate a total of two (2) directors to the Board. For so long as the Investor holds the Requisite Shares and following the time at which the Series C-3 Convertible Preferred Stock shall have become convertible in full, the Investor shall be entitled to nominate a total of three (3) directors to the Board (each such director, an “ Investor Director ”). Notwithstanding the foregoing, in no event shall the Investor be entitled to nominate a number of directors to the Board that would represent a percentage of the Board greater than the percentage determined by dividing the number of Common Stock Equivalents held by the Investor by the sum of (i) the total shares of the Company’s Common Stock outstanding and (ii) the number of shares of Common Stock into which the Preferred Stock held by the Investor is convertible. In accordance with the provisions of this Section, at each meeting of the Company’s shareholders at which the election of directors is to be considered, the Company shall nominate the Investor Directors designated by the Investor for election to the Board by the shareholders and solicit proxies from the Company’s shareholders in favor of the election of the Investor Directors.  The Company shall use reasonable best efforts to cause each Investor Director to be elected to the Board (including voting all unrestricted proxies in favor of the election of such the Investor Director and including recommending approval of such Investor Director’s appointment to the Board). Each Investor Director appointed pursuant to this Section shall continue to hold office until the next annual meeting of the shareholders of the Company and until his or her successor is elected and qualified in accordance with this Section and the Bylaws, unless such Investor Director is earlier removed from office or at such time as such Investor Director’s death, resignation, retirement or disqualification.  The Company shall use reasonable best efforts to ensure that an Investor Director is removed only if so directed in writing by the Investor, unless otherwise required by this Section or applicable Law. In the event of a vacancy on the Board resulting from the death, disqualification, resignation, retirement or termination of the term of office of the Investor Director, the Company shall use reasonable best efforts to cause the Board to fill such vacancy or new directorship with a representative designated by the Investor as provided hereunder, in either case, to serve until the next annual or special meeting of the shareholders.  If the Investor fails or declines to fill the vacancy, then the directorship shall remain open until such time as the Investor elects to fill it with a representative designated hereunder.
 
 
 
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3.             Matters Requiring Investor Approval . So long as the Investor continues to hold the Requisite Shares, the Company hereby covenants and agrees with the Investor that it shall not, without prior written approval of Investor, take any of the following actions (“ Restricted Actions ”):
 
(a)            the conduct by the Company of any business other than, or the engagement by the Company in any transaction not substantially related to, the business as currently conducted;
 
(b)           changing the number or manner of appointment of the Directors on the Board;
 
(c)           the dissolution, liquidation or winding-up of the Company or the commencement of a voluntary proceeding seeking reorganization or other similar relief;
 
(d)           other than in the ordinary course of conducting the Company’s business consistent with past practice, the incurrence, issuance, assumption, guarantee or refinancing of any debt if the aggregate amount of such debt and all other outstanding debt of the Company exceeds $10 million;
 
(e)           the acquisition, repurchase or redemption by the Company of any Junior Securities;
 
 
 
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(f)           (i) the acquisition of an interest in any Person or the acquisition of a substantial portion of the assets or business of any Person or any division or line of business thereof or any other acquisition of material assets, in any such case where the consideration paid exceeds $2 million, or (ii) any Fundamental Transaction (as defined in the Certificate of Designation);
 
(g)           the entering into by the Company of any agreement, arrangement or transaction with any Affiliate of the Company, other than any Subsidiary (as such term is defined in the Securities Purchase Agreement) (or any relative, beneficiary, employee or affiliate of such person) that calls for aggregate payments (other than payment of salary, bonus or reimbursement of reasonable expenses) in excess of $120,000;
 
(h)           the commitment to capital expenditures in excess of $7 million during any fiscal year;
 
(i)           the selection or replacement of the auditors of the Company;
 
(j)           entering into of any partnership, consortium, joint venture or other similar enterprise involving the payment, contribution, or assignment by the Company or to the Company of money or assets greater than $5 million;
 
(k)           amend or otherwise change its Articles of Incorporation or by-laws or equivalent organizational documents of the Company or any Subsidiary in any manner that materially and adversely affects any rights of the Investor;
 
(l)           amend or otherwise change the Articles of Incorporation or by-laws or equivalent organizational documents of any Subsidiary in any manner;
 
(m)           grant, issue or sell any Equity Securities (in each case, other than any Permitted Issuances) to any Person;
 
(n)           declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock; provided, however, that the dividends called for by Section 3(b) of the Certificate of Designation of Preferences, Rights and Limitations of the Company’s Series B Convertible Preferred Stock shall nonetheless continue to accrue and accumulate on each share of the Company’s Series B Convertible Preferred Stock;
 
(o)           reclassify, combine, split or subdivide, directly or indirectly, any of its capital stock;
 
(p)           permit any item of material intellectual property to lapse or to be abandoned, dedicated, or disclaimed, fail to perform or make any applicable filings, recordings or other similar actions or filings, or fail to pay all required fees and taxes required or advisable to maintain and protect its interest in such intellectual property; or
 
(q)           enter into any contract, arrangement, understanding or other similar agreement with respect to any of the foregoing.
 
 
 
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4.             Preemptive Rights .  If at any time the Company proposes to grant, issue or sell any Equity Securities (in each case, other than any Permitted Issuances) to any Person (the “ Purchase Rights ”) then it shall give the Investor written notice of its intention to do so, describing the Equity Securities and the price and the terms and conditions upon which the Company proposes to issue the same. The Investor shall be entitled to acquire, upon the terms applicable to such Purchase Rights, its Pro Rata Share of the Equity Securities proposed to be granted, issued or sold by the Company triggering the Purchase Rights. The Investor shall have ten (10) Business Days from the giving of such notice to agree to purchase its Pro Rata Share of the Equity Securities for the price and upon the terms and conditions specified in the notice by giving written notice to the Company and stating therein the quantity of such Equity Securities to be purchased.  If the Investor fails to exercise in full its Purchase Rights, the Company shall have ninety (90) days thereafter to sell the Equity Securities in respect of which the Investor’s rights were not exercised, at a price and upon terms and conditions no more favorable to the purchasers thereof than specified in the Company’s notice to the Investor pursuant to this Section.  If the Company has not sold such Equity Securities within such ninety (90) days, the Company shall not thereafter issue or sell any Equity Securities (other than Permitted Issuances) without first again complying with this Section.  The provisions of this Section shall terminate upon the Investor ceasing to own the Requisite Shares.
 
5.             Stand Still.   Until the earlier of (i) conversion in full by the Investor of the Preferred Shares, (ii) the occurrence of a Significant Event, the Investor covenants and agrees with the Company that it will not directly or in concert with others make any nominations to the Board (other than pursuant to this Agreement) or make any shareholder proposals for other shareholder business.  A “ Significant Event ” shall mean any of the following:  (a) the acquisition by any person or 13D Group (as defined below) of beneficial ownership of Voting Securities (as defined below) representing 10% or more of the then outstanding Voting Securities of the Company or a right to nominate or appoint a member of the Board; (b) the announcement or commencement by any person or 13D Group of a tender or exchange offer to acquire Voting Securities which, if successful, would result in such person or 13D Group owning, when combined with any other Voting Securities owned by such person or 13D Group, 10% or more of the then outstanding Voting Securities; and (c) the Company enters into or otherwise determines to seek to enter into any merger, sale or other business combination transaction pursuant to which the outstanding shares of common stock of the Company (the “ Common Stock ”) would be converted into cash or securities of another person or 13D Group or 50% or more of the then outstanding shares of Common Stock would be owned by persons other than current holders of shares of Common Stock, or which would result in all or a substantial portion of the Company’s assets being sold to any person or 13D Group.  “ Voting Securities ” shall mean at any time shares of any class of capital stock of the Company that are then entitled to vote generally in the election of directors; provided that for purposes of this definition any securities that at such time are convertible or exchangeable into or exercisable for shares of Common Stock shall be deemed to have been so converted, exchanged or exercised.  “ 13D Group ” shall mean any group of persons formed for the purpose of acquiring, holding, voting or disposing of Voting Securities that would be required under Section 13(d) of the Exchange Act and the rules and regulations thereunder to file a statement on Schedule 13D with the SEC as a “person” within the meaning of Section 13(d)(3) of the Exchange Act.
 
 
 
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6.             Directors’ and Officers’ Indemnification and Insurance .  For so long as Investor is entitled to appoint any Investor Director, (a) the Company agrees that its by-laws shall contain provisions no less favorable with respect to indemnification than are set forth in Article V of the Company's Amended and Restated By-Laws as of November 4, 2009, and (b) the Company shall maintain in effect directors’ and officers’ liability insurance policies of customary coverage maintained by the Company.
 
7.             Termination . This Agreement shall terminate upon the earliest to occur of:
 
(a)           Investor holding a majority of the Company’s common stock (including all Equity Securities of the Company on an as-convertible and as-exercisable basis);
 
(b)           upon mutual agreement of such parties as would be required to amend this Agreement; and
 
(c)           the liquidation, dissolution or winding up of the Company.
 
8.             Amendments and Waivers . Neither this Agreement nor any term hereof may be amended or otherwise modified other than by an instrument in writing signed by the Company and the Investor. No provision of this Agreement may be waived, discharged or terminated other than by an instrument in writing signed by the party against whom the enforcement of such waiver, discharge or termination is sought.
 
9.             Enforceability/Severability . The parties hereto agree that each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law. If any provision of this Agreement shall nevertheless be held to be prohibited by or invalid under applicable law, (a) such provision shall be invalid only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement, and (b) the parties shall, to the extent permissible by applicable law, amend this Agreement so as to make effective and enforceable the intent of this Agreement.
 
10.             Specific Enforcement . It is agreed and understood that monetary damages would not adequately compensate an injured party for the breach of this Agreement by any other party, that this Agreement shall be specifically enforceable, and that any breach or threatened breach of this Agreement shall be the proper subject of a temporary or permanent injunction or restraining order. Further, each party hereto waives any claim or defense that there is an adequate remedy at law for such breach or threatened breach.  All remedies, either under this Agreement, by law, or otherwise afforded to parties hereunder, shall be cumulative and not alternative.
 
11.             Governing Law . This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed by and construed under the laws of the State of   Wisconsin without regard to principles of conflict of laws.
 
12.             Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
 
 
 
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13.             Successors and Assigns . This Agreement shall not be assignable or otherwise transferable by a party without the prior written consent of the other party, and any attempt to so assign or otherwise transfer this Agreement without such consent shall be void and of no effect.  The provisions hereof shall inure to the benefit of, and be binding upon, the successors and assigns of the parties hereto.
 
14.             Notices . Any notice, request or other document required or permitted to be given or delivered to the Investor by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.
 
15.             Entire Agreement . This Agreement constitutes the full and entire understanding and agreement among the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any oral or written representations, warranties, covenants and agreements except as specifically set forth herein.  Each party expressly represents and warrants that it is not relying on any oral or written representations, warranties, covenants or agreements outside of this Agreement.
 
16.             Delays or Omissions . It is agreed that no delay or omission to exercise any right, power or remedy accruing to any party hereunder, upon any breach, default or noncompliance under this Agreement shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of any similar breach, default or noncompliance thereafter occurring.
 
17.             Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
 
18.             Attorneys’ Fees . If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.
 
[signatures follow on next page]
 
 
 
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IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the day and year hereinabove first written.
 
    COMPANY:
   
   ZBB ENERGY CORPORATION
   
   By:  /s/ Eric Apfelbach                                                      
   
   Name: Eric Apfelbach
   
   Title: Chief Executive Officer
   
   
    INVESTOR:
   
   SOLAR POWER, INC.
   
   By:  /s/ Dejun Ye                                                                 
   
   Name: Dejun Ye
   
    Title: Chief Executive Officer
 
 
 
Exhibit 10.3
 
 
AMENDMENT TO EMPLOYMENT AGREEMENT
 
THIS AMENDMENT TO EMPLOYMENT AGREEMENT (“Amendment”) is made as of July 13, 2015 (“Effective Date”), by and between ZBB Energy Corporation (“ZBB” or the “Company”) and Bradley Hansen (“you”).
 
WHEREAS , you and the Company entered into that certain Employment Agreement dated May 19, 2014 (the “Employment Agreement”); and
 
WHEREAS , you and the Company desire to amend the Employment Agreement as set forth below.
 
NOW, THEREFORE , in consideration of the provisions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree to amend the Employment Agreement as follows:
 
1.   The Term “Chief Operating Officer” is deleted from the first recital and replaced with the term “Chief Executive Officer (CEO).”
 
2.   The first sentence of Section 1(a) is deleted and replaced with the following: “You will serve as the Company’s President and CEO, reporting to the Board of Directors, and performing the duties customarily associated with that position, or as may later be explicitly agreed upon between the parties.”
 
3.   The term “COO” is deleted in Section 1(d) and replaced with “CEO”.
 
4.   The number $245,000 in Section 2(a) is deleted and replaced with $300,000.
 
5.   In Section 3, the clause “This Agreement shall have an initial term of two (2) years” is deleted and replaced with “This Agreement’s initial term shall last until June 30, 2019”.
 
6.   The following clauses are added to Section 4:
 
(c)           Upon receipt of shareholder approval for any required increase in authorized shares under the Company’s articles of incorporation and/or equity plans, you will also be granted 1,500,000 restricted stock units (“RSUs”).
 
     (i)   The RSUs will vest upon the Compensation Committee’s confirmation that certain performance targets are met as described in Exhibit A to the Restricted Stock Unit Agreement provided to you (see Attachment I).
 
The RSUs will have such other terms and conditions specified in the Restricted Stock Unit Agreement (Attachment I).
 
 
 
 
 
 
 
7.   Section 5 is deleted and replaced with the following:
 
5.             Incentive Compensation; ZBB Powersav Holdings Limited.
 
(a)           You shall be eligible to participate in various performance-based stock option and cash bonus plans offered by the Company, the terms of conditions of which shall be solely determined by the Company and approved by the Company’s compensation committee.
 
(b)           During the Term of Employment, you shall be eligible to earn such annual bonuses as may be provided by the Company to you as set forth herein.  Your annual target bonus opportunity shall equal 30% of your base salary.  Your annual bonus will be based on the performance metrics set by the Board in its sole discretion.
 
(c) You have informed the Company that in your role as founder of PowerSav Inc. you have some concern regarding your ability to effect the monetization of PowerSav’s investment in ZBB Powersav Holding Limited (“Meineng Holdco”) on a timely basis given the fact that the employment term extends beyond the time that PowerSav Inc.’s investors expect liquidity for their investment.  In recognition of this concern, the Company hereby covenant and agrees with you to use reasonable efforts to enable PowerSav to monetize its investment in Meineng Holdco by no later than December 31, 2015, such efforts to include the Company’s and/or Solar Power Inc.’s consideration of the purchase of such investment or good faith effort to secure a third party investor.
 
8.   This Amendment shall be deemed to be an amendment to the Employment Agreement, and the Employment Agreement, as amended hereby, is hereby ratified, approved and confirmed in each and every respect.
 
9.   This Amendment may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument.
 
IN WITNESS WHEREOF , the undersigned have executed this Amendment to be effective as of the Effective Date set forth above.
 
 
  COMPANY:     EMPLOYEE:
 ZBB Energy Corporation  
  /s/ Dilek Wagner                                                 /s/ Bradley Hansen                                          
 By: Dilek Wagner  Bradley Hansen
 Its: Vice President of Finance