Form of Indemnification Agreement



 





Exhibit 4.10




FORM OF INDEMNIFICATION AGREEMENT




     INDEMNIFICATION AGREEMENT dated as of ______, between China Yuchai
International Limited, a company incorporated under the laws of Bermuda (the
“Company”), and ______ (“Indemnitee”).



     WHEREAS:



     (A)  It is essential to the Company to retain and attract as directors and
officers the most capable persons available;



     (B)  It is becoming increasingly difficult for companies to attract the
most qualified and experienced people to serve as officers and directors
because of the tendency of increasing litigation and other challenges by
stockholders and others against officers and directors of companies; and



     (C)  In recognition of Indemnitee’s need for substantial protection against
personal liability to enhance Indemnitee’s continued and effective service to
the Company, and to induce Indemnitee to provide such services to the Company
as a director or officer, the Company wishes to provide in this Agreement for
the indemnification of and the advancing of expenses to Indemnitee to the
fullest extent (whether partial or complete) permitted by law and as set forth
in this Agreement, whether or not insurance is maintained to provide coverage
for Indemnitee;



     NOW THEREFORE, in consideration of the foregoing and of Indemnitee’s
continued service to the Company, the parties hereto agree as follows:



     1. Certain Definitions. Whenever used in this Agreement, the following
words and phrases shall have the following meanings:



     “Affiliate” of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
“control” (including, with correlative meanings, the terms “controlled by” and
“under common control with”), as used with respect to any person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such person, whether through the
ownership of voting securities or by agreement or otherwise.



     “Board” shall mean the Board of Directors of the Company.



     “Change in Control” shall be deemed to have occurred if:




     (i)  any “person” or “group”, as such terms are used in Sections
3(a)(9), 13(d) and 14(d) of the United States Securities Exchange Act of
1934, as amended (the “Exchange Act”), other than (x) Hong Leong Asia Ltd
or any of its Affiliates or (y) any employee benefit plan sponsored by
the Company or an Affiliate, becomes a “Beneficial Owner”, as such term
is used in Rule 13d-3 under the Exchange Act, of 30% or more of the
“Voting Stock” (which means the capital stock of any class or classes of
the Company having general voting power


 









 






under
ordinary circumstances, in the absence of contingencies, to elect the directors of such
corporation) of the Company;



     (ii)  one-third or more of the Board consists of individuals other
than members of the Board on the date hereof (the “Incumbent Directors”);
provided, however, that (x) any person becoming a director subsequent to
such date whose election or nomination for election was approved by
two-thirds (but in no event less than two) of the directors who at the
time of such election or nomination comprise the Incumbent Directors and
(y) any person elected or designated a director pursuant to the Amended
and Restated Shareholders Agreement with respect to the Company, dated as
of November 9, 1994, shall, in the case of both (x) and (y) above, for
purposes of this Agreement, be considered an Incumbent Director;




     (iii)  the Company adopts any plan of liquidation providing for the
distribution of all or substantially all of its assets;




     (iv)  the Company combines with another company (whether or not the
Company is the surviving corporation) and immediately after the
combination, the stockholders of the Company immediately prior to the
combination (other than stockholders who, immediately prior to the
combination, were “Affiliates” of such other company) do not beneficially
own, directly or indirectly, more than 70% of the Voting Stock of the
combined company; or




     (v)  any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, the
assets of the Company occurs.


Notwithstanding the foregoing, no Change in Control shall be deemed to have
occurred upon (i) the transfer, directly or indirectly, of the Company’s
Special Share to Hong Leong Asia Ltd. or any of its Affiliates or (ii) any
corporate reorganization or restructuring occurring, as a result of, directly
or indirectly, or otherwise in connection with, the Agreement between the
Company and Guangxi Yuchai Machinery Company Limited, a Sino-foreign joint
stock company incorporated under the laws of the People’s Republic of China
(“Yuchai”), in Yulin City on July 18-19, 2003.




     “Expenses” shall mean any expense, liability or loss, including attorneys’
fees, judgments, fines, amounts paid or to be paid in settlement, any interest,
assessments, or other charges imposed thereon, and any domestic or foreign
taxes imposed as a result of the actual or deemed receipt of any payments under
this Agreement, paid or incurred in connection with investigating, defending,
being a witness in, or participating in (including on appeal), or preparing for
any Proceeding relating to any Indemnifiable Event.



     “Indemnifiable Event” shall mean any event or occurrence, whether
occurring prior to or after the execution of this Agreement, related to the
Indemnitee serving or having served as a director or an officer of the Company,
or, while a director or officer of the Company, is or was serving at the
request of the Company as an agent or representative of the Company or as a
director, officer, employee, trustee, agent, or fiduciary of another foreign or
domestic corporation (including, but not limited to, Yuchai), partnership,
joint venture, employee benefit plan, trust, or other enterprise, or was a
director, officer, employee, or agent of a foreign or domestic corporation or
of another enterprise at the request of the Company, or by reason of anything
done or not done by Indemnitee in any such capacity, whether or not the basis
of the Proceeding is alleged action in an official capacity as a director,
officer, employee, or agent or



 









 






in any other capacity while serving as a director, officer, employee or
agent of the Company, as described above.



     “Independent Counsel” shall mean the person or body appointed in
accordance with Section 3.



     “Proceeding” shall mean any threatened, pending, or completed action,
suit, arbitration, alternative dispute resolution mechanism, or any other
proceeding (including an action by or in the right of the Company or Yuchai),
whether civil, criminal, administrative or investigative, whether predicated on
the law of any jurisdiction and whether formal or informal, including, without
limitation, Proceedings brought under or predicated upon the Securities Act of
1933, as amended (the “Securities Act”), the Exchange Act and their respective
state counterparts or any rule or regulation promulgated thereunder, or any
inquiry, hearing, or investigation, whether conducted by the Company or Yuchai,
a stockholder or bondholder of the Company or Yuchai, a governmental body, or
any other party, that Indemnitee in good faith believes might lead to the
institution of any such action, suit, or proceeding.



     “Reviewing Party” shall mean the person or body appointed in accordance
with Section 3.



     2. Agreement to Indemnify.



     (a) General Agreement. In the event Indemnitee was, is, or becomes a
party to or witness or other participant in, or is threatened to be made a
party to or witness or other participant in, a Proceeding by reason of (or
arising out of) an Indemnifiable Event, the Company shall indemnify and hold
harmless Indemnitee from and against any and all Expenses to the fullest extent
permitted by law applicable to the Indemnifiable Event, or as the same may
exist currently or may hereafter be amended or interpreted (but in the case of
any such subsequent amendments or interpretations, only to the extent that such
amendments or interpretations permit the Company to provide broader
indemnification rights than were permitted prior thereto). The parties hereto
intend that this Agreement shall provide for indemnification in excess of that
expressly permitted by statute, including, without limitation, any
indemnification provided by the Company’s Articles of Association, Bye-laws,
vote of its stockholders’ or disinterested directors, or applicable law.



     (b) Initiation of Proceeding. Notwithstanding anything in this Agreement
to the contrary, Indemnitee shall not be entitled to indemnification pursuant
to this Agreement in connection with any Proceeding initiated by Indemnitee
against the Company or any director or officer of the Company unless (i) the
Company has joined in or the Board has consented to the initiation of such
Proceeding; (ii) the Proceeding is one to enforce indemnification rights under
Section 5 hereof; or (iii) the Proceeding is instituted after a Change in
Control (other than a Change in Control approved by a majority of the Incumbent
Directors) and Independent Counsel has approved its initiation.



     (c) Expense Advances. If so requested by Indemnitee, the Company shall
advance (within ten business days of such request) any and all Expenses to
Indemnitee (an “Expense Advance”), to the extent that the Company is permitted
to do so under applicable law; provided that, if and to the extent the
Reviewing Party determines that Indemnitee would not be permitted to be so
indemnified under applicable law, the Company shall be entitled to be
reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all
such amounts theretofore paid in connection with the Proceeding then in
question. If Indemnitee has



 









 






commenced or commences legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee should be indemnified
under applicable law, as provided in Section 4, any determination made by the
Reviewing Party that Indemnitee would not be permitted to be indemnified under
applicable law shall not be binding and Indemnitee shall not be required to
reimburse the Company for any Expense Advance until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or have lapsed). Indemnitee’s obligation to
reimburse the Company for Expense Advances shall be unsecured and no interest
shall be charged thereon.



     (d) Mandatory Indemnification. Notwithstanding any other provision of
this Agreement, to the extent that Indemnitee has been successful on the merits
in defense of any Proceeding relating in whole or in part to an Indemnifiable
Event or in defense of any issue or matter therein, Indemnitee shall be
indemnified against all Expenses incurred in connection therewith.



     (e) Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expense, but not, however, for the total amount thereof, the Company
shall nevertheless indemnify Indemnitee for the portion thereof to which
Indemnitee is entitled.



     3. Reviewing Party. Prior to any Change in Control, the Reviewing Party
shall be any appropriate person or body consisting of a member or members of
the Board or any other person or body appointed by the Board who is not a party
to the Proceeding at issue; after a Change in Control, the Reviewing Party
shall be the Independent Counsel referred to below. With respect to all matters
arising after a Change in Control (other than a Change in Control approved by a
majority of Incumbent Directors) concerning the rights of Indemnitee to
indemnity payments and Expense Advances under this Agreement or any other
agreement or under applicable law or the Company’s Articles of Association or
Bye-laws now or hereafter in effect relating to indemnification for
Indemnifiable Events, the Company shall seek advice only from Independent
Counsel selected by Indemnitee and approved by the Company (which approval
shall not be unreasonably withheld), and who has not otherwise performed
services for the Company or the Indemnitee (other than in connection with
indemnification matters) within the last five years. The Independent Counsel
shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine
Indemnitee’s rights under this Agreement. Such counsel, among other things,
shall render its written opinion to the Company and Indemnitee as to whether
and to what extent the Indemnitee should be permitted to be indemnified under
applicable law. The Company agrees to pay the reasonable fees and expenses of
the Independent Counsel and to indemnify fully such counsel against any and all
expenses (including attorneys’ fees), claims, liabilities, loss and damages
arising out of or relating to this Agreement or the engagement of Independent
Counsel pursuant hereto.



     4. Indemnification Process and Appeal.



     (a) Indemnification Payment. Indemnitee shall be entitled to
indemnification of Expenses (to the extent permitted under applicable law), and
shall receive payment thereof, from the Company in accordance with this
Agreement as soon as practicable after Indemnitee has made written demand on
the Company for indemnification, unless the Reviewing Party has given a written
opinion to the Company that Indemnitee is not entitled to indemnification under
applicable law.



 









 





     (b) Suit to Enforce Rights. Regardless of any action by the Reviewing
Party, if Indemnitee has not received full indemnification within thirty days
after making a demand in accordance with Section 4(a), Indemnitee shall have
the right to enforce its indemnification rights under this Agreement by
commencing litigation in any court in The City of New York, State of New York,
having subject matter jurisdiction thereof and in which venue is proper or in
any other court of competent jurisdiction seeking an initial determination by
the court or challenging any determination by the Reviewing Party or any aspect
thereof. The Company hereby consents to service of process and to appear in any
such proceeding. Any determination by the Reviewing Party not challenged by the
Indemnitee shall be binding on the Company and Indemnitee. The remedy provided
for in this Section 4 shall be in addition to any other remedies available to
Indemnitee in law or equity.



     (c) Defense to Indemnification, Burden of Proof, and Presumptions. It
shall be a defense to any action brought by Indemnitee against the Company to
enforce this Agreement (other than an action brought to enforce a claim for
Expenses incurred in defending a Proceeding in advance of its final disposition
where the required undertaking has been tendered to the Company) that it is not
permissible under applicable law or under this Agreement for the Company to
indemnify Indemnitee for the amount claimed. In connection with any such action
or any determination by the Reviewing Party or otherwise as to whether
Indemnitee is entitled to be indemnified hereunder, the burden of proving such
a defense or determination shall be on the Company. Neither the failure of the
Reviewing Party or the Company (including its Board, independent legal counsel,
or its shareholders) to have made a determination prior to the commencement of
such action by Indemnitee that indemnification of the claimant is proper under
the circumstances because he has met the standard of conduct set forth in
applicable law, nor an actual determination by the Reviewing Party or Company
(including its Board, independent legal counsel, or its stockholders) that the
Indemnitee had not met such applicable standard of conduct, shall be a defense
to the action or create a presumption that the Indemnitee has not met the
applicable standard of conduct. For purposes of this Agreement, the termination
of any claim, action, suit, or proceeding, by judgment, order, settlement
(whether with or without court approval), conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief
or that a court has determined that indemnification is not permitted by
applicable law.



     5. Indemnification for Expenses Incurred in Enforcing Rights. The Company
shall indemnify Indemnitee against any and all Expenses that are incurred by
Indemnitee in seeking (i) indemnification of Expenses by the Company under this
Agreement or any other agreement or under applicable law or the Company’s
Articles of Association or Bye-laws now or hereafter in effect relating to
indemnification for Indemnifiable Events, and/or (ii) recovery under directors’
and officers’ liability insurance policies maintained by the Company, but only
in the event that Indemnitee ultimately is determined to be entitled to such
indemnification or insurance recovery, as the case may be. In addition, the
Company shall, if so requested by Indemnitee, advance the foregoing Expenses to
Indemnitee (to the extent that the Company is permitted to under applicable
law), subject to and in accordance with Section 2(c).



     6. Notification and Defense of Proceeding.



     (a) Notice. Promptly after receipt by Indemnitee of notice of the
commencement of any Proceeding, Indemnitee will, if a claim in respect thereof
is to be made against the Company under this Agreement, notify the Company of
the commencement thereof;



 









 






but the omission so to notify the Company will not relieve it from any
liability that it may have to Indemnitee, except as provided in Section 6(c).



     (b) Defense. With respect to any Proceeding as to which Indemnitee
notifies the Company of the commencement thereof, the Company will be entitled
to participate in the Proceeding at its own expense and except as otherwise
provided below, to the extent the Company so wishes, it may assume the defense
thereof with counsel reasonably satisfactory to Indemnitee. After notice from
the Company to Indemnitee of its election to assume the defense of any
Proceeding, the Company will not be liable to Indemnitee under this Agreement
or otherwise for any Expenses subsequently incurred by Indemnitee under this
Agreement except as otherwise provided below. Indemnitee shall have the right
to employ his own counsel in such Proceeding, but all Expenses related thereto
incurred after notice from the Company of its assumption of the defense shall
be at Indemnitee’s expense unless: (i) the employment of counsel by Indemnitee
has been authorized by the Company, (ii) Indemnitee has reasonably determined
that there may be a conflict of interest between Indemnitee and the Company in
the defense of the Proceeding and such determination has been affirmed any then
existing Independent Counsel, (iii) after a Change in Control the employment of
counsel by Indemnitee has been approved by the Independent Counsel, or (iv) the
Company shall not in fact have employed counsel to assume the defense of such
Proceeding, in each of which case all Expenses of the Proceeding shall be borne
by the Company. The Company shall not be entitled to assume the defense of any
Proceeding brought by or on behalf of the Company or as to which Indemnitee
shall have made the determination provided for in (ii) above.



     (c) Settlement of Claims. The Company shall not be liable to indemnify
Indemnitee under this Agreement or otherwise for any amounts paid in settlement
of any Proceeding effected without the Company’s written consent, provided,
however, that if a Change in Control has occurred the Company shall be liable
for indemnification of Indemnitee for amounts paid in settlement if the
Independent Counsel has approved the settlement. The Company shall not settle
any Proceeding in any manner that would impose any penalty or limitation on
Indemnitee without Indemnitee’s written consent. Neither the Company nor
Indemnitee shall unreasonably withhold their consent to any proposed
settlement. The Company shall not be liable to indemnify Indemnitee under this
Agreement with regard to any judicial award if the Company was not given a
reasonable and timely opportunity, at its expense, to participate in the
defense of such action; the Company’s liability hereunder shall not be excused
if participation in the Proceeding by the Company was barred by this Agreement.



     7. Establishment of Trust. In the event of a Change in Control the
Company shall, upon written request by Indemnitee, create a Trust for the
benefit of Indemnitee and from time to time upon written request of Indemnitee
shall fund the Trust in an amount sufficient to satisfy any and all Expenses
reasonably anticipated at the time of each such request to be incurred in
connection with investigating, preparing for, participating in, and/or
defending any Proceeding relating to an Indemnifiable Event. The amount or
amounts to be deposited in the Trust pursuant to the foregoing funding
obligation shall be determined by the Reviewing Party. The terms of the Trust
shall provide that (i) the Trust shall not be revoked or the principal thereof
invaded, without the written consent of Indemnitee, (ii) the Trustee shall
advance, within ten business days of a request by Indemnitee, any and all
Expenses to Indemnitee (and Indemnitee hereby agrees to reimburse the Trust
under the same circumstances for which Indemnitee would be required to
reimburse the Company under Section 2(c) of this Agreement), (iii) the Trust
shall continue to be funded by the Company in accordance with the



 









 






funding obligation set forth above, (iv) the Trustee shall promptly pay to
Indemnitee all amounts for which Indemnitee shall be entitled to
indemnification pursuant to this Agreement or otherwise, and (v) all unexpended
funds in the Trust shall revert to the Company upon a final determination by
the Reviewing Party or a court of competent jurisdiction, as the case may be,
that Indemnitee has been fully indemnified under the terms of this Agreement.
The Trustee shall be chosen by Indemnitee. Nothing in this Section 7 shall
relieve the Company of any of its obligations under this Agreement. All income
earned on the assets held in the Trust shall be reported as income by the
Company for federal, state, local, and foreign tax purposes. The Company shall
pay all costs of establishing and maintaining the Trust, and shall indemnify
the Trustee against any and all expenses (including attorneys’ fees), claims,
liabilities, loss, and damages arising out of or relating to this Agreement or
the establishment and maintenance of the Trust.



     8. Non-Exclusivity. The rights of Indemnitee hereunder shall be in
addition to any other rights Indemnitee may have under the Company’s Articles
of Association or Bye-laws, applicable law, or otherwise. To the extent that a
change in applicable law (whether by statute or judicial decision) permits
greater indemnification by agreement than would be afforded currently under the
Company’s Articles of Association or Bye-laws, applicable law, or this
Agreement, it is the intent of the parties that Indemnitee enjoy by this
Agreement the greater benefits so afforded by such change.



     9. Liability Insurance. To the extent the Company maintains an insurance
policy or policies providing directors’ and officers’ liability insurance,
Indemnitee shall be covered by such policy or policies, in accordance with its
or their terms, to the maximum extent of the coverage available for any Company
director or officer.



     10. Period of Limitations. No legal action shall be brought and no cause
of action shall be asserted by or on behalf of the Company or any Affiliate of
the Company against Indemnitee, Indemnitee’s spouse, heirs, executors, or
personal or legal representatives after the expiration of two years from the
date of accrual of such cause of action, or such longer period as may be
required by state law under the circumstances. Any claim or cause of action of
the Company or its Affiliate shall be extinguished and deemed released unless
asserted by the timely filing of a legal action within such period; provided,
however, that if any shorter period of limitations is otherwise applicable to
any such cause of action, the shorter period shall govern.



     11. Retroactivity. This Agreement shall be deemed to have been in effect
during all periods that Indemnitee was an officer or director of the Company,
regardless of the date of this Agreement.



     12. Amendment of this Agreement. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be binding unless in the form of a writing signed by the party against
whom enforcement of the waiver is sought, and no such waiver shall operate as a
waiver of any other provisions hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver. Except as specifically provided herein,
no failure to exercise or any delay in exercising any right or remedy hereunder
shall constitute a waiver thereof.



     13. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee,



 









 






who shall execute all papers reasonably required and shall do everything
that may be reasonably necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.



     14. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise received payment (under any
insurance policy, Articles of Association or Bye-laws, or otherwise) of the
amounts otherwise indemnifiable hereunder.



     15. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors (including any direct or indirect successor by purchase, merger,
consolidation, or otherwise to all or substantially all of the business and/or
assets of the Company), assigns, spouses, heirs, and personal and legal
representatives. The Company shall require and cause any successor (whether
direct or indirect by purchase, merger, consolidation, or otherwise) to all,
substantially all, or a substantial part, of the business and/or assets of the
Company, by written agreement in form and substance satisfactory to Indemnitee,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform if no such
succession had taken place. The indemnification provided under this Agreement
shall continue as to Indemnitee for any action taken or not taken while serving
in an indemnified capacity pertaining to an Indemnifiable Event even though he
may have ceased to serve in such capacity at the time of any Proceeding.



     16. Severability. If any provision (or portion thereof) of this Agreement
shall be held by a court of competent jurisdiction to be invalid, void, or
otherwise unenforceable, the remaining provisions shall remain enforceable to
the fullest extent permitted by law. Furthermore, to the fullest extent
possible, the provisions of this Agreement (including without limitation, each
portion of this Agreement containing any provision held to be invalid, void, or
otherwise unenforceable, that is not itself invalid, void or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, void, or unenforceable.



     17. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York.



     18. Consent to Jurisdiction.



     (a)  The parties irrevocably agree that any United States Federal or State
court in the Borough of Manhattan, The City of New York, State of New York are
to have jurisdiction to settle any disputes which may arise out of or in
connection with this Agreement and that, accordingly, any legal action or
proceedings arising out of or in connection with this Agreement may be brought
in such courts and the parties irrevocably submit to the jurisdiction of such
courts.



     (b)  Nothing in this Section shall limit the right of any party to take any
legal action or proceedings arising out of or in connection with this Agreement
in any other court of competent jurisdiction nor shall the taking of
Proceedings in one or more jurisdictions preclude any party from taking
Proceedings in any other jurisdiction, whether concurrently or not.



     19. Notices. All notices, demands, and other communications required or
permitted hereunder shall be made in writing and shall be deemed to have been
duly given if delivered by hand against receipt, mailed postage prepaid by
certified or registered mail with



 









 






return receipt requested or sent by facsimile transmission with
acknowledging transmission requested and received and addressed as follows:



	 	 	 
	COMPANY:

	 	China Yuchai International Limited

16 Raffles Quay #26-00

Hong Leong Building

Singapore 048581

Tel: +65-6220-8411

Fax: +65-6226-0502

ATTENTION: President

	 
	 	 
	INDEMNITEE:

	 	[name]

[address]

Tel: ____________

Fax: ____________







     Notice of change of address or facsimile number shall be effective only
when given in accordance with this Section. All notices complying with this
Section shall be deemed to have been received on the earlier of the date of
delivery or on the third business day after mailing.



 









 





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



	 	 	 	 	 
	 	 	CHINA YUCHAI INTERNATIONAL LIMITED
	 	 	 
	 	 	By	 	 



	 	 	 	 	Name:
	 	 	 	 	Title:
	 	 	 	 	 



Name:
	 	 	 	 	Title:
	 	 	 
	 	 	INDEMNITEE
	 	 	 	 	 



Name:
	 	 	 	 	Title: