**Exhibit 4.10**
FORM OF INDEMNIFICATION AGREEMENT
     INDEMNIFICATION AGREEMENT dated as of ______, between China YuchaiInternational 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 andofficers the most capable persons available;
     (B)  It is becoming increasingly difficult for companies to attract themost qualified and experienced people to serve as officers and directorsbecause of the tendency of increasing litigation and other challenges bystockholders and others against officers and directors of companies; and
     (C)  In recognition of Indemnitee’s need for substantial protection againstpersonal liability to enhance Indemnitee’s continued and effective service tothe Company, and to induce Indemnitee to provide such services to the Companyas a director or officer, the Company wishes to provide in this Agreement forthe indemnification of and the advancing of expenses to Indemnitee to thefullest extent (whether partial or complete) permitted by law and as set forthin this Agreement, whether or not insurance is maintained to provide coveragefor Indemnitee;
     NOW THEREFORE, in consideration of the foregoing and of Indemnitee’scontinued service to the Company, the parties hereto agree as follows:
     1. Certain Definitions. Whenever used in this Agreement, the followingwords and phrases shall have the following meanings:
     “Affiliate” of any specified person means any other person directly orindirectly controlling or controlled by or under direct or indirect commoncontrol 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 meanthe possession, directly or indirectly, of the power to direct or cause thedirection of the management or policies of such person, whether through theownership 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 Sections3(a)(9), 13(d) and 14(d) of the United States Securities Exchange Act of1934, as amended (the “Exchange Act”), other than (x) Hong Leong Asia Ltdor any of its Affiliates or (y) any employee benefit plan sponsored bythe Company or an Affiliate, becomes a “Beneficial Owner”, as such termis 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 ofthe Company having general voting power
 

 

underordinary circumstances, in the absence of contingencies, to elect the directors of suchcorporation) of the Company;
     (ii)  one-third or more of the Board consists of individuals otherthan members of the Board on the date hereof (the “Incumbent Directors”);provided, however, that (x) any person becoming a director subsequent tosuch date whose election or nomination for election was approved bytwo-thirds (but in no event less than two) of the directors who at thetime of such election or nomination comprise the Incumbent Directors and(y) any person elected or designated a director pursuant to the Amendedand Restated Shareholders Agreement with respect to the Company, dated asof November 9, 1994, shall, in the case of both (x) and (y) above, forpurposes of this Agreement, be considered an Incumbent Director;
     (iii)  the Company adopts any plan of liquidation providing for thedistribution of all or substantially all of its assets;
     (iv)  the Company combines with another company (whether or not theCompany is the surviving corporation) and immediately after thecombination, the stockholders of the Company immediately prior to thecombination (other than stockholders who, immediately prior to thecombination, were “Affiliates” of such other company) do not beneficiallyown, directly or indirectly, more than 70% of the Voting Stock of thecombined company; or
     (v)  any sale, lease, exchange or other transfer (in one transactionor a series of related transactions) of all, or substantially all, theassets of the Company occurs.
Notwithstanding the foregoing, no Change in Control shall be deemed to haveoccurred upon (i) the transfer, directly or indirectly, of the Company’sSpecial Share to Hong Leong Asia Ltd. or any of its Affiliates or (ii) anycorporate reorganization or restructuring occurring, as a result of, directlyor indirectly, or otherwise in connection with, the Agreement between theCompany and Guangxi Yuchai Machinery Company Limited, a Sino-foreign jointstock 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 foreigntaxes imposed as a result of the actual or deemed receipt of any payments underthis Agreement, paid or incurred in connection with investigating, defending,being a witness in, or participating in (including on appeal), or preparing forany Proceeding relating to any Indemnifiable Event.
     “Indemnifiable Event” shall mean any event or occurrence, whetheroccurring prior to or after the execution of this Agreement, related to theIndemnitee 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 therequest of the Company as an agent or representative of the Company or as adirector, officer, employee, trustee, agent, or fiduciary of another foreign ordomestic corporation (including, but not limited to, Yuchai), partnership,joint venture, employee benefit plan, trust, or other enterprise, or was adirector, officer, employee, or agent of a foreign or domestic corporation orof another enterprise at the request of the Company, or by reason of anythingdone or not done by Indemnitee in any such capacity, whether or not the basisof 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 oragent of the Company, as described above.
     “Independent Counsel” shall mean the person or body appointed inaccordance with Section 3.
     “Proceeding” shall mean any threatened, pending, or completed action,suit, arbitration, alternative dispute resolution mechanism, or any otherproceeding (including an action by or in the right of the Company or Yuchai),whether civil, criminal, administrative or investigative, whether predicated onthe law of any jurisdiction and whether formal or informal, including, withoutlimitation, Proceedings brought under or predicated upon the Securities Act of1933, as amended (the “Securities Act”), the Exchange Act and their respectivestate counterparts or any rule or regulation promulgated thereunder, or anyinquiry, hearing, or investigation, whether conducted by the Company or Yuchai,a stockholder or bondholder of the Company or Yuchai, a governmental body, orany other party, that Indemnitee in good faith believes might lead to theinstitution of any such action, suit, or proceeding.
     “Reviewing Party” shall mean the person or body appointed in accordancewith Section 3.
     2. Agreement to Indemnify.
     (a) General Agreement. In the event Indemnitee was, is, or becomes aparty to or witness or other participant in, or is threatened to be made aparty to or witness or other participant in, a Proceeding by reason of (orarising out of) an Indemnifiable Event, the Company shall indemnify and holdharmless Indemnitee from and against any and all Expenses to the fullest extentpermitted by law applicable to the Indemnifiable Event, or as the same mayexist currently or may hereafter be amended or interpreted (but in the case ofany such subsequent amendments or interpretations, only to the extent that suchamendments or interpretations permit the Company to provide broaderindemnification rights than were permitted prior thereto). The parties heretointend that this Agreement shall provide for indemnification in excess of thatexpressly permitted by statute, including, without limitation, anyindemnification 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 Agreementto the contrary, Indemnitee shall not be entitled to indemnification pursuantto this Agreement in connection with any Proceeding initiated by Indemniteeagainst the Company or any director or officer of the Company unless (i) theCompany has joined in or the Board has consented to the initiation of suchProceeding; (ii) the Proceeding is one to enforce indemnification rights underSection 5 hereof; or (iii) the Proceeding is instituted after a Change inControl (other than a Change in Control approved by a majority of the IncumbentDirectors) and Independent Counsel has approved its initiation.
     (c) Expense Advances. If so requested by Indemnitee, the Company shalladvance (within ten business days of such request) any and all Expenses toIndemnitee (an “Expense Advance”), to the extent that the Company is permittedto do so under applicable law; provided that, if and to the extent theReviewing Party determines that Indemnitee would not be permitted to be soindemnified under applicable law, the Company shall be entitled to bereimbursed by Indemnitee (who hereby agrees to reimburse the Company) for allsuch amounts theretofore paid in connection with the Proceeding then inquestion. If Indemnitee has
 

 

commenced or commences legal proceedings in a court of competentjurisdiction to secure a determination that Indemnitee should be indemnifiedunder applicable law, as provided in Section 4, any determination made by theReviewing Party that Indemnitee would not be permitted to be indemnified underapplicable law shall not be binding and Indemnitee shall not be required toreimburse the Company for any Expense Advance until a final judicialdetermination is made with respect thereto (as to which all rights of appealtherefrom have been exhausted or have lapsed). Indemnitee’s obligation toreimburse the Company for Expense Advances shall be unsecured and no interestshall be charged thereon.
     (d) Mandatory Indemnification. Notwithstanding any other provision ofthis Agreement, to the extent that Indemnitee has been successful on the meritsin defense of any Proceeding relating in whole or in part to an IndemnifiableEvent or in defense of any issue or matter therein, Indemnitee shall beindemnified against all Expenses incurred in connection therewith.
     (e) Partial Indemnification. If Indemnitee is entitled under anyprovision of this Agreement to indemnification by the Company for some or aportion of Expense, but not, however, for the total amount thereof, the Companyshall nevertheless indemnify Indemnitee for the portion thereof to whichIndemnitee is entitled.
     3. Reviewing Party. Prior to any Change in Control, the Reviewing Partyshall be any appropriate person or body consisting of a member or members ofthe Board or any other person or body appointed by the Board who is not a partyto the Proceeding at issue; after a Change in Control, the Reviewing Partyshall be the Independent Counsel referred to below. With respect to all mattersarising after a Change in Control (other than a Change in Control approved by amajority of Incumbent Directors) concerning the rights of Indemnitee toindemnity payments and Expense Advances under this Agreement or any otheragreement or under applicable law or the Company’s Articles of Association orBye-laws now or hereafter in effect relating to indemnification forIndemnifiable Events, the Company shall seek advice only from IndependentCounsel selected by Indemnitee and approved by the Company (which approvalshall not be unreasonably withheld), and who has not otherwise performedservices for the Company or the Indemnitee (other than in connection withindemnification matters) within the last five years. The Independent Counselshall not include any person who, under the applicable standards ofprofessional conduct then prevailing, would have a conflict of interest inrepresenting either the Company or Indemnitee in an action to determineIndemnitee’s rights under this Agreement. Such counsel, among other things,shall render its written opinion to the Company and Indemnitee as to whetherand to what extent the Indemnitee should be permitted to be indemnified underapplicable law. The Company agrees to pay the reasonable fees and expenses ofthe Independent Counsel and to indemnify fully such counsel against any and allexpenses (including attorneys’ fees), claims, liabilities, loss and damagesarising out of or relating to this Agreement or the engagement of IndependentCounsel pursuant hereto.
     4. Indemnification Process and Appeal.
     (a) Indemnification Payment. Indemnitee shall be entitled toindemnification of Expenses (to the extent permitted under applicable law), andshall receive payment thereof, from the Company in accordance with thisAgreement as soon as practicable after Indemnitee has made written demand onthe Company for indemnification, unless the Reviewing Party has given a writtenopinion to the Company that Indemnitee is not entitled to indemnification underapplicable law.
 

 

     (b) Suit to Enforce Rights. Regardless of any action by the ReviewingParty, if Indemnitee has not received full indemnification within thirty daysafter making a demand in accordance with Section 4(a), Indemnitee shall havethe right to enforce its indemnification rights under this Agreement bycommencing 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 inany other court of competent jurisdiction seeking an initial determination bythe court or challenging any determination by the Reviewing Party or any aspectthereof. The Company hereby consents to service of process and to appear in anysuch proceeding. Any determination by the Reviewing Party not challenged by theIndemnitee shall be binding on the Company and Indemnitee. The remedy providedfor in this Section 4 shall be in addition to any other remedies available toIndemnitee in law or equity.
     (c) Defense to Indemnification, Burden of Proof, and Presumptions. Itshall be a defense to any action brought by Indemnitee against the Company toenforce this Agreement (other than an action brought to enforce a claim forExpenses incurred in defending a Proceeding in advance of its final dispositionwhere the required undertaking has been tendered to the Company) that it is notpermissible under applicable law or under this Agreement for the Company toindemnify Indemnitee for the amount claimed. In connection with any such actionor any determination by the Reviewing Party or otherwise as to whetherIndemnitee is entitled to be indemnified hereunder, the burden of proving sucha defense or determination shall be on the Company. Neither the failure of theReviewing Party or the Company (including its Board, independent legal counsel,or its shareholders) to have made a determination prior to the commencement ofsuch action by Indemnitee that indemnification of the claimant is proper underthe circumstances because he has met the standard of conduct set forth inapplicable law, nor an actual determination by the Reviewing Party or Company(including its Board, independent legal counsel, or its stockholders) that theIndemnitee had not met such applicable standard of conduct, shall be a defenseto the action or create a presumption that the Indemnitee has not met theapplicable standard of conduct. For purposes of this Agreement, the terminationof any claim, action, suit, or proceeding, by judgment, order, settlement(whether with or without court approval), conviction, or upon a plea of nolocontendere, or its equivalent, shall not create a presumption that Indemniteedid not meet any particular standard of conduct or have any particular beliefor that a court has determined that indemnification is not permitted byapplicable law.
     5. Indemnification for Expenses Incurred in Enforcing Rights. The Companyshall indemnify Indemnitee against any and all Expenses that are incurred byIndemnitee in seeking (i) indemnification of Expenses by the Company under thisAgreement or any other agreement or under applicable law or the Company’sArticles of Association or Bye-laws now or hereafter in effect relating toindemnification for Indemnifiable Events, and/or (ii) recovery under directors’and officers’ liability insurance policies maintained by the Company, but onlyin the event that Indemnitee ultimately is determined to be entitled to suchindemnification or insurance recovery, as the case may be. In addition, theCompany shall, if so requested by Indemnitee, advance the foregoing Expenses toIndemnitee (to the extent that the Company is permitted to under applicablelaw), 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 thecommencement of any Proceeding, Indemnitee will, if a claim in respect thereofis to be made against the Company under this Agreement, notify the Company ofthe commencement thereof;
 

 

but the omission so to notify the Company will not relieve it from anyliability that it may have to Indemnitee, except as provided in Section 6(c).
     (b) Defense. With respect to any Proceeding as to which Indemniteenotifies the Company of the commencement thereof, the Company will be entitledto participate in the Proceeding at its own expense and except as otherwiseprovided below, to the extent the Company so wishes, it may assume the defensethereof with counsel reasonably satisfactory to Indemnitee. After notice fromthe Company to Indemnitee of its election to assume the defense of anyProceeding, the Company will not be liable to Indemnitee under this Agreementor otherwise for any Expenses subsequently incurred by Indemnitee under thisAgreement except as otherwise provided below. Indemnitee shall have the rightto employ his own counsel in such Proceeding, but all Expenses related theretoincurred after notice from the Company of its assumption of the defense shallbe at Indemnitee’s expense unless: (i) the employment of counsel by Indemniteehas been authorized by the Company, (ii) Indemnitee has reasonably determinedthat there may be a conflict of interest between Indemnitee and the Company inthe defense of the Proceeding and such determination has been affirmed any thenexisting Independent Counsel, (iii) after a Change in Control the employment ofcounsel by Indemnitee has been approved by the Independent Counsel, or (iv) theCompany shall not in fact have employed counsel to assume the defense of suchProceeding, in each of which case all Expenses of the Proceeding shall be borneby the Company. The Company shall not be entitled to assume the defense of anyProceeding brought by or on behalf of the Company or as to which Indemniteeshall have made the determination provided for in (ii) above.
     (c) Settlement of Claims. The Company shall not be liable to indemnifyIndemnitee under this Agreement or otherwise for any amounts paid in settlementof any Proceeding effected without the Company’s written consent, provided,however, that if a Change in Control has occurred the Company shall be liablefor indemnification of Indemnitee for amounts paid in settlement if theIndependent Counsel has approved the settlement. The Company shall not settleany Proceeding in any manner that would impose any penalty or limitation onIndemnitee without Indemnitee’s written consent. Neither the Company norIndemnitee shall unreasonably withhold their consent to any proposedsettlement. The Company shall not be liable to indemnify Indemnitee under thisAgreement with regard to any judicial award if the Company was not given areasonable and timely opportunity, at its expense, to participate in thedefense of such action; the Company’s liability hereunder shall not be excusedif participation in the Proceeding by the Company was barred by this Agreement.
     7. Establishment of Trust. In the event of a Change in Control theCompany shall, upon written request by Indemnitee, create a Trust for thebenefit of Indemnitee and from time to time upon written request of Indemniteeshall fund the Trust in an amount sufficient to satisfy any and all Expensesreasonably anticipated at the time of each such request to be incurred inconnection with investigating, preparing for, participating in, and/ordefending any Proceeding relating to an Indemnifiable Event. The amount oramounts to be deposited in the Trust pursuant to the foregoing fundingobligation shall be determined by the Reviewing Party. The terms of the Trustshall provide that (i) the Trust shall not be revoked or the principal thereofinvaded, without the written consent of Indemnitee, (ii) the Trustee shalladvance, within ten business days of a request by Indemnitee, any and allExpenses to Indemnitee (and Indemnitee hereby agrees to reimburse the Trustunder the same circumstances for which Indemnitee would be required toreimburse the Company under Section 2(c) of this Agreement), (iii) the Trustshall continue to be funded by the Company in accordance with the
 

 

funding obligation set forth above, (iv) the Trustee shall promptly pay toIndemnitee all amounts for which Indemnitee shall be entitled toindemnification pursuant to this Agreement or otherwise, and (v) all unexpendedfunds in the Trust shall revert to the Company upon a final determination bythe 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 shallrelieve the Company of any of its obligations under this Agreement. All incomeearned on the assets held in the Trust shall be reported as income by theCompany for federal, state, local, and foreign tax purposes. The Company shallpay all costs of establishing and maintaining the Trust, and shall indemnifythe Trustee against any and all expenses (including attorneys’ fees), claims,liabilities, loss, and damages arising out of or relating to this Agreement orthe establishment and maintenance of the Trust.
     8. Non-Exclusivity. The rights of Indemnitee hereunder shall be inaddition to any other rights Indemnitee may have under the Company’s Articlesof Association or Bye-laws, applicable law, or otherwise. To the extent that achange in applicable law (whether by statute or judicial decision) permitsgreater indemnification by agreement than would be afforded currently under theCompany’s Articles of Association or Bye-laws, applicable law, or thisAgreement, it is the intent of the parties that Indemnitee enjoy by thisAgreement the greater benefits so afforded by such change.
     9. Liability Insurance. To the extent the Company maintains an insurancepolicy or policies providing directors’ and officers’ liability insurance,Indemnitee shall be covered by such policy or policies, in accordance with itsor their terms, to the maximum extent of the coverage available for any Companydirector or officer.
     10. Period of Limitations. No legal action shall be brought and no causeof action shall be asserted by or on behalf of the Company or any Affiliate ofthe Company against Indemnitee, Indemnitee’s spouse, heirs, executors, orpersonal or legal representatives after the expiration of two years from thedate of accrual of such cause of action, or such longer period as may berequired by state law under the circumstances. Any claim or cause of action ofthe Company or its Affiliate shall be extinguished and deemed released unlessasserted by the timely filing of a legal action within such period; provided,however, that if any shorter period of limitations is otherwise applicable toany such cause of action, the shorter period shall govern.
     11. Retroactivity. This Agreement shall be deemed to have been in effectduring 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, oramendment of this Agreement shall be binding unless executed in writing by bothof the parties hereto. No waiver of any of the provisions of this Agreementshall be binding unless in the form of a writing signed by the party againstwhom enforcement of the waiver is sought, and no such waiver shall operate as awaiver of any other provisions hereof (whether or not similar), nor shall suchwaiver constitute a continuing waiver. Except as specifically provided herein,no failure to exercise or any delay in exercising any right or remedy hereundershall constitute a waiver thereof.
     13. Subrogation. In the event of payment under this Agreement, theCompany shall be subrogated to the extent of such payment to all of the rightsof recovery of Indemnitee,
 

 

who shall execute all papers reasonably required and shall do everythingthat may be reasonably necessary to secure such rights, including the executionof such documents necessary to enable the Company effectively to bring suit toenforce such rights.
     14. No Duplication of Payments. The Company shall not be liable underthis Agreement to make any payment in connection with any claim made againstIndemnitee to the extent Indemnitee has otherwise received payment (under anyinsurance policy, Articles of Association or Bye-laws, or otherwise) of theamounts otherwise indemnifiable hereunder.
     15. Binding Effect. This Agreement shall be binding upon and inure to thebenefit of and be enforceable by the parties hereto and their respectivesuccessors (including any direct or indirect successor by purchase, merger,consolidation, or otherwise to all or substantially all of the business and/orassets of the Company), assigns, spouses, heirs, and personal and legalrepresentatives. The Company shall require and cause any successor (whetherdirect or indirect by purchase, merger, consolidation, or otherwise) to all,substantially all, or a substantial part, of the business and/or assets of theCompany, by written agreement in form and substance satisfactory to Indemnitee,expressly to assume and agree to perform this Agreement in the same manner andto the same extent that the Company would be required to perform if no suchsuccession had taken place. The indemnification provided under this Agreementshall continue as to Indemnitee for any action taken or not taken while servingin an indemnified capacity pertaining to an Indemnifiable Event even though hemay have ceased to serve in such capacity at the time of any Proceeding.
     16. Severability. If any provision (or portion thereof) of this Agreementshall be held by a court of competent jurisdiction to be invalid, void, orotherwise unenforceable, the remaining provisions shall remain enforceable tothe fullest extent permitted by law. Furthermore, to the fullest extentpossible, the provisions of this Agreement (including without limitation, eachportion of this Agreement containing any provision held to be invalid, void, orotherwise unenforceable, that is not itself invalid, void or unenforceable)shall be construed so as to give effect to the intent manifested by theprovision held invalid, void, or unenforceable.
     17. Governing Law. This Agreement shall be governed by and construed andenforced 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 Statecourt in the Borough of Manhattan, The City of New York, State of New York areto have jurisdiction to settle any disputes which may arise out of or inconnection with this Agreement and that, accordingly, any legal action orproceedings arising out of or in connection with this Agreement may be broughtin such courts and the parties irrevocably submit to the jurisdiction of suchcourts.
     (b)  Nothing in this Section shall limit the right of any party to take anylegal action or proceedings arising out of or in connection with this Agreementin any other court of competent jurisdiction nor shall the taking ofProceedings in one or more jurisdictions preclude any party from takingProceedings in any other jurisdiction, whether concurrently or not.
     19. Notices. All notices, demands, and other communications required orpermitted hereunder shall be made in writing and shall be deemed to have beenduly given if delivered by hand against receipt, mailed postage prepaid bycertified or registered mail with
 

 

return receipt requested or sent by facsimile transmission withacknowledging transmission requested and received and addressed as follows:   COMPANY: China Yuchai International Limited