Korea Joint Venture Agreement

This Agreement is entered into effective as of this 18th day of March 2003 by and between Enova Systems, Inc., a corporation organized and existing under the laws of the State of California, U.S.A., with its principal place of business at 19850 South Magellan Drive, Torrance CA 90502 (hereinafter referred to as "ENOVA") and Hyundai Heavy Industries Co., Ltd., a corporation organized and existing under the laws of the Republic of Korea, with its principal place of business at Ulsan, Korea (hereinafter referred to as "HHI").


WITNESSETH


WHEREAS, ENOVA is engaged in research, development, sales and marketing of power management, conversion and propulsion systems for electric, hybrid-electric and fuel cell vehicles; and


WHEREAS, HHI is engaged in design, development and manufacture of electrical equipment such as switchgears, transformers, circuit breakers, instrumentation and control system, power electronics, motors and generators; and


WHEREAS, ENOVA and HHI desire to collaborate by establishing and funding a joint venture company ("JVC") to which ENOVA and HHI will license certain of their respective technologies to the JVC, pursuant to the License and Technology Transfer Agreements in form and substance as set forth in Exhibits B-1 and B-2 attached hereto (the "Licenses"), in consideration of HHI investing $6,000,000 ($3,000,000 directly in ENOVA and $3,000,000 in the JVC), pursuant to Stock Purchase Agreement substantially in form and substance attached hereto as Exhibit A (the "Stock Purchase Agreement") and ENOVA investing $2 million in the JVC; and


WHEREAS, the JVC shall engage in the research and development of certain power conversion and power management technology and products, including electric vehicle products and distributed generation systems as set forth herein, and shall grant licenses of its technologies to HHI and ENOVA to manufacture and market products as more fully set forth in Exhibits C-1 and C-2 attached hereto (the "Manufacturing and Sales Agreements").


NOW, THEREFORE, in consideration of promises and covenants hereinafter set forth, ENOVA and HHI agree as follows:


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Article 1. Definitions


For the purposes of this Agreement, the following terms shall have the following meanings respectively:


1.1 The term "Agreement " shall mean this Joint Venture Agreement.


1.2 The term "Agreement Date" shall mean the effective date of this Agreement
as set forth in the preamble above.


1.3 The term "Parties" shall mean ENOVA and HHI.


1.4 The term "JVC" shall mean that joint venture company to be incorporated
under the laws of the State of California by the Parties in the manner
provided in this Agreement.


1.5 The term "Related Agreements" shall mean those agreements to be
incorporated into this Agreement as exhibits which are to be entered into
between or among ENOVA, HHI and/or the JVC, as the case may be, pursuant
to Article 3 hereof.


1.6 The term "Products" shall mean those products set forth on Schedule 1
attached hereto.


1.7 Unless specifically provided to the contrary, all amounts referred to in
this Agreement are in United States Dollars.


Article 2. Formation of JVC


2.1 Formation. As soon as practically possible after the Agreement Date, but in no event later than ninety (90) days after the Agreement Date, provided that all of the Related Agreements referred to in Article 3 have been executed by the Parties, the Parties shall cause the JVC to be organized and registered under the laws of the State of California. The Parties shall closely cooperate and consult with each other with respect to the procedures and particulars of the organization and registration of the JVC. The JVC will be a close corporation and the initial registered principal office of the JVC shall be located at 19850 South Magellan Drive, Torrance CA 90502.


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2.2 Articles of Incorporation. At the time of the organization and registration of the JVC, the Parties shall cause the JVC to adopt the Articles of Incorporation and Bylaws annexed hereto and marked as Exhibits D-1 and D-2, respectively (collectively, the Articles and Bylaws to be hereinafter referred to as the "Charter Documents").


2.3 Paid-in Capital. JVC shall have a paid-in capital of US Five Million Dollars (USD 5,000,000) consisting of five million shares (5,000,000) of common stock. HHI shall subscribe to and pay US Three Million Dollars (USD 3,000,000) for three million shares (3,000,000) amounting to sixty percent (60%) of JVC common stock shares and ENOVA shall subscribe to and pay US Two Million Dollars (USD 2,000,000) for two million shares (2,000,000) amounting to forty percent (40%) of JVC common stock shares. The subscription shall take place in the following manner:


A. At the time of incorporation of JVC, HHI shall wire transfer
[REDACTED]* to the bank account of JVC [REDACTED]* and at the same
time, shall wire transfer [REDACTED]* to the bank account of ENOVA
pursuant to the Stock Purchase Agreement attached as Exhibit A
hereto.


B. One year following the Agreement Date, HHI shall wire transfer
[REDACTED]* to the bank account of JVC [REDACTED]* and at the same
time, shall wire transfer [REDACTED]* to the bank account of ENOVA
pursuant to the ENOVA Stock Purchase Agreement attached as Exhibit A
hereto.


C. From the above transactions and as pursuant to the Stock Purchase
Agreement, ENOVA shall be deemed to have subscribed to and purchased
forty percent (40%) of JVC common stock shares and HHI shall be
deemed to have subscribed to and purchased sixty percent (60%) of
JVC common stock shares. Moreover, as consideration of HHI paying US
Two Million Dollars (USD 2,000,000) on behalf of ENOVA for ENOVA's
subscription of JVC's common stock shares, HHI shall be deemed to
have purchased ENOVA's common stock shares equivalent to US Three
Million Dollars (USD 3,000,000).


2.4 Formation Costs. Expenses incurred by each Party up to the Agreement Date, including travel expenses and legal fees, shall be borne by the Party so incurring such expenses. After the Agreement Date, all costs and expenses of the formation of JVC, to the extent the same are not incurred or assumed by the JVC, be borne equally by the Parties.


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Article 3. Related Agreements


Immediately after the formation and registration of the JVC, including but not limited to filing of the Articles of Incorporation ("Exhibit D-1") and adoption of the Bylaws (Exhibit D-2") by the JVC, the following agreements shall be entered into between the relevant Parties.


A. The Stock Purchase Agreement ("Exhibits A");


B. The License and Technology Transfer Agreements (Exhibits B-1 and B-2);
and


C. The Manufacturing and Sales Agreements (Exhibits C-1 and C-2).


Article 4. Organization of JVC


4.1 JVC Governance. The organization and governance of the JVC shall be governed by the Charter Documents except as otherwise set forth in this Agreement. Notwithstanding anything set forth in the Charter Documents to the contrary, the following corporate actions shall require the written consent or authorization at a duly held meeting of the shareholders of the JVC holding at least seventy-five percent (75%) of the outstanding shares in the JVC:


A. Any amendment to the Charter Documents which has the effect of
increasing or decreasing of the share capital of the JVC or the
authorized number of directors of the JVC;


B. Any merger or other reorganization with another entity;


C. Any dissolution of the JVC except pursuant to the termination of
this Agreement in accordance with its terms;


D. Any sale of all or substantially all of the assets of the JVC; and


E. Any compensation of the Board of Directors.


4.2 Directors and the Board of Directors.


4.2.1 Except as otherwise required by mandatory provisions of law or provided for in the Charter Documents or this Agreement, responsibility for the management, direction and control of the JVC shall be vested in the Board of Directors.


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4.2.2 The Board of Directors may delegate authority for management of the JVC to officers of the JVC in accordance with this Agreement and the Bylaws, resolutions duly passed by the Board of Directors and as consistent with the Articles of Incorporation and mandatory provisions of law.


4.2.3 The directors of the JVC shall be elected as provided in the Bylaws. The Bylaws of the JVC shall provide for the election of five (5) directors. It is understood and agreed by the Parties that three (3) of the directors of the JVC shall be individuals appointed by HHI and two (2) of the directors shall be individuals nominated by ENOVA. The term of directors shall be for one (1) year and directors shall be eligible for re-election as are consistent with applicable law and the Bylaws.


4.2.4 In the event of death, incapacity, prolonged illness, resignation or removal of a director prior to the completion of the term to which he was elected, the Board of Directors or shareholders shall vote their shares and take such other action as may be necessary to appoint or cause to be appointed a director nominated by the shareholder Party which originally elected such director as his replacement.


4.2.5 Meetings of the Board of Directors of JVC shall be convened and conducted not less than once during each calendar quarter of the JVC. Meetings of the Board of Directors shall be called by the President of the JVC or at the request of any member of the Board of Directors. Meetings of the Board of Directors shall be chaired by the President/CEO of JVC who shall be a member of the Board of Directors.


4.2.6 [REDACTED]* A. [REDACTED]*; B. [REDACTED]*; C. [REDACTED]*; D. [REDACTED]*; E. [REDACTED]*; F. [REDACTED]*; G. [REDACTED]*; H. [REDACTED]*; I. [REDACTED]*; J. [REDACTED]*;


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