Unassociated Document


    EXECUTION
COPY

    
      
        


        TERMINATION AND RESTRUCTURING
AGREEMENT, dated as of November 30, 2010, among the registered shareholders of
INNER MONGOLIA TEHONG COAL AND POWER GROUP CO., LTD set forth on the signature
pages hereto (the “Coal Group
Shareholders”), the registered shareholders of INNER MONGOLIA ZHUNGER
HEAT POWER CO., LTD set forth on the signature pages hereto (the “Heat Power
Shareholders”, and together with the Coal Group Shareholders, the “PRC Shareholders”),
CHINA ENERGY CORPORATION, a Nevada corporation (“CEC”), BEIJING TEHONG ENERGY
TECHNOLOGY CONSULTING CO., LTD, a corporation organized under the laws of the
People’s Republic of China (“PRC”) and an
indirect, wholly-owned subsidiary of CEC (“CEC
China”),  INNER MONGOLIA TEHONG COAL AND POWER GROUP CO., LTD.,
a corporation organized under the laws of the People’s Republic of China (“Coal Group”), and
INNER MONGOLIA HEAT POWER CO., LTD, a corporation organized under the laws of
the People’s Republic of China (“Heat Power”, and
together with Coal Group, the “PRC Operating
Companies”).

        


        WITNESSETH:

        


        WHEREAS, the Coal Group Shareholders,
the Heat Power Shareholders, and Pacific Projects Inc. (“PPI”), a Nevada
corporation and a direct, wholly-owned subsidiary of CEC,  entered
into a Trust Agreement dated as of December 31, 2007 (the “Share Trust
Agreement”) pursuant to which the PRC Shareholders agreed to hold their
equity interests in Coal Group and Heat Power in trust for PPI in connection
with a plan (the “FIE
Plan”) to convert Coal Group and Heat Power from domestic enterprises to
Foreign Invested Enterprises under the laws of the People’s Republic of China
(the “PRC”);

        


        WHEREAS,  PPI has merged with
and into CEC with CEC as the surviving and continuing corporation;

        


        WHEREAS, the parties hereto have
decided to terminate the Share Trust Agreement and the related FIE Plan set
forth therein;

        


        WHEREAS,
CEC has determined that it is in its best interests to cause  CEC
China to enter into the Management and Control Agreements (as defined below)
with the PRC Shareholders; and

        


        WHEREAS,
the PRC Shareholders have determined that it is in their best interests to enter
into the Management and Control Agreements with CEC China.

        


        NOW, THEREFORE, in consideration of the
premises and mutual agreements and covenants hereinafter set forth, the parties
hereto agree as follows:

        


        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

           

        

        ARTICLE
I

        


        MERGER;
TERMINATION OF SHARE TRUST AGREMENT; RESTRUCTURING

        


        SECTION
1.01  Merger.  CEC
and PPI have taken all necessary steps to effect, as of November 29, 2010, the
merger of PPI with and into CEC pursuant to which CEC is the surviving and
continuing corporation.

        


        SECTION
1.02.  Termination.  The
parties hereto agree that, effective as of November 30, 2010, the Share Trust
Agreement and all the covenants and agreements set forth therein will be deemed
terminated, null and void, and of no further force and effect.

        


        SECTION
1.03. Restructuring.  Following
the termination set forth in Section 1.02 hereof, for good and valuable
consideration the receipt of which is hereby acknowledged, each Coal Group
Shareholder and each Heat Power Shareholder agree to enter into a variable
interest entity (“VIE”) arrangement
with CEC China pursuant to which control and the economic benefits of ownership
of Coal Group and Heat Power will accrue solely and fully to CEC
China.  The VIE arrangement will be made effective through various
contracts, including business cooperation agreements, powers of attorney,
exclusive share option agreements, and equity interest pledge agreements entered
into by the Coal Group Shareholders, the Heat Power Shareholders, and CEC China
(collectively, the “Management and Control
Agreements”) to be valid and effective as of the date hereof in
accordance with applicable PRC law.

        


        ARTICLE
II

        


        REPRESENTATIONS
AND WARRANTIES OF

        PRC
OPERATING COMPANIES AND PRC SHAREHOLDERS

        


        The PRC Operating Companies and the PRC
Shareholders hereby represent and warrant, jointly and severally, to CEC as
follows:

        


        SECTION
2.01.  Authority.  Each
of the PRC Shareholders has all the necessary power and authority to enter into
this Agreement and the Management and Control Agreements.  Each of the
PRC Shareholders that is a corporation, partnership or similar entity is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized.

        


        SECTION
2.02. Ownership of
Shares.  The equity interests in the registered capital of Coal
Group and Heat Power (the “Shares”) as set forth
in detail on Schedule 2.02 are owned under PRC law of record and beneficially
solely by the PRC Shareholders free and clear of all
encumbrances.  The Shares are validly issued, fully paid and
non-assessable, and constitute all the issued and outstanding capital stock of
the PRC Operating Companies.   None of the Shares was issued in
violation of any pre-

        emptive
rights.  Other than the Management and Control Agreements entered into
in connection herewith, there are no options, warrants, convertible securities
or other rights, agreements or commitments of any character relating to the
equity interests of the PRC Operating Companies or obligating any PRC Operating
Company or any PRC Shareholder to issue or sell any shares of capital stock of,
or any other interest in, any of the PRC Operating Companies.  Other
than the Share Trust Agreement (which is terminated by this Agreement) and the
Management and Control Agreements, there are no voting trusts, stockholder
agreements, proxies or other agreements or understandings in effect with respect
to the voting or transfer of any of the Shares.

        


        
          
            
            

          

          
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        SECTION 2.03.  No
Conflicts.  The execution, delivery and performance of this
Agreement and the Management and Control Agreements do not and will not (a)
conflict with or violate any law, regulation or governmental or judicial order
applicable to any of the PRC Operating Companies and PRC Shareholders, or (b)
other than as contemplated by the Management and Control Agreements, create any
encumbrance on any of the Shares, or (c) conflict with, result in any breach of,
constitute a default (or event with the giving of notice or lapse of time, or
both, would become a default under), require any consent under, or give to
others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of any note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, permit, franchise or other instrument or
arrangement to which Coal Group or Heat Power is bound or affected.

        


        SECTION 2.04.  Governmental Consents and
Approvals.  Except as set forth on Schedule 2.04, the
execution, delivery and performance of this Agreement and the Management and
Control Agreements by the PRC Operating Companies and the PRC Shareholders do
not and will not require any consent, approval, authorization or other order of,
action by, filing with or notification to any governmental or judicial
authority.

        


        SECTION 2.05.  Litigation.  There
are no claims, actions, suits, arbitrations, inquiries, proceedings or
investigation by or before any government or judicial authority affecting the
Shares.

        


        SECTION 2.06.  Full
Disclosure.  The PRC Operating Companies and the PRC
Shareholders are not aware of any facts which affect adversely, or which are
likely to affect adversely, CEC, the PRC Operating Companies, the Shares or the
transactions contemplated by this Agreement and the Management and Control
Agreements which have not been disclosed in this Agreement, the audited
financial statements of the Company, or otherwise disclosed to CEC by one or
more of the PRC Shareholders in writing.  No representation or
warranty of the PRC Operating Companies and the PRC Shareholders in this
Agreement or in the Management and Control Agreements contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading.


        


        
          
            
            

          

          
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        ARTICLE
III

        


        REPRESENTATIONS
AND WARRANTIES OF CEC

        


        CEC hereby represents and warrants to
the PRC Shareholders as follows:

        


        SECTION
3.01.  Authority.  CEC
has all the necessary power and authority to enter into this
Agreement.  CEC China has all the necessary power and authority to
enter into the Management and Control Agreements.  Each of CEC and CEC
China is duly organized, validly existing and in good standing under the laws of
the jurisdiction in which it is organized.

        


        SECTION 3.02.  No
Conflicts.  The execution, delivery and performance of this
Agreement and the Management and Control Agreements do not and will not conflict
with or violate any law, regulation or governmental or judicial order applicable
to CEC or CEC China.

        


        SECTION 3.03.  Governmental Consents and
Approvals.  Except as set forth on Schedule 3.03, the
execution, delivery and performance of this Agreement and the Management and
Control Agreements by CEC China do not and will not require any consent,
approval, authorization or other order of, action by, filing with or
notification to any governmental or judicial authority.

        


        SECTION 3.04.  Litigation.  There
are no claims, actions, suits, arbitrations, inquiries, proceedings or
investigation by or before any government or judicial authority affecting the
Shares.

        


        SECTION 3.05.  Full
Disclosure.  No representation or warranty of CEC or CEC China
in this Agreement or in the Management and Control Agreements contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements contained herein or therein not
misleading.

        


        
          
            
            

          

          
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        ARTICLE
IV

        


        GENERAL
PROVISIONS

        


        SECTION
4.01.  Entire
Agreement.  This Agreement and the Management and Control
Agreements constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and thereof and supersede all prior agreements and
undertakings, both written and oral, among the parties hereto with respect to
the subject matter hereof and thereof.

        


        SECTION
4.02.  No
Third Party Beneficiaries.  This Agreement shall be binding and
inure solely to the benefit of the parties hereto and their permitted assigns
and nothing herein, express or implied, is intended to or shall confer upon any
other person or entity any legal or equitable right, benefit or remedy of any
nature whatsoever.

        


        SECTION
4.03.  Headings.  The
descriptive headings contained in this Agreement are for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.

        


        SECTION
4.04. Amendment or
Waiver; Assignment.   This Agreement may not be amended or
modified, nor more any provision thereof be waived, except by an instrument in
writing signed by CEC and all of the PRC Shareholders.  This Agreement
may not be assigned by operation of law or otherwise without the written consent
of all the parties hereto.

        


        SECTION
4.05. Governing
Law.  This Agreement shall be governed by the laws of
Nevada.  All actions or proceedings arising out of or relating to this
Agreement shall be heard and determined in any federal court sitting in the city
of Las Vegas, Nevada.

        


        SECTION
4.06.  Specific
Performance.  The parties hereto agree that irreparable damage
would occur in the event any provision of this Agreement was not performed in
accordance with the terms hereof and the parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or
equity.

        


        SECTION
4.07.  Counterparts.  This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.

        


        SECTION
4.08.  Severability. If any
term or other provision of this Agreement is invalid, illegal or incapable of
being enforced by any law, regulation or public policy, all other terms and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any
party.  Upon such determination that any term or other provision is
invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby are consummated as originally contemplated to the greatest extent
possible.

         

        
          
            
            

          

          
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        SECTION
4.09.  Costs
and Expenses.  Each party shall bear their own costs and
expenses with respect to this Agreement.

        


        *        *        *

         

        
          
            
            

          

          
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                  IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be
      executed as of the date first written above.

                
	 
      	 
      
	
                  CHINA
      ENERGY CORPORATION

                	
                   

                
	 
      	 
      
	 
      	 
      
	
                  By: /s/ Wenxiang
Ding

                	
                   

                
	
                         Name:
      Wenxiang Ding

                	
                   

                
	
                         Title:
      President and Chief Executive Officer

                	
                    

                
	 
      	 
      
	
                  INNER
      MONGOLIA TEHONG COAL

                	
                  INNER
      MONGOLIA HEAT

                
	
                  AND
      POWER GROUP CO., LTD

                	
                  POWER
      CO., LTD

                
	 
      	 
      
	 
      	 
      
	
                  By: /s/ Wenxiang
Ding

                	
                  By: /s/ Wenxiang Ding

                
	
                         Name:
      Wenxiang Ding

                	
                         Name:
      Wenxiang Ding

                
	
                         Title:
      Legal Representative

                	
                         Title:
      Legal Representative

                
	 
      	 
      
	
                  BEIJING
      TEHONG ENERGY

                	 
      
	
                  TECHNOLOGY
      CONSULTING CO., LTD

                	 
      
	 
      	 
      
	 
      	 
      
	
                  By: /s/ Wenxiang
Ding

                	 
      
	
                         Name:
      Wenxiang Ding

                	 
      
	
                         Title:
      Legal Representative

                	 
      
	 
      	 
      
	
                  INNER
      MONGOLIA TEHONG COAL AND POWER GROUP CO., LTD
  SHAREHOLDERS:

                
	 
      	 
      
	 
      	 
      
	 
      	 
      
	
                  /s/ Wenxiang
      Ding

                	
                  
                    /s/
      Yanhua Li

                  

                
	
                  Wenxiang
      Ding

                	
                  Yanhua
      Li

                
	 
      	 
      
	 
      	 
      
	 
      	 
      
	
                  
                    /s/
      Yi Ding

                  

                	
                  
                    /s/
      Biao Ding

                  

                
	
                  Yi
      Ding

                	
                  Biao
      Ding

                
	 
      	 
      


        

      

      


      
        
          
          

        

        
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                  INNER
      MONGOLIA HEAT POWER CO., LTD SHAREHOLDERS:

                
	 
      	 
      
	
                  HANGZHOU
      DAYUAN GROUP

                	
                  ORDOS
      CITY YIYUAN.

                
	
                  CO.
      LTD

                	
                  INVESTMENT
      CO. LTD

                
	 
      	 
      
	
                  By: /s/ Lu Jin

                	
                  By: /s/ Zhiyong
  Guo

                
	
                         Name:
      Lu Jin

                	
                         Name:
      Zhiyong Guo

                
	
                         Title:
      Legal Representative

                	
                         Title:
      Legal Representative

                
	 
      	 
      
	
                  INNER
      MONGOLIA DUOYIDA

                	 
      
	
                  MINING
      CO., LTD.

                	 
      
	 
      	 
      
	
                  By: /s/ Liguo Zhang

                	 
      
	
                         Name:
      Liguo Zhang

                	
                   

                
	
                         Title:
      Legal Representative

                	 
      


        

      

      
 

      
        
          
          

        

        
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      SCHEDULE
2.02

      


      


      INNER
MONGOLIA AND TEHONG COAL AND POWER GROUP CO. LTD

      


      Registered
Shareholders and Capital Contributions as of November 30, 2010

      


      
        	
                 

                Shareholders

              	
                Total
      Paid-Up Capital (RMB)

              	
                %
      Issued and Outstanding Shares

              
	
                Wenxiang
      Ding

              	
                16,670,000

              	
                16.67

              
	
                Yanhua
      Li

              	
                16,670,000

              	
                16.67

              
	
                Yi
      Ding

              	
                33,330,000

              	
                33.33

              
	
                Biao
      Ding

              	
                33,330,000

              	
                33.33

              
	
                TOTAL

              	
                100,000,000
      (RMB)

              	
                100.00%

              


      

      


      


      


      INNER
MONGOLIA HEAT POWER CO. LTD

      


      Registered
Shareholders and Capital Contributions as of November 30, 2010

      


      
        	
                 

                Shareholders

              	
                Total
      Paid-Up Capital (RMB)

              	
                %
      Issued and Outstanding Shares

              
	
                Hangzhou
      DaYuan Group Co. Ltd

              	
                11,500,000

              	
                23.00

              
	
                Ordos
      City YiYuan Investment Co. Ltd

              	
                7,000,000

              	
                14.00

              
	
                XIngHeHaiFu
      Transportation & Sales Co. Ltd

              	
                6,000,000

              	
                12.00

              
	
                Inner
      Mongolia and Tehong Coal and Power Group Co Ltd

              	
                25,500,000

              	
                51.00

              
	
                TOTAL

              	
                50,000,000
      (RMB)

              	
                100.00%

              


      

      


      
        
          
          

        

        
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      SCHEDULE
2.04

      


      Consents,
approvals, authorizations or other orders of, actions by, filings with or
notification to any governmental or judicial authority required by

      PRC
Operating Companies and/or PRC Shareholders

      for this
Agreement and Management and Control

      Agreements

      


      


      
        	
                1.  

              	
                Registration
      with relevant PRC authorities of share pledge for the equity interests
      pledged under the share pledge agreements of the Management and Control
      Agreements.

              


      

      


      
        	
                2.  

              	
                Registration
      with relevant PRC authorities of change of shareholders of Heat Power and
      Coal Group if WFOE elects to exercise the option granted under the share
      options agreements of the Management and Control Agreements (with other
      applicable approvals/registrations with relevant PRC authorities if WFOE
      appoints an overseas entity/individual to exercise the
      option).

              


      

       

      
        
          
          

        

        
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      SCHEDULE
3.03

      


      Consents,
approvals, authorizations or other orders of, actions by, filings with or
notification to any governmental or judicial authority required by CEC
and

       CEC
China for this Agreement and Management and Control

      Agreements

      


      
        	
                1.  

              	
                Registration
      with relevant PRC authorities of share pledge for the equity interests
      pledged under the share pledge agreements of the Management and Control
      Agreements.

              


      

      


      
        	
                2.  

              	
                Registration
      with relevant PRC authorities of change of shareholders of Heat Power and
      Coal Group if WFOE elects to exercise the option granted under the share
      options agreements of the Management and Control Agreements (with other
      applicable approvals/registrations with relevant PRC authorities if WFOE
      appoints an overseas entity/individual to exercise the
      option).

              


      

      


      
        
          
          

        

        
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