Longhai Steel, Inc.: Exhibit 10.1 - Filed by newsfilecorp.com






Exhibit 10.1

 

INDEPENDENT DIRECTOR AGREEMENT 

THIS INDEPENDENT DIRECTOR AGREEMENT (this
“Agreement”) is made effective as of November 18, 2010 by and
between Longhai Steel Inc. (the “Company”), and Mr. Michael
Billings (“Director”).

WHEREAS, the Company seeks to attract and retain as
directors, capable and qualified persons to serve on the Company’s board of
directors (the “Board”); and 

 WHEREAS, the Company has
requested and received from Director certain information regarding Director’s
qualifications and fitness to serve on the Board and has considered and relied
upon the accuracy of such information in offering Director the opportunity to
serve on the Board; and 

 WHEREAS, the Company believes that Director
possesses the necessary qualifications and abilities to serve as a director of
the Company and to perform the functions and meet the Company’s needs related to
its Board.

NOW, THEREFORE, the parties agree as follows:

1. Service to the Board. 

(a) Service as a Director. Director
will serve for a period of three years (the “term as a director of the Company
in accordance with the bylaws of the Company and perform all duties as a
director of the Company, including without limitation (1) attending meetings of
the Board, (2) serving on such committees of the Board (each a
“Committee”) to which Director has been appointed, (3) attending
meetings of each Committee of which Director is a member and (4) performing
Director’s duties on behalf of the Company in good faith and in a manner that is
not opposed to the best interests of the Company. 

(b) Service on Committees. Director
will serve on the following committees and in the capacities stated:


	  	Member 	Chairperson 
	Audit Committee 	X 	  
	Compensation/Nominating Committee 	X 	  
	Corporate Governance Committee 	  	X 



To the extent Director serves as Audit Committee Chairperson,
Director agrees that Director is also serving as the financial expert for
purposes of filings before the Securities and Exchange Commission.

2. Term. The term of this Agreement shall commence as of
the date of Director’s appointment by the Board of Directors of the Company and
shall continue until the Director’s removal or resignation. 




Date: 18.11.2010 
Page 2 of 4 


3. Compensation and Expenses. 

(a) Director Compensation. In
recognition of the services provided by and to be provided by Director, the
Company agrees to issue to Director, an aggregate of 5000 restricted shares of
the Company’s common stock per annum (such issuance, the “Compensation”), half
of the restricted shares to be granted on the date that is six (6) months
following the closing date of a secondary offering of shares of the Company’s
common stock, and half the annual Compensation to be granted on each six (6)
month interval thereafter (each such date a “grant date”). The Board reserves
the right to change the Compensation from time to time, to take into
consideration the responsibilities associated with different committees in
setting Compensation levels and to grant additional restricted shares
periodically, which may vary from the terms described in this section. If
Director ceases to serve as a director on the Company’s Board at any time and
for any reason prior to a grant date associated with any restricted shares, all
restricted shares described in the restricted share agreement that have not been
granted as of such time of cessation of services will not be granted. All such
cancelled or forfeited restricted shares shall be returned to the Company’s
incentive pool.

(b) Expenses. The Company will
reimburse Director for all reasonable, out-of-pocket expenses, approved by the
Company in advance, incurred in connection with the performance of Director’s
duties under this Agreement (“Expenses”), upon submission of
receipts and a written request for payment. Such statement shall be accompanied
by sufficient documentary matter to support the expenditures. The Company may
withhold from any payment any amount of withholding required by law.

(c) Future Compensation and Benefits. The
Board, with the compensation committee, reserves the right to determine the
compensation for services provided under this Agreement. The Board may from time
to time authorize additional compensation and benefits for Director, including
stock options and restricted stock.

(d) Insurance and Indemnification. This Agreement
is effective only when the directors’ and officers’ insurance policy previously
shown to the Director is in place and an Indemnification Agreement satisfactory
to the Director is signed by the Company. When and if the Company anticipates
the successful qualification of its common stock for trading on the NASDAQ Stock
Exchange or any similar exchange for securities trading, the Company shall amend
its existing directors’ and officers’ insurance policy to increase limits
available to independent directors by approximately $5,000,000 or a lesser or
greater amount which is determined and approved by the Board to be appropriate,
with such insurance effective on date of such listing or as soon thereafter as
possible, provided that such increase is in the best interests of the Company
and its shareholders.

The Company has provided the Director with a summary of the
limits and terms of its current Directors’ and Officers’ Liability Insurance
(the “D&O Insurance”) and the provisions of its corporate
by-laws and governing documents dealing with indemnification of directors (the
“Indemnification Provisions”). To the fullest extent permitted by
applicable law, the Company agrees that it will not voluntarily change the terms
of such D&O Insurance or the Indemnification Provisions to the detriment of
the Director at anytime while he is entitled to benefit of such D&O
Insurance or Indemnification Provisions.

4. Confidentiality. The Company and Director each
acknowledge that, in order for the intents and purposes of this Agreement to be
accomplished, Director shall necessarily be obtaining access to certain
confidential information concerning the Company and its affairs, including, but not limited to business methods, information
systems, financial data and strategic plans which are unique assets of the
Company (“Confidential Information”). Director covenants not to, either
directly or indirectly, in any manner, utilize or disclose to any person, firm,
corporation, association or other entity any Confidential Information.




Date: 18.11.2010 
Page 3 of 4 


5. Non-Compete. During the term of this Agreement and
for a period of twelve (12) months following Director’s removal or resignation
from the Board of Directors of the Company or any of its subsidiaries or
affiliates (the “Restricted Period”), Director shall not, directly or
indirectly, (i) in any manner whatsoever engage in any capacity with any
business competitive with the Company’s current lines of business or any
business then engaged in by the Company, any of its subsidiaries or any of its
affiliates (the “Company's Business”) for Director’s own benefit or for
the benefit of any person or entity other than the Company or any subsidiary or
affiliate; or (ii) have any interest as owner, sole proprietor, shareholder,
partner, lender, director, officer, manager, employee, consultant, agent or
otherwise in any business competitive with the Company's Business;
provided, however, that Director may hold, directly or indirectly,
solely as an investment, not more than two percent (2%) of the outstanding
securities of any person or entity which are listed on any national securities
exchange or regularly traded in the over-the-counter market notwithstanding the
fact that such person or entity is engaged in a business competitive with the
Company's Business. In addition, during the Restricted Period, Director shall
not develop any property for use in the Company’s Business on behalf of any
person or entity other than the Company, its subsidiaries and affiliates.

6. Termination. With or without cause, the Company and
Director may each terminate this Agreement at any time upon ten (10) days
written notice, and the Company shall be obligated to pay to Director the
compensation and expenses due up to the date of the termination. Nothing
contained herein or omitted herefrom shall prevent the shareholder(s) of the
Company from removing Director with immediate effect at any time for any
reason.

7. Amendments and Waiver. No supplement, modification or
amendment of this Agreement will be binding unless executed in writing by both
parties. No waiver of any provision of this Agreement on a particular occasion
will be deemed or will constitute a waiver of that provision on a subsequent
occasion or a waiver of any other provision of this Agreement.

8. Binding Effect. This Agreement will be binding upon
and inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.

9. Severability. The provisions of this Agreement are
severable, and any provision of this Agreement that is held by a court of
competent jurisdiction to be invalid, void, or otherwise unenforceable in any
respect will not affect the validity or enforceability of any other provision of
this Agreement.

10. Governing Law. This Agreement will be governed by
and construed and enforced in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed in that state without giving
effect to the principles of conflicts of laws.

11. Notice. Any and all notices referred to
herein shall be sufficient if furnished in writing at the addresses specified on
the signature page hereto or, if to the Company, to the Company’s address as
specified in filings made by the Company with the U.S. Securities and Exchange
Commission.

12. Assignment. The rights and benefits of the
Company under this Agreement shall be transferable, and all the covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by or against, its successors and assigns. The
duties and obligations of Director under this Agreement are personal and
therefore Director may not assign any right or duty under this Agreement without
the prior written consent of the Company.




Date: 18.11.2010 
Page 4 of 4 


13. Entire Agreement. Except as provided
elsewhere herein, this Agreement sets forth the entire agreement of the parties
with respect to its subject matter and supersedes all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party to this Agreement with respect to such subject matter.

14. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one
instrument. Facsimile execution and delivery of this Agreement is legal, valid
and binding for all purposes.

IN WITNESS WHEREOF, the parties hereto have caused this
Independent Director Agreement to be duly executed and signed as of the day and
year first above written.

LONGHAI STEEL INC.

By: /s/ Dr. Eberhard
Kornotzki                        

Name: Dr. Eberhard Kornotzki  
Title: Chief Financial Officer



DIRECTOR

_________________________________

Name: Mr. Michael Billings 
Address: