Exhibit 10.1

 

K&F INDUSTRIES HOLDINGS, INC.

(FORMERLY KNOWN AS K&F PARENT, INC.)

 

AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN

(AMENDED AND RESTATED AS OF AUGUST 7, 2005)

 

Section 1.  PURPOSE OF PLAN

 

The purpose of this Amended and Restated 2004 Stock Incentive Plan (“Plan”) of
K&F Industries Holdings, Inc. (formerly known as K&F Parent, Inc.), a Delaware
corporation (the “Company”), is to enable the Company to attract, retain and
motivate (i) its employees, non-employee directors, independent contractors and
consultants, (ii) members of the Advisory Committee (the “Advisors”) of Aurora
Capital Partners III L.P., a Delaware limited partnership, and Aurora Capital
Partners II L.P., a Delaware limited partnership (collectively with Aurora
Capital Partners III L.P. “ACP”) and (iii) employees of ACP (the “ACP
Employees”) by providing for or increasing the proprietary interests of such
employees, non-employee directors, independent contractors, consultants,
Advisors and ACP Employees in the Company.

 

Section 2.  PERSONS ELIGIBLE UNDER PLAN

 

Any Advisor, ACP Employee or employee, non-employee director, independent
contractor or consultant of the Company or any of its subsidiaries (each, a
“Participant”), shall be eligible to be considered for the grant of Awards (as
hereinafter defined) hereunder.

 

Section 3.  AWARDS

 

(a)           Subject to Section 3(b), the Board, on behalf of the Company, is
authorized under this Plan to enter into any type of arrangement with a
Participant that is not inconsistent with the provisions of this Plan and that,
by its terms, involves or might involve the issuance of (i) shares of the Common
Stock, par value $0.01, of the Company (the “Common Shares”) or (ii) a
Derivative Security (as such term is defined in Rule 16a-1 promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), as such
rule may be amended from time to time) with an exercise or conversion privilege
at a price related to the Common Shares or with a value derived from the value
of the Common Shares.  The entering into of any such arrangement is referred to
herein as the “grant” of an “Award.”

 

(b)           Awards are not restricted to any specified form or structure and
may include, without limitation, sales or bonuses of stock, restricted stock,
stock options, reload stock options, stock purchase warrants, other rights to
acquire stock, securities convertible into or redeemable for stock, stock
appreciation rights, phantom stock, dividend equivalents, performance units or
performance shares, and an Award may consist of one such security or benefit, or
two or more of them in tandem or in the alternative.

 

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(c)           Awards may be issued, and Common Shares may be issued pursuant to
an Award, for any lawful consideration as determined by the Board, including,
without limitation, services rendered by the recipient of such Award.

 

(d)           Subject to the provisions of this Plan, the Board, in its sole and
absolute discretion, shall determine all of the terms and conditions of each
Award granted under this Plan, which terms and conditions may include, among
other things:

 

(i)            a provision permitting the recipient of such Award, including any
recipient who is a director or officer of the Company, to pay the purchase price
of the Common Shares or other property issuable pursuant to such Award, or such
recipient’s tax withholding obligation with respect to such issuance, in whole
or in part, by any one or more of the following:

 

(A)          the delivery of cash;

 

(B)           the delivery of other property deemed acceptable by the Board;

 

(C)           the delivery of previously owned shares of capital stock of the
Company (including “pyramiding”) or other property;

 

(D)          a reduction in the amount of Common Shares or other property
otherwise issuable pursuant to such Award (such reduction to be valued on the
basis of the aggregate Fair Market Value, on the date of exercise, of the
additional Common Shares that would have been delivered to the Participant upon
exercise of the Award), provided that the Company is not then prohibited from
purchasing or acquiring Common Shares; or

 

(E)           the delivery of a promissory note of the recipient or of a third
party, the terms and conditions of which shall be determined by the Board.

 

(ii)           provisions specifying the exercise or settlement price for any
option, stock appreciation right or similar Award, or specifying the method by
which such price is determined, provided that the exercise or settlement price
of any option, stock appreciation right or similar Award that is intended to
qualify as “performance based compensation” for purposes of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the “Code”) shall be not less
than the Fair Market Value of a Common Share on the date such Award is granted;

 

(iii)          provisions relating to the exercisability and/or vesting of
Awards, lapse and non-lapse restrictions upon the Common Shares obtained or
obtainable under Awards or under the Plan and the termination, expiration and/or
forfeiture of Awards;

 

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(iv)          a provision conditioning or accelerating the receipt of benefits
pursuant to such Award, either automatically or in the discretion of the Board,
upon the occurrence of specified events, including, without limitation, a change
of control of the Company (as defined by the Board), an acquisition of a
specified percentage of the voting power of the Company, the dissolution or
liquidation of the Company, the financial performance of the Company, a sale of
substantially all of the property and assets of the Company or an event of the
type described in Section 7 hereof;

 

(v)           a provision required in order for such Award to qualify (A) as an
incentive stock option under Section 422 of the Code (an “Incentive Stock
Option”), (B) as “performance based compensation” under Section 162(m) of the
Code, and/or (C) for an exemption from Section 16 of the Exchange Act; or

 

(vi)          provisions restricting the transferability of Awards or Common
Shares issued under Awards.

 

(e)           For purposes of any Award under this Plan, unless provided
otherwise in the grant of such Award, the “Fair Market Value” of a Common Share
or other security on any date (the “Determination Date”) shall be equal to the
closing price per Common Share or unit of such other security on the business
day immediately preceding the Determination Date, as reported in The Wall Street
Journal, Western Edition, or, if no closing price was so reported for such
immediately preceding business day, the closing price for the next preceding
business day for which a closing price was so reported, or, if no closing price
was so reported for any of the 30 business days immediately preceding the
Determination Date, the average of the high bid and low asked prices per Common
Share or unit of such other security on the business day immediately preceding
the Determination Date in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System or
such other system then in use, or, if the Common Shares or such other security
were not quoted by any such organization on such immediately preceding business
day, the average of the closing bid and asked prices on such day as furnished by
a professional market maker making a market in the Common Shares or such other
security selected by the Board of Directors of the Company (the Board), or, if
no such market was made in the Common Shares or such other security, the value
of a Common Share or such other security as determined by the Board in its sole
discretion.  The Fair Market Value of a Common Share as of the initial effective
date of this Plan as provided in Section 9 hereof was $1,000.00, without giving
effect to the 133.0 for one stock split that was effected by the Company on
August 8, 2005.

 

Section 4.  STOCK SUBJECT TO PLAN

 

(a)           The aggregate number of Common Shares that may be issued pursuant
to all Incentive Stock Options granted under this Plan shall not exceed
1,500,000 subject to adjustment as provided in Section 7 hereof.

 

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(b)           At any time, the aggregate number of Common Shares issued and
issuable pursuant to all Awards (including all Incentive Stock Options) granted
under this Plan shall not exceed 2,500,000, subject to adjustment as provided in
Section 7 hereof.

 

(c)           For purposes of Section 4(b) hereof, the aggregate number of
Common Shares issued and issuable pursuant to Awards granted under this Plan
shall at any time be deemed to be equal to the sum of the following:

 

(i)            the number of Common Shares that were issued prior to such time
pursuant to Awards granted under this Plan, other than Common Shares that were
subsequently reacquired by the Company pursuant to the terms and conditions of
such Awards and with respect to which the holder thereof received no benefits of
ownership such as dividends; plus

 

(ii)           the number of Common Shares that were otherwise issuable prior to
such time pursuant to Awards granted under this Plan, but that were withheld by
the Company as payment of the purchase price of the Common Shares issued
pursuant to such Awards or as payment of the recipient’s tax withholding
obligation with respect to such issuance; plus

 

(iii)          the maximum number of Common Shares that are or may be issuable
at or after such time pursuant to Awards granted under this Plan prior to such
time.

 

Section 5.  DURATION OF PLAN

 

No Awards shall be made under this Plan after November 18, 2014.  Although
Common Shares may be issued after November 18, 2014 pursuant to Awards made
prior to such date, no Common Shares shall be issued under this Plan after
November 18, 2024.

 

Section 6.  ADMINISTRATION OF PLAN

 

(a)           This Plan shall be administered by the Board, provided, however,
that the Board may, in its sole discretion, delegate such authority to a
committee (the “Committee”) of the Board at any time.  In the event that the
Company becomes “publicly held” within the meaning of § 162(m) of the Code, then
the Board or any such Committee shall consist of two or more directors, each of
whom:  (i) is a “non-employee director” (as such term is defined in Rule 16b-3
promulgated under the Exchange Act, as such Rule may be amended from time to
time), and (ii) is an “outside director” within the meaning of Section 162(m) of
the Code.

 

(b)           Subject to the provisions of this Plan, the Board shall be
authorized and empowered to do all things necessary or desirable in connection
with the administration of this Plan, including, without limitation, the
following:

 

(i)            adopt, amend and rescind rules and regulations relating to this
Plan;

 

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(ii)           determine which persons are eligible to participate in the Plan
and to which of such persons, if any, Awards shall be granted hereunder;

 

(iii)          grant Awards to Participants and determine the terms and
conditions thereof, including the number of Common Shares issuable pursuant
thereto;

 

(iv)          determine whether, and the extent to which adjustments are
required pursuant to Section 7 hereof; and

 

(v)           interpret and construe this Plan and the terms and conditions of
any Award granted hereunder.

 

Section 7.  ADJUSTMENTS

 

If the outstanding securities of the class then subject to this Plan are
increased, decreased or exchanged for or converted into cash, property or a
different number or kind of securities, or if cash, property or securities are
distributed in respect of such outstanding securities, in either case as a
result of a reorganization, merger, consolidation, recapitalization,
restructuring, reclassification, dividend (other than a regular, quarterly cash
dividend) or other distribution, stock split, reverse stock split or the like,
or if substantially all of the property and assets of the Company are sold, then
the Board shall make appropriate and proportionate adjustments in (a) the number
and type of shares or other securities or cash or other property that may be
acquired pursuant to Incentive Stock Options and other Awards theretofore
granted under this Plan, (b) the maximum number and type of shares or other
securities that may be issued pursuant to Incentive Stock Options and other
Awards thereafter granted under this Plan, and (c) the minimum option exercise
price set forth in Section 3(d)(ii).

 

Section 8.  AMENDMENT AND TERMINATION OF PLAN

 

The Board may amend or terminate this Plan at any time and in any manner,
provided, however, that no such amendment or termination shall deprive the
recipient of any Award theretofore granted under this Plan, without the consent
of such recipient, of any of his or her rights thereunder or with respect
thereto.

 

Section 9.  EFFECTIVE DATE OF PLAN

 

This Plan shall be effective as of November 18, 2004, the date as of which it
was approved by the Board; provided, however, that no Common Shares may be
issued under this Plan until it has been approved, directly or indirectly, by
the affirmative votes of the holders of a majority of the securities of the
Company present, or represented, and entitled to vote by unanimous written
consent or at a meeting duly held in accordance with the laws of the State of
Delaware.

 

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