Exhibit 10.2


 


AMENDED AND
RESTATED

MANAGEMENT SERVICES AGREEMENT


 


This
Amended and Restated Management Services Agreement (the “Agreement”) is made
and entered into as of August 12, 2005 by and among K&F Industries
Holdings, Inc. (formerly known as K&F Parent, Inc.), a Delaware
corporation (the “Company”), K&F Industries, Inc., a Delaware
corporation (“K&F”), and Aurora Management Partners LLC, a Delaware limited
liability company (“AMP”).


 


WHEREAS,
the Company, K&F and AMP are parties to that certain Management Services
Agreement dated as of November 18, 2004 (the “Original Agreement”)
pursuant to which the Company and K&F assured themselves of the financial
consulting services of AMP upon the terms and conditions set forth in the
Original Agreement (including in connection with a debt offering by the Company
in February 2005 and the initial public offering of common stock of the
Company), which the Company and K&F believe have been beneficial to them
and their respective subsidiaries;


 


WHEREAS,
the Company and K&F desire to terminate the Services (as defined in the
Original Agreement) and the Company’s and K&F’s preexisting payment
obligations with respect to the Services as provided in the Original Agreement
in consideration of the payment of the fee described in this Agreement; and


 


WHEREAS,
the Company and K&F desire to have the opportunity to avail themselves of
certain financial consulting services of AMP in the future upon the terms and
conditions set forth in this Agreement.


 


NOW,
THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties agree as follows:


 


1.             Termination of Services Under
Original Agreement.  In payment for
and in consideration of the termination of the provisions of the Original
Agreement relating to the Services, the Company and K&F shall pay or cause
to be paid to AMP a lump sum termination fee of $5,000,000, which shall be
payable in cash on the date hereof to the bank account designated by AMP and
shall not be refundable under any circumstances.  The parties anticipate that the Company will
pay or cause to be paid such specified termination fee.


 


2.             Right of First Refusal to
Provide Services; Certain Fees.


 


(a)           If
the Company, K&F and/or any of their respective subsidiaries determines
that it is advisable for the Company, K&F or such subsidiary, as the case
may be, to hire a financial advisor, consultant, investment banker or any
similar advisor in connection with any merger, acquisition, disposition,
recapitalization, issuance of securities, financing or any similar transaction,
it will notify AMP of such determination in writing.  Promptly thereafter, upon the request of AMP,
the parties will negotiate in good faith to agree upon appropriate services,
compensation and indemnification for the Company, K&F or such


 





















 


subsidiary,
as the case may be, to hire AMP or one of its Affiliates (as defined herein)
for such services.  The Company, K&F
and/or its subsidiaries may not hire any person, other than AMP or one of its
Affiliates, to perform any such services unless all of the following conditions
have been satisfied: (i) the parties are unable to agree upon the terms of
the engagement of AMP or its Affiliate to render such services after 30 days
following receipt by AMP of such written notice, (ii) such other person
has a reputation that is at least equal to the reputation of AMP in respect of
such services, (iii) ten business days have elapsed after the Company,
K&F and/or such subsidiary, as the case may be, provides a written notice
to AMP of its intention to hire such other person, which notice shall identify
such other person and shall describe in reasonable detail the nature of the
services to be provided, the compensation to be paid and the indemnification to
be provided, (iv) the compensation to be paid is not more than AMP or its
Affiliate was willing to accept in the negotiations described above and (v) the
indemnification to be provided is not more favorable to such other person than
the indemnification that AMP or its Affiliate was willing to accept in the
negotiations described above.


 


(b)           In
the event that the Company, K&F and/or its subsidiaries hires AMP or one of
its Affiliates in connection with any acquisition, divestiture, refinancing,
recapitalization or similar transaction by the Company, K&F and/or any of
its subsidiaries, as the case may be, and there is an absence of an express
agreement regarding compensation for services to be performed by AMP or any of
its Affiliates in connection with any such transaction, AMP shall be entitled
to receive, for services rendered in connection with any acquisition, sale or
disposition of any division of the Company, K&F or any of their respective
Affiliates, any sale or disposition of the Company or all or substantially all
of the assets of the Company, K&F or any of their respective Affiliates or
any other sale or disposition of any assets of the Company, K&F or any of
their respective Affiliates other than in the ordinary course of business of
such entities (including researching industry information, performing financial
analysis on prospective acquisition candidates, arranging acquisition
financing, and facilitating the close of the transaction), a fee equal to up to
2.0% of the aggregate transaction consideration (including debt assumed by the
purchaser and current assets retained by the seller).


 


(c)           In
addition, if mutually agreed between the Company and/or K&F and AMP, the
Company and/or K&F may engage AMP to provide, by and through itself, its
affiliates and such of their respective officers, employees, representatives
and third parties as AMP in its sole discretion may designate from time to
time, monitoring, advisory and consulting services in relation to the affairs
of the Company, K&F and its subsidiaries, including, without limitation, (i) advice
regarding the structure, distribution and timing of debt and equity offerings
and advice regarding relationships with the Company’s, K&F’s and its
subsidiaries’ lenders and bankers, (ii) advice regarding the strategy of
the Company, K&F and its subsidiaries, (iii) general advice
regarding dispositions and/or acquisitions and (iv) such other advice
directly related or ancillary to the above financial consulting services as may
be reasonably requested by the Company and/or K&F, provided that AMP shall
have no obligation to provide any services to the Company and/or K&F absent
agreement between the Company and/or K&F, as the case may be, and AMP with
respect to the scope of


 


2





















 


services
to be provided, the consideration to be paid therefor and other terms of such
engagement.


 


(d)           As used herein, the following terms
are defined as follows:


 


(i)            “Affiliate”
of a specified Person means a Person that controls, is controlled by, or is
under common control with, the specified Person, and in this context, “control”,
“controls” and “controlled” mean the direct or indirect power to direct the
management and policies or affairs of a Person through the ownership of voting
securities or by contract or otherwise and, in the case of a limited
partnership, shall include, but shall not be limited to, all of the limited
partnership’s general partners and their respective Affiliates.


 


(ii)           “Person”
means a natural person, a company,
a corporation, a joint venture, a limited liability company, a partnership, a
trust, an unincorporated association or organization or other legal entity, or
a government or an agency or political subdivision thereof.


 


3.             Reimbursements.  Subject to obtaining the approval of the
Boards of Directors of the Company and K&F (or any committees thereof) that
may be required (if any) from time to time under applicable law or stock
exchange policy, in addition to the fees payable pursuant to this Agreement,
the Company and/or K&F will pay, or cause to be paid, directly, or
reimburse AMP and each of its Affiliates for, their respective Out-of-Pocket
Expenses (as defined below).  For the
purposes of this Agreement, the term “Out-of-Pocket Expenses” means the
reasonable out-of-pocket costs and expenses incurred by AMP and its Affiliates (i) in
connection with the Services provided under the Original Agreement and any
services provided under this Agreement (including prior to the date hereof or
the date of the Original Agreement) or (ii) in order to make Securities
and Exchange Commission and other legally required filings relating to the
ownership of capital stock of the Company or its successor by AMP or its
Affiliates, or otherwise incurred by AMP or its Affiliates from time to time in
the future in connection with the ownership or subsequent sale or transfer by
AMP or its Affiliates of capital stock of the Company or its successor,
including, without limitation, (a) fees and disbursements of any
independent professionals and organizations, including independent accountants,
outside legal counsel or consultants, retained by AMP or any of its Affiliates,
(b) costs of any outside services or independent contractors such as
couriers, business publications, on-line financial services or similar
services, retained or used by AMP or any of its Affiliates and (c) transportation,
per diem costs, word processing expenses or any similar expense not associated
with AMP’s or its Affiliates’ ordinary operations.  All payments or reimbursements for
Out-of-Pocket Expenses will be made by wire transfer in same-day funds promptly
upon or as soon as practicable following request for payment or reimbursement
in accordance with this Agreement, to the bank account indicated to the Company
and/or K&F by the relevant payee.


 


4.             Term.  Unless earlier terminated as provided in Section 5
below, the term of this Agreement shall commence on the date hereof and shall
terminate automatically on the earlier to occur of (i) the date on which
AMP and its Affiliates (in the aggregate) own less than 5% of the equity of the
Company then outstanding and (ii) such earlier date as the Company,
K&F and AMP may mutually agree upon. 
The expiration of the term of this


 


3





















 


Agreement
shall not adversely affect AMP’s right to receive any compensation accrued
prior to the date of such termination or any rights to receive reimbursement of
any costs and expenses incurred by AMP prior to the date of such
termination.  The provisions of
Sections 6, 7, 8, 9, 10, 11, 12 and 13 shall survive the expiration of the
term of this Agreement or any termination of this Agreement.


 


5.             Termination for Cause.  The Company, by written notice to AMP
authorized by a majority of the directors (other than those affiliated with
AMP), may terminate this Agreement for justifiable cause, which shall mean any
of the following events:  (a) misappropriation
by AMP of funds or property of the Company, K&F and/or any of its
subsidiaries; (b) gross neglect or willful misconduct by AMP in the fulfillment
of its obligations hereunder; or (c) the conviction of AMP or any person
who is then a member of AMP of a felony involving moral turpitude that has
become final and not subject to further appeal.


 


6.             Confidential Information.  During the term of this Agreement, AMP will
have access to and become acquainted with confidential information of the
Company, K&F and/or any of its subsidiaries, including among other things
customer relationships, processes, and compilations of information, records and
specifications, which are owned by the Company, K&F and/or any of its
subsidiaries.  AMP shall not use or
disclose any of the Company’s, K&F’s and/or any of its subsidiaries
confidential information in any way that is detrimental to the interests of the
Company, K&F and/or any of its subsidiaries, directly or indirectly, either
during or within two (2) years after the term of this Agreement, except as
required in the course of this Agreement. 
AMP shall be responsible for any breaches of this Section 6 by AMP’s
officers, directors, employees and advisors.


 


7.             Notices.  All notices, demands and requests required
under this Agreement shall be in writing and shall be deemed to have been given
if served personally or sent by registered or certified mail, postage prepaid,
or by telegraph or telex addressed to the addressee set forth or such other
addresses as either party may designate by notice to the other:


 


	
  If to the
  Company:

  	
  K&F
  Industries Holdings, Inc.

  
	
   

  	
  50 Main Street,
  4th floor

  
	
   

  	
  White Plains,
  New York 10606

  
	
   

  	
  Telecopier: 914-448-2719

  
	
   

  	
  Attn: General
  Counsel

  
	
   

  	
   

  
	
  If to K&F:

  	
  K&F
  Industries, Inc.

  
	
   

  	
  50 Main Street,
  4th floor

  
	
   

  	
  White Plains,
  New York 10606

  
	
   

  	
  Telecopier: 914-448-2719

  
	
   

  	
  Attn: General
  Counsel

  



 


4





















 


	
  If to AMP:

  	
  Aurora Management Partners LLC

  	
   

  
	
   

  	
  10877 Wilshire
  Boulevard

  	
   

  
	
   

  	
  Suite 2100

  	
   

  
	
   

  	
  Los Angeles, CA
  90024

  	
   

  
	
   

  	
  Telecopier No:
  (310) 227-5591

  	
   

  
	
   

  	
  Attn: Richard K.
  Roeder

  	
   

  



 


Notices delivered in person shall be effective when so
delivered.  Notices delivered by courier
shall be effective three (3) business days after delivery by the sender to
an air courier of national reputation who guarantees delivery within such three
(3) business day period.  Telecopied
notices shall be effective when receipt is acknowledged telephonically by the
addressee or its agent or employee. 
Notices sent by mail shall be effective five (5) business days
after the sender’s deposit of such notice in the United States mails, first
class postage prepaid.


 


8.             Assigns and Successors.  The rights and obligations of the Company and
K&F under this Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Company and K&F, respectively.  The rights and obligations of AMP under this
Agreement may be assigned by AMP in its sole discretion to an Affiliate of AMP.


 


9.             Attorneys’ Fees.  If any legal proceeding is necessary to
enforce or interpret the terms of this Agreement, or to recover damages for
breach thereof, the prevailing party shall be entitled to reasonable attorneys’
fees, as well as costs and disbursements, in addition to any other relief to
which he or she is entitled.


 


10.           Indemnity.  To the same extent as the Company or K&F
provides indemnification (whether through contract or the Company’s or K&F’s
respective Certificate of Incorporation or Bylaws) to its directors and
officers, the Company and K&F, jointly and severally, shall indemnify and
hold each of AMP and their respective partners, members, officers, employees,
agents and Affiliates and the stockholders, partners, members, Affiliates,
directors, officers and employees of any of the foregoing (and representatives
and agents of any of the foregoing designated by AMP from time to time whether
before or after the occurrence of the event giving rise to the claim for
indemnity) (each such person entitled to indemnity hereunder being referred to
as an “Indemnitee”) harmless from any and all losses, costs, liabilities and
damages (including reasonable attorneys’ fees) arising out of or connected
with, or claimed to arise out of or to be connected with, any act performed or
omitted to be performed under this Agreement or otherwise relating to the
business or affairs of the Company, K&F or their respective Affiliates,
provided such act or omission was taken in good faith by such Indemnitee and
did not constitute gross negligence or willful misconduct on the part of the
relevant Indemnitee, and provided further only in the event of criminal
proceedings, that the Indemnitee had no reasonable cause to believe the conduct
of the Indemnitee was unlawful.  An
adverse judgment or plea of nolo contendere shall
not, of itself, create a presumption that the Indemnitee did not act in good
faith or that the Indemnitee had reasonable cause to believe the conduct of the
Indemnitee was unlawful.  Expenses
incurred in defending any civil or criminal action arising out of or relating
to any


 


5





















 


event
or circumstance to which this indemnity shall apply shall be paid by the Company
and/or K&F, as the case may be, upon receipt of an undertaking by or on
behalf of the Indemnitee to repay such amount if it be later shown that such
Indemnitee was not entitled to indemnification. 
No Indemnitee shall be liable to the Company, K&F or any of their
respective partners, members, Affiliates, stockholders, directors, officers or
employees or any Affiliates, stockholders, partners, members, directors,
officers, employees, representatives or agents of any of the foregoing or any
other person claiming through any of the foregoing for any act or omission by
AMP in the performance of its duties hereunder or otherwise in relation hereto
which was taken or omitted to be taken in good faith by such Indemnitee and
which did not constitute gross negligence or willful misconduct on the part of
such Indemnitee.


 


11.           Outside Activities of AMP.  AMP shall be entitled to and may have
business interests and engage in business activities in addition to the
activities contemplated by this Agreement. 
Neither AMP, any partner, member, officer, employee or Affiliate of AMP
nor any stockholder, partner, member, director, officer or employee of any of
the foregoing shall have any obligation or duty to offer any investment or
business opportunity (other than an opportunity directly involving the Company
Business (as defined below)) of any kind to the Company and/or K&F or any
of their respective stockholders, directors, officers or employees (under any
doctrine of “corporate opportunity” or otherwise), it being expressly
understood that AMP and their respective partners, members, officers, employees
and Affiliates and the stockholders, partners, members, directors, officers and
employees of any of the foregoing may make investments in, acquire, or provide
management, advisory or consulting services to, entities engaged in businesses
similar to the business of the Company and/or K&F without any duty,
obligation or liability to the Company and/or K&F or their respective
stockholders, partners, members, directors, officers or employees.  As used herein, the “Company Business” means,
at any time of determination, the specific business or businesses actively
conducted by the Company and K&F at such time of determination, it being
agreed that as of the date hereof such business consists of the design,
development and manufacturing of aircraft wheels, brakes and brake control
systems for commercial, military and general aviation aircraft, the manufacture
of aircraft fuel tanks, iceguards, inflatable oil booms and specially coated
fabrics (including bonding and composites materials and components comprising
the interior panel and upholstery contract work of the Company)  with storage, shipping, environmental and
rescue applications for commercial and military uses, and related repair and
overhaul activities.


 


12.           Amendment; Waiver.  This Agreement may be amended, and any right
or claim hereunder waived, only by a written instrument signed by AMP, the
Company and K&F.  Except as provided
in Sections 10 and 11 hereof, nothing in this Agreement, express or
implied, is intended to confer upon any third person any rights or remedies
under or by reason of this Agreement.  No
amendment or waiver of this Agreement requires the consent of any individual,
partnership, corporation or other entity not a party to this Agreement, except
that any amendment of Section 10 shall only operate prospectively as to
any Indemnitee provided therein unless such Indemnitee shall have agreed in
writing to such amendment.


 


13.           Construction, Etc.  This Agreement shall be construed under and
governed by the internal laws of the State of Delaware.  Section headings are for convenience
only and


 


6





















 


shall
not be considered a part of the terms and provisions of this Agreement.  This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed an
original and all of which when taken together shall constitute one and the same
instrument.


 


7





















 


IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
set forth above.


 


	
   

  	
  K&F
  INDUSTRIES HOLDINGS, INC.

  (formerly known as K&F PARENT, INC.)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kenneth M.
  Schwartz

  	
   

  
	
   

  	
  Name:

  	
  K. Schwartz

  	
   

  
	
   

  	
  Title:

  	
  CEO

  	
   

  
	
   

  	
   

  
	
   

  	
  K & F
  INDUSTRIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kenneth M.
  Schwartz

  	
   

  
	
   

  	
  Name:

  	
  K. Schwartz

  	
   

  
	
   

  	
  Title:

  	
  CEO

  	
   

  
	
   

  	
   

  
	
   

  	
  AURORA
  MANAGEMENT PARTNERS LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard K.
  Roeder

  	
   

  
	
   

  	
   

  	
   Richard K. Roeder, Vice President and

  
	
   

  	
   

  	
   Secretary

  
							



 


8