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.


 





















 


(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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