Exhibit 10.3

XERIUM TECHNOLOGIES, INC.

LONG TERM INCENTIVE PLAN

This Xerium Technologies, Inc. Long Term Incentive Plan (the “LTIP”) contains
rules supplemental to those set forth in the Xerium Technologies, Inc. 2010
Equity Incentive Plan (the “EIP”). The LTIP provides for the grant of incentive
award opportunities (each, an “Award”) under and subject to the terms of the
EIP, which is incorporated herein by reference. In the event of any
inconsistency between the LTIP and applicable provisions of the EIP, the EIP
shall control. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the EIP.

1. Administration; Eligibility. The LTIP shall be administered by the Committee
as described in the EIP. The Committee may in its discretion consult with
outside advisors or internal Company resources for purposes of making any
determinations in connection with its administration of the Program. Eligibility
to participate in the LTIP shall be limited to individuals who are selected in
accordance with the terms of the EIP to participate in the LTIP from among those
individuals who are eligible to participate in the EIP (each, a “Participant”).
Participation in any Award shall not entitle a Participant to share in any
future Awards or in any other future awards of the Company or its subsidiaries.

2. Denomination of Awards; Determination of Number of Shares. Awards will
initially be denominated in dollars. The number of shares of Common Stock
covered by an Award (the “LTIP Shares”) shall be the quotient determined by
dividing (x) by (y), where (x) is the dollar amount of the Award and (y) is
$21.50.

3. Determination of Time-Based Versus Performance-Based LTIP Shares.
Participants will receive thirty-five percent (35%) of their LTIP Shares,
rounded down to the nearest whole number, in the form of time-based Restricted
Stock Units as described in Section 4 below (“Time-Based RSUs”) and have the
remainder of their LTIP Shares (approximately sixty-five percent (65%)) credited
to them as Stock Units on the books of the Company on a one-for-one basis to be
earned and vested subject to satisfaction of certain performance conditions (and
to the extent the Award is intended to qualify for the performance-based
compensation exception under Section 162(m) of the Internal Revenue Code of
1986, as amended (the “Code”), to the further limitations of the EIP with
respect thereto) as described in Section 5 below and Exhibit A (“Performance
Units”).

4. Terms of Time-Based RSUs. Any LTIP Shares that are to be conveyed in the form
of Time-Based RSUs will be granted as of March 14, 2011, substantially in the
form of the Restricted Stock Units Agreement attached as Exhibit B hereto (the
“Time-Based RSU Agreement”), which provides that the RSUs shall vest in three
equal annual installments on March 31st of 2012, 2013 and 2014 and settle in
shares of Common Stock as soon as administratively possible after they vest.

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5. Determination of Number of Performance Shares. The determination of the
number of shares of Common Stock to be delivered at the end of the three-year
performance period with respect to the Performance Units (the “Performance
Shares”) shall be made in accordance with the provisions of Exhibit A applicable
for such three-year performance period. Performance Shares will be delivered
following the filing of the Form 10-K audited results for the last fiscal year
of the three-year performance period but in no case later than March 31 of the
calendar year following the close of the three-year performance period.

6. Tax Withholding. The minimum tax withholding amount with respect to any
payments being made in RSUs shall be satisfied by means of share withholding at
the time the RSUs are settled as provided in the Restricted Stock Units
Agreement. The minimum tax withholding amount with respect to any payments being
made in Performance Shares shall be satisfied by means of share withholding at
the time Performance Shares are delivered.

7. Intent to be Exempt from Section 162(m). Awards for the three-year
performance period beginning in 2011 are intended to qualify for the
performance-based compensation exception under Section 162(m) of the Code. In
the case of any Award for a subsequent three-year performance period that is
intended to so qualify, (i) the Exhibit B performance goals with respect to such
Award shall be established by the Committee not later than ninety (90) days
after the commencement of the three-year performance period (or by such earlier
date as is required by Section 1.162-27(e)(2)(i) of the Treasury Regulations),
(ii) the Exhibit B performance goals, as so established, shall be consistent
with the eligible performance measures, if any, approved by the shareholders of
the Company for use in respect of performance awards under the EIP and shall be
objectively determinable in compliance with Section 1.162-27(e)(2) of the
Treasury Regulations, and (iii) no portion of the Award shall be paid unless and
until the Committee has certified (as required by Section 1.162-27(e)(5) of the
Treasury Regulations) that the performance goals have been achieved (or, if the
performance goals are expressed in terms that admit of varying payout levels for
different levels of performance, have been achieved at a level sufficient to
support the payment).

8. Nature of Awards. Awards hereunder are intended to qualify as Stock Unit
Awards under the EIP. The LTIP is unfunded.

9. Termination of Employment. No Performance Shares shall be payable to or in
respect of a Participant, except as the Committee shall otherwise expressly
determine, unless the Participant is employed by the Company or a subsidiary on
December 31 of the last year of the three-year performance period.

10. Availability of Stock. If, when Performance Shares become payable in respect
of any three-year performance period, the number of shares of Stock needed
exceeds the number of shares then available under the EIP, the Performance
Shares shall be delivered when the shareholders approve an increase in the
number of shares available under the EIP. If the shareholders do not approve
such an increase so that all or part of the Performance Shares are not
delivered, the Company will pay out the value of any Performance Shares that
were not delivered in cash and determine their value by using the average of the
per-share closing price of the Common Stock for the last twenty (20) trading
days preceding the date the Performance Shares would have been delivered had
there been a sufficient number available under the EIP.

 

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11. Clawback. If a participant receives an Award payout under the LTIP based on
financial statements that are subsequently required to be restated in a way that
would decrease the number of Performance Shares to which the Participant was
entitled, the Participant will refund to the Company the difference between what
the Participant received and what the Participant should have received; provided
that no refund will be required for Performance Shares delivered more than three
years prior to the date on which the Company is required to prepare the
applicable restatement. The value of any difference to be refunded will be
determined in a manner consistent with regulations the Securities and Exchange
Commission may adopt pursuant to Section 945 of the Dodd-Frank Wall Street
Reform and Consumer Protection Act.

12. Treatment of Awards Upon a Change of Control. If (a) the Company merges into
or combines with any other entity and, immediately following such merger or
combination, any Person or group of Persons acting in concert holds 50% or more
of the voting power of the entity surviving such merger or combination (other
than any Person or group of Persons which held 50% or more of the Company’s
voting power immediately prior to such merger or combination or any Affiliated
Person of any such Person or member of such group); (b) any Person or group of
Persons acting in concert acquires 50% or more of the Company’s voting power; or
(c) the Company sells all or substantially all of its assets or business for
cash or for securities of another Person or group of Persons (other than to any
Person or group of Persons which held 50% or more of the Company’s total voting
power immediately prior to such sale or to any Affiliated Person of any such
Person or any member of such group) (each of (a), (b), or (c) a “Change of
Control”), then, unless the Committee provides for the continuation or
assumption of Performance Units or for the grant of new awards in substitution
therefore (which substitute awards, if any, may be payable in cash or other
property or a combination thereof) by the surviving entity or acquirer, in each
case on such terms and subject to such conditions as the Committee may
determine, with respect to each Performance Unit not so assumed or continued:

(a) In the event such transaction occurs on or after the close of the three-year
performance period with respect to the Performance Units, the Committee shall
determine, acting in its sole and reasonable discretion, prior to the occurrence
of the transaction, the extent to which the applicable performance metrics
specified in Exhibit A have been satisfied. If financial statements or other
relevant data are not available prior to the time of such determination, the
Committee shall make such determination based upon the financial information and
data then available to the Company.

(b) In the event such transaction occurs prior to the close of the three-year
performance period with respect to the Performance Units, the applicable
performance metrics specified in Exhibit A shall be determined as follows:
(i) the three-year performance period shall be deemed to end on the effective
date of such transaction; and (ii) the extent to which the applicable
performance metrics specified in Exhibit A for the shortened three-year
performance period described in clause (i) above have been achieved shall be
determined by the Committee based upon the financial information available to
the Company (it being understood that the Committee may, to the extent it deems
necessary, extrapolate performance through the effective date of the transaction
based upon available data); (iii) the performance determined pursuant to clause
(ii) shall then be adjusted by multiplying it by fraction, the numerator of
which is the number of days in the shortened three-year performance period and
the denominator of which is 1,095, and the performance as so adjusted shall be
the basis for determining the number of Performance Shares to be paid out with
respect to the Performance Units, subject to proration in accordance with
Section 12(c) below.

 

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(c) If subsection (b) above applies, the number of Performance Shares initially
determined under subsection (b) with respect to an Award shall be prorated by
multiplying such initially determined amount by a fraction, the numerator of
which is the number of days in the shortened three-year performance period and
the denominator of which is 1,095.

For purposes of this Section 12, “Person” means any individual, partnership,
limited liability company, corporation, association, trust, joint venture,
unincorporated organization, or other entity or group, and “Affiliated Person”
means, with respect to any Person, any other Person that directly or indirectly
controls or is controlled by or is under common control with such Person.

13. Amendment. The Committee may amend the LTIP at any time and from time to
time, and may terminate the Program, in each case subject only to such
limitations, if any, as the EIP may impose.

14. 409A. This LTIP and the Time-Based RSUs and Performance Units granted
thereunder shall be construed and administered consistent with the intent that
they at all times be in compliance with or exempt from the requirements of
Section 409A of the Code and the regulations promulgated thereunder.

 

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XERIUM TECHNOLOGIES, INC.

LONG TERM INCENTIVE PLAN

Exhibit A (Applicable to 2011-2013 Performance Period)

Except as otherwise expressly provided herein, all accounting terms not
otherwise defined herein shall have the meanings assigned to them in conformity
with U.S. generally accepted accounting principles.

Performance Shares

One measure of performance will be used in determining the number of Performance
Shares to be delivered, if any, with respect to Performance Units: Xerium
Cumulative Bank Adjusted EBITDA.

 

i. Bank Adjusted EBITDA Metric and Cumulative Bank Adjusted EBITDA Metric

“Bank Adjusted EBITDA Metric” means “Adjusted EBITDA,” as such term is defined
in the first sentence of the definition of such term in the Second Amended and
Restated Credit and Guaranty Agreement (the “Credit Agreement”), dated as of
May 25, 2010, entered into by and among the Company, certain subsidiaries of the
Company, Citigroup Global Markets Inc., and other agents and banks party
thereto, as in effect for Xerium Technologies, Inc. for the year ended
December 31, 2011.

“Cumulative Bank Adjusted EBITDA Metric” means the sum of Bank Adjusted EBITDA
Metric for fiscal years 2011 through 2013. Cumulative Bank Adjusted EBITDA
Metric will be determined once following the close of the three-year performance
period. The Committee shall determine Cumulative Bank Adjusted EBITDA Metric
relative to the target for such metric set forth below.

 

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ii. Annual Currency Adjustments.

The final Bank Adjusted EBITDA Metric for each year in the three-year
performance period will be adjusted to reflect currency fluctuations relative to
the US$ in all markets. Any adjustments made for any year in the three-year
performance period under the 2011-2013 LTIP will be based on the following
budgeted rates:

 

Foreign Exchange Rates

      

ARS

   $ 0.260   

AUD

   $ 0.882   

BRL

   $ 0.563   

CAD

   $ 0.933   

CHF

   $ 0.964   

CNY

   $ 0.146   

EUR

   $ 1.463   

GBP

   $ 1.600   

JPY

   $ 0.011   

MXN

   $ 0.074   

SEK

   $ 0.143   

VND

   $ 0.000056   

 

iii. Cumulative Target Bank Adjusted EBITDA Metric

The target for Cumulative Bank Adjusted EBITDA Metric for the 2011-2013
performance period (the “Target Cumulative Bank Adjusted EBITDA Metric”) shall
be $411.6 million; provided, however, that the amount may be adjusted by the
Committee after the initial determination of the amount to reflect any material
change of circumstance, including without limitation, the acquisition or
disposition of any business by the Company or any of its subsidiaries.

 

iv. Determination of Number of Performance Shares

“X” below refers to the number of Performance Units credited to a Participant
under an Award.

“Y” below refers to the Cumulative Target Bank Adjusted EBITDA Metric set forth
above.

The number of Performance Shares payable with respect to an Award shall be
determined after the close of the last year in the three-year performance period
as follows:

Cumulative Bank Adjusted EBITDA Metric at or below .80Y: no payment

Cumulative Bank Adjusted EBITDA Metric above .80Y: bonus = percentage of X
determined based on straight line interpolation between no payment at .80Y and X
at Y

Cumulative Bank Adjusted EBITDA Metric at Y: bonus = X

Cumulative Bank Adjusted EBITDA Metric above Y: bonus = percentage of X
determined based on straight line interpolation between X at Y and 1.10X at
1.10Y

The number of Performance Shares payable with respect to Performance Units shall
in all cases be capped at 1.10 times a Participant’s Performance Units (1.10X).

 

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Exhibit B

XERIUM TECHNOLOGIES, INC.

TIME-BASED RESTRICTED STOCK UNITS AGREEMENT

(2011-2013 LTIP)

Dated as of

Pursuant to the terms of the Xerium Technologies, Inc. Long Term Incentive Plan
effective for fiscal years 2011 through 2013 (the “2011-2013 LTIP”) and the
Xerium Technologies, Inc. 2010 Equity Incentive Plan (the “Plan”), Xerium
Technologies, Inc. (the “Company”) hereby grants to (the “Employee”) the
Restricted Stock Units Award described below.

 

1. The Restricted Stock Units Award. The Company hereby grants to the Employee
Units, subject to the terms and conditions of this Agreement and the Plan. An
Award shall be paid hereunder, only to the extent that such Award is Vested, as
provided in this Agreement. The Employee’s rights to the Units are subject to
the restrictions described in this Agreement and the Plan in addition to such
other restrictions, if any, as may be imposed by law.

 

2. Definitions. The following definitions will apply for purposes of this
Agreement. Capitalized terms not defined in the Agreement are used as defined in
the Plan, including without limitation the following terms: “Affiliate”;
“Committee”; and “Covered Transaction”.

 

  (a) “Agreement” means this Restricted Stock Units Agreement granted by the
Company and agreed to by the Employee.

 

  (b) “Award” means the grant of Units in accordance with this Agreement.

 

  (c) “Cause” has the meaning ascribed to it in the written employment agreement
between the Company and the Employee (as in effect on the date hereof). If the
Employee has no written employment agreement with the Company, “Cause” shall
mean (i) the Employee’s conviction of or plea of nolo contendere to a felony or
other crime involving moral turpitude; (ii) the Employee’s fraud, theft or
embezzlement committed with respect to the Company or any of its subsidiaries;
or (iii) the Employee’s willful and continued failure to perform his material
duties to the Company and its Subsidiaries, where the Company has provided
written notice to the Employee of the failure and the Employee shall not have
remedied such failure within then (10) business days following the effectiveness
of such notice.

 

  (d) “Change of Control” has the meaning ascribed to it in Section 12 of the
2011-2013 LTIP.

 

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  (e) “Change of Control Termination” means a termination of the Employee’s
employment with the Company or a member of the Company Group that occurs within
three (3) months prior to or two (2) years following a Change of Control as a
result of (x) termination by a member of the Company Group without Cause or
(y) a Good Reason Termination.

 

  (f) “Common Stock” means the common stock of the Company, $0.01 par value.

 

  (g) “Company Group” means the Company together with its Affiliates.

 

  (h) “Fair Market Value” means, on the applicable date, or if the applicable
date is not a date on which the NYSE is open the next preceding date on which
the NYSE was open, the last sale price with respect to such Common Stock
reported on the NYSE or, if on any such date such Common Stock is not quoted by
NYSE, the average of the closing bid and asked prices with respect to such
Common Stock, as furnished by a professional market maker making a market in
such Common Stock selected by the Committee in good faith; or, if no such market
maker is available, the fair market value of such Common Stock as of such day as
determined in good faith by the Committee.

 

  (i) “Good Reason Termination” shall mean a termination of employment by the
Employee with “Good Reason,” as such term is defined in the written employment
agreement between the Company and the Employee (as in effect on the date
hereof), where the Employee provides notice of the Good Reason event within 90
days of its occurrence and provides the Company at least 30 days to cure such
matter. If the Employee has no written employment agreement with the Company,
“Good Reason” shall mean a requirement that the Employee relocate more than
fifty (50) miles from his then-current principal residence, it being understood
that the Employee may be required to travel frequently and that prolonged
periods spent away from Employee’s principal residence shall not constitute Good
Reason.

 

  (j) “Grant Date” means March 14, 2011.

 

  (k) “NYSE” means the New York Stock Exchange.

 

  (l) “Payment Date” means, as to Vested Units, within 30 days of the date on
which the Units become Vested, provided that to the extent practicable such
Payment Date shall be immediately preceding the Change of Control transaction
with respect to Units that become Vested in connection with a Change of Control.

 

  (m) “Pro Rata Portion” shall mean the product of (x) a fraction, the numerator
of which is, as of the time of measurement, the number of months (rounded down
to the nearest whole number) occurring since the most recently occurring annual
anniversary of the Grant Date (or the Grant Date if such an anniversary has not
yet occurred) and the denominator of which is 12 and (y) (i) if the time of
measurement is prior to the first annual anniversary of the Grant Date, 33.33%
of the Units not previously Vested; (ii) if the time of measurement is between
the first and second annual anniversary of the Grant Date, 50% of the Units not
previously Vested; or (iii) if the time of measurement is between the second and
third annual anniversary of the Grant Date, 100% of the Units not previously
Vested.

 

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  (n) “Unit” means a notional unit which is equivalent to a single share of
Common Stock on the Grant Date, subject to Section 8(a).

 

  (o) “Vested” means that portion of the Award to which the Employee has a
nonforfeitable right.

 

  (p) “Vesting Dates” means the dates set forth in Section 3(a) of this
Agreement.

 

3. Vesting.

 

  (a) The Award shall become Vested based on the following schedule:

 

Vesting Date    Percentage of Units (including any Units then
credited to the Employee pursuant to Section 7)
Vested on Vesting Date

March 31, 2012

   33.33%

March 31, 2013

   33.33%

March 31, 2014

   33.34%

 

4. Payment of Award. Subject to Section 8(d) below, on the Payment Date, the
Company shall issue to the Employee that number of shares of Common Stock as
equals that number of Units which have become Vested.

 

5. Change of Control.

In the event of a Change of Control unless the Committee determines, in its sole
discretion, to accelerate the vesting of the entire portion of the Award that is
not then Vested, the Pro Rata Percentage shall become Vested upon the Change of
Control and that portion of the Award that is not then Vested or and has not
become Vested in accordance with this Section 5 or Section 6 shall be forfeited
automatically and the Committee shall arrange for new rights of comparable
value, granted by the Company or another entity, to be substituted for the
portion of the Award that is not Vested after giving effect to the Change of
Control (such rights being referred to herein as a “Replacement Award”).
Notwithstanding the foregoing, if the Company is the surviving entity following
the Change of Control, the Committee may elect to continue the portion of this
Award that is not then Vested and does not become Vested upon the Change of
Control in lieu of providing a Replacement Award.

 

6. Termination of Employment.

 

  (a) Resignation or Termination by the Company. If the Employee ceases to be
employed by the Company Group prior to a Vesting Date as a result of
resignation, dismissal or any other reason, then the portion of the Award that
has not previously Vested shall be forfeited automatically; provided that (i) in
the event of a termination by a member of the Company Group without Cause or a
Good Reason Termination, a portion of the Award equal to the Pro Rata Portion as
of the time of termination shall Vest immediately prior to such termination and
(ii) in the event that the Employee’s employment termination is a Change of
Control Termination, then the entire portion of the Award (or any Replacement
Award) that is then not Vested shall become Vested on the date of termination.

 

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  (b) Meaning of termination of employment. If the Company or a member of the
Company Group provides Employee a written notice of termination of employment
but the termination of employment is not effective for a period of more than
thirty (30) days due to applicable law or contractual arrangements between a
member of the Company Group and the Employee, for the purposes of this Award,
including without limitation Section 6(a) hereof, the Employee’s employment
shall be deemed terminated and the Employee shall be deemed ceased to be
employed by the Company Group on the date that is thirty (30) days from the date
of such notice instead of the actual date of termination.

 

7. Dividends. On each date on which dividends are paid by the Company, the
Employee shall be credited with that number of additional Units (including
fractional Units) as is equal to the amount of the dividend that would have been
paid on the Units then credited to the Employee under this Agreement (which
shall not include any Vested Units following the Payment Date in respect of such
Vested Units) had they been held in Common Stock on such date divided by the
Fair Market Value of a share of Common Stock on such date.

 

8. Miscellaneous.

 

  (a) Adjustments Based on Certain Changes in the Common Stock. In the event of
any stock split, reverse stock split, stock dividend, recapitalization or
similar change affecting the Common Stock, the Award shall be equitably
adjusted.

 

  (b) No Voting Rights. The Award shall not be interpreted to bestow upon the
Employee any equity interest or ownership in the Company or any Affiliate prior
to the applicable Payment Date, and then only with respect to the shares of
Common Stock issued on such Payment Date.

 

  (c) No Assignment. No right or benefit or payment under the Plan shall be
subject to assignment or other transfer nor shall it be liable or subject in any
manner to attachment, garnishment or execution.

 

  (d) Withholding. The Employee is responsible for payment of any taxes required
by law to be withheld by the Company with respect to an Award. To facilitate
that payment, the Company will, to the extent permitted by law, retain from the
number of shares of Common Stock issued to the Employee on the Payment Date that
number of shares necessary for payment of the minimum tax withholding amount,
valued at their Fair Market Value on the business day most immediately preceding
the date of retention. To the extent the Company’s withholding obligation cannot
be satisfied by means of share withholding, the Company may, to the extent
permitted by law, deduct any such tax obligations from any payment of any kind
due to the Employee.

 

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  (e) Employment Rights. This Agreement shall not create any right of the
Employee to continued employment with the Company or its Affiliates or limit the
right of Company or its Affiliates to terminate the Employee’s employment at any
time and shall not create any right of the Employee to employment with the
Company or any of its Affiliates. Except to the extent required by applicable
law that cannot be waived, the loss of the Award shall not constitute an element
of damages in the event of termination of the Employee’s employment even if the
termination is determined to be in violation of an obligation of the Company or
its Affiliates to the Employee by contract or otherwise.

 

  (f) Unfunded Status. The obligations of the Company hereunder shall be
contractual only. The Employee shall rely solely on the unsecured promise of the
Company and nothing herein shall be construed to give the Employee or any other
person or persons any right, title, interest or claim in or to any specific
asset, fund, reserve, account or property of any kind whatsoever owned by the
Company or any Affiliate.

 

  (g) Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction will not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction. In the event that any provision hereof would, under
applicable law, be invalid or unenforceable in any respect, such provision will
be construed by modifying or limiting it so as to be valid and enforceable to
the maximum extent compatible with, and possible under, applicable law.

 

  (h) Governing Law. This Agreement and all actions arising in whole or in part
under or in connection herewith, will be governed by and construed in accordance
with the domestic substantive laws of the State of Delaware, without giving
effect to any choice or conflict of law provision or rule that would cause the
application of the laws of any other jurisdiction.

 

  (i) 409A. The Award shall be construed and administered consistent with the
intent that it be at all times in compliance with, or exempt from, the
requirements of Section 409A of the Internal Revenue Code and the regulations
thereunder.

 

  (j) Section 162(m). The Award shall be construed and administered consistent
with the intent that it qualify to the maximum extent possible as qualifying
performance-based compensation within the meaning of Section 162(m) of the
Internal Revenue Code and the regulations thereunder.

 

  (k) Amendment. This Agreement may be amended only by mutual written agreement
of the parties.

 

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IN WITNESS WHEREOF, Xerium Technologies, Inc. has executed this Restricted Stock
Units Agreement as of the date first written above.

 

Xerium Technologies, Inc. By:  

 

Name: Stephen R. Light Title:   Chairman, CEO

Acknowledged and agreed:

 

EMPLOYEE By:  

 

Name:

 

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