Exhibit 10.1

AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT

dated as of May 30, 2008

among

XERIUM TECHNOLOGIES, INC., XTI LLC, XERIUM ITALIA S.P.A., XERIUM

CANADA, INC.

HUYCK WANGNER AUSTRIA GMBH and XERIUM GERMANY HOLDING GMBH

as Borrowers,

CERTAIN SUBSIDIARIES OF THE BORROWERS,

as Guarantors,

VARIOUS BANKS,

CITIGROUP GLOBAL MARKETS, INC.

as Lead Arranger and Bookrunner,

CITICORP NORTH AMERICA, INC.,

as Collateral Agent,

and

CITICORP NORTH AMERICA, INC.,

as Administrative Agent

 

 

U.S. Dollars 450,170,019.92

EUR 189,986,646.72

Canadian Dollars 76,188,596.86

 

 

“NOTE: THIS AGREEMENT, ANY CERTIFIED COPY OF THIS AGREEMENT AND ANY SUBSTITUTE
DOCUMENT IS TO BE RETAINED OUTSIDE THE REPUBLIC OF AUSTRIA. TAKING THIS
AGREEMENT, ANY CERTIFIED COPY OF THIS AGREEMENT OR ANY DOCUMENT REFERRING TO ANY
OF THE AFOREMENTIONED INTO THE REPUBLIC OF AUSTRIA MAY GIVE RISE TO A CHARGE OF
STAMP DUTY UNDER THE LAWS OF AUSTRIA.”

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TABLE OF CONTENTS

 

          Page

SECTION 1.

   DEFINITIONS AND INTERPRETATION    1

1.1

   Definitions    1

1.2

   Accounting Terms    38

1.3

   Interpretation, etc.   

SECTION 2.

   LOANS AND LETTERS OF CREDIT    38

2.1

   B Term Loans    38

2.2

   Revolving Loans    39

2.3

   [Intentionally Omitted.]    41

2.4

   Issuance of Letters of Credit and Purchase of Participations Therein    41

2.5

   Pro Rata Shares; Availability of Funds    45

2.6

   Use of Proceeds    46

2.7

   Evidence of Debt; Register; Banks’ Books and Records; Promissory Notes    46

2.8

   Interest on Loans    47

2.9

   Continuation    50

2.10

   Default Interest    50

2.11

   Fees    51

2.12

   Scheduled Payments    52

2.13

   Voluntary Prepayments/Commitment Reductions    53

2.14

   Mandatory Prepayments/Commitment Reductions    53

2.15

   Application of Prepayments/Reductions    55

2.16

   General Provisions Regarding Payments    57

2.17

   Ratable Sharing    59

2.18

   Making or Maintaining LIBOR Loans, Euribor Loans or BA Loans    60

2.19

   Increased Costs; Capital Adequacy    62

2.20

   Taxes; Withholding, etc.    63

2.21

   Obligation to Mitigate    67

2.22

   Tax Credit    67

2.23

   Defaulting Banks    68

2.24

   Removal or Replacement of a Bank    69

 

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2.25

   Joint and Several Liability    69

2.26

   Optional Currencies    71

2.27

   Loans to Non-US Borrowers    72

SECTION 3.

   CONDITIONS PRECEDENT    72

3.1

   Closing Date    72

3.2

   Conditions to Each Credit Extension    74

3.3

   Conditions Relating to Optional Currencies    75

3.4

   Conditions to Tranche 2 Revolving Loan Credit Extensions   

SECTION 4.

   REPRESENTATIONS AND WARRANTIES    76

4.1

   Organization; Requisite Power and Authority; Qualification    76

4.2

   Capital Stock and Ownership    76

4.3

   Due Authorization    77

4.4

   No Conflict    77

4.5

   Governmental Consents    77

4.6

   Binding Obligation    77

4.7

   Historical Financial Statements    77

4.8

   Projections    78

4.9

   No Material Adverse Change    78

4.10

   No Restricted Junior Payments    78

4.11

   Adverse Proceedings, etc.   

4.12

   Payment of Taxes    78

4.13

   Properties    78

4.14

   Environmental Matters    79

4.15

   No Defaults    79

4.16

   Material Contracts    80

4.17

   Governmental Regulation    80

4.18

   Margin Stock    80

4.19

   Employee Matters    80

4.20

   Employee Benefit Plans    80

4.21

   Certain Fees    81

4.22

   Solvency    81

4.23

   Related Agreements    81

4.24

   Compliance with Statutes, etc.   

 

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4.25

   Disclosure    82

SECTION 5.

   AFFIRMATIVE COVENANTS    83

5.1

   Financial Statements and Other Reports    83

5.2

   Existence    88

5.3

   Payment of Taxes and Claims    88

5.4

   Maintenance of Properties    88

5.5

   Insurance    89

5.6

   Books and Records; Inspections    89

5.7

   [Intentionally Omitted]   

5.8

   Compliance with Laws    89

5.9

   Environmental    90

5.10

   Subsidiaries    91

5.11

   Additional Material Real Estate Assets    91

5.12

   Interest Rate Protection   

5.13

   Further Assurances    92

5.14

   Intellectual Property    92

5.15

   Know-Your-Customer Rules    92

5.16

   Pari Passu Ranking    93

5.17

   Post Closing Matters    93

SECTION 6.

   NEGATIVE COVENANTS    94

6.1

   Indebtedness    94

6.2

   Liens    95

6.3

   Equitable Lien    97

6.4

   No Further Negative Pledges    97

6.5

   Restricted Junior Payments    98

6.6

   Restrictions on Subsidiary Distributions    98

6.7

   Investments    99

6.8

   Financial Covenants    100

6.9

   Fundamental Changes; Disposition of Assets; Acquisitions    103

6.10

   Disposal of Subsidiary Interests    104

6.11

   Sales and Lease Backs    104

6.12

   Transactions with Shareholders and Affiliates    105

6.13

   Conduct of Business    105

 

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6.14

   [Intentionally Omitted]   

6.15

   Amendments or Waivers of Organizational Documents    105

6.16

   Amendments or Waivers of with respect to Subordinated Debt    105

6.17

   Fiscal Year    105

6.18

   [Intentionally Omitted].    105

6.19

   [Intentionally Omitted].    106

SECTION 7.

   GUARANTY    106

7.1

   Guaranty of the Obligations    106

7.2

   Contribution by Guarantors    106

7.3

   Payment by Guarantors    108

7.4

   Liability of Guarantors Absolute    109

7.5

   Waivers by Guarantors    112

7.6

   Guarantors’ Rights of Subrogation, Contribution, etc.   

7.7

   Subordination of Other Obligations    113

7.8

   Continuing Guaranty    114

7.9

   Authority of Guarantors or Borrowers    114

7.10

   Financial Condition of Each Borrower    114

7.11

   Bankruptcy, etc.    114

7.12

   Discharge of Guaranty Upon Sale of Guarantor    115

7.13

   Validity of Pledge of Shares held by Xerium SAS and the German Guarantors;
Parallel Obligations    115

7.14

   Limitation of Non-US Guaranteed Obligations    116

7.15

   Validity and Effectiveness    122

SECTION 8.

   EVENTS OF DEFAULT    122

8.1

   Events of Default    122

SECTION 9.

   AGENTS    125

9.1

   Appointment of Agents    125

9.2

   Powers and Duties    125

9.3

   General Immunity    126

9.4

   Agents Entitled to Act as Bank    127

9.5

   Banks’ Representations, Warranties and Acknowledgment    127

9.6

   Right to Indemnity    127

9.7

   Successor Administrative Agent    128

 

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9.8

   Collateral Documents and Guaranty    128

9.9

   Reliance and Engagement Letters    129

SECTION 10.

   MISCELLANEOUS    130

10.1

   Notices    130

10.2

   Expenses    130

10.3

   VAT    131

10.4

   Indemnity    131

10.5

   Set Off    132

10.6

   Amendments and Waivers    132

10.7

   Successors and Assigns; Participations    134

10.8

   Independence of Covenants    138

10.9

   Survival of Representations, Warranties and Agreements    138

10.10

   No Waiver; Remedies Cumulative    138

10.11

   Marshalling; Payments Set Aside    138

10.12

   Severability    139

10.13

   Obligations Several; Independent Nature of Banks’ Rights    139

10.14

   Headings    139

10.15

   APPLICABLE LAW    139

10.16

   CONSENT TO JURISDICTION AND SERVICE OF PROCESS    139

10.17

   WAIVER OF JURY TRIAL    141

10.18

   Confidentiality    141

10.19

   Usury Savings Clause    142

10.20

   Counterparts    142

10.21

   Effectiveness    142

10.22

   Importation of Credit Documents into Austria    143

10.23

   Place of Performance    143

10.24

   USA Patriot Act Notice    143

 

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APPENDICES:

A-1

   Xerium B Term Loan Commitments

A-2

   XTI B Term Loan Commitments

A-3

   Italia B Term Loan Commitments

A-4

   Xerium Canada SW B Term Loan Commitments

A-5

   Xerium Canada Wxx B Term Loan Commitments

A-6

   Austria B Term Loan Commitments

A-7

   Germany B Term Loan Commitments

A-8

   Tranche 1 Revolving Commitments

B

   Notice Addresses

C

   Mandatory Cost Formula

SCHEDULES:

   1.1(a)    [Intentionally Omitted]    1.1(b)    Factoring Agreements    1.1(c)
   Guarantors    1.01(d)    [Intentionally Omitted]    3.1(d)    Capitalization
of Xerium and each other Borrower    3.1(i)    Closing Date Mortgaged Properties
   4.1    Jurisdictions of Organization    4.2    Capital Stock and Ownership   
4.13(b)    Real Estate Assets    4.14    Environmental Matters    4.16   
Material Contracts    5.17    Post Closing Matters    6.1(i)    Certain
Indebtedness    6.2(l)    Certain Liens    6.7(i)    Certain Investments    6.12
   Certain Affiliate Transactions

EXHIBITS:

   A 1    Funding Notice    A 2    Continuation Notice    A 3    Issuance Notice
   C    Compliance Certificate    D    Opinions of Counsel    E    Assignment
Agreement    F    Certificate Re Non-Bank Status    G 1    Closing Date
Certificate    G 2    Solvency Certificate    H    Counterpart Agreement    I-A
   Pledge and Security Agreement    J    Mortgage    K    Landlord Waiver and
Consent Agreement    L    Affiliate Subordination Agreement    M    Letter of
Credit    N    Formalities Certificate

 

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AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT

This AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT, dated as of May 30,
2008, is entered into by and among XERIUM TECHNOLOGIES, INC. (“XERIUM”), a
Delaware corporation, XTI LLC (“XTI”), a Delaware limited liability company,
XERIUM ITALIA S.P.A. (“ITALIA SPA”), an Italian società per azioni, XERIUM
CANADA, INC. (“XERIUM CANADA”), a New Brunswick (Canada) corporation resulting
from the amalgamation of Stowe-Woodward/Mount Hope Inc. and Weavexx Corporation,
HUYCK WANGNER AUSTRIA GMBH (“HUYCK AUSTRIA”), an Austrian limited liability
company (formerly known as Huyck Austria GmbH), and XERIUM GERMANY HOLDING GMBH
(“GERMANY HOLDINGS”), a German limited liability company (each of Xerium, Italia
SpA, Xerium Canada, Huyck Austria and Germany Holdings, individually, a
“Borrower” and, collectively, the “Borrowers”), CERTAIN SUBSIDIARIES OF THE
BORROWERS, as Guarantors, the Banks party hereto from time to time, CITIGROUP
GLOBAL MARKETS, INC., as Lead Arranger and Bookrunner (in such capacity, “Lead
Arranger”), CITICORP NORTH AMERICA, INC., as Administrative Agent (together with
its permitted successors, in such capacity, “Administrative Agent”) and CITICORP
NORTH AMERICA, INC., as Collateral Agent (together with its permitted
successors, in such capacity, “Collateral Agent”).

RECITALS:

WHEREAS, capitalized terms used in these Recitals and not otherwise defined
herein shall have the respective meanings set forth for such terms in
Section 1.1 hereof;

WHEREAS, the Borrowers, the Guarantors, the Banks party hereto and the Agents
are party to that certain Credit and Guaranty Agreement dated as of May 18, 2005
(as amended by Amendment No. 1 dated as of February 8, 2006, by Amendment No. 2
dated as of December 22, 2006, by Amendment No. 3 dated as of May 2, 2007 and by
Amendment No. 4 and Waiver (“Amendment No. 4”) dated as of April 8, 2008 (the
“Existing Credit Agreement”);

WHEREAS, the Credit Parties have requested that the Banks (as defined in the
Existing Credit Agreement) amend and restate the Existing Credit Agreement in
its entirety;

WHEREAS, the Requisite Banks and the Agents have agreed to amend and restate the
Existing Credit Agreement in its entirety as set forth below;

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

SECTION 1. DEFINITIONS AND INTERPRETATION

1.1 Definitions. The following terms used herein, including in the preamble,
recitals, exhibits and schedules hereto, shall have the following meanings:

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“Adjusted EBITDA” means, with respect to any Person for any period, the total of
(A) the Consolidated Net Income of such Person and its Subsidiaries for such
period, plus (B), without duplication, to the extent that any of the following
were deducted in computing such Consolidated Net Income for such period:
(i) provision for taxes based on income or profits, (ii) Consolidated Interest
Expense, (iii) Consolidated Depreciation and Amortization Expense, (iv) reserves
for inventory in connection with plant closures, (v) Consolidated Restructuring
Costs, (vi) [intentionally omitted], (vii) [intentionally omitted],
(viii) [intentionally omitted], (ix) Consolidated Transaction Costs,
(x) Consolidated Amendment/Termination Costs, (xi) non-cash charges resulting
from the application of purchase accounting, (xii) non-cash compensation
charges, including any such charges arising from stock options, restricted stock
grants or other equity-incentive programs or from the forgiveness of loans made
to employees in connection with the purchase of equity and related tax gross-up
payments made in cash in connection with the IPO or on or prior to the Closing
Date, (xiii) non-cash expenses resulting from the granting of stock options,
restricted stock or restricted stock unit awards under equity compensation
programs solely with respect to Common Stock, and (xiv) expenses incurred as a
result of the repurchase, redemption or retention by Xerium of Common Stock
earned under equity compensation programs solely in order to make withholding
tax payments. Notwithstanding the foregoing, taxes paid and provision for taxes
based on the income or profits of, and the Consolidated Depreciation and
Amortization Expense of, a Subsidiary of such Person shall be added to
Consolidated Net Income of such Person to compute Adjusted EBITDA only to the
extent (and in the same proportion) that the Consolidated Net Income of such
Subsidiary was included in calculating Consolidated Net Income of such Person.
Notwithstanding the foregoing, Adjusted EBITDA for the Fiscal Quarter ended
(A) September 30, 2007 shall be $38,431,000, (B) December 31, 2007 shall be
$36,514,000 and (C) March 31, 2008 shall be $35,610,000.

“Administrative Agent” as defined in the preamble hereto.

“Adverse Proceeding” means any action, suit, proceeding (whether administrative,
judicial or otherwise), governmental investigation or arbitration (whether or
not purportedly on behalf of Xerium or any of its Subsidiaries) at law or in
equity, or before or by any Governmental Authority, domestic or foreign
(including any Environmental Claims), whether pending or, to the knowledge of
Xerium or any of its Subsidiaries, threatened against or affecting Xerium or any
of its Subsidiaries or any property of Xerium or any of its Subsidiaries.

“Affected Bank” as defined in Section 2.18(b).

“Affected Loans” as defined in Section 2.18(b).

“Affiliate” means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, “control” (including, with
correlative meanings, the terms “controlling”, “controlled by” and “under common
control with”), as applied to any Person, means the possession, directly or
indirectly, of the power (i) to vote 10% or more of the Securities having
ordinary voting power for the election of directors of such Person or (ii) to
direct or cause the direction of the management and policies of that Person,
whether through the ownership of voting securities or by contract or otherwise.

 

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“Affiliate Subordination Agreement” means the Affiliate Subordination Agreement,
dated the date hereof, among the Credit Parties and the Administrative Agent,
substantially in the form of Exhibit L, as amended, supplemented or otherwise
modified from time to time.

“Agent” means each of the Administrative Agent, the Collateral Agent and the
Lead Arranger.

“Agent Parties” as defined in Section 5.1(o)(iii).

“Agent’s Spot Rate of Exchange” means the Administrative Agent’s spot rate of
exchange for the purchase of the relevant currency with the Base Currency in the
foreign exchange market at or about 11:00 a.m. (New York City time) on a
particular day.

“Aggregate Amounts Due” as defined in Section 2.17.

“Agreement” means this Amended and Restated Credit and Guaranty Agreement, as it
may be amended, restated, supplemented or otherwise modified from time to time.

“Amendment No. 4” as defined in the Recitals.

“Apax Partners” means Apax Europe IV GP, L.P., a Delaware limited partnership,
and its Affiliates.

“Applicable EC Percentage” means with respect to Fiscal Year 2008 and each other
Fiscal Year thereafter an amount equal to 75% of the Excess Cash for such Fiscal
Year.

“Applicable Margin” means with respect to the B Term Loans and the Revolving
Loans (a) on each day commencing on the Restatement Effective Date and ending on
December 31, 2008, 4.75% and (b) after December 31, 2008, for any day, the
Applicable Margin set forth below next to the highest Rating Level that is then
applicable to the corporate credit rating of Xerium:

 

Rating Level

   Applicable Margin  

Ba3 or higher by Moody’s and BB- or higher by S&P, in each case with a stable
outlook

   2.75 %

B1 by Moody’s or B+ by S&P, in each case with a stable outlook

   3.75 %

B3 or higher but lower than B1 by Moody’s and B- or higher but lower than B+ by
S&P, in each case with a stable outlook

   4.25 %

Lower than B3 by Moody’s or lower than B- by S&P, in each case with a stable
outlook

   4.75 %

“Applicable Revolving Commitment Fee Percentage” means 0.75%.

 

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“Asset Sale” means a sale, lease or sublease (as lessor or sub-lessor), sale and
leaseback, assignment, conveyance, transfer or other disposition to, or any
exchange of property with, any Person (other than Xerium or any of its
Subsidiaries), in one transaction or a series of transactions, of all or any
part of Xerium’s or any of its Subsidiaries’ businesses, assets or properties of
any kind, whether real, personal, or mixed and whether tangible or intangible,
whether now owned or hereafter acquired, including, without limitation, the
Capital Stock of any of Xerium’s Subsidiaries, other than (i) inventory (or
other assets) sold or leased in the Ordinary Course (excluding any such sales by
operations or divisions discontinued or to be discontinued), and (ii) sales of
other assets for gross consideration of less than $100,000 with respect to any
transaction or series of related transactions.

“Assignment Agreement” means an Assignment and Assumption Agreement
substantially in the form of Exhibit E, with such amendments or modifications as
may be approved by Administrative Agent.

“Austria B Term Loan” means an Austria B Term Loan made by a Bank to Huyck
Austria pursuant to Section 2.1(a)(vi).

“Austria B Term Loan Commitment” means the commitment of a Bank to make or
otherwise fund an Austria B Term Loan and “Austria B Term Loan Commitments”
means such commitments of all Banks in the aggregate. The amount in Base
Currency of each Bank’s Austria B Term Loan Commitment, if any, is set forth on
Appendix A-6 or in the applicable Assignment Agreement, subject to any
adjustment or reduction pursuant to the terms and conditions hereof. The
aggregate amount in Base Currency of the Austria B Term Loan Commitments as of
the Closing Date is set forth on Appendix A-6.

“Austria B Term Loan Exposure” means, with respect to any Bank, as of any date
of determination, the outstanding principal amount in Base Currency of the
Austria B Term Loans of such Bank; provided, at any time prior to the making of
the Austria B Term Loans, the Austria B Term Loan Exposure of any Bank shall be
equal to such Bank’s Austria B Term Loan Commitment.

“Austria B Term Loan Maturity Date” means the earlier of (i) the date that is
seven years after the Closing Date, and (ii) the date that all Austria B Term
Loans shall become due and payable in full hereunder, whether by acceleration or
otherwise.

“Authorized Officer” means, as applied to any Person, any individual holding the
position of chairman of the board (if an officer), chief executive officer,
president or one of its vice presidents (or the equivalent thereof), and such
Person’s chief financial officer or treasurer.

“B Term Loan” means a Xerium B Term Loan, an XTI B Term Loan, an Italia B Term
Loan, a Xerium Canada SW B Term Loan, a Xerium Canada Wxx B Term Loan, an
Austria B Term Loan or a German B Term Loan.

“B Term Loan Commitment” means a Xerium B Term Loan Commitment, an XTI B Term
Loan Commitment, an Italia B Term Loan Commitment, a Xerium Canada SW B Term
Loan Commitment, a Xerium Canada Wxx B Term Loan Commitment, an Austria B Term
Loan Commitment or a German B Term Loan Commitment, and “B Term Loan
Commitments” means such commitments of all Banks.

 

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“B Term Loan Maturity Date” means the Xerium B Term Loan Maturity Date, the XTI
B Term Loan Maturity Date, the Italia B Term Loan Maturity Date, the Xerium
Canada SW B Term Loan Maturity Date, the Xerium Canada Wxx B Term Loan Maturity
Date, the Austria B Term Loan Maturity Date or the German B Term Loan Maturity
Date.

“BA Loan” means a Loan or any portion thereof bearing interest by reference to
the BA Rate.

“BA Rate” means, in relation to any Loan denominated in Canadian Dollars, CDOR
as of approximately 11:00 a.m. (New York City time) on the Interest Rate
Determination Date.

“Bank” means each financial institution listed on the signature pages hereto as
a Bank, and any other Person that becomes a party hereto pursuant to an
Assignment Agreement.

“Bank Counterparty” means each Bank, or any Affiliate of a Bank, counterparty to
the applicable documentation creating Hedging Obligations (including any Person
who is a Bank (and any Affiliate thereof) as of the Closing Date but
subsequently, after entering into the applicable documentation creating Hedging
Obligations, ceases to be a Bank) including, without limitation, each such
Affiliate that enters into a joinder agreement with Collateral Agent.

“Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy,” as now and hereafter in effect, or any successor statute.

“Base Currency” means Dollars.

“Base Currency Amount” means in relation to a Credit Extension, the amount
specified in the Funding Notice delivered by a Borrower for that Credit
Extension (or, if the amount requested is not denominated in the Base Currency,
that amount converted into the Base Currency at the Agent’s Spot Rate of
Exchange on the date which is three Business Days before the Credit Date or, if
later, on the date the Administrative Agent receives the Funding Notice in
accordance with the terms of this Agreement), as adjusted to reflect any
repayment, prepayment, consolidation or division of a Loan.

“Beneficiary” means each Agent, Issuing Bank, Bank and Bank Counterparty.

“Borrower” as defined in the preamble hereto.

“Brazilian Reorganization” means the legal reorganization of the Subsidiaries of
Xerium organized under law of Brazil and the transactions contemplated thereby.

“Budget” as defined in Section 5.1(q).

“Business Day” means (i) with respect to all matters except those addressed in
clause (ii), any day, excluding Saturday, Sunday and any day which is a legal
holiday under the laws of the State of New York or is a day on which banking
institutions located in such state or jurisdiction are authorized or required by
law or other governmental action to close and (ii) with respect to all notices,

 

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determinations, fundings and payments in connection with LIBOR Loans, Euribor
Loans or BA Loans, means any such day that is a Business Day described in clause
(i) and (A) in connection with LIBOR Loans, that is also a day on which banks in
the City of London are generally open for interbank or foreign exchange, (B) in
connection with Euribor Loans, that is also a TARGET Day and (C) in connection
with BA Loans, that is also not a day on which banks in the City of Toronto are
authorized or required by applicable law to remain closed.

“Canadian Dollars” means the lawful currency of Canada.

“Canadian Guarantor” as defined in 7.14(e).

“Canadian Pension Plan Event” means (i) the failure by Xerium Canada, or any
Affiliate of Xerium Canada to make any required contribution or premium payment
to a Canadian Registered Pension Plan in a timely manner in accordance with the
terms of the applicable Canadian Registered Pension Plan and all applicable
laws; (ii) the withdrawal by Xerium Canada or any Affiliate of Xerium Canada as
a participating employer under any multi-employer pension plan, as defined under
applicable laws; (iii) the termination, in whole or in part, of any Canadian
Registered Pension Plan; (iv) the institution of proceedings by a pension
regulator which has jurisdiction over a Canadian Registered Pension Plan to
terminate the Canadian Registered Pension Plan in whole or in part; or (v) the
occurrence of any event or condition which could reasonably be expected to
result in the institution of proceedings by the applicable pension regulator to
terminate a Canadian Registered Pension Plan, in whole or in part.

“Canadian Registered Pension Plan” means a “registered pension plan”, as defined
in subsection 248(1) of the Income Tax Act (Canada) which is or, within the
preceding six years, was sponsored, maintained or contributed to by, or required
to be contributed to by, Xerium Canada or any Affiliate of Canada.

“Capital Expenditures” means, with respect to any Person, all expenditures that,
in accordance with GAAP, are or should be included in “purchase of property and
equipment” or similar items reflected in the cash flows of such Person.

“Capitalized Lease Obligation” means, as applied to any Person, any obligation
incurred or arising out of in connection with a Capital Lease.

“Capital Lease” means, as applied to any Person, any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is or should be accounted for as a capital lease on the balance sheet
of that Person.

“Capital Stock” means any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation),
including, without limitation, partnership interests, membership interests, and
any and all warrants, rights or options to purchase or other arrangements or
rights to acquire any of the foregoing.

“Cash” means money, currency or a credit balance in any Deposit Account.

 

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“Cash Collateral Account” means a deposit account maintained by the Borrowers
with the Administrative Agent for the purpose of holding deposits of Net Asset
Sale Proceeds and Net Insurance/Condemnation Proceeds that are allowed to be
reinvested by the Borrowers in accordance with Sections 2.14(a) and 2.14(b),
respectively; provided that the Administrative Agent shall require any such
deposits remaining in such deposit account for three hundred sixty-one
(361) days to be applied by the Borrowers to repay Loans, in each case, to the
extent required by and in a manner consistent with Section 2.15(b).

“Cash Equivalents” means (i) Dollars or any foreign currency freely exchangeable
into Dollars and, in the case of any Foreign Subsidiary, such local currencies
held by it from time to time in the Ordinary Course, (ii) securities issued or
directly and fully guaranteed or insured by the US government or any agency or
instrumentality thereof, (iii) certificates of deposit, time deposits and
Eurodollar time deposits with maturities of one year or less from the date of
acquisition, bankers’ acceptances with maturities not exceeding one year and
overnight bank deposits, in each case with any commercial bank having capital
and surplus in excess of $500.0 million and whose long-term debt is rated at
least “A” or the equivalent thereof by Moody’s or S&P, (iv) repurchase
obligations for underlying securities of the types described in clauses (ii) and
(iii) above entered into with any financial institution meeting the
qualifications specified in the immediately preceding clause, (v) commercial
paper issued by a corporation (other than an Affiliate of Xerium) rated at least
“A-2” or the equivalent thereof by Moody’s or S&P and in each case maturing
within one year after the date of acquisition, (vi) investment funds investing
substantially all of their assets in securities of the types described in
clauses (i) through (v) above, (vii) readily marketable direct obligations
issued by any state of the United States or any political subdivision thereof
having one of the two highest rating categories obtainable from either Moody’s
or S&P and (viii) instruments equivalent to those referred to above denominated
in Euros or any other foreign currency that are comparable in credit quality and
tenor to those referred to above and customarily used by corporations for cash
management purposes in any jurisdiction outside the United States.

“CDOR” means, on any date and with respect to any Loan, the annual rate of
interest which is the rate based on the average rate applicable to Canadian
Dollar bankers’ acceptances for the applicable Interest Period appearing on the
“Reuters Screen CDOR Page” (as defined in the International Swaps and
Derivatives Association, Inc. 1991 definitions, as modified and amended from
time to time), rounded to the nearest 1/100th of 1% (with .005% being rounded
up), at approximately 11:00 a.m. (New York City time), on such date, or if such
date is not a Business Day, then on the immediately preceding Business Day;
provided, that if such rate does not appear on the Reuters Screen CDOR Page on
such date as contemplated, then the CDOR on such date shall be calculated as the
arithmetic mean of the rates for the Interest Period referred to above
applicable to Canadian Dollar bankers’ acceptances quoted by the banks listed in
Schedule 1 of the Bank Act (Canada) that are Banks as of 11:00 a.m. (Toronto
time) on such date or, if such date is not a Business Day, then on the
immediately preceding Business Day.

“Certificate re Non-Bank Status” means a certificate substantially in the form
of Exhibit F.

“Change of Control” means, at any time, (i) any Person or “group” (within the
meaning of Section 13(d) and 14(d) under the Exchange Act), other than Apax
Partners and its Affiliates and holders of Common Stock as of the Closing Date
who are also officers

 

7

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or employees of Xerium as of the Closing Date, shall have acquired beneficial
ownership (as defined in Rule13d-3 under the Exchange Act), directly or
indirectly, of 35% or more on a fully diluted basis of the voting and/or
economic interest in the Capital Stock of Xerium; (ii) Xerium shall cease to
directly or indirectly beneficially own and control 100% on a fully diluted
basis of the economic and voting interest in the Capital Stock of the Borrowers
(other than Xerium) including, but not limited to, if a Person shall attain the
right, even if not exercised, by contract, share ownership or otherwise, to
appoint the majority of the board of directors of any such Borrower or to direct
the manner in which the board of directors of any such Borrower conducts its
affairs; (iii) the majority of the seats (other than vacant seats) on the board
of directors (or similar governing body) of Xerium cease to be occupied by
Persons who either (a) were members of the board of directors of Xerium on the
Closing Date or (b) were nominated for election by the board of directors of
Xerium, a majority of whom were directors on the Closing Date or whose election
or nomination for election was previously approved by a majority of such
directors; or (iv) any “change of control” or similar event under the documents
governing Subordinated Debt, if any, shall occur.

“Class” means (i) with respect to Banks, each of the following classes of Banks:
(a) Banks having Xerium B Term Loan Exposure, (b) Banks having XTI B Term Loan
Exposure, (c) Banks having Italia B Term Loan Exposure, (d) Banks having Xerium
Canada SW B Term Loan Exposure, (e) Banks having Xerium Canada Wxx B Term Loan
Exposure, (f) Banks having Austria B Term Loan Exposure, (g) Banks having German
B Term Loan Exposure and (h) Banks having Revolving Exposure, and (ii) with
respect to Loans, each of the following classes of Loans: (a) Xerium B Term
Loans, (b) XTI B Term Loans, (c) Italia B Term Loans, (d) Xerium Canada SW B
Term Loans, (e) Xerium Canada Wxx B Term Loans, (f) Austria B Term Loans,
(g) German B Term Loans and (h) Tranche 1 Revolving Loans.

“Closing Date” means the date on which the B Term Loans were made.

“Closing Date Certificate” means a Closing Date Certificate substantially in the
form of Exhibit G 1.

“Closing Date Mortgaged Property” means, each Real Estate Asset listed in
Schedule 3.1(i) and which has been encumbered by fully executed and notarized
Mortgages, and recorded in all appropriate places in all applicable
jurisdictions.

“Collateral” means, collectively, all of the real, personal and mixed property
(including Capital Stock) in which Liens are purported to be granted pursuant to
the Collateral Documents as security for the Obligations.

“Collateral Agent” as defined in the preamble hereto.

“Collateral Documents” means the Pledge and Security Agreements, the Mortgages,
the Landlord Personal Property Collateral Access Agreements, if any, the
Memorandum of Agreed Security and Guarantee Principles, and all other
instruments, documents and agreements delivered by any Credit Party pursuant to
this Agreement or any of the other Credit Documents in order to grant to
Collateral Agent, for the benefit of Banks, a Lien on any real, personal or
mixed property of that Credit Party as security for the Obligations.

 

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“Collateral Questionnaire” means a certificate in form satisfactory to
Collateral Agent that provides information with respect to the personal or mixed
property of each Credit Party.

“Commitment” means any Revolving Commitment or B Term Loan Commitment.

“Common Stock” means the common stock of Xerium, par value 0.01 per share.

“Communications” as defined in Section 5.1(p)(i).

“Compliance Certificate” means a Compliance Certificate substantially in the
form of Exhibit C.

“Consolidated Amendment/Termination Costs” means costs incurred by Xerium and
its Subsidiaries in Fiscal Year 2008 in connection with the consummation of
Amendment No. 4, the potential issuance of new equity by Xerium and this
Agreement and the termination of the employment contract of the former Chief
Executive Officer and transition to the new Chief Executive Officer in an amount
not to collectively exceed $8.0 million in the aggregate.

“Consolidated Capital Expenditures” means, with respect to any Person for any
period, the aggregate of all Capital Expenditures of such Person and its
Subsidiaries during such period determined on a consolidated basis.

“Consolidated Depreciation and Amortization Expense” means, with respect to any
Person for any period, the total amount of depreciation and amortization expense
of such Person and its Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP, including without limitation non-cash impairment
charges resulting from the application of Statements of Financial Accounting
Standards No. 142 and No. 144 and any amortization of intangibles arising
pursuant to Statement of Financial Accounting Standards No. 141.

“Consolidated Fixed Charges” means, for any period, the sum, without
duplication, of the amounts determined for Xerium and its Subsidiaries on a
consolidated basis equal to (i) Consolidated Interest Expense, (ii) scheduled
payments of principal on Debt and (iii) the portion of taxes based on income
actually paid or to be paid in cash.

“Consolidated Interest Expense” means, with respect to any Person for any
period, consolidated interest expense of such Person and its Subsidiaries for
such period determined on a consolidated basis in accordance with GAAP;
provided, however, that for the purpose of calculating the Interest Coverage
Ratio only, amortization of deferred financing fees shall be excluded from the
calculation of Consolidated Interest Expense. The calculation of Consolidated
Interest Expense shall be net of interest income and the effect of all payments
made or received pursuant to interest rate Hedging Obligations and shall exclude
payments or receipts made or received in connection with closing out interest
rate hedges, in whole or in part, as a result of the prepayment of Indebtedness
outstanding under this Agreement. For purposes of clarifying the intention of
the parties, notwithstanding any other provision of this Agreement, any non-cash
gains and losses resulting from marking to market Hedging Obligations shall not
be included in Consolidated Interest Expense and Letters of Credit expenses
shall not be included in Consolidated Interest Expense to the extent they are
classified by Xerium as SG&A costs.

 

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“Consolidated Net Income” means, with respect to any Person for any period, the
aggregate of the net income (loss) of such Person and its Subsidiaries for such
period determined on a consolidated basis in accordance with GAAP; provided,
however, that the following, without duplication, shall be excluded in
determining Consolidated Net Income: (i) any net after-tax extraordinary or
non-recurring gains, losses or expenses (less all fees and expenses relating
thereto), (ii) the cumulative effect of changes in accounting principles,
(iii) [intentionally omitted] and (iv) any gains resulting from the returned
surplus assets of any Pension Plan or Canadian Registered Pension Plan; and
provided, further that, without duplication, (x) the net income for such period
of any Person that is not a Subsidiary of such Person or that is accounted for
by the equity method of accounting shall be included only to the extent of the
amount of dividends or distributions or other payments paid in cash (or to the
extent converted into cash) to such Person or a wholly-owned Subsidiary thereof
in respect of such period (and if such net income is a loss it will be included
only to the extent such loss has been funded with cash by such Person or a
wholly-owned Subsidiary thereof in respect of such period), and (y) the net
income (loss) for such period of any Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by such
Subsidiary of its net income is not at the date of determination permitted
without any prior governmental approval (which has not been obtained and which
is not expected by Xerium to be obtained in the Ordinary Course) or, directly or
indirectly, by the operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary or its stockholders (other than any loan agreement
or similar agreement which restricts the payment of dividends or similar
distributions upon the occurrence of or during the existence or continuance of a
default or event of default), unless such restrictions with respect to the
payment of dividends or in similar distributions have been legally waived and
except that this clause (y) shall not apply to any Subsidiary that is also a
Guarantor in the calculation of Xerium’s Leverage Ratio.

“Consolidated Restructuring Costs” means, with respect to any Person for any
period, any restructuring or related impairment costs for such Person and its
Subsidiaries resulting from the restructuring activities of such Person and its
Subsidiaries, provided, that the amount of such costs for Fiscal Year 2008 and
any Fiscal Year thereafter shall not exceed $5.0 million in the aggregate.

“Consolidated Transaction Costs” means costs incurred by Xerium and its
Subsidiaries in connection with the consummation of the IPO, the preparation and
closing of the Existing Credit Agreement, the preparation of the Brazilian
Reorganization and related compensation charges associated with the termination
of the incentive plans.

“Constitutional Documents” means the constitutional documents of the Credit
Parties as amended from time to time in accordance with the terms of this
Agreement.

“Continuation Date” means the effective date of a continuation as set forth in
the applicable Continuation Notice.

 

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“Continuation Notice” means a Continuation Notice substantially in the form of
Exhibit A 2 or the modification or extension of an outstanding Letter of Credit.

“Contractual Obligation” means, as applied to any Person, any provision of any
Security issued by that Person or of any indenture, mortgage, deed of trust,
contract, undertaking, agreement or other instrument to which that Person is a
party or by which it or any of its properties is bound or to which it or any of
its properties is subject.

“Counterpart Agreement” means a Counterpart Agreement substantially in the form
of Exhibit H delivered by a Credit Party pursuant to Section 5.10.

“Credit Date” means the date of a Credit Extension.

“Credit Document” means any of this Agreement, the Collateral Documents, the
Affiliate Subordination Agreement, any documents or certificates executed by any
Borrower in favor of Issuing Bank relating to Letters of Credit, and all other
documents, instruments or agreements executed and delivered by a Credit Party
for the benefit of any Agent, Issuing Bank or any Bank in connection herewith.

“Credit Extension” means the making of a Loan or the issuing of a Letter of
Credit.

“Credit Party” means each US Credit Party and Non-US Credit Party.

“Debt” means, with respect to Xerium, on a consolidated basis on any date, the
actual outstanding amount of funded indebtedness of Xerium and its Subsidiaries,
plus, without duplication, the principal component of all Capitalized Lease
Obligations and, without duplication, other Indebtedness of Xerium and its
Subsidiaries on such date. For purposes of computing Debt, Indebtedness which is
payable in Canadian Dollars or Euros shall be converted into Dollars using the
average exchange rate for the period of four consecutive Fiscal Quarters ended
March 31, 2008 and Indebtedness which is payable in currencies other than
Canadian Dollars, Euros and Dollars shall be converted into Dollars using the
average exchange rate for the most recently ended four Fiscal Quarters for which
internal financial statements are available.

“Default” means a condition or event that, after notice or expiry of an
applicable grace period, or the making of any determination under the Credit
Documents, or any combination of any of the foregoing, would constitute an Event
of Default.

“Default Excess” means, with respect to any Defaulting Bank, the excess, if any,
of such Defaulting Bank’s Pro Rata Share of the aggregate outstanding principal
amount of Loans of all Banks (calculated as if all Defaulting Banks (other than
such Defaulting Bank) had funded all of their respective Defaulted Loans) over
the aggregate outstanding principal amount of all Loans of such Defaulting Bank.

“Default Period” means, with respect to any Defaulting Bank, the period
commencing on the date of the applicable Funding Default and ending on the
earliest of the following dates: (i) the date on which all Commitments are
cancelled or terminated and/or the Obligations are declared or become
immediately due and payable, (ii) the date on which (a) the Default Excess with
respect to such Defaulting Bank shall have been reduced to zero (whether by the
funding by such Defaulting Bank of any Defaulted Loans of

 

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such Defaulting Bank or by the non-pro rata application of any voluntary or
mandatory prepayments of the Loans in accordance with the terms of Section 2.13
or Section 2.14 or by a combination thereof) and (b) such Defaulting Bank shall
have delivered to each Borrower and Administrative Agent a written reaffirmation
of its intention to honor its obligations hereunder with respect to its
Commitments, and (iii) the date on which each Borrower, Administrative Agent and
Requisite Banks waive all Funding Defaults of such Defaulting Bank in writing.

“Defaulted Loan” as defined in Section 2.23.

“Defaulting Bank” as defined in Section 2.23.

“Deposit Account” means a demand, time, savings, passbook or like account with a
bank, savings and loan association, credit union or like organization, other
than an account evidenced by a negotiable certificate of deposit.

“Dollars” and the sign “$” mean the lawful money of the United States of
America.

“Domestic Subsidiary” means any Subsidiary organized under the laws of the
United States of America, any State thereof or the District of Columbia.

“Eligible Assignee” means (i) any Bank, any Affiliate of any Bank and any
Related Fund (any two or more Related Funds being treated as a single Eligible
Assignee for all purposes hereof), and (ii) any commercial bank, financial
institution, trust fund, insurance company, investment or mutual fund or other
entity that is an “accredited investor” (as defined in Regulation D under the
Securities Act) and which extends credit or buys loans as one of its businesses
or in the ordinary course or other entity which is regularly engaged in or
established for the purpose of making, purchasing or investing in loans,
securities or other financial assets; provided, no Affiliate of Xerium or Apax
Partners shall be an Eligible Assignee.

“Employee Benefit Plan” means any “employee benefit plan” as defined in
Section 3(3) of ERISA which is or, within the preceding six years, was
sponsored, maintained or contributed to by, or required to be contributed by,
Xerium, any of its Subsidiaries or any of their respective ERISA Affiliates.

“Environmental Claim” means any investigation, notice, notice of violation,
claim, action, suit, proceeding, demand, abatement order or other order or
directive (conditional or otherwise), by any Governmental Authority or any other
Person, arising (i) pursuant to or in connection with any actual or alleged
violation of any Environmental Law; (ii) in connection with any Hazardous
Material or any actual or alleged Hazardous Materials Activity; or (iii) in
connection with any actual or alleged damage, injury, threat or harm to health,
safety, natural resources or the environment.

“Environmental Laws” means any and all current or future foreign or domestic,
federal, provincial or state (or any subdivision of either of them), statutes,
ordinances, orders, rules, regulations, judgments, Governmental Authorizations,
or any other requirements of Governmental Authorities relating to
(i) environmental matters, including those relating to any Hazardous Materials
Activity; (ii) the generation, use, storage, transportation or disposal of
Hazardous Materials; or (iii) occupational safety and health, industrial
hygiene, land use or the protection of human, plant or animal health or welfare,
in any manner applicable to Xerium or any of its Subsidiaries or any Facility.

 

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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any successor thereto.

“ERISA Affiliate” means, as applied to any Person, (i) any corporation which is
a member of a controlled group of corporations within the meaning of
Section 414(b) of the Internal Revenue Code of which that Person is a member;
(ii) any trade or business (whether or not incorporated) which is a member of a
group of trades or businesses under common control within the meaning of
Section 414(c) of the Internal Revenue Code of which that Person is a member;
and (iii) any member of an affiliated service group within the meaning of
Section 414(m) or (o) of the Internal Revenue Code of which that Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above is a member. Any former ERISA Affiliate of Xerium or any of
its Subsidiaries shall continue to be considered an ERISA Affiliate of Xerium or
any such Subsidiary within the meaning of this definition with respect to the
period such entity was an ERISA Affiliate of Xerium or such Subsidiary and with
respect to liabilities arising after such period for which Xerium or such
Subsidiary could be liable under the Internal Revenue Code or ERISA.

“ERISA Event” means (i) a “reportable event” within the meaning of Section 4043
of ERISA and the regulations issued thereunder with respect to any Pension Plan
(excluding those for which the provision for 30 day notice to the PBGC has been
waived by regulation); (ii) the failure to meet the minimum funding standard of
Section 412 of the Internal Revenue Code with respect to any Pension Plan
(whether or not waived in accordance with Section 412(d) of the Internal Revenue
Code) or the failure to make by its due date a required installment under
Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or
the failure to make any required contribution to a Multiemployer Plan; (iii) the
provision by the administrator of any Pension Plan pursuant to
Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a
distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal
by Xerium, any of its Subsidiaries or any of their respective ERISA Affiliates
from any Pension Plan with two or more contributing sponsors or the termination
of any such Pension Plan resulting in liability to Xerium, any of its
Subsidiaries or any of their respective Affiliates pursuant to Section 4063 or
4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any
Pension Plan, or the occurrence of any event or condition which could reasonably
be expected to constitute grounds under ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan; (vi) the imposition of
liability on Xerium, any of its Subsidiaries or any of their respective ERISA
Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the
application of Section 4212(c) of ERISA; (vii) the withdrawal of Xerium, any of
its Subsidiaries or any of their respective ERISA Affiliates in a complete or
partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from
any Multiemployer Plan if there is any potential liability therefor, or the
receipt by Xerium, any of its Subsidiaries or any of their respective ERISA
Affiliates of notice from any Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to
terminate or has terminated under Section 4041A or 4042 of ERISA; or (viii) the
imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or pursuant to ERISA with respect to any Pension Plan.

 

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“Euribor” means, in relation to any Loan in euro:

 

  (a) the applicable Screen Rate; or

 

  (b) (if no Screen Rate is available for the Interest Period of that Loan) the
arithmetic mean of the rates (rounded upwards to four decimal places) as
supplied to the Administrative Agent at its request quoted by the Reference
Banks to leading banks in the European interbank market,

as of approximately 11:00 a.m. (Brussels time) on the Interest Rate
Determination Date for the offering of deposits in EUROS for a period comparable
to the Interest Period of the relevant Loan.

“Euribor Loan” means a Loan or any portion thereof bearing interest by reference
to the Euribor Rate.

“Euribor Rate” means the rate of interest for each Interest Period that is equal
to the interest rate per annum which is the aggregate of the applicable Euribor
determined interest rate and Mandatory Cost, if any.

“EUROS” “Euro”, “euro”, “EUR”, “€” or “euros” means the single currency of
Participating Member States.

“Event of Default” means each of the conditions or events set forth in
Section 8.1.

“Excess Cash” means commencing with Fiscal Year 2008, with respect to any
period, the total of (A) Adjusted EBITDA for such period minus (B) the sum,
without duplication, for such period of: (i) Consolidated Interest Expense paid
in cash, (ii) cash income tax expense, net of cash income tax refunds and cash
income tax rebates received by Xerium and its Subsidiaries, (iii) Consolidated
Capital Expenditures (except to the extent (I) financed or refinanced with an
incurrence of Indebtedness, until such Indebtedness is repaid (other than
through the refinancing thereof), (II) financed with insurance or condemnation
proceeds or (III) financed with the cash proceeds from any Asset Sale) permitted
under Section 6.8(d), (iv) Consolidated Restructuring Costs paid in cash and
(v) cash payments of withholding taxes from proceeds of the repurchase,
redemption or retention of Common Stock permitted under Section 6.5(c).

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time
to time, and any successor statute.

“Excluded Sale Proceeds” means Net Asset Sale Proceeds which arise from sales or
other dispositions of Xerium’s manufacturing facilities in Wake Forest, North
Carolina, Farmville, Virginia, Spartanburg, South Carolina, and Kimberly,
Wisconsin but only to the extent that such Net Asset Sale Proceeds do not
exceed, in the aggregate, $10,000,000.

“Existing Credit Agreement” as defined in the Recitals.

 

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“Facility” means any real property (including all buildings, fixtures or other
improvements located thereon) now, hereafter or heretofore owned, leased,
operated or used by Xerium or any of its Subsidiaries or any of their respective
predecessors or Affiliates.

“Facility Office” means the office or offices notified by a Bank or the Issuing
Bank to the Administrative Agent in writing on or before the date it becomes a
Bank or the Issuing Bank (or, following that date, by not less than five
Business Days’ written notice) as the office or offices through which it will
perform its obligations under this Agreement.

“Factoring Agreements” means those certain agreements set forth on Schedule
1.1(b) and provided to the Lead Arranger and Administrative Agent and its
counsel, providing for Xerium or any of its Subsidiaries to sell or otherwise
dispose of any receivable:

(A) on arm’s length terms for cash payable at the time of disposal in accordance
with the terms of the Japanese Promissory Note Discounting Facilities as in
effect on May 18, 2005, provided that the maximum aggregate amount of
receivables which have been so sold or disposed of and which remain outstanding
(other than as a result of a default by the relevant debtor) does not exceed
¥1,500,000,000 at any time; or

(B) on non-recourse (as regards default by the relevant debtor(s)) and arm’s
length terms for cash payable at the time of disposal by Huyck Australia Pty.
Ltd in respect of customer-provided letters of credit, provided that the maximum
aggregate amount of receivables which have been so sold or disposed of and which
remain outstanding (other than as a result of a default by the relevant debtor)
does not exceed AUD 7,500,000 at any time.

“Financial Officer Certification” means, with respect to the financial
statements for which such certification is required, the certification of the
chief financial officer of Xerium that such financial statements fairly present,
in all material respects, the financial condition of Xerium and its Subsidiaries
as of the dates indicated and the results of their operations and their cash
flows for the periods indicated, subject to changes resulting from audit and
normal year end adjustments.

“First Currency” as defined in Section 10.4(b).

“First Priority” means, with respect to any Lien purported to be created in any
Collateral pursuant to any Collateral Document, that such Lien is the only Lien
to which such Collateral is subject, other than Permitted Liens set forth in
clauses (b), (c), (e), (f), (i), (j), (k), (l), (m) and (n) of Section 6.2.

“Fiscal Quarter” means a fiscal quarter of any Fiscal Year.

“Fiscal Year” means the fiscal year of Xerium and its Subsidiaries ending on
December 31 of each calendar year.

“Fixed Charge Coverage Ratio” means the ratio as of the last day of any Fiscal
Quarter of (i) Adjusted EBITDA for the four-Fiscal Quarter period then ending,
to (ii) Consolidated Fixed Charges for such four-Fiscal Quarter period;
provided, that in computing Consolidated Fixed Charges for any period commencing
on or prior to the Closing Date and ending as of the close of any Fiscal

 

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Quarter on or prior to the first anniversary of the Closing Date, Consolidated
Fixed Charges for such period shall equal the product of (x) Consolidated Fixed
Charges for the period commencing on the first day of the first full calendar
month following the Closing Date and ending on the last day of such Fiscal
Quarter multiplied by (y) a fraction, the numerator of which is equal to 365 and
the denominator of which is equal to the number of days that have elapsed in
such period commencing on the first day of the first full calendar month
following the Closing Date and ending on the last day of such Fiscal Quarter.

“Flood Hazard Property” means any Real Estate Asset subject to a mortgage in
favor of Collateral Agent, for the benefit of the Banks, and located in an area
designated by the Federal Emergency Management Agency or other Governmental
Authority as having special flood or mud slide hazards.

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

“Formalities Certificate” means a Formalities Certificate substantially in the
form of Exhibit N.

“Fraudulent Transfer Laws” as defined in Section 2.25(a).

“French Guarantor” as defined in Section 7.14(d).

“Funding Borrower” as defined in Section 2.25(b).

“Funding Default” as defined in Section 2.23.

“Funding Notice” means a notice substantially in the form of Exhibit A 1.

“GAAP” means, subject to the limitations on the application thereof set forth in
Section 1.2, for Xerium and its Subsidiaries, United States generally accepted
accounting principles in effect as of the date of determination thereof.

“German B Term Loan” means a German B Term Loan made by a Bank to Germany
Holdings pursuant to Section 2.1(a)(vii).

“German B Term Loan Commitment” means the commitment of a Bank to make or
otherwise fund a German B Term Loan and “German B Term Loan Commitments” means
such commitments of all Banks in the aggregate. The amount in Base Currency of
each Bank’s German B Term Loan Commitment, if any, is set forth on Appendix A-7
or in the applicable Assignment Agreement, subject to any adjustment or
reduction pursuant to the terms and conditions hereof. The aggregate amount in
Base Currency of the German B Term Loan Commitments as of the Closing Date is
set forth on Appendix A-7.

“German B Term Loan Exposure” means, with respect to any Bank, as of any date of
determination, the outstanding principal amount in Base Currency of the German B
Term Loans of such Bank; provided, at any time prior to the making of the German
B Term Loans, the German B Term Loan Exposure of any Bank shall be equal to such
Bank’s German B Term Loan Commitment.

 

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“German B Term Loan Maturity Date” means the earlier of (i) the date that is
seven years after the Closing Date, and (ii) the date that all German B Term
Loans shall become due and payable in full hereunder, whether by acceleration or
otherwise.

“German Guarantors” means Robec Walzen GmbH, formerly known as Stowe Woodward
Forschungs- und Entwicklungs GmbH (also as universal successor of Robec GmbH),
Stowe Woodward AG, Huyck. Wangner Germany GmbH, formerly known as Wangner
Beteiligungsgesellschaft mbH (also as universal successor of Wangner Service
GmbH, Wangner Verwaltungsgesellschaft mbH and Wangner Finckh GmbH & Co. KG).

“Governmental Acts” means any act or omission, whether rightful or wrongful, of
any present or future de jure or de facto government or Governmental Authority.

“Governmental Authority” means any federal, provincial, state, municipal,
national or other government, governmental department, commission, board,
bureau, court, agency or instrumentality or political subdivision thereof or any
entity or officer exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to any government or any court, in
each case whether associated with a state of the United States, the United
States, or any foreign entity or government.

“Governmental Authorization” means any permit, license, authorization, plan,
directive, consent order or consent decree of or from any Governmental
Authority.

“Grantor” as defined in the Pledge and Security Agreement.

“Guaranteed Obligations” as defined in Section 7.1(b).

“Guarantor” means each Non-US Guarantor and each US Guarantor.

“Guarantor Subsidiary” means each Guarantor other than Xerium.

“Guaranty” means the guaranty of each Guarantor set forth in Section 7 or any
other guaranty which purports to guaranty all or a portion of the Obligations.

“Hazardous Materials” means any chemical, material or substance, exposure to
which is prohibited, limited or regulated by any Governmental Authority or which
may or could pose a hazard to the health and safety of the owners, occupants or
any Persons in the vicinity of any Facility or to the indoor or outdoor
environment.

“Hazardous Materials Activity” means any past, current, proposed or threatened
activity, event or occurrence involving any Hazardous Materials, including the
use, manufacture, possession, storage, holding, presence, existence, location,
Release, threatened Release, discharge, placement, generation, transportation,
processing, construction, treatment, abatement, removal, remediation, disposal,
disposition or handling of any Hazardous Materials, and any corrective action or
response action with respect to any of the foregoing.

“Hedging Obligations” means, with respect to any Person, the obligations of such
Person under (i) currency exchange, interest rate or commodity swap agreements,
currency exchange, interest rate or commodity cap agreements and currency
exchange, interest

 

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rate or commodity collar agreements entered into with a Bank Counterparty in
order to satisfy the requirements of this Agreement or otherwise in Xerium’s or
any of its Subsidiaries’ Ordinary Course and not for speculative purposes and
(ii) other agreements or arrangements designed to protect such Person against
fluctuations in currency exchange, interest rates or commodity prices entered
into with a Bank Counterparty in order to satisfy the requirements of this
Agreement or otherwise in Xerium’s or any of its Subsidiaries’ Ordinary Course
and not for speculative purposes.

“Highest Lawful Rate” means the maximum lawful interest rate, if any, that at
any time or from time to time may be contracted for, charged, or received under
the laws applicable to any Bank which are presently in effect or, to the extent
allowed by law, under such applicable laws which may hereafter be in effect and
which allow a higher maximum non-usurious interest rate than applicable laws now
allow.

“Historical Financial Statements” means as of the Closing Date, (i) the audited
financial statements of Xerium and its Subsidiaries, for the immediately
preceding three Fiscal Years, consisting of balance sheets and the related
consolidated statements of income, stockholders’ equity and cash flows for such
Fiscal Years, and (ii) the unaudited financial statements of Xerium and its
Subsidiaries as at the most recently ended Fiscal Quarter, consisting of a
balance sheet and the related consolidated statements of income, stockholders’
equity and cash flows for the three , six or nine month period, as applicable,
ending on such date, and, in the case of clauses (i) and (ii), certified by the
chief financial officer of Xerium that they fairly present, in all material
respects, the financial condition of Xerium and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated, subject to changes resulting from audit and normal year end
adjustments.

“Increased Cost Banks” as defined in Section 2.24.

“Indebtedness” means, with respect to any Person, the principal and premium (if
any) of any indebtedness of such Person, whether or not contingent: (i) in
respect of borrowed money, (ii) evidenced by bonds, notes, debentures or similar
instruments or letters of credit or bankers’ acceptances (or, without
duplication, reimbursement agreements in respect thereof), (iii) representing
the deferred and unpaid purchase price of any property, other than trade
payables incurred in the Ordinary Course, (iv) in respect of Capitalized Lease
Obligations, or (v) representing any Hedging Obligations, if and to the extent
that any of the foregoing Indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability on a balance sheet (excluding the
footnotes thereto) of such Person prepared in accordance with GAAP. To the
extent not otherwise included, Indebtedness shall include (a) any obligation of
such Person to be liable for, or to pay, as obligor, guarantor or otherwise, on
the Indebtedness of another Person (other than by endorsement of negotiable
instruments for collection in the Ordinary Course), and (b) Indebtedness of
another Person secured by a Lien on any asset owned by such Person (whether or
not such Indebtedness is assumed by such Person); provided, however, that the
amount of such Indebtedness will be the lesser of (A) the fair market value of
such asset at such date of determination and (B) the amount of such Indebtedness
of such other Person. Notwithstanding the foregoing, any obligation of such
Person or any of its Subsidiaries in respect of (x) minimum guaranteed
commissions, or other similar payments, to clients, minimum returns to clients
or stop loss limits in favor of clients or indemnification obligations to
clients, in each case pursuant to contracts to provide services to clients
entered into in the Ordinary Course, and (y) account credits to participants
under any compensation plan, shall be deemed not to constitute Indebtedness.

 

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“Indemnified Liabilities” means, collectively, any and all liabilities,
obligations, losses, damages (including natural resource damages), penalties,
claims (including Environmental Claims), costs (including the costs of any
investigation, study, sampling, testing, abatement, cleanup, removal,
remediation or other response action necessary to remove, remediate, clean up or
abate any Hazardous Materials Activity), expenses and disbursements of any kind
or nature whatsoever (including the reasonable fees and disbursements of counsel
for Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened by any Person, whether or not any such
Indemnitee shall be designated as a party or a potential party thereto, and any
fees or expenses incurred by Indemnitees in enforcing this indemnity), whether
direct, indirect or consequential and whether based on any federal, provincial,
state or foreign laws, statutes, rules or regulations (including securities and
commercial laws, statutes, rules or regulations and Environmental Laws), on
common law or equitable cause or on contract or otherwise, that may be imposed
on, incurred by, or asserted against any such Indemnitee, in any manner relating
to or arising out of (i) this Agreement or the other Credit Documents or the
transactions contemplated hereby or thereby (including the Banks’ agreement to
make Credit Extensions (including Credit Extensions that were Tranche 2
Revolving Loans) or the use or intended use of the proceeds thereof, or any
enforcement of any of the Credit Documents (including any sale of, collection
from, or other realization upon any of the Collateral or the enforcement of the
Guaranty)); or (ii) any Environmental Claim or any Hazardous Materials Activity
relating to or arising from, directly or indirectly, any past or present
activity, operation, land ownership, or practice of Xerium or any of its
Subsidiaries.

“Indemnitee” as defined in Section 10.4.

“Information” as defined in Section 10.18.

“Information Memorandum” means the Confidential Information Memorandum dated
February 2005 in respect of Xerium Technologies, Inc.

“Interest Coverage Ratio” means, with respect to Xerium for any period, the
ratio of (A) the Adjusted EBITDA for the four-Fiscal Quarters period then ending
to (B) the Consolidated Interest Expense for the four-Fiscal Quarters then
ending; provided, that in computing Consolidated Interest Expense for any period
commencing on or prior to the Closing Date and ending as of the close of any
Fiscal Quarter on or prior to the first anniversary of the Closing Date,
Consolidated Interest Expense for such period shall equal the product of
(x) Consolidated Interest Expense for the period commencing on the first day of
the first full calendar month following the Closing Date and ending on the last
day of such Fiscal Quarter multiplied by (y) a fraction, the numerator of which
is equal to 365 and the denominator of which is equal to the number of days that
have elapsed in such period commencing on the first day of the first full
calendar month following the Closing Date and ending on the last day of such
Fiscal Quarter.

 

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“Interest Payment Date” means with respect to any LIBOR Loan, Euribor Loan or BA
Loan, the last day of each Interest Period applicable to such Loan; provided, in
the case of each Interest Period of longer than three months “Interest Payment
Date” shall also include each date that is three months, or an integral multiple
thereof, after the commencement of such Interest Period.

“Interest Period” means, in connection with a Euribor Loan, a LIBOR Loan or a BA
Loan, an interest period of one, two, three or six months, or, with respect to a
Euribor Loan or a LIBOR Loan only, nine or twelve months if consented to in
writing by all Banks making such Loan, as selected by each Borrower in the
applicable Funding Notice or Continuation Notice (provided, that until the
earlier to occur of (i) the 90th day following the Closing Date or (ii) the date
upon which the Lead Arranger determines in its sole discretion that the primary
syndication of the Revolving Loans and B Term Loans has been completed, Euribor
Loans, LIBOR Loans and BA Loans shall be restricted to a single one month
interest period at all times, with the first such interest period to begin on
the Closing Date and with any subsequent interest periods to begin on the last
day of the prior one month interest period theretofore in effect),
(i) initially, commencing on the Credit Date or Continuation Date thereof, as
the case may be; and (ii) thereafter, commencing on the day on which the
immediately preceding Interest Period expires; provided, (a) if an Interest
Period would otherwise expire on a day that is not a Business Day, such Interest
Period shall expire on the next succeeding Business Day unless no further
Business Day occurs in such month, in which case such Interest Period shall
expire on the immediately preceding Business Day; (b) any Interest Period that
begins on the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clauses (c) and (d), of this definition, end
on the last Business Day of a calendar month; (c) no Interest Period with
respect to any portion of any Class of B Term Loans shall extend beyond such
Class’ B Term Loan Maturity Date; (d) no Interest Period with respect to any
portion of any Class of Revolving Loans shall extend beyond such Class’
Revolving Commitment Termination Date; and (e) all interest periods of the same
currency having the same commencing date and expiration date shall be considered
one Interest Period.

“Interest Rate Agreement” means any interest rate swap agreement, interest rate
cap agreement, interest rate collar agreement, interest rate hedging agreement
or other similar agreement or arrangement, each of which is for the purpose of
hedging the interest rate exposure associated with Xerium’s and its
Subsidiaries’ operations and not for speculative purposes.

“Interest Rate Determination Date” means, with respect to any Interest Period
(i) for any currency other than Sterling, the date that is two Business Days
prior to the first day of such Interest Period and (ii) for Sterling, the date
that is the first day of such Interest Period.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended to
the date hereof and from time to time hereafter, and any successor statute.

“Investment” means (i) any direct or indirect purchase or other acquisition by
Xerium or any of its Subsidiaries of, or of a beneficial interest in, any of the
Securities of any other Person (other than Xerium, any other Borrower or a
Guarantor Subsidiary); (ii) any direct or indirect redemption, retirement,
purchase or other acquisition for value, by any Subsidiary of Xerium from any

 

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Person (other than Xerium, any other Borrower or a Guarantor Subsidiary), of any
Capital Stock of such Person; and (iii) any direct or indirect loan, advance
(other than advances to employees for moving, entertainment and travel expenses,
drawing accounts and similar expenditures in the Ordinary Course) or capital
contribution by Xerium or any of its Subsidiaries to any other Person (other
than Xerium, any other Borrower or a Guarantor Subsidiary), including all
indebtedness and accounts receivable from that other Person that are not current
assets or did not arise from sales to that other Person in the Ordinary Course.
The amount of any Investment shall be the original cost of such Investment plus
the cost of all additions thereto, without any adjustments for increases or
decreases in value, or write ups, write downs or write offs with respect to such
Investment.

“IPO” means the initial public offering of Common Stock.

“IPO Documents” means the Prospectus, the Underwriting Agreement, and the
Registration Statement on Form S-1, as amended.

“Issuance Notice” means an Issuance Notice substantially in the form of
Exhibit A 3.

“Issuing Bank” means, in respect of the Letters of Credit in existence on the
Closing Date, CIBC World Markets plc, and, in respect of all other Letters of
Credit, Citicorp. North America, Inc., each as Issuing Bank hereunder, and each
together with their respective permitted successors and assigns in such
capacity.

“Italia B Term Loan” means an Italia B Term Loan made by a Bank to Italia SpA
pursuant to Section 2.1(a)(iii).

“Italia B Term Loan Commitment” means the commitment of a Bank to make or
otherwise fund an Italia B Term Loan and “Italia B Term Loan Commitments” means
such commitments of all Banks in the aggregate. The Base Currency of each Bank’s
Italia B Term Loan Commitment, if any, is set forth on Appendix A-3 or in the
applicable Assignment Agreement, subject to any adjustment or reduction pursuant
to the terms and conditions hereof. The aggregate amount in Base Currency of the
Italia B Term Loan Commitments as of the Closing Date is set forth on Appendix
A-3.

“Italia B Term Loan Exposure” means, with respect to any Bank, as of any date of
determination, the outstanding principal in Base Currency of the Italia B Term
Loans of such Bank; provided, at any time prior to the making of the Italia B
Term Loans, the Italia B Term Loan Exposure of any Bank shall be equal to such
Bank’s Italia B Term Loan Commitment.

“Italia B Term Loan Maturity Date” means the earlier of (i) the date that is
seven years after the Closing Date, and (ii) the date that all Italia B Term
Loans shall become due and payable in full hereunder, whether by acceleration or
otherwise.

“Japanese Yen” or “¥” means the lawful currency of Japan.

“Joint Venture” means a joint venture, partnership or other similar arrangement,
whether in corporate, partnership or other legal form; provided, in no event
shall any corporate Subsidiary of any Person be considered to be a Joint Venture
to which such Person is a party.

 

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“Landlord Personal Property Collateral Access Agreement” means a Landlord Waiver
and Consent Agreement substantially in the form of Exhibit K with such
amendments or modifications as may be approved by Collateral Agent.

“Lead Arranger” as defined in the preamble hereto.

“Leasehold Property” means any leasehold interest of any Credit Party as lessee
under any lease of real property, other than any such leasehold interest
designated from time to time by Collateral Agent in its sole discretion as not
being required to be included in the Collateral.

“Letter of Credit” means a commercial or standby letter of credit issued or to
be issued by Issuing Bank pursuant to this Agreement substantially in the form
of Exhibit M or otherwise acceptable to Issuing Bank and Administrative Agent.

“Letter of Credit Sublimit” means the lesser of (i) the Base Currency Amount of
$50,000,000 and (ii) the remainder of the Tranche 1 Revolving Commitments then
in effect less the aggregate principal amount of the Tranche 1 Revolving Loans
then outstanding.

“Letter of Credit Usage” means, as at any date of determination, the sum of
(i) the maximum aggregate Base Currency Amount which is, or at any time
thereafter may become, available for drawing under all Letters of Credit then
outstanding, and (ii) the aggregate Base Currency Amount of all drawings under
Letters of Credit honored by Issuing Bank and not theretofore reimbursed by or
on behalf of each Borrower.

“Leverage Ratio” means, with respect to Xerium on any date, the ratio of (A) the
Debt of Xerium and its Subsidiaries as of such date to (B) the Adjusted EBITDA
of Xerium and its Subsidiaries for the period of four consecutive Fiscal
Quarters ending on such date (or if such date is not the last day of a Fiscal
Quarter of Xerium, for the period of four consecutive Fiscal Quarters most
recently ended).

“LIBOR” means, in relation to any Loan (other than a Loan denominated in EUROS
or Canadian Dollars):

 

  (a) the applicable Screen Rate; or

 

  (b) (if no Screen Rate is available for the currency or Interest Period of
that Loan) the arithmetic mean of the rates (rounded upwards to four decimal
places) as supplied to the Administrative Agent at its request quoted by the
Reference Banks to leading banks in the London interbank market,

as of approximately 11:00 a.m. (London time) on the Interest Rate Determination
Date for the offering of deposits in the currency of that Loan and for a period
comparable to the Interest Period for that Loan.

“LIBOR Loan” means a Loan or any portion thereof bearing interest by reference
to the LIBOR Rate.

 

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“LIBOR Rate” means the rate of interest for each Interest Period that is equal
to the interest rate per annum which is the aggregate of the applicable LIBOR
determined interest rate and Mandatory Cost, if any.

“Lien” means (i) any lien, mortgage, pledge, assignment, security interest,
charge or encumbrance of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, and any
lease in the nature thereof) and any option, trust or other preferential
arrangement having the practical effect of any of the foregoing and (ii) in the
case of Securities, any purchase option, call or similar right of a third party
with respect to such Securities.

“Loan” means a Xerium B Term Loan, an XTI B Term Loan, an Italia B Term Loan, a
Xerium Canada SW B Term Loan, a Xerium Canada Wxx B Term Loan, an Austria B Term
Loan, a German B Term Loan and a Tranche 1 Revolving Loan.

“Mandatory Cost” means the percentage rate per annum calculated by the Agent in
accordance with Appendix C (Mandatory Cost Formula).

“Margin Stock” as defined in Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.

“Material Adverse Effect” means any effect, event, matter or circumstance:
(a) which in the reasonable opinion of the Requisite Banks is materially adverse
to the: (i) business, assets or financial condition of Xerium and its
Subsidiaries taken as a whole; or (ii) ability of any Credit Party to perform
any of its Obligations in accordance with their terms under any of the Credit
Documents; or (b) which in the reasonable opinion of the Requisite Banks results
in any (i) Credit Document not being legal, valid and binding on and, subject to
reservations contained in the legal opinions provided as conditions precedent
thereto, enforceable against any party thereto and/or (ii) Collateral Document
not being a valid and effective security interest, and in the case of (b), in
each case in a manner or to an extent materially prejudicial to the interest of
any Bank under the Credit Documents.

“Material Contract” means any contract or other arrangement to which Xerium or
any of its Subsidiaries is a party (other than the Credit Documents) for which
breach, non-performance, cancellation or failure to renew could reasonably be
expected to have a Material Adverse Effect.

“Material Real Estate Asset” means (i) (a) any fee-owned Real Estate Asset
having a fair market value in excess of $1,000,000 as of the date of the
acquisition thereof and (b) all Leasehold Properties other than those with
respect to which the aggregate payments under the terms of the lease are less
than $500,000 per annum, in each case located in the United States, Canada and
the United Kingdom or (ii) any Real Estate Asset that the Requisite Banks have
reasonably determined is material to the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Xerium or any
Subsidiary thereof, including each Borrower.

“Material Subsidiary” means (i) each Borrower and Guarantor; (ii) any other
direct or indirect Subsidiary of Xerium’s the profit from ordinary activities
before interest, goodwill, amortization, taxation and exceptional items or gross
assets of which exceeds

 

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4% of the consolidated profit from ordinary activities before interest,
goodwill, amortization, taxation and exceptional items or gross assets of Xerium
and its Subsidiaries on a consolidated basis, and for this purpose the
calculation of profit from ordinary activities before interest, goodwill,
amortization, taxation and exceptional items or gross assets shall: (a) be made
in accordance with GAAP; (b) in the case of a company which itself has
Subsidiaries, be made by using the consolidated profit from ordinary activities
before interest, goodwill, amortization, taxation and exceptional items or gross
assets, as the case may be, of it and its Subsidiaries; and (c) be made by
reference to the latest available quarterly financial information of the
relevant Subsidiary of Xerium and its Subsidiaries on a consolidated basis; and
(iii) any other direct or indirect Subsidiary of Xerium’s in which Xerium or any
of its Subsidiaries has made Investments, singly or in the aggregate, totaling
in excess of $5,000,000.

“Maximum Consolidated Capital Expenditures” as defined in Section 6.8(d).

“Memorandum of Agreed Security and Guarantee Principles” means the Memorandum of
Agreed Security and Guarantee Principles, dated the date hereof, by and between
Xerium and the Collateral Agent, as the same may be amended, supplemented or
otherwise modified from time to time.

“Moody’s” means Moody’s Investors Service, Inc.

“Mortgage” means a Mortgage substantially in the form of Exhibit J, as it may be
amended, supplemented or otherwise modified from time to time.

“Multiemployer Plan” means any Employee Benefit Plan which is a “multiemployer
plan” as defined in Section 3(37) or 4001(a)(3) of ERISA.

“NAIC” means The National Association of Insurance Commissioners, and any
successor thereto.

“Net Asset Sale Proceeds” means, with respect to any Asset Sale, an amount equal
to: (i) Cash payments (including any Cash received by way of deferred payment
pursuant to, or by monetization of, a note receivable or otherwise, but only as
and when so received) received by Xerium or any of its Subsidiaries from such
Asset Sale, minus (ii) any bona fide direct costs (including, without
limitation, reasonable transaction costs) incurred in connection with such Asset
Sale, including (a) income or gains taxes payable by the seller as a result of
any gain recognized in connection with such Asset Sale, (b) payment of the
outstanding principal amount of, premium or penalty, if any, and interest on any
Indebtedness (other than the Loans) that is secured by a Lien on the stock or
assets in question and that is required to be repaid under the terms thereof as
a result of such Asset Sale and (c) a reasonable reserve for any indemnification
payments (fixed or contingent) attributable to seller’s indemnities and
representations and warranties to purchaser in respect of such Asset Sale
undertaken by Xerium or any of its Subsidiaries in connection with such Asset
Sale.

“Net Insurance/Condemnation Proceeds” means an amount equal to: (i) any Cash
payments or proceeds received by Xerium or any of its Subsidiaries (a) under any
casualty insurance policy in respect of a covered loss thereunder (excluding
proceeds of business interruption insurance) or (b) as a result of the taking of
any assets of Xerium or any of its Subsidiaries by any Person

 

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pursuant to the power of eminent domain, condemnation or otherwise, or pursuant
to a sale of any such assets to a purchaser with such power under threat of such
a taking, minus (ii) (a) any actual and reasonable costs incurred by Xerium or
any of its Subsidiaries in connection with the adjustment or settlement of any
claims of Xerium or such Subsidiary in respect thereof, and (b) any bona fide
direct costs incurred in connection with any sale of such assets as referred to
in clause (i)(b) of this definition, including income taxes payable as a result
of any gain recognized in connection therewith.

“Non-Consenting Bank” as defined in Section 2.24.

“Non-US Aggregate Payments” as defined in 7.2(a).

“Non-US Bank” as defined in Section 2.20(c).

“Non-US Borrower” means each Borrower other than Xerium and XTI.

“Non-US Credit Party” means each Non-US Borrower and each Non-US Guarantor.

“Non-US Contributing Guarantor” as defined in Section 7.2(a).

“Non-US Fair Share” as defined in Section 7.2(a).

“Non-US Fair Share Contribution Amount” as defined in Section 7.2(a).

“Non-US Funding Guarantor” as defined in Section 7.2(a).

“Non-US Guaranteed Obligations” as defined in Section 7.1(a).

“Non-US Guarantor” means each Guarantor listed as a Non-US guarantor in Schedule
1.1(c) and any other Foreign Subsidiary that becomes a party to the Guaranty.

“Non-US Obligations” means the Obligations of the Non-US Borrowers and the
Non-US Guarantors.

“Notice” means a Funding Notice, an Issuance Notice, or a Continuation Notice.

“Obligation Aggregate Payments” as defined in Section 2.25(b).

“Obligation Fair Share” as defined in Section 2.25(b).

“Obligation Fair Share Contribution Amount” as defined in Section 2.25(b).

“Obligation Fair Share Shortfall” as defined in Section 2.25(b).

“Obligations” means all obligations of every nature of a US Credit Party or a
Non-US Credit Party, as the case may be, from time to time owed to the Agents
(including former Agents), the Banks, or any of them, any Issuing Bank and Bank
Counterparties, including Hedging Obligations, under any Credit Document or the
applicable documents creating the Hedging Obligations (including,

 

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without limitation, with respect to Hedging Obligations, obligations owed to any
person who was a Bank or an Affiliate of a Bank at the time such Hedging
Obligation was incurred), whether for principal, interest (including interest
which, but for the filing of a petition in bankruptcy with respect to such
Credit Party, would have accrued on any Obligation, whether or not a claim is
allowed against such Credit Party for such interest in the related bankruptcy
proceeding), reimbursement of amounts drawn under Letters of Credit, payments
for early termination of Hedging Obligations, fees, expenses, indemnification or
otherwise.

“Obligee Guarantor” as defined in Section 7.7.

“Officers’ Certificate” means a certificate signed on behalf of Xerium by two
officers of Xerium, one of whom must the principal executive officer, the
principal financial officer, the treasurer or the principal accounting officer
of Xerium.

“Optional Currency” means a currency (i) denominated in EUROS, Canadian Dollars,
Sterling, Japanese Yen and any other currency approved by the Administrative
Agent and (ii) which complies with the conditions set out in Section 2.26.

“Ordinary Course” means ordinary course of business or ordinary trade activities
that are customary, typical and carried out in a manner consistent with past
practice.

“Organizational Documents” means (i) with respect to any corporation, its
certificate or articles of incorporation or organization, as amended, and its
bylaws, as amended, (ii) with respect to any limited partnership, its
certificate of limited partnership, as amended, and its partnership agreement,
as amended, (iii) with respect to any general partnership, its partnership
agreement, as amended, (iv) with respect to any limited liability company, its
articles of organization, as amended, and its operating agreement, as amended,
and (v) with respect to any other Foreign Subsidiary or entity, its memorandum
or articles of association or other constitutional documents. In the event any
term or condition of this Agreement or any other Credit Document requires any
Organizational Document to be certified by a secretary of state or similar
governmental official, the reference to any such “Organizational Document” shall
only be to a document of a type customarily certified by such governmental
official.

“Participating Member State” means any member state of the European Communities
that adopts or has adopted the euro as its lawful currency in accordance with
legislation of the European Community relating to Economic and Monetary Union.

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

“Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan,
which is subject to Section 412 of the Internal Revenue Code or Section 302 of
ERISA which is or, within the preceding six years, was sponsored, maintained or
contributed to by, or required to be contributed by, Xerium, any of its
Subsidiaries or any of its ERISA Affiliates.

“Permitted Acquisition” means any acquisition by a Borrower or any of its wholly
owned Subsidiaries, whether by purchase, merger or otherwise, of all or
substantially all of the assets of, all or substantially all of the Capital
Stock of, or a business line or unit or a division of, any Person; provided,

 

26

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  (i) immediately prior to, and after giving effect thereto, no Default or Event
of Default shall have occurred and be continuing or would result therefrom;

 

  (ii) all transactions in connection therewith shall be consummated, in all
material respects, in accordance with all applicable laws and in conformity with
all applicable Governmental Authorizations;

 

  (iii) in the case of the acquisition of Capital Stock, all of the Capital
Stock (except for any such Securities in the nature of directors’ qualifying
shares required pursuant to applicable law) acquired or otherwise issued by such
Person or any newly formed Subsidiary of a Borrower in connection with such
acquisition shall be owned (directly or indirectly) 100% by a Borrower or a
Guarantor Subsidiary thereof; provided such Guarantor Subsidiary shall not have
any limitations in respect of its guaranty of the Obligation similar to those
set forth in Section 7.14, and each Borrower shall have taken, or caused to be
taken, as of the date such Person becomes a Subsidiary of each Borrower, each of
the actions set forth in Sections 5.10 and/or 5.11, as applicable;

 

  (iv) Xerium and its Subsidiaries shall be in compliance with the financial
covenants set forth in Section 6.8 on a pro forma basis after giving effect to
such acquisition as of the last day of the Fiscal Quarter most recently ended
(as determined in accordance with Section 6.8(e));

 

  (v) there are no material contingent liabilities (including, without
limitation, Environmental Claims, but excluding for this purpose Ordinary Course
Tax liabilities) relating to the company or business acquired;

 

  (vi) Xerium shall have delivered to Administrative Agent at least fifteen
(15) Business Days prior to such proposed acquisition, a Compliance Certificate
evidencing compliance with Section 6.8 as required under clause (iv) above,
together with all relevant financial information with respect to such acquired
assets, including, without limitation, the aggregate consideration for such
acquisition and any other information required to demonstrate compliance with
Section 6.8; and

 

  (vii) any Person or assets or division as acquired in accordance herewith
(x) shall be in the same business or lines of business in which Xerium and/or
any of its Subsidiaries are engaged as of the Closing Date and (y) shall have
generated positive cash flow for the four quarter period most recently ended
prior to the date of such acquisition adjusted on a pro forma basis as certified
by the Chief Financial Officer of Xerium.

“Permitted Liens” means each of the Liens permitted pursuant to Section 6.2.

 

27

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“Person” means and includes natural persons, corporations, limited partnerships,
general partnerships, limited liability companies, limited liability
partnerships, joint stock companies, Joint Ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and Governmental Authorities.

“Phase I Report” means, with respect to any Facility, a report that (i) conforms
to the ASTM Standard Practice for Environmental Site Assessments: Phase I
Environmental Site Assessment Process, E 1527, (ii) includes an assessment of
asbestos containing materials at such Facility, (iii) is accompanied by (a) an
estimate of the reasonable worst case cost of investigating and remediating any
Hazardous Materials Activity identified in the Phase I Report as giving rise to
an actual or potential material violation of any Environmental Law or as
presenting a material risk of giving rise to a material Environmental Claim, and
(b) a current compliance audit setting forth an assessment of Xerium’s, its
Subsidiaries’ and such Facility’s current and past compliance with Environmental
Laws and an estimate of the cost of rectifying any non-compliance with current
Environmental Laws identified therein and the cost of compliance with reasonably
anticipated future Environmental Laws identified therein.

“Platform” as defined in Section 5.1(p)(ii).

“Pledge and Security Agreements” mean the Pledge and Security Agreement to be
executed by each U.S. Credit Party substantially in the form of Exhibit I-A and
each functionally similar agreement executed by any Non-U.S. Credit Party, as
each may be amended, supplemented or otherwise modified from time to time.

“Principal Office” means, for each of Administrative Agent and Issuing Bank,
such Person’s “Principal Office” as set forth on Appendix B, or such other
office as such Person may from time to time designate in writing to each
Borrower, Administrative Agent and each Bank.

“Projections” as defined in Section 4.8.

“Pro Rata Share” means (i) with respect to all payments, computations and other
matters relating to the Xerium B Term Loan of any Bank, the percentage obtained
by dividing (a) the Xerium B Term Loan Exposure of that Bank by (b) the
aggregate Xerium B Term Loan Exposure of all Banks; (ii) with respect to all
payments, computations and other matters relating to the XTI B Term Loan of any
Bank, the percentage obtained by dividing (a) the XTI B Term Loan Exposure of
that Bank by (b) the aggregate XTI B Term Loan Exposure of all Banks; (iii) with
respect to all payments, computations and other matters relating to the Italia B
Term Loan of any Bank, the percentage obtained by dividing (a) the Italia B Term
Loan Exposure of that Bank by (b) the aggregate Italia B Term Loan Exposure of
all Banks; (iv) with respect to all payments, computations and other matters
relating to the Xerium Canada SW B Term Loan of any Bank, the percentage
obtained by dividing (a) the Xerium Canada SW B Term Loan Exposure of that Bank
by (b) the aggregate Xerium Canada SW B Term Loan Exposure of all Banks;
(v) with respect to all payments, computations and other matters relating to the
Xerium Canada Wxx B Term Loan of any Bank, the percentage obtained by dividing
(a) the Xerium Canada Wxx B Term Loan Exposure of that Bank by (b) the aggregate
Xerium Canada Wxx B Term Loan Exposure of all Banks; (vi) with respect to all
payments, computations and other matters relating to the Austria B Term Loan of
any Bank, the percentage obtained by dividing (a) the Austria B Term Loan
Exposure of that Bank by (b) the aggregate Austria B Term Loan Exposure of all
Banks; (vii)

 

28

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with respect to all payments, computations and other matters relating to the
German B Term Loan of any Bank, the percentage obtained by dividing (a) the
German B Term Loan Exposure of that Bank by (b) the aggregate German B Term Loan
Exposure of all Banks; and (viii) with respect to all payments, computations and
other matters relating to the Tranche 1 Revolving Commitment or Tranche 1
Revolving Loans of any Bank or any Letters of Credit issued or participations
purchased therein by any Bank, the percentage obtained by dividing (a) the
Tranche 1 Revolving Exposure of that Bank by (b) the aggregate Tranche 1
Revolving Exposure of all Banks. For all other purposes with respect to each
Bank, “Pro Rata Share” means the percentage obtained by dividing (A) an amount
equal to the sum of the Xerium B Term Loan Exposure, the XTI B Term Loan
Exposure, the Italia B Term Loan Exposure, the Xerium Canada SW B Term Loan
Exposure, the Xerium Canada Wxx B Term Loan Exposure, the Austria B Term Loan
Exposure, the German B Term Loan Exposure and the Revolving Exposure of that
Bank, by (B) an amount equal to the sum of the aggregate Xerium B Term Loan
Exposure, the aggregate XTI B Term Loan Exposure, the aggregate Italia B Term
Loan Exposure, the aggregate Xerium Canada SW B Term Loan Exposure, the
aggregate Xerium Canada Wxx B Term Loan Exposure, the aggregate Austria B Term
Loan Exposure, the aggregate German B Term Loan Exposure and the aggregate
Revolving Exposure of all Banks.

“Prospectus” means the Registration Statement on Form S-1 filed with the U.S.
Securities and Exchange Commission by Xerium, as amended.

“Qualifying Lender” means:

 

  (a) a Bank which is a bank as defined in Section 840A of the Income and
Corporation Taxes Act of 1988 of the United Kingdom, beneficially entitled to
all amounts payable to it by a Credit Party under the Credit Documents and
within the charge to United Kingdom corporation tax as respects such amounts; or

 

  (b) a bank in respect of which an order under Section 840A(1)(d) designating
it as a bank for the purposes of Section 349(3)(a) of the Income and Corporation
Taxes Act of 1988 of the United Kingdom provides that Section 349(3)(a) shall
apply to it as if the words from “if” to the end in that section were omitted;
or

 

  (c) a Treaty Lender.

“Quotation Day” means, in relation to any period for which an interest rate is
to be determined:

 

  (a) (if the currency is Sterling) the first day of that period;

 

  (b) (if the currency is euro) two TARGET Days before the first day of that
period; or

 

  (c) (for any other currency) two Business Days before the first day of that
period,

 

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unless market practice differs in the Relevant Interbank Market for a currency,
in which case the Quotation Day for that currency will be determined by the
Agent in accordance with market practice in the Relevant Interbank Market (and
if quotations would normally be given by Reference Banks in the Relevant
Interbank Market on more than one day, the Quotation Day will be the last of
those days).

“R&W Material Adverse Effect” means any effect, event, matter or circumstance:
(a) is materially adverse to the: (i) business, assets or financial condition of
Xerium and its Subsidiaries taken as a whole; or (ii) the ability of any Credit
Party to perform any of its Obligations in accordance with their terms under any
of the Credit Documents; or (b) results in any (i) Credit Document not being
legal, valid and binding on and, subject to reservations contained in the legal
opinions provided as conditions precedent thereto, enforceable against any party
thereto and/or (ii) Collateral Document not being a valid and effective security
interest, and in the case of (b), in each case in a manner or to an extent
materially prejudicial to the interest of any Bank under the Credit Documents.

“Real Estate Asset” means, at any time of determination, any interest (fee,
leasehold or otherwise) then owned by any Credit Party in any real property.

“Record Document” means, with respect to any Leasehold Property, (i) the lease
evidencing such Leasehold Property or a memorandum thereof, executed and
acknowledged by the owner of the affected real property, as lessor, or (ii) if
such Leasehold Property was acquired or subleased from the holder of a Recorded
Leasehold Interest, the applicable assignment or sublease document, executed and
acknowledged by such holder, in each case in form sufficient to give such
constructive notice upon recordation and otherwise in form reasonably
satisfactory to Collateral Agent.

“Recorded Leasehold Interest” means a Leasehold Property with respect to which a
Record Document has been recorded in all places necessary or desirable, in
Administrative Agent’s reasonable judgment, to give constructive notice of such
Leasehold Property to third party purchasers and encumbrancers of the affected
real property.

“Reference Banks” means, in relation to LIBOR, Euribor and Mandatory Cost, the
principal London offices of Citibank, N.A. and such two other banks as may be
appointed by the Administrative Agent in consultation with Xerium.

“Register” as defined in Section 2.7(b).

“Reimbursement Date” as defined in Section 2.4(e).

“Related Agreements” means, collectively, the Information Memorandum and the IPO
Documents.

“Related Fund” means, with respect to any Bank that is an investment fund, any
other investment fund that invests in commercial loans and that is managed or
advised by the same investment advisor as such Bank or by an Affiliate of such
investment advisor.

 

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“Release” means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of any Hazardous Material into the indoor or outdoor environment
(including the abandonment or disposal of any barrels, containers or other
closed receptacles containing any Hazardous Material), including the movement of
any Hazardous Material through the air, soil, surface water or groundwater.

“Relevant Interbank Market” means in relation to EUROS, the European interbank
market and, in relation to any other currency, the London interbank market.

“Replacement Bank” as defined in Section 2.24.

“Replacement Rate” means the rate notified to the Administrative Agent by a
Bank, as soon as practicable and in any event no later than 11:00 a.m. (New York
City time) on the date that interest is due to be paid in respect of the
applicable Interest Period, to be that interest rate which expresses as a
percentage rate per annum the cost to that Bank of funding its participation in
the applicable Loan from whatever source such Bank may reasonably select.

“Required Prepayment Date” as defined in Section 2.15(c).

“Requisite Banks” means one or more Banks having or holding Xerium B Term Loan
Exposure, XTI B Term Loan Exposure, Italia B Term Loan Exposure, Xerium Canada
SW B Term Loan Exposure, Xerium Canada Wxx B Term Loan Exposure, Austria B Term
Loan Exposure, German B Term Loan Exposure and/or any Revolving Exposure and
representing more than 66.7% of the sum of the (i) aggregate Xerium B Term Loan
Exposure of all Banks, (ii) aggregate XTI B Term Loan Exposure of all Banks,
(iii) aggregate Italia B Term Loan Exposure of all Banks, (iv) aggregate Xerium
Canada SW B Term Loan Exposure of all Banks, (v) aggregate Xerium Canada Wxx B
Term Loan Exposure of all Banks, (vi) aggregate Austria B Term Loan Exposure of
all Banks, (vii) aggregate German B Term Loan Exposure of all Banks and
(viii) aggregate Revolving Exposure of all Banks.

“Requisite Class Banks” means, at any time of determination, (i) for the Class
of Banks having Xerium B Term Loan Exposure, Banks holding more than 66.7% of
the aggregate Xerium B Term Loan Exposure of all Banks; (ii) for the Class of
Banks having XTI B Term Loan Exposure, Banks holding more than 66.7% of the
aggregate XTI B Term Loan Exposure of all Banks; (iii) for the Class of Banks
having Italia B Term Loan Exposure, Banks holding more than 66.7% of the
aggregate Italia B Term Loan Exposure of all Banks; (iv) for the Class of Banks
having Xerium Canada SW B Term Loan Exposure, Banks holding more than 66.7% of
the aggregate Xerium Canada SW B Term Loan Exposure of all Banks; (v) for the
Class of Banks having Xerium Canada Wxx B Term Loan Exposure, Banks holding more
than 66.7% of the aggregate Xerium Canada Wxx B Term Loan Exposure of all Banks;
(vi) for the Class of Banks having Austria B Term Loan Exposure, Banks holding
more than 66.7% of the aggregate Austria B Term Loan Exposure of all Banks;
(vii) for the Class of Banks having German B Term Loan Exposure, Banks holding
more than 66.7% of the aggregate German B Term Loan Exposure of all Banks; and
(viii) for the Class of Banks having Tranche 1 Revolving Exposure, Banks holding
more than 66.7% of the aggregate Tranche 1 Revolving Exposure of all Banks.

 

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“Restatement Effective Date” as defined in Section 10.21.

“Restatement Fee” as defined in Section 3.1(o).

“Restricted Junior Payment” means (i) any dividend or other distribution, direct
or indirect, on account of any shares of any class of stock of Xerium now or
hereafter outstanding, except a dividend payable solely in shares of that class
of stock to the holders of that class; (ii) any redemption, retirement, sinking
fund or similar payment, purchase or other acquisition for value, direct or
indirect, of any shares of any class of stock of Xerium now or hereafter
outstanding, except any payment made solely in shares of that class of stock to
the holders of that class; (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of Xerium now or hereafter outstanding; and
(iv) any payment or prepayment of principal of, premium, if any, or interest on,
or redemption, purchase, retirement, defeasance (including in substance or legal
defeasance), sinking fund or similar payment with respect to, any Subordinated
Debt, excluding, in respect of this clause (iv), payments in kind.

“Revolving Commitment” means the commitment of a Bank to make or otherwise fund
any Tranche 1 Revolving Loan including the commitment to acquire participations
in Letters of Credit hereunder and “Revolving Commitments” means such
commitments of all Banks in the aggregate. The aggregate Base Currency Amount of
the Revolving Commitments is $50,000,000.

“Revolving Commitment Period” means the Tranche 1 Revolving Commitment Period.

“Revolving Commitment Termination Date” means the Tranche 1 Revolving Commitment
Termination Date.

“Revolving Exposure” means the Tranche 1 Revolving Exposure.

“Revolving Loan” means a Tranche 1 Revolving Loan.

“Roll-Over Amount” as defined in Section 6.8(d).

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw Hill
Companies.

“Screen Rate” means:

 

  (a) in relation to LIBOR, the British Bankers Association Interest Settlement
Rate for the relevant currency and period; and

 

  (b) in relation to Euribor, the percentage rate per annum determined by the
Banking Federation of the European Union for the relevant period,

displayed on the appropriate page of the Telerate screen. If the agreed page is
replaced or service ceases to be available, the Administrative Agent may specify
another page or service displaying the appropriate rate after consultation with
the Borrowers and the Banks.

 

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“Second Currency” as defined in Section 10.4(b).

“Secured Parties” has the meaning assigned to that term in the Collateral
Documents.

“Securities” means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as “securities” or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.

“Securities Act” means the Securities Act of 1933, as amended from time to time,
and any successor statute.

“Solvency Certificate” means a Solvency Certificate of the chief financial
officer of Xerium substantially in the form of Exhibit G 2.

“Solvent” means, with respect to any Credit Party, that as of the date of
determination, both (i) (a) the sum of such Credit Party’s debt (including
contingent liabilities) does not exceed the present fair saleable value of such
Credit Party’s present assets; (b) such Credit Party’s capital is not
unreasonably small in relation to its business as contemplated on the Closing
Date and reflected in the Projections or with respect to any transaction
contemplated or undertaken after the Closing Date; and (c) such Person has not
incurred and does not intend to incur, or believe (nor should it reasonably
believe) that it will incur, debts beyond its ability to pay such debts as they
become due (whether at maturity or otherwise); and (ii) such Person is “solvent”
within the meaning given that term and similar terms under applicable laws
relating to fraudulent transfers and conveyances and by the laws of the
jurisdiction where such Credit Party is incorporated, formed or organized. For
purposes of this definition, the amount of any contingent liability at any time
shall be computed as the amount that, in light of all of the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability (irrespective of whether
such contingent liabilities meet the criteria for accrual under Statement of
Financial Accounting Standard No. 5).

“Sterling” means the lawful currency of the United Kingdom.

“Subject Transaction” as defined in Section 6.8(e).

“Subordinated Debt” means unsecured Indebtedness that is subordinated pursuant
to a written agreement to the Obligations on terms and conditions reasonably
satisfactory to the Requisite Lenders.

“Subsidiary” means, with respect to any Person, any corporation, partnership,
limited liability company, association, joint venture or other business entity
of which more than 50% of the total voting power of shares of stock or other
ownership interests entitled (without regard to the occurrence of any
contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of

 

33

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that Person or a combination thereof; provided, in determining the percentage of
ownership interests of any Person controlled by another Person, no ownership
interest in the nature of a “qualifying share” of the former Person shall be
deemed to be outstanding.

“Sum” as defined in Section 10.4(b).

“Swiss Guarantor” means each Guarantor incorporated in Switzerland.

“Swiss Obligee Guarantor” as defined in Section 7.14(c).

“TARGET” means Trans-European Automated Real-Time Gross Settlement Express
Transfer payment system.

“TARGET Day” means a day in which TARGET is open for the settlement of payments
in Euro.

“Tax” means any present or future tax, levy, impost, duty, assessment, charge,
fee, deduction or withholding of any nature and whatever called, by whomsoever,
on whomsoever and wherever imposed, levied, collected, withheld or assessed,
whether disputed or not, including any interest, penalties or additions thereto
and any installments in respect thereof; provided, “Tax on the overall net
income” of a Person shall be construed as a reference to a Tax imposed by the
jurisdiction in which that Person is organized or in which that Person’s
applicable principal office (and/or, in the case of a Bank, its lending office)
is located or in which that Person (and/or, in the case of a Bank, its lending
office) is deemed to be doing business on all or part of the net income,
profits, or gains (whether worldwide, or only insofar as such income, profits,
or gains are considered to arise in or to relate to a particular jurisdiction,
or otherwise) of that Person (and/or, in the case of a Bank, its applicable
lending office).

“Tax Confirmation” means a confirmation by a Bank that it is an 840A Bank.

“Tax Credit” means a credit against, relief or remission for or repayment of
any Tax.

“Terminated Bank” as defined in Section 2.24.

“Total Utilization of Tranche 1 Revolving Commitments” means, as at any date of
determination, the sum of (i) the aggregate principal Base Currency Amount of
all outstanding Tranche 1 Revolving Loans (other than Tranche 1 Revolving Loans
made for the purpose of reimbursing Issuing Bank for any amount drawn under any
Letter of Credit, but not yet so applied) and (ii) the Letter of Credit Usage.

“Tranche 1 Revolving Commitment” means the commitment of a Bank to make or
otherwise fund any Tranche 1 Revolving Loan and to acquire participations in
Letters of Credit hereunder and “Tranche 1 Revolving Commitments” means such
commitments of all Banks in the aggregate. The Base Currency Amount of each
Bank’s Tranche 1 Revolving Commitment, if any, is set forth on Appendix A-8 or
in the applicable Assignment Agreement subject to any adjustment or reduction
pursuant to the terms and conditions hereof. The aggregate Base Currency Amount
of the Tranche 1 Revolving Commitments is $50,000,000.

 

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“Tranche 1 Revolving Commitment Period” means the period from the Closing Date
to but excluding the Tranche 1 Revolving Commitment Termination Date.

“Tranche 1 Revolving Commitment Termination Date” means the earliest to occur of
(i) May 21, 2005, if the B Term Loans are not made on or before that date,
(ii) the date that is six and one half years after the Closing Date, (iii) the
date the Tranche 1 Revolving Commitments are permanently reduced to zero
pursuant to Section 2.13(b) or 2.14, and (iv) the date of the termination of the
Tranche 1 Revolving Commitments pursuant to Section 8.1.

“Tranche 1 Revolving Exposure” means, with respect to any Bank as of any date of
determination, (i) prior to the termination of the Tranche 1 Revolving
Commitments, that Bank’s Tranche 1 Revolving Commitment; and (ii) after the
termination of the Tranche 1 Revolving Commitments, the sum of (a) the aggregate
outstanding principal amount of the Tranche 1 Revolving Loans of that Bank,
(b) in the case of Issuing Bank, the aggregate Letter of Credit Usage in respect
of all Letters of Credit issued by that Bank (net of any participations by Banks
in such Letters of Credit), and (c) the aggregate amount of all participations
by that Bank in any outstanding Letters of Credit or any unreimbursed drawing
under any Letter of Credit.

“Tranche 1 Revolving Loan” means a Loan made by a Bank to a Borrower pursuant to
Section 2.2(a)(i).

“Tranche 2 Revolving Loan” means a Loan made by a Bank to a Borrower pursuant to
Section 2.2(a)(ii) of the Existing Credit Agreement.

“Treaty Lender” means a Bank which at the time the payment is made is
beneficially entitled to all amounts payable to it under the Credit Documents
and is entitled pursuant to the interpretation of the taxation authorities of
the jurisdiction from which the payment is made or deemed to be made under a
double taxation agreement in force at that date (subject only to the completion
of any necessary formalities or administrative procedures, (including, without
limitation, the matters referred to in Section 2.20(e)) to receive any payments
of interest under the Credit Documents without deduction or withholding for or
on account of Tax.

“Type of Loan” means with respect to either B Term Loans or Revolving Loans, a
LIBOR Loan, Euribor Loan or BA Loan.

“UCC” means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.

“Underwriting Agreement” means that certain Underwriting Agreement dated May 16,
2005 among Xerium, Citigroup Global Markets, Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and CIBC World Markets Corp, as representatives of
the several underwriters.

“Unpaid Sum” means any sum due and payable but unpaid by a Credit Party under
the Credit Documents.

“US Aggregate Payments” as defined in 7.2(b).

“US Credit Party” means Xerium, XTI, and each US Guarantor.

 

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“US Contributing Guarantors” as defined in 7.2(b).

“US Funding Guarantor” as defined in Section 7.2(b).

“US Fair Share” as defined in 7.2(b).

“US Fair Share Contribution Amount” as defined in 7.2(b).

“US Guarantor” means (i) each Guarantor listed in Schedule 1.1(c) as a US
Guarantor and (ii) each other Domestic Subsidiary that becomes a party to the
Guaranty.

“VAT” means value added tax, goods and services tax and any similar sales or
turnover tax.

“Waivable Mandatory Prepayment” as defined in Section 2.15(c).

“Xerium” as defined in the preamble hereto.

“Xerium B Term Loan” means a Xerium B Term Loan made by a Bank to Xerium
pursuant to Section 2.1(a)(i).

“Xerium B Term Loan Commitment” means the commitment of a Bank to make or
otherwise fund a Xerium B Term Loan and “Xerium B Term Loan Commitments” means
such commitments of all Banks in the aggregate. The amount of each Bank’s Xerium
B Term Loan Commitment, if any, is set forth on Appendix A-1 or in the
applicable Assignment Agreement, subject to any adjustment or reduction pursuant
to the terms and conditions hereof. The aggregate amount of the Xerium B Term
Loan Commitments as of the Closing Date is set forth on Appendix A-1.

“Xerium B Term Loan Exposure” means, with respect to any Bank, as of any date of
determination, the outstanding principal amount of the Xerium B Term Loans of
such Bank; provided, at any time prior to the making of the Xerium B Term Loans,
the Xerium B Term Loan Exposure of any Bank shall be equal to such Bank’s Xerium
B Term Loan Commitment.

“Xerium B Term Loan Maturity Date” means the earlier of (i) the date that is
seven years after the Closing Date, and (ii) the date that all Xerium B Term
Loans shall become due and payable in full hereunder, whether by acceleration or
otherwise.

“Xerium Canada SW B Term Loan” means a Xerium Canada SW B Term Loan made by a
Bank to Stowe-Woodward/Mount Hope Inc. pursuant to Section 2.1(a)(iv).

“Xerium Canada Wxx B Term Loan” means a Xerium Canada Wxx B Term Loan made by a
Bank to Weavexx Corporation pursuant to Section 2.1(a)(v).

“Xerium Canada SW B Term Loan Commitment” means the commitment of a Bank to make
or otherwise fund a Xerium Canada SW B Term Loan and “Xerium Canada SW B Term
Loan Commitments” means such commitments of all Banks in the aggregate. The
amount in Base Currency of each Bank’s Xerium Canada SW B Term Loan Commitment,
if any, is set forth on

 

36

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Appendix A-4 or in the applicable Assignment Agreement, subject to any
adjustment or reduction pursuant to the terms and conditions hereof. The
aggregate amount in Base Currency of the Xerium Canada SW B Term Loan
Commitments as of the Closing Date is set forth on Appendix A-4.

“Xerium Canada Wxx B Term Loan Commitment” means the commitment of a Bank to
make or otherwise fund a Xerium Canada Wxx B Term Loan and “Xerium Canada Wxx B
Term Loan Commitments” means such commitments of all Banks in the aggregate. The
amount in Base Currency of each Bank’s Xerium Canada Wxx B Term Loan Commitment,
if any, is set forth on Appendix A-5 or in the applicable Assignment Agreement,
subject to any adjustment or reduction pursuant to the terms and conditions
hereof. The aggregate amount in Base Currency of the Xerium Canada Wxx B Term
Loan Commitments as of the Closing Date is set forth on Appendix A-5.

“Xerium Canada SW B Term Loan Exposure” means, with respect to any Bank, as of
any date of determination, the outstanding principal amount in Base Currency of
the Xerium Canada SW B Term Loans of such Bank; provided, at any time prior to
the making of the Xerium Canada SW B Term Loans, the Xerium Canada SW B Term
Loan Exposure of any Bank shall be equal to such Bank’s Xerium Canada SW B Term
Loan Commitment.

“Xerium Canada Wxx B Term Loan Exposure” means, with respect to any Bank, as of
any date of determination, the outstanding principal amount in Base Currency of
the Xerium Canada Wxx B Term Loans of such Bank; provided, at any time prior to
the making of the Xerium Canada Wxx B Term Loans, the Xerium Canada Wxx B Term
Loan Exposure of any Bank shall be equal to such Bank’s Xerium Canada Wxx B Term
Loan Commitment.

“Xerium Canada SW B Term Loan Maturity Date” means the earlier of (i) the
seventh anniversary of the Closing Date, and (ii) the date that all Xerium
Canada SW B Term Loans shall become due and payable in full hereunder, whether
by acceleration or otherwise.

“Xerium Canada Wxx B Term Loan Maturity Date” means the earlier of (i) the
seventh anniversary of the Closing Date, and (ii) the date that all Xerium
Canada Wxx B Term Loans shall become due and payable in full hereunder, whether
by acceleration or otherwise.

“XTI” as defined in the preamble hereto.

“XTI B Term Loan” means an XTI B Term Loan made by a Bank to XTI pursuant to
Section 2.1(a)(ii).

“XTI B Term Loan Commitment” means the commitment of a Bank to make or otherwise
fund an XTI B Term Loan and “XTI B Term Loan Commitments” means such commitments
of all Banks in the aggregate. The amount of each Bank’s XTI B Term Loan
Commitment, if any, is set forth on Appendix A-2 or in the applicable Assignment
Agreement, subject to any adjustment or reduction pursuant to the terms and
conditions hereof. The aggregate amount of the XTI B Term Loan Commitments as of
the Closing Date is set forth on Appendix A-2.

 

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“XTI B Term Loan Exposure” means, with respect to any Bank, as of any date of
determination, the outstanding principal amount of the XTI B Term Loans of such
Bank; provided, at any time prior to the making of the XTI B Term Loans, the XTI
B Term Loan Exposure of any Bank shall be equal to such Bank’s XTI B Term Loan
Commitment.

“XTI B Term Loan Maturity Date” means the earlier of (i) the date that is seven
years after the Closing Date, and (ii) the date that all XTI B Term Loans shall
become due and payable in full hereunder, whether by acceleration or otherwise.

“840A Bank” means a Bank falling within paragraph (a) or (b) of the definition
of Qualifying Lender.

1.2 Accounting Terms. Except as otherwise expressly provided herein, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by Xerium to Banks pursuant to Section 5.1(b) and
5.1(c) shall be prepared in accordance with GAAP as in effect at the time of
such preparation. Notwithstanding the foregoing, calculations in connection with
the definitions, covenants and other provisions hereof shall utilize accounting
principles and policies in conformity with those used to prepare the Historical
Financial Statements for the Fiscal Year ended December 31, 2004 only.

Any of the terms defined herein may, unless the context otherwise requires, be
used in the singular or the plural, depending on the reference. References
herein to any Section, Appendix, Schedule or Exhibit shall be to a Section, an
Appendix, a Schedule or an Exhibit, as the case may be, hereof unless otherwise
specifically provided. The use herein of the word “include” or “including”, when
following any general statement, term or matter, shall not be construed to limit
such statement, term or matter to the specific items or matters set forth
immediately following such word or to similar items or matters, whether or not
limiting language (such as “without limitation” or “but not limited to” or words
of similar import) is used with reference thereto, but rather shall be deemed to
refer to all other items or matters that fall within the broadest possible scope
of such general statement, term or matter.

SECTION 2. LOANS AND LETTERS OF CREDIT

2.1 B Term Loans Loan Commitments. Subject to the terms and conditions hereof,

(i) each Bank made, on the Closing Date, a Xerium B Term Loan to Xerium in
Dollars in an amount equal to such Bank’s Xerium B Term Loan Commitment on such
date;

(ii) each Bank made, on the Closing Date, an XTI B Term Loan to XTI in Euros in
an amount equal to such Bank’s XTI B Term Loan Commitment on such date;

 

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(iii) each Bank made, on the Closing Date, an Italia B Term Loan to Italia SpA
in EUROS in an amount equal to such Bank’s Italia B Term Loan Commitment on such
date;

(iv) each Bank made, on the Closing Date, a Xerium Canada SW B Term Loan to
Stowe-Woodward/Mount Hope, Inc. in Canadian Dollars in an amount equal to such
Bank’s Xerium Canada SW B Term Loan Commitment on such date;

(v) each Bank made, on the Closing Date, a Xerium Canada Wxx B Term Loan to
Weavexx Corporation in Canadian Dollars in an amount equal to such Bank’s Xerium
Canada Wxx B Term Loan Commitment on such date;

(vi) each Bank made, on the Closing Date, an Austria B Term Loan to Huyck
Austria in EUROS in an amount equal to such Bank’s Austria B Term Loan
Commitment on such date; and

(vii) each Bank made, on the Closing Date, a German B Term Loan to Germany
Holdings in EUROS in an amount equal to such Bank’s German B Term Loan
Commitment on such date.

Any amount borrowed under this Section 2.1(a) and subsequently repaid or prepaid
may not be reborrowed. Subject to Sections 2.13(a) and 2.14, all amounts owed
hereunder with respect to the Xerium B Term Loans, XTI B Term Loans, Italia B
Term Loans, Xerium Canada SW B Term Loans, Xerium Canada Wxx B Term Loans,
Austria B Term Loans and German B Term Loans shall be paid in full no later than
the Xerium B Term Loan Maturity Date, XTI B Term Loan Maturity Date, Italia B
Term Loan Maturity Date, Xerium Canada SW B Term Loan Maturity Date, Xerium
Canada Wxx B Term Loan Maturity Date, Austria B Term Loan Maturity Date and
German B Term Loan Maturity Date, respectively. Each Bank’s Xerium B Term Loan
Commitment, XTI B Term Loan Commitment, Italia B Term Loan Commitment, Xerium
Canada SW B Term Loan Commitment, Xerium Canada Wxx B Term Loan Commitment,
Austria B Term Loan Commitment and German B Term Loan Commitment terminated on
the Closing Date after giving effect to the funding of such Bank’s Xerium B Term
Loan Commitment, XTI B Term Loan Commitment, Italia B Term Loan Commitment,
Xerium Canada SW B Term Loan Commitment, Xerium Canada Wxx B Term Loan
Commitment, Austria B Term Loan Commitment and German B Term Loan Commitment on
such date.

(b) [Intentionally Omitted].

2.2 Revolving Loans

(a) Revolving Commitments.

(i) During the Tranche 1 Revolving Commitment Period, subject to the terms and
conditions hereof, each Bank severally agrees to make Tranche 1 Revolving Loans
to each of Xerium, XTI, Xerium Canada in an aggregate amount up to but not
exceeding such Bank’s Tranche 1 Revolving Commitment; provided, that after
giving effect to the making of

 

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any Revolving Loans in no event shall the Total Utilization of Tranche 1
Revolving Commitments exceed the Tranche 1 Revolving Commitments then in effect;
and provided, further, that for a period of at least 30 consecutive days during
each Fiscal Year, commencing with the Fiscal Year ended December 31, 2005, the
outstanding principal amount of Tranche 1 Revolving Loans (other than the
aggregate amount available for drawing under all Letters of Credit then
outstanding) shall be no more than $20,000,000.

(ii) [Intentionally Omitted].

(b) Borrowing Mechanics for Revolving Loans.

(i) Except pursuant to Section 2.4(d), Revolving Loans that are LIBOR Loans,
Euribor Loans or BA Loans shall be in an aggregate minimum Base Currency Amount
of $5,000,000 and integral multiples of $1,000,000 in excess of that amount.

(ii) Whenever a Borrower desires that Banks make Revolving Loans, such Borrower
shall deliver to Administrative Agent a fully executed and delivered Funding
Notice no later than 9:30 a.m. (New York City time) at least three Business Days
in advance of the proposed Credit Date in the case of a LIBOR Loan, a Euribor
Loan or a BA Loan. Except as otherwise provided herein, a Funding Notice for a
Revolving Loan that is a LIBOR Loan or a Euribor Loan shall be irrevocable on
and after the related Interest Rate Determination Date, and such Borrower shall
be bound to make a borrowing in accordance therewith.

(iii) Notice of receipt of each Funding Notice in respect of Revolving Loans,
together with the amount of each Bank’s Pro Rata Share thereof, if any, together
with the applicable interest rate, shall be provided by Administrative Agent to
each applicable Bank by telefacsimile with reasonable promptness, but (provided
Administrative Agent shall have received such notice by 9:30 a.m. (New York City
time)) not later than 3:00 p.m. (New York City time) on the same day as
Administrative Agent’s receipt of such Notice from the applicable Borrower. In
addition, the Administrative Agent shall determine the Base Currency Amount of
each Revolving Loan which is to be made in an Optional Currency and notify each
Bank of the amount, currency and the Base Currency Amount of each Loan.

(iv) Each Bank shall make the amount of its Revolving Loan available to
Administrative Agent not later than 12:00 p.m. (New York City time) on the
applicable Credit Date by wire transfer of same day funds in Base Currency (or
the Optional Currency if requested), at Administrative Agent’s Principal Office.
Except as provided herein, upon satisfaction or waiver of the conditions
precedent specified herein, Administrative Agent shall make the proceeds of such
Revolving Loans available to the applicable Borrower on the applicable Credit
Date by causing an amount of same day funds in Base Currency (or the Optional
Currency if requested) equal to the proceeds of all such Revolving Loans
received

 

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by Administrative Agent from Banks to be credited to the account of such
Borrower at Administrative Agent’s Principal Office or such other account as may
be reasonably designated in writing no later than 3 days before to
Administrative Agent by such Borrower.

2.3 [Intentionally Omitted.]

2.4 Issuance of Letters of Credit and Purchase of Participations Therein.

(a) [Intentionally Omitted.]

(b) Letters of Credit. During the Revolving Commitment Period, subject to the
terms and conditions hereof, Issuing Bank agrees to issue Letters of Credit for
the account of each Borrower in the aggregate Base Currency Amount up to but not
exceeding the Letter of Credit Sublimit; provided, (i) each Letter of Credit
shall be denominated in Base Currency (or the Optional Currency if requested);
(ii) the stated amount of each Letter of Credit shall not be less than a Base
Currency Amount of $500,000 or such lesser amount as is acceptable to Issuing
Bank; (iii) after giving effect to such issuance, in no event shall the Total
Utilization of Tranche 1 Revolving Commitments exceed the Tranche 1 Revolving
Commitments then in effect; (iv) after giving effect to such issuance, in no
event shall the Letter of Credit Usage exceed the Letter of Credit Sublimit then
in effect; (v) in no event shall any standby Letter of Credit have an expiration
date later than the earlier of (1) the Tranche 1 Revolving Commitment
Termination Date and (2) the date which is one year from the date of issuance of
such standby Letter of Credit; (vi) in no event shall any commercial Letter of
Credit have an expiration date later than the earlier of (1) the Tranche 1
Revolving Commitment Termination Date and (2) the date which is 180 days from
the date of issuance of such commercial Letter of Credit; and (vii) in no event
shall a commercial Letter of Credit be issued if such commercial Letter of
Credit is not substantially in the form of Exhibit M or otherwise acceptable to
Issuing Bank in its reasonable discretion. Subject to the foregoing, Issuing
Bank may agree that a standby Letter of Credit will automatically be extended
for one or more successive periods not to exceed one year each, unless Issuing
Bank elects not to extend for any such additional period; provided, Issuing Bank
shall not extend any such Letter of Credit if it has received written notice
from the Administrative Agent, acting on behalf of the Requisite Banks, that an
Event of Default has occurred and is continuing; provided, further, in the event
(x) a Funding Default exists or (y) a determination pursuant to Section 2.18 or
2.19 occurs, Issuing Bank shall not be required to issue any Letter of Credit
unless Issuing Bank has entered into arrangements satisfactory to it and each
Borrower to eliminate Issuing Bank’s risk with respect to the participation in
Letters of Credit of the Defaulting Bank, including by cash collateralizing such
Defaulting Bank’s Pro Rata Share of the Letter of Credit Usage.

(c) Notice of Issuance. Whenever a Borrower desires the issuance of a Letter of
Credit, it shall deliver to Administrative Agent an Issuance Notice no later
than 9:30 a.m. (New York City time) at least three Business Days (in the case of
standby letters of credit) or five Business Days (in the case of commercial
letters of credit), or in each case such shorter

 

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period as may be agreed to by Issuing Bank in any particular instance, in
advance of the proposed date of issuance. Upon satisfaction or waiver of the
conditions set forth in Section 3.2, Issuing Bank shall issue the requested
Letter of Credit only in accordance with Issuing Bank’s standard operating
procedures. The Agent shall determine the Base Currency Amount of each Letter of
Credit which is to be issued in an Optional Currency. Upon the issuance of any
Letter of Credit or amendment or modification to a Letter of Credit, Issuing
Bank shall promptly notify each Bank of such issuance, which notice shall be
accompanied by a copy of such Letter of Credit or amendment or modification to a
Letter of Credit and the amount of such Bank’s respective participation in such
Letter of Credit pursuant to Section 2.4(f).

(d) Responsibility of Issuing Bank With Respect to Requests for Drawings and
Payments. In determining whether to honor any drawing under any Letter of Credit
by the beneficiary thereof, Issuing Bank shall be responsible only to examine
the documents delivered under such Letter of Credit with reasonable care so as
to ascertain whether they appear on their face to be in accordance with the
terms and conditions of such Letter of Credit. As between each Borrower and
Issuing Bank, each Borrower assumes all risks of the acts and omissions of, or
misuse of, the Letters of Credit issued by Issuing Bank by the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the foregoing, Issuing Bank shall not be responsible for: (i) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
any such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or (viii) any consequences arising from causes beyond the
control of Issuing Bank, including any Governmental Acts; none of the above
shall affect or impair, or prevent the vesting of, any of Issuing Bank’s rights
or powers hereunder. Without limiting the foregoing and in furtherance thereof,
any action taken or omitted by Issuing Bank under or in connection with the
Letters of Credit or any documents and certificates delivered thereunder, if
taken or omitted in good faith, shall not give rise to any liability on the part
of Issuing Bank to any Borrower. Notwithstanding anything to the contrary
contained in this Section 2.4(d), each Borrower shall retain any and all rights
it may have against Issuing Bank for any liability arising solely out of the
gross negligence or willful misconduct of Issuing Bank.

(e) Reimbursement by a Borrower of Amounts Drawn or Paid Under Letters of
Credit. In the event Issuing Bank has determined to honor a drawing under a
Letter of Credit, it shall immediately notify the applicable Borrower and
Administrative

 

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Agent, and such Borrower shall reimburse Issuing Bank on or before the Business
Day immediately following the date on which such drawing is honored (the
“Reimbursement Date”) in the same amount and currency as the Issuing Bank
honored and in same day funds equal to the amount of such honored drawing;
provided, anything contained herein to the contrary notwithstanding, (i) unless
such Borrower shall have notified Administrative Agent and Issuing Bank prior to
9:30 a.m. (New York City time) on the date three (3) Business Days prior to the
date such drawing is honored that such Borrower intends to reimburse Issuing
Bank for the amount of such honored drawing with funds other than the proceeds
of Tranche 1 Revolving Loans, such Borrower shall be deemed to have given a
timely Funding Notice to Administrative Agent requesting Banks to make Tranche 1
Revolving Loans that are LIBOR Loans or BA Loans on the Reimbursement Date in
the same amount and currency of such honored drawing, and (ii) subject to
satisfaction or waiver of the conditions specified in Section 3.2, Banks having
a Tranche 1 Revolving Commitment shall, on the Reimbursement Date, make
Revolving Loans that are LIBOR Loans or BA Loans, as applicable, in the amount
of such honored drawing, the proceeds of which shall be applied directly by
Administrative Agent to reimburse Issuing Bank for the amount of such honored
drawing; and provided further, if for any reason proceeds of Tranche 1 Revolving
Loans are not received by Issuing Bank on the Reimbursement Date in an amount
equal to the amount of such honored drawing, such Borrower shall reimburse
Issuing Bank, on demand, in an amount in same day funds equal to the excess of
the amount of such honored drawing over the aggregate amount of such Tranche 1
Revolving Loans, if any, which are so received. Nothing in this Section 2.4(e)
shall be deemed to relieve any Bank from its obligation to make Tranche 1
Revolving Loans on the terms and conditions set forth herein, and each Borrower
shall retain any and all rights it may have against any Bank resulting from the
failure of such Bank to make such Tranche 1 Revolving Loans under this
Section 2.4(e).

(f) Banks’ Purchase of Participations in Letters of Credit. Immediately upon the
issuance of each Letter of Credit, each Bank having a Tranche 1 Revolving
Commitment shall be deemed to have purchased, and hereby agrees to irrevocably
purchase, from Issuing Bank a participation in such Letter of Credit and any
drawings honored thereunder in an amount equal to such Bank’s Pro Rata Share
(with respect to the Tranche 1 Revolving Commitments) of the maximum amount
which is or at any time may become available to be drawn thereunder. In the
event that a Borrower shall fail for any reason to reimburse Issuing Bank as
provided in Section 2.4(e), Issuing Bank shall promptly notify each Bank of the
unreimbursed amount of such honored drawing and of such Bank’s respective
participation therein based on such Bank’s Pro Rata Share of the Tranche 1
Revolving Commitments. Each Bank shall make available to Issuing Bank an amount
equal to the Base Currency Amount of its respective participation, in same day
funds, at the office of Issuing Bank specified in such notice, not later than
12:00 p.m. (New York City time) on the first business day (under the laws of the
jurisdiction in which such office of Issuing Bank is located) after the date
notified by Issuing Bank. In the event that any Bank fails to make available to
Issuing Bank on such business day the amount of such Bank’s participation in
such Letter of Credit as provided in this Section 2.4(f), Issuing Bank shall be
entitled to recover such amount on demand from such Bank together with interest
thereon for three Business Days at the rate customarily used by

 

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Issuing Bank for the correction of errors among banks and thereafter at the
LIBOR Rate or Euribor Rate, as applicable. Nothing in this Section 2.4(f) shall
be deemed to prejudice the right of any Bank to recover from Issuing Bank any
amounts made available by such Bank to Issuing Bank pursuant to this Section in
the event that it is determined that the payment with respect to a Letter of
Credit in respect of which payment was made by such Bank constituted gross
negligence or willful misconduct on the part of Issuing Bank. In the event
Issuing Bank shall have been reimbursed by other Banks pursuant to this
Section 2.4(f) for all or any portion of any drawing honored by Issuing Bank
under a Letter of Credit, such Issuing Bank shall distribute to each Bank which
has paid all amounts payable by it under this Section 2.4(f) with respect to
such honored drawing such Bank’s Pro Rata Share of all payments subsequently
received by Issuing Bank from such Borrower in reimbursement of such honored
drawing when such payments are received. Any such distribution shall be made to
a Bank at its primary address set forth below its name on Appendix B or at such
other address as such Bank may request.

(g) Obligations Absolute. The obligation of each Borrower to reimburse Issuing
Bank for drawings honored under the Letters of Credit issued by it and to repay
any Tranche 1 Revolving Loans made by Banks pursuant to Section 2.4(e) and the
obligations of Banks under Section 2.4(f) shall be unconditional and irrevocable
and shall be paid strictly in accordance with the terms hereof under all
circumstances including any of the following circumstances: (i) any lack of
validity or enforceability of any Letter of Credit; (ii) the existence of any
claim, set off, defense or other right which any Borrower or any Bank may have
at any time against a beneficiary or any transferee of any Letter of Credit (or
any Persons for whom any such transferee may be acting), Issuing Bank, Bank or
any other Person or, in the case of a Bank, against any Borrower, whether in
connection herewith, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between such Borrower or one
of its Subsidiaries and the beneficiary for which any Letter of Credit was
procured); (iii) any draft or other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect; (iv) payment
by Issuing Bank under any Letter of Credit against presentation of a draft or
other document which does not substantially comply with the terms of such Letter
of Credit; (v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Xerium or any of its
Subsidiaries; (vi) any breach hereof or any other Credit Document by any party
thereto; (vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing; or (viii) the fact that an Event of Default or
a Default shall have occurred and be continuing; provided, in each case, that
payment by Issuing Bank under the applicable Letter of Credit shall not have
constituted gross negligence or willful misconduct of Issuing Bank under the
circumstances in question.

(h) Indemnification. Without duplication of any obligation of each Borrower
under Section 10.2, 10.3 or 10.4, in addition to amounts payable as provided
herein, each Borrower hereby agrees to protect, indemnify, pay and save harmless
Issuing Bank from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable fees, expenses and
disbursements of counsel and allocated costs of internal counsel) which Issuing
Bank may incur

 

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or be subject to as a consequence, direct or indirect, of (i) the issuance of
any Letter of Credit by Issuing Bank, other than as a result of (1) the gross
negligence or willful misconduct of Issuing Bank or (2) the wrongful dishonor by
Issuing Bank of a proper demand for payment made under any Letter of Credit
issued by it, or (ii) the failure of Issuing Bank to honor a drawing under any
such Letter of Credit as a result of any Governmental Act.

(i) Revaluation of Letters of Credit. (i) If any Letters of Credit are
denominated in an Optional Currency, the Administrative Agent shall, at the end
of each Fiscal Quarter, recalculate the Base Currency Amount of each Letter of
Credit by notionally converting into the Base Currency the outstanding amount of
that Letter of Credit on the basis of the Agent’s Spot Rate of Exchange on the
date of calculation.

(ii) Xerium shall, if requested by the Administrative Agent within two
(2) Business Days of any calculation under paragraph (i) above, ensure that
within three Business Days sufficient Revolving Loan Credit Extensions are
prepaid to prevent the Base Currency Amount of the aggregate Revolving Exposure
from exceeding the Tranche 1 Revolving Commitments following any adjustment to a
Base Currency Amount under paragraph (i) of this Section 2.4(i).

2.5 Pro Rata Shares; Availability of Funds.

(a) Pro Rata Shares. All Loans shall be made, and all participations purchased,
by Banks simultaneously and proportionately to their respective Pro Rata Shares,
it being understood that no Bank shall be responsible for any default by any
other Bank in such other Bank’s obligation to make a Loan requested hereunder or
purchase a participation required hereby nor shall any B Term Loan Commitment or
any Revolving Commitment of any Bank be increased or decreased as a result of a
default by any other Bank in such other Bank’s obligation to make a Loan
requested hereunder or purchase a participation required hereby.

(b) Availability of Funds. Unless Administrative Agent shall have been notified
by any Bank prior to the applicable Credit Date that such Bank does not intend
to make available to Administrative Agent the amount of such Bank’s Loan
requested on such Credit Date, Administrative Agent may assume that such Bank
has made such amount available to Administrative Agent on such Credit Date and
Administrative Agent may, in its sole discretion, but shall not be obligated to,
make available to each Borrower a corresponding amount on such Credit Date. If
such corresponding amount is not in fact made available to Administrative Agent
by such Bank, Administrative Agent shall be entitled to recover the
corresponding Base Currency Amount on demand from such Bank together with
interest thereon, for each day from such Credit Date until the date such amount
is paid to Administrative Agent, at the customary rate set by Administrative
Agent for the correction of errors among banks for three Business Days and
thereafter at the LIBOR Rate or Euribor Rate, as applicable. If such Bank does
not pay such corresponding amount forthwith upon Administrative Agent’s demand
therefor, Administrative Agent shall promptly notify the applicable Borrower and
the applicable Borrower shall immediately pay such corresponding Base Currency
Amount

 

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to Administrative Agent together with interest thereon, for each day from such
Credit Date until the date such amount is paid to Administrative Agent, at the
rate payable hereunder for LIBOR Rate Loans or Euribor Loans, as applicable, for
such Class of Loans. Nothing in this Section 2.5(b) shall be deemed to relieve
any Bank from its obligation to fulfill its B Term Loan Commitments and
Revolving Commitments hereunder or to prejudice any rights that any Borrower may
have against any Bank as a result of any default by such Bank hereunder.

2.6 Use of Proceeds. The proceeds of the B Term Loans made on the Closing Date
shall be applied by each Borrower to fund the Refinancing and to pay fees and
expenses in connection with the Transaction. On the Closing Date, the Tranche 1
Revolving Loans shall be available only for the issuance of Letters of Credit.
The proceeds of the Tranche 1 Revolving Loans and Letters of Credit made after
the Closing Date shall be applied by each Borrower for working capital and
general corporate purposes of Xerium and its Subsidiaries; provided, that no
proceeds of the Revolving Loans shall be utilized to pay amounts owing
immediately prior to the Closing Date to effect the Refinancing or to pay any
fees and expenses incurred in connection with the Transaction, and, that in no
event will the proceeds of Revolving Loans be used for the purposes of
repurchasing Loans as permitted under Section 2.13 hereof. No portion of the
proceeds of any Credit Extension shall be used in any manner that causes or
might cause such Credit Extension or the application of such proceeds to violate
Regulation T, Regulation U or Regulation X of the Board of Governors of the
Federal Reserve System or any other regulation thereof or to violate the
Exchange Act.

2.7 Evidence of Debt; Register; Banks’ Books and Records; Promissory Notes.

(a) Banks’ Evidence of Debt. Each Bank may maintain on its internal records an
account or accounts evidencing the Obligations of each Borrower to such Bank,
including the amounts of the Loans made by it and each repayment and prepayment
in respect thereof. Any such recordation shall be conclusive and binding on such
Borrower, absent manifest error; provided, that the failure to make any such
recordation, or any error in such recordation, shall not affect any Bank’s
Revolving Commitments or such Borrower’s Obligations in respect of any
applicable Loans; and provided further, in the event of any inconsistency
between the Register and any Bank’s records, the recordations in the Register
shall govern.

(b) Register. Administrative Agent may maintain at its Principal Office a
register for the recordation of the names and addresses of Banks and the
Revolving Commitments and Loans of each Bank from time to time (the “Register”).
Administrative Agent may record in the Register the Revolving Commitments and
the Loans, and each repayment or prepayment in respect of the principal amount
of the Loans, and any such recordation shall be conclusive and binding on such
Borrower and each Bank, absent manifest error; provided, failure to make any
such recordation, or any error in such recordation, shall not affect any Bank’s
Revolving Commitments or such Borrower’s Obligations in respect of any Loan.
Each Borrower hereby designates the Administrative Agent to serve as each
Borrower’s agent solely for purposes of maintaining the Register as provided in
this Section 2.7, and each Borrower hereby agrees that, to the extent the
Administrative Agent serves in such capacity, the Administrative Agent and its
officers, directors, employees, agents and affiliates shall constitute
“Indemnitees.”

 

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(c) Notes. If so requested by any Bank by written notice to Xerium (with a copy
to Administrative Agent) at least two Business Days prior to the Closing Date,
or at any time thereafter, each Borrower shall execute and deliver to such Bank
(and/or, if applicable and if so specified in such notice, to any Person who is
an assignee of such Bank pursuant to Section 10.7) on the Closing Date (or, if
such notice is delivered after the Closing Date, promptly after Company’s
receipt of such notice) a promissory note or promissory notes, in a form
reasonably acceptable to the Administrative Agent and Xerium, to evidence such
Bank’s B Term Loans or Revolving Loans, as the case may be.

2.8 Interest on Loans.

(a) Except as otherwise set forth herein, each Class of Loan shall bear interest
on the unpaid principal amount thereof from the date made through repayment
(whether by acceleration or otherwise) thereof as follows:

(i) in the case of Xerium Canada SW B Term Loans and Xerium Canada Wxx B Term
Loans at the BA Rate plus Applicable Margin;

(ii) in the case of Xerium B Term Loans at the LIBOR Rate plus the Applicable
Margin; or

(iii) in the case of Xerium B Loans, XTI B Term Loans, Italia B Term Loans,
Austria B Term Loans and German B Term Loans, if a Euribor Loan at the Euribor
Rate plus the Applicable Margin;

(iv) in the case of Revolving Loans:

(1) if a LIBOR Loan, at the LIBOR Rate plus the Applicable Margin;

(2) if a Euribor Loan, at the Euribor Rate plus the Applicable Margin; or

(3) if a BA Loan, at the BA Rate plus the Applicable Margin.

(b) The basis for determining the rate of interest with respect to any Loan, and
the Interest Period with respect to any LIBOR Loan, Euribor Loan or BA Loan,
shall be selected by each Borrower and notified to Administrative Agent and
Banks pursuant to the applicable Funding Notice or Continuation Notice, as the
case may be; provided, until the date that the Lead Arranger notifies Xerium
that the primary syndication of the Loans and Revolving Commitments has been
completed, as determined by the Lead Arranger, in its sole discretion, the B
Term Loans shall be maintained as LIBOR Loans, Euribor Loans or BA Loans having
an Interest Period of no longer than one month.

 

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(c) In connection with LIBOR Loans, Euribor Loans and BA Loans there shall be no
more than fifteen (15) Interest Periods in the aggregate outstanding at any
time. In the event a Borrower fails to specify an Interest Period for any LIBOR
Loan, Euribor Loan or BA Loan in the applicable Funding Notice or Continuation
Notice, such Borrower shall be deemed to have selected an Interest Period of one
month. As soon as practicable after 11:00 a.m. (London time) on each Interest
Rate Determination Date, Administrative Agent shall determine (which
determination shall, absent manifest error, be final, conclusive and binding
upon all parties) the interest rate that shall apply to the LIBOR Loans, the
Euribor Loans or the BA Loans, as the case may be, for which an interest rate is
then being determined for the applicable Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to each
Borrower and each Bank.

(d) Interest payable pursuant to Section 2.8(a) and any other interest,
commission or fee accruing under a Credit Document (other than interest payable
pursuant to Section 2.8(f)) will accrue from day to day and is calculated on the
basis of the actual number of days elapsed and a year of 360 days or, in any
case where the practice in the Relevant Interbank Market differs, in accordance
with that market practice. For the purposes of the Interest Act (Canada) and
disclosure thereunder, whenever any interest or any fee to be paid under a
Credit Document or in connection therewith is to be calculated on the basis of
any period of time that is less than a calendar year, the yearly rate of
interest to which the rate used in such calculation is equivalent is the rate so
used multiplied by the actual number of days in the calendar year in which the
same is to be ascertained and divided by 360 or 365 days, as applicable to such
interest or fee pursuant to such Credit Document. The rates of interest
hereunder are nominal rates, and not effective rates or yields. The principle of
deemed reinvestment of interest does not apply to any interest calculation
hereunder.

(e) Except as otherwise set forth herein, interest on each Loan shall be payable
in arrears on and to (i) each Interest Payment Date applicable to that Loan;
(ii) upon any prepayment of that Loan, whether voluntary or mandatory, to the
extent accrued on the amount being prepaid; and (iii) at maturity, including
final maturity.

(f) Each Borrower agrees to pay to Issuing Bank, with respect to drawings
honored under any Letter of Credit, interest on the amount paid by Issuing Bank
in respect of each such honored drawing from the date such drawing is honored to
but excluding the date such amount is reimbursed by or on behalf of each
Borrower at a rate equal to (i) for the period from the date such drawing is
honored to but excluding the applicable Reimbursement Date, the rate of interest
otherwise payable hereunder with respect to Revolving Loans that are LIBOR
Loans, Euribor Loans or BA Loans, and (ii) thereafter, to the extent permitted
by applicable law, a rate which is 2% per annum in excess of the rate of
interest otherwise payable hereunder with respect to Revolving Loans that are
LIBOR Loans, Euribor Loans or BA Loans.

 

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(g) Interest payable pursuant to Section 2.8(f) shall be computed on the basis
of a 365/366 day year for the actual number of days elapsed in the period during
which it accrues, and shall be payable on demand or, if no demand is made, on
the date on which the related drawing under a Letter of Credit is reimbursed in
full. Promptly upon receipt by Issuing Bank of any payment of interest pursuant
to Section 2.8(f), Issuing Bank shall distribute to each Bank, out of the
interest received by Issuing Bank in respect of the period from the date such
drawing is honored to but excluding the date on which Issuing Bank is reimbursed
for the amount of such drawing (including any such reimbursement out of the
proceeds of any Revolving Loans), the amount that such Bank would have been
entitled to receive in respect of the letter of credit fee that would have been
payable in respect of such Letter of Credit for such period if no drawing had
been honored under such Letter of Credit. In the event Issuing Bank shall have
been reimbursed (other than with the proceeds of a Revolving Loan) by Banks for
all or any portion of such honored drawing, Issuing Bank shall distribute to
each Bank which has paid all amounts payable by it under Section 2.4(f) with
respect to such honored drawing such Bank’s Pro Rata Share of any interest
received by Issuing Bank in respect of that portion of such honored drawing so
reimbursed by Banks for the period from the date on which Issuing Bank was so
reimbursed by Banks to but excluding the date on which such portion of such
honored drawing is reimbursed by the applicable Borrower.

(h) For purposes of disclosure pursuant to the Interest Act (Canada), the annual
rates of interest or fees to which the rates of interest or fees provided in
this Agreement and the other Credit Documents (and stated herein or therein, as
applicable, to be computed on the basis of a three hundred sixty (360) day year
or any other period of time less than a calendar year) are equivalent to the
rates so determined multiplied by the actual number of days in the applicable
calendar year and divided by three hundred sixty (360) or such other period of
time, respectively.

(i) If any provision of this Agreement or any other Credit Document would
obligate Xerium Canada to make any payment of interest or other amount payable
to (including for the account of) any Bank in an amount, or calculated at a
rate, that would be prohibited by law or would result in a receipt by such Bank
of interest at a criminal rate (as such terms are construed under the Criminal
Code (Canada)) then, notwithstanding such provision, such amount or rate shall
be deemed to have been adjusted with retroactive effect to the maximum amount or
rate of interest, as the case may be, as would not be so prohibited by law or so
result in a receipt by such Bank of interest at a criminal rate, such adjustment
to be effected, to the extent necessary, as follows: (A) first, by reducing the
amount or rate of interest required to be paid to such Bank; and (B) thereafter,
by reducing any fees, commissions, premiums and other amounts required to be
paid to such Bank that would constitute interest for purposes of Section 347 of
the Criminal Code (Canada). Notwithstanding the foregoing, and after giving
effect to all adjustments contemplated thereby, if a Bank shall have received an
amount in excess of the maximum amount permitted by that section of the Criminal
Code (Canada), then Xerium Canada shall be entitled, by notice in writing to
such Bank, to obtain reimbursement from such Bank in an amount equal to such
excess, and pending such reimbursement, such amount shall be deemed to be an
amount payable by such Bank to Xerium Canada. Any amount or rate of interest
referred to in this section with respect to the

 

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Non-US Obligations shall be determined in accordance with generally accepted
actuarial practices and principles as an effective annual rate of interest over
the term that the Non-US Obligations remain outstanding on the assumption that
any charges, fees or expenses that fall within the meaning of “interest” (as
defined in the Criminal Code (Canada)) shall, if they relate to a specific
period of time, be pro-rated over that period of time and otherwise be pro-rated
over the Revolving Commitment Period and, in the event of a dispute, a
certificate of a Fellow of the Canadian Institute of Actuaries appointed by
Agent shall be conclusive for the purposes of such determination.

(j) Notwithstanding any provision to the contrary contained in this Agreement,
in no event shall the aggregate “interest” (as defined in Section 347 of the
Criminal Code, Revised Statutes of Canada, 1985, c. 46 as the same may be
amended, replaced or re-enacted from time to time) payable under this Agreement
exceed the effective annual rate of interest on the “credit advanced” (as
defined in that section) under this Agreement lawfully permitted under that
section and, if any payment, collection or demand pursuant to this Agreement in
respect of “interest” (as defined in that section) is determined to be contrary
to the provisions of that section, such payment, collection or demand shall be
deemed to have been made by mutual mistake of Xerium Canada and the Banks and
the amount of such payment or collection shall be refunded to Xerium Canada. For
the purposes of this Agreement, the effective annual rate of interest shall be
determined in accordance with generally accepted actuarial practices and
principles over the term of the Loan on the basis of annual compounding of the
lawfully permitted rate of interest and, in the event of a dispute, a
certificate of a Fellow of the Canadian Institute of Actuaries appointed by
Agent will be conclusive for the purposes of such determination.

(k) Notwithstanding any other provisions contained herein and solely in respect
of the Italian Borrower, in no event shall the aggregate annual interest
applicable hereunder exceed the maximum annual rate of interest lawfully
permitted by the provisions of Italian Law No. 108 of March 7, 1996, as from
time to time amended or supplemented.

2.9 Continuation. Subject to Section 2.18, each Borrower shall have the option
upon the expiration of any Interest Period applicable to any LIBOR Loan, Euribor
Loan or BA Loan, to continue all or any portion of such Loan equal to the Base
Currency Amount (calculated as of the date which is the end of such Interest
Period) of $5,000,000 (or its currency equivalent) and integral multiples of
$250,000 (or its currency equivalent) in excess of that amount as a LIBOR Loan,
Euribor Loan or BA Loan; provided that if a Default or Event of Default shall
have occurred and be continuing, such LIBOR Loans, Euribor Loans or BA Loans, as
the case may be, shall bear interest at a rate that is 2% per annum in excess of
the interest rate otherwise payable under this Agreement with respect to the
such Loans.

2.10 Default Interest. Notwithstanding anything to the contrary in Section 2.9
and without duplication, any principal payments on the Loans not paid when due
and, to the extent permitted by applicable law, any interest payments on the
Loans or any fees or other amounts owed hereunder not paid when due, in each
case whether at stated maturity, by notice of prepayment, by acceleration or
otherwise, shall thereafter bear interest (including post-petition interest in
any proceeding under the Bankruptcy Code, or other applicable bankruptcy or
insolvency laws) payable upon demand at a rate that is 2% per annum in excess of
the interest rate

 

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otherwise payable under this Agreement with respect to the applicable Loans (or,
in the case of any such fees and other amounts, at a rate which is 2% per annum
in excess of the interest rate otherwise payable under this Agreement for
Revolving Loans that are LIBOR Loans, Euribor Loans or BA Loans). Payment or
acceptance of the increased rates of interest provided for in this Section 2.10
is not a permitted alternative to timely payment and shall not constitute a
waiver of any Default or Event of Default or otherwise prejudice or limit any
rights or remedies of the Administrative Agent or any Bank. For the avoidance of
doubt, the default interest provisions of this Section 2.10 shall not apply to
the Xerium Canada SW B Term Loans, Xerium Canada Wxx B Term Loans or borrowings
by Xerium Canada under the Revolving Loans, so long as such tranches are secured
by any real property located in the country of Canada.

2.11 Fees.

(a) Each Borrower agrees to pay to Banks having:

(i) Tranche 1 Revolving Exposure (A) commitment fees equal to (1) the average of
the daily difference between (a) the Tranche 1 Revolving Commitments, and
(b) the sum of (x) the aggregate principal amount of outstanding Tranche 1
Revolving Loans plus (y) the Letter of Credit Usage, times (2) the Applicable
Revolving Commitment Fee Percentage; and (B) letter of credit fees equal to
(1) the Applicable Margin for Revolving Loans that are LIBOR Loans, Euribor
Loans or BA Loans, times (2) the average aggregate daily maximum amount
available to be drawn under all such Letters of Credit (regardless of whether
any conditions for drawing could then be met and determined as of the close of
business on any date of determination); and

(ii) [Intentionally Omitted].

All fees referred to in this Section 2.11(a) shall be paid in Cash in Dollars to
Administrative Agent at its Principal Office and upon receipt, Administrative
Agent shall promptly distribute to each Bank its Pro Rata Share thereof.

(b) Each Borrower agrees to pay directly to Issuing Bank, for its own account,
the following fees:

(i) a fronting fee equal to 0.125%, per annum, times the average aggregate daily
Base Currency Amount available to be drawn under all Letters of Credit
(determined as of the close of business on any date of determination); and

(ii) such documentary and processing charges for any issuance, amendment,
transfer or payment of a Letter of Credit as are in accordance with Issuing
Bank’s standard schedule for such charges and as in effect at the time of such
issuance, amendment, transfer or payment, as the case may be.

(c) All fees referred to in Sections 2.11(a) and 2.11(b)(i) shall be calculated
on the basis of a 360 day year and the actual number of days elapsed and shall
be payable quarterly in arrears on March 31, June 30, September 30 and
December 31

 

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of each year during the Revolving Commitment Period, commencing on the first
such date to occur after the Closing Date, and on the Revolving Commitment
Termination Date.

(d) In addition to any of the foregoing fees, each Borrower agrees to pay to
Agents such other fees in the amounts and at the times separately agreed upon.

2.12 Scheduled Payments. Each Borrower shall make principal payments on its
respective B Term Loans in installments in amounts as set forth below and on the
dates set forth below:

 

Borrower:

   Xerium    XTI LLC    Xerium
Germany    HW
Austria    Xerium
Italy    Xerium
Canada SW    Xerium
Canada Wxx

Currency:

   USD    Euro    Euro    Euro    Euro    CAD    CAD

Quarter Ended:

                    

06/30/2008

   983,270    147,882    195,831    88,964    124,139    132,957    100,838

09/30/2008

   983,270    147,882    195,831    88,964    124,139    132,957    100,838

12/31/2008

   983,270    147,882    195,831    88,964    124,139    132,957    100,838

03/31/2009

   2,458,174    369,706    489,577    222,409    310,348    332,393    252,096

06/30/2009

   2,458,174    369,706    489,577    222,409    310,348    332,393    252,096

09/30/2009

   2,458,174    369,706    489,577    222,409    310,348    332,393    252,096

12/31/2009

   2,458,174    369,706    489,577    222,409    310,348    332,393    252,096

03/31/2010

   3,318,535    499,103    660,929    300,252    418,970    448,730    340,329

06/30/2010

   3,318,535    499,103    660,929    300,252    418,970    448,730    340,329

09/30/2010

   3,318,535    499,103    660,929    300,252    418,970    448,730    340,329

12/31/2010

   3,318,535    499,103    660,929    300,252    418,970    448,730    340,329

03/31/2011

   4,055,987    610,015    807,802    366,974    512,074    548,448    415,958

06/30/2011

   4,055,987    610,015    807,802    366,974    512,074    548,448    415,958

09/30/2011

   4,055,987    610,015    807,802    366,974    512,074    548,448    415,958

12/31/2011

   4,055,987    610,015    807,802    366,974    512,074    548,448    415,958

03/31/2012

   4,916,348    739,412    979,154    444,818    620,696    664,785    504,191

All scheduled payments required to be made pursuant to this Section 2.12 shall
be applied in accordance with Section 2.15(d).

 

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2.13 Voluntary Prepayments/Commitment Reductions.

(a) Voluntary Prepayments.

(i) Any time and from time to time with respect to LIBOR Loans, Euribor Loans
and BA Loans, each Borrower may prepay any such Loans on any Business Day in
whole or in part in an aggregate minimum Base Currency Amount of $5,000,000 (or
its currency equivalent) and integral multiples of $250,000 (or its currency
equivalent) in excess of that amount.

(ii) All such prepayments shall be made upon not less than three Business Days’
prior written or telephonic notice in the case of LIBOR Loans, Euribor Loans and
BA Loans, in each case given to Administrative Agent by 12:00 p.m. (New York
City time) on the date required and, if given by telephone, promptly confirmed
in writing to Administrative Agent (and Administrative Agent will promptly
transmit such telephonic or original notice for B Term Loans or Revolving Loans,
as the case may be, by telefacsimile or telephone to each Bank). Upon the giving
of any such notice, the principal amount of the Loans specified in such notice
shall become due and payable on the prepayment date specified therein. Any such
voluntary prepayment shall be applied as specified in Section 2.15(a).

(b) Voluntary Commitment Reductions.

(i) Each Borrower may, upon not less than three Business Days’ prior written or
telephonic notice confirmed in writing to Administrative Agent (which original
written or telephonic notice Administrative Agent will promptly transmit by
telefacsimile or telephone to each applicable Bank), at any time and from time
to time terminate in whole or permanently reduce in part, without premium or
penalty, the Tranche 1 Revolving Commitments in an amount up to the amount by
which the Tranche 1 Revolving Commitments exceed the Total Utilization of
Tranche 1 Revolving Commitments at the time of such proposed termination or
reduction; provided, any such partial reduction of the Tranche 1 Revolving
Commitments shall be in an aggregate minimum Base Currency Amount of $5,000,000
and integral multiples of $250,000 in excess of that amount.

(ii) Each Borrower’s notice to Administrative Agent shall designate the date
(which shall be a Business Day) of such termination or reduction and the amount
of any partial reduction, and such termination or reduction of the Revolving
Commitments shall be effective on the date specified in each Borrower’s notice
and shall reduce the applicable Revolving Commitment of each Bank
proportionately to its Pro Rata Share thereof.

2.14 Mandatory Prepayments/Commitment Reductions.

(a) Asset Sales. No later than the second Business Day following the date of
receipt by Xerium or any of its Subsidiaries of any Net Asset Sale Proceeds (but
not including Excluded Sale Proceeds), each Borrower shall prepay the Loans
and/or the Tranche 1 Revolving Commitments shall be permanently reduced as set
forth in Section 2.15(b) in an aggregate amount equal to such Net Asset Sale
Proceeds; provided, so long as no Default or Event of Default shall have
occurred and be

 

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continuing, each Borrower shall have the option, directly or through one or more
of its Subsidiaries, to invest up to $3,000,000 of Net Asset Sale Proceeds of
Asset Sales consummated after the Restatement Effective Date, in one transaction
or a series of transactions, within three hundred and sixty (360) days of
receipt thereof in long term productive assets of the general type used in the
business of Xerium and its Subsidiaries, which assets need not be of the same
type as the assets sold or otherwise disposed of to generate such Net Asset Sale
Proceeds; provided, further, pending any such investment all such Net Asset Sale
Proceeds shall be deposited in the Cash Collateral Account.

(b) Insurance/Condemnation Proceeds. No later than the second Business Day
following the date of receipt by Xerium or any of its Subsidiaries, or
Administrative Agent as loss payee, of any Net Insurance/Condemnation Proceeds
(but not including the first $2,000,000 of Net Insurance/Condemnation Proceeds
in the aggregate received after the Closing Date), each Borrower shall prepay
the Loans and/or the Revolving Commitments shall be permanently reduced as set
forth in Section 2.15(b) in an aggregate amount equal to such Net
Insurance/Condemnation Proceeds; provided, so long as no Default or Event of
Default shall have occurred and be continuing, each Borrower shall have the
option, directly or through one or more of its Subsidiaries to commit to invest
within one hundred eighty (180) days and invest such Net Insurance/Condemnation
Proceeds within three hundred sixty (360) days of receipt thereof in the
acquisition of long term productive assets of the general type used in the
business of Xerium and its Subsidiaries, which assets need not be the same as
the assets lost or damaged and which Net Insurance/Condemnation Proceeds may,
but need not, be invested in the repair, restoration or replacement of the
applicable assets thereof; provided further, pending any such investment all
such Net Insurance/Condemnation Proceeds, as the case may be, shall be deposited
in the Cash Collateral Account.

(c) Issuance of Capital Stock. No later than the second Business Day following
the date of receipt by Xerium or any of its Subsidiaries of any Cash proceeds
(but not including the first $100,000 of such Cash proceeds received after the
Restatement Effective Date) from the issuance of Capital Stock by Xerium or any
of its Subsidiaries, each Borrower shall prepay the Loans and/or the Revolving
Commitments shall be permanently reduced as set forth in Section 2.15(b) in an
aggregate amount equal to 75% of such proceeds, net of underwriting discounts
and commissions and other reasonable costs and expenses associated therewith,
including reasonable legal fees and expenses.

(d) Issuance of Debt. No later than the second Business Day following the date
of receipt by Xerium or any of its Subsidiaries of any Cash proceeds from the
incurrence of any Indebtedness of Xerium or any of its Subsidiaries (other than
with respect to any Indebtedness permitted to be incurred pursuant to
Section 6.1 other than Subordinated Debt permitted to be incurred under
Section 6.1(c) as provided below), each Borrower shall prepay the Loans and/or
the Revolving Commitments shall be permanently reduced as set forth in
Section 2.15(b) in an aggregate amount equal to 100% of such proceeds, net of
underwriting discounts and commissions and other reasonable costs and expenses
associated therewith, including reasonable legal fees and expenses.

 

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(e) Excess Cash. In the event that there shall be Excess Cash for any Fiscal
Year (commencing with Fiscal Year 2008), each Borrower shall, no later than 90
days after the end of such Fiscal Year, prepay the Loans and/or the Revolving
Commitments shall be permanently reduced as set forth in Section 2.15(b) in an
aggregate amount equal to the remainder of (i) the Applicable EC Percentage for
such Fiscal Year minus (without duplication) (ii) the aggregate amount for such
Fiscal Year of scheduled payments of the B Term Loans under Section 2.12, any
other scheduled payments of long term debt permitted under this Agreement, any
voluntary prepayments of the B Term Loans under Section 2.13 and any permanent
reductions of the Revolving Commitments made under Section 2.12 or 2.13(b).

(f) Revolving Loans. Each Borrower shall from time to time prepay the Revolving
Loans to the extent necessary so that the Total Utilization of Tranche 1
Revolving Commitments shall not at any time exceed the Revolving Commitments
then in effect.

(g) Prepayment Certificate. Concurrently with any prepayment of the Loans and/or
reduction of the Revolving Commitments pursuant to Sections 2.14(a) through
2.14(e), each Borrower shall deliver to Administrative Agent a certificate of an
Authorized Officer demonstrating the calculation of the amount of the applicable
net proceeds or Excess Cash, as the case may be; provided, if such officer’s
certificate is subsequently determined to be inaccurate, such Authorized Officer
(or such Authorized Officer’s successor) must deliver a new certificate setting
forth in detail the adjustments necessary to make the prior certificate accurate
in all respects. In the event that a Borrower shall subsequently determine that
the actual amount exceeded the amount set forth in such certificate, each
Borrower shall promptly make an additional prepayment of the Loans and/or the
Revolving Commitments shall be permanently reduced in an amount equal to such
excess, and such Borrower shall concurrently therewith deliver to Administrative
Agent the certificate as set forth above in this Section 2.14(g).

(h) [Intentionally Omitted].

2.15 Application of Prepayments/Reductions/Scheduled Payments.

(a) Application of Voluntary Prepayments. Any prepayment of any Loan pursuant to
Section 2.13(a) shall be applied as specified by such Borrower in the applicable
notice of prepayment; provided, in the event such Borrower fails to specify the
Loans to which any such prepayment shall be applied, such prepayment shall be
applied as follows:

first, to prepay the B Term Loans on a pro rata basis (in accordance with the
respective outstanding principal amounts thereof); and

second, to repay outstanding Revolving Loans to the full extent thereof.

 

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(b) Application of Mandatory Prepayments. Any amount required to be paid
pursuant to Sections 2.14(a) through 2.14(e) shall be applied as follows:

first, to prepay B Term Loans, and so long as no Event of Default has occurred
and is continuing, as specified by such Borrower, provided, in the event an
Event of Default has occurred and is continuing or such Borrower fails to
specify the Loans to which any such prepayment shall be applied, such prepayment
shall be applied to reduce the remaining scheduled repayments of principal due
in respect of the B Term Loans under Section 2.12 on a pro rata basis (in
accordance with the respective outstanding principal amounts thereof);

second, to prepay the Revolving Loans, as specified by such Borrower, provided,
in the event such Borrower fails to specify the Loans to which any such
prepayment shall be applied, such prepayment shall be applied on a pro rata
basis (in accordance with the respective outstanding principal amounts thereof)
to the full extent thereof and to further permanently reduce the Revolving
Commitments by the amount of such prepayment;

third, to prepay outstanding reimbursement obligations with respect to Letters
of Credit and to further permanently reduce the Tranche 1 Revolving Commitments
by the amount of such prepayment;

fourth, to cash collateralize Letters of Credit and to further permanently
reduce the Tranche 1 Revolving Commitments by the amount of such cash
collateralization; and

fifth, to further permanently reduce the Revolving Commitments to the full
extent thereof.

(c) Waivable Mandatory Prepayment. Anything contained herein to the contrary
notwithstanding, so long as any Revolving Loans are outstanding, in the event a
Borrower is required to make any mandatory prepayment (a “Waivable Mandatory
Prepayment”) of the B Term Loans, not less than five Business Days prior to the
date (the “Required Prepayment Date”) on which such Borrower is required to make
such Waivable Mandatory Prepayment, such Borrower shall notify Administrative
Agent of the amount of such prepayment, and Administrative Agent will promptly
thereafter notify each Bank holding an outstanding B Term Loan of the amount of
such Bank’s Pro Rata Share of such Waivable Mandatory Prepayment and such Bank’s
option to refuse such amount. Each such Bank may exercise such option by giving
written notice to such Borrower and Administrative Agent of its election to do
so on or before the first Business Day prior to the Required Prepayment Date (it
being understood that any Bank which does not notify such Borrower and
Administrative Agent of its election to exercise such option on or before the
first Business Day prior to the Required Prepayment Date shall be deemed to have
elected, as of such date, not to exercise such option). On the Required
Prepayment Date, such Borrower shall pay to Administrative Agent the amount of
the Waivable Mandatory Prepayment, which amount shall be applied in accordance
with Section 2.15(b) (except prepayments of the B Term Loans shall only be
applied to the B Term Loans of such Banks that have elected not to exercise such
option).

 

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(d) Application of Scheduled Payments. Any amount required to be paid pursuant
to Section 2.12 shall be applied as follows:

first, to pay the applicable B Term Loans, on a pro rata basis (in accordance
with the respective outstanding principal amounts thereof);

second, to pay the Revolving Loans, on a pro rata basis (in accordance with the
respective outstanding principal amounts thereof) to the full extent thereof and
to permanently reduce the Revolving Commitments by the amount of such payment;

third, to pay outstanding reimbursement obligations with respect to Letters of
Credit and to further permanently reduce the Revolving Commitments by the amount
of such payment;

fourth, to cash collateralize Letters of Credit and to further permanently
reduce the Revolving Commitments by the amount of such cash collateralization;
and

(e) fifth, to further permanently reduce the Revolving Commitments to the full
extent thereof.

2.16 General Provisions Regarding Payments.

(a) Except as otherwise provided in Section 2.20, all payments by each Borrower
of principal, interest, fees and other Obligations shall be made in same day
funds, without defense, setoff or counterclaim, free of any restriction or
condition, and delivered to Administrative Agent not later than 12:00 p.m. (New
York City time) on the date due at Administrative Agent’s Principal Office for
the account of Banks; funds received by Administrative Agent after that time on
such due date shall be deemed to have been paid by such Borrower on the next
succeeding Business Day.

(b) All payments in respect of the principal amount of any Loan shall be
accompanied by payment of accrued interest on the principal amount being repaid
or prepaid.

(c) Administrative Agent shall promptly distribute to each Bank at such address
as such Bank shall indicate in writing, such Bank’s applicable Pro Rata Share of
all payments and prepayments of principal and interest due hereunder, together
with all other amounts due thereto, including, without limitation, all fees
payable with respect thereto, to the extent received by Administrative Agent.

(d) Subject to the provisos set forth in the definition of “Interest Period”,
whenever any payment to be made hereunder shall be stated to be due on a day
that is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest hereunder or of the Revolving Commitment fees hereunder.

 

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(e) Each Borrower hereby authorizes Administrative Agent to charge such
Borrower’s accounts with Administrative Agent in order to cause timely payment
to be made to Administrative Agent of all principal, interest, fees and expenses
due hereunder (subject to sufficient funds being available in its accounts for
that purpose).

(f) Administrative Agent shall deem any payment by or on behalf of each Borrower
hereunder that is not made in same day funds prior to 12:00 p.m. (New York City
time) to be a non-conforming payment. Any such payment shall not be deemed to
have been received by Administrative Agent until the later of (i) the time such
funds become available funds, and (ii) the applicable next Business Day.
Administrative Agent shall give prompt telephonic notice to such Borrower and
each applicable Bank (confirmed in writing) if any payment is non-conforming.
Any non-conforming payment may constitute or become a Default or Event of
Default in accordance with the terms of Section 8.1(a). Interest shall continue
to accrue on any principal as to which a non- conforming payment is made until
such funds become available funds (but in no event less than the period from the
date of such payment to the next succeeding applicable Business Day) at the rate
determined pursuant to Section 2.10 from the date such amount was due and
payable until the date such amount is paid in full.

(g) If an Event of Default shall have occurred and not otherwise been waived,
and the maturity of the Obligations shall have been accelerated pursuant to
Section 8.1, all payments or proceeds received by Agents hereunder in respect of
any of the Obligations (except as expressly provided elsewhere in a Credit
Document), shall be forwarded to the Administrative Agent and applied in full or
in part by the Administrative Agent against, the Obligations in the following
order of priority: first, to the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation to the
Administrative Agent and Collateral Agent and their agents and counsel, and all
other expenses, liabilities and advances made or incurred by the Administrative
Agent or Collateral Agent in connection therewith, and all amounts for which the
Administrative Agent or Collateral Agent is entitled to indemnification
hereunder (each in its capacity as the Administrative Agent or Collateral Agent,
and not as a Bank) and all advances made by the Administrative Agent or
Collateral Agent hereunder for the account of the applicable Credit Party, and
to the payment of all costs and expenses paid or incurred by the Administrative
Agent or Collateral Agent in connection with the exercise of any right or remedy
hereunder or under any Credit Document, all in accordance with the terms hereof
or thereof; second, to the extent of any excess of such proceeds, to the payment
of all other Obligations for the ratable benefit of the Banks and the Bank
Counterparties; and third, to the extent of any excess of such proceeds, to the
payment to or upon the order of such Credit Party or to whosoever may be
lawfully entitled to receive the same or as a court of competent jurisdiction
may direct.

(h) Currency of account:

(i) Subject to paragraphs (ii) through (v) below, the Base Currency is the
currency of account and payment for any sum due from any Credit Party under any
Credit Document.

 

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(ii) A repayment of a Credit Extension or other Obligation or a part of a Credit
Extension or other Obligation shall be made in the currency in which that Credit
Extension or other Obligation is denominated on its due date.

(iii) Each payment of interest shall be made in the currency in which the sum in
respect of which the interest is payable was denominated when that interest
accrued.

(iv) Each payment in respect of costs, expenses or Taxes shall be made in the
currency in which the costs, expenses or Taxes are incurred.

(v) Any amount expressed to be payable in a currency other than the Base
Currency shall be paid in that other currency.

(i) Change of currency

(i) Unless otherwise prohibited by law, if more than one currency or currency
unit are at the same time recognized by the central bank of any country as the
lawful currency of that country, then:

 

  (A) any reference in the Credit Documents to, and any Obligations arising
under the Credit Documents in, the currency of that country shall be translated
into, or paid in, the currency or currency unit of that country designated by
the Administrative Agent (after consultation with Xerium); and

 

  (B) any translation from one currency or currency unit to another shall be at
the official rate of exchange recognized by the central bank for the conversion
of that currency or currency unit into the other, rounded up or down by the
Administrative Agent (acting reasonably).

(ii) If a change in any currency of a country occurs, this Agreement will, to
the extent the Administrative Agent (acting reasonably and after consultation
with Xerium) specifies to be necessary, be amended to comply with any generally
accepted conventions and market practice in the Relevant Interbank Market and
otherwise to reflect the change in currency.

2.17 Ratable Sharing. Banks hereby agree among themselves that, except as
otherwise provided in the Collateral Documents with respect to amounts realized
from the exercise of rights with respect to Liens on the Collateral, if any of
them shall, whether by voluntary payment (other than a voluntary prepayment of
Loans made and applied in accordance with the terms hereof), through the
exercise of any right of set off or banker’s lien, by counterclaim or cross
action or by the enforcement of any right under the Credit Documents or
otherwise, or as adequate protection of a deposit treated as cash collateral
under the Bankruptcy Code, receive payment or reduction of a proportion of the
aggregate amount of principal, interest, amounts payable in respect of Letters
of Credit, fees and other amounts then due and owing to such Bank hereunder or
under the other Credit Documents (collectively, the “Aggregate Amounts Due” to
such Bank) which is greater than the proportion received by any other Bank in
respect of the

 

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Aggregate Amounts Due to such other Bank, then the Bank receiving such
proportionately greater payment shall (a) notify Administrative Agent and each
other Bank of the receipt of such payment and (b) apply a portion of such
payment to purchase participations (which it shall be deemed to have purchased
from each seller of a participation simultaneously upon the receipt by such
seller of its portion of such payment) in the Aggregate Amounts Due to the other
Banks so that all such recoveries of Aggregate Amounts Due shall be shared by
all Banks in proportion to the Aggregate Amounts Due to them; provided, if all
or part of such proportionately greater payment received by such purchasing Bank
is thereafter recovered from such Bank upon the bankruptcy or reorganization of
such Borrower or otherwise, those purchases shall be rescinded and the purchase
prices paid for such participations shall be returned to such purchasing Bank
ratably to the extent of such recovery, but without interest. Each Borrower
expressly consents to the foregoing arrangement and agrees that any holder of a
participation so purchased may exercise any and all rights of banker’s lien, set
off or counterclaim with respect to any and all monies owing by each Borrower to
that holder with respect thereto as fully as if that holder were owed the amount
of the participation held by that holder.

2.18 Making or Maintaining LIBOR Loans, Euribor Loans or BA Loans

(a) Inability to Determine Applicable Interest Rate. In the event that
Administrative Agent shall have determined (which determination shall be final
and conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any LIBOR Loans or Euribor Loans, as the case
may be, that by reasons of circumstances affecting the Relevant Interbank Market
adequate and fair means do not exist for ascertaining the interest rate
applicable to such Loans on the basis provided for in the definition of LIBOR
Rate or Euribor Rate, as applicable, Administrative Agent shall on such date
give notice (by telefacsimile or by telephone confirmed in writing) to such
Borrower and each Bank of such determination, whereupon (i) no Loans may be made
as, or converted to, such affected LIBOR Loans or Euribor Loans until such time
as Administrative Agent notifies such Borrower and Banks that the circumstances
giving rise to such notice no longer exist, (ii) any Funding Notice or
Continuation Notice given by a Borrower with respect to the Loans in respect of
which such determination was made shall be deemed to be rescinded by such
Borrower and (iii) the interest rate applicable to such Loans shall be
determined by substituting the Replacement Rate for the LIBOR Rate or Euribor
Rate, as applicable, until such time as Administrative Agent notifies such
Borrower and Banks that the circumstances giving rise to such notice no longer
exist.

(b) Illegality or Impracticability of LIBOR Loans or Euribor Loans. In the event
that on any date any Bank shall have determined (which determination shall be
final and conclusive and binding upon all parties hereto but shall be made only
after consultation with such Borrower and Administrative Agent) that the making,
maintaining or continuation of all or any of its Loans, (i) has become unlawful
as a result of compliance by such Bank in good faith with any law, treaty,
governmental rule, regulation, guideline or order (or would conflict with any
such treaty, governmental rule, regulation, guideline or order not having the
force of law even though the failure to comply therewith would not be unlawful),
or (ii) has become impracticable, as

 

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a result of contingencies occurring after the date hereof which materially and
adversely affect the Relevant Interbank Market or the position of such Bank in
that market, then, and in any such event, such Bank shall be an “Affected Bank”
and it shall on that day give notice (by telefacsimile or by telephone confirmed
in writing) to each Borrower and Administrative Agent of such determination
(which notice Administrative Agent shall promptly transmit to each other Bank).
Thereafter the Commitments and obligation of the Affected Bank to make Loans as,
or to convert Loans to, LIBOR Loans or Euribor Loans, as the case may be, shall
be suspended until such notice shall be withdrawn by the Affected Bank, (2) the
Affected Bank’s obligation to maintain its outstanding LIBOR Loans or Euribor
Loans (the “Affected Loans”) shall be terminated at the earlier to occur of the
expiration of the Interest Period then in effect with respect to the Affected
Loans or when required by law, and (3) the interest rate applicable to such
Affected Loans shall be determined by substituting the Replacement Rate for the
LIBOR Rate or Euribor Rate, as applicable, provided the Affected Bank shall make
commercially reasonable efforts to assign the Affected Loans according to
Section 10.6. Notwithstanding the foregoing, to the extent a determination by an
Affected Bank as described above relates to a LIBOR Loan or a Euribor Loan then
being requested by a Borrower pursuant to a Funding Notice or a Continuation
Notice, such Borrower shall have the option, subject to the provisions of
Section 2.18(c), to rescind such Funding Notice or Continuation Notice as to all
Banks by giving notice (by telefacsimile or by telephone confirmed in writing)
to Administrative Agent of such rescission on the date on which the Affected
Bank gives notice of its determination as described above (which notice of
rescission Administrative Agent shall promptly transmit to each other Bank).
Except as provided in the immediately preceding sentence, nothing in this
Section 2.18(b) shall affect the obligation of any Bank other than an Affected
Bank to make or maintain Loans as, or to convert Loans to, LIBOR Loans or
Euribor Loans in accordance with the terms hereof.

(c) Compensation for Breakage or Non-Commencement of Interest Periods. Each
Borrower shall compensate each Bank, upon written request by such Bank (which
request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including any interest paid by such
Bank to banks of funds borrowed by it to make or carry its LIBOR Loans, Euribor
Loans or BA Loans and any loss, expense or liability sustained by such Bank in
connection with the liquidation or re employment of such funds but excluding
loss of anticipated profits) which such Bank may sustain: (i) if for any reason
(other than a default by such Bank) a borrowing of any LIBOR Loan, Euribor Loan
or BA Loan does not occur on a date specified therefor in a Funding Notice or a
telephonic request for borrowing, or a continuation of any LIBOR Loans, Euribor
Loans or BA Loans does not occur on a date specified therefor in a Continuation
Notice or a telephonic request for continuation; (ii) if any prepayment or other
principal payment of any of its LIBOR Loans, Euribor Loans or BA Loans occurs on
a date prior to the last day of an Interest Period applicable to that Loan
(including, without limitation, pursuant to Section 2.18(b) hereof); or (iii) if
any prepayment of any of its LIBOR Loans, Euribor Loans or BA Loans is not made
on any date specified in a notice of prepayment given by such Borrower.

 

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(d) Booking of LIBOR Loans, Euribor Loans or BA Loans. Any Bank may make, carry
or transfer LIBOR Loans, Euribor Loans or BA Loans at, to, or for the account of
any of its branch offices or the office of an Affiliate of such Bank.

(e) Assumptions Concerning Funding of LIBOR Loans or Euribor Loans. Calculation
of all amounts payable to a Bank under this Section 2.18 and under Section 2.19
shall be made as though such Bank had actually funded each of its relevant LIBOR
Loans or Euribor Loans through the purchase of a LIBOR or Euribor deposit
bearing interest at the rate in an amount equal to the amount of such LIBOR Loan
or Euribor Loan and having a maturity comparable to the relevant Interest Period
and through the transfer of such LIBOR or Euribor deposit from an offshore
office of such Bank to a domestic office of such Bank in the United States of
America; provided, however, each Bank may fund each of its LIBOR Loans or
Euribor Loans in any manner it sees fit and the foregoing assumptions shall be
utilized only for the purposes of calculating amounts payable under this
Section 2.18 and under Section 2.19.

2.19 Increased Costs; Capital Adequacy.

(a) Compensation For Increased Costs and Taxes. Subject to the provisions of
Section 2.20 (which shall be controlling with respect to the matters covered
thereby), in the event that any Bank (which term shall include Issuing Bank for
purposes of this Section 2.19(a)) shall determine (which determination shall,
absent manifest error, be final and conclusive and binding upon all parties
hereto) that any law, treaty or governmental rule, regulation or order, or any
change therein or in the interpretation, administration or application thereof
(including the introduction of any new law, treaty or governmental rule,
regulation or order), or any determination of a court or governmental authority,
in each case that becomes effective after the date hereof, or compliance by such
Bank with any guideline, request or directive issued or made after the date
hereof by any central bank or other governmental or quasi governmental authority
(whether or not having the force of law): (i) subjects such Bank (or its
applicable lending office) to any additional Tax (other than any Tax on the
overall net income of such Bank or its applicable lending office) with respect
to this Agreement or any of the other Credit Documents or any of its obligations
hereunder or thereunder or any payments to such Bank (or its applicable lending
office) of principal, interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including any marginal,
emergency, supplemental, special or other reserve), special deposit, compulsory
loan, FDIC insurance or similar requirement against assets held by, or deposits
or other liabilities in or for the account of, or advances or loans by, or other
credit extended by, or any other acquisition of funds by, any office of such
Bank (other than any such reserve or other requirements with respect to LIBOR
Loans, Euribor Loans or BA Loans); or (iii) imposes any other condition (other
than with respect to a Tax matter) on or affecting such Bank (or its applicable
lending office) or its obligations hereunder or the Relevant Interbank Market;
and the result of any of the foregoing is to increase the cost to such Bank of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such Bank (or its applicable lending office) with
respect thereto; then, in any such case, such Borrower shall promptly pay to
such Bank, upon receipt of the statement referred to in the next sentence, such
additional amount

 

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or amounts (in the form of an increased rate of, or a different method of
calculating, interest or otherwise as such Bank in its sole discretion shall
determine) as may be necessary to compensate such Bank for any such increased
cost or reduction in amounts received or receivable hereunder. Such Bank shall
deliver to such Borrower (with a copy to Administrative Agent) a written
statement, setting forth in reasonable detail the basis for calculating the
additional amounts owed to such Bank under this Section 2.19(a), which statement
shall be conclusive and binding upon all parties hereto absent manifest error.

(b) Capital Adequacy Adjustment. In the event that any Bank (which term shall
include Issuing Bank for purposes of this Section 2.19(b)) shall have determined
that the adoption, effectiveness, phase in or applicability after the Closing
Date of any law, rule or regulation (or any provision thereof) regarding capital
adequacy, or any change therein or in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Bank (or
its applicable lending office) with any guideline, request or directive
regarding capital adequacy (whether or not having the force of law) of any such
Governmental Authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the capital of such Bank or any
corporation controlling such Bank as a consequence of, or with reference to,
such Bank’s Loans or Revolving Commitments or Letters of Credit, or
participations therein or other obligations hereunder with respect to the Loans
or the Letters of Credit to a level below that which such Bank or such
controlling corporation could have achieved but for such adoption,
effectiveness, phase in, applicability, change or compliance (taking into
consideration the policies of such Bank or such controlling corporation with
regard to capital adequacy), then from time to time, within five Business Days
after receipt by such Borrower from such Bank of the statement referred to in
the next sentence, such Borrower shall pay to such Bank such additional amount
or amounts as will compensate such Bank or such controlling corporation on an
after tax basis for such reduction. Such Bank shall deliver to such Borrower
(with a copy to Administrative Agent) a written statement, setting forth in
reasonable detail the basis for calculating the additional amounts owed to Bank
under this Section 2.19(b), which statement shall be conclusive and binding upon
all parties hereto absent manifest error.

2.20 Taxes; Withholding, etc.

(a) Payments to Be Free and Clear. All sums payable by any Credit Party
hereunder and under the other Credit Documents shall (except to the extent
required by law) be paid free and clear of, and without any deduction or
withholding on account of, any Tax (other than a Tax on the overall net income
of any Bank) imposed, levied, collected, withheld or assessed by or within the
United States of America or any political subdivision in or of the United States
of America or any other jurisdiction from or to which a payment is made by or on
behalf of any Credit Party or by any federation or organization of which the
United States of America or any such jurisdiction is a member at the time of
payment.

 

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(b) Withholding of Taxes. If any Credit Party or any other Person is required by
law to make any deduction or withholding on account of any Tax from any sum paid
or payable by any Credit Party to Administrative Agent or any Bank (which term
shall include Issuing Bank for purposes of this Section 2.20(b)) under any of
the Credit Documents: (i) each Borrower shall notify Administrative Agent of any
such requirement or any change in any such requirement as soon as each Borrower
becomes aware of it; (ii) each Borrower shall pay to the appropriate taxing or
other authority any such Tax before the date on which penalties attach thereto,
such payment to be made (if the liability to pay is imposed on any Credit Party)
for its own account or (if that liability is imposed on Administrative Agent or
such Bank, as the case may be) on behalf of and in the name of Administrative
Agent or such Bank; (iii) the sum payable by such Credit Party in respect of
which the relevant deduction, withholding or payment is required shall be
increased to the extent necessary to ensure that, after the making of that
deduction, withholding or payment, (including deductions, withholdings or
payments applicable to additional sums payable under this Section 2.20(b))
Administrative Agent or such Bank, as the case may be, receives on the due date
a net sum equal to what it would have received had no such deduction,
withholding or payment been required or made; and (iv) within thirty days after
paying any sum from which it is required by law to make any deduction or
withholding, and within thirty days after the due date of payment of any Tax
which it is required by clause (ii) above to pay, each Borrower shall deliver to
Administrative Agent evidence satisfactory to the other affected parties of such
deduction, withholding or payment and of the remittance thereof to the relevant
taxing or other authority. Each Borrower shall indemnify the Administrative
Agent, each Bank and the Issuing Bank, within 10 days after written demand
therefor, which demand shall identify in reasonable detail the nature and amount
of such Taxes (and provide such other evidence thereof as has been received by
the Administrative Agent, such Bank or such Issuing Bank, as the case may be),
for the full amount of any Taxes paid by the Administrative Agent, such Bank or
the Issuing Bank, as the case may be, on or with respect to any payment by or on
account of any obligation of such Borrower hereunder and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or
not such Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to a Borrower by a Bank or the Issuing Bank, or by the
Administrative Agent on its own behalf or on behalf of a Bank or the Issuing
Bank, shall be conclusive absent manifest error.

(c) Evidence of Exemption From U.S. Withholding Tax. Each Bank that is not a
United States Person (as such term is defined in Section 7701(a)(30) of the
Internal Revenue Code) for U.S. federal income tax purposes (a “Non-US Bank”)
shall deliver to Administrative Agent for transmission to Xerium, on or prior to
the Closing Date (in the case of each Bank listed on the signature pages hereof
on the Closing Date) or on or prior to the date of the Assignment Agreement
pursuant to which it becomes a Bank (in the case of each other Bank), and at
such other times as may be necessary in the determination of Xerium or
Administrative Agent (each in the reasonable exercise of its discretion),
(i) two original copies of Internal Revenue Service Form W-8BEN or W-8ECI (or
any successor forms), properly completed and duly executed by such Bank, and
such other documentation required under the Internal Revenue Code and reasonably
requested by Xerium to establish that such Bank is not

 

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subject to deduction or withholding of United States federal income tax with
respect to any payments to such Bank of principal, interest, fees or other
amounts payable under any of the Credit Documents, or (ii) if such Bank is not a
“bank” or other Person described in Section 881(c)(3) of the Internal Revenue
Code and cannot deliver Internal Revenue Service Form W-8ECI pursuant to clause
(i) above, a Certificate re Non-Bank Status together with two original copies of
Internal Revenue Service Form W-8BEN (or any successor form), properly completed
and duly executed by such Bank, and such other documentation required under the
Internal Revenue Code and reasonably requested by each Borrower to establish
that such Bank is not subject to deduction or withholding of United States
federal income tax with respect to any payments to such Bank of interest payable
under any of the Credit Documents. Each Bank that is a United States Person (as
such term is defined in Section 7701(a)(30) of the Internal Revenue Code) for
U.S. federal income tax purposes (a “US Bank”) shall deliver to the
Administrative Agent for transmission to Xerium, on or prior to the Closing Date
(in the case of each Bank listed on the signature pages hereof on the Closing
Date) or on or prior to the date of the Assignment Agreement pursuant to which
it becomes a Bank (in the case of each other Bank), and at such times as may be
necessary in the determination of Xerium or the Administrative Agent (each in
the reasonable exercise of its discretion), such other form or forms,
certificates or documentation, including two original copies of Internal Revenue
Service Form W-9, as reasonably requested by any Borrower to confirm or
establish that such Bank is not subject to deduction, withholding, or backup
withholding of United States federal income tax with respect to any payments to
such Bank of principal, interest, fees or other amounts payable under any of the
Credit Documents. Each Bank required to deliver any forms, certificates or other
evidence with respect to United States federal income tax withholding matters
pursuant to this Section 2.20(c) hereby agrees, from time to time after the
initial delivery by such Bank of such forms, certificates or other evidence,
whenever a lapse in time or change in circumstances renders such forms,
certificates or other evidence obsolete or inaccurate in any material respect,
that such Bank shall promptly deliver to Administrative Agent for transmission
to each Borrower two new original copies of Internal Revenue Service Form W-8BEN
or W-8ECI, or a Certificate re Non-Bank Status and two original copies of
Internal Revenue Service Form W-8BEN (or any successor form), or two new
original copies of Internal Revenue Service Form W-9, as the case may be,
properly completed and duly executed by such Bank, and such other documentation
required under the Internal Revenue Code and reasonably requested by any
Borrower to confirm or establish that such Bank is not subject to deduction or
withholding of United States federal income tax with respect to payments to such
Bank under the Credit Documents, or notify Administrative Agent and each
Borrower of its inability to deliver any such forms, certificates or other
evidence. Each Borrower shall not be required to pay any additional amount to
any Non-US Bank under Section 2.20(b)(iii) if such Bank shall have failed (1) to
deliver the forms, certificates or other evidence referred to in the first three
sentences of this Section 2.20(c), or (2) to notify Administrative Agent and
each Borrower of its inability to deliver any such forms, certificates or other
evidence, as the case may be; provided, if such Bank shall have satisfied the
requirements of the first sentence of this Section 2.20(c) on the Closing Date
or on the date of the Assignment Agreement pursuant to which it became a Bank,
as applicable, nothing in this last sentence of Section 2.20(c) shall relieve
each Borrower of its obligation to pay

 

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any additional amounts pursuant to this Section 2.20 in the event that, as a
result of any change in any applicable law, treaty or governmental rule,
regulation or order, or any change in the interpretation, administration or
application thereof, such Bank is no longer properly entitled to deliver forms,
certificates or other evidence at a subsequent date establishing the fact that
such Bank is not subject to withholding as described herein.

(d) Withholding or deduction for or on account of Non-US Tax. A Credit Party
shall not be required to pay any additional amount under Section 2.20(b)(iii)
if, on the date on which the payment falls due (i) the payment could have been
made to the relevant Bank without deduction or withholding for or on account of
any Tax imposed by any jurisdiction other than the United States (“Non-US Tax”)
if that Bank was a Qualifying Lender but on that date that Bank is not or has
ceased to be a Qualifying Lender (other than where such Bank was a Qualifying
Lender on the Closing Date or on the date of the Assignment Agreement pursuant
to which it became a Bank, as applicable, and has ceased to be a Qualifying
Lender as a result of any change in any applicable law, treaty or governmental
rule, regulation or order, or any change in the interpretation, administration
or application thereof); (ii) the relevant Bank is a Treaty Lender and the
payment could have been made to the Lender without deduction or withholding for
or on account of Non-US Tax had that Bank complied with its obligations under
Section 2.20(e) below; or (iii) the relevant Bank is an 840A Bank and has not
given a Tax Confirmation to the Administrative Bank (other than by reason of any
change in any applicable law, treaty or governmental rule, regulation or order,
or any change in the interpretation, administration or application thereof after
the Closing Date or the date of the Assignment Agreement pursuant to which the
relevant Bank became a Bank, as applicable). The provisions of this
Section 2.20(d) are subject always to the proviso contained in Section 2.20(b)
above.

(e) Completion of procedural formalities. A Treaty Lender and each Credit Party
which makes a payment to which that Treaty Lender is entitled shall co-operate
in completing as soon as reasonably practicable after the Closing Date (or the
date of the Assignment Agreement pursuant to which the relevant Bank becomes a
Bank, as applicable) any procedural formalities necessary for that Credit Party
to obtain authorization to make that payment without deduction or withholding
for or on account of Non-US Tax (including for the avoidance of doubt the
completion and submission to the Tax authority in the relevant Treaty Lender’s
country of incorporation (or, if different, its country of residence for the
purposes of the relevant double taxation agreement) of appropriate forms and
documents that are provided to it by the relevant Credit Party).

(f) Change in circumstance. A Bank that is an 840A Bank shall promptly notify
the Administrative Bank if there is any change in the position from that set out
in the Tax Confirmation.

(g) Certain Documents. If any Tax was not correctly or legally asserted, the
relevant Bank(s) shall, upon Xerium’s reasonable request and at the expense of
Xerium, provide such documents to Xerium to enable Xerium to contest such Tax

 

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pursuant to appropriate proceedings then available to the relevant Bank(s) (so
long as providing such documents shall not, in the good faith determination of
the relevant Bank(s) result in any liability to the relevant Bank(s) and doing
so is otherwise permitted under applicable law as determined by the relevant
Bank(s)).

(h) Withholdings for certain German Taxes. The provisions of Section 2.20(a)
through (g) shall, in addition to all other deductions and withholdings on
account of any German Taxes, also apply to deductions and withholdings that are
to be made by a Credit Party with respect to any sums payable under the Credit
Documents that constitute deemed distributions by a Credit Party. As among the
Credit Parties on the one hand and the Administrative Agent and the Banks on the
other hand, the Credit Parties shall be responsible for, and effect, the payment
of these deductions and withholdings and indemnify the Administrative Agent and
the Banks against any sums paid or damages incurred as a result of being
required to make the respective payments; Section 2.20(b) shall in such event
apply, mutatis mutandis.

2.21 Obligation to Mitigate. Each Bank (which term shall include Issuing Bank
for purposes of this Section 2.21) agrees that, as promptly as practicable after
the officer of such Bank responsible for administering its Loans or Letters of
Credit, as the case may be, becomes aware of the occurrence of an event or the
existence of a condition that would cause such Bank to become an Affected Bank
or that would entitle such Bank to receive payments under Sections 2.18, 2.19 or
2.20, it will, to the extent not inconsistent with the internal policies of such
Bank and any applicable legal or regulatory restrictions, use reasonable efforts
to (a) make, issue, fund or maintain its Credit Extensions, including any
Affected Loans, through another office of such Bank, or (b) take such other
measures as such Bank may deem reasonable, if as a result thereof the
circumstances which would cause such Bank to be an Affected Bank would cease to
exist or the additional amounts which would otherwise be required to be paid to
such Bank pursuant to Sections 2.18, 2.19 or 2.20 would be materially reduced
and if, as determined by such Bank in its sole discretion, the making, issuing,
funding or maintaining of such Revolving Commitments, Loans or Letters of Credit
through such other office or in accordance with such other measures, as the case
may be, would not otherwise adversely affect such Revolving Commitments, Loans
or Letters of Credit or the interests of such Bank; provided, such Bank will not
be obligated to utilize such other office pursuant to this Section 2.21 unless
each Borrower agrees to pay all incremental expenses incurred by such Bank as a
result of utilizing such other office as described in clause (a) above. A
certificate as to the amount of any such expenses payable by each Borrower
pursuant to this Section 2.21 (setting forth in reasonable detail the basis for
requesting such amount) submitted by such Bank to such Borrower (with a copy to
Administrative Agent) shall be conclusive absent manifest error.

2.22 Tax Credit. If a Credit Party pays any additional amount under
Section 2.20(b)(iii) or under the second-to-last sentence of Section 2.20(b) and
the relevant Bank (or the Administrative Agent, as the case may be) determines
in its sole discretion that (a) a Tax Credit is attributable either to an
increased payment of which that additional amount forms part, or to that
additional amount and (b) that Bank (or the Administrative Agent, as the case
may be) has obtained, utilized and retained that Tax Credit, the Bank (or the
Administrative Agent, as the case may be) shall, to the extent that it can do so
without prejudice to the retention of the Tax Credit, pay an amount to the
Credit Party which that Credit Party determines in its absolute discretion but
in good faith will leave

 

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it (after that payment) in the same after-Tax position as it would have been in
had the additional amount not been required to be paid by the Credit Party.
Nothing herein contained shall interfere with the right of any Bank (or the
Administrative Agent, as the case may be) to arrange its affairs in whatever
manner it thinks fit and, in particular, no Bank (or the Administrative Agent,
as the case may be) shall be under any obligation to claim a Tax Credit on its
corporate profits or otherwise, or to claim such relief in priority to any other
claims, reliefs, credits or deductions available to it or to disclose details of
its affairs. Any amount to be paid by a bank pursuant to this Section 2.22 shall
be made promptly on the date of receipt of the relevant Tax Credit by such
Bank(or the Administrative Agent, as the case may be) or, if later, on the last
date on which the applicable taxation authority would be able in accordance with
applicable law to reclaim or reduce such Tax Credit.

2.23 Defaulting Banks. Anything contained herein to the contrary
notwithstanding, in the event that any Bank, other than at the direction or
request of any regulatory agency or authority, defaults (a “Defaulting Bank”) in
its obligation to fund (a “Funding Default”) any Revolving Loan or its portion
of any unreimbursed payment under Section 2.2(b)(iv) or 2.4(e) (in each case, a
“Defaulted Loan”), then (a) during any Default Period with respect to such
Defaulting Bank, such Defaulting Bank shall be deemed not to be a “Bank” for
purposes of voting on any matters (including the granting of any consents or
waivers) with respect to any of the Credit Documents; (b) to the extent
permitted by applicable law, until such time as the Default Excess with respect
to such Defaulting Bank shall have been reduced to zero, (i) any voluntary
prepayment of the Revolving Loans shall, if a Borrower so directs at the time of
making such voluntary prepayment, be applied to the Revolving Loans of other
Banks as if such Defaulting Bank had no Revolving Loans outstanding and the
Revolving Exposure of such Defaulting Bank were zero, and (ii) any mandatory
prepayment of the Revolving Loans shall, if a Borrower so directs at the time of
making such mandatory prepayment, be applied to the Revolving Loans of other
Banks (but not to the Revolving Loans of such Defaulting Bank) as if such
Defaulting Bank had funded all Defaulted Loans of such Defaulting Bank, it being
understood and agreed that such Borrower shall be entitled to retain any portion
of any mandatory prepayment of the Revolving Loans that is not paid to such
Defaulting Bank solely as a result of the operation of the provisions of this
clause (b); (c) such Defaulting Bank’s Revolving Commitment and outstanding
Revolving Loans and such Defaulting Bank’s Pro Rata Share of the Letter of
Credit Usage shall be excluded for purposes of calculating the Revolving
Commitment fee payable to Banks in respect of any day during any Default Period
with respect to such Defaulting Bank, and such Defaulting Bank shall not be
entitled to receive any Revolving Commitment fee pursuant to Section 2.11 with
respect to such Defaulting Bank’s Revolving Commitment in respect of any Default
Period with respect to such Defaulting Bank; and (d) the Total Utilization of
Tranche 1 Revolving Commitments as at any date of determination shall be
calculated as if such Defaulting Bank had funded all Defaulted Loans of such
Defaulting Bank. No Revolving Commitment of any Bank shall be increased or
otherwise affected, and, except as otherwise expressly provided in this
Section 2.23, performance by each Borrower of its obligations hereunder and the
other Credit Documents shall not be excused or otherwise modified as a result of
any Funding Default or the operation of this Section 2.23. The rights and
remedies against a Defaulting Bank under this Section 2.23 are in addition to
other rights and remedies which each Borrower may have against such Defaulting
Bank with respect to any Funding Default and which Administrative Agent or any
Bank may have against such Defaulting Bank with respect to any Funding Default.

 

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2.24 Removal or Replacement of a Bank. Anything contained herein to the contrary
notwithstanding, in the event that: (a) (i) any Bank (an “Increased Cost Bank”)
shall give notice to each Borrower that such Bank is an Affected Bank or that
such Bank is entitled to receive payments under Section 2.18, 2.19 or 2.20,
(ii) the circumstances which have caused such Bank to be an Affected Bank or
which entitle such Bank to receive such payments shall remain in effect, and
(iii) such Bank shall fail to withdraw such notice within five Business Days
after a Borrower’s request for such withdrawal; or (b) (i) any Bank shall become
a Defaulting Bank, (ii) the Default Period for such Defaulting Bank shall remain
in effect, and (iii) such Defaulting Bank shall fail to cure the default as a
result of which it has become a Defaulting Bank within five Business Days after
such Borrower’s request that it cure such default; or (c) in connection with any
proposed amendment, modification, termination, waiver or consent with respect to
any of the provisions hereof as contemplated by Section 10.6(b), the consent of
Requisite Banks shall have been obtained but the consent of one or more of such
other Banks (each a “Non-Consenting Bank”) whose consent is required shall not
have been obtained; then, with respect to each such Increased Cost Bank,
Defaulting Bank or Non-Consenting Bank (the “Terminated Bank”), a Borrower may,
by giving written notice to Administrative Agent and any Terminated Bank of its
election to do so, elect to cause such Terminated Bank (and such Terminated Bank
hereby irrevocably agrees) to assign its outstanding Loans and its Revolving
Commitments, if any, in full to one or more Eligible Assignees (each a
“Replacement Bank”) in accordance with the provisions of Section 10.6 and Xerium
shall pay any fees payable thereunder in connection with such assignment;
provided, (1) on the date of such assignment, the Replacement Bank shall pay to
Terminated Bank an amount equal to the sum of (A) an amount equal to the
principal of, and all accrued interest on, all outstanding Loans of the
Terminated Bank, (B) an amount equal to all unreimbursed drawings that have been
funded by such Terminated Bank, together with all then unpaid interest with
respect thereto at such time and (C) an amount equal to all accrued, but
theretofore unpaid fees owing to such Terminated Bank pursuant to Section 2.11;
(2) on the date of such assignment, each Borrower shall pay any amounts payable
to such Terminated Bank pursuant to Section 2.18(c), 2.19 or 2.20 or otherwise
as if it were a prepayment; and (3) in the event such Terminated Bank is a
Non-Consenting Bank, each Replacement Bank shall consent, at the time of such
assignment, to each matter in respect of which such Terminated Bank was a
Non-Consenting Bank; provided, a Borrower may not make such election with
respect to any Terminated Bank that is also an Issuing Bank unless, prior to the
effectiveness of such election, such Borrower shall have caused each outstanding
Letter of Credit issued thereby to be cancelled. Upon the prepayment of all
amounts owing to any Terminated Bank and the termination of such Terminated
Bank’s Revolving Commitments, if any, such Terminated Bank shall no longer
constitute a “Bank” for purposes hereof; provided, any rights of such Terminated
Bank to indemnification hereunder shall survive as to such Terminated Bank.

2.25 Joint and Several Liability.

(a) Joint and Several Liability. All Obligations of the Borrowers under this
Agreement and the other Credit Documents shall be joint and several Obligations
of each Borrower to the extent (i) legally permissible and (ii) local
restrictions apply and provided that none of Italia SpA, Huyck Austria, Xerium
Canada, Germany Holdings or any Non-US Guarantor shall be liable for any
Obligations of any Borrower organized in the United States. Anything contained
in this Agreement and the

 

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other Credit Documents to the contrary notwithstanding, the Obligations of each
Borrower hereunder shall be limited to a maximum aggregate amount equal to the
largest amount that would not render its Obligations hereunder subject to
avoidance as a fraudulent transfer or conveyance under § 548 of the Bankruptcy
Code, 11 U.S.C. § 548, or any applicable provisions of comparable law of a
Governmental Authority (collectively, the “Fraudulent Transfer Laws”), in each
case after giving effect to all other liabilities of such Borrower, contingent
or otherwise, that are relevant under the Fraudulent Transfer Laws (specifically
excluding, however, any liabilities of such Borrower in respect of intercompany
Indebtedness to any other Credit Party or Affiliates of any other Credit Party
to the extent that such Indebtedness would be discharged in an amount equal to
the amount paid by such Credit Party hereunder) and after giving effect as
assets to the value (as determined under the applicable provisions of the
Fraudulent Transfer Laws) of any rights to subrogation or contribution of such
Borrower pursuant to (i) applicable law or (ii) any agreement providing for an
equitable allocation among such Borrower and other Affiliates of any Credit
Party of Obligations arising under Guaranties by such parties.

(b) Subrogation. Until the Obligations shall have been paid in full in Cash,
each Borrower shall withhold exercise of any right of subrogation, contribution
or any other right to enforce any remedy which it now has or may hereafter have
against any other Borrower or any other guarantor of the Obligations. Each
Borrower further agrees that, to the extent the waiver of its rights of
subrogation, contribution and remedies as set forth herein is found by a court
of competent jurisdiction to be void or voidable for any reason, any such rights
such Borrower may have against any other Borrower, any collateral or security or
any such other guarantor, shall be junior and subordinate to any rights
Collateral Agent may have against any such other Borrower, any such collateral
or security, and any such other guarantor. The Borrowers under this Agreement
and the other Credit Documents together desire to allocate among themselves, in
a fair and equitable manner, their Obligations arising under this Agreement and
the other Credit Documents. Accordingly, in the event any payment or
distribution is made on any date by any Borrower under this Agreement and the
other Credit Documents (a “Funding Borrower”) that exceeds its Obligation Fair
Share (as defined below) as of such date, that Funding Borrower shall be
entitled to a contribution from each of the other Borrowers in the amount of
such other Borrowers’ Obligation Fair Share Shortfall (as defined below) as of
such date, with the result that all such contributions will cause each
Borrowers’ Obligation Aggregate Payments (as defined below) to equal its
Obligation Fair Share as of such date. “Obligation Fair Share” means, with
respect to a Borrower as of any date of determination, an amount equal to
(i) the ratio of (X) the Obligation Fair Share Contribution Amount (as defined
below) with respect to such Borrower to (Y) the aggregate of the Obligation Fair
Share Contribution Amounts with respect to all the Borrowers, multiplied by
(ii) the aggregate amount paid or distributed on or before such date by all
Funding Borrowers under this Agreement and the other Credit Documents in respect
of the Obligations guarantied. “Obligation Fair Share Shortfall” means, with
respect to a Borrower as of any date of determination, the excess, if any, of
the Obligation Fair Share of such Borrower over the Obligation Aggregate
Payments of such Borrower. “Obligation Fair Share Contribution Amount” means,
with respect to a Borrower as of any date of determination, the maximum
aggregate amount of the Obligations of such Borrower under this Agreement and
the other

 

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Credit Documents that would not render its Obligations hereunder or thereunder
subject to avoidance as a fraudulent transfer or conveyance under Section 548 of
Title 11 of the United States Code or any comparable applicable provisions of
state law; provided that, solely for purposes of calculating the “Obligation
Fair Share Contribution Amount” with respect to any Borrower for purposes of
this Section 2.25, any assets or liabilities of such Credit Party arising by
virtue of any rights to subrogation, reimbursement or indemnification or any
rights to or Obligations of contribution hereunder shall not be considered as
assets or liabilities of such Borrower. “Obligation Aggregate Payments” means,
with respect to a Borrower as of any date of determination, an amount equal to
(i) the aggregate amount of all payments and distributions made on or before
such date by such Borrower in respect of this Agreement and the other Credit
Documents (including in respect of this Section 2.25) minus (ii) the aggregate
amount of all payments received on or before such date by such Borrower from the
other Borrowers as contributions under this Section 2.25. The amounts payable as
contributions hereunder shall be determined as of the date on which the related
payment or distribution is made by the applicable Funding Borrower. The
allocation among the Borrowers of their Obligations as set forth in this
Section 2.25 shall not be construed in any way to limit the liability of any
Borrower hereunder or under any other Credit Document.

2.26 Optional Currencies.

(a) Selection of Currency. A Borrower (or Xerium on its behalf) shall select the
currency of a Revolving Loan Credit Extension in a Funding Notice or
Continuation Notice, provided Revolving Loan Credit Extensions may not be
denominated in more than five Optional Currencies at any time.

(b) Unavailability of a Currency. If before 11:00 a.m. (New York City time) on
any Quotation Day:

(i) a Bank notifies the Administrative Agent that the Optional Currency
requested is not readily available to it in the amount required; or

(ii) a Bank notifies the Administrative Agent that compliance with its
obligation to participate in a Loan in the proposed Optional Currency would
contravene a law or regulation applicable to it,

(iii) the Administrative Agent will give notice to the relevant Borrower or
Xerium to that effect by 2:00 p.m. (New York City time) on that day. In this
event, any Bank that gives notice pursuant to this Section 2.26(b) will be
required to participate in the Loan in the Base Currency (in an amount equal to
that Bank’s proportion of the Base Currency Amount) and its participation will
be treated as a separate Loan denominated in the Base Currency during that
Interest Period.

(c) Administrative Agent’s Calculations. Each Bank’s participation in a Loan
will be determined in accordance with Section 2.5(a).

 

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2.27 Loans to Non-US Borrowers. Each Bank may, at its option, make any Loan
available to any Non-US Borrower by causing any foreign or domestic branch or
Affiliate of such Bank to make such Loan; provided that any exercise of such
option shall not affect the obligation of such Non-US Borrower to repay such
Loan in accordance with the terms of this Agreement.

SECTION 3. CONDITIONS PRECEDENT

3.1 Conditions to Restatement Effective Date. The occurrence of the Restatement
Effective Date pursuant to Section 10.21 and the obligation of each Bank to make
Credit Extensions hereunder, in each case as of the Restatement Effective Date,
are, in addition to the conditions specified in Sections 3.2 and 3.3, subject at
the time of the occurrence of the Restatement Effective Date to the
satisfaction, or waiver in accordance with Section 10.6, of the following
conditions:

(a) [Intentionally Omitted].

(b) Schedules. The Administrative Agent shall have received updated Schedules to
this Agreement in form and substance reasonably satisfactory to the
Administrative Agent.

(c) Officer’s Certificate. The Administrative Agent shall have received a
certificate, dated the date hereof and signed by an Authorized Officer of
Xerium, confirming that all conditions precedent to the effectiveness of this
Agreement have been met, that all representations and warranties set forth
herein are true, accurate and correct.

(d) No Liabilities. Neither Xerium nor any of its Subsidiaries has any
contingent liability or liability for taxes, long term lease or unusual forward
or long term commitment that is not reflected in the audited financial
statements delivered pursuant to Section 5.1(c) for Fiscal Year 2007 or the
notes thereto and which in any such case is material in relation to the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Xerium and any of its Subsidiaries taken as a whole.

(e) [Intentionally Omitted].

(f) [Intentionally Omitted].

(g) [Intentionally Omitted].

(h) [Intentionally Omitted].

(i) [Intentionally Omitted].

(j) [Intentionally Omitted].

 

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(k) [Intentionally Omitted].

(l) Financial Statements; Projections. Banks shall have received from Xerium
(i) the consolidated balance sheet of Xerium and its Subsidiaries as of
March 31, 2008, which consolidated balance sheet shall be in form and substance
reasonably satisfactory to the Lead Arranger and Administrative Agent, and
(ii) the Projections.

(m) [Intentionally Omitted].

(n) Opinions of Counsel to Credit Parties. The Administrative Agent and its
counsel shall have received originally executed copies of the favorable written
opinions of Ropes & Gray LLP as to such matters as the Administrative Agent may
reasonably request, dated as of the Restatement Effective Date and otherwise in
form and substance reasonably satisfactory to the Administrative Agent.

(o) Fees. Xerium shall have paid to each Bank executing and delivering (by
facsimile or otherwise) this Agreement, on or before 5:00 P.M., New York time,
May 29, 2008, a fee equal to 0.50% (the “Restatement Fee”) of the outstanding
principal amount of all Loans and Commitments of such Bank. The Restatement Fee
shall be fully earned and non-refundable on the date the Requisite Banks have
executed and delivered this Agreement. Xerium shall pay the Restatement Fee to
the Administrative Agent on such date for the benefit of the Banks that have
executed and delivered this Agreement.

(p) Administrative Agent Fees and Expenses. The Administrative Agent shall have
received payment in full of all fees and expenses invoiced and due to the
Administrative Agent and the Banks (including the reasonable fees and expenses
due of its legal counsel) under the Existing Credit Agreement and in connection
with this Agreement.

(q) [Intentionally Omitted].

(r) No Litigation. There shall not exist any action, suit, investigation,
litigation or proceeding or other legal or regulatory developments, pending or
threatened in any court or before any arbitrator or Governmental Authority that,
in the reasonable opinion of the Administrative Agent, singly or in the
aggregate, materially impairs the transactions contemplated by the Credit
Documents or that could have a Material Adverse Effect.

(s) Completion of Proceedings. All partnership, corporate and other proceedings
taken or to be taken in connection with the transactions contemplated hereby and
all documents incidental thereto not previously found acceptable by the Lead
Arranger and Administrative Agent and its counsel shall be satisfactory in form
and substance to the Lead Arranger and Administrative Agent and such counsel,
and the Lead Arranger and Administrative Agent and such counsel shall have
received all such counterpart originals or certified copies of such documents as
the Lead Arranger and Administrative Agent may reasonably request.

 

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(t) [Intentionally Omitted].

(u) [Intentionally Omitted].

(v) No Material Adverse Effect. Since December 31, 2007, nothing shall have
occurred (and neither the Administrative Agent nor the Requisite Banks shall
have become aware of any facts or conditions not previously known) which the
Administrative Agent or the Requisite Banks shall reasonably determine has had,
or could reasonably be expected to have, a Material Adverse Effect.

(w) Compliance with Law and Regulations. All Loans and all other financings to
the Borrowers (and all guaranties thereof and security therefor), as well as the
transactions contemplated hereby and the consummation thereof, shall be in full
compliance in all material respects with all applicable requirements of law,
including Regulations T, U and X of the Federal Reserve Board.

(x) No Conflict with Material Contracts. After giving effect to the transactions
contemplated hereby, there shall be no conflict with, or default under, any
Material Contract.

(y) [Intentionally Omitted].

(z) [Intentionally Omitted].

(aa) [Intentionally Omitted].

(bb) [Intentionally Omitted].

(cc) [Intentionally Omitted].

(dd) [Intentionally Omitted].

3.2 Conditions to Each Credit Extension.

(a) Conditions Precedent. The obligation of each Bank to make, convert or
continue any Loan, or Issuing Bank to issue any Letter of Credit, on any Credit
Date or Continuation Date, including the Closing Date, is subject to the
satisfaction, or waiver in accordance with Section 10.6, of the following
conditions precedent:

(i) Administrative Agent shall have received a fully executed and delivered
Funding Notice, Continuation Notice or Issuance Notice, as the case may be;

(ii) after making the Credit Extensions requested on such Credit Date or
Continuation Date, the Total Utilization of Tranche 1 Revolving Commitments
shall not exceed the Revolving Commitments then in effect;

 

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(iii) as of such Credit Date or Continuation Date, the representations and
warranties contained herein and in the other Credit Documents shall be true and
correct in all material respects on and as of that Credit Date or Continuation
Date to the same extent as though made on and as of that date, except to the
extent such representations and warranties specifically relate to an earlier
date, in which case such representations and warranties shall have been true and
correct in all material respects on and as of such earlier date;

(iv) as of such Credit Date, no event shall have occurred and be continuing or
would result from the consummation of the applicable Credit Extension that would
constitute an Event of Default or a Default; and

(v) on or before the date of issuance of any Letter of Credit, Administrative
Agent shall have received all other information required by the applicable
Issuance Notice, and such other documents or information as Issuing Bank may
reasonably require in connection with the issuance of such Letter of Credit.

Any Agent or Requisite Banks shall be entitled, but not obligated to, request
and receive, prior to the making of any Credit Extension, additional information
reasonably satisfactory to the requesting party confirming the satisfaction of
any of the foregoing if, in the good faith judgment of such Agent or Requisite
Bank, such request is warranted under the circumstances.

(b) Notices. Any Notice shall be executed by an Authorized Officer in a writing
delivered to Administrative Agent. In lieu of delivering a Notice, each Borrower
may give Administrative Agent telephonic notice by the required time of any
proposed borrowing, continuation or issuance of a Letter of Credit, as the case
may be; provided each such notice shall be promptly confirmed in writing by
delivery of the applicable Notice to Administrative Agent on or before the
applicable date of borrowing, continuation or issuance. Neither Administrative
Agent nor any Bank shall incur any liability to any Borrower in acting upon any
telephonic notice referred to above that Administrative Agent believes in good
faith to have been given by a duly authorized officer or other person authorized
on behalf of a Borrower or for otherwise acting in good faith.

3.3 Conditions Relating to Optional Currencies.

(a) A currency will constitute an Optional Currency in relation to a Revolving
Loan Funding Notice if:

(i) it is readily available in the amount required and freely convertible into
the Base Currency in the Relevant Interbank Market at 11:00 a.m. (New York City
time) on the Credit Date for the applicable Credit Extension; and

(ii) it has been approved by the Administrative Agent (acting on the
instructions of all the Banks) on or prior to receipt by the Administrative
Agent of the relevant Funding Notice for that Credit Extension.

 

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(b) If the Administrative Agent has received a written request from Xerium for a
currency to be approved under paragraph (a)(ii) above, the Administrative Agent
will confirm to Xerium by 5:00 p.m. (New York City time) on the date the
Administrative Agent receives such written request:

(i) whether or not the Banks have granted their approval; and

(ii) if approval has been granted, the minimum amount and multiples for any
subsequent Credit Extension in that currency.

SECTION 4. REPRESENTATIONS AND WARRANTIES

In order to induce Banks and Issuing Bank to make each Credit Extension to be
made by this Agreement, and to induce each Bank Counterparty to enter into any
transaction in respect of Hedging Obligations, each Credit Party represents and
warrants to each Bank, Bank Counterparty and Issuing Bank, on the Restatement
Effective Date, each Interest Payment Date and each Credit Date, that the
following statements are true and correct:

4.1 Organization; Requisite Power and Authority; Qualification. Each of Xerium
and its Subsidiaries (a) is duly organized, validly existing and in good
standing (or, for Non-U.S. Credit Parties of equivalent status when reasonably
ascertainable) under the laws of its jurisdiction of organization as identified
in Schedule 4.1, (b) has all requisite power and authority to own and operate
its properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into the Credit Documents to which it is a party and to
carry out the transactions contemplated thereby, and (c) is qualified to do
business and in good standing in every jurisdiction where its assets are located
and wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had, and could not be reasonably expected to have, an R&W Material Adverse
Effect.

4.2 Capital Stock and Ownership. The Capital Stock of each of Xerium and its
Subsidiaries has been duly authorized and validly issued and is fully paid and
non-assessable. Except as set forth on Schedule 4.2, as of the date hereof,
there is no existing option, warrant, call, right, commitment or other agreement
to which Xerium or any of its Subsidiaries is a party requiring, and there is no
membership interest or other Capital Stock of Xerium or any of its Subsidiaries
outstanding which upon conversion or exchange would require, the issuance by
Xerium or any of its Subsidiaries of any additional membership interests or
other Capital Stock of Xerium or any of its Subsidiaries or other Securities
convertible into, exchangeable for or evidencing the right to subscribe for or
purchase, a membership interest or other Capital Stock of Xerium or any of its
Subsidiaries. Schedules 4.1 and 4.2 correctly set forth the ownership interest
of Xerium and each of its Subsidiaries in their respective Subsidiaries as of
the Restatement Effective Date.

 

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4.3 Due Authorization. The execution, delivery and performance of the Credit
Documents have been duly authorized by all necessary action on the part of each
Credit Party that is a party thereto.

4.4 No Conflict. The execution, delivery and performance by Credit Parties of
the Credit Documents to which they are parties and the consummation of the
transactions contemplated by the Credit Documents do not and will not
(a) violate any provision of any law or any governmental rule or regulation
applicable to Xerium or any of its Subsidiaries, any of the Organizational
Documents of Xerium or any of its Subsidiaries, or any order, judgment or decree
of any court or other agency of government binding on Xerium or any of its
Subsidiaries; (b) conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any Contractual Obligation of
Xerium or any of its Subsidiaries except to the extent such conflict, breach or
default could not reasonably be expected to have an R&W Material Adverse Effect;
(c) result in or require the creation or imposition of any Lien upon any of the
properties or assets of Xerium or any of its Subsidiaries (other than any Liens
created under any of the Credit Documents in favor of Collateral Agent, on
behalf of Secured Parties); or (d) require any approval of stockholders, members
or partners or any approval or consent of any Person under any Contractual
Obligation of Xerium or any of its Subsidiaries, except for such approvals or
consents which will be obtained on or before the Closing Date and disclosed in
writing to Banks and except for any such approvals or consents the failure of
which to obtain will not have an R&W Material Adverse Effect.

4.5 Governmental Consents. The execution, delivery and performance by Credit
Parties of the Credit Documents to which they are parties and the consummation
of the transactions contemplated by the Credit Documents do not and will not
require any registration with, consent or approval of, or notice to, or other
action to, with or by, any Governmental Authority except for (i) filings and
recordings with respect to the Collateral to be made, or otherwise delivered to
Collateral Agent for filing and/or recordation, as of the Closing Date and
(ii) filings and recordings to be made in connection with the perfection of
Collateral acquired after the Closing Date.

4.6 Binding Obligation. Each Credit Document has been duly executed and
delivered by each Credit Party that is a party thereto and is the legally valid
and binding obligation of such Credit Party, enforceable against such Credit
Party in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors’ rights generally or by equitable principles relating to
enforceability.

4.7 Historical Financial Statements. The Historical Financial Statements were
prepared in conformity with GAAP and fairly present, in all material respects,
the financial position, on a consolidated basis, of the Persons described in
such financial statements as at the respective dates thereof and the results of
operations and cash flows, on a consolidated basis, of the entities described
therein for each of the periods then ended, subject, in the case of any such
unaudited financial statements, to changes resulting from audit and normal year
end adjustments. As of the Closing Date, neither Xerium nor any of its
Subsidiaries has any contingent liability or liability for taxes, long term
lease or unusual forward or long term commitment that is not reflected in the
Historical Financial Statements or the notes thereto and which in any such case
is material in relation to the business, operations, properties, assets,
condition (financial or otherwise) or prospects of Xerium and any of its
Subsidiaries taken as a whole.

 

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4.8 Projections. On and as of the Restatement Effective Date, the Projections of
Xerium and its Subsidiaries for the period Fiscal Year 2008 through and
including Fiscal Year 2012 (the “Projections”) are based on good faith estimates
and assumptions made by the management of Xerium; provided, the Projections are
not to be viewed as facts and that actual results during the period or periods
covered by the Projections may differ from such Projections and that the
differences may be material; provided, further, as of the Restatement Effective
Date, management of Xerium believed that the Projections were reasonable and
attainable.

4.9 No Material Adverse Change. Since December 31, 2007, no event, circumstance
or change has occurred that has caused or evidences, either in any case or in
the aggregate, an R&W Material Adverse Effect.

4.10 No Restricted Junior Payments. Since December 31, 2007, neither Xerium nor
any of its Subsidiaries has directly or indirectly declared, ordered, paid or
made, or set apart any sum or property for, any Restricted Junior Payment or
agreed to do so except as permitted pursuant to Section 6.5.

There are no Adverse Proceedings, individually or in the aggregate, that could
reasonably be expected to have an R&W Material Adverse Effect. Neither Xerium
nor any of its Subsidiaries (a) is in violation of any applicable laws
(including Environmental Laws) that, individually or in the aggregate, could
reasonably be expected to have an R&W Material Adverse Effect, or (b) is subject
to or in default with respect to any final judgments, writs, injunctions,
decrees, rules or regulations of any court or any federal, provincial, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that, individually or in the aggregate,
could reasonably be expected to have an R&W Material Adverse Effect.

4.12 Payment of Taxes. Except as otherwise permitted under Section 5.3, all tax
returns and reports of Xerium and its Subsidiaries required to be filed by any
of them have been timely filed, and all taxes shown on such tax returns to be
due and payable and all assessments, fees and other governmental charges upon
Xerium and its Subsidiaries and upon their respective properties, assets,
income, businesses and franchises which are due and payable have been paid when
due and payable. Xerium knows of no proposed tax assessment against Xerium or
any of its Subsidiaries which is not being actively contested by Xerium or such
Subsidiary in good faith and by appropriate proceedings; provided, such reserves
or other appropriate provisions, if any, as shall be required in conformity with
GAAP shall have been made or provided therefor.

4.13 Properties. (a) Title. Each of Xerium and its Subsidiaries has (i) good,
sufficient and legal title to (in the case of fee interests in real property),
(ii) valid leasehold interests in (in the case of leasehold interests in real or
personal property), and (iii) good title to (in the case of all other personal
property), all of their respective properties and assets reflected in their
respective Historical Financial Statements referred to in Section 4.7 and in the
most recent financial statements delivered pursuant to Section 5.1, in each case
except for assets disposed of since the date of such financial statements in the
Ordinary Course or as otherwise permitted under Section 6.9. Except as permitted
by this Agreement, all such properties and assets are free and clear of Liens.

 

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(b) Real Estate. As of the Restatement Effective Date, Schedule 4.13(b) contains
a true, accurate and complete list of (i) all Real Estate Assets, and (ii) all
leases, subleases or assignments of leases (together with all amendments,
modifications, supplements, renewals or extensions of any thereof) affecting
each Real Estate Asset of any Credit Party, regardless of whether such Credit
Party is the landlord or tenant (whether directly or as an assignee or successor
in interest) under such lease, sublease or assignment. Each agreement listed in
clause (ii) of the immediately preceding sentence is in full force and effect
and Xerium does not have knowledge of any default that has occurred and is
continuing thereunder except where the consequences, direct or indirect, of such
default or defaults, if any, could not be reasonably expected to have an R&W
Material Adverse Effect, and each such agreement constitutes the legally valid
and binding obligation of each applicable Credit Party, enforceable against such
Credit Party in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or limiting creditors’ rights generally or by equitable principles.

4.14 Environmental Matters. Neither Xerium nor any of its Subsidiaries nor any
of their respective Facilities or operations are subject to any outstanding
written order, consent decree or settlement agreement with any Person relating
to any Environmental Law, any Environmental Claim, or any Hazardous Materials
Activity that, individually or in the aggregate, could reasonably be expected to
have an R&W Material Adverse Effect. There are and, to each of Xerium’s and its
Subsidiaries’ knowledge, have been, no conditions, occurrences, or Hazardous
Materials Activities which could reasonably be expected to form the basis of an
Environmental Claim against Xerium or any of its Subsidiaries that, individually
or in the aggregate, could reasonably be expected to have an R&W Material
Adverse Effect. Neither Xerium nor any of its Subsidiaries nor, to any Credit
Party’s knowledge, any predecessor of Xerium or any of its Subsidiaries has
filed any notice under any Environmental Law indicating past or present
treatment of Hazardous Materials at any Facility that, individually or in the
aggregate, could be reasonably expected to have an R&W Material Adverse Effect,
and none of Xerium’s or any of its Subsidiaries’ operations involves the
generation, transportation, treatment, storage or disposal of Hazardous
Materials, except as would not reasonably be expected to form the basis of an
Environmental Claim against Xerium or any of its Subsidiaries, or as listed on
Schedule 4.14. Compliance with all current or reasonably foreseeable future
requirements pursuant to or under Environmental Laws could not be reasonably
expected to have, individually or in the aggregate, an R&W Material Adverse
Effect. No event or condition has occurred or is occurring with respect to
Xerium or any of its Subsidiaries relating to any Environmental Law, any Release
of Hazardous Materials, or any Hazardous Materials Activity which individually
or in the aggregate has had, or could reasonably be expected to have, an R&W
Material Adverse Effect.

4.15 No Defaults. Neither Xerium nor any of its Subsidiaries is in default in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any of its Contractual Obligations, and no condition
exists which, with the giving of notice or the lapse of time or both, could
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, could not reasonably be expected to have an
R&W Material Adverse Effect.

 

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4.16 Material Contracts. Schedule 4.16 contains a true, correct and complete
list of all the Material Contracts in effect on the Restatement Effective Date,
and except as described thereon, all such Material Contracts are in full force
and effect and no defaults currently exist thereunder, any such default or
failure to be in force and effect which could not reasonably be expected to
result in an exercise of remedies or acceleration of the indebtedness created
thereunder.

4.17 Governmental Regulation. Neither Xerium nor any of its Subsidiaries is
subject to regulation under the Federal Power Act or the Investment Company Act
of 1940 or under any other federal, provincial or state statute or regulation
which may limit its ability to incur Indebtedness or which may otherwise render
all or any portion of the Obligations unenforceable. Neither Xerium nor any of
its Subsidiaries is a “registered investment company” or a company “controlled”
by a “registered investment company” or a “principal underwriter” of a
“registered investment company” as such terms are defined in the Investment
Company Act of 1940.

4.18 Margin Stock. Neither Xerium nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock. No part of
the proceeds of the Loans made to such Credit Party will be used to purchase or
carry any such margin stock or to extend credit to others for the purpose of
purchasing or carrying any such margin stock or for any purpose that violates,
or is inconsistent with, the provisions of Regulation T, U or X of said Board of
Governors.

4.19 Employee Matters. Neither Xerium nor any of its Subsidiaries is engaged in
any unfair labor practice that could reasonably be expected to have an R&W
Material Adverse Effect. There is (a) no unfair labor practice complaint pending
against Xerium or any of its Subsidiaries, or to the best knowledge of Xerium
and each other Borrower, threatened against any of them before the National
Labor Relations Board and no grievance or arbitration proceeding arising out of
or under any collective bargaining agreement that is so pending against Xerium
or any of its Subsidiaries or to the best knowledge of Xerium and each other
Borrower, threatened against any of them, (b) no strike or work stoppage in
existence or threatened involving Xerium or any of its Subsidiaries, and (c) to
the best knowledge of Xerium and each other Borrower, no union representation
question existing with respect to the employees of Xerium or any of its
Subsidiaries and, to the best knowledge of Xerium and each other Borrower, no
union organization activity that is taking place, except (with respect to any
matter specified in clause (a), (b) or (c) above, either individually or in the
aggregate) such as is not reasonably likely to have an R&W Material Adverse
Effect.

4.20 Employee Benefit Plans

(a) Xerium, each of its Subsidiaries and each of their respective ERISA
Affiliates are in compliance with all applicable provisions and requirements of
ERISA and the Internal Revenue Code and the regulations and published

 

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interpretations thereunder with respect to each Employee Benefit Plan, and have
performed all their obligations under each Employee Benefit Plan, other than any
non-compliance that would not be reasonably expected to have an R&W Material
Adverse Effect. Each Employee Benefit Plan which is intended to qualify under
Section 401(a) of the Internal Revenue Code has received a favorable
determination letter from the Internal Revenue Service indicating that such
Employee Benefit Plan is so qualified and nothing has occurred subsequent to the
issuance of such determination letter which would cause such Employee Benefit
Plan to lose its qualified status, except such defect that can be corrected
pursuant to Rev. Proc. 2003-44 or any successor ruling or regulation without
giving rise to an R&W Material Adverse Effect. No liability to the PBGC (other
than required premium payments), the Internal Revenue Service, any Employee
Benefit Plan or any trust established under Title IV of ERISA has been or is
expected to be incurred by Xerium, any of its Subsidiaries or any of their ERISA
Affiliates that could reasonably be expected to have an R&W Material Adverse
Effect. No ERISA Event has occurred or is reasonably expected to occur which
could reasonably be expected to result in an R&W Material Adverse Effect.

(b) Each Canadian Registered Pension Plan has been established, registered,
qualified, invested and administered in compliance with its terms and all
applicable laws, other than any non-compliance that would not reasonably be
expected to have an R&W Material Adverse Effect. No liability (other than
required contributions and premium payments) under the Canadian Registered
Pension Plans has been or is expected to be incurred by Xerium Canada, or any
Affiliate of Xerium Canada that could reasonably be expected to have an R&W
Material Adverse Effect. No Canadian Pension Plan Event has occurred or is
reasonably expected to occur which could reasonably be expected to result in a
liability to Xerium Canada or any Affiliate of Xerium Canada in excess of
$1,000,000. Each Canadian Registered Pension Plan has been funded on both a
going concern and solvency basis in accordance with applicable laws and on the
basis of the actuarial report which was most recently filed with the applicable
pension regulator for the applicable Canadian Registered Pension Plan. None of
Xerium Canada or any Affiliate of Xerium Canada contribute to, are obligated to
contribute to (or have contributed within the last five years to) a
multi-employer pension plan, as defined under applicable laws.

4.21 Certain Fees. No broker’s or finder’s fee or commission will be payable
with respect hereto or any of the transactions contemplated hereby.

4.22 Solvency. Each Credit Party is and, upon the incurrence of any Obligation
by such Credit Party on any date on which this representation and warranty is
made, will be, Solvent.

4.23 Related Agreements.

(a) Delivery. Xerium and each other Borrower have delivered to the Lead Arranger
and Administrative Agent complete and correct copies of (i) each Related
Agreement and of all exhibits and schedules thereto as of the date hereof and
(ii) copies of any material amendment, restatement, supplement or other
modification to or waiver of each Related Agreement entered into after the date
hereof.

 

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(b) Representations and Warranties. Except to the extent otherwise expressly set
forth herein or in the schedules hereto, and subject to the qualifications set
forth therein, each of the representations and warranties given by any Credit
Party in any Related Agreement is true and correct in all material respects as
of the Closing Date (or as of any earlier date to which such representation and
warranty specifically relates). Notwithstanding anything in the Related
Agreements to the contrary, the representations and warranties of each Credit
Party set forth in this Section 4.23 (other than the representations and
warranties in respect of the Information Memorandum and the Prospectus) shall,
solely for purposes hereof, survive the Closing Date for the benefit of Banks.

(c) Governmental Approvals. All Governmental Authorizations and all other
authorizations, approvals and consents of any other Person required by the
Related Agreements have been obtained and are in full force and effect.

(d) Conditions Precedent. On the Closing Date, (i) all of the conditions to
effecting or consummating the transactions set forth in the Related Agreements
have been duly satisfied or, with the consent of Administrative Agent and the
Lead Arranger, waived, and (ii) such transactions have been consummated in
accordance with the Related Agreements and all applicable laws.

Each of Xerium and its Subsidiaries is in compliance with all applicable
statutes, regulations and orders of, and all applicable restrictions imposed by,
all Governmental Authorities, in respect of the conduct of its business and the
ownership of its property (including compliance with all applicable
Environmental Laws with respect to any Real Estate Asset or governing its
business and the requirements of any permits issued under such Environmental
Laws with respect to any such Real Estate Asset or the operations of Xerium or
any of its Subsidiaries), except such non-compliance that, individually or in
the aggregate, could not reasonably be expected to result in an R&W Material
Adverse Effect.

4.25 Disclosure. No representation or warranty of any Credit Party contained in
any Credit Document or in any other documents, certificates or written
statements, including without limitation, information contained in the
presentations made to the Banks, furnished to Banks by or on behalf of Xerium or
any of its Subsidiaries for use in connection with the transactions contemplated
hereby contains any untrue statement of a material fact or omits to state a
material fact (known to Xerium or any other Borrower, in the case of any
document not furnished by either of them) necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances in which the same were made. Any projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by Xerium or any other Borrower to be
reasonable at the time made, it being recognized by Banks that such projections
as to future events are not to be viewed as facts and that actual results during
the period or periods covered by any such projections may differ from the
projected results. There are no facts known (or which should upon the reasonable
exercise of diligence be known) to Xerium or any other Borrower (other than
matters of a general economic nature) that, individually or in the aggregate,
could reasonably be expected to

 

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result in an R&W Material Adverse Effect and that have not been disclosed herein
or in such other documents, certificates and statements furnished to Banks for
use in connection with the transactions contemplated hereby.

SECTION 5. AFFIRMATIVE COVENANTS

Each Credit Party covenants and agrees that so long as any Commitment is in
effect and until payment in full of all Obligations and cancellation or
expiration of all Letters of Credit, each Credit Party shall perform, and shall
cause each of its Subsidiaries to perform, all covenants in this Section 5.

5.1 Financial Statements and Other Reports. Xerium will deliver to
Administrative Agent:

(a) Quarterly Cash Flow Projections. As soon as available, and in any event
within 30 days after then end of each Fiscal Quarter, a 3 month rolling cash
flow statement in form and substance reasonably satisfactory to the
Administrative Agent;

(b) Quarterly Financial Statements. As soon as available, and in any event
within 45 days after the end of the first three Fiscal Quarters of each Fiscal
Year, the consolidated balance sheets of Xerium and its Subsidiaries as at the
end of such Fiscal Quarter and the related consolidated statements of income,
stockholders’ equity and cash flows of Xerium and its Subsidiaries for such
Fiscal Quarter and for the period from the beginning of the then current Fiscal
Year to the end of such Fiscal Quarter, setting forth in each case in
comparative form the corresponding figures for the corresponding periods of the
previous Fiscal Year, together with a Financial Officer Certification with
respect thereto;

(c) Annual Financial Statements. As soon as available, and in any event within
90 days after the end of each Fiscal Year, (i) the audited consolidated balance
sheets of Xerium and its Subsidiaries as at the end of such Fiscal Year and the
related consolidated statements of income, stockholders’ equity and cash flows
of Xerium and its Subsidiaries for such Fiscal Year, setting forth in each case
in comparative form the corresponding figures for the previous Fiscal Year,
together with a Financial Officer Certification; and (ii) with respect to such
consolidated financial statements a report thereon of Ernst & Young LLP or other
independent certified public accountants of recognized international standing
selected by Xerium (which report (other than with respect to the “on going
concern” opinion in the report for Fiscal Year 2007) shall be unqualified as to
going concern and scope of audit, and shall state that such consolidated
financial statements fairly present, in all material respects, the consolidated
financial position of Xerium and its Subsidiaries as at the dates indicated and
the results of their operations and their cash flows for the periods indicated
in conformity with GAAP applied on a basis consistent with prior years (except
as otherwise disclosed in such financial statements) and that the examination by
such accountants in connection with such consolidated financial statements has
been made in accordance with generally accepted auditing standards) together
with a written statement by such

 

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independent certified public accountants stating that nothing has come to their
attention that causes them to believe that the information contained in any
Compliance Certificate is not correct or that the matters set forth in such
Compliance Certificate are not stated in accordance with the terms hereof;

(d) Compliance Certificate. Together with each delivery of financial statements
of Xerium and its Subsidiaries pursuant to Sections 5.1(b) and 5.1(c), a duly
executed and completed Compliance Certificate; provided, that in respect of the
fourth Fiscal Quarter of each Fiscal Year, it shall also deliver a duly executed
and completed Compliance Certificate as soon as available, and in any event
within 90 days after the end of the fourth Fiscal Quarter;

(e) Statements of Reconciliation after Change in Accounting Principles. If, as a
result of any change in accounting principles and policies from those used in
the preparation of the Historical Financial Statements, the Compliance
Certificate (including, without limitation, calculation of Excess Cash therein)
of Xerium and its Subsidiaries delivered pursuant to Section 5.1(d) will differ
in any material respect in the manner in which computations are derived from
Xerium’s financial statements for the Compliance Certificate that would have
been delivered pursuant to such subsection had no such change in accounting
principles and policies been made, then, together with the first delivery of
such Compliance Certificate after such change, Xerium will deliver one or more
statements of explanation of such difference(s) in form and substance
satisfactory to Administrative Agent and, if appropriate, Xerium’s proposal for
amending any terms or requirements used or addressed in the Compliance
Certificate to adjust for such change(s);

(f) Sufficiency of Public Quarterly and Annual Reports. Notwithstanding anything
to the contrary contained herein, delivery to the Administrative Agent by Xerium
of its quarterly report on Form 10-Q and its annual report on form 10-K shall
satisfy the requirements of Sections 5.1(b) and (c), respectively, for so long
as Xerium remains a reporting company under the Exchange Act.

(g) Notice of Default. Promptly upon any officer of Xerium or each other
Borrower obtaining knowledge (i) of any condition or event that constitutes a
Default or an Event of Default or that notice has been given to Xerium or each
other Borrower with respect thereto; (ii) that any Person has given any notice
to Xerium or any of its Subsidiaries or taken any other action with respect to
any event or condition set forth in Section 8.1(b); or (iii) of the occurrence
of any event or change that has caused or evidences, either in any case or in
the aggregate, a Material Adverse Effect, a certificate of its Authorized
Officers specifying the nature and period of existence of such condition, event
or change, or specifying the notice given and action taken by any such Person
and the nature of such claimed Event of Default, Default, default, event or
condition, and what action each Borrower has taken, is taking and proposes to
take with respect thereto;

(h) Notice of Litigation. Promptly upon any officer of Xerium or each other
Borrower obtaining knowledge of (i) the institution of, or non-frivolous threat
of, any Adverse Proceeding not previously disclosed in writing by each Borrower
to

 

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Banks, or (ii) any material development in any Adverse Proceeding that, in the
case of either (i) or (ii) could be reasonably expected to have a Material
Adverse Effect, or seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the transactions
contemplated hereby, written notice thereof together with such other information
as may be reasonably available to Xerium or each other Borrower to enable Banks
and their counsel to evaluate such matters;

(i) ERISA. (i) Promptly upon becoming aware of the occurrence of or forthcoming
occurrence of any ERISA Event, a written notice specifying the nature thereof,
what action Xerium, any of its Subsidiaries or any of their respective ERISA
Affiliates has taken, is taking or proposes to take with respect thereto and,
when known, any action taken or threatened by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto; and (ii) with reasonable
promptness, copies of (1) each Schedule B (Actuarial Information) to the annual
report (Form 5500 Series) filed by Xerium, any of its Subsidiaries or any of
their respective ERISA Affiliates with the Internal Revenue Service with respect
to each Pension Plan; (2) all notices received by Xerium, any of its
Subsidiaries or any of their respective ERISA Affiliates from a Multiemployer
Plan sponsor concerning an ERISA Event; and (3) copies of such other documents
or governmental reports or filings relating to any Employee Benefit Plan as
Administrative Agent shall reasonably request;

(j) Canadian Registered Pension Plans. (i) Promptly upon becoming aware of the
occurrence of or forthcoming occurrence of any Canadian Pension Plan Event, a
written notice specifying the nature thereof, what action Xerium Canada or any
Affiliate of Xerium Canada has taken, is taking or proposes to take with respect
thereto and, when known, any action taken or threatened by the Canada Revenue
Agency or any applicable pension regulator; and (ii) with reasonable promptness,
(1) copies of each annual information return filed with the Canada Revenue
Agency or any applicable pension regulator with respect to a Canadian Registered
Pension Plan; (2) copies of all notices received by Xerium Canada or any
Affiliate of Xerium Canada from the sponsor of a multi-employer pension plan, as
defined under applicable laws, concerning a Canadian Pension Plan Event; and
(3) copies of such other documents or governmental reports or filings relating
to any Canadian Registered Pension Plan as Administrative Agent shall reasonably
request;

(k) Insurance Report. As soon as practicable following any material change in
the insurance coverage, notice to the Administrative Agent of such change and an
explanation in form and substance reasonably satisfactory to the Administrative
Agent of such change;

(l) Environmental Reports and Audits. As soon as practicable following receipt
thereof, copies of all environmental audits and reports with respect to
environmental matters at any Facility or which relate to any environmental
liabilities of Xerium or its Subsidiaries which, in any such case, individually
or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect;

 

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(m) Information Regarding Collateral. Each Borrower will furnish to Collateral
Agent prompt written notice of any change (i) in any Credit Party’s corporate
name, (ii) in any Credit Party’s identity or corporate structure or (iii) in any
Credit Party’s Federal Taxpayer Identification Number. Each Borrower agrees not
to effect or permit any change referred to in the preceding sentence unless all
filings have been made under the Uniform Commercial Code or otherwise that are
required in order for Collateral Agent to continue at all times following such
change to have a valid, legal and perfected security interest in all the
Collateral as contemplated in the Collateral Documents. Each Borrower also
agrees promptly to notify Collateral Agent if any material portion of the
Collateral is damaged or destroyed;

(n) Annual Collateral Verification. Each year, at the time of delivery of annual
financial statements with respect to the preceding Fiscal Year pursuant to
Section 5.1(c), each Borrower shall deliver to Collateral Agent an Officer’s
Certificate either confirming that there has been no change in such information
since the date of the Collateral Questionnaire delivered on the Closing Date or
the date of the most recent certificate delivered pursuant to this Section
and/or identifying such changes;

(o) Other Information. (i) Promptly upon their becoming available, copies of
(A) all financial statements, reports, notices and proxy statements sent or made
available generally by Xerium to its security holders acting in such capacity or
by any Subsidiary of Xerium to its security holders other than Xerium or another
Subsidiary of Xerium, (B) all regular and periodic reports and all registration
statements and prospectuses, if any, filed by Xerium or any of its Subsidiaries
with any securities exchange or with the Securities and Exchange Commission and
(C) all press releases and other statements made available generally by Xerium
or any of its Subsidiaries to the public concerning material developments in the
business of Xerium or any of its Subsidiaries, and (ii) such other information
and data with respect to Xerium or any of its Subsidiaries as from time to time
may be reasonably requested by Administrative Agent;

(p) Electronic Delivery.

(i) Notwithstanding anything in any Credit Document to the contrary, each Credit
Party hereby agrees that it will use its reasonable best efforts to provide to
the Administrative Agent all information, documents and other materials that it
is obligated to furnish to the Administrative Agent pursuant to the Credit
Documents, including, without limitation, all notices, requests, financial
statements, financial and other reports, certificates and other information
materials, but excluding any such communication that (A) relates to a request
for a new Credit Extension or other extension of credit (including any election
of an interest rate or Interest Period relating thereto), (B) relates to the
payment of any principal or other amount due under any Credit Document prior to
the scheduled date therefor, (C) provides notice of any Default or Event of
Default under any Credit Document or (D) is required to be delivered to satisfy
any condition set forth in Sections 3.1 and/or 3.2 (all such non-excluded
communications being referred to herein collectively as the “Communications”),
by transmitting the Communications in an electronic/soft medium in a format
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oploanswebadmin@citigroup.com, with a copy to lynne.p.savage@citigroup.com. In
addition, each Credit Party agrees to continue to provide the Communications to
the Administrative Agent in the manner specified in the Credit Documents, but
only to the extent requested by the Administrative Agent.

(ii) Each Credit Party further agrees that the Administrative Agent may make the
Communications available to the Banks by posting the Communications on
Intralinks, Fixed Income Direct or a substantially similar electronic
transmission system (each such system, a “Platform”). Each Credit Party
acknowledges that the distribution of material through an electronic medium is
not necessarily secure and that there are confidentiality and other risks
associated with such distribution.

(iii) EACH PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE”. THE AGENT PARTIES
(AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE
COMMUNICATIONS, OR THE ADEQUACY OF ANY PLATFORM, AND EXPRESSLY DISCLAIM
LIABILITY FOR ERRORS OR OMISSIONS IN THE COMMUNICATIONS. NO WARRANTY OF ANY
KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD
PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE AGENT
PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR ANY PLATFORM. IN NO EVENT SHALL
ANY AGENT OR ANY OF ITS AFFILIATES OR ANY OF THEIR OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ADVISORS OR REPRESENTATIVES (COLLECTIVELY, THE “AGENT
PARTIES”) HAVE ANY LIABILITY TO THE BORROWERS, ANY OTHER CREDIT PARTY, ANY BANK
OR ANY OTHER PERSON OR ENTITY FOR DAMAGES OF ANY KIND, INCLUDING, WITHOUT
LIMITATION, DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES,
LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF THE
BORROWERS’ OR THE AGENTS’ TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET,
EXCEPT TO THE EXTENT THE LIABILITY OF ANY AGENT PARTY IS FOUND IN A FINAL
NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED
PRIMARILY FROM SUCH AGENT PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

(iv) The Administrative Agent agrees that the receipt of the Communications by
it at its e-mail address set forth in Annex B shall constitute effective
delivery of the Communications to the Administrative Agent for purposes of this
Section 5.1(p). Each Bank agrees that notice to it (as provided in the next
sentence) specifying that the Communications

 

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have been posted to a Platform shall constitute effective delivery of the
Communications to such Bank for purposes of this Section 5.1(p). Each Bank
agrees (A) to notify the Administrative Agent in writing (including by
electronic communication) from time to time of such Bank’s e-mail address to
which the foregoing notice may be sent by electronic transmission and (B) that
the foregoing notice may be sent to such e-mail address.

(v) Nothing in this Section 5.1(p) shall prejudice the right of any Agent or any
Bank to give any notice or other communication pursuant to any Credit Document
in any other manner specified in such Credit Document.

(q) Budget. On or before April 1 of each Fiscal Year, Xerium shall deliver to
the Administrative Agent (commencing with Fiscal Year 2009), a detailed
consolidated budget and business plan of Xerium and its Subsidiaries through
Fiscal Year 2012 (including a projected consolidated balance sheet and related
statements of projected operations and cash flow as of the end of Fiscal Year
2012) in form and substance reasonably satisfactory to the Administrative Agent
(the “Budget”); provided that with respect to the Fiscal Year in which the
Budget is being delivered such Budget shall be prepared by Fiscal Quarter for
such Fiscal Year.

5.2 Existence. Except as otherwise permitted under Section 6.9, each Credit
Party will, and will cause each of its Subsidiaries to, at all times preserve
and keep in full force and effect its existence and all rights and franchises,
licenses and permits material to its business; provided, no Credit Party or any
of its Subsidiaries shall be required to preserve any such existence, right or
franchise, licenses and permits if such Person’s board of directors (or similar
governing body) shall determine that the preservation thereof is no longer
desirable in the conduct of the business of such Person, and that the loss
thereof is not disadvantageous in any material respect to such Person or to
Banks.

5.3 Payment of Taxes and Claims. Each Credit Party will, and will cause each of
its Subsidiaries to, pay all Taxes imposed upon it or any of its properties or
assets or in respect of any of its income, capital, payroll businesses or
franchises before any penalty or fine accrues thereon, and all Taxes or claims
(including claims for labor, services, materials and supplies) for sums that
have become due and payable and that by law have or may become a Lien upon any
of its properties or assets, prior to the time when any penalty or fine shall be
incurred with respect thereto; provided, no such Tax or claim need be paid if it
is being contested in good faith by appropriate proceedings promptly instituted
and diligently conducted, so long as (a) adequate reserve or other appropriate
provision, as shall be required in conformity with GAAP, shall have been made
therefor, and (b) in the case of a Tax or claim which has or may become a Lien
against any of the Collateral, such contest proceedings conclusively operate to
stay the sale of any portion of the Collateral to satisfy such Tax or claim. No
Credit Party will, nor will it permit any of its Subsidiaries to, file or
consent to the filing of any consolidated income tax return with any Person
(other than Xerium or any of its Subsidiaries).

5.4 Maintenance of Properties. Each Credit Party will, and will cause each of
its Subsidiaries to, maintain or cause to be maintained in good repair, working
order and condition, ordinary wear and tear excepted, all material properties
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business of Xerium and its Subsidiaries and from time to time will make or cause
to be made all appropriate repairs, renewals and replacements thereof except
where the failure to maintain such properties could not reasonably be expected
in any individual case or in the aggregate to have a Material Adverse Effect.

5.5 Insurance. Xerium will maintain or cause to be maintained, with financially
sound and reputable insurers, such public liability insurance, third party
property damage insurance, business interruption insurance and casualty
insurance with respect to liabilities, losses or damage in respect of the
assets, properties and businesses of Xerium and its Subsidiaries as may
customarily be carried or maintained under similar circumstances by Persons of
established reputation engaged in similar businesses, in each case in such
amounts (giving effect to self insurance), with such deductibles, covering such
risks and otherwise on such terms and conditions as shall be customary for such
Persons. Without limiting the generality of the foregoing, Xerium will maintain
or cause to be maintained (a) flood insurance with respect to each Flood Hazard
Property that is located in a community that participates in the National Flood
Insurance Program, in each case in compliance with any applicable regulations of
the Board of Governors of the Federal Reserve System, and (b) replacement value
casualty insurance on the Collateral under such policies of insurance, with such
insurance companies, in such amounts, with such deductibles, and covering such
risks as are at all times carried or maintained under similar circumstances by
Persons of established reputation engaged in similar businesses. Each such
policy of insurance issued by an insurer organized or incorporated in the United
States shall (i) name Collateral Agent, on behalf of Banks as an additional
insured thereunder as its interests may appear and (ii) in the case of each
casualty insurance policy, contain a loss payable clause or endorsement,
satisfactory in form and substance to Collateral Agent, that names Collateral
Agent, on behalf of Banks, as the loss payee thereunder for losses of $1,000,000
or greater and provides for at least thirty days’ prior written notice to
Collateral Agent of any modification or cancellation of such policy.

5.6 Books and Records; Inspections. Each Credit Party will, and will cause each
of its respective Subsidiaries to, keep books and records which accurately
reflect its business affairs in all material respects and material transactions
and each Credit Party will, and will cause each of its respective Subsidiaries
to, permit any authorized representatives designated by the Administrative Agent
to visit and inspect any of the properties of any Credit Party and any of its
respective Subsidiaries, to inspect, copy and take extracts from its and their
financial and accounting records, and to discuss its and their affairs, finances
and accounts with its and their officers and independent public accountants, all
upon reasonable notice and at such reasonable times during normal business hours
and as often as may reasonably be requested.

5.8 Compliance with Laws. Each Credit Party will comply, and shall cause each of
its Subsidiaries and all other Persons, if any, on or occupying any Facilities
to comply in all material respects, with the requirements of all applicable
laws, rules, regulations and orders of any Governmental Authority (including all
Environmental Laws).

 

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5.9 Environmental.

(a) Environmental Disclosure. Xerium will deliver to Administrative Agent:

(i) as soon as practicable following receipt thereof, copies of all
environmental audits, investigations, analyses and reports of any kind or
character, whether prepared by personnel of Xerium or any of its Subsidiaries or
by independent consultants, governmental authorities or any other Persons, with
respect to significant environmental matters at any Facility or with respect to
any Environmental Claims that could reasonably be expected to have a Material
Adverse Effect;

(ii) promptly upon the occurrence thereof, written notice describing in
reasonable detail (1) any Release required to be reported to any federal,
provincial, state or local governmental or regulatory agency under any
applicable Environmental Laws, (2) any remedial action taken by Xerium or any
other Person in response to (A) any Hazardous Materials Activities the existence
of which has a reasonable possibility of resulting in one or more Environmental
Claims having, individually or in the aggregate, a Material Adverse Effect, or
(B) any Environmental Claims that, individually or in the aggregate, have a
reasonable possibility of resulting in a Material Adverse Effect, and
(3) Xerium’s or each other Borrower’s discovery of any occurrence or condition
on any real property adjoining or in the vicinity of any Facility that could
cause such Facility or any part thereof to be subject to any material
restrictions on the ownership, occupancy, transferability or use thereof under
any Environmental Laws;

(iii) as soon as practicable following the sending or receipt thereof by Xerium
or any of its Subsidiaries, a copy of any and all written communications with
respect to (1) any Environmental Claims that, individually or in the aggregate,
have a reasonable possibility of giving rise to a Material Adverse Effect,
(2) any Release required to be reported to any federal, state or local
governmental or regulatory agency, and (3) any request for information from any
governmental agency that suggests such agency is investigating whether Xerium or
any of its Subsidiaries may be potentially responsible for any Hazardous
Materials Activity;

(iv) prompt written notice describing in reasonable detail (1) any proposed
acquisition of stock, assets, or property by Xerium or any of its Subsidiaries
that could reasonably be expected to (A) expose Xerium or any of its
Subsidiaries to, or result in, Environmental Claims that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect or
(B) adversely affect the ability of Xerium or any of its Subsidiaries to
maintain in full force and effect all material Governmental Authorizations
required under any Environmental Laws for their respective operations and
(2) any proposed action to be taken by Xerium or any of its Subsidiaries to
modify current operations in a manner that could reasonably be expected to
subject Xerium or any of its Subsidiaries to any additional material obligations
or requirements under any Environmental Laws; and

 

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(v) with reasonable promptness, such other documents and information as from
time to time may be reasonably requested by Administrative Agent in relation to
any matters disclosed pursuant to this Section 5.9(a).

(b) Hazardous Materials Activities, Etc. Each Credit Party shall promptly take,
and shall cause each of its Subsidiaries promptly to take, any and all actions
necessary to (i) cure any violation of applicable Environmental Laws by such
Credit Party or its Subsidiaries that could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, and (ii) make an
appropriate response to any Environmental Claim against such Credit Party or any
of its Subsidiaries and discharge any obligations it may have to any Person
thereunder where failure to do so could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

5.10 Subsidiaries. In the event that any Person becomes a Material Subsidiary of
a Borrower, such Borrower shall (a) promptly cause such Material Subsidiary to
become a Guarantor hereunder and a Grantor under the Pledge and Security
Agreement by executing and delivering to Administrative Agent and Collateral
Agent a Counterpart Agreement, taking into account not to create adverse tax
consequences to any Credit Party in respect of Section 956 of the Internal
Revenue Code, and (b) take all such actions and execute and deliver, or cause to
be executed and delivered, all such documents, instruments, agreements, opinions
and certificates as are reasonably requested by the Collateral Agent. With
respect to each such Material Subsidiary, each Borrower shall promptly send to
Administrative Agent written notice setting forth with respect to such Person
(i) the date on which such Person became a Subsidiary of such Borrower, and
(ii) all of the data required to be set forth in Schedules 4.1 and 4.2 with
respect to all Subsidiaries of such Borrower; provided, such written notice
shall be deemed to supplement Schedule 4.1 and 4.2 for all purposes hereof.

5.11 Additional Material Real Estate Assets. In the event that any Credit Party
acquires a Material Real Estate Asset or a Real Estate Asset owned or leased on
the Closing Date becomes a Material Real Estate Asset and such interest has not
otherwise been made subject to the Lien of the Collateral Documents in favor of
Collateral Agent, for the benefit of Secured Parties, taking into account not to
create adverse tax consequences to Xerium in respect of Section 956 of the
Internal Revenue Code, then such Credit Party, as soon as practicable but in no
event later than twenty (20) days after acquiring such Material Real Estate
Asset, shall take all such actions and execute and deliver, or cause to be
executed and delivered, all such mortgages, documents, instruments, agreements,
opinions and certificates with respect to each such Material Real Estate Asset
that Collateral Agent shall reasonably request to create in favor of Collateral
Agent, for the benefit of Secured Parties, a valid and, subject to any filing
and/or recording referred to herein, perfected First Priority security interest
in such Material Real Estate Assets. In addition to the foregoing, each Borrower
shall, at the request of Requisite Banks, deliver, from time to time, to
Administrative Agent such appraisals as are required by law or regulation of
Real Estate Assets with respect to which Collateral Agent has been granted a
Lien.

 

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5.13 Further Assurances. At any time or from time to time upon the request of
Administrative Agent, each Credit Party will, at its expense, promptly execute,
acknowledge and deliver such further documents and do such other acts and things
as Administrative Agent or Collateral Agent may reasonably request in order to
effect fully the purposes of the Credit Documents. In furtherance and not in
limitation of the foregoing, each Credit Party shall take such actions as
Administrative Agent or Collateral Agent may reasonably request from time to
time to ensure that the Obligations are guarantied by the Guarantors and are
secured by substantially all of the assets of Xerium, and its Subsidiaries and
all of the outstanding Capital Stock of each Borrower and its Subsidiaries
(subject to limitations contained in the Credit Documents with respect to
Foreign Subsidiaries).

5.14 Intellectual Property. Unless otherwise consented to by Agents or Requisite
Banks, the Borrower and each of its Subsidiaries will continue to own or possess
the right to use, free from any restrictions, all Patents, Trademarks,
Copyrights, and Domain Names that are used in the operation of their respective
businesses as presently conducted and as proposed to be conducted, except to the
extent the failure to so own or possess would not reasonably be expected to have
a Material Adverse Effect.

5.15 Know-Your-Customer Rules.

If :

(i) (A) the introduction of or any change in (or in the interpretation,
administration or application of) any law or regulation made after the date of
the Existing Credit Agreement;

(B) any change in the status of a Credit Party after the date of the Existing
Credit Agreement; or

(C) a proposed assignment or transfer by a Bank of any of its rights and
obligations under this Agreement to a party that is not a Bank prior to such
assignment or transfer,

obliges the Administrative Agent or any Bank (or, in the case of paragraph
(C) above, any prospective new Bank) to comply with “know your customer” or
similar identification procedures in circumstances where the necessary
information is not already available to it, each Credit Party shall promptly
upon the request of the Administrative Agent or any Bank supply, or procure the
supply of, such documentation and other evidence as is reasonably requested by
the Administrative Agent (for itself or on behalf of any Bank) or any Bank (for
itself or, in the case of the event described in paragraph (C) above, on behalf
of any prospective new Bank) in order for the Administrative Agent, such Bank
or, in the case of the event described in paragraph (C) above, any prospective
new Bank to carry out and be satisfied it has complied with all necessary “know
your customer” or other similar checks under all applicable laws and regulations
pursuant to the transactions contemplated in the Credit Documents.

(ii) Each Bank shall promptly upon the request of the Administrative Agent
supply, or procure the supply of, such documentation and other evidence as is
reasonably requested by the Administrative Agent (for itself) in order for the

 

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Administrative Agent to carry out and be satisfied it has complied with all
necessary “know your customer” or other similar checks under all applicable laws
and regulations pursuant to the transactions contemplated in the Credit
Documents.

(iii) Xerium shall, by not less than 10 Business Days’ prior written notice to
the Administrative Agent, notify the Administrative Agent (which shall promptly
notify the Banks) that one of its Subsidiaries shall become a Guarantor pursuant
to Section 5.10.

Following the giving of any notice pursuant to paragraph (iii) above, if the
accession of such Subsidiary obliges the Administrative Agent or any Bank to
comply with “know your customer” or similar identification procedures in
circumstances where the necessary information is not already available to it,
Xerium shall promptly upon the request of the Administrative Agent or any Bank
supply, or procure the supply of, such documentation and other evidence as is
reasonably requested by the Administrative Agent (for itself or on behalf of any
Bank) or any Bank (for itself or on behalf of any prospective new Bank) in order
for the Administrative Agent or such Bank or any prospective new Bank to carry
out and be satisfied it has complied with the results of all necessary “know
your customer” or other similar checks under all applicable laws and regulations
pursuant to the accession of such Subsidiary to this Agreement.

5.16 Pari Passu Ranking. Each Credit Party will, and will cause each of its
Subsidiaries to ensure that its payment obligations under each of the Credit
Documents rank and will at all times rank at least pari passu in right and
priority of payment with all its other present and future secured and
unsubordinated indebtedness (actual or contingent) except indebtedness preferred
solely by operation of law.

5.17 Post Restatement Effective Date Matters. Each Credit Party will execute and
deliver the documents and complete the tasks set forth on Schedule 5.17, in each
case within the time limits specified on such schedule or as such time as may be
extended by the Collateral Agent in its sole discretion. No failure to execute
and deliver such documents or complete such tasks on or before the Restatement
Effective Date shall constitute a failure to meet any condition imposed by
Section 3 of this Agreement; and, until the expiration of the time limits
established as provided in the preceding sentence, no failure to execute and
deliver such documents or complete such tasks shall constitute a Default or
Event of Default.

 

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SECTION 6. NEGATIVE COVENANTS

Each Credit Party covenants and agrees that, so long as any Commitment is in
effect and until payment in full of all Obligations and cancellation or
expiration of all Letters of Credit, such Credit Party shall perform, and shall
cause each of its Subsidiaries to perform, all covenants in this Section 6.

6.1 Indebtedness. No Credit Party shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or
otherwise become or remain directly or indirectly liable with respect to any
Indebtedness, except:

(a) the Obligations;

(b) Indebtedness of any Subsidiary to a Borrower or to any other Subsidiary, or
of a Borrower to any other Borrower or any Subsidiary; provided, (i) all such
Indebtedness shall be evidenced by promissory notes and all such notes shall be
subject to a First Priority Lien pursuant to the Pledge and Security Agreement,
(ii) all such Indebtedness shall be unsecured and subordinated in right of
payment to the payment in full of the Obligations pursuant to the terms of the
applicable promissory notes or an intercompany subordination agreement that in
any such case, is reasonably satisfactory to Administrative Agent, and (iii) any
payment by any such Guarantor Subsidiary under any guaranty of the Obligations
shall result in a pro tanto reduction of the amount of any Indebtedness owed by
such Subsidiary to Xerium or to any of its Subsidiaries for whose benefit such
payment is made;

(c) Subordinated Debt; provided, that (i) no Default or Event of Default is
continuing under this Agreement or would result from such issuance, (ii) the
Borrowers are in compliance (and certify as to such compliance) with Section 6.8
on a pro forma basis after giving effect to the such issuance and (iii) the
proceeds of such issuance are applied in accordance with Section 2.14(d);

(d) Indebtedness incurred by Xerium or any of its Subsidiaries arising from
agreements providing for indemnification, adjustment of purchase price or
similar obligations, or from guaranties or letters of credit, surety bonds or
performance bonds securing the performance of each Borrower or any such
Subsidiary pursuant to such agreements, in connection with Permitted
Acquisitions or permitted dispositions of any business, assets or Subsidiary of
Xerium or any of its Subsidiaries;

(e) Indebtedness which may be deemed to exist pursuant to any guaranties,
performance, surety, statutory, appeal or similar obligations incurred in the
Ordinary Course;

(f) Indebtedness in respect of netting services, overdraft protections and
otherwise in connection with deposit accounts;

(g) guaranties in the Ordinary Course of obligations to suppliers, customers,
franchisees and licensees of Xerium and its Subsidiaries;

 

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(h) guaranties by a Borrower of Indebtedness of a Subsidiary or guaranties by a
Subsidiary of a Borrower of Indebtedness of a Borrower or a Subsidiary with
respect, in each case, to Indebtedness otherwise permitted to be incurred
pursuant to this Section 6.1;

(i) Indebtedness described in Schedule 6.1(i), but not any extensions, renewals
or replacements of such Indebtedness except (i) renewals and extensions
expressly provided for in the agreements evidencing any such Indebtedness as the
same are in effect on the date of the Existing Credit Agreement and
(ii) refinancings and extensions of any such Indebtedness if the terms and
conditions thereof are not less favorable to the obligor thereon or to the Banks
than the Indebtedness being refinanced or extended, and the average life to
maturity thereof is greater than or equal to that of the Indebtedness being
refinanced or extended; provided, such Indebtedness permitted under the
immediately preceding clause (i) or (ii) above shall not (A) include
Indebtedness of an obligor that was not an obligor with respect to the
Indebtedness being extended, renewed or refinanced, (B) exceed in a principal
amount the Indebtedness being renewed, extended or refinanced or (C) be
incurred, created or assumed if any Default or Event of Default has occurred and
is continuing or would result therefrom;

(j) Indebtedness with respect to Capital Leases or purchase money Indebtedness
in an amount not to exceed at any time $20,000,000 in the aggregate (including
any Indebtedness acquired in connection with a Permitted Acquisition); provided,
any such purchase money Indebtedness shall be secured only to the asset(s)
acquired in connection with the incurrence of such Indebtedness;

(k) other Indebtedness of Xerium and its Subsidiaries in an aggregate amount not
to exceed at any time $15,000,000;

(l) Indebtedness under the Factoring Agreements otherwise permitted by this
Agreement;

(m) unsecured working capital facilities of any Subsidiary in respect of which a
Letter of Credit in an amount equal to the maximum principal amount of such
facilities has been issued under the Revolving Facility; and

(n) Hedging Obligations entered into for the purpose of hedging risks associated
with the operations of Xerium and its Subsidiaries.

6.2 Liens. No Credit Party shall, nor shall it permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or permit to exist any Lien on
or with respect to any property or asset of any kind (including any document or
instrument in respect of goods or accounts receivable) of Xerium or any of its
Subsidiaries, whether now owned or hereafter acquired, or any income or profits
therefrom, or file or permit the filing of, or permit to remain in effect, any
financing statement or other similar notice of any Lien with respect to any such
property, asset, income or profits under the UCC of any State or under any
similar recording or notice statute, except:

(a) Liens in favor of Collateral Agent for the benefit of Secured Parties
granted pursuant to any Credit Document;

 

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(b) Liens for Taxes not then due or if due obligations with respect to such
Taxes that are not at such time required to be paid pursuant to Section 5.3 or
which are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and for which an adequate reserve has been
made in accordance with GAAP;

(c) statutory Liens of landlords, banks (and rights of set off), of carriers,
warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens
imposed by law (other than any such Lien imposed pursuant to Section 401 (a)(29)
or 412(n) of the Internal Revenue Code or by ERISA), in each case incurred in
the Ordinary Course (i) for amounts not yet overdue or (ii) for amounts that are
overdue and that (in the case of any such amounts overdue for a period in excess
of fifteen (15) days) are being contested in good faith by appropriate
proceedings, so long as such reserves or other appropriate provisions, if any,
as shall be required by GAAP shall have been made for any such contested
amounts;

(d) Liens incurred in the Ordinary Course in connection with workers’
compensation, unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, trade contracts, performance and
return of money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money or other Indebtedness), so long as no
foreclosure, sale or similar proceedings have been commenced with respect to any
portion of the Collateral on account thereof;

(e) easements, rights of way, restrictions, encroachments, and other minor
defects or irregularities in title, in each case which do not and will not
interfere in any material respect with the ordinary conduct of the business of
Xerium or any of its Subsidiaries;

(f) any (i) interest or title of a lessor or sublessor under any lease of real
estate permitted hereunder, (ii) restriction or encumbrance that the interest or
title of such lessor or sublessor may be subject to, or (iii) subordination of
the interest of the lessee or sublessee under such lease to any restriction or
encumbrance referred to in the preceding clause (ii), so long as the holder of
such restriction or encumbrance agrees to recognize the rights of such lessee or
sublessee under such lease;

(g) Liens solely on any cash earnest money deposits made by Xerium or any of its
Subsidiaries in connection with any letter of intent or purchase agreement
permitted hereunder;

(h) purported Liens evidenced by the filing of precautionary UCC financing
statements or, for property located in foreign jurisdictions, the preparation
and/or filing of functionally similar documents, relating solely to operating
leases of personal property entered into in the Ordinary Course;

 

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(i) Liens in favor of customs and revenue authorities arising as a matter of law
to secure payment of customs duties in connection with the importation of goods;

(j) any zoning or similar law or right reserved to or vested in any governmental
office or agency to control or regulate the use of any real property;

(k)(i) licenses of patents, trademarks and other intellectual property rights
granted by Xerium or any of its Subsidiaries in the Ordinary Course and not
interfering in any material respect with the ordinary conduct of the business of
Xerium or such Subsidiary and (ii) leases or subleases granted by Xerium of any
of its Subsidiaries to third parties in respect of surplus property which is not
fundamental to the operation of the business in the Ordinary Course; provided
that such leases and subleases are on arms-length commercial terms and are
otherwise satisfactory to the Administrative Agent;

(l) Liens described in Schedule 6.2(l) or on a title report delivered pursuant
to Section 3.1(i)(iv);

(m) Liens securing Indebtedness permitted pursuant to Sections 6.1(j) and (k);
provided, any such Lien shall encumber only the asset acquired with the proceeds
of such Indebtedness;

(n) Liens granted by entities acquired pursuant to Section 6.9 prior to their
acquisition and not in contemplation of such acquisition and which are
discharged within three (3) months of the date of acquisition and in relation to
which the secured amount is not increased in contemplation of or after the date
of the relevant acquisition; and

(o) the Parallel Obligations.

6.3 Equitable Lien. If any Credit Party or any of its Subsidiaries shall create
or assume any Lien upon any of its properties or assets, whether now owned or
hereafter acquired, other than Permitted Liens, it shall make or cause to be
made effective provisions whereby the Obligations will be secured by such Lien
equally and ratably with any and all other Indebtedness secured thereby as long
as any such Indebtedness shall be so secured; provided, notwithstanding the
foregoing, this covenant shall not be construed as a consent by Requisite Banks
to the creation or assumption of any such Lien not otherwise permitted hereby.

6.4 No Further Negative Pledges. Except with respect to (a) specific property
encumbered to secure payment of particular Indebtedness or to be sold pursuant
to an executed agreement with respect to a permitted Asset Sale,
(b) restrictions contained in the IPO Documents or any documents evidencing
Subordinated Debt; provided, that in respect of Subordinated Debt such
restrictions do not restrict the ability to grant security interests under this
Agreement or any agreement that refinances this Agreement, (c) restrictions by
reason of customary provisions restricting assignments, subletting or other
transfers contained in leases, licenses and similar agreements entered into in
the Ordinary Course (provided that such restrictions are limited to the property
or assets secured by such Liens or the property or assets subject to such
leases, licenses or similar agreements, as the case may be), (d) Liens permitted
to

 

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be incurred under Section 6.2 and restrictions in the agreements relating
thereto that limit the right of any Credit Party to dispose of or transfer the
assets subject to such Liens, (e) provisions limiting the disposition or
distribution of assets or property sale-leaseback agreements, stock sale
agreements and other similar agreements, which limitation is applicable only to
the assets that are the subject of such agreements, (f) any encumbrance or
restriction in connection with an acquisition of property, so long as such
encumbrance or restriction relates solely to the property so acquired and was
not created in connection with or in anticipation of such acquisition, and
(g) restrictions imposed by customary provisions in partnership agreements,
limited liability company organizational governance documents, joint venture
agreements and other similar agreements that restrict the transfer of ownership
interest in such partnership, limited liability company, joint venture or
similar Person, no Credit Party nor any of its Subsidiaries shall enter into any
agreement prohibiting the creation or assumption of any Lien upon any of its
properties or assets, whether now owned or hereafter acquired.

6.5 Restricted Junior Payments. No Credit Party shall, nor shall it permit any
of its Subsidiaries or Affiliates through any manner or means or through any
other Person to, directly or indirectly, declare, order, pay, make or set apart,
or agree to declare, order, pay, make or set apart, any sum for any Restricted
Junior Payment, except:

(a) any wholly-owned Subsidiary may declare and pay or make any distributions to
its parent;

(b) [Intentionally omitted]; and

(c) so long as no Default or Event of Default has occurred and is continuing,
Xerium may repurchase, redeem or retain Common Stock in an amount not to exceed
$7.0 million per annum solely for the purpose of paying withholding taxes
payable with respect to vested equity compensation programs.

6.6 Restrictions on Subsidiary Distributions. Except as provided herein, no
Credit Party shall, nor shall it permit any of its Subsidiaries to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Subsidiary of
Xerium to (a) pay dividends or make any other distributions on any of such
Subsidiary’s Capital Stock owned by Xerium or any other Subsidiary of Xerium,
(b) repay or prepay any Indebtedness owed by such Subsidiary to Xerium or any
other Subsidiary of Xerium, (c) make loans or advances to Xerium or any other
Subsidiary of Xerium, or (d) transfer any of its property or assets to Xerium or
any other Subsidiary of Xerium, other than restrictions (i) in agreements
evidencing Indebtedness permitted by Section 6.1(k) that impose restrictions on
the property so acquired; (ii) by reason of customary provisions restricting
assignments, subletting or other transfers contained in leases, licenses, joint
venture agreements and similar agreements entered into in the Ordinary Course;
(iii) that are or were created by virtue of any transfer of, agreement to
transfer or option or right with respect to any property, assets or Capital
Stock not otherwise prohibited under this Agreement; (iv) in any agreement for
the sale or other disposition of a Subsidiary that restricts distributions by
that Subsidiary pending the sale or other disposition; (v) in provisions in
agreements or instruments which prohibit the payment of dividends or the making
of other distributions with respect to any class of Capital Stock of a Person
other than on a pro rata basis; and (vi) in any instrument governing
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Stock of a Person acquired by Xerium or any of its Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness or Capital
Stock was incurred in connection with or in contemplation of such acquisition),
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person or the property or
assets of the Person, so acquired, provided that, in the case of Indebtedness,
such Indebtedness was permitted by Section 6.1.

6.7 Investments. No Credit Party shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, make or own any Investment in any
Person, including without limitation any Joint Venture, except:

(a) Investments in Cash and Cash Equivalents;

(b) equity Investments and loans as of the Closing Date in or to any Subsidiary
and equity Investments and loans made after the Closing Date in or to any wholly
owned Subsidiary of any Borrower;

(c) Investments (i) in any Securities received in satisfaction or partial
satisfaction of obligations of financially troubled account debtors and
(ii) deposits, prepayments and other credits to suppliers made in Xerium’s and
its Subsidiaries’ Ordinary Course;

(d) intercompany loans and guaranties to the extent permitted under
Section 6.1(b), (d), (e), (g) and (h);

(e) Consolidated Capital Expenditures permitted by Section 6.8(d);

(f) loans and advances to employees of Xerium and its Subsidiaries made in the
Ordinary Course in an aggregate principal amount not to exceed $1,000,000 in the
aggregate;

(g) Investments made in connection with Permitted Acquisitions permitted
pursuant to and in accordance with Section 6.9;

(h) Investments received in lieu of Cash in connection with Asset Sales
permitted by and in accordance with Section 6.9;

(i) Investments described in Schedule 6.7(i);

(j) other Investments (including without limitation Investments in Subsidiaries
which are not wholly owned, directly or indirectly, by any Borrower) in an
aggregate amount not to exceed at any time $15,000,000 minus the amount of
Investments made pursuant to Section 6.7(g);

(k) [Intentionally omitted];

(l) [Intentionally omitted];

 

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(m) [Intentionally omitted];

(n) [Intentionally omitted].

Notwithstanding the foregoing, in no event shall any Credit Party make any
Investment which results in or facilitates in any manner any Restricted Junior
Payment not otherwise permitted under the terms of Section 6.5.

6.8 Financial Covenants.

(a) Interest Coverage Ratio. Xerium shall not permit the Interest Coverage Ratio
for any period of four consecutive Fiscal Quarters ending with any Fiscal
Quarter set forth below to be less than the ratio set forth below opposite such
Fiscal Quarter:

 

Fiscal Quarter

   Interest
Coverage Ratio

March 31, 2008

   3.00:1.00

June 30, 2008

   2.75:1.00

September 30, 2008

   2.50:1.00

December 31, 2008

   2.25:1.00

March 31, 2009

   2.00:1.00

June 30, 2009

   2.00:1.00

September 30, 2009

   2.00:1.00

December 31, 2009

   2.00:1.00

March 31, 2010

   2.00:1.00

June 30, 2010

   2.25:1.00

September 30, 2010

   2.25:1.00

December 31, 2010

   2.25:1.00

March 31, 2011

   2.25:1.00

June 30, 2011

   2.50:1.00

September 30, 2011

   2.50:1.00

December 31, 2011

   2.50:1.00

March 31, 2012

   2.75:1.00

(b) Leverage Ratio. Xerium shall not permit the Leverage Ratio for any period of
four consecutive Fiscal Quarters ending with any Fiscal Quarter set forth below
to be greater than the ratio set forth below opposite such Fiscal Quarter:

 

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Fiscal Quarter

   Leverage
Ratio

March 31, 2008

   4.50:1.00

June 30, 2008

   5.75:1.00

September 30, 2008

   5.75:1.00

December 31, 2008

   5.50:1.00

March 31, 2009

   5.50:1.00

June 30, 2009

   5.25:1.00

September 30, 2009

   5.25:1.00

December 31, 2009

   5.00:1.00

March 31, 2010

   4.75:1.00

June 30, 2010

   4.75:1.00

September 30, 2010

   4.50:1.00

December 31, 2010

   4.25:1.00

March 31, 2011

   4.25:1.00

June 30, 2011

   4.00:1.00

September 30, 2011

   4.00:1.00

December 31, 2011

   4.00:1.00

March 31, 2012

   4.00:1.00

(c) Fixed Charge Coverage Ratio. Xerium shall not permit the Fixed Charge
Coverage Ratio for any period of four consecutive Fiscal Quarters ending with
any Fiscal Quarter set forth below to be less than the ratio set forth below
opposite such Fiscal Quarter:

 

Fiscal Quarter

   Fixed Charge
Coverage Ratio

March 31, 2008

   1.85:1.00

June 30, 2008

   1.70:1.00

September 30, 2008

   1.60:1.00

December 31, 2008

   1.40:1.00

March 31, 2009

   1.40:1.00

June 30, 2009

   1.20:1.00

September 30, 2009

   1.20:1.00

 

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Fiscal Quarter

   Fixed Charge
Coverage Ratio

December 31, 2009

   1.20:1.00

March 31, 2010

   1.20:1.00

June 30, 2010

   1.20:1.00

September 30, 2010

   1.20:1.00

December 31, 2010

   1.20:1.00

March 31, 2011

   1.20:1.00

June 30, 2011

   1.20:1.00

September 30, 2011

   1.20:1.00

December 31, 2011

   1.20:1.00

March 31, 2012

   1.20:1.00

(d) Maximum Consolidated Capital Expenditures. Xerium shall not, and shall not
permit its Subsidiaries to, make or incur Consolidated Capital Expenditures, in
any Fiscal Year indicated below, in an aggregate amount for Xerium and its
Subsidiaries in excess of the corresponding amount (“Maximum Consolidated
Capital Expenditures”) set forth below opposite such Fiscal Year (exclusive of
capital expenditures paid with Net Insurance/Condemnation Proceeds in accordance
with Section 2.14(b)):

 

Fiscal Year

   Maximum Consolidated
Capital Expenditures

2008

   $ 50,000,000

2009

   $ 35,000,000

2010

   $ 35,000,000

2011

   $ 35,000,000

provided, that the Maximum Consolidated Capital Expenditures for any Fiscal Year
shall be increased by an amount equal to 50% of the portion of Maximum
Consolidated Capital Expenditures not expended in the immediately preceding
Fiscal Year (the “Roll-Over Amount”); provided, further, that any Roll-Over
Amount not expended in the applicable Fiscal Year shall not be added to the
amount of Maximum Consolidated Capital Expenditures for the immediately
succeeding Fiscal Year; provided, further, that solely for Fiscal Year 2008, the
Roll-Over Amount shall equal the sum of (i) 100% of the first $10.0 million of
the Maximum Consolidated Capital Expenditures not expended by Xerium and its
Subsidiaries in Fiscal Year 2008 plus (ii) 50% of the remaining Maximum
Consolidated Capital Expenditures not expended by Xerium and its Subsidiairies
in Fiscal Year 2008.

 

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(e) Certain Calculations. (i) With respect to any period during which a
Permitted Acquisition or an Asset Sale has occurred (each, a “Subject
Transaction”), for purposes of determining compliance with the financial
covenants set forth in this Section 6.8, Adjusted EBITDA shall be calculated
with respect to such period on a pro forma basis (including pro forma
adjustments arising out of events which are directly attributable to a specific
transaction, are factually supportable and are expected to have a continuing
impact, in each case determined on a basis consistent with Article 11 of
Regulation S-X promulgated under the Securities Act and as interpreted by the
staff of the Securities and Exchange Commission, which would include cost
savings resulting from head count reduction, closure of facilities and similar
restructuring charges, which pro forma adjustments shall be certified by the
chief financial officer of Xerium) using the historical audited financial
statements of any business so acquired or to be acquired or sold or to be sold
and the consolidated financial statements of Xerium and its Subsidiaries which
shall be reformulated as if such Subject Transaction, and any Indebtedness
incurred or repaid in connection therewith, had been consummated or incurred or
repaid at the beginning of such period (and assuming that such Indebtedness
bears interest during any portion of the applicable measurement period prior to
the relevant acquisition at the weighted average of the interest rates
applicable to outstanding Loans incurred during such period).

(ii) Whenever pro forma effect is to be given to any transaction, the pro forma
calculations shall be made in good faith by a responsible financial or
accounting officer of Xerium. Interest on a Capitalized Lease Obligation shall
be deemed to accrue at an interest rate reasonably determined by a responsible
financial or accounting officer of Xerium to be the rate of interest implicit in
such Capitalized Lease Obligation in accordance with GAAP.

6.9 Fundamental Changes; Disposition of Assets; Acquisitions. No Credit Party
shall, nor shall it permit any of its Subsidiaries to, enter into any merger or
consolidation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease or sub lease (as lessor or
sublessor), exchange, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business, assets or property of
any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible, whether now owned or hereafter acquired, or acquire by purchase or
otherwise (other than purchases or other acquisitions of inventory, materials
and equipment and Capital Expenditures in the Ordinary Course) the business,
property or fixed assets of, or stock or other evidence of beneficial ownership
of, any Person or any division or line of business or other business unit of any
Person, except:

(a) any Subsidiary of Xerium may be merged with or into a Borrower or any other
Subsidiary, or be liquidated, wound up or dissolved, or all or any part of its
business, property or assets may be conveyed, sold, leased, transferred or

 

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otherwise disposed of, in one transaction or a series of transactions, to a
Borrower or any other Subsidiary; provided, however, in the case of such a
merger involving a Borrower or a Guarantor Subsidiary merging with a
non-Guarantor Subsidiary, such Borrower or Guarantor Subsidiary shall be the
continuing or surviving Person;

(b) sales or other dispositions of assets that do not constitute Asset Sales;

(c) Asset Sales, the proceeds of which (valued at the principal amount thereof
in the case of non-Cash proceeds consisting of notes or other debt Securities
and valued at fair market value in the case of other non-Cash proceeds) (i) are
less than $5,000,000 with respect to any single Asset Sale or series of related
Asset Sales and (ii) when aggregated with the proceeds of all other Asset Sales
made within the same Fiscal Year, are less than $10,000,000; provided (1) the
consideration received for such assets shall be in an amount at least equal to
the fair market value thereof (determined in good faith by the board of
directors of such Credit Party (or similar governing body)), (2) no less than
75% thereof shall be paid in Cash, and (3) the Net Asset Sale Proceeds thereof
shall be applied as required by Section 2.14(a);

(d) disposals of obsolete, worn out or surplus property, and any assets acquired
in connection with the acquisition of another Person in a division or line of
business of such Person reasonably determined by the acquirer to be surplus
assets;

(e) Permitted Acquisitions; provided that Permitted Acquisitions for the period
commencing on the Restatement Effective Date to but excluding the Tranche I
Revolving Commitment Termination Date may not exceed in the aggregate
$10,000,000 (including any Indebtedness acquired in connection with a Permitted
Acquisition); and

(f) Investments made in accordance with Section 6.7.

6.10 Disposal of Subsidiary Interests. Except for any sale of all of its
interests in the Capital Stock of any of its Subsidiaries in compliance with the
provisions of Section 6.9 or pursuant to the Collateral Documents, no Credit
Party shall, nor shall it permit any of its Subsidiaries to, (a) directly or
indirectly sell, assign, pledge or otherwise encumber or dispose of any Capital
Stock of any of its Subsidiaries, except to qualify directors if required by
applicable law; or (b) permit any of its Subsidiaries directly or indirectly to
sell, assign, pledge or otherwise encumber or dispose of any Capital Stock of
any of its Subsidiaries, except to another Credit Party (subject to the
restrictions on such disposition otherwise imposed hereunder), or to qualify
directors if required by applicable law.

6.11 Sales and Lease Backs. No Credit Party shall, nor shall it permit any of
its Subsidiaries to, directly or indirectly, become or remain liable as lessee
or as a guarantor or other surety with respect to any lease of any property
(whether real, personal or mixed), whether now owned or hereafter acquired,
which such Credit Party (a) has sold or transferred or is to sell or to transfer
to any other Person (other than Xerium or any of its Subsidiaries), or
(b) intends to use for substantially the same purpose as any other property
which has been or is to be sold or transferred by such Credit Party to any
Person (other than Xerium or any of its Subsidiaries) in connection with such
lease.

 

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6.12 Transactions with Shareholders and Affiliates. No Credit Party shall, nor
shall it permit any of its Subsidiaries to, directly or indirectly, enter into
or permit to exist any transaction (including the purchase, sale, lease or
exchange of any property or the rendering of any service) with any holder of 5%
or more of any class of Capital Stock of Xerium or any of its Subsidiaries or
with any Affiliate of Xerium or of any such holder, on terms that are less
favorable to Xerium or that Subsidiary, as the case may be, than those that
might be obtained at the time from a Person who is not such a holder or
Affiliate; provided, the foregoing restriction shall not apply to (a) any
transaction between Xerium or any of its Subsidiaries and any other of Xerium
and its Subsidiaries; (b) reasonable and customary fees paid to members of the
board of directors (or similar governing body) of Xerium and its Subsidiaries;
(c) compensation arrangements for officers and other employees of Xerium and its
Subsidiaries entered into in the Ordinary Course; and (d) transactions described
in Schedule 6.12.

6.13 Conduct of Business. From and after the Closing Date, no Credit Party
shall, nor shall it permit any of its Subsidiaries to, engage in any business
other than (i) the businesses engaged in by one or more Credit Parties on the
Closing Date and similar or related businesses and (ii) such other lines of
business as may be consented to by Requisite Banks.

6.15 Amendments or Waivers of Organizational Documents. No Credit Party shall
terminate or agree to any amendment, restatement, supplement or other
modification to, any Organizational Document that would be materially adverse to
the Banks.

6.16 Amendments or Waivers of with respect to Subordinated Debt. No Credit Party
shall, nor shall it permit any of its Subsidiaries to, amend or otherwise change
the terms of any Subordinated Debt or make any payment consistent with an
amendment thereof or change thereto, if the effect of such amendment or change
is to increase the interest rate or the amortization rate on such Subordinated
Debt, change (to earlier dates) any dates upon which payments of principal or
interest are due thereon, change any event of default or condition to an event
of default with respect thereto (other than to eliminate any such event of
default or increase any grace period related thereto), change the redemption,
prepayment or defeasance provisions thereof, change the subordination provisions
of such Subordinated Debt (or of any guaranty thereof), or if the effect of such
amendment or change, together with all other amendments or changes made, is to
increase materially the obligations of the obligor thereunder or to confer any
additional rights on the holders of such Subordinated Debt (or a trustee or
other representative on their behalf) which would be adverse to any Credit Party
or Banks.

6.17 Fiscal Year. No Credit Party shall, nor shall it permit any of its
Subsidiaries to, change its Fiscal Year end from December 31st.

6.18 Account Control Agreements; Cash Management.

(a) Xerium shall not terminate without the prior written consent of the
Collateral Agent that certain (i) Securities Account Control Agreement dated as
of May     , 2008 among Xerium, Evergreen Service Company LLC and the Collateral
Agent and (ii) Deposit Account Control Agreement dated as of May     , 2008
among Xerium, Wachovia Bank, National Association and the Collateral Agent.

 

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(b) Xerium Technologies Ltd. (“XTL”) shall not terminate without the prior
written consent of the Collateral Agent that certain (i) [securities account
control agreement] dated as of May     , 2008 among XTL, Commerzbank Money Fund
WKN 973 739 and the Collateral Agent and (ii) [deposit account control
agreement] dated as of May     , 2008 among XTL, Deutsche Bank and the
Collateral Agent.

(c) Xerium shall not alter or permit its Subsidiaries to alter the cash
concentration and cash management practice and services with respect to the
accounts covered by the control agreements described in clauses (a) and
(b) above unless it gives the Collateral Agent 30 days’ prior written notice of
such change and Xerium, prior to effecting such change, enters into control
agreements in form and substance similar to those referred to in clause
(a) above and causes XTL to enter into control agreements in form and substance
similar to those referred to in clause (b) above, in each case, reasonably
satisfactory to the Collateral Agent.

6.19 [Intentionally Omitted].

SECTION 7. GUARANTY

7.1 Guaranty of the Obligations.

(a) Subject to the provisions of Section 7.2 and 7.14, the Non-US Guarantors
jointly and severally hereby irrevocably and unconditionally guaranty to
Administrative Agent for the ratable benefit of the Beneficiaries the due and
punctual payment in full of all Non-US Obligations when the same shall become
due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, 11 U.S.C. § 362(a)) (collectively, the “Non-US Guaranteed Obligations”)

(b) Subject to the provisions of Section 7.2, the US Guarantors jointly and
severally hereby irrevocably and unconditionally guaranty to Administrative
Agent for the ratable benefit of the Beneficiaries the due and punctual payment
in full of all Obligations when the same shall become due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or otherwise
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a))
(collectively, the “Guaranteed Obligations”).

7.2 Contribution by Guarantors.

(a) All Non-US Guarantors desire to allocate among themselves (collectively, the
“Non-US Contributing Guarantors”), in a fair and equitable manner, their
obligations arising under this Guaranty. Accordingly, in the event any

 

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payment or distribution is made on any date by a Guarantor (a “Non-US Funding
Guarantor”) under this Guaranty such that its Non-US Aggregate Payments exceed
its Non-US Fair Share as of such date, such Non-US Funding Guarantor shall be
entitled to a contribution from each of the other Non-US Contributing Guarantors
in an amount sufficient to cause each Non-US Contributing Guarantor’s Non-US
Aggregate Payments to equal its Non-US Fair Share as of such date. “Non-US Fair
Share” means, with respect to a Non-US Contributing Guarantor as of any date of
determination, an amount equal to (a) the ratio of (i) the Non-US Fair Share
Contribution Amount with respect to such Non-US Contributing Guarantor to
(ii) the aggregate of the Non-US Fair Share Contribution Amounts with respect to
all Non-US Contributing Guarantors multiplied by (b) the aggregate amount paid
or distributed on or before such date by all Non-US Funding Guarantors under
this Guaranty in respect of the obligations Guaranteed. “Non-US Fair Share
Contribution Amount” means, with respect to a Non-US Contributing Guarantor as
of any date of determination, the maximum aggregate amount of the obligations of
such Non-US Contributing Guarantor under this Guaranty that would not render its
obligations hereunder or thereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of Title 11 of the United States Code
or any comparable applicable provisions of state law; provided, solely for
purposes of calculating the “Non-US Fair Share Contribution Amount” with respect
to any Non-US Contributing Guarantor for purposes of this Section 7.2, any
assets or liabilities of such Non-US Contributing Guarantor arising by virtue of
any rights to subrogation, reimbursement or indemnification or any rights to or
obligations of contribution hereunder shall not be considered as assets or
liabilities of such Non-US Contributing Guarantor. “Non-US Aggregate Payments”
means, with respect to a Non-US Contributing Guarantor as of any date of
determination, an amount equal to (1) the aggregate amount of all payments and
distributions made on or before such date by such Non-US Contributing Guarantor
in respect of this Guaranty (including, without limitation, in respect of this
Section 7.2), minus (2) the aggregate amount of all payments received on or
before such date by such Non-US Contributing Guarantor from the other Non-US
Contributing Guarantors as contributions under this Section 7.2. The amounts
payable as contributions hereunder shall be determined as of the date on which
the related payment or distribution is made by the applicable Non-US Funding
Guarantor. The allocation among Non-US Contributing Guarantors of their
obligations as set forth in this Section 7.2 shall not be construed in any way
to limit the liability of any Non-US Contributing Guarantor hereunder. Each
Non-US Guarantor is a third party beneficiary to the contribution agreement set
forth in this Section 7.2(a).

(b) All US Guarantors desire to allocate among themselves (collectively, the “US
Contributing Guarantors”), in a fair and equitable manner, their obligations
arising under this Guaranty. Accordingly, in the event any payment or
distribution is made on any date by a US Guarantor (a “US Funding Guarantor”)
under this Guaranty such that its US Aggregate Payments exceed its US Fair Share
as of such date, such US Funding Guarantor shall be entitled to a contribution
from each of the other US Contributing Guarantors in an amount sufficient to
cause each US Contributing Guarantor’s US Aggregate Payments to equal its US
Fair Share as of such date. “US Fair Share” means, with respect to a US
Contributing Guarantor as of any date of

 

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determination, an amount equal to (a) the ratio of (i) the US Fair Share
Contribution Amount with respect to such US Contributing Guarantor to (ii) the
aggregate of the US Fair Share Contribution Amounts with respect to all US
Contributing Guarantors multiplied by (b) the aggregate amount paid or
distributed on or before such date by all US Funding Guarantors under this
Guaranty in respect of the obligations Guaranteed. “US Fair Share Contribution
Amount” means, with respect to a US Contributing Guarantor as of any date of
determination, the maximum aggregate amount of the obligations of such US
Contributing Guarantor under this Guaranty that would not render its obligations
hereunder or thereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
comparable applicable provisions of state law; provided, solely for purposes of
calculating the “US Fair Share Contribution Amount” with respect to any US
Contributing Guarantor for purposes of this Section 7.2, any assets or
liabilities of such US Contributing Guarantor arising by virtue of any rights to
subrogation, reimbursement or indemnification or any rights to or obligations of
contribution hereunder shall not be considered as assets or liabilities of such
US Contributing Guarantor. “US Aggregate Payments” means, with respect to a US
Contributing Guarantor as of any date of determination, an amount equal to
(1) the aggregate amount of all payments and distributions made on or before
such date by such US Contributing Guarantor in respect of this Guaranty
(including, without limitation, in respect of this Section 7.2), minus (2) the
aggregate amount of all payments received on or before such date by such US
Contributing Guarantor from the other US Contributing Guarantors as
contributions under this Section 7.2. The amounts payable as contributions
hereunder shall be determined as of the date on which the related payment or
distribution is made by the applicable US Funding Guarantor. The allocation
among US Contributing Guarantors of their obligations as set forth in this
Section 7.2 shall not be construed in any way to limit the liability of any US
Contributing Guarantor hereunder. Each US Guarantor is a third party beneficiary
to the contribution agreement set forth in this Section 7.2(b).

7.3 Payment by Guarantors

(a) Subject to Section 7.2(a), Non-US Guarantors hereby jointly and severally
agree, in furtherance of the foregoing and not in limitation of any other right
which any Beneficiary may have at law or in equity against any Non-US Guarantor
by virtue hereof, that upon the failure of a Non-US Borrower to pay any of the
Non-US Guaranteed Obligations when and as the same shall become due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand or
otherwise (including amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)),
Non-US Guarantors will upon demand pay, or cause to be paid, in Cash, to
Administrative Agent for the ratable benefit of Beneficiaries, an amount equal
to the sum of the unpaid principal amount of all Non-US Guaranteed Obligations
then due as aforesaid, accrued and unpaid interest on such Non-US Guaranteed
Obligations (including interest which, but for any Non-US Borrower’s becoming
the subject of a case under the Bankruptcy Code, would have accrued on such
Non-US Guaranteed Obligations, whether or not a claim is allowed against such
Non-US Borrower for such interest in the related bankruptcy case) and all other
Non-US Guaranteed Obligations then owed to Beneficiaries as aforesaid.

 

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(b) Subject to Section 7.2(b), US Guarantors hereby jointly and severally agree,
in furtherance of the foregoing and not in limitation of any other right which
any Beneficiary may have at law or in equity against any US Guarantor by virtue
hereof, that upon the failure of a Borrower to pay any of the Guaranteed
Obligations when and as the same shall become due, whether at stated maturity,
by required prepayment, declaration, acceleration, demand or otherwise
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)), US
Guarantors will upon demand pay, or cause to be paid, in Cash, to Administrative
Agent for the ratable benefit of Beneficiaries, an amount equal to the sum of
the unpaid principal amount of all Guaranteed Obligations then due as aforesaid,
accrued and unpaid interest on such Guaranteed Obligations (including interest
which, but for any Borrower’s becoming the subject of a case under the
Bankruptcy Code, would have accrued on such Guaranteed Obligations, whether or
not a claim is allowed against such Borrower for such interest in the related
bankruptcy case) and all other Guaranteed Obligations then owed to Beneficiaries
as aforesaid.

7.4 Liability of Guarantors Absolute. Each Guarantor agrees that its obligations
hereunder are irrevocable, absolute, independent and unconditional and shall not
be affected by any circumstance which constitutes a legal or equitable discharge
of a guarantor or surety other than payment in full of the Non-US Guaranteed
Obligations or Guaranteed Obligations, as the case may be. In furtherance of the
foregoing and without limiting the generality thereof, each Guarantor agrees as
follows:

(a) this Guaranty is a guaranty of payment when due and not of collectability.
This Guaranty is a primary obligation of such Guarantor and not merely a
contract of surety;

(b) Administrative Agent may enforce this Guaranty upon the occurrence of an
Event of Default notwithstanding the existence of any dispute between any
Borrower and any Beneficiary with respect to the existence of such Event of
Default;

(c) the obligations of such Guarantor hereunder are independent of the
obligations of any Borrower and the obligations of any other guarantor
(including any other Guarantor) of the obligations of any Borrower, and a
separate action or actions may be brought and prosecuted against such Guarantor
whether or not any action is brought against any Borrower or any of such other
guarantors and whether or not any Borrower is joined in any such action or
actions;

(d) payment by any Guarantor of a portion, but not all, of the Non-US Guaranteed
Obligations or Guaranteed Obligations, as the case may be, shall in no way
limit, affect, modify or abridge any Guarantor’s liability for any portion of
the Non-US Guaranteed Obligations or Guaranteed Obligations, as the case may be,
which has not been paid. Without limiting the generality of the foregoing, if
Administrative Agent is awarded a judgment in any suit brought to enforce any
Guarantor’s covenant to pay a portion of the Non-US Guaranteed Obligations or
Guaranteed Obligations, as the case may be, such judgment shall not be deemed to
release such Guarantor from its covenant to pay the portion of the Non-US
Guaranteed Obligations or Guaranteed Obligations, as the case may be, that is
not the subject of such suit, and such judgment shall not, except to the extent

 

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satisfied by such Guarantor, limit, affect, modify or abridge any other
Guarantor’s liability hereunder in respect of the Non-US Guaranteed Obligations
or Guaranteed Obligations, as the case may be;

(e) any Beneficiary, upon such terms as it deems appropriate, without notice or
demand and without affecting the validity or enforceability hereof or giving
rise to any reduction, limitation, impairment, discharge or termination of any
Guarantor’s liability hereunder, from time to time may (i) renew, extend,
accelerate, increase the rate of interest on, or otherwise change the time,
place, manner or terms of payment of the Non-US Guaranteed Obligations or
Guaranteed Obligations, as the case may be; (ii) settle, compromise, release or
discharge, or accept or refuse any offer of performance with respect to, or
substitutions for, the Non-US Guaranteed Obligations or Guaranteed Obligations,
or any agreement relating thereto and/or subordinate the payment of the same to
the payment of any other obligations; (iii) request and accept other guaranties
of the Non-US Guaranteed Obligations or Guaranteed Obligations, as the case may
be, and take and hold security for the payment hereof or the Non-US Guaranteed
Obligations or Guaranteed Obligations, as the case may be; (iv) release,
surrender, exchange, substitute, compromise, settle, rescind, waive, alter,
subordinate or modify, with or without consideration, any security for payment
of the Non-US Guaranteed Obligations or Guaranteed Obligations, as the case may
be, any other guaranties of the Non-US Guaranteed Obligations or Guaranteed
Obligations, as the case may be, or any other obligation of any Person
(including any other Guarantor) with respect to the Non-US Guaranteed
Obligations or Guaranteed Obligations, as the case may be, provided, however,
that no Credit Document to which such Guarantor is party may be amended without
its written consent; (v) enforce and apply any security now or hereafter held by
or for the benefit of such Beneficiary in respect hereof or the Non-US
Guaranteed Obligations or Guaranteed Obligations, as the case may be, and direct
the order or manner of sale thereof, or exercise any other right or remedy that
such Beneficiary may have against any such security, in each case as such
Beneficiary in its discretion may determine consistent herewith or the
applicable documentation creating Hedging Obligations and any applicable
security agreement, including foreclosure on any such security pursuant to one
or more judicial or non-judicial sales, whether or not every aspect of any such
sale is commercially reasonable, and even though such action operates to impair
or extinguish any right of reimbursement or subrogation or other right or remedy
of any Guarantor against any Borrower or any security for the Non-US Guaranteed
Obligations or Guaranteed Obligations, as the case may be; and (vi) exercise any
other rights available to it under the Credit Documents or the applicable
documentation creating Hedging Obligations; and

(f) this Guaranty and the obligations of Guarantors hereunder shall be valid and
enforceable and shall not be subject to any reduction, limitation (subject,
however, to the limitations applicable to certain Non-US Guarantors as set out
in Section 7.14), impairment, discharge or termination for any reason (other
than payment in full of the Non-US Guaranteed Obligations and Guaranteed
Obligations), including the occurrence of any of the following, whether or not
any Guarantor shall have had notice or knowledge of any of them: (i) any failure
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assert or enforce, or the stay or enjoining, by order of court, by operation of
law or otherwise, of the exercise or enforcement of, any claim or demand or any
right, power or remedy (whether arising under the Credit Documents or the
applicable documentation creating Hedging Obligations, at law, in equity or
otherwise) with respect to the Non-US Guaranteed Obligations or Guaranteed
Obligations, as the case may be, or any agreement relating thereto, or with
respect to any other guaranty of or security for the payment of the Non-US
Guaranteed Obligations or Guaranteed Obligations, as the case may be; (ii) any
rescission, waiver, amendment or modification of, or any consent to departure
from, any of the terms or provisions (including provisions relating to events of
default) hereof, any of the other Credit Documents, any of the applicable
documentation creating Hedging Obligations or any agreement or instrument
executed pursuant thereto, or of any other guaranty or security for the Non-US
Guaranteed Obligations or Guaranteed Obligations, as the case may be, in each
case whether or not in accordance with the terms hereof or such Credit Document,
such applicable documentation creating Hedging Obligations or any agreement
relating to such other guaranty or security; (iii) the Non-US Guaranteed
Obligations or Guaranteed Obligations, as the case may be, or any agreement
relating thereto, at any time being found to be illegal, invalid or
unenforceable in any respect; (iv) the application of payments received from any
source (other than payments received pursuant to the other Credit Documents or
any of the applicable documentation creating Hedging Obligations or from the
proceeds of any security for the Non-US Guaranteed Obligations or Guaranteed
Obligations, as the case may be, except to the extent such security also serves
as collateral for indebtedness other than the Non-US Guaranteed Obligations or
Guaranteed Obligations) to the payment of indebtedness other than the Non-US
Guaranteed Obligations or Guaranteed Obligations, as the case may be, even
though any Beneficiary might have elected to apply such payment to any part or
all of the Non-US Guaranteed Obligations or Guaranteed Obligations, as the case
may be; (v) any Beneficiary’s consent to the change, reorganization or
termination of the corporate structure or existence of Xerium or any of its
Subsidiaries and to any corresponding restructuring of the Non-US Guaranteed
Obligations or Guaranteed Obligations, as the case may be; (vi) any failure to
perfect or continue perfection of a security interest in any collateral which
secures any of the Non-US Guaranteed Obligations or Guaranteed Obligations, as
the case may be; (vii) any defenses, set offs or counterclaims which any
Borrower may allege or assert against any Beneficiary in respect of the Non-US
Guaranteed Obligations or Guaranteed Obligations, as the case may be, including
failure of consideration, breach of warranty, payment, statute of frauds,
statute of limitations, accord and satisfaction and usury; and (viii) any other
act or thing or omission, or delay to do any other act or thing, which may or
might in any manner or to any extent vary the risk of any Guarantor as an
obligor in respect of the Non-US Guaranteed Obligations or Guaranteed
Obligations, as the case may be.

(g) Notwithstanding anything to the contrary herein or in any Credit Document,
this guarantee given by any guarantor organized under Austrian law is meant to
be and shall be interpreted as abstract guarantee (“abstrakter Garantievertrag”)
and not as surety (“Buergschaft”), neither as a joint obligation as a borrower
(“Mitschuldner”) and such Austrian Guarantor undertakes to pay unconditionally,
irrevocably, upon first demand and without raising any defenses (“unbedingt,
unwiderruflich, ueber erste Aufforderung und unter Verzicht auf alle
Einwendungen”) any amounts demanded by any of the Beneficiaries under reference
to this guarantee.

 

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(h) Notwithstanding anything to the contrary herein or in any Credit Document,
to the extent that this guarantee is granted by any guarantor organized under
German law, such guarantee is granted in the form of an abstract guarantee
(abstraktes Garantieversprechen) and not as a surety (Buergschaft) or as a joint
obligation as borrower (Mitschuldübernahme), and any German Guarantor
undertakes, subject to subsection 7.14(f) hereof, to pay unconditionally,
irrevocably, upon first demand and without raising any defenses (unbedingt,
unwiderruflich, auf erstes Anfordern und unter Verzicht auf alle Einwendungen)
any amounts demanded by any of the Beneficiaries under reference to this
guarantee.

7.5 Waivers by Guarantors. Each Guarantor hereby waives, for the benefit of
Beneficiaries: (a) any right to require any Beneficiary, as a condition of
payment or performance by such Guarantor, to (i) proceed against any Borrower,
any other guarantor (including any other Guarantor) of the Non-US Guaranteed
Obligations or Guaranteed Obligations, as the case may be or any other Person,
(ii) proceed against or exhaust any security held from any Borrower, any such
other guarantor or any other Person, (iii) proceed against or have resort to any
balance of any Deposit Account or credit on the books of any Beneficiary in
favor of any Borrower or any other Person, or (iv) pursue any other remedy in
the power of any Beneficiary whatsoever; (b) any defense arising by reason of
the incapacity, lack of authority or any disability or other defense of any
Borrower or any other Guarantor including any defense based on or arising out of
the lack of validity or the unenforceability of the Non-US Guaranteed
Obligations or Guaranteed Obligations, as the case may be, or any agreement or
instrument relating thereto or by reason of the cessation of the liability of
any Borrower or any other Guarantor from any cause other than payment in full of
the Non-US Guaranteed Obligations or Guaranteed Obligations; (c) any defense
based upon any statute or rule of law which provides that the obligation of a
surety must be neither larger in amount nor in other respects more burdensome
than that of the principal; (d) any defense based upon any Beneficiary’s errors
or omissions in the administration of the Non-US Guaranteed Obligations or
Guaranteed Obligations, except behavior which amounts to bad faith; (e) (i) any
principles or provisions of law, statutory or otherwise, which are or might be
in conflict with the terms hereof and any legal or equitable discharge of such
Guarantor’s obligations hereunder, (ii) the benefit of any statute of
limitations affecting such Guarantor’s liability hereunder or the enforcement
hereof, (iii) any rights to set offs, recoupments and counterclaims, and
(iv) promptness, diligence and any requirement that any Beneficiary protect,
secure, perfect or insure any security interest or lien or any property subject
thereto; (f) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including acceptance
hereof, notices of default hereunder, the applicable documentation creating
Hedging Obligations or any agreement or instrument related thereto, notices of
any renewal, extension or modification of the Non-US Guaranteed Obligations or
Guaranteed Obligations or any agreement related thereto, notices of any
extension of credit to any Borrower and notices of any of the matters referred
to in Section 7.4 and any right to consent to any thereof; and (g) any defenses
or benefits that may be derived from or afforded by law which limit the
liability of or exonerate guarantors or sureties, or which may conflict with the
terms hereof, subject to the limitations applicable to certain Non-US Guarantors
as set out in Section 7.14.

 

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Until the Non-US Guaranteed Obligations and Guaranteed Obligations shall have
been indefeasibly paid in full and the Revolving Commitments shall have
terminated and all Letters of Credit shall have expired or been cancelled, each
Guarantor hereby waives any claim, right or remedy, direct or indirect, that
such Guarantor now has or may hereafter have against any Borrower or any other
Guarantor or any of its assets in connection with this Guaranty or the
performance by such Guarantor of its respective obligations hereunder, in each
case whether such claim, right or remedy arises in equity, under contract, by
statute, under common law or otherwise and including without limitation (a) any
right of subrogation, reimbursement or indemnification that such Guarantor now
has or may hereafter have against any Borrower with respect to the Non-US
Guaranteed Obligations or Guaranteed Obligations, as the case may be, (b) any
right to enforce, or to participate in, any claim, right or remedy that any
Beneficiary now has or may hereafter have against any Borrower, and (c) any
benefit of, and any right to participate in, any collateral or security now or
hereafter held by any Beneficiary. In addition, until the Non-US Guaranteed
Obligations and Guaranteed Obligations shall have been indefeasibly paid in full
and the Revolving Commitments shall have terminated and all Letters of Credit
shall have expired or been cancelled, each Guarantor shall withhold exercise of
any right of contribution such Guarantor may have against any other guarantor
(including any other Guarantor) of the Non-US Guaranteed Obligations or
Guaranteed Obligations, as the case may be, including, without limitation, any
such right of contribution as contemplated by Section 7.2. Each Guarantor
further agrees that, to the extent the waiver or agreement to withhold the
exercise of its rights of subrogation, reimbursement, indemnification and
contribution as set forth herein is found by a court of competent jurisdiction
to be void or voidable for any reason, any rights of subrogation, reimbursement
or indemnification such Guarantor may have against any Borrower or against any
collateral or security, and any rights of contribution such Guarantor may have
against any such other guarantor, shall be junior and subordinate to any rights
any Beneficiary may have against any Borrower, to all right, title and interest
any Beneficiary may have in any such collateral or security, and to any right
any Beneficiary may have against such other guarantor. If any amount shall be
paid to any Guarantor on account of any such subrogation, reimbursement,
indemnification or contribution rights at any time when all Non-US Guaranteed
Obligations and Guaranteed Obligations shall not have been finally and
indefeasibly paid in full, such amount shall be held in trust for Administrative
Agent on behalf of Beneficiaries and shall forthwith be paid over to
Administrative Agent for the benefit of Beneficiaries to be credited and applied
against the Non-US Guaranteed Obligations or Guaranteed Obligations, as the case
may be, whether matured or unmatured, in accordance with the terms hereof.

7.7 Subordination of Other Obligations. Any Indebtedness of any Borrower or any
Guarantor now or hereafter held by any Guarantor (the “Obligee Guarantor”) is
hereby subordinated in right of payment to the Non-US Guaranteed Obligations and
Guaranteed Obligations, and any such indebtedness collected or received by the
Obligee Guarantor after an Event of Default has occurred and is continuing shall
be held in trust for Administrative Agent on behalf of Beneficiaries and shall
forthwith be paid over to Administrative Agent for the benefit of Beneficiaries
to be credited and applied against the Non-US Guaranteed Obligations or
Guaranteed Obligations, as the case may be, but without affecting, impairing or
limiting in any manner the liability of the Obligee Guarantor under any other
provision hereof, subject, however to the limitations applicable to certain
Non-US Guarantors as set out in Sections 7.13 and 7.14.

 

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7.8 Continuing Guaranty. This Guaranty is a continuing guaranty and shall remain
in effect until all of the Non-US Guaranteed Obligations and Guaranteed
Obligations shall have been paid in full and the Revolving Commitments shall
have terminated and all Letters of Credit shall have expired or been cancelled.
Each Guarantor hereby irrevocably waives any right to revoke this Guaranty as to
future transactions giving rise to any Non-US Guaranteed Obligations or
Guaranteed Obligations, as the case may be.

7.9 Authority of Guarantors or Borrowers. It is not necessary for any
Beneficiary to inquire into the capacity or powers of any Guarantor or any
Borrower or the officers, directors or any agents acting or purporting to act on
behalf of any of them.

7.10 Financial Condition of Each Borrower. Any Credit Extension may be made to
any Borrower or continued from time to time, and any applicable documentation
creating Hedging Obligations may be entered into from time to time, in each case
without notice to or authorization from any Guarantor regardless of the
financial or other condition of such Borrower at the time of any such grant or
continuation or at the time such applicable documentation creating Hedging
Obligations is entered into, as the case may be. No Beneficiary shall have any
obligation to disclose or discuss with any Guarantor its assessment, or any
Guarantor’s assessment, of the financial condition of any Borrower. Each
Guarantor has adequate means to obtain information from each Borrower on a
continuing basis concerning the financial condition of such Borrower and its
ability to perform its respective obligations under the Credit Documents and the
applicable documentation creating Hedging Obligations, and each Guarantor
assumes the responsibility for being and keeping informed of the financial
condition of each Borrower and of all circumstances bearing upon the risk of
non-payment of the Guaranteed Obligations. Each Guarantor hereby waives and
relinquishes any duty on the part of any Beneficiary to disclose any matter,
fact or thing relating to the business, operations or conditions of any Borrower
now known or hereafter known by any Beneficiary.

7.11 Bankruptcy, etc.

(a) So long as any Non-US Guaranteed Obligations or Guaranteed Obligations
remain outstanding, no Guarantor shall, without the prior written consent of
Administrative Agent acting pursuant to the instructions of Requisite Banks,
commence or join with any other Person in commencing any bankruptcy,
reorganization or insolvency case or proceeding of or against any Borrower or
any other Guarantor, subject to the limitations applicable to certain Non-US
Guarantors as set out in Section 7.13 and Section 7.14. The obligations of
Guarantors hereunder shall not be reduced, limited, impaired, discharged,
deferred, suspended or terminated by any case or proceeding, voluntary or
involuntary, involving the bankruptcy, insolvency, receivership, reorganization,
liquidation or arrangement of any Borrower or any other Guarantor or by any
defense which any Borrower or any other Guarantor may have by reason of the
order, decree or decision of any court or administrative body resulting from any
such proceeding.

(b) Each Guarantor acknowledges and agrees that any interest on any portion of
the Guaranteed Obligations which accrues after the commencement of any case or
proceeding referred to in clause (a) above (or, if interest on any portion of
the

 

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Non-US Guaranteed Obligations and Guaranteed Obligations ceases to accrue by
operation of law by reason of the commencement of such case or proceeding, such
interest as would have accrued on such portion of the Non-US Guaranteed
Obligations and Guaranteed Obligations if such case or proceeding had not been
commenced) shall be included in the Non-US Guaranteed Obligations and Guaranteed
Obligations because it is the intention of Guarantors and Beneficiaries that the
Non-US Guaranteed Obligations and Guaranteed Obligations which are guaranteed by
the applicable Guarantors pursuant hereto should be determined without regard to
any rule of law or order which may relieve any Borrower of any portion of such
Non-US Guaranteed Obligations or Guaranteed Obligations, as the case may be.
Guarantors will permit any trustee in bankruptcy, receiver, debtor in
possession, assignee for the benefit of creditors or similar person to pay
Administrative Agent, or allow the claim of Administrative Agent in respect of,
any such interest accruing after the date on which such case or proceeding is
commenced.

(c) In the event that all or any portion of the Non-US Guaranteed Obligations or
Guaranteed Obligations are paid by any Borrower, the obligations of Guarantors
hereunder shall continue and remain in full force and effect or be reinstated,
as the case may be, in the event that all or any part of such payment(s) are
rescinded or recovered directly or indirectly from any Beneficiary as a
preference, fraudulent transfer or otherwise, and any such payments which are so
rescinded or recovered shall constitute Non-US Guaranteed Obligations and
Guaranteed Obligations for all purposes hereunder.

7.12 Discharge of Guaranty Upon Sale of Guarantor. If all of the Capital Stock
of any Guarantor or any of its successors in interest hereunder shall be sold or
otherwise disposed of (including by merger or consolidation) in accordance with
the terms and conditions hereof, the Guaranty of such Guarantor or such
successor in interest, as the case may be, hereunder shall automatically be
discharged and released without any further action by any Beneficiary or any
other Person effective as of the time of such Asset Sale.

7.13 Validity of Pledge of Shares held by Xerium SAS and the German Guarantors;
Parallel Obligations.

(a) For the purposes of taking a valid security interest in the shares held by
Xerium SAS, Xerium Technologies Limited and the German Guarantors securing only
the Non-US Obligations and ensuring the continued validity of such security
interest, and despite anything to the contrary contained in any Credit Document:

(i) Xerium SAS shall pay to the Collateral Agent sums equal to, and in the
currency of, its obligations owing by it to a Secured Party (other than the
Collateral Agent) as and when the same fall due for payment under the Credit
Documents and each of the German Guarantors shall pay to the Collateral Agent
sums equal to, and in the currency of, the Non-US Obligations as and when the
same fall due for payment under the Credit Documents (the “Parallel
Obligations”);

 

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(ii) the rights of the Secured Parties to receive payment under the Credit
Documents are several and independent from the rights of the Collateral Agent to
receive the Parallel Obligations;

(iii) the Collateral Agent shall have its own independent right to demand
payment of the Parallel Obligations by Xerium SAS and the German Guarantors;

(iv) the payment by Xerium Technologies Limited, Xerium SAS or any of the German
Guarantors of its Parallel Obligations to the Collateral Agent in accordance
with this Section 7.13 shall be a good discharge of the corresponding
obligations owed by it to the relevant Secured Party under the relevant Credit
Document, or the corresponding Non-US Obligations, as the case may be, and
payment by Xerium SAS or any of the German Guarantors of its obligations owed by
it to the relevant Secured Party under the relevant Credit Document, or the
corresponding Non-US Obligations, as the case may be, shall be a good discharge
of the corresponding Parallel Obligations to the Collateral Agent; and

(v) with regard to Xerium Technologies Limited, Xerium SAS and the German
Guarantors, nothing in any Credit Document shall in any way limit the Collateral
Agent’s right to act in the protection or preservation of the rights under, or
to enforce any, Collateral Document as contemplated by this Section 7.13 or the
relevant Collateral Document.

(b) Despite the foregoing, any such payment shall be made to the Administrative
Agent unless the Administrative Agent directs such payment to be made to the
Collateral Agent.

(c) Without limiting or affecting the Collateral Agent’s rights against Xerium
Technologies Limited, Xerium SAS or any of the German Guarantors (whether under
this Section 7.13 or under any other provision of the Credit Documents and
subject to paragraph (a)(v) of this Section 7.13), the Collateral Agent agrees
with each other Secured Party or creditor of a Non-US Obligation, as the case
may be, that it will not exercise its rights in respect of the Parallel
Obligations except with the consent of the relevant Secured Party or the
creditor of a Non-US Obligation or the Requisite Banks, as the case may be.

(d) A Secured Party and the Collateral Agent may not, by virtue of this
Section 7.13, pursue Xerium Technologies Limited, Xerium SAS or any of the
German Guarantors concurrently for the same obligation.

7.14 Limitation of Non-US Guaranteed Obligations.

(a) Austrian guarantee. The obligations of each Non-US Guarantor organized under
Austrian law shall be limited so as not to result in the violation of Austrian
capital maintenance rules pursuant to Austrian company law, in particular
Section 82 of the Act on Limited Liability Companies (Gesetz über Gesellschaften
mit beschränkter Haftung) and Section 52 of the

 

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Austrian Act on Stock Corporations (Aktiengesetz)(Austrian Capital Maintenance
Rules), and all obligations hereunder of such Austrian Guarantor shall be
limited in accordance with these rules. Further, the subordination of
obligations pursuant to Section 7.7 hereof shall not be binding on any Obligee
Guarantor organized under Austrian law to the extent such subordination would
constitute a violation of mandatory Austrian capital maintenance provisions.

(b) Italian guarantee. This liability of each Non-US Guarantor organized under
the laws of the Republic of Italy (each, an “Italian Guarantor”) shall:

(i) at no time require an Italian Guarantor to pay an amount which exceeds an
amount corresponding from time to time to the aggregate of the outstanding
indebtedness of the Italian Guarantor under any Revolving Loan granted to that
Italian Guarantor under this Agreement and under the Italia B Term Loan; and

(ii) the guarantee obligations of an Italian Guarantor under this
Section 7.14(b) shall be limited to the extent required to comply with Italian
mandatory provisions on financial assistance and corporate benefit (including,
without limitation, Article 2358 of the Italian Civil Code) and, accordingly,
such guarantee obligations shall not include and shall not extend to any
indebtedness incurred by any Borrower and/or Guarantor in relation to the
financing of the acquisition or subscription for of shares issued or to be
issued by such Italian Guarantor or by any direct or indirect controlling entity
of such Italian Guarantor; without prejudice to the foregoing, the maximum
amount that each Italian Guarantor may be required to pay under this
Section 7.14 shall in no event exceed Euro 132,863,163.00.

(c) Swiss guarantee.

(i) The guarantees, obligations, liabilities and undertakings of any Swiss
Guarantor under Section 7 (Guaranty) of this Agreement in relation to
obligations, liabilities or undertakings of an obligor (other than the
respective Swiss Guarantor or any of its subsidiaries) shall only be deemed to
be undertaken or incurred to the extent and in the maximum amount of its free
reserves available for distribution (being the positive difference between the
assets of the Swiss Guarantor and the aggregate of all liabilities, the amount
of the registered share capital and the mandatory reserves at any given time,
all these amounts to be established in accordance with Swiss law and to be
confirmed by the auditors of the relevant Swiss Guarantor based on an interim
audited balance sheet as of the date the guarantee is drawn), taking into
account the deduction of Swiss withholding tax at the rate of 35% (or such other
rate in force from time to time), subject to any applicable double taxation
treaty, levied on any such reserves made available for distribution.

(ii) The subordination by an Obligee Guarantor incorporated in Switzerland (a
“Swiss Obligee Guarantor”) for the benefit of any Borrower or any Guarantor
(other than subsidiaries of the respective Swiss Obligee Guarantor) shall only

 

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be deemed to be undertaken or incurred to the extent and in the maximum amount
of its free reserves available for distribution (being the positive difference
between the assets of the Swiss Obligee Guarantor and the aggregate of all
liabilities, the amount of the registered share capital and the mandatory
reserves at any given time, all these amounts to be established in accordance
with Swiss law and to be confirmed by the auditors of the relevant Swiss Obligee
Guarantor based on an interim audited balance sheet as of the date the guarantee
is drawn), taking into account the deduction of Swiss withholding tax at the
rate of 35% (or such other rate in force from time to time), subject to any
applicable double taxation treaty, levied on any such reserves made available
for distribution.

(iii) The obligation of a Swiss Obligee Guarantor not without the prior written
consent of the Administrative Agent acting pursuant to the instructions of
Requisite Banks to commence or join with any other Person in commencing any
bankruptcy, reorganization or insolvency case or proceeding of or against any
Borrower or any Guarantor (other than subsidiaries of the respective Swiss
Obligee Guarantor), shall only be deemed to be undertaken or incurred to the
extent and in the maximum amount of its free reserves available for distribution
(being the positive difference between the assets of the Swiss Obligee Guarantor
and the aggregate of all liabilities, the amount of the registered share capital
and the mandatory reserves at any given time, all these amounts to be
established in accordance with Swiss law and to be confirmed by the auditors of
the relevant Swiss Obligee Guarantor based on an interim audited balance sheet
as of the date the guarantee is drawn), taking into account the deduction of
Swiss withholding tax at the rate of 35% (or such other rate in force from time
to time), subject to any applicable double taxation treaty, levied on any such
reserves made available for distribution.

(d) French guarantee. The liability of each Non-US Guarantor organized under the
laws of France (a “French Guarantor”) shall (A) not include any obligations
which if incurred would constitute the provision of financial assistance as
defined by article L225-216 of the French Commercial Code, (B) only guarantee
obligations to the extent that the proceeds are used to finance or refinance the
working capital needs or the debt of any Borrower and (C) be limited at any time
to the greater of:

(i) the equivalent to Euros of the Advances (plus any accrued interest thereon,
commissions and fees) made available to any obligor (other than, if applicable,
the French Guarantor) to the extent directly or indirectly on-lent by the
obligor to the French Guarantor calculated by the Facility Agent on the date on
which such moneys are paid; and

(ii) 80% of the greater of:

 

  (A) the Net Asset Value of the French Guarantor calculated and certified by
the statutory auditors of the French Guarantor on the basis of the last audited
financial statements available at the date hereof; and

 

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  (B) the Net Asset Value of the French Guarantor calculated and certified by
the statutory auditors of the French Guarantor on the basis of the last audited
financial statements available at the date on which demand is made on it
pursuant to this Section 7.

For the purposes of this Section 7.14(d) “Net Asset Value” of the French
Guarantor means the capitaux propres (as defined under the provisions of French
accounting laws, decrees and regulations consistently applied) of the French
Guarantor. A certificate of the statutory auditors of the French Guarantor as to
the Net Asset Value shall be prima facie evidence as to the amount to which it
relates.

(e) Canadian guarantee. No Guarantor existing under the laws of Canada or any
province thereof (a “Canadian Guarantor”) shall guarantee, undertake, or provide
any indemnity in respect of, the obligations of any person under this Section 7
unless at the time such guarantee or undertaking is given or indemnity is
provided (i) such person is a Subsidiary of the Canadian Guarantor or (ii) the
Canadian Guarantor is a wholly owned Subsidiary of such person or (iii) such
Canadian Guarantor is not prohibited by applicable laws from giving such
guarantee or undertaking or providing such indemnity.

(f) German guarantees.

(i) To the extent that any of the guarantees granted hereunder by any Guarantor
organized under the laws of the Federal Republic of Germany as a German limited
liability company (GmbH) or a German limited partnership without any natural
person as general partner (GmbH & Co. KG) is enforced with respect to Non-US
Guaranteed Obligations owed and payable by an affiliated company (verbundenes
Unternehmen) within the meaning of Section 15 et seq. of the German Stock
Corporation Act (Aktiengesetz) of the relevant Guarantor other than affiliated
companies as to which such Guarantor (or, in the case of a GmbH & Co. KG, it or
its general partner) is a direct or indirect shareholder, the right to enforce
the Guarantee against the relevant Guarantor shall, but only with respect to
such Guarantor, be limited

(1) to such Guarantor’s (or, in the case of a GmbH & Co. KG, its general
partner’s) net assets, being its total assets less its liabilities each as
calculated in accordance with the accounting standards applicable to such
Guarantor (or, in the case of a GmbH & Co. KG, its general partner) by law from
time to time, (Nettovermögen) (the “Net Assets”), however only if and to the
extent that such Guarantor provides sufficient evidence to the Administrative
Agent that

 

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(A) such Guarantor’s (or, in the case of a GmbH & Co. KG, its general partner’s)
Net Assets are reduced below the amount of its (or, in the case of a GmbH & Co.
KG, its general partner’s) stated share capital (Stammkapital) as a result of
the enforcement, the application of the proceeds towards the Non-US Guaranteed
Obligations would thus constitute a violation of Sections 30, 31 German Limited
Liability Company Act (GmbH-Gesetz), and such payment of proceeds to such
Guarantor is therefore required to allow such Guarantor (or, in the case of a
GmbH & Co. KG, its general partner) to maintain its stated share capital in
accordance with Sections 30, 31 German Limited Liability Company Act, or

(B) such Guarantor’s (or, in the case of a GmbH & Co. KG, its general partner’s)
Net Assets had already been reduced prior to the enforcement to an amount below
its (or, in the case of a GmbH & Co. KG, its general partner’s) stated share
capital, the application of the proceeds towards the Non-US Guaranteed
Obligations would thus constitute a violation of Sections 30, 31 German Limited
Liability Company Act, and such payment of proceeds to such Guarantor is
therefore required to restore such Guarantor’s (or, in the case of a GmbH & Co.
KG, its general partner’s) stated share capital in accordance with Sections 30,
31 German Limited Liability Company Act;

(2) to such an amount as such limitation is required to prevent a destruction of
such Guarantor’s (or, in the case of a GmbH & Co. KG, its general partner’s)
existence, however only if and to the extent that such Guarantor provides
sufficient evidence to the Administrative Agent that such destruction of
existence would otherwise occur and be deemed to have been brought about by a
lack of minimum considerateness of such Guarantor’s (or, in the case of a GmbH &
Co. KG, its general partner’s) interests (Rücksichtnahme auf die Eigenbelange
der GmbH) on the part of such Guarantor’s (or, in the case of a GmbH & Co. KG,
its general partner’s) sole shareholder (existenzvernichtender Eingriff);

however in each case only if and to the extent that such Guarantor further
provides sufficient evidence to the Administrative Agent that the Non-US
Guaranteed Obligations, including without limitation any interest or ancillary
obligations relating thereto, with respect to which the guarantee is enforced do
not correspond to funds that have been directly or indirectly passed on by any
of the Borrowers of such Non-US Guaranteed Obligations (1) in the form of a loan
to such Guarantor (or, in the case of a GmbH & Co. KG, to it or its general
partner) or (2) in the form of a loan or of equity to an affiliated company of
such Guarantor (or, in the case of a GmbH & Co. KG, of it or its general
partner) as to which it (or, in the case of a GmbH & Co. KG, it or its general
partner) is a direct or indirect shareholder and that is not itself a Credit
Party.

(ii) The foregoing subsection 7.14(f)(i)(1) shall apply only subject to the
provisos that

 

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(1) for the purposes of the determination of the relevant Guarantor’s (or, in
the case of a GmbH & Co. KG, its general partner’s) stated share capital the
amount of any increase of such stated share capital after the date hereof shall
be disregarded to the extent such increase (A) has been effected without the
prior written consent of the Administrative Agent, (B) is effected out of
company funds (Kapitalerhöhung aus Gesellschaftsmitteln) or (C) is not fully
paid up; and

(2) for the purposes of the calculation of the relevant Guarantor’s (or, in the
case of a GmbH & Co. KG, its general partner’s) Net Assets the following items
shall be adjusted as follows:

 

  1. (A) obligations under loans provided to the relevant Guarantor (or, in the
case of a GmbH & Co. KG, to it or its general partner) by its (or, in the case
of a GmbH & Co. KG, its or its general partner’s) direct or indirect
shareholders or their affiliates to the extent that such obligations (x) are
subordinated except where such obligations are subordinated to individual other
obligations only and of full value (voll werthaltig) at and immediately
following the time at which they are subordinated, (y) qualify as obligations
which may not be repaid under Sections 30 and 31 of the German Limited Liability
Company Act, or (z) qualify as obligations under loans or equivalent
transactions within the meaning of Section 32a of the German Limited Liability
Company Act shall be disregarded;

 

  2. (B) rights for payment under loans granted by the relevant Guarantor (or,
in the case of a GmbH & Co. KG, by it or its general partner) to any of its (or,
in the case of a GmbH & Co. KG, its or its general partner’s) direct or indirect
shareholders or their affiliates to the extent the granting of such loans
constituted a violation of Sections 30, 31 German Limited Liability Company Act
shall be accounted for with their full nominal value; without prejudice to the
foregoing, rights for payment under loans (other than or in excess of those
accounted for with their full value pursuant to the foregoing) shall be
disregarded to the extent such rights do not qualify as assets of the relevant
Guarantor (or, in the case of a GmbH & Co. KG, of its general partner) for
purposes of Sections 30, 31 German Limited Liability Company Act provided that
such loans were made by such Guarantor (or, in the case of a GmbH & Co. KG, by
its general partner) to one of its (or, in the case of a GmbH & Co. KG, its
general partner’s) direct or indirect shareholders or their affiliates and such
shareholder or affiliate is fully liable for the payment of the Non-US
Guaranteed Obligations;

 

  3. (C) obligations under loans or other contractual liabilities incurred by
the relevant Guarantor (or, in the case of a GmbH & Co. KG, by it or its general
partner) in violation of any Credit Document to which it (or, in the case of a
GmbH & Co. KG, it or its general partner, respectively) is a party shall be
disregarded; and

 

  4.

(D) any asset that is not necessary for the relevant Guarantor’s (or, in the
case of a GmbH & Co. KG, its or its general partner’s) business (nicht
betriebsnotwendig), that is shown in such Guarantor’s (or, in the case of a
GmbH & Co. KG, its

 

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or its general partner’s, respectively) balance sheet with a book value
(Buchwert) which is lower than the market value of such asset, and that can be
realized, shall be taken into account with its market value, except where such
Guarantor provides sufficient evidence to the Administrative Agent that (x) such
realization would not be legally permitted or (y) the proceeds achievable
through such realization would not exceed the total of the book value plus the
expenses in connection with such realization.

7.15 Validity and Effectiveness. This Guaranty shall remain wholly valid and
effective until the full, unconditional and irrevocable performance and
discharge of the Non-US Guaranteed Obligations or Guaranteed Obligations, as the
case may be, and for all the period during which payments effected in such
respect are subject to the claw back and/or avoidance under any applicable law.

SECTION 8. EVENTS OF DEFAULT

8.1 Events of Default. If any one or more of the following conditions or events
shall occur:

(a) Failure to Make Payments When Due. Failure by a Borrower to pay (i) when due
any installment of principal of any Loan, whether at stated maturity, by
acceleration, by notice of voluntary prepayment, by mandatory prepayment or
otherwise; (ii) when due any amount payable to Issuing Bank in reimbursement of
any drawing under a Letter of Credit; or (iii) any interest on any Loan or any
fee or any other amount due hereunder, which failure continues for three
(3) Business Days only if as a result of a transmission failure due to a failure
of the banking markets; or

(b) Default in Other Agreements. (i) Failure of any Credit Party or any of their
respective Subsidiaries to pay when due any principal of or interest on or any
other amount payable in respect of one or more items of Indebtedness (other than
Indebtedness referred to in Section 8.1(a)) with an aggregate principal amount
of $5,000,000 or more, in each case beyond the grace period, if any, provided
therefor; or (ii) breach or default by any Credit Party with respect to any
other material term of (1) one or more items of Indebtedness in the individual
or aggregate principal amounts referred to in clause (i) above or (2) any loan
agreement, mortgage, indenture or other agreement relating to such item(s) of
Indebtedness, in each case beyond the grace period, if any, originally provided
therefor, if the effect of such breach or default is to cause, or to permit the
holder or holders of that Indebtedness (or a trustee on behalf of such holder or
holders), to cause, that Indebtedness to become or be declared due and payable
(or redeemable) prior to its stated maturity or the stated maturity of any
underlying obligation, as the case may be; or

(c) Breach of Certain Covenants. Failure of any Credit Party to perform or
comply with any term or condition contained in Section 2.6, Section 5.1(g)(i),
Section 5.2 or Section 6; or

 

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(d) Breach of Representations, etc. Any representation, warranty, certification
or other statement made or deemed made by any Credit Party in any Credit
Document or in any statement or certificate at any time given by any Credit
Party or any of its Subsidiaries in writing pursuant hereto or thereto or in
connection herewith or therewith shall be false in any material respect as of
the date made or deemed made; or

(e) Other Defaults Under Credit Documents. Any Credit Party shall default in the
performance of or compliance with any term contained herein or any of the other
Credit Documents, other than any such term referred to in any other subsection
of this Section 8.1, and such default shall not have been remedied or waived
within fifteen (15) Business Days after the earlier of (i) an officer of such
Credit Party becoming aware of such default or (ii) receipt by Xerium of notice
from Administrative Agent or any Bank of such default; or

(f) Involuntary Bankruptcy; Appointment of Receiver, etc. (i) A court of
competent jurisdiction shall enter a decree or order for relief in respect of
Xerium or any of its Subsidiaries in an involuntary case under the Bankruptcy
Code or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, which decree or order is not stayed; or any other similar
relief shall be granted under any applicable federal, provincial or state law;
or (ii) an involuntary case shall be commenced against Xerium or any of its
Subsidiaries under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect, or any application shall
have been made, or is required by applicable law to be made, with a court for
the opening of insolvency proceedings with regard to Xerium or any of its
Subsidiaries; or a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over Xerium or any of its
Subsidiaries, or over all or a substantial part of its property, shall have been
entered; or there shall have occurred the involuntary appointment of an interim
receiver, trustee or other custodian of Xerium or any of its Subsidiaries for
all or a substantial part of its property; or a warrant of attachment, execution
or similar process shall have been issued against any substantial part of the
property of Xerium or any of its Subsidiaries, and (A) in relation only to any
Non-US Borrower and any Foreign Subsidiary, any such event described in this
clause (ii) shall continue for seven days without having been dismissed, bonded
or discharged, and (B) in relation only to Xerium or any Domestic Subsidiary,
any such event described in this clause (ii) shall continue for sixty days
without having been dismissed, bonded or discharged; or

(g) Voluntary Bankruptcy; Appointment of Receiver, etc. (i) Xerium or any of its
Subsidiaries shall have an order for relief entered with respect to it or shall
commence a voluntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect, or
shall consent to the entry of an order for relief in an involuntary case, or to
the conversion of an involuntary case to a voluntary case, under any such law,
or shall consent to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property; or
Xerium or any of its Subsidiaries shall make any assignment for the benefit of
creditors; or (ii) Xerium or any of its Subsidiaries shall be unable, or shall
fail generally, or shall admit in writing its inability, to pay its debts as
such debts become due; or the

 

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board of directors (or similar governing body) of Xerium or any of its
Subsidiaries (or any committee thereof) shall adopt any resolution or otherwise
authorize any action to approve any of the actions referred to herein or in
Section 8.1(f); or

(h) Judgments and Attachments. Any money judgment, writ or warrant of attachment
or similar process involving in the aggregate at any time an amount in excess of
$5,000,000 (in either case to the extent not adequately covered by insurance as
to which a solvent and unaffiliated insurance company has acknowledged coverage)
shall be entered or filed against Xerium or any of its Subsidiaries or any of
their respective assets and shall remain undischarged, unvacated, unbonded or
unstayed for a period of sixty days (or in any event later than five days prior
to the date of any proposed sale thereunder); or

(i) Dissolution. Any order, judgment or decree shall be entered against any
Credit Party decreeing the dissolution or split up of such Credit Party and such
order shall remain undischarged or unstayed for a period in excess of thirty
days; or

(j) Employee Benefit Plans. (i) There shall occur one or more ERISA Events
and/or Canadian Pension Plan Events which individually or in the aggregate
results in or could reasonably be expected to result in liability of Xerium, any
of its Subsidiaries or any of their respective ERISA Affiliates in excess of
$5,000,000 during the term hereof; or (ii) there exists any fact or circumstance
that reasonably could be expected to result in the imposition of a Lien or
security interest under Section 412(n) of the Internal Revenue Code or under
ERISA; or

(k) Change of Control. A Change of Control shall occur; or

(l) Guaranties, Collateral Documents and Other Credit Documents. At any time
after the execution and delivery thereof, (i) any Guaranty for any reason, other
than the satisfaction in full of all Obligations, shall cease to be in full
force and effect (other than in accordance with its terms) or shall be declared
to be null and void or any Guarantor shall repudiate its obligations thereunder,
(ii) this Agreement or any Collateral Document ceases to be in full force and
effect (other than by reason of a release of Collateral in accordance with the
terms hereof or thereof or the satisfaction in full of the Obligations in
accordance with the terms hereof or any other termination of such Collateral
Document in accordance with the terms thereof) or shall be declared null and
void, or Collateral Agent shall not have or shall cease to have a valid and
perfected Lien in any Collateral purported to be covered by the Collateral
Documents with the priority required by the relevant Collateral Document, in
each case for any reason other than the failure of Collateral Agent or any
Secured Party to take any action within its control, or (iii) any Credit Party
shall contest the validity or enforceability of any Credit Document in writing
or deny in writing that it has any further liability, including with respect to
future advances by Banks, under any Credit Document to which it is a party; or

(m) Material Adverse Effect. Any event, condition or situation shall occur that
has a Material Adverse Effect,

 

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THEN, (1) upon the occurrence of any Event of Default described in Sections
8.1(f), (g) or (k), automatically, and (2) upon the occurrence of any other
Event of Default, at the request of (or with the consent of) Requisite Banks,
upon notice to Xerium by Administrative Agent, (A) the Revolving Commitments, if
any, of each Bank having such Revolving Commitments and the obligation of
Issuing Bank to issue any Letter of Credit shall immediately terminate; (B) each
of the following shall immediately become due and payable, in each case without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived by each Credit Party: (I) the unpaid principal amount of
and accrued interest on the Loans, (II) an amount equal to the maximum amount
that may at any time be drawn under all Letters of Credit then outstanding
(regardless of whether any beneficiary under any such Letter of Credit shall
have presented, or shall be entitled at such time to present, the drafts or
other documents or certificates required to draw under such Letters of Credit),
and (III) all other Obligations; provided, the foregoing shall not affect in any
way the obligations of Banks under Section 2.4(e); (C) Administrative Agent may
cause Collateral Agent to enforce any and all Liens and security interests
created pursuant to Collateral Documents; and (D) Administrative Agent shall
direct each Borrower to pay (and each Borrower hereby agrees upon receipt of
such notice, or upon the occurrence of any Event of Default specified in
Section 8.1(f) and (g) to pay) to Administrative Agent such additional amounts
of cash, to be held as security for each Borrower’s reimbursement Obligations in
respect of Letters of Credit then outstanding, equal to the Letter of Credit
Usage at such time.

SECTION 9. AGENTS

9.1 Appointment of Agents. Citigroup Global Markets, Inc. is hereby appointed
Lead Arranger hereunder, and each Bank hereby authorizes the Lead Arranger to
act as its agent in accordance with the terms hereof and the other Credit
Documents. Citicorp North America, Inc. is hereby appointed Administrative Agent
hereunder and under the other Credit Documents and each Bank hereby authorizes
Administrative Agent to act as its agent in accordance with the terms hereof and
the other Credit Documents. Each Agent hereby agrees to act upon the express
conditions contained herein and the other Credit Documents, as applicable. The
provisions of this Section 9 are solely for the benefit of Agents and Banks and
no Credit Party shall have any rights as a third party beneficiary of any of the
provisions thereof. In performing its functions and duties hereunder, each Agent
shall act solely as an agent of Banks and does not assume and shall not be
deemed to have assumed any obligation towards or relationship of agency or trust
with or for Xerium or any of its Subsidiaries. The Lead Arranger, without
consent of or notice to any party hereto, may assign any and all of its
respective rights or obligations hereunder to any of its Affiliates. As of the
Closing Date, Citigroup Global Markets, Inc, in its capacity as Lead Arranger,
shall not have any obligations but shall be entitled to all benefits of this
Section 9.

9.2 Powers and Duties. Each Bank irrevocably authorizes each Agent to take such
action on such Bank’s behalf and to exercise such powers, rights and remedies
hereunder and under the other Credit Documents as are specifically delegated or
granted to such Agent by the terms hereof and thereof, together with such
powers, rights and remedies as are reasonably incidental thereto. Each Agent
shall have only those duties and responsibilities that are expressly specified
herein and the other Credit Documents. Each

 

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Agent may exercise such powers, rights and remedies and perform such duties by
or through its agents or employees. No Agent shall have, by reason hereof or any
of the other Credit Documents, a fiduciary relationship in respect of any Bank;
and nothing herein or any of the other Credit Documents, expressed or implied,
is intended to or shall be so construed as to impose upon any Agent any
obligations in respect hereof or any of the other Credit Documents except as
expressly set forth herein or therein.

9.3 General Immunity.

(a) No Responsibility for Certain Matters. No Agent shall be responsible to any
Bank for the execution, effectiveness, genuineness, validity, enforceability,
collectability or sufficiency hereof or any other Credit Document or for any
representations, warranties, recitals or statements made herein or therein or
made in any written or oral statements or in any financial or other statements,
instruments, reports or certificates or any other documents furnished or made by
any Agent to Banks or by or on behalf of any Credit Party to any Agent or any
Bank in connection with the Credit Documents and the transactions contemplated
thereby or for the financial condition or business affairs of any Credit Party
or any other Person liable for the payment of any Obligations, nor shall any
Agent be required to ascertain or inquire as to the performance or observance of
any of the terms, conditions, provisions, covenants or agreements contained in
any of the Credit Documents or as to the use of the proceeds of the Loans or as
to the existence or possible existence of any Event of Default or Default or to
make any disclosures with respect to the foregoing. Anything contained herein to
the contrary notwithstanding, Administrative Agent shall not have any liability
arising from confirmations of the amount of outstanding Loans or the Letter of
Credit Usage or the component amounts thereof.

(b) Exculpatory Provisions. No Agent or any of its officers, partners,
directors, employees or agents shall be liable to Banks for any action taken or
omitted by any Agent under or in connection with any of the Credit Documents
except to the extent caused by such Agent’s gross negligence or willful
misconduct. No Agent shall have an obligation to act without receiving a
satisfactory indemnity from the parties to this Agreement. Each Agent shall be
entitled to refrain from any act or the taking of any action (including the
failure to take an action) in connection herewith or any of the other Credit
Documents or from the exercise of any power, discretion or authority vested in
it hereunder or thereunder unless and until such Agent shall have received
instructions in respect thereof from Requisite Banks (or such other Banks as may
be required to give such instructions under Section 10.6) and, upon receipt of
such instructions from Requisite Banks (or such other Banks, as the case may
be), such Agent shall be entitled to act or (where so instructed) refrain from
acting, or to exercise such power, discretion or authority, in accordance with
such instructions. Without prejudice to the generality of the foregoing,
(i) each Agent shall be entitled to rely, and shall be fully protected in
relying, upon any communication, instrument or document believed by it to be
genuine and correct and to have been signed or sent by the proper Person or
Persons, and shall be entitled to rely and shall be protected in relying on
opinions and judgments of attorneys (who may be attorneys for Xerium and its
Subsidiaries), accountants, experts and other professional advisors selected by
it; and (ii) no Bank shall have any right of action whatsoever

 

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against any Agent as a result of such Agent acting or (where so instructed)
refraining from acting hereunder or any of the other Credit Documents in
accordance with the instructions of Requisite Banks (or such other Banks as may
be required to give such instructions under Section 10.6).

9.4 Agents Entitled to Act as Bank. The agency hereby created shall in no way
impair or affect any of the rights and powers of, or impose any duties or
obligations upon, any Agent in its individual capacity as a Bank hereunder. With
respect to its participation in the Loans and the Letters of Credit, each Agent
shall have the same rights and powers hereunder as any other Bank and may
exercise the same as if it were not performing the duties and functions
delegated to it hereunder, and the term “Bank” shall, unless the context clearly
otherwise indicates, include each Agent in its individual capacity. Any Agent
and its Affiliates may accept deposits from, lend money to, own securities of,
and generally engage in any kind of banking, trust, financial advisory or other
business with Xerium or any of its Affiliates as if it were not performing the
duties specified herein, and may accept fees and other consideration from each
Borrower for services in connection herewith and otherwise without having to
account for the same to Banks.

9.5 Banks’ Representations, Warranties and Acknowledgment. Each Bank represents
and warrants that it has made its own independent investigation of the financial
condition and affairs of Xerium and its Subsidiaries in connection with Credit
Extensions hereunder and that it has made and shall continue to make its own
appraisal of the creditworthiness of Xerium and its Subsidiaries. No Agent shall
have any duty or responsibility, either initially or on a continuing basis, to
make any such investigation or any such appraisal on behalf of Banks or to
provide any Bank with any credit or other information with respect thereto,
whether coming into its possession before the making of the Loans or at any time
or times thereafter, and no Agent shall have any responsibility with respect to
the accuracy of or the completeness of any information provided to Banks.

9.6 Right to Indemnity. Each Bank, in proportion to its Pro Rata Share,
severally agrees to indemnify each Agent, to the extent that such Agent shall
not have been reimbursed by any Credit Party (and without limiting the
Borrowers’ obligation to do so), for and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including reasonable counsel fees and disbursements) or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against such Agent in exercising its powers, rights and remedies or
performing its duties hereunder or under the other Credit Documents or otherwise
in its capacity as such Agent in any way relating to or arising out of this
Agreement or the other Credit Documents; provided, no Bank shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from such
Agent’s gross negligence or willful misconduct. If any indemnity furnished to
any Agent for any purpose shall, in the opinion of such Agent, be insufficient
or become impaired, such Agent may call for additional indemnity and cease, or
not commence, to do the acts indemnified against until such additional indemnity
is furnished; provided, in no event shall this sentence require any Bank to
indemnify any Agent against any liability, obligation, loss, damage, penalty,
action, judgment, suit, cost, expense or disbursement in excess of such Bank’s
Pro Rata Share thereof; and provided further, this sentence shall not be deemed
to require any Bank to indemnify any Agent against any liability, obligation,
loss, damage, penalty, action, judgment, suit, cost, expense or disbursement
described in the proviso in the immediately preceding sentence.

 

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9.7 Successor Administrative Agent. Administrative Agent may resign at any time
by giving thirty days’ prior written notice thereof to Banks and Xerium, and
Administrative Agent may be removed at any time with or without cause by an
instrument or concurrent instruments in writing delivered to Xerium and
Administrative Agent and signed by Requisite Banks. Upon any such notice of
resignation or any such removal, Requisite Banks shall have the right, upon five
Business Days’ notice to Xerium, to appoint a successor Administrative Agent.
Upon the acceptance of any appointment as Administrative Agent hereunder by a
successor Administrative Agent, that successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Administrative Agent and the retiring or
removed Administrative Agent shall promptly (i) transfer to such successor
Administrative Agent all sums, Securities and other items of Collateral held
under the Collateral Documents, together with all records and other documents
necessary or appropriate in connection with the performance of the duties of the
successor Administrative Agent under the Credit Documents, and (ii) execute and
deliver to such successor Administrative Agent such amendments to financing
statements, and take such other actions, as may be necessary or appropriate in
connection with the assignment to such successor Administrative Agent of the
security interests created under the Collateral Documents, whereupon such
retiring or removed Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring or removed Administrative Agent’s
resignation or removal hereunder as Administrative Agent, the provisions of this
Section 9 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent hereunder.

9.8 Collateral Documents and Guaranty.

(a) Agents under Collateral Documents and Guaranty. Each Bank hereby further
authorizes Administrative Agent or Collateral Agent, as applicable, on behalf of
and for the benefit of Banks, to be the agent for and representative of Banks
with respect to the Guaranty, the Collateral and the Collateral Documents.
Subject to Section 10.6, without further written consent or authorization from
Banks, Administrative Agent or Collateral Agent, as applicable, may execute any
documents or instruments necessary to (i) release any Lien encumbering any item
of Collateral that is the subject of a sale or other disposition of assets
permitted hereby or to which Requisite Banks (or such other Banks as may be
required to give such consent under Section 10.6) have otherwise consented or
(ii) release any Guarantor from the Guaranty pursuant to Section 7.12 or with
respect to which Requisite Banks (or such other Banks as may be required to give
such consent under Section 10.6) have otherwise consented.

(b) Right to Realize on Collateral and Enforce Guaranty. Anything contained in
any of the Credit Documents to the contrary notwithstanding, each Borrower,
Administrative Agent, Collateral Agent and each Bank hereby agrees that (i) no
Bank shall have any right individually to realize upon any of the Collateral or
to enforce the Guaranty, it being understood and agreed that all powers, rights
and remedies hereunder may be exercised solely by Administrative Agent, on
behalf of Banks in accordance with the terms hereof and all powers, rights and
remedies under the Collateral Documents may be exercised solely

 

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by Collateral Agent, and (ii) in the event of a foreclosure by Collateral Agent
on any of the Collateral pursuant to a public or private sale, Collateral Agent
or any Bank may be the purchaser of any or all of such Collateral at any such
sale and Collateral Agent, as agent for and representative of Secured Parties
(but not any Bank or Banks in its or their respective individual capacities
unless Requisite Banks shall otherwise agree in writing) shall be entitled, for
the purpose of bidding and making settlement or payment of the purchase price
for all or any portion of the Collateral sold at any such public sale, to use
and apply any of the Obligations as a credit on account of the purchase price
for any collateral payable by Collateral Agent at such sale.

(c) Collateral Agent’s Power of Attorney. Each Secured Party, including in its
capacity as Bank Counterparty, irrevocably constitutes, to the extent necessary,
the Collateral Agent as the holder of an irrevocable power of attorney (i.e.
“fondé de pouvoirs” within the meaning of Article 2692 of the Civil Code of
Québec) in order to hold security granted by any Credit Party in the Province of
Quebec to secure the Indebtedness of such Credit Party under any bond issued by
such Credit Party. Notwithstanding the provisions of section 32 of an Act
respecting the special powers of a legal person (Québec), each Secured Party,
including in its capacity as Bank Counterparty, acknowledges that the Collateral
Agent may acquire and be the holder of any bond issued by any Credit Party. Each
assignee Bank that enters into an Assignment Agreement shall be deemed to have
confirmed and ratified the constitution of the Collateral Agent as the holder of
such irrevocable power of attorney (“fondé de pouvoirs”) and the acquisition and
holding by the Collateral Agent of any bonds issued by any Credit Party. Each of
the Credit Parties hereby acknowledge that, for the purposes of holding any
security granted by any Credit Party on property pursuant to the laws of the
Province of Québec to secure obligations of any Credit Party under any bonds
issued by any Credit Party, the Collateral Agent shall be the holder of an
irrevocable power of attorney (i.e. “fondé de pouvoirs” within the meaning of
Article 2692 of the Civil Code of Québec) for each Secured Party, including in
its capacity as Bank Counterparty). Each of the Credit Parties hereby
acknowledges that such bond constitutes a title on indebtedness, as such term is
used in Article 2692 of the Civil Code of Québec. The execution by the
Collateral Agent, acting as fondé de pouvoir as aforesaid, prior to the date of
this Agreement of any deeds of hypothec or other security documents is hereby
ratified and confirmed.

9.9 Reliance and Engagement Letters. Each Bank confirms that each of the Lead
Arranger and the Administrative Agent has authority to accept on its behalf the
terms of any reliance or engagement letters relating to any reports or letters
provided by accountants in connection with the Credit Documents or the
transactions contemplated in the Credit Documents (including any net asset
letter in connection with the financial assistance procedures) and to bind it in
respect of those reports or letters and to sign such on its behalf and further
confirms that it accepts the terms and qualifications set out in such letters.

 

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SECTION 10. MISCELLANEOUS

10.1 Notices. Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given to a Credit Party,
Collateral Agent, Administrative Agent, Issuing Bank or Lead Arranger, shall be
sent to such Person’s address as set forth on Appendix B or in the other
relevant Credit Document, and in the case of any Bank, the address as indicated
on Appendix B or otherwise indicated to Administrative Agent in writing. Each
notice hereunder shall be in writing and may be personally served, telexed or
sent by telefacsimile or mail or courier service and shall be deemed to have
been given when delivered in person or by courier service and signed for against
receipt thereof, upon receipt of telefacsimile or telex, or three Business Days
after depositing it in the mail with postage prepaid and properly addressed;
provided, no notice to any Agent shall be effective until received by such Agent
and all notices from or to a Credit Party shall be sent through the applicable
Agent.

10.2 Expenses. Whether or not the transactions contemplated hereby shall be
consummated, each Borrower agrees to pay promptly (a) all the actual and
reasonable costs and expenses of preparation of the Credit Documents and any
consents, amendments, waivers or other modifications thereto; (b) all the costs
of furnishing all opinions by counsel for each Borrower and the other Credit
Parties; (c) the reasonable fees, expenses and disbursements of counsel to
Agents (in each case including allocated costs of internal counsel) in
connection with the negotiation, preparation, execution and administration of
the Credit Documents and any consents, amendments, waivers or other
modifications thereto and any other documents or matters requested by any
Borrower; (d) all the actual costs and reasonable expenses of creating and
perfecting Liens in favor of Collateral Agent, for the benefit of Banks pursuant
hereto, including filing and recording fees, expenses stamp, registration,
transfer, documentary and other similar taxes, search fees, title insurance
premiums and reasonable fees, expenses and disbursements of counsel to each
Agent and of counsel providing any opinions that any Agent or Requisite Banks
may reasonably request in respect of the Collateral or the Liens created
pursuant to the Collateral Documents; (e) all the actual costs and reasonable
fees, expenses and disbursements of any auditors, accountants, consultants or
appraisers retained by Administrative or Collateral Agent with the prior consent
of Xerium (not to be unreasonably withheld); (f) all the actual costs and
reasonable expenses (including the reasonable fees, expenses and disbursements
of any appraisers, consultants, advisors and agents employed or retained by
Collateral Agent and its counsel) in connection with the custody or preservation
of any of the Collateral; (g) all other actual and reasonable costs and expenses
incurred by each Agent in connection with the syndication of the Loans and
Commitments and the negotiation, preparation and execution of the Credit
Documents and any consents, amendments, waivers or other modifications thereto
and the transactions contemplated thereby; and (h) after the occurrence of a
Default or an Event of Default, all costs and expenses, including reasonable
attorneys’ fees (including allocated costs of internal counsel) and costs of
settlement, incurred by any Agent and Banks in enforcing any Obligations of or
in collecting any payments due from any Credit Party hereunder or under the
other Credit Documents by reason of such Default or Event of Default (including
in connection with the sale of, collection from, or other realization upon any
of the Collateral or the enforcement of the Guaranty) or in connection with any
refinancing or restructuring of the credit arrangements provided hereunder in
the nature of a “work out” or pursuant to any insolvency or bankruptcy cases or
proceedings.

 

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10.3 VAT. All amounts set out or expressed to be payable under a Credit Document
by a Credit Party to a Bank shall be exclusive of any applicable VAT and
(subject to the provisions regarding reimbursement of VAT below) the Credit
Party shall in addition pay to the Bank an amount equal to the amount of the
VAT, following receipt by the Credit Party of a valid VAT invoice. Where a
Credit Party is required by a Credit Document to reimburse a Bank for any costs
or expenses, that Credit Party shall also reimburse the Bank for any VAT
incurred by the Bank in respect of the relevant costs or expenses to the extent
that neither the Bank nor any member of any group of which it is a member for
VAT purposes is entitled to credit or repayment from the relevant Tax authority
in respect of the VAT.

10.4 Indemnity. In addition to the payment of expenses pursuant to Sections 10.2
and 10.3, whether or not the transactions contemplated hereby shall be
consummated, each Credit Party agrees to defend (subject to Indemnitees’
reasonable approval of counsel), indemnify, pay and hold harmless, each Agent
and Bank and the officers, partners, directors, trustees, investment advisors,
employees, agents and Affiliates of each Agent and each Bank (each, an
“Indemnitee”), from and against any and all Indemnified Liabilities; provided,
no Credit Party shall have any obligation to any Indemnitee hereunder with
respect to any Indemnified Liabilities to the extent such Indemnified
Liabilities arise from the gross negligence or willful misconduct of that
Indemnitee. To the extent that the undertakings to defend, indemnify, pay and
hold harmless set forth in this Section 10.4 may be unenforceable in whole or in
part because they are in violation of any law or public policy, the applicable
Credit Party shall contribute the maximum portion that it is permitted to pay
and satisfy under applicable law to the payment and satisfaction of all
Indemnified Liabilities incurred by Indemnitees or any of them.

(a) To the extent permitted by applicable law, no Credit Party shall assert, and
each Credit Party hereby waives, any claim against Banks, Agents and their
respective Affiliates, directors, employees, attorneys or agents, on any theory
of liability, for special, indirect, consequential or punitive damages (as
opposed to direct or actual damages) (whether or not the claim therefor is based
on contract, tort or duty imposed by any applicable legal requirement) in
connection with, arising out of, as a result of, or in any way related to, this
Agreement or any Credit Document or any agreement or instrument contemplated
hereby or thereby or referred to herein or therein, the transactions
contemplated hereby or thereby, any Loan or the use of the proceeds thereof or
any act or omission or event occurring in connection therewith, and Xerium and
each other Borrower hereby waives, releases and agrees not to sue upon any such
claim or any such damages, whether or not accrued and whether or not known or
suspected to exist in its favor.

(b) Currency indemnity.

(i) If any sum due from a Credit Party under the Credit Documents (a “Sum”), or
any order, judgment or award given or made in relation to a Sum, has to be
converted from the currency (the “First Currency”) in which that Sum is payable
into another currency (the “Second Currency”) for the purpose of:

 

  (A) making or filing a claim or proof against that Credit Party; or

 

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  (B) obtaining or enforcing an order, judgment or award in relation to any
litigation or arbitration proceedings,

that Credit Party shall as an independent obligation, within three Business Days
of demand, indemnify the Agent and each Bank to whom that Sum is due against any
cost, loss or liability arising out of or as a result of the conversion
including any discrepancy between (x) the rate of exchange used to convert that
Sum from the First Currency into the Second Currency and (y) the rate or rates
of exchange available to that person at the time of its receipt of that Sum.

(ii) Each Credit Party waives any right it may have in any jurisdiction to pay
any amount under the Credit Documents in a currency or currency unit other than
that in which it is expressed to be payable.

10.5 Set Off. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, each Bank is
hereby authorized by each Credit Party at any time or from time to time subject
to the consent of Administrative Agent (such consent not to be unreasonably
withheld or delayed), without notice to any Credit Party or to any other Person
(other than Administrative Agent), any such notice being hereby expressly
waived, to set off and to appropriate and to apply any and all deposits (general
or special, including Indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts) and any other
Indebtedness at any time held or owing by such Bank to or for the credit or the
account of any Credit Party against and on account of the obligations and
liabilities of any Credit Party to such Bank hereunder, the Letters of Credit
and participations therein and under the other Credit Documents, including all
claims of any nature or description arising out of or connected hereto, the
Letters of Credit and participations therein or with any other Credit Document,
irrespective of whether or not (a) such Bank shall have made any demand
hereunder or (b) the principal of or the interest on the Loans or any amounts in
respect of the Letters of Credit or any other amounts due hereunder shall have
become due and payable pursuant to Section 2 and although such obligations and
liabilities, or any of them, may be contingent or unmatured.

10.6 Amendments and Waivers.

(a) Requisite Banks’ and Borrower Consent. Subject to Section 10.6(b) and
10.6(c), no amendment, modification, termination or waiver of any provision of
the Credit Documents, or consent to any departure by any Credit Party therefrom,
shall in any event be effective without the written concurrence of the Credit
Parties and the Requisite Banks.

(b) Affected Banks’ Consent. Without the written consent of the Credit Parties
and each Bank (other than a Defaulting Bank) that would be affected thereby, no
amendment, modification, termination, or consent shall be effective if the
effect thereof would:

(i) extend the scheduled final maturity of any Loan;

 

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(ii) waive, reduce or postpone any scheduled repayment (but not prepayment);

(iii) extend the stated expiration date of any Letter of Credit beyond the
Revolving Commitment Termination Date;

(iv) reduce the rate of interest on any Loan (other than any waiver of any
increase in the interest rate applicable to any Loan pursuant to Section 2.10)
or any fee payable hereunder;

(v) extend the time for payment of any such interest or fees;

(vi) reduce or forgive the principal amount of any Loan or any reimbursement
obligation in respect of any Letter of Credit;

(vii) amend, modify, terminate or waive any provision of this Section 10.6(b) or
Section 10.6(c);

(viii) amend the definition of “Requisite Banks” or “Pro Rata Share”; provided,
with the consent of Requisite Banks, additional extensions of credit pursuant
hereto may be included in the determination of “Requisite Banks” or “Pro Rata
Share” on substantially the same basis as the B Term Loan Commitments, the B
Term Loans, the Revolving Commitments and the Revolving Loans are included on
the Closing Date;

(ix) extend the Revolving Commitment Termination Date;

(x) release all or substantially all of the Collateral or all or substantially
all of the Guarantors from the Guaranty except as expressly provided in the
Credit Documents;

(xi) consent to the assignment or transfer by any Credit Party of any of its
rights and obligations under any Credit Document;

(xii) amend, modify or waive any provision of Section 2.16(g); or

(xiii) consent to currency changes.

(c) Other Consents. No amendment, modification, termination or waiver of any
provision of the Credit Documents, or consent to any departure by any Credit
Party therefrom, shall:

(i) increase any Revolving Commitment of any Bank over the amount thereof then
in effect without the consent of each Credit Party and such Bank; provided, no
amendment, modification or waiver of any condition precedent, covenant, Default
or Event of Default shall constitute an increase in any Revolving Commitment of
any Bank;

 

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(ii) amend the definition of “Requisite Class Banks” without the consent of
Requisite Class Banks of each Class; provided, with the consent of each Credit
Party and the Requisite Banks, additional extensions of credit pursuant hereto
may be included in the determination of such “Requisite Class Banks” on
substantially the same basis as the B Term Loan Commitments, the B Term Loans,
the Revolving Commitments and the Revolving Loans are included on the Closing
Date;

(iii) alter the required application of any repayments or prepayments as between
Classes pursuant to Section 2.15 without the consent of each Credit Party and
the Requisite Class Banks of each Class which is being allocated a lesser
repayment or prepayment as a result thereof; provided, Requisite Banks may
waive, in whole or in part, any prepayment so long as the application, as
between Classes, of any portion of such prepayment which is still required to be
made is not altered;

(iv) amend, modify, terminate or waive any obligation of Banks relating to the
purchase of participations in Letters of Credit as provided in Section 2.4(e)
without the written consent of each Credit Party, Administrative Agent and of
Issuing Bank; or

(v) amend, modify, terminate or waive any provision of Section 9 as the same
applies to any Agent, or any other provision hereof as the same applies to the
rights or obligations of any Agent, in each case without the consent of each
Credit Party and such Agent.

(d) Execution of Amendments, etc. Administrative Agent may, but shall have no
obligation to, with the concurrence of any Bank, execute amendments,
modifications, waivers or consents on behalf of such Bank. Any waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it was given. No notice to or demand on any Credit Party in any case
shall entitle any Credit Party to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance with this Section 10.6 shall be binding upon
each Bank at the time outstanding, each future Bank and, if signed by a Credit
Party, on such Credit Party.

10.7 Successors and Assigns; Participations.

(a) Generally. This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Banks. No Credit Party’s rights or
obligations hereunder nor any interest therein may be assigned or delegated by
any Credit Party without the prior written consent of all Banks. Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby and, to the extent expressly contemplated hereby, Affiliates of
each of the Agents and Banks) any legal or equitable right, remedy or claim
under or by reason of this Agreement.

 

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(b) Register. Each Borrower, Administrative Agent and Bank shall deem and treat
the Persons listed as Banks in the Register as the holders and owners of the
corresponding Commitments and Loans listed therein for all purposes hereof, and
no assignment or transfer of any such Commitment or Loan shall be effective, in
each case, unless and until an Assignment Agreement effecting the assignment or
transfer thereof shall have been delivered to and accepted by Administrative
Agent and recorded in the Register as provided in Section 10.7(e). Prior to such
recordation, all amounts owed with respect to the applicable Commitment or Loan
shall be owed to the Bank listed in the Register as the owner thereof, and any
request, authority or consent of any Person who, at the time of making such
request or giving such authority or consent, is listed in the Register as a Bank
shall be conclusive and binding on any subsequent holder, assignee or transferee
of the corresponding Commitments or Loans.

(c) Right to Assign. Each Bank shall have the right at any time to sell, assign
or transfer all or a portion of its rights and obligations under this Agreement,
including, without limitation, all or a portion of its Commitment or Loans owing
to it or other Obligation (provided, however, that each such assignment shall be
of a uniform, and not varying, percentage of all rights and obligations under
and in respect of any Loan and any related Commitments):

(i) to any Person meeting the criteria of clause (i) of the definition of the
term “Eligible Assignee” upon the giving of notice to Xerium and Administrative
Agent; and

(ii) to any Person meeting the criteria of clause (ii) of the definition of the
term “Eligible Assignee” upon the giving of notice to Xerium and Administrative
Agent (except in the case of assignments made by or to the Lead Arranger);
subject, however, in the case of assignments of Revolving Loans or Revolving
Commitments to any such Person (except in the case of assignments made by or to
the Lead Arranger), to prior written consent by Xerium, Administrative Agent and
Issuing Bank (such consent not to be (x) unreasonably withheld or delayed or,
(y) in the case of Xerium, required at any time an Event of Default shall have
occurred and then be continuing); provided, further, each such assignment
pursuant to this Section 10.7(c)(ii) shall be in an aggregate amount of not less
than Base Currency Amount (A) $5,000,000 or its currency equivalent (or such
lesser amount as may be agreed to by the Administrative Agent (and so long as no
Event of Default shall have occurred and be continuing) Xerium or as shall
constitute the aggregate amount of the Revolving Commitments and Revolving Loans
of the assigning Bank) with respect to the assignment of the Revolving
Commitments and Revolving Loans and (B) $1,000,000 or its currency equivalent
(or such lesser amount as may be agreed to by the Administrative Agent (and so
long as no Event of Default shall have occurred and be continuing) Xerium or as
shall constitute the aggregate amount or the Xerium B Term Loan, XTI B Term
Loan, Italia B Term Loan, Xerium Canada SW B Term Loan, Xerium Canada Wxx B Term
Loan, Austria B Term Loan or German B Term Loan of the assigning Bank) with
respect to the assignment of B Term Loans.

 

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(d) Mechanics. The assigning Bank and the assignee thereof shall execute and
deliver to Administrative Agent an Assignment Agreement, together with (i) a
processing and recordation fee of $3,500 (except (A) in the case of assignments
pursuant to Section 10.7(c)(i) or made by or to the Lead Arranger, no processing
or recordation fee shall be required and (B) that only one fee shall be payable
in the case of contemporaneous assignments to or by Related Funds), and
(ii) such forms, certificates or other evidence, if any, with respect to United
States federal income tax withholding matters as the assignee under such
Assignment Agreement may be required to deliver to Administrative Agent pursuant
to Section 2.20(c).

(e) Notice of Assignment. Upon its receipt of a duly executed and completed
Assignment Agreement, together with the processing and recordation fee referred
to in Section 10.7(d) (and any forms, certificates or other evidence required by
this Agreement in connection therewith), Administrative Agent shall record the
information contained in such Assignment Agreement in the Register, shall give
prompt notice thereof to each Borrower and shall maintain a copy of such
Assignment Agreement.

(f) Representations and Warranties of Assignee. Each Bank, upon execution and
delivery hereof or upon executing and delivering an Assignment Agreement, as the
case may be, represents and warrants as of the Closing Date or as of the
applicable Effective Date (as defined in the applicable Assignment Agreement)
that (i) it is an Eligible Assignee; (ii) it has experience and expertise in the
making of or investing in commitments or loans such as the applicable
Commitments or Loans, as the case may be; and (iii) it will make or invest in,
as the case may be, its Commitments or Loans for its own account in the Ordinary
Course and without a view to distribution of such Commitments or Loans within
the meaning of the Securities Act or the Exchange Act or other federal
securities laws (it being understood that, subject to the provisions of this
Section 10.7, the disposition of such Revolving Commitments or Loans or any
interests therein shall at all times remain within its exclusive control).

(g) Effect of Assignment. Subject to the terms and conditions of this
Section 10.7, as of the “Effective Date” specified in the applicable Assignment
Agreement: (i) the assignee thereunder shall have the rights and obligations of
a “Bank” hereunder to the extent such rights and obligations hereunder have been
assigned to it pursuant to such Assignment Agreement and shall thereafter be a
party hereto and a “Bank” for all purposes hereof; (ii) the assigning Bank
thereunder shall, to the extent that rights and obligations hereunder have been
assigned thereby pursuant to such Assignment Agreement, relinquish its rights
(other than any rights which survive the termination hereof under Section 10.9)
and be released from its obligations hereunder (and, in the case of an
Assignment Agreement covering all or the remaining portion of an assigning
Bank’s rights and obligations hereunder, such Bank shall cease to be a party
hereto; provided, anything contained in any of the Credit Documents to the
contrary notwithstanding, (y) the Issuing Bank shall continue to have all rights
and obligations thereof with respect to such

 

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Letters of Credit until the cancellation or expiration of such Letters of Credit
and the reimbursement of any amounts drawn thereunder and (z) such assigning
Bank shall continue to be entitled to the benefit of all indemnities hereunder
as specified herein with respect to matters arising out of the prior involvement
of such assigning Bank as a Bank hereunder); (iii) the Commitments shall be
modified to reflect the Commitment of such assignee and any Revolving Commitment
of such assigning Bank, if any; and (iv) for the purposes of article 1263 of the
Italian Civil Code, it is expressly agreed that the security created or
evidenced by the Collateral Documents shall be preserved for the benefit of the
assignee and each other Bank. Any assignment or transfer by a Bank of rights or
obligations under this Agreement that does not comply with subsections
(c) through (g) of this Section 10.7 shall be treated for purposes of this
Agreement as a sale by such Bank of a participation in such rights and
obligations in accordance with clause (h).

(h) Participations. Each Bank shall have the right at any time to sell one or
more participations to any Person (other than Xerium, any of its Subsidiaries or
any of its Affiliates) in all or any part of its Commitments or Loans or in any
other Obligation. The holder of any such participation, other than an Affiliate
of the Bank granting such participation, shall not be entitled to require such
Bank to take or omit to take any action hereunder except with respect to any
amendment, modification or waiver that would (i) extend the final scheduled
maturity of any Loan, or Letter of Credit (unless such Letter of Credit is not
extended beyond the Revolving Commitment Termination Date) in which such
participant is participating, or reduce the rate or extend the time of payment
of interest or fees thereon (except in connection with a waiver of applicability
of any post default increase in interest rates) or reduce the principal amount
thereof, or increase the amount of the participant’s participation over the
amount thereof then in effect (it being understood that a waiver of any Default
or Event of Default or of a mandatory reduction in the Commitment shall not
constitute a change in the terms of such participation, and that an increase in
any Commitment or Loan shall be permitted without the consent of any participant
if the participant’s participation is not increased as a result thereof),
(ii) consent to the assignment or transfer by any Credit Party of any of its
rights and obligations under this Agreement or (iii) release all or
substantially all of the Collateral under the Collateral Documents (except as
expressly provided in the Credit Documents) supporting the Loans hereunder in
which such participant is participating. The Borrowers agree that each
participant shall be entitled to the benefits of Sections 2.18(c), 2.19 and 2.20
to the same extent as if it were a Bank and had acquired its interest by
assignment pursuant to paragraph (c) of this Section; provided, (i) a
participant shall not be entitled to receive any greater payment under
Section 2.19 or 2.20 than the applicable Bank would have been entitled to
receive with respect to the participation sold to such participant, unless the
sale of the participation to such participant is made with each Borrower’s prior
written consent, and (ii) a participant that would be a Non-US Bank if it were a
Bank shall not be entitled to the benefits of Section 2.20 unless each Borrower
is notified of the participation sold to such participant and such participant
agrees, for the benefit of each Borrower, to comply with Section 2.20 as though
it were a Bank. To the extent permitted by law, each participant also shall be
entitled to the benefits of Section 10.6 as though it were a Bank, provided such
participant agrees to be subject to Section 2.17 as though it were a Bank.

 

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(i) Certain Other Assignments. In addition to any other assignment permitted
pursuant to this Section 10.7, any Bank may assign and/or pledge all or any
portion of its Loans, the other Obligations owed by or to such Bank, to secure
obligations of such Bank including, without limitation, any Federal Reserve Bank
as collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such Federal Reserve
Bank; provided, no Bank, as between each Borrower and such Bank, shall be
relieved of any of its obligations hereunder as a result of any such assignment
and pledge, and provided, further, in no event shall the applicable Federal
Reserve Bank, pledgee or trustee be considered to be a “Bank” or be entitled to
require the assigning Bank to take or omit to take any action hereunder.

10.8 Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or would otherwise be within the limitations of, another covenant shall not
avoid the occurrence of a Default or an Event of Default if such action is taken
or condition exists.

10.9 Survival of Representations, Warranties and Agreements. All
representations, warranties and agreements made herein shall survive the
execution and delivery hereof and the making of any Credit Extension.
Notwithstanding anything herein or implied by law to the contrary, the
agreements of each Credit Party set forth in Sections 2.18(c), 2.19, 2.20, 10.2,
10.3, 10.4 and 10.5 and the agreements of Banks set forth in Sections 2.17,
9.3(b) and 9.6 shall survive the payment of the Loans, the cancellation or
expiration of the Letters of Credit and the reimbursement of any amounts drawn
thereunder, and the termination hereof.

10.10 No Waiver; Remedies Cumulative. No failure or delay on the part of any
Agent or any Bank in the exercise of any power, right or privilege hereunder or
under any other Credit Document shall impair such power, right or privilege or
be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other power, right or privilege. The
rights, powers and remedies given to each Agent and each Bank hereby are
cumulative and shall be in addition to and independent of all rights, powers and
remedies existing by virtue of any statute or rule of law or in any of the other
Credit Documents or any of the applicable documentation creating Hedging
Obligations. Any forbearance or failure to exercise, and any delay in
exercising, any right, power or remedy hereunder shall not impair any such
right, power or remedy or be construed to be a waiver thereof, nor shall it
preclude the further exercise of any such right, power or remedy.

10.11 Marshalling; Payments Set Aside. Neither any Agent nor any Bank shall be
under any obligation to marshal any assets in favor of any Credit Party or any
other Person or against or in payment of any or all of the Obligations. To the
extent that any Credit Party makes a payment or payments to Administrative Agent
or Banks (or to Administrative Agent, on behalf of Banks), or Administrative
Agent or Banks enforce any security interests or exercise their rights of
setoff, and such payment or payments or the

 

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proceeds of such enforcement or setoff or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, any other provincial, state or federal law, common law or any
equitable cause, then, to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied, and all Liens, rights and remedies
therefor or related thereto, shall be revived and continued in full force and
effect as if such payment or payments had not been made or such enforcement or
setoff had not occurred.

10.12 Severability. In case any provision in or obligation hereunder shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.

10.13 Obligations Several; Independent Nature of Banks’ Rights. The obligations
of Banks hereunder are several and no Bank shall be responsible for the
obligations or Commitment of any other Bank hereunder. Nothing contained herein
or in any other Credit Document, and no action taken by Banks pursuant hereto or
thereto, shall be deemed to constitute Banks as a partnership, an association, a
joint venture or any other kind of entity. The amounts payable at any time
hereunder to each Bank shall be a separate and independent debt, and each Bank
shall be entitled to protect and enforce its rights arising out hereof and it
shall not be necessary for any other Bank to be joined as an additional party in
any proceeding for such purpose.

10.14 Headings. Section headings herein are included herein for convenience of
reference only and shall not constitute a part hereof for any other purpose or
be given any substantive effect.

10.15 APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK INCLUDING GENERAL OBLIGATIONS
LAW 5-1401.

10.16 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. (a) ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST ANY CREDIT PARTY ARISING OUT OF OR RELATING HERETO
OR ANY OTHER CREDIT DOCUMENT, OR ANY OF THE OBLIGATIONS, MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY
OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH CREDIT PARTY, FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (i) ACCEPTS GENERALLY
AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS;
(ii) WAIVES ANY DEFENSE OF FORUM NON- CONVENIENS; (iii) AGREES THAT,
NOTWITHSTANDING SECTION 10.16(c), SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING
IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO THE APPLICABLE CREDIT PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE
WITH SECTION 10.1; (iv) AGREES THAT SERVICE AS

 

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PROVIDED IN CLAUSE (iii) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION
OVER THE APPLICABLE CREDIT PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND
OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND
(v) AGREES AGENTS AND BANKS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY CREDIT PARTY IN THE
COURTS OF ANY OTHER JURISDICTION;

(b) IN ADDITION TO SECTION 10.16(a), HUYCK AUSTRIA GMBH IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS IN ENGLAND FOR THE PURPOSE OF
HEARING AND DETERMINING ANY DISPUTE ARISING OUT OF THIS AGREEMENT, ANY OTHER
CREDIT DOCUMENT OR ANY OF THE OBLIGATIONS OR RELATING HERETO AND FOR THE
PURPOSES OF ENFORCEMENT OF ANY JUDGMENT AGAINST ITS ASSETS; AND

(c) EACH CREDIT PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY APPOINTS CT
CORPORATION SYSTEM WITH AN OFFICE ON THE DATE HEREOF AT 111 EIGHTH AVENUE, NEW
YORK, NEW YORK 10001, UNITED STATES AND ITS SUCCESSORS HEREUNDER (THE “PROCESS
AGENT”), AS ITS AGENT TO RECEIVE ON BEHALF OF SUCH CREDIT PARTY AND ITS PROPERTY
SERVICE OF COPIES OF THE SUMMONS AND COMPLAINTS AND ANY OTHER PROCESS WHICH MAY
BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY COURT SPECIFIED
IN SECTION 10.16(a). SUCH SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF
SUCH PROCESS TO A CREDIT PARTY IN CARE OF THE PROCESS AGENT AT THE ADDRESS
SPECIFIED ABOVE FOR THE PROCESS AGENT, AND EACH CREDIT PARTY HEREBY IRREVOCABLY
AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT SUCH SERVICE ON ITS BEHALF.
EACH CREDIT PARTY FURTHER CONSENTS TO MAILING COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH CREDIT PARTY AT ITS ADDRESSES FOR
NOTICE HEREUNDER, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER MAILING.
FAILURE OF THE PROCESS AGENT TO GIVE NOTICE TO ANY CREDIT PARTY OR FAILURE OF A
CREDIT PARTY TO RECEIVE NOTICE OF SUCH SERVICES OF PROCESS SHALL NOT AFFECT IN
ANY WAY THE VALIDITY OF SUCH SERVICE ON THE PROCESS AGENT OR SUCH CREDIT PARTY.
EACH CREDIT PARTY COVENANTS AND AGREES THAT IT SHALL TAKE ANY AND ALL REASONABLE
ACTION, INCLUDING THE EXECUTION AND FILING OF ANY AND ALL DOCUMENTS, THAT MAY BE
NECESSARY FOR THE PROCESS AGENT TO ACT AS SUCH. IN THE EVENT THAT AT ANY TIME
SUCH PROCESS AGENT SHALL FOR ANY REASON CEASE TO MAINTAIN AN OFFICE IN THE
BOROUGH OF MANHATTAN IN NEW YORK CITY, OR CEASE TO ACT AS PROCESS AGENT, THEN,
SUCH CREDIT PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN
ANY SUCH SUIT, ACTION OR PROCEEDING IN ACCORDANCE WITH THE TERMS OF CLAUSE
(iii) OF SECTION 10.16(a). EACH CREDIT PARTY ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS SECTION 10.16(b) SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN
ANY OTHER JURISDICTION.

 

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10.17 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING HEREUNDER OR UNDER ANY OF THE OTHER CREDIT DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
BANK/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER
IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN
ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED
ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO
RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL
AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SECTION 10.17 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO OR ANY OF THE OTHER CREDIT
DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE
HEREUNDER. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.

10.18 Confidentiality. Each of the Agent, the Issuing Bank and the Banks agrees
to maintain the confidentiality of the Information (as defined below), except
that Information may be disclosed (a) to its and its Affiliates’ directors,
officers, trustees, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority, including the NAIC, (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process,
(d) to any other party to this Agreement, (e) in connection with the exercise of
any remedies hereunder or any suit, action or proceeding relating to this
Agreement or any other Credit Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section 10.18, to any assignee of or participant in, or
any prospective assignee of or participant in, any of its rights or obligations
under this Agreement, (g) with the consent of Xerium, (h) to any pledgee
referred to in Section 10.7(i) or any direct or indirect

 

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contractual counterparty in any Hedging Agreement (or to any such contractual
counterparty’s professional advisor), so long as such pledgee or contractual
counterparty (or such professional advisor) agrees to be bound by the provisions
of this Section 10.18, or (i) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section 10.18 or
(ii) becomes available to any Agent, any Issuing Bank or any Bank on a
non-confidential basis from a source other than Xerium. For the purposes of this
Section 10.18, “Information” means all information received from the Borrowers
relating to the Borrowers or their business, other than any such information
that is available to any Agent, any Issuing Bank or any Bank on a
non-confidential basis prior to disclosure by the Borrowers. Any Person required
to maintain the confidentiality of Information as provided in this Section 10.18
shall be considered to have complied with its obligation to do so if such Person
has exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
Notwithstanding anything in this Agreement or in any other Credit Document to
the contrary, the Borrowers and each Bank (and each employee, representative or
other agent of the Borrowers) may disclose to any and all persons, without
limitation of any kind, the U.S. tax treatment and U.S. tax structure of the
transactions contemplated hereby and under the Existing Credit Agreement and all
materials of any kind (including opinions or other tax analyses) that are
provided to the Borrower relating to such U.S. tax treatment and U.S. tax
structure.

10.19 Usury Savings Clause. Notwithstanding any other provision herein, the
aggregate interest rate charged with respect to any of the Obligations,
including all charges or fees in connection therewith deemed in the nature of
interest under applicable law shall not exceed the Highest Lawful Rate. If the
rate of interest (determined without regard to the preceding sentence) under
this Agreement at any time exceeds the Highest Lawful Rate, the outstanding
amount of the Loans made hereunder shall bear interest at the Highest Lawful
Rate until the total amount of interest due hereunder equals the amount of
interest which would have been due hereunder if the stated rates of interest set
forth in this Agreement had at all times been in effect. In addition, if when
the Loans made hereunder are repaid in full the total interest due hereunder
(taking into account the increase provided for above) is less than the total
amount of interest which would have been due hereunder if the stated rates of
interest set forth in this Agreement had at all times been in effect, then to
the extent permitted by law, each Borrower shall pay to Administrative Agent an
amount equal to the difference between the amount of interest paid and the
amount of interest which would have been paid if the Highest Lawful Rate had at
all times been in effect. Notwithstanding the foregoing, it is the intention of
each Bank and each Borrower to conform strictly to any applicable usury laws.
Accordingly, if any Bank contracts for, charges, or receives any consideration
which constitutes interest in excess of the Highest Lawful Rate, then any such
excess shall be cancelled automatically and, if previously paid, shall at such
Bank’s option be applied to the outstanding amount of the Loans made hereunder
or be refunded to each Borrower, as applicable.

10.20 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.

10.21 Restatement Effective Date. This Agreement shall become effective on the
date (the “Restatement Effective Date” on which (i) each Credit Party, the
Administrative Agent, and each of the Requisite Banks shall have executed a
counterpart

 

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hereof (whether the same or different counterparts) and shall have delivered the
same (including by way of facsimile transmission) to the reasonable satisfaction
of the Administrative Agent and (ii) the conditions contained in Section 3 are
met to the satisfaction of the Administrative Agent and the Requisite Banks
(determined immediately after the occurrence of the Restatement Effective Date).
Unless the Administrative Agent has received actual notice from any member of
the Requisite Banks that the conditions contained in Section 3 have not been met
to such Bank’s satisfaction, upon the satisfaction of the condition described in
clause (i) of the immediately preceding sentence and upon the Administrative
Agent’s good faith determination that the conditions described in clause (ii) of
the immediately preceding sentence have been met, then the Restatement Effective
Date shall have been deemed to have occurred, regardless of any subsequent
determination that one or more of the conditions thereto had not been met
(although the occurrence of the Restatement Effective Date shall not release the
Credit Parties from any liability for failure to satisfy one or more of the
applicable conditions contained in Section 3).

10.22 Importation of Credit Documents into Austria. Each of the parties hereto
covenants and agrees that it will not send, or cause to be sent, bring or cause
to be brought, or otherwise import, or cause otherwise to be imported, into the
Republic of Austria any original counterpart or certified or conformed copy of
any executed Credit Document or any document constituting or evidencing any
transfer by any party of any right or interest under any Credit Document, or
make use of any Credit Document or document before any fiscal or governmental
authority or agency or any court of Austria; provided that, any party may, at
the joint and several cost and expense of the Credit Parties, send, or cause to
be sent, bring, or cause to be brought, or otherwise import, or cause otherwise
to be imported, any such Credit Document or document into the Republic of
Austria if required to do so by applicable law or if such Credit Document or
document is required to be presented in Austria in order to assist, enforce,
protect or preserve any right of or remedy available to such party arising under
or in respect of any of the Credit Documents or applicable law.

10.23 Place of Performance. The place of performance for all parties under this
Agreement and the other Credit Documents shall be any jurisdiction other than
the Republic of Austria. Nothing in this Agreement shall be construed in a way
as to entitle or oblige any party hereto to render or request any performance
contemplated by this Agreement, including, but not limited to, payment
obligations, within the Republic of Austria.

10.24 USA Patriot Act Notice. Each Bank and the Agents (for the Agents and not
on behalf of any Bank) hereby notifies the Borrowers that pursuant to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-5 (signed into law
on October 26, 2001)), as amended (the “Act”), it is required to obtain, verify
and record information that identifies the Borrowers, which information includes
the name and address of the Borrowers and other information that will allow such
Lender or the Agent, as applicable, to identify the Borrowers in accordance with
the Act.

10.25 Special Provision. The Existing Credit Agreement hereby is amended and
restated in its entirety and Xerium and its Subsidiaries shall remain obligated
to pay any amounts owing under the Existing Credit Agreement.

 

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10.26 Releases by the Borrowers and the Guarantors. As an inducement to the
Administrative Agent to enter into this Agreement on behalf of the Banks, each
Borrower and each Guarantor hereby releases and discharges the Banks and the
Agents, and their respective successors and assignees, and all officers,
directors, employees, agents, representatives, insurers and attorneys of each of
them from all actions, counterclaims, causes of actions, suits, debts, dues,
sums of money, accounts, reckonings, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises, variances, trespasses, damages,
judgments, executions, claims, and demands whatsoever, in law, admiralty or
equity, against the Banks, the Agents and/or successors and assigns which such
Borrower or Guarantor ever had, now has or hereafter can, shall or may, have
for, upon, or by reason of any matter, cause or thing whatsoever arising out of
or in connection with the Credit Documents, from the time prior to the date of
the Existing Credit Agreement to the date hereof.

10.27 No Setoffs and Defenses. Each Credit Party acknowledges it has no setoffs
or defenses to their respective obligations under the Credit Documents and no
claims or counterclaims against any of the Agents or the Banks.

10.28 Effect on this Agreement and the Other Credit Documents.

(a) Except to the extent expressly provided herein, this Agreement does not
constitute, and shall not be deemed to constitute a waiver of (i) any Agents’ or
Banks’ remedies under the Credit Documents or (ii) any Default or Event of
Default other than the Events of Default specified in Amendment No. 4 which are
hereby cured. Except as expressly provided in this Agreement, no action taken by
any Bank or Agent prior to, on or after the hereof shall constitute a waiver or
modification of any term or condition of any of the Credit Documents or of any
instruments or agreements referred to therein, or prejudice any rights which the
Agent or any of the Banks may now have as of the date hereof or may have in the
future under or in connection with the Credit Documents or any of the
instruments referred to therein, including without limitation all rights and
remedies in connection with Defaults, Events of Default and failures of
conditions precedent to the making of Loans and the issuance of Letters of
Credit that have occurred and are continuing, all of which rights and remedies
each Bank and each Agent hereby expressly reserves.

(b) On and after the Restatement Effective Date, each reference in the Credit
Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of like
import referring to the Existing Credit Agreement shall mean and be a reference
to this Agreement, as it may be amended, restated, supplemented or otherwise
modified from time to time. For the avoidance of doubt but without limitation,
where any Collateral Document secures amounts owing by a Credit Party under the
Existing Credit Agreement, such Collateral Document shall secure amounts owing
by such Credit Party under this Agreement.

(c) Each Credit Document is and continues to be in full force and effect and is
hereby in all respects ratified and confirmed.

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first written above.

 

XERIUM TECHNOLOGIES, INC. By:  

/s/ Michael P O’Donnell

Name:   Michael P O’Donnell Title:   EVP & Chief Financial Officer XTI LLC By:  

/s/ Michael P O’Donnell

Name:   Michael P O’Donnell Title:   Director XERIUM ITALIA S.P.A. By:  

/s/ Michael P O’Donnell

Name:   Michael P O’Donnell Title:   Director XERIUM CANADA INC. By:  

/s/ Michael P O’Donnell

Name:   Michael P O’Donnell Title:   Director

 

S-1

--------------------------------------------------------------------------------

HUYCK.WANGNER AUSTRIA GMBH

Signed by Joan Badrinas as managing director of

Huyck.Wangner Austria GmbH

By:  

/s/ J Badrinas

XERIUM GERMANY HOLDING GMBH

Signed by Joan Badrinas as managing director of

Xerium Germany Holding GmbH

By:  

/s/ J Badrinas

HUYCK.WANGNER GERMANY GMBH

Signed by Joan Badrinas as managing director of

Huyck.Wangner Germany GmbH

By:  

/s/ J Badrinas

--------------------------------------------------------------------------------

HUYCK.WANGNER AUSTRALIA PTY LIMITED By:  

/s/ Michael P O’Donnell

Name:   Michael P O’Donnell Title:   Director By:  

/s/ Cheryl Diuguid

Name:   Cheryl Duiguid Title:   Director ROBEC WALZEN GMBH

Signed by Michael P O’Donnell as director or

Robec Walzen GmbH

By:  

/s/ Michael P O’Donnell

--------------------------------------------------------------------------------

WANGNER ITELPA PARTICIPAÇÕES LTDA. By:  

/s/ M Godoi

Name:   Marcelo de Bártolo Godoi Title:   Director XERIUM TECHNOLOGIES BRASIL
INDÚSTRIA E COMÉRCIO S.A. By:  

/s/ M Godoi

Name:   Marcelo de Bártolo Godoi Title:   Director XERIUM DO BRASIL LTDA. By:  

/s/ M Godoi

Name:   Marcelo de Bártolo Godoi Title:   Director

--------------------------------------------------------------------------------

XERIUM (FRANCE) SAS By:  

/s/ P Williamson

Name:   Peter Williamson Title:   President STOWE WOODWARD FRANCE SAS By:  

/s/ P Williamson

Name:   Peter Williamson Title:   President STOWE WOODWARD AG

Signed by Peter Williamson as managing director of

Stowe Woodward AG

By:  

/s/ P Williamson

--------------------------------------------------------------------------------

HUYCK.WANGNER JAPAN LIMITED By:  

/s/ Michael P O’Donnell

  duly authorized for purposes of this Agreement Name:   Michael P O’Donnell
Title:   Director STOWE WOODWARD MÉXICO, S.A. DE C.V. By:  

/s/ Michael P O’Donnell

Name:   Michael P O’Donnell Title:   Director TIAG TRANSWORLD INTERWEAVING GMBH
By:  

/s/ Michael P O’Donnell

Name:   Michael P O’Donnell Title:   Prokurist HUYCK.WANGNER (UK) LIMITED By:  

/s/ Michael P O’Donnell

Name:   Michael P O’Donnell Title:   Director STOWE WOODWARD (UK) LIMITED By:  

/s/ Michael P O’Donnell

Name:   Michael P O’Donnell Title:   Director

--------------------------------------------------------------------------------

XERIUM TECHNOLOGIES LIMITED By:  

/s/ Michael P O’Donnell

Name:   Michael P O’Donnell Title:   Director HUYCK LICENSCO INC. By:  

/s/ Michael P O’Donnell

Name:   Michael P O’Donnell Title:   Director

--------------------------------------------------------------------------------

STOWE WOODWARD LLC By:  

/s/ Michael P O’Donnell

Name:   Michael P O’Donnell Title:   Director STOWE WOODWARD LICENSCO LLC By:  

/s/ Michael P O’Donnell

Name:   Michael P O’Donnell Title:   Director

WEAVEXX CORPORATION,

a Delaware corporation

By:  

/s/ Michael P O’Donnell

Name:   Michael P O’Donnell Title:   Director XERIUM III (US) LIMITED By:  

/s/ Michael P O’Donnell

Name:   Michael P O’Donnell Title:   Director

--------------------------------------------------------------------------------

XERIUM IV (US) LIMITED By:  

/s/ Michael P O’Donnell

Name:   Michael P O’Donnell Title:   Director XERIUM V (US) LIMITED By:  

/s/ Michael P O’Donnell

Name:   Michael P O’Donnell Title:   Director WANGNER ITELPA I LLC By:  

/s/ Michael P O’Donnell

Name:   Michael P O’Donnell Title:   Director WANGNER ITELPA II LLC By:  

/s/ Michael P O’Donnell

Name:   Michael P O’Donnell Title:   Director

--------------------------------------------------------------------------------

CITIGROUP GLOBAL MARKETS INC., as Lead Arranger and Bookrunner By:  

 

Name:   Title:  

--------------------------------------------------------------------------------

CITICORP NORTH AMERICA, INC. as Administrative Agent, Issuing Bank, Collateral
Agent and a Bank By:  

/s/ Blake Gronich

Name:   Blake Gronich Title:   Director

--------------------------------------------------------------------------------

 

 

,

 

as a

Bank (please print name of institution)

 

By:

 

 

Name:

 

Title:

 

A list of applicable signing banks is attached hereto.

 

 

ABCLO 2007-1 LTD

ACA CLO 2005-1, LIMITIED

ACCESS INSTITUTIONAL LOAN FUND

ACM INCOME FUND

ADDISON CDO, LIMITED

ALIE STREET INVESTMENTS 6 LIMITED

ALLIED IRISH BANK PLC

AMERIPRISE CERTIFICATE COMPANY

AQUILAE CLO I PLC

AQUILAE CLO II PLC

AVOCA CLO V PLC.

AZURE FUNDING

BALLYROCK CLO II LIMITED

BALLYROCK CLO III LTD

BANCO ESPIRITO SANTO

BANK OF AMERICA N.A.

BLACK DIAMOND CLO 2005-2 LTD FKA

BLACK DIAMOND CLO 2006 -I

BLACK DIAMOND INTERNATIONAL FUNDING

BRIDGEPORT CLO II LTD

BRIDGEPORT CLO LTD

BRYN MAWR CLO II LTD

BURR RIDGE CLO PLUS LTD.

CENT CDO 12 LTD

CENT CDO 14 LTD

CENT CDO 15 LTD

CENT CDO XI LIMITED

CENTURION CDO 10 LIMITED

CENTURION CDO 8, LIMITED

CENTURION CDO 9 LIMITED

CENTURION CDO VI, LTD

CENTURION CDO VII, LTD

CENTURION CDO XI LIMITED

CITIBANK, (ORIGINATION)

CITIBANK, N.A. - SECONDARY TRADING

CLARENVILLE CDO, SA

COOKSMILL

CUMBERLAND II CLO LTD

EAGLE CREEK CLO LTD

ESSEX PARK CDO LTD FKA

EUROCREDIT CDO I B.V.

EUROCREDIT CDO II B.V.

EUROPEAN ENHANCED LOAN FUND SA

FAIRWAY LOAN FUNDING COMPANY

FALL CREEK CLO LTD

FOREST CREEK CLO, LTD.

GE CORPORATE BANKING SAS FKA

GRAND CENTRAL ASSET TRUST, BDC SERI

GREEN PARK CDO B.V.

HARBOURMASTER CLO 4 BV

HARBOURMASTER CLO 5 B.V.

HARBOURMASTER CLO 6 BV

HARBOURMASTER LOAN CORPORATION

HARCH CLO II LIMITED

HARCH CLO III LIMITED

INDIANA STATE TEACHERS’ RETIREMENT

ING INTERNATIONAL(II)-SENIOR BANK L

ING INVESTMENT MANAGEMENT CLO I, LT

ING INVESTMENT MANAGEMENT CLO IV LT

ING INVESTMENT MANAGEMENT CLO V LTD

ING INVESTMENT MANAGMENT CLO II

ING INVESTMENT MANAGMENT CLO III

ING PRIME RATE TRUST

ING SENIOR INCOME FUND

INTERCONTINENTAL CDO SA

INWOOD PARK CDO LTD.

KBC BANK N.V.

LAFAYETTE SQUARE CDO LTD

LANDSBANKI ISLANDS HF

LOAN FUNDING III LLC

LOAN FUNDING VI LLC

LONG GROVE CLO LIMITED

MAGI FUNDING I PLC

MALIBU CBNA LOAN FUNDING LLC

MARQUETTE PARK CLO LTD.

MAYPORT CLO LTD

Melchior CDO I S.A.

MERRILL LYNCH CAPITAL SERVICES, INC

MONUMENT PARK CDO LTD

MUIRFIELD TRADING LLC

NEW ALLIANCE GLOBAL CDO, LIMITED

NUVEEN FLOATING RATE INCOME FUND

ONE WALL STREET CLO II LTD FKA

OREGON STATE TREASURY

PIMCO FLOATING INCOME FUND

PIMCO FLOATING RATE STRATEGY FUND

PINEHURST TRADING, INC.

PPM GRAYHAWK CLO LTD

PPM Monarch Bay Funding LLC

PPM RIVIERA CBNA LOAN FUNDING LLC

PPM SHADOW CREEK FUNDING LLC

PROSPECT PARK CDO LTD

PROSPERO CLO I B.V.

REGENTS PARK CDO BV

RIVERSOURCE BOND SERIES INC.

RIVERSOURCE LIFE INSURANCE COMPANY

RIVERSOURCE STRATEGIC ALLOCATION SE

RMF EURO CDO III PUBLIC LTD. CO.

RMF EURO CDO S.A.

RMF EURO CDO V PLC

ROSEMONT CLO, LTD

SANFORD C. BERNSTEIN FUND. INC. II

SEQUILS-CENTURION V, LTD.

SERVES 2006-1 LTD

SKELLIG ROCK B.V.

SOLEIL-NEPTUNE LIMITED

SOUTHPORT CLO LIMITED

SOVEREIGN BANK

STANFIELD VEYRON CLO LTD

SYMPHONY CLO I, LTD

THE GOVERNOR AND COMPANY OF THE BAN

UBS AG

UNION SQUARE CDO LTD.

WATERFRONT CLO 2007-1

WAVELAND-INGOTS, LTD

--------------------------------------------------------------------------------

APPENDIX A-1

TO AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT

Xerium B Term Loan Commitments

 

Bank

   Xerium
B Term Loan Commitment    Pro
Rata Share  

CITICORP NORTH AMERICA, INC.

   $ 350,170,019.92    100 %

Total

   $ 350,170,019.92    100 %

 

APPENDIX A-1-1

--------------------------------------------------------------------------------

APPENDIX A-2

TO AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT

XTI B Term Loan Commitments

 

Bank

   Xerium
B Term Loan Commitment    Pro
Rata Share  

CITICORP NORTH AMERICA, INC.

   Euros 48,191,499.65    100 %

Total

   Euros 48,191,499.65    100 %

 

APPENDIX A-2-1

--------------------------------------------------------------------------------

APPENDIX A-3

TO AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT

Italia B Term Loan Commitments

 

Bank

   Italia
B Term Loan Commitment    Pro
Rata Share  

CITIBANK, N.A.

   Euros 48,987,161.29    100 %

Total

   Euros 48,987,161.29    100 %

 

APPENDIX A-3-1

--------------------------------------------------------------------------------

APPENDIX A-4

TO AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT

Xerium Canada SW B Term Loan Commitments

 

Bank

   Xerium Canada
SW B Term Loan Commitment    Pro
Rata Share  

CITIBANK, N.A., CANADIAN BRANCH

   Canadian Dollars 43,327,684.20    100 %

Total

   Canadian Dollars 43,327,684.20    100 %

 

APPENDIX A-4-1

--------------------------------------------------------------------------------

APPENDIX A-5

TO AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT

Xerium Canada Wxx B Term Loan Commitments

 

Bank

   Xerium Canada
Wxx B Term Loan Commitment    Pro
Rata Share  

CITIBANK, N.A., CANADIAN BRANCH

   Canadian Dollars 32,860,912.66    100 %

Total

   Canadian Dollars 32,860,912.66    100 %

 

APPENDIX A-5-1

--------------------------------------------------------------------------------

APPENDIX A-6

TO AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT

Austria B Term Loan Commitments

 

Bank

   Austria
B Term Loan Commitment    Pro
Rata Share  

CITIBANK, N.A.

   Euros 28,991,191.89    100 %

Total

   Euros 28,991,191.89    100 %

 

APPENDIX A-6-1

--------------------------------------------------------------------------------

APPENDIX A-7

TO AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT

Germany B Term Loan Commitments

 

Bank

   Austria
B Term Loan Commitment    Pro
Rata Share  

CITIBANK, N.A.

   Euros 63,816,793.89    100 %

Total

   Euros 63,816,793.89    100 %

 

APPENDIX A-7-1

--------------------------------------------------------------------------------

APPENDIX A-8

TO AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT

Tranche 1 Revolving Commitments

 

Bank

   Revolving Commitment    Pro
Rata Share  

Citicorp North America, Inc.

   $ 25,000,000.00    50.0 %

CIBC World Markets plc

   $ 25,000,000.00    50.0 %

Total

   $ 50,000,000.00    100 %

 

APPENDIX A-8-1

--------------------------------------------------------------------------------

APPENDIX B

TO AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT

Notice Addresses

XERIUM TECHNOLOGIES, INC.

One Technology Drive

Westborough Technology Park

Westborough, MA 01581

Attention: Michael O’Donnell

Telecopier: 508-616-9479

XTI LLC

One Technology Drive

Westborough Technology Park

Westborough, MA 01581

Attention: Michael O’Donnell

Telecopier: 508-616-9479

XERIUM ITALIA S.P.A.

Casella Postale 109

Via Persicara 70

04100 Latina,

Italy

Attention: Michael O’Donnell

Telecopier: 39-077-362-9008

XERIUM CANADA INC.

Aird & Berlis

181 Bay Street

Suite 1800

Toronto, Ontario M5J279

Attention: Michael O’Donnell

Telecopier: 416-863-1515

HUYCK WANGNER AUSTRIA GMBH

Zeile 40

2640 Gloggnitz

Austria

Attention: Michael O’Donnell

Telecopier: 43-2662-410-159

 

APPENDIX B-1

--------------------------------------------------------------------------------

XERIUM GERMANY HOLDING GMBH

Föehrstrasse 39

72760 Reutlingen

Germany

Attention: Michael O’Donnell

Telecopier: 49-712-130-6396

HUYCK LICENSCO INC.

HUYCK EUROPE, INC.

STOWE WOODWARD LLC

STOWE WOODWARD LICENSCO LLC

[WEAVEXX CORPORATION], a Delaware corporation

XERIUM INC.

XERIUM I (US) LIMITED

XERIUM III (US) LIMITED

XERIUM IV (US) LIMITED

XERIUM V (US) LIMITED

WANGNER ITELPA I LLC

WANGNER ITELPA II LLC

One Technology Drive

Westborough Technology Park

Westborough, MA 01581

Attention: Michael O’Donnell

Telecopier: (508) 616-9479

HUYCK AUSTRALIA PTY. LIMITED

P.O. Box 757

Geelong Vic. 3220

Australia

Attention: Michael O’Donnell

Telecopier: 61-352-237-099

HUYCK INDÚSTRIA E COMÉRCIO LTDA.

Avenida Barão do Rio Branco, 1958/2000

Parte, Centro - CEP 25680-270, City of Petrópolis,

State of Rio de Janeiro, Brazil

Attention: Michael O’Donnell

Telecopier: 55-24-2237-5449

INDÚSTRIA E COMÉRCIO DE TELAS S/A - NORTELAS

Rua Manoel Rufino da Silva, 2250, Cj. Ernesto Geisel

CEP 58075-000, City of João Pessoa

State of Paraíba, Brazil

Attention: Michael O’Donnell

Telecopier: 55-83-231-2858

 

APPENDIX B-2

--------------------------------------------------------------------------------

WANGNER ITELPA INDÚSTRIA E COMÉRCIO LTDA.

Rod. Americana- Piracicaba, km 156,5

Distrito Industrial, 13400-970

City of Piracicaba, State of São Paulo, Brazil

Attention: Michael O’Donnell

Telecopier: 55-19-3424-1947

XERIUM DO BRASIL LTDA.

Avenida Barão do Rio Branco, 1958/2000

Parte, Centro - CEP 25680-270

City of Petrópolis, State of Rio de Janeiro, Brazil

Attention: Michael O’Donnell

Telecopier: 55-24-2237-5449

XERIUM SAS

102 avenue des Champs-Elysees

75008 Paris France

Attention: Michael O’Donnell

Telecopier: 33-4-50382593

STOWE WOODWARD SAS

12 rue Jean Jaurès

Meyzieu, France 69330

Attention: Michael O’Donnell

Telecopier: 33-4-50382593

STOWE WOODWARD AG

Am Langen Graben 22

52353 Düeren Germany or

Postfach 10 02 37, 52302 Düeren Germany

Attention: Michael O’Donnell

Telecopier: 49-242-184-05319

ROBEC WALZEN GMBH

Am Langen Graben 22

52353 Düeren Germany or

Postfach 10 02 37, 52302 Düeren Germany

Attention: Michael O’Donnell

Telecopier: 49-242-184-05319

HUYCK JAPAN LIMITED

5F, Kokusai Bldg., 2-13-11

Nihonbashi Kayabacho

Chuo-ku, Tokyo, 103-0025

Japan

Attention: Michael O’Donnell

Telecopier: 81-336-670-986

 

APPENDIX B-3

--------------------------------------------------------------------------------

STOWE WOODWARD MÉXICO, S.A. DE C.V.

Circuito Balvanera No. 2

Fracc. Agro Ind. Balvanera

KM 7 Carr. Libre A Celaya

Villa Corregidora 79920

Queretaro, Mexico

Attention: Michael O’Donnell

Telecopier: 52-442-225-0618

TIAG TRANSWORLD INTERWEAVING GMBH

Winkelriedstrasse 36

CH-6003 Luzern

Switzerland

Attention: Michael O’Donnell

Telecopier: 41-41-210-1687

HUYCK WANGNER (UK) LIMITED

Thanet Way

Whitstable

Kent, CT5 3EG

England

Attention: Michael O’Donnell

Telecopier: 44-122-727-7532

STOWE-WOODWARD (UK) LIMITED

Viewfield Industrial Estate

Glenrothes

Fife KY6 2RG

Scotland

Attention: Michael O’Donnell

Telecopier: 44-159-277-2821

XERIUM TECHNOLOGIES LIMITED

Thanet Way

Whitstable

Kent, CT5 3EG

England

Attention: Michael O’Donnell

Telecopier: 44-122-727-7532

HUYCK LIMITED

Thanet Way

Whitstable

Kent, CT5 3EG

 

APPENDIX B-4

--------------------------------------------------------------------------------

England

Attention: Michael O’Donnell

Telecopier: 44-122-727-7532

STOWE-WOODWARD LIMITED

Viewfield Industrial Estate

Glenrothes

Fife KY6 2RG

Scotland

Attention: Michael O’Donnell

Telecopier: 44-159-277-2821

in each case, with a copy to:

Xerium Technologies, Inc.

One Technology Drive

Westborough Technology Park

Westborough, MA 01581

Attention: Michael Stick

Telecopier: (508) 616-9485

and to

Xerium Technologies, Inc.

One Technology Drive

Westborough Technology Park

Westborough, MA 01581

Attention: Michael O’Donnell

Telecopier: (508) 616-9486

 

APPENDIX B-5

--------------------------------------------------------------------------------

CITIGROUP GLOBAL MARKETS,

as Lead Arranger and Bookrunner

Citibank, N.A.

390 Greenwich St., 1st Floor

New York, NY 10013

Attention: Blake Gronich

Telecopier: (646) 291-1653

Email: blake.gronich@citi.com

with a copy to:

McGuireWoods LLP

1345 Avenue of the Americas

Seventh Floor

New York, New York 10105

Attention: James Gelman

Telecopier: (212) 548-2174

E-mail: jgelman@mcguirewoods.com

 

APPENDIX B-6

--------------------------------------------------------------------------------

CITICORP NORTH AMERICA, INC.,

as Administrative Agent, Collateral Agent,

Issuing Bank and a Bank

Citicorp North America, Inc.

390 Greenwich St., 1st Floor

New York, NY 10013

Attention: Blake Gronich

Telecopier: (646) 291-1653

Email: blake.gronich@citi.com

with a copy to:

McGuireWoods LLP

1345 Avenue of the Americas

Seventh Floor

New York, New York 10105

Attention: James Gelman

Telecopier: (212) 548-2174

E-mail: jgelman@mcguirewoods.com

 

APPENDIX B-7

--------------------------------------------------------------------------------

CITIBANK, N.A., CANADIAN BRANCH,

as a Bank

Citibank, N.A., Canadian Branch

Citibank Place, 10th floor

123 Front Street West

Toronto, CANADA

Attention: Adeel Kheraj

Telecopier: (416) 947-5650

Email: adeel.kheraj@citigroup.com

with a copy to:

McGuireWoods LLP

1345 Avenue of the Americas

Seventh Floor

New York, New York 10105

Attention: James Gelman

Telecopier: (212) 548-2174

E-mail: jgelman@mcguirewoods.com

 

APPENDIX B-8

--------------------------------------------------------------------------------

CITIBANK, N.A., as a Bank

Citibank, N.A.

390 Greenwich St., 1st Floor

New York, NY 10013

Attention: Blake Gronich

Telecopier: (646) 291-1653

Email: blake.gronich@citi.com

with a copy to:

McGuireWoods LLP

1345 Avenue of the Americas

Seventh Floor

New York, New York 10105

Attention: James Gelman

Telecopier: (212) 548-2174

E-mail: jgelman@mcguirewoods.com

 

APPENDIX B-9

--------------------------------------------------------------------------------

APPENDIX C

TO AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT

Mandatory Cost Formula

 

1. For the purposes of this Appendix C:

 

  (a) “Eligible Liabilities” and “Special Deposits” have the meanings given to
them from time to time under or pursuant to the Bank of England Act 1998 or (as
may be appropriate) by the Bank of England;

 

  (b) “Fees Rules” means the rules on periodic fees contained in the FSA
Supervision Manual or such other law or regulation as may be in force from time
to time in respect of the payment of fees for the acceptance of deposits;

 

  (c) “Fee Tariffs” means the fee tariffs specified in the Fees Rules under the
activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee
required pursuant to the Fees Rules but taking into account any applicable
discount rate); and

 

  (d) “Tariff Base” has the meaning given to it in, and will be calculated in
accordance with, the Fees Rules.

 

2. The Mandatory Cost is an addition to the interest rate to compensate Banks
for the cost of compliance with (a) the requirements of the Bank of England
and/or the Financial Services Authority (or, in either case, any other authority
which replaces all or any of its functions) or (b) the requirements of the
European Central Bank.

 

3. On the first day of each Interest Period (or as soon as possible thereafter)
the Administrative Agent shall calculate, as a percentage rate, a rate (the
“Additional Cost Rate”) for each Bank, in accordance with the paragraphs set out
below. The Mandatory Cost will be calculated by the Administrative Agent as a
weighted average of the Banks’ Additional Cost Rates (weighted in proportion to
the percentage participation of each Bank in the relevant Loan) and will be
expressed as a percentage rate per annum.

 

4. The Additional Cost Rate for any Bank lending from a Facility Office in a
Participating Member State will be the percentage notified by that Bank to the
Administrative Agent. This percentage will be certified by that Bank in its
notice to the Administrative Agent to be its reasonable determination of the
cost (expressed as a percentage of that Bank’s participation in all Loans made
from that Facility Office) of complying with the minimum reserve requirements of
the European Central Bank in respect of loans made from that Facility Office.

 

APPENDIX C-1

--------------------------------------------------------------------------------

5. The Additional Cost Rate for any Bank lending from a Facility Office in the
United Kingdom will be calculated by the Administrative Agent as follows:

 

  (a) in relation to a sterling Loan:

 

 

AB + C(B – D) + E × 0.01

   per cent. per annum   100 – (A + C)   

 

  (b) in relation to a Loan in any currency other than sterling:

 

 

E × 0.01

   per cent. per annum.   300   

Where:

 

A is the percentage of Eligible Liabilities (assuming these to be in excess of
any stated minimum) which that Bank is from time to time required to maintain as
an interest free cash ratio deposit with the Bank of England to comply with cash
ratio requirements.

 

B is the percentage rate of interest (excluding the Applicable Margin and the
Mandatory Cost and, if the Loan is an Unpaid Sum, the additional rate of
interest specified in paragraph (a) of Section 2.10 (Default Interest)) payable
for the relevant Interest Period on the Loan.

 

C is the percentage (if any) of Eligible Liabilities which that Bank is required
from time to time to maintain as interest bearing Special Deposits with the Bank
of England.

 

D is the percentage rate per annum payable by the Bank of England to the
Administrative Agent on interest bearing Special Deposits.

 

E is designed to compensate Banks for amounts payable under the Fees Rules and
is calculated by the Administrative Agent as being the average of the most
recent rates of charge supplied by the Reference Banks to the Administrative
Agent pursuant to paragraph 7 below and expressed in pounds per £1,000,000.

 

6. In application of the above formula, A, B, C and D will be included in the
formula as percentages (i.e. 5 per cent. will be included in the formula as 5
and not as 0.05). A negative result obtained by subtracting D from B shall be
taken as zero. The resulting figures shall be rounded to four decimal places.

 

7. If requested by the Administrative Agent, each Reference Bank shall, as soon
as practicable after publication by the Financial Services Authority, supply to
the Administrative Agent, the rate of charge payable by that Reference Bank to
the Financial Services Authority pursuant to the Fees Rules in respect of the
relevant financial year of the Financial Services Authority (calculated for this
purpose by that Reference Bank as being the average of the Fee Tariffs
applicable to that Reference Bank for that financial year) and expressed in
pounds per £1,000,000 of the Tariff Base of that Reference Bank.

 

APPENDIX C-2

--------------------------------------------------------------------------------

8. Each Bank shall supply any information required by the Administrative Agent
for the purpose of calculating its Additional Cost Rate. In particular, but
without limitation, each Bank shall supply the following information on or prior
to the date on which it becomes a Bank:

 

  (a) the jurisdiction of its Facility Office; and

 

  (b) any other information that the Administrative Agent may reasonably require
for such purpose.

Each Bank shall promptly notify the Administrative Agent of any change to the
information provided by it pursuant to this paragraph.

 

9. The percentages of each Bank for the purpose of A and C above and the rates
of charge of each Reference Bank for the purpose of E above shall be determined
by the Administrative Agent based upon the information supplied to it pursuant
to paragraphs 7 and 8 above and on the assumption that, unless a Bank notifies
the Administrative Agent to the contrary, each Bank’s obligations in relation to
cash ratio deposits and Special Deposits are the same as those of a typical bank
from its jurisdiction of incorporation with a Facility Office in the same
jurisdiction as its Facility Office.

 

10. The Administrative Agent shall have no liability to any person if such
determination results in an Additional Cost Rate which over or under compensates
any Bank and shall be entitled to assume that the information provided by any
Bank or Reference Bank pursuant to paragraphs 3, 7 and 8 above is true and
correct in all respects.

 

11. The Administrative Agent shall distribute the additional amounts received as
a result of the Mandatory Cost to the Banks on the basis of the Additional Cost
Rate for each Bank based on the information provided by each Bank and each
Reference Bank pursuant to paragraphs 3, 7 and 8 above.

 

12. Any determination by the Administrative Agent pursuant to this Appendix C in
relation to a formula, the Mandatory Cost, an Additional Cost Rate or any amount
payable to a Bank shall, in the absence of manifest error, be conclusive and
binding on all Parties.

 

13. The Administrative Agent may from time to time, after consultation with
Xerium and the Banks, determine and notify to all parties to this Agreement any
amendments which are required to be made to this Appendix C in order to comply
with any change in law, regulation or any requirements from time to time imposed
by the Bank of England, the Financial Services Authority or the European Central
Bank (or, in any case, any other authority which replaces all or any of its
functions) and any such determination shall, in the absence of manifest error,
be conclusive and binding on all parties to this Agreement.

 

APPENDIX C-3