EXHIBIT 10.35

XERIUM TECHNOLOGIES, INC.

PERFORMANCE AWARD PROGRAM

This Xerium Technologies, Inc. Performance Award Program (the “Program”)
contains rules supplemental to those set forth in the Xerium Technologies, Inc.
2005 Equity Incentive Plan (the “EIP”). The Program provides for the grant of
the incentive award opportunities (each, an “Award”) under and subject to the
terms of the EIP, which is incorporated herein by reference. In the event of any
inconsistency between the Program and applicable provisions of the EIP, the EIP
shall control. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the EIP.

1.    Administration; Eligibility; Features of Awards.    The Program shall be
administered by the Committee as described in the EIP. Eligibility to
participate in the Program shall be limited to individuals who are selected in
accordance with the terms of the EIP to participate in the Program from among
those individuals who are eligible to participate in the EIP (each, a
“Participant”). Participation in any Award shall not entitle a Participant to
share in any future Awards or in any other future awards of Xerium Technologies,
Inc. (the “Company”) or its subsidiaries. Each Award shall entitle the holder,
subject to satisfaction of the performance conditions under the Award (and, if
the Award is intended to qualify for the performance-based compensation
exception under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the “Code”), to the further limitations of the EIP with respect thereto), to a
benefit determined under Section 2 below and Exhibit A (the “Total Benefit
Amount”) that is payable as follows: (a) so much of the Total Benefit Amount as
equals the minimum tax withholding shall be determined (the “Tax Withholding
Amount”); (b) fifty (50%) percent of the Total Benefit Amount shall be payable
in the form of Stock; and (c) the balance of the Total Benefit Amount (the
“Election-Eligible Portion”) after the amounts determined pursuant to clauses
(a) and (b) of this Section 1 shall be payable, as the Participant may elect
pursuant to Section 3 below, either in cash or in Stock (and will be paid in
cash if the Participant makes no such election). The number of shares of Stock
deliverable in respect of any portion of an Award payable in Stock shall be
determined as described in Section 4 below.

2.    Determination of Total Benefit Amount.    The determination of each
Participant’s Total Benefit Amount under an Award for any calendar year or
portion thereof (a “performance year”) shall be made in accordance with the
provisions of Exhibit A applicable to such Participant for such performance
year.

3.    Election to Receive Stock for Election-Eligible Portion.    A Participant
holding an Award for any performance year may elect not later than thirty-one
(31) calendar days prior to the conclusion of the performance year to receive
all or any portion of the Election-Eligible Portion of his or her Award payment,
if any, in Stock rather than cash.

4.    Determination of Number of Shares Payable.    The number of shares of
Stock payable under any Award shall be the quotient determined by dividing (x)
by (y), where (x) is that portion of the Total Benefit Amount, if any, payable
with respect to such Award in Stock, and (y) is the average of the per-share
closing prices of the Stock (adjusted as appropriate to reflect any stock
splits, stock dividends or similar events) for the last twenty (20) trading days
of the performance year, rounded down to the nearest whole number.

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5.    Latest Payment Date; Tax Withholding.

(a)  All payments, if any, under an Award shall be made not later than by March
15 of the calendar year following the performance year unless the Company
establishes that it was administratively impracticable to make the payment by
that deadline and, as of the date the Award was granted, such impracticability
was unforeseeable in accordance with Section 409A of the Code and the
regulations promulgated thereunder. If payment is delayed beyond March 15 by
reason of the preceding sentence, payment shall be made as soon as
administratively practicable.

(b)  The Tax Withholding Amount with respect to an Award shall be used to
satisfy tax withholding requirements for such Award and such withheld amount
shall be deemed to have been paid to the Participant partially in cash and
partially in Stock in the same proportion as the Stock and cash paid with
respect to the Award excluding the Tax Withholding Amount.

6.    Intent to be Exempt from Section 162(m).    Awards for the 2008
performance year are not intended to qualify for the performance-based
compensation exception under Section 162(m) of the Code. In the case of any
Award for a subsequent performance year that is intended to so qualify, (i) the
Exhibit A performance goals with respect to such Award shall be established by
the Committee not later than ninety (90) days after the commencement of the
performance year (or by such earlier date as is required by Section
1.162-27(e)(2)(i) of the Treasury Regulations), (ii) the Exhibit A performance
goals, as so established, shall be consistent with the eligible performance
measures, if any, approved by the shareholders of the Company for use in respect
of performance awards under the EIP and shall be objectively determinable in
compliance with Section 1.162-27(e)(2) of the Treasury Regulations, and (iii) no
portion of the Award shall be paid unless and until the Committee has certified
(as required by Section 1.162-27(e)(5) of the Treasury Regulations) that the
performance goals have been achieved (or, if the performance goals are expressed
in terms that admit of varying payout levels for different levels of
performance, have been achieved at a level sufficient to support the payment).

7.    Nature of Awards.    Awards hereunder are intended to qualify as Stock
Unit Awards under the EIP, with the cash portion payable pursuant to Section
9(d) of the EIP. The Program is unfunded and any cash payments by the Company
hereunder shall be made from the general assets of the Company.

8.    Termination of Employment.    No Award shall be payable to or in respect
of a Participant, except as the Committee shall otherwise expressly determine,
unless the Participant is employed by the Company or a subsidiary on December 31
of the performance year.

9.    Availability of Stock.    If, when Awards become payable in respect of any
performance year, the number of shares of Stock deliverable under the Awards
exceeds the number of shares then available under the EIP, there shall first be
reduced proportionally the number of shares deliverable under the
Election-Eligible Portion of the Awards, and if any further reduction is needed
such further reduction shall be made proportionally among all Awards, with the
amount of any such reductions payable in cash.

 

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

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

(b)  In the event such transaction occurs prior to the close of the performance
year with respect to the Award, the applicable performance metrics specified in
Exhibit A shall be determined as follows: (i) the performance year shall be
deemed to end on the effective date of such transaction; and (ii) the extent to
which the applicable performance metrics specified in Exhibit A for the
shortened performance year described in clause (i) above have been achieved
shall be determined by the Committee acting in its sole and reasonable
discretion based upon the financial information available to the Company (it
being understood that the Committee may, to the extent it deems necessary,
extrapolate performance through the effective date of the transaction based upon
available data); (iii) the performance determined pursuant to clause (ii) shall
then be adjusted by multiplying it by fraction, the numerator of which is the
number of days in the shortened performance year and the denominator of which is
365, and the performance as so adjusted shall be the basis for determining the
Total Benefit Amount with respect to the Award, subject to proration in
accordance with Section 10(c) below.

(c)  If subsection (b) above applies, the Total Benefit Amount initially
determined under subsection (b) with respect to an Award shall be prorated by
multiplying such initially determined amount by a fraction, the numerator of
which is the number of days in the shortened performance year and the
denominator of which is 365.

 

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For purposes of this Section 10, “Person” means any individual, partnership,
limited liability company, corporation, association, trust, joint venture,
unincorporated organization, or other entity or group, and “Affiliated Person”
means, with respect to any Person, any other Person that directly or indirectly
controls or is controlled by or is under common control with such Person.

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

12.    409A.    This Program and the Awards granted thereunder shall be
construed and administered consistent with the intent that they at all times be
in compliance with or exempt from the requirements of Section 409A of the Code
and the regulations promulgated thereunder.

 

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XERIUM TECHNOLOGIES, INC.

PERFORMANCE AWARD PROGRAM

Exhibit A (applicable to 2008 performance year)

There are five different types of Awards under the Program for performance year
2008:

1. Corporate Awards

2. North America Division Awards

3. South America Division Awards

4. Europe Division Awards and

5. Asia Division Awards.

The North America Division Awards, South America Division Awards, Europe
Division Awards and Asia Division Awards are referred to herein collectively as
“Division Awards” and each as a “Division Award”. The North America Division,
South America Division, Europe Division and Asia Division are referred to herein
collectively as “Divisions” and each as a “Division”.

Participants in the Program selected by the Committee shall receive the types of
Awards in the amounts determined by the Committee.

Corporate Awards are described in Section 1 below, and Division Awards are
described in Section 2 below.

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

Section 1 — Corporate Awards

Two measures of performance are relevant in determining the Total Benefit
Amount, if any, under a Corporate Award: (i) the Corporate Cash Metric and (ii)
the Corporate EBITDA Metric.

i.  Corporate Cash Metric

The “Corporate Cash Metric” means, for Xerium Technologies, Inc., on a
consolidated basis, net cash provided by operating activities for the year ended
December 31, 2008 minus capital expenditures (as reflected on the cash flow
statement) for the year ended December 31, 2008 plus interest expense (excluding
the amortization of debt expense and net of interest income) for the year ended
December 31, 2008 plus the reduction (where a reduction is expressed as a
positive number and an increase is expressed as a negative number) in Trapped
Cash for Xerium Technologies, Inc., on a consolidated basis, from December 31,
2007 to December 31, 2008. “Trapped Cash” means accounts receivable (if any)
outstanding at December 31, 2007 or December 31, 2008, as the case may be, in
excess of the accounts receivable that would cause the quotient determined by
dividing accounts receivable on such date by the

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ratio of net sales for the year then ended to 365 to be in excess of 50 plus
inventory (if any) at December 31, 2007 or December 31, 2008, as the case may
be, in excess of one-sixth of cost of goods sold for the year then ended plus
accounts payable (if any) outstanding at December 31, 2007 or December 31, 2008,
as the case may be, less than the amount of the accounts payable that would
cause the quotient determined by dividing accounts payable on such date by the
ratio of cost of goods sold for the year then ended to 365 to be less than 48.
The Committee shall have sole discretion to determine the calculation of the
amount of the Corporate Cash Metric.

Weighting: The amount of the target award under the Corporate Award that is
based upon the Corporate Cash Metric is 60% of the total Corporate Award for the
Participant. “X” below refers to the target award for the Participant under the
Corporate Award that is based upon the Corporate Cash Metric.

The Target Corporate Cash Metric (referred to below as “Y”) shall be established
by the Committee upon the granting of Corporate Awards and communicated to
Participants receiving a Corporate Award; provided, however, that the amount so
established by the Committee may be adjusted by the Committee after the initial
determination of the amount to reflect any significant change of circumstance,
including without limitation, the acquisition or disposition of any business by
Xerium Technologies, Inc. or any of its subsidiaries.

Subject to Section 1(iii), the Total Benefit Amount payable with respect to a
Corporate Award based upon the portion measured against the Corporate Cash
Metric shall be determined as follows:

Corporate Cash Metric below .95Y: no payment under the Corporate Cash Metric
component

Corporate Cash Metric at .95Y: bonus = .5 X

Corporate Cash Metric at .975Y: bonus = .667X

Corporate Cash Metric at Y: bonus = X

Corporate Cash Metric at 1.25Y: bonus = 1.5X

Corporate Cash Metric at 1.45Y: bonus = 2X

Corporate Cash Metric at 1.8Y or above: bonus = 2.5X

The amount payable between the levels of Corporate Cash Metric identified above
shall be determined on the basis of straight line interpolation between points.

ii.  Corporate EBITDA Metric

The “Corporate EBITDA Metric” means Adjusted EBITDA, as such term is defined in
the first sentence of the definition of such term in the Credit and Guaranty
Agreement (the “Credit Agreement), dated as of May 19, 2005, entered into by and
among the Company, certain subsidiaries of the Company, Citigroup Global
Markets, Inc., CIBC World Markets Corp. and other agents and banks party
thereto, as amended and in effect on May 30, 2008, for Xerium Technologies, Inc.
for the year ended December 31, 2008; provided, however, that notwithstanding
anything to the contrary in such definition of “Adjusted EBITDA”, (a) because
the intent is

 

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that the Corporate EBITDA Metric be calculated on a “self funded” basis, the
Corporate EBITDA Metric shall be determined taking into account the expense for
all Awards under the Program (including both Corporate and Division Awards) for
the performance year regardless of whether such Awards are paid in cash or
Stock; and (b) the Corporate EBITDA Metric for the three months ended March 31,
2008 was $35,610,000. The Committee shall have sole discretion to determine the
calculation of the amount of the Corporate EBITDA Metric.

Weighting: The amount of the target award under the Corporate Award that is
based upon the Corporate EBITDA Metric is 40% of the total Corporate Award for
the Participant. “X” below refers to the target award for the Participant under
the Corporate Award that is based upon the Corporate EBITDA Metric.

The Target Corporate EBITDA Metric (referred to below as “Y”) shall be
established by the Committee upon the granting of Corporate Awards and
communicated to Participants receiving a Corporate Award; provided, however,
that the amount so established by the Committee may be adjusted by the Committee
after the initial determination of the amount to reflect any significant change
of circumstance, including without limitation, the acquisition or disposition of
any business by the Company or any of its subsidiaries.

Subject to Section 1(iii), the Total Benefit Amount payable with respect to a
Corporate Award based upon the portion measured against the Corporate EBITDA
Metric shall be determined as follows:

Corporate EBITDA Metric below .95Y: no payment under the Corporate EBITDA Metric
component

Corporate EBITDA at .95Y: bonus = .5 X

Corporate EBITDA at .975Y: bonus = .667X

Corporate EBITDA at Y: bonus = X

Corporate EBITDA at 1.06Y: bonus = 1.5X

Corporate EBITDA at 1.1Y: bonus = 2X

Corporate EBITDA at 1.42Y or above: bonus = 2.5X

The amount payable between the levels of Corporate EBITDA Metric identified
above shall be determined on the basis of straight line interpolation between
points.

iii.  Total Benefit Amount payable with respect to a Corporate Award shall be
the sum of the amounts determined pursuant to Section 1(i) and Section 1(ii)
above; provided, however, if the such amount exceeds two (2) times the sum of
(a) the target award for the Participant under the Corporate Award that is based
upon the Corporate Cash Metric and (b) the target award for the Participant
under the Corporate Award that is based upon the Corporate EBITDA Metric (such
sum with respect to a Participant, the “Corporate Target”) then the Total
Benefit Amount payable with respect to a Corporate Award for such Participant
shall be reduced to two (2) times the Corporate Target.

 

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Section 2 — Division Awards

The description of Division Awards below applies to the Division Awards of each
of the four Divisions.

Two measures of performance are relevant in determining the Total Benefit
Amount, if any, under a Division Award: (i) the Division Cash Metric and (ii)
the Division EBITDA Metric.

i.  Division Cash Metric

The “Division Cash Metric” means net cash provided by operating activities for
the year ended December 31, 2008 minus capital expenditures for the year ended
December 31, 2008 plus interest expense (excluding the amortization of debt
expense and net of interest income) for the year ended December 31, 2008 plus
the reduction (where a reduction is expressed as a positive number and an
increase is expressed as a negative number) in Trapped Cash (as defined in
Section 1(i) above) for the particular Division from December 31, 2007 to
December 31, 2008, in each case as required to be presented in the internal
financial management reports (commonly referred to as “GRs”) of the Company for
the particular Division. The Committee shall have sole discretion to determine
the calculation of the amount of the Division Cash Metric.

Weighting: The amount of the target award under the Division Award that is based
upon the Division Cash Metric is 60% of the total Division Award for the
Participant. “X” below refers to the target award for the Participant under the
Division Award that is based upon the Division Cash Metric.

The Target Division Cash Metric (referred to below as “Y”) shall be established
by the Committee upon the granting of Division Awards and communicated to
Participants receiving a Division Award for the particular Division; provided,
however, that the amount so established by the Committee may be adjusted by the
Committee after the initial determination of the amount to reflect any
significant change of circumstance, including without limitation, the
acquisition or disposition of any business by the particular Division.

Subject to Section 2(iii), the Total Benefit Amount payable with respect to a
Division Award (other than an Asia Division Award) based upon the portion
measured against the Division Cash Metric shall be determined as follows:

Division Cash Metric below .95Y: no payment under the Division Cash Metric
component

Division Cash Metric at .95Y: bonus = .5 X

Division Cash Metric at .975Y: bonus = .667X

Division Cash Metric at Y: bonus = X

Division Cash Metric at 1.25Y: bonus = 1.5X

Division Cash Metric at 1.45Y: bonus = 2X

Division Cash Metric at 1.81Y or above: bonus = 2.5X

The amount payable between the levels of Division Cash Metric identified above
shall be determined on the basis of straight line interpolation between points.

 

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Subject to Section 2(iii), the Total Benefit Amount payable with respect to an
Asia Division Award based upon the portion measured against the Division Cash
Metric shall be determined as follows:

Division Cash Metric below .95Y: no payment under the Division Cash Metric
component

Division Cash Metric at .95Y: bonus = .5 X

Division Cash Metric at .975Y: bonus = .667X

Division Cash Metric at Y: bonus = X

Division Cash Metric at 3.5Y: bonus = 1.5X

Division Cash Metric at 7Y: bonus = 2X

Division Cash Metric at 8.25Y or above: bonus = 2.5X

The amount payable between the levels of Division Cash Metric identified above
shall be determined on the basis of straight line interpolation between points.

ii.  Division EBITDA Metric:

The “Division EBITDA Metric” means “Adjusted EBITDA” for the particular Division
for the year ended December 31, 2008 as required to be presented in the internal
financial management reports (commonly referred to as “GRs”) of the Company in
accordance with the guidelines for such reports in effect on June 30, 2008 and
consistent with the definition of Adjusted EBITDA as set forth in the first
sentence of the definition of such term in the Credit Agreement; provided that
notwithstanding anything to the contrary contained herein, (a) because the
intent is that the Division EBITDA Metric be calculated on a “self funded”
basis, the Division EBITDA Metric shall be determined taking into account the
expense for all Awards for that particular Division for the performance year and
the expense for the allocated portion (as determined by the Compensation
Committee in accordance with Company internal accounting policies) of any
Corporate Awards for the performance year regardless of whether such Awards are
paid in cash or Stock; (b) the limit on Consolidated Restructuring Costs (as
defined in the Credit Agreement) that may be added back to net income for the
purposes of calculating the Division EBITDA Metric shall be as determined by the
Committee; (c) the amount of the Division EBITDA Metric for the Division for the
three months ended March 31, 2008 shall be as previously reported in theGRs for
such period. The Committee shall have sole discretion to determine the
calculation of the amount of the Division EBITDA Metric.

 

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Weighting: The amount of the target award under the Division Award that is based
upon the Division EBITDA Metric is 40% of the total Division Award for the
Participant. “X” below refers to the target award for the Participant under the
Division Award that is based upon the Division EBITDA Metric.

The Target Division EBITDA Metric (referred to below as “Y”) shall be
established by the Committee upon the granting of Division Awards and
communicated to Participants receiving a Division Award for the particular
Division; provided, however, that the amount so established by the Committee may
be adjusted by the Committee after the initial determination of the amount to
reflect any significant change of circumstance, including without limitation,
the acquisition or disposition of any business by the particular Division.

Subject to Section 2(iii), the Total Benefit Amount payable with respect to a
Division Award (other than an Asia Division Award) based upon the portion
measured against the Division EBITDA Metric shall be determined as follows:

Division EBITDA Metric below .95Y: no payment under the Division EBITDA Metric
component

Division EBITDA at .95Y: bonus = .5 X

Division EBITDA at .975Y: bonus = .667X

Division EBITDA at Y: bonus = X

Division EBITDA at 1.06Y: bonus = 1.5X

Division EBITDA at 1.1Y: bonus = 2X

Division EBITDA Metric at 1.38Y or above: bonus = 2.5X

The amount payable between the levels of Division EBITDA Metric identified above
shall be determined on the basis of straight line interpolation between points.

Subject to Section 2(iii), the Total Benefit Amount payable with respect to an
Asia Division Award based upon the portion measured against the Division EBITDA
Metric shall be determined as follows:

Division EBITDA Metric below .95Y: no payment under the Division EBITDA Metric
component

Division EBITDA at .95Y: bonus = .5 X

Division EBITDA at .975Y: bonus = .667X

Division EBITDA at Y: bonus = XDivision EBITDA at 1.65Y: bonus = 1.5X

Division EBITDA at 2.6Y: bonus = 2X

Division EBITDA Metric at 3.25Y or above: bonus = 2.5X

The amount payable between the levels of Division EBITDA Metric identified above
shall be determined on the basis of straight line interpolation between points.

 

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iii.  Total Benefit Amount payable with respect to a Division Award shall be the
sum of the amounts determined pursuant to Section 2(i) and Section 2(ii) above;
provided, however, if the such amount exceeds two (2) times the sum of (a) the
target award for the Participant under the Division Award that is based upon the
Division Cash Metric and (b) the target award for the Participant under the
Division Award that is based upon the Division EBITDA Metric (such sum with
respect to a Participant, the “Division Target”) then the Total Benefit Amount
payable with respect to a Division Award for such Participant shall be reduced
to two (2) times the Division Target.

Section 3 — Total Benefit Amount

The Total Benefit Amount for a Participant shall be the sum of the Total Benefit
Amount payable with respect to any Corporate Award for such Participant (as
determined in accordance with Section 1(iii)) and the Total Benefit Amount
payable with respect to any Division Award for such Participant (as determined
in accordance with Section 2(iii)).

 

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