EXHIBIT 10.1

 

CREDIT AND GUARANTY AGREEMENT

 

dated as of May 18, 2005

 

among

 

XERIUM TECHNOLOGIES, INC., XTI LLC, XERIUM ITALIA S.P.A., STOWE-WOODWARD/MOUNT
HOPE INC., WEAVEXX CORPORATION, HUYCK AUSTRIA GMBH and XERIUM GERMANY HOLDING
GMBH

as Borrowers,

 

CERTAIN SUBSIDIARIES OF THE BORROWERS,

as Guarantors,

 

VARIOUS BANKS,

 

CITIGROUP GLOBAL MARKETS, INC.

 

and

 

CIBC WORLD MARKETS PLC,

as Joint Lead Arrangers and Lead Bookrunners,

 

CITICORP NORTH AMERICA, INC.,

as Collateral Agent,

 

CITIGROUP GLOBAL MARKETS, INC.

 

and

 

CIBC WORLD MARKETS PLC.

 

as Syndication Agents

 

and

 

CITICORP NORTH AMERICA, INC.,

as Administrative Agent

 

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U.S. Dollars 450,170,019.92

EUR 189,986,646.72

Canadian Dollars 76,188,596.86

 

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“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

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SECTION 1.    DEFINITIONS AND INTERPRETATION    2 1.1        Definitions    2
1.2        Accounting Terms    41 1.3        Interpretation, etc.    41
SECTION 2.    LOANS AND LETTERS OF CREDIT    41 2.1        B Term Loans    41
2.2        Revolving Loans    43 2.3        [Intentionally Omitted.]    44
2.4        Issuance of Letters of Credit and Purchase of Participations Therein.
   44 2.5        Pro Rata Shares; Availability of Funds.    49 2.6        Use of
Proceeds    49 2.7        Evidence of Debt; Register; Banks’ Books and Records;
Promissory Notes    50 2.8        Interest on Loans.    50 2.9       
Continuation.    54 2.10        Default Interest    54 2.11        Fees    54
2.12        Scheduled Payments    55 2.13        Voluntary
Prepayments/Commitment Reductions    56 2.14        Mandatory
Prepayments/Commitment Reductions    57 2.15        Application of
Prepayments/Reductions    60 2.16        General Provisions Regarding Payments
   61 2.17        Ratable Sharing    63 2.18        Making or Maintaining LIBOR
Loans, Euribor Loans or BA Loans    64 2.19        Increased Costs; Capital
Adequacy    66 2.20        Taxes; Withholding, etc.    67 2.21        Obligation
to Mitigate    70 2.22        Tax Credit    71 2.23        Defaulting Banks   
71 2.24        Removal or Replacement of a Bank    72

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2.25        Joint and Several Liability    73 2.26        Optional Currencies   
74 2.27        Loans to Non-US Borrowers    75 SECTION 3.    CONDITIONS
PRECEDENT    75 3.1        Closing Date    75 3.2        Conditions to Each
Credit Extension.    82 3.3        Conditions Relating to Optional Currencies.
   83 3.4        Conditions to Tranche 2 Revolving Loan Credit Extensions    83
SECTION 4.    REPRESENTATIONS AND WARRANTIES    83 4.1        Organization;
Requisite Power and Authority; Qualification    84 4.2        Capital Stock and
Ownership    84 4.3        Due Authorization    84 4.4        No Conflict    84
4.5        Governmental Consents    85 4.6        Binding Obligation    85
4.7        Historical Financial Statements    85 4.8        Projections    85
4.9        No Material Adverse Change    85 4.10        No Restricted Junior
Payments    85 4.11        Adverse Proceedings, etc.    86 4.12        Payment
of Taxes    86 4.13        Properties    86 4.14        Environmental Matters   
87 4.15        No Defaults    87 4.16        Material Contracts    87 4.17    
   Governmental Regulation    87 4.18        Margin Stock    88 4.19       
Employee Matters    88 4.20        Employee Benefit Plans    88 4.21       
Certain Fees    89 4.22        Solvency    89 4.23        Related Agreements   
89 4.24        Compliance with Statutes, etc.    89 4.25        Disclosure    90

 

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SECTION 5.    AFFIRMATIVE COVENANTS    90 5.1        Financial Statements and
Other Reports    90 5.2        Existence    95 5.3        Payment of Taxes and
Claims    95 5.4        Maintenance of Properties    95 5.5        Insurance   
95 5.6        Books and Records; Inspections    96 5.7        [Intentionally
Omitted]    96 5.8        Compliance with Laws    96 5.9        Environmental   
96 5.10        Subsidiaries    98 5.11        Additional Material Real Estate
Assets    98 5.12        Interest Rate Protection    98 5.13        Further
Assurances    98 5.14        Intellectual Property    99 5.15       
Know-Your-Customer Rules    99 5.16        Pari Passu Ranking    100 5.17       
Post Closing Matters    100 SECTION 6.    NEGATIVE COVENANTS    100 6.1       
Indebtedness    100 6.2        Liens    102 6.3        Equitable Lien    104
6.4        No Further Negative Pledges    104 6.5        Restricted Junior
Payments    104 6.6        Restrictions on Subsidiary Distributions    105
6.7        Investments    106 6.8        Financial Covenants    107 6.9       
Fundamental Changes; Disposition of Assets; Acquisitions    110 6.10       
Disposal of Subsidiary Interests    111 6.11        Sales and Lease Backs    112
6.12        Transactions with Shareholders and Affiliates    112 6.13       
Conduct of Business    112

 

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6.14        Reserved    112 6.15        Amendments or Waivers of Organizational
Documents    112 6.16        Amendments or Waivers of with respect to
Subordinated Debt    112 6.17        Fiscal Year    113 SECTION 7.    GUARANTY
   113 7.1        Guaranty of the Obligations    113 7.2        Contribution by
Guarantors    113 7.3        Payment by Guarantors    115 7.4        Liability
of Guarantors Absolute    115 7.5        Waivers by Guarantors    118 7.6       
Guarantors’ Rights of Subrogation, Contribution, etc.    119 7.7       
Subordination of Other Obligations    120 7.8        Continuing Guaranty    120
7.9        Authority of Guarantors or Borrowers    120 7.10        Financial
Condition of Each Borrower    120 7.11        Bankruptcy, etc.    120 7.12    
   Discharge of Guaranty Upon Sale of Guarantor    121 7.13        Validity of
Pledge of Shares held by Xerium SAS and the German Guarantors; Parallel
Obligations    121 7.14        Limitation of Non-US Guaranteed Obligations   
123 7.15        Validity and Effectiveness    128 SECTION 8.    EVENTS OF
DEFAULT    128 8.1        Events of Default    128 SECTION 9.    AGENTS    132
9.1        Appointment of Agents    132 9.2        Powers and Duties    132
9.3        General Immunity    132 9.4        Agents Entitled to Act as Bank   
133 9.5        Banks’ Representations, Warranties and Acknowledgment    133
9.6        Right to Indemnity    134 9.7        Successor Administrative Agent
   134 9.8        Collateral Documents and Guaranty    135 9.9        Reliance
and Engagement Letters    136

 

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SECTION 10.    MISCELLANEOUS    136 10.1        Notices    136 10.2       
Expenses    136 10.3        VAT    137 10.4        Indemnity    137 10.5       
Set Off    138 10.6        Amendments and Waivers.    139 10.7        Successors
and Assigns; Participations    141 10.8        Independence of Covenants    144
10.9        Survival of Representations, Warranties and Agreements    144
10.10        No Waiver; Remedies Cumulative    144 10.11        Marshalling;
Payments Set Aside    145 10.12        Severability    145 10.13       
Obligations Several; Independent Nature of Banks’ Rights    145 10.14       
Headings    145 10.15        APPLICABLE LAW    145 10.16        CONSENT TO
JURISDICTION AND SERVICE OF PROCESS    145 10.17        WAIVER OF JURY TRIAL   
147 10.18        Confidentiality    147 10.19        Usury Savings Clause    148
10.20        Counterparts    149 10.21        Effectiveness    149 10.22       
Importation of Credit Documents into Austria    149 10.23        Place of
Performance    149 10.24        USA Patriot Act Notice    149

 

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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    Stowe-Woodward B Term Loan Commitments A-5
   Weavexx B Term Loan Commitments A-6    Austria B Term Loan Commitments A-7   
Germany B Term Loan Commitments A-8    Tranche 1 Revolving Commitments A-9   
Tranche 2 Revolving Commitments B    Notice Addresses C    Mandatory Cost
Formula

 

SCHEDULES:   1.1(a)   Existing Indebtedness     1.1(b)   Factoring Agreements  
  1.1(c)   Guarantors     1.01(d)   Existing Letters of Credit     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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CREDIT AND GUARANTY AGREEMENT

 

This CREDIT AND GUARANTY AGREEMENT, dated as of May 18, 2005, 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, STOWE-WOODWARD/MOUNT HOPE INC.
(“STOWE-WOODWARD”), a New Brunswick (Canada) corporation, WEAVEXX CORPORATION
(“WEAVEXX”), a New Brunswick (Canada) corporation, HUYCK AUSTRIA GMBH (“HUYCK
AUSTRIA”), an Austrian limited liability company, and XERIUM GERMANY HOLDING
GMBH (“GERMANY HOLDINGS”), a German limited liability company (each of Xerium,
Italia SpA, Stowe-Woodward, Weavexx, 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. and CIBC WORLD MARKETS PLC, as Joint
Lead Arrangers and Lead Bookrunners (in such capacity, “Lead Arrangers”),
CITIGROUP GLOBAL MARKETS, INC. and CIBC WORLD MARKETS PLC, as Syndication Agents
(in such capacity, each a “Syndication Agent”), 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, Xerium desires to repay, among other things, all outstanding
obligations under the (i) Facility Agreement, dated December 9, 2002, as
amended, restated, supplemented or otherwise modified from time to time (the
“Facility Agreement”), among Xerium SA, the borrowers and guarantors party
thereto, the lenders from time to time party thereto and CIBC World Markets plc,
as Facility Agent and (ii) Mezzanine Facility Agreement, dated December 9, 2002,
as amended, restated, supplemented or otherwise modified from time to time (the
“Mezzanine Facility Agreement”), among Xerium SA, the borrowers and guarantors
party thereto, the lenders from time to time party thereto and Bayerische
Hypo-und-Vereinsbank AG, London Branch, as Mezzanine Facility Agent;

 

WHEREAS, Xerium desires to issue shares of its Common Stock in an initial public
offering (“IPO”) and pay the Transaction Costs;

 

WHEREAS, Banks have agreed to extend certain credit facilities to Xerium, XTI,
Italia SpA, Stowe-Woodward, Weavexx, Huyck Austria and Germany Holdings in a
Base Currency aggregate amount not to exceed $[750,000,000] as of the Closing
Date, consisting of $[650,000,000] Base Currency aggregate principal amount of B
Term Loans, and up to $100,000,000 Base Currency aggregate principal amount of
Revolving Commitments, in each case as of the Closing Date, the proceeds of
which will be used, along with the proceeds of the IPO, (i) to consummate the
Refinancing, (ii) pay Transaction Costs and (iii) for working capital and
general corporate purposes of Xerium and its Subsidiaries subject to the
limitations herein;

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WHEREAS, Xerium and XTI have agreed to secure all of its Obligations by granting
to Collateral Agent, for the benefit of Secured Parties, a First Priority Lien
on certain of its assets, including a pledge of all of the Capital Stock of
certain of its Subsidiaries;

 

WHEREAS, each of Xerium, XTI, Italia SpA, Stowe-Woodward, Weavexx, Huyck Austria
and Germany Holdings has agreed to secure all Non-US Obligations by granting to
Collateral Agent, for the benefit of Secured Parties, a First Priority Lien on
substantially all of its assets, including a pledge of all of the Capital Stock
of each of its Subsidiaries, except as specifically limited by the Credit
Documents;

 

WHEREAS, the Non-US Guarantors have agreed to guarantee the Non-US Obligations
and the US Guarantors have agreed to guarantee the Obligations of all the Credit
Parties, in each case hereunder and to secure their respective Obligations, as
the case may be, by granting to Collateral Agent, for the benefit of Secured
Parties, a First Priority Lien on substantially all of such Guarantors’
respective assets, including a pledge of all of the Capital Stock of each of
such Guarantors’ respective Subsidiaries, as set forth in the Collateral
Documents;

 

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:

 

“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) any non-cash gains or losses resulting from marking-to-market
Hedging Obligations, (vii) any expense or loss associated with (A) any proposed
or completed equity or debt financing on or prior to the Closing Date and (B)
the early retirement, extinguishment or refinancing of debt including bonuses
paid with respect to the completion of any of the foregoing, (viii) any fees,
expenses or charges deducted in computing Consolidated Net Income which have
been determined by management of Xerium, which determination is reasonably
acceptable to the Administrative Agent, to be non-recurring by virtue of changes
in Xerium’s method of operations pursuant to its cost reduction programs, (ix)
Consolidated Transaction Costs, (x) non-cash charges resulting from the
application of purchase accounting, (xi) 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, (xii) 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 (xiii) expenses incurred as a
result of the

 

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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.

 

“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.

 

“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 Syndication Agent, Administrative Agent, Collateral Agent
and each 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 Credit and Guaranty Agreement, dated as of May 18, 2005,
as it may be amended, restated, supplemented or otherwise modified from time to
time.

 

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

 

“Applicable Margin” means (a) with respect to Xerium B Term Loans, 2.00% and (b)
with respect to the other B Term Loans and Revolving Loans, 2.25%; provided,
further, that on any date on or after the one year anniversary of the Closing
Date, with respect to any Revolving Loans, the Applicable Margin shall be
determined by reference to the Leverage Ratio set forth in the grid below as of
the end of the most recently ended Fiscal Quarter for which the financial
statements required by Section 5.1(b) (or Section 5.1(c), if such Fiscal Quarter
is the last Fiscal Quarter of a Fiscal Year) have been delivered in accordance
therewith and such change in the Applicable Margin shall take effect on the
first day immediately following the delivery of the aforementioned financial
statements; provided, further, that no change in the Applicable Margin shall be
effective until after the Administrative Agent receives such financial
statements and a certificate of an Authorized Officer calculating such Leverage
Ratio in reasonable detail and no Default or Event of Default has occurred and
is continuing (except that the Applicable Margin for all outstanding Loans shall
be 2.25% during the continuation of a Default or Event of Default).

 

Leverage Ratio level    

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   Applicable Margin

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Leverage Ratio greater than or equal to 3.00:1.00

   2.25%

Leverage Ratio less than 3.00:1.00 but greater than or equal to 2.25:1.00

   2.00%

Leverage Ratio less than 2.25:1.00

   1.75%

 

“Applicable Revolving Commitment Fee Percentage” means 0.75%.

 

“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”

 

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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 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 Stowe-Woodward B Term Loan, a Weavexx 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 Stowe-Woodward B Term Loan
Commitment, a Weavexx 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.

 

“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
Stowe-Woodward B Term Loan Maturity Date, the Weavexx 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

 

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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.

 

“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,
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 Loan” means a Stowe-Woodward B Term Loan or a Weavexx B Term Loan.

 

“Canadian Pension Plan Event” means (i) the failure by Stowe-Woodward, Weavexx
or any Affiliate of Stowe-Woodward or Weavexx 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 Stowe-Woodward, Weavexx or any
Affiliate of Stowe-Woodward or Weavexx as

 

6

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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, Stowe-Woodward, Weavexx or any Affiliate of
Stowe-Woodward or Weavexx.

 

“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.

 

“Cash Collateral Account” means a deposit account maintained by the Borrowers
with the Administrative Agent for the purpose of holding deposits of Net Asset
Sales 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 (i) such
deposits (other than Net Insurance/Condemnation Proceeds) remaining in such
deposit account for one hundred eighty-one (181) days to be applied by the
Borrowers to repay Loans and (ii) deposits in respect of Net
Insurance/Condemnation Proceeds remaining in such deposit account for three
hundred sixty (360) 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

 

7

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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 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

 

8

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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
Stowe-Woodward B Term Loan Exposure, (e) Banks having Weavexx 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) Stowe-Woodward B Term
Loans, (e) Weavexx B Term Loans, (f) Austria B Term Loans, (g) German B Term
Loans, (h) Tranche 1 Revolving Loans and (i) Tranche 2 Revolving Loans.

 

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

 

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

 

“Closing Date Mortgaged Property” as defined in Section 3.1(i).

 

“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.

 

“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(o)(i).

 

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

 

9

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“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 Cash Restructuring Costs” means, with respect to any Person for
any period, any restructuring costs paid in Cash for such Person and its
Subsidiaries resulting from the restructuring activities of such Person and its
Subsidiaries; provided, that such Consolidated Cash Restructuring Costs do not
exceed $7.1 million in Fiscal Year 2005 in the aggregate, $1.0 million in Fiscal
Year 2006 in the aggregate, $2.5 million in Fiscal Year 2007 in the aggregate
and $1.5 million in the aggregate in any Fiscal Year thereafter.

 

“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.

 

“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)
any unrealized gains or losses on account of indebtedness (external and
structural) made pursuant to Financial Accounting Standard No. 52 or otherwise
in accordance with GAAP 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-

 

10

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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 (i) Fiscal Year 2005
shall not exceed $11,000,000 in the aggregate, (ii) Fiscal Year 2006 shall not
exceed $4,000,000 in the aggregate, (iii) Fiscal Year 2007 shall not exceed
$3,500,000 in the aggregate and (iv) any Fiscal Year thereafter shall not exceed
$1,500,000 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 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.

 

“Continuation Notice” means a Continuation Notice substantially in the form of
Exhibit A 2.

 

“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.

 

11

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“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 less the aggregate principal Base Currency Amounts
outstanding under the Tranche 2 Revolving Loans. For purposes of computing Debt,
Indebtedness which is payable other than in 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 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.

 

12

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“Disposition Event” as defined in Section 2.14(c).

 

“Dividend Payment Date” means the 15th day of each June, September, December and
March.

 

“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.

 

“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

 

13

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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.

 

“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,

 

14

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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 Pre-Dividend Free Cash Flow minus actual dividend payments
made or to be made with respect to the applicable period.

 

“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 Indebtedness” means (i) Indebtedness and other obligations outstanding
under the Facility Agreement and the Mezzanine Facility Agreement, and (ii)
Indebtedness and other obligations set forth in Schedule 1.1(a).

 

“Existing Letters of Credit” means each letter of credit issued or deemed to
have been issued under the Existing Indebtedness (including any extension
thereof) that is outstanding on the Closing Date. The Existing Letters of Credit
are listed on Schedule 1.01(d).

 

“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 each of the Lead Arrangers and Administrative Agent and
its counsel, providing for Xerium or any of its Subsidiaries to sell or
otherwise dispose of any receivable:

 

15

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(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 the date of this Agreement, 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 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 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.

 

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“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 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.

 

“Funds Flow Statement” means the agreed form funds flow statement prepared by
Xerium and approved by the Administrative Agent in respect of the Transactions.

 

“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.

 

“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 Stowe Woodward Forschungs- und Entwicklungs GmbH,
Stowe Woodward AG, Robec GmbH, Wangner Service GmbH, Wangner
Beteiligungsgesellschaft mbH, Wangner GmbH & Co. KG, and Wangner
Verwaltungsgesellschaft mbH.

 

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“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 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.

 

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“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 nonusurious 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.

 

“Incremental Permitted Capital Expenditures” means the aggregate amount of
Excess Cash that remains with Xerium after giving effect to Section 2.14(e),
solely to the extent that such Excess Cash has been spent on Capital
Expenditures.

 

“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.

 

19

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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 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.

 

“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.

 

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“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 Arrangers determine in their 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
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

 

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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” as defined in the Recitals.

 

“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.

 

“Landlord Consent and Estoppel” means, with respect to any Leasehold Property, a
letter, certificate or other instrument in writing from the lessor under the
related lease, pursuant to which, among other things, the landlord consents to
the granting of a Mortgage on such Leasehold Property by the Credit Party
tenant, such Landlord Consent and Estoppel to be in form and substance
acceptable to Collateral Agent in its reasonable discretion, but in any event
sufficient for Collateral Agent to obtain a Title Policy with respect to such
Mortgage.

 

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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.

 

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

 

“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
Stowe-Woodward B Term Loan, a Weavexx B Term Loan, an Austria B Term Loan, a
German B Term Loan, a Tranche 1 Revolving Loan and a Tranche 2 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, nonperformance, 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.

 

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“Material Subsidiary” means (i) each Borrower and Guarantor; and (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 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.

 

“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

 

25

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Subsidiaries by any Person 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 7.2(a).

 

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

 

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

 

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

 

“Non-US Guaranteed Obligations” as defined in 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

 

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Hedging Obligations (including, 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,

 

  (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;

 

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  (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.

 

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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.

 

“Pre-Dividend Free Cash Flow” means, commencing with Fiscal Year 2006, 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, (III) financed with the cash proceeds from any Asset Sale
or (IV) Consolidated Capital Expenditures which are included in Incremental
Permitted Capital Expenditures), (iv) Consolidated Cash Restructuring Costs, (v)
any scheduled prepayment of the B Term Loans and any other long term debt
permitted under the Credit Agreement and any mandatory prepayment that results
in a permanent reduction of the Revolving Commitments (excluding any mandatory
prepayments pursuant to Sections 2.14(a), (b), (c), (d) and (e) and, with
respect to the Tranche 2 Revolving Commitments, any mandatory prepayment made)
and (vi) cash payments of withholding taxes from proceeds of the repurchase,
redemption or retention of Common Stock permitted under Section 6.5(c).

 

“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.

 

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“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 Stowe-Woodward B Term Loan of any Bank, the percentage obtained
by dividing (a) the Stowe-Woodward B Term Loan Exposure of that Bank by (b) the
aggregate Stowe-Woodward B Term Loan Exposure of all Banks; (v) with respect to
all payments, computations and other matters relating to the Weavexx B Term Loan
of any Bank, the percentage obtained by dividing (a) the Weavexx B Term Loan
Exposure of that Bank by (b) the aggregate Weavexx 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) 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; (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; and (ix) with respect
to all payments, computations and other matters relating to the Tranche 2
Revolving Commitment or Tranche 2 Revolving Loans of any Bank, the percentage
obtained by dividing (a) the Tranche 2 Revolving Exposure of that Bank by (b)
the aggregate Tranche 2 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 Stowe-Woodward B
Term Loan Exposure, the Weavexx 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 Stowe-Woodward B Term Loan Exposure, the aggregate
Weavexx 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.

 

“Projections” as defined in Section 4.8.

 

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

 

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“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,

 

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

 

31

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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.

 

“Refinancing” means the repayment of Existing Indebtedness.

 

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

 

“Regulation D” means Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.

 

“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.

 

“Related Transactions” means, collectively, (i) the consummation of the IPO on
terms and conditions satisfactory to the Lead Arrangers and (ii) the payment of
fees (including applicable premiums and consent fees) and expenses in connection
with the transactions described in preceding clause (i).

 

“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

 

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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, Stowe-Woodward
B Term Loan Exposure, Weavexx 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
Stowe-Woodward B Term Loan Exposure of all Banks, (v) aggregate Weavexx 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 Stowe-Woodward B Term Loan Exposure, Banks holding more than 66.7% of the
aggregate Stowe-Woodward B Term Loan Exposure of all Banks; (v) for the Class of
Banks having Weavexx B Term Loan Exposure, Banks holding more than 66.7% of the
aggregate Weavexx 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; (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; and (ix) for the Class of
Banks having Tranche 2 Revolving Exposure, Banks holding more than 66.7% of the
aggregate Tranche 2 Revolving Exposure of all Banks.

 

“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.

 

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“Revolving Commitment” means the commitment of a Bank to make or otherwise fund
any Tranche 1 Revolving Loan and Tranche 2 Revolving Loan; provided, that in the
case of a Tranche 1 Revolving Loan it also includes 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 $100,000,000.

 

“Revolving Commitment Period” means the Tranche 1 Revolving Commitment Period
and the Tranche 2 Revolving Commitment Period, as the case may be.

 

“Revolving Commitment Termination Date” means the Tranche 1 Revolving Commitment
Termination Date and the Tranche 2 Revolving Commitment Termination Date, as the
case may be.

 

“Revolving Exposure” means the Tranche 1 Revolving Exposure and the Tranche 2
Revolving Exposure, as the case may be.

 

“Revolving Loan” means a Tranche 1 Revolving Loan and a Tranche 2 Revolving
Loan.

 

“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.

 

“Second Currency” as defined in 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.

 

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“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.

 

“Stowe-Woodward B Term Loan” means a Stowe-Woodward B Term Loan made by a Bank
to Stowe-Woodward pursuant to Section 2.1(a)(iv).

 

“Stowe-Woodward B Term Loan Commitment” means the commitment of a Bank to make
or otherwise fund a Stowe-Woodward B Term Loan and “Stowe-Woodward B Term Loan
Commitments” means such commitments of all Banks in the aggregate. The amount in
Base Currency of each Bank’s Stowe-Woodward B Term Loan Commitment, if any, is
set forth on 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 Stowe-Woodward B Term Loan Commitments
as of the Closing Date is set forth on Appendix A-4.

 

“Stowe-Woodward 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
Stowe-Woodward B Term Loans of such Bank; provided, at any time prior to the
making of the Stowe-Woodward B Term Loans, the Stowe-Woodward B Term Loan
Exposure of any Bank shall be equal to such Bank’s Stowe-Woodward B Term Loan
Commitment.

 

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

 

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

 

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“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 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 10.4(b).

 

“Swiss Guarantor” as defined in 3.1(ee).

 

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

 

“Syndication Agent” as defined in the preamble hereto.

 

“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.

 

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“Title Policy” as defined in Section 3.1(i).

 

“Total Utilization of Revolving Commitments” means, as at any date of
determination, the sum of (i) the aggregate principal Base Currency Amount of
all outstanding Revolving Loans (other than 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.

 

“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.

 

“Total Utilization of Tranche 2 Revolving Commitments” means, as at any date of
determination, the aggregate principal Base Currency Amount of all outstanding
Tranche 2 Revolving Loans.

 

“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.

 

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

 

“Tranche 2 Revolving Commitment” means the commitment of a Bank to make or
otherwise fund any Tranche 2 Revolving Loan and “Tranche 2 Revolving
Commitments” means such commitments of all Banks in the aggregate. The Base
Currency Amount of each Bank’s Tranche 2 Revolving Commitment, if any, is set
forth on Appendix A-9 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 Revolving Commitments is $50,000,000.

 

“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 2 Revolving Commitment Period” means the period from the Closing Date
to but excluding the Tranche 2 Revolving Commitment Termination Date.

 

“Tranche 2 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

 

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that the Brazilian Reorganization has been completed, (iii) the date that is 364
days after the Closing Date, (iv) the date the Tranche 2 Revolving Commitments
are permanently reduced to zero pursuant to Section 2.13(b) or 2.14, and (v) the
date of the termination of the Tranche 2 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 2 Revolving Exposure” means, with respect to any Bank as of any date of
determination, (i) prior to the termination of the Tranche 2 Revolving
Commitments, that Bank’s Tranche 2 Revolving Commitment; and (ii) after the
termination of the Tranche 2 Revolving Commitments, the aggregate outstanding
principal amount of the Tranche 2 Revolving Loans of that Bank.

 

“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).

 

“Transaction Costs” means the fees, costs and expenses payable by Xerium, each
other Borrower or any of each Borrower’s Subsidiaries on or before the Closing
Date in connection with the transactions contemplated by the Transactions.

 

“Transactions” means, collectively, (i) the incurrence of Loans and the
transactions contemplated under this Agreement, (ii) the Refinancing, (iii) the
Related Transactions, and (iv) the payment of fees (including applicable
premiums and consent fees) and expenses in connection with the transactions
described in preceding clauses (i) through (iii).

 

“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.

 

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“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.

 

“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).

 

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

 

“Weavexx B Term Loan Commitment” means the commitment of a Bank to make or
otherwise fund a Weavexx B Term Loan and “Weavexx B Term Loan Commitments” means
such commitments of all Banks in the aggregate. The amount in Base Currency of
each Bank’s Weavexx 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 Weavexx B Term Loan Commitments as of the Closing Date is
set forth on Appendix A-5.

 

“Weavexx 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
Weavexx B Term Loans of such Bank; provided, at any time prior to the making of
the Weavexx B Term Loans, the Weavexx B Term Loan Exposure of any Bank shall be
equal to such Bank’s Weavexx B Term Loan Commitment.

 

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

 

“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.

 

“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.

 

“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.

 

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“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.

 

1.3 Interpretation, etc. 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

 

(a) Loan Commitments. Subject to the terms and conditions hereof,

 

(i) each Bank severally agrees to make, 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;

 

(ii) each Bank severally agrees to make, 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;

 

(iii) each Bank severally agrees to make, 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;

 

(iv) each Bank severally agrees to make, on the Closing Date, a Stowe-Woodward B
Term Loan to Stowe-Woodward in Canadian Dollars in an amount equal to such
Bank’s Stowe-Woodward B Term Loan Commitment;

 

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(v) each Bank severally agrees to make, on the Closing Date, a Weavexx B Term
Loan to Weavexx in Canadian Dollars in an amount equal to such Bank’s Weavexx B
Term Loan Commitment;

 

(vi) each Bank severally agrees to make, 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; and

 

(vii) each Bank severally agrees to make, 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;.

 

Each Borrower may make only one borrowing under each of the Xerium B Term Loan
Commitment, XTI B Term Loan Commitment, Italia B Term Loan Commitment,
Stowe-Woodward B Term Loan Commitment, Weavexx B Term Loan Commitment, Austria B
Term Loan Commitment and German B Term Loan Commitment, which shall be on the
Closing 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, Stowe-Woodward B Term Loans, Weavexx 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, Stowe-Woodward B Term Loan Maturity Date, Weavexx 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, Stowe-Woodward B Term
Loan Commitment, Weavexx B Term Loan Commitment, Austria B Term Loan Commitment
and German B Term Loan Commitment shall terminate immediately and without
further action 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, Stowe-Woodward B Term Loan Commitment, Weavexx B Term Loan
Commitment, Austria B Term Loan Commitment and German B Term Loan Commitment on
such date.

 

(b) Borrowing Mechanics for B Term Loans.

 

(i) Each Borrower shall deliver to Administrative Agent a fully executed Funding
Notice no later than three (3) Business Days prior to the Closing Date. Promptly
upon receipt by Administrative Agent of such Funding Notice, Administrative
Agent shall notify each Bank of the proposed borrowing.

 

(ii) Each Bank shall make its Xerium B Term Loan, XTI B Term Loan, Italia B Term
Loan, Stowe-Woodward B Term Loan, Weavexx B Term Loan, Austria B Term Loan
and/or German B Term Loan, as the case may be, available to Administrative Agent
not later than 12:00 p.m. (New York City time) on the Closing Date, by wire
transfer of same day funds in Dollars (for funding the Xerium B Term Loan), in
EUROS (for funding the XTI B Term Loan, Italia B Term Loan, Austria B Term Loan
and German B Term Loan) and in Canadian Dollars (for funding the Stowe-Woodward
B Term Loan and Weavexx B Term Loan), if applicable, at Administrative

 

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Agent’s Principal Office. Upon satisfaction or waiver of the conditions
precedent specified herein, Administrative Agent shall make the proceeds of the
B Term Loans available to the relevant Borrowers on the Closing Date by causing
an amount of same day funds in Dollars, EUROS or Canadian Dollars, as
applicable, equal to the proceeds of all such Loans received by Administrative
Agent from Banks to be credited to the account of each relevant Borrower at
Administrative Agent’s Principal Office or to such other account as may be
reasonably designated in writing no later than three (3) days before to
Administrative Agent by each Borrower.

 

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, Stowe-Woodward and Weavexx 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 any Revolving Loans in no event shall the
(A) Total Utilization of Revolving Commitments exceed the Revolving Commitments
then in effect and (B) 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
zero. Amounts borrowed pursuant to this Section 2.2(a)(i) may be repaid and
reborrowed during the Tranche 1 Revolving Commitment Period. Each Bank’s Tranche
1 Revolving Commitment shall expire on the Tranche 1 Revolving Commitment
Termination Date and all Tranche 1 Revolving Loans and all other amounts owed
hereunder with respect to the Tranche 1 Revolving Loans and the Tranche 1
Revolving Commitments shall be paid in full no later than such date.

 

(ii) During the Tranche 2 Revolving Commitment Period, subject to the terms and
conditions hereof, each Bank severally agrees to make Tranche 2 Revolving Loans
to Xerium in an aggregate amount up to but not exceeding such Bank’s Tranche 2
Revolving Commitment; provided, that after giving effect to the making of any
Revolving Loans in no event shall the (A) Total Utilization of Revolving
Commitments exceed the Revolving Commitments then in effect and (B) Total
Utilization of Tranche 2 Revolving Commitments exceed the Tranche 2 Revolving
Commitments then in effect. Amounts borrowed pursuant to this Section 2.2(a)(ii)
may be repaid and reborrowed during the Tranche 2 Revolving Commitment Period.
Each Bank’s Tranche 2 Revolving Commitment shall expire on the Tranche 2
Revolving Commitment Termination Date and all Tranche 2 Revolving Loans and all
other amounts owed hereunder with respect to the Tranche 2 Revolving Loans and
the Tranche 2 Revolving Commitments shall be paid in full no later than such
date.

 

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(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 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) Existing Letters of Credit. On the Closing Date, the Existing Letters of
Credit will automatically, without any action on the part of any Person, be
deemed to be Letters of Credit issued on the Closing Date under this Agreement
for the account of the Borrower for all purposes hereunder and under the other
Credit Documents.

 

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(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 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).

 

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(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 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

 

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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 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

 

47

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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 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).

 

48

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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 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 (A) 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 and (B) Tranche 2
Revolving Loans shall be applied by Xerium to fund intercompany cash movements
in connection with the Brazilian Reorganization; 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.

 

49

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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.”

 

(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 Stowe-Woodward B Term Loans and Weavexx 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

 

50

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(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 Arrangers notify Xerium that
the primary syndication of the Loans and Revolving Commitments has been
completed, as determined by the Lead Arrangers, in their 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.

 

(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.

 

51

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(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.

 

(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 Stowe-Woodward or Weavexx 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

 

52

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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 Stowe-Woodward or Weavexx (as applicable) 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 Stowe-Woodward or Weavexx (as
applicable). Any amount or rate of interest referred to in this section with
respect to the 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 Stowe-Woodward or Weavexx and the
Banks and the amount of such payment or collection shall be refunded to
Stowe-Woodward or Weavexx (as applicable). 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.

 

53

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2.9 Continuation.

 

Subject to Section 2.18 and so long as no Default or Event of Default shall have
occurred and then be continuing, 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.

 

2.10 Default Interest. 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 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 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 Stowe-Woodward B Term Loans, the Weavexx B Term Loans or borrowings by
Stowe-Woodward and Weavexx 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) Tranche 2 Revolving Exposure commitment fees equal to (1) the average of
the daily difference between (a) the Tranche 2 Revolving Commitments and (b) the
aggregate principal amount of outstanding Tranche 2 Revolving Loans, times (2)
the Applicable Revolving Commitment Fee Percentage.

 

54

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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 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. The Borrowers shall make principal payments on the B
Term Loans in installments in amounts equal to a percentage of the B Term Loans
funded on the Closing Date as set forth below and on the dates set forth below:

 

DATE

--------------------------------------------------------------------------------

  

SCHEDULED REPAYMENT

OF

B TERM LOANS

--------------------------------------------------------------------------------

September 30, 2005

December 31, 2005

March 31, 2006

   0.25%
0.25%
0.25%

June 30, 2006

September 30, 2006

December 31, 2006

March 31, 2007

   0.25%
0.25%
0.25%
0.25%

June 30, 2007

September 30, 2007

December 31, 2007

March 31, 2008

   0.25%
0.25%
0.25%
0.25%

 

55

--------------------------------------------------------------------------------

DATE

--------------------------------------------------------------------------------

  

SCHEDULED REPAYMENT

OF

B TERM LOANS

--------------------------------------------------------------------------------

June 30, 2008

September 30, 2008

December 31, 2008

March 31, 2009

   0.25%
0.25%
0.25%
0.25%

June 30, 2009

September 30, 2009

December 31, 2009

March 31, 2010

   0.25%
0.25%
0.25%
0.25%

June 30, 2010

September 30, 2010

December 31, 2010

March 31, 2011

   0.25%
0.25%
0.25%
0.25%

June 30, 2011

September 30, 2011

December 31, 2011

March 31, 2012

   0.25%
0.25%
0.25%
0.25%

Seventh anniversary of the Closing Date

   93.25%

 

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).

 

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(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 Revolving Commitments in an amount up to the amount by which the
Revolving Commitments exceed the Total Utilization of Revolving Commitments at
the time of such proposed termination or reduction; provided, any such partial
reduction of the 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. Other than in respect of Stowe-Woodward B Term Loan and Weavexx
B Term Loan, no later than the first 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 and the first $10,000,000 of Net Asset Sale
Proceeds other than Excluded Sale Proceeds in the aggregate received after the
Closing Date), 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 continuing,
each Borrower shall have the option, directly or through one or more of its
Subsidiaries, to invest Net Asset Sale Proceeds within one hundred and eighty
(180) 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. Other than in respect of Stowe-Woodward B
Term Loan and Weavexx B Term Loan, no later than the first 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

 

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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) Prepayments on Events of Failure. Subject to Section 2.14(h), in the case of
a Stowe-Woodward B Term Loan or Weavexx B Term Loan, where either Borrower under
such Loans or any of its Subsidiaries has undertaken an Asset Sale or suffers an
expropriation, condemnation, destruction or other loss of its property, such
Asset Sale or such expropriation, condemnation, destruction or other loss of
property (each, a “Disposition Event”) shall constitute an event of failure
under this Agreement and, subject to the proviso below, no later than the first
Business Day following the receipt by a Borrower or any of its Subsidiaries of
any Net Asset Sale Proceeds (but, without duplication, not including the first
$10,000,000 of Net Asset Sale Proceeds in the aggregate received after the
Closing Date as set forth in Section 2.14(a)) or any Net Insurance/Condemnation
Proceeds (but, without duplication, not including the first $2,000,000 of Net
Insurance/Condemnation Proceeds in the aggregate received after the Closing Date
as set forth in Section 2.14(b)), as the case may be, such Borrower shall make
an offer to the Administrative Agent to prepay an aggregate principal amount of
the Stowe-Woodward B Loan or Weavexx B Loan, as the case may be, equal to the
amount of such Net Asset Sale Proceeds or such Net Insurance/Condemnation
Proceeds, as the case may be, relating to such Disposition Event which proceeds
shall be applied as set forth in Section 2.15(b); provided, (i) in the case of
the receipt of any such Net Asset Sale Proceeds, so long as no Default or Event
of Default shall have occurred and be continuing, such Borrower shall have the
option, directly or through one or more of its Subsidiaries, to invest such Net
Asset Sale Proceeds within one hundred and eighty (180) days of receipt thereof
in long-term productive assets of the general type used in the business of each
Borrower 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;
and (ii) in the case of the receipt of any such Net Insurance/Condemnation
Proceeds, so long as no Default or Event of Default shall have occurred and be
continuing, such 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 the Borrower and its Subsidiaries, which
assets need not be the same as the assets lost or damaged and which such Net
Insurance/Condemnation Proceeds may, but need not be, invested in the repair,
restoration or replacement of the applicable assets thereof.

 

(d) Issuance of Debt. Subject to Section 2.14(h), on 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

 

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other reasonable costs and expenses associated therewith, including reasonable
legal fees and expenses; provided, that Xerium may retain up to 100% of the
proceeds from the issuance of Subordinated Debt, so long as (and only so long
as) (i) no Default or Event of Default is continuing under the Agreement or
would result from such issuance, (ii) the Borrowers are in compliance (and
Xerium certifies 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 used to effect Permitted Acquisitions or Capital Expenditures
and/or concurrently utilized by the Borrowers to make voluntary prepayments of
Revolving Loans (in accordance with Section 2.13) in an aggregate principal
amount equal to the aggregate principal amount of Revolving Loans actually
incurred to finance a Permitted Acquisition or Capital Expenditures in the one
hundred eighty (180) day period prior to such issuance of Subordinated Debt.

 

(e) Excess Cash. Subject to Section 2.14(h), in the event that there shall be
Excess Cash for any Fiscal Year (commencing with Fiscal Year 2006), each
Borrower shall, no later than ninety 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 50% of such
Excess Cash; provided, that with respect to payments made in Fiscal Year 2007
and after, in the event that Xerium makes dividend payments in excess of 65% of
its Pre-Dividend Free Cash each Borrower shall, no later than ninety 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 75% of such Excess Cash.

 

(f) Revolving Loans. Each Borrower shall from time to time prepay the Revolving
Loans to the extent necessary so that the Total Utilization of 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) During the period ending on the fifth anniversary of the Closing Date, any
amount required to be applied to reduce a Canadian Loan in accordance with any
of Sections 2.14(c), (d) or (e) shall be applied to the outstanding principal
amount of such Loan, provided that the amount of the prepayment applied to a
Canadian Loan shall not exceed an amount which, when aggregated with any other
amount prepaid or to be prepaid under this Section 2.14 as well as any other
mandatory prepayment in respect of the principal amount of such Canadian Loan
within five years of the Closing Date, is equal to 25% of the original principal
amount of such Canadian Loan. In the event that an amount is required to be
prepaid pursuant to Section 2.14

 

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which (after application in accordance with the preceding sentence) would
otherwise result in more of a Canadian Loan being repaid or prepaid than
referred to in the preceding sentence, the excess shall not be applied in
further reduction of such Canadian Loan and shall instead be applied first, in
prepayment of any Revolving Loan made to such Borrower and second, in a manner
consistent with Section 2.15(b) (except, no further prepayment shall be made to
reduce a Canadian Loan). Notwithstanding other provisions in this Agreement, a
Borrower under a Canadian Loan shall not be under any obligation pursuant to
Section 2.14 to prepay or make any offer to prepay any loans or advances made
pursuant to this Agreement other than a loan made to such Borrower.

 

2.15 Application of Prepayments/Reductions.

 

(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, subject to Section 2.14(h), 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.

 

(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.

 

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(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).

 

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

 

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Amounts Due” to such Bank) which is greater than the proportion received by any
other Bank in respect of the 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 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,

 

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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. Notwithstanding the other provisions of this
Agreement, a Borrower under a Canadian Loan shall not be under any obligation
pursuant to this Section 2.18 (b) to prepay such Canadian Loan within 5 years of
the Closing Date unless the terms of such Canadian Loan or any agreement
relating thereto become unlawful or are changed by virtue of legislation or by a
court, statutory board or commission.

 

(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 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

 

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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.

 

(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

 

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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 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

 

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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 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

 

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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
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

 

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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 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

 

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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 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.

 

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

 

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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,
Stowe-Woodward, Weavexx, 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 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

 

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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 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.

 

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(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).

 

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 Closing Date. The obligation of any Bank to make a Credit Extension on the
Closing Date is subject to the satisfaction, or waiver in accordance with
Section 10.6, of the following conditions on or before the Closing Date:

 

(a) Credit Documents. The Lead Arrangers and Administrative Agent shall have
received sufficient copies of each Credit Document originally executed and
delivered by each applicable Credit Party for each Bank.

 

(b) Organizational Documents; Incumbency. The Lead Arrangers and Administrative
Agent shall have received (i) sufficient copies of each Organizational Document
executed and delivered by each Credit Party, as applicable, and, to the extent
applicable, certified as of a recent date by the appropriate governmental
official, for each Bank, each dated the Closing Date or a recent date prior
thereto; (ii) signature and incumbency certificates of the officers of such
Person executing the Credit Documents to which it is a party; (iii) resolutions
of the Board of Directors or similar governing body and/or Stockholder(s), as
appropriate, of each Credit Party approving and authorizing the execution,
delivery and performance of this Agreement and the other Credit Documents and
the Related Agreements to which it is a party or by which it or its assets may
be bound as of the Closing Date, certified as of the Closing Date by its
secretary or any of its Authorized Officers as being in full force and effect
without

 

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modification or amendment; (iv) a good standing certificate, or certified
register excerpt, from the applicable Governmental Authority of each Credit
Party’s jurisdiction of incorporation, organization or formation and in each
jurisdiction in which it is qualified as a foreign corporation or other entity
to do business, or functionally similar documents, if any, as are customary and
timely available in the applicable foreign jurisdiction, each dated a recent
date prior to the Closing Date; and (v) such other documents as the Lead
Arrangers and Administrative Agent may reasonably request. For Credit Parties
organized, incorporated or formed outside of the United States delivery of a
Formalities Certificate shall suffice to satisfy this Section 3.1(b).

 

(c) Organizational and Capital Structure. The organizational structure and
capital structure of Xerium and its Subsidiaries, both before and after giving
effect to the Related Transactions, shall be as set forth on Schedules 4.1 and
4.2.

 

(d) Capitalization of Xerium and each other Borrower. On or before the Closing
Date, the capitalization requirements and contributions set forth in Schedule
3.1(d) shall have been made.

 

(e) Consummation of the Related Transactions.

 

(i) (1) All conditions to the Related Transactions set forth in the Related
Agreements shall have been satisfied or the fulfillment of any such conditions
shall have been waived in writing with the consent of the Banks, Lead Arrangers
and Administrative Agent, (2) the Related Transactions shall have become
effective in accordance with the terms of the Related Agreements and (3) the
aggregate cash consideration paid to holders of Existing Indebtedness in
connection with the Refinancing shall not exceed $760,600,000.

 

(ii) The Lead Arrangers and Administrative Agent shall have received a fully
executed or conformed copy of each Related Agreement and any documents executed
in connection therewith certified by an officer of Xerium as being true and
complete, together with copies of each of the opinions of counsel delivered to
the parties under the Related Agreements, accompanied by a letter from each such
counsel (to the extent not inconsistent with such counsel’s established internal
policies) authorizing Banks to rely upon such opinion to the same extent as
though it were addressed to Banks. Each Related Agreement shall be in full force
and effect, shall include terms and provisions reasonably satisfactory to the
Lead Arrangers and Administrative Agent and no provision thereof shall have been
modified or waived in any respect determined by the Lead Arrangers and
Administrative Agent to be material, in each case without the written consent of
the Lead Arrangers and Administrative Agent.

 

(f) Existing Indebtedness. On the Closing Date, Xerium and its Subsidiaries
shall have (i) repaid in full all Existing Indebtedness, (ii) terminated any
commitments to lend or make other extensions of credit thereunder, (iii)
delivered to the Lead Arrangers and Administrative Agent all documents or
instruments necessary to release all Liens securing Existing Indebtedness or
other obligations of Xerium and its Subsidiaries thereunder being repaid on the
Closing Date, and (iv) made arrangements satisfactory to the Lead Arrangers and
Administrative Agent with respect to the cancellation of any letters of credit
outstanding thereunder or the issuance of Letters of Credit to support the
obligations of Xerium and its Subsidiaries with respect thereto.

 

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(g) Transaction Costs. On or prior to the Closing Date, each Borrower shall have
delivered to the Lead Arrangers and Administrative Agent such Borrower’s
reasonable best estimate of the Transaction Costs (other than fees payable to
any Agent).

 

(h) Governmental Authorizations and Consents. Each Credit Party shall have
obtained all Governmental Authorizations and all consents of other Persons, in
each case that are necessary or advisable in connection with the transactions
contemplated by the Credit Documents and the Related Agreements and each of the
foregoing shall be in full force and effect and in form and substance reasonably
satisfactory to the Lead Arrangers and Administrative Agent. All applicable
waiting periods shall have expired without any action being taken or threatened
by any competent authority which would restrain, prevent or otherwise impose
adverse conditions on the transactions contemplated by the Credit Documents or
the Related Agreements or the financing thereof and no action, request for stay,
petition for review or rehearing, reconsideration, or appeal with respect to any
of the foregoing shall be pending, and the time for any applicable agency to
take action to set aside its consent on its own motion shall have expired.

 

(i) Real Estate Assets. In order 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 certain Real
Estate Assets, Collateral Agent shall have received from each Borrower and each
applicable Guarantor:

 

(i) fully executed and notarized Mortgages, in proper form for recording in all
appropriate places in all applicable jurisdictions, encumbering each Real Estate
Asset listed in Schedule 3.1(i) (each, a “Closing Date Mortgaged Property”);

 

(ii) an opinion of counsel (which counsel shall be reasonably satisfactory to
the Lead Arrangers and Collateral Agent) in each jurisdiction in which a Closing
Date Mortgaged Property is located with respect to the enforceability of the
form(s) of Mortgages to be recorded in such jurisdiction and such other matters
as Collateral Agent may reasonably request, in each case in form and substance
reasonably satisfactory to Collateral Agent;

 

(iii) in the case of each Leasehold Property in the United States that is a
Closing Date Mortgaged Property, (1) a Landlord Consent and Estoppel and (2)
evidence that such Leasehold Property is a Recorded Leasehold Interest, or
whatever is necessary in the applicable jurisdiction to give the same effect;

 

(iv) (a) ALTA mortgagee title insurance policies or unconditional commitments
therefor (on similar documents as are customary in the relevant foreign
jurisdictions) issued by one or more title companies reasonably satisfactory to
Collateral Agent with respect to each Closing Date Mortgaged Property (each, a
“Title Policy”), in amounts not less than the fair market value of each Closing
Date Mortgaged Property, together with a title report issued by a title company
with respect thereto, dated not more

 

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than thirty days prior to the Closing Date and copies of all recorded documents
listed as exceptions to title or otherwise referred to therein, each in form and
substance reasonably satisfactory to Collateral Agent and (b) evidence
satisfactory to the Lead Arrangers and Collateral Agent that such Credit Party
has paid to the title company or to the appropriate governmental authorities all
expenses and premiums of the title company and all other sums required in
connection with the issuance of each Title Policy and all recording and stamp
taxes (including mortgage recording and intangible taxes) payable in connection
with recording the Mortgages for each Closing Date Mortgaged Property in the
appropriate real estate records;

 

(v) evidence of 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, in form and substance reasonably
satisfactory to the Lead Arrangers and Collateral Agent; and

 

(vi) ALTA surveys (or functionally similar documents, if any, as are customary
and timely available in the relevant foreign jurisdictions) of all Closing Date
Mortgaged Properties which are not Leasehold Properties, certified to Collateral
Agent and dated not more than thirty days prior to the Closing Date or otherwise
reasonably acceptable to Collateral Agent.

 

(j) Personal Property Collateral. In order to create in favor of Collateral
Agent, for the benefit of Secured Parties, a valid, perfected First Priority
security interest in the personal property Collateral, the Lead Arrangers and
Collateral Agent shall have received:

 

(i) evidence satisfactory to the Lead Arrangers and Collateral Agent of the
compliance by each Credit Party with its obligations under the Pledge and
Security Agreements and the other Collateral Documents (including, without
limitation, obligations to execute and deliver UCC (or equivalent) financing
statements (or, for Non-U.S. Credit Parties, functionally similar, customary
documents, if any), fixture filings, originals of securities, instruments and
chattel paper and any agreements governing deposit and/or securities accounts as
provided therein);

 

(ii) a completed Collateral Questionnaire dated the Closing Date and executed by
an Authorized Officer of Xerium, together with all attachments contemplated
thereby, including (A) the results of a recent search, by a Person satisfactory
to the Lead Arrangers and Collateral Agent, of all effective UCC financing
statements (or equivalent filings) made with respect to any personal or mixed
property of any Credit Party in the jurisdictions specified in the Collateral
Questionnaire, together with copies of all such filings disclosed by such
search, and (B) UCC termination statements (or functionally similar, customary
documents, if any) duly executed by all applicable Persons for filing in all
applicable jurisdictions as may be necessary to terminate any effective UCC
financing statements (or functionally similar filings, if any) disclosed in such
search (other than any such financing statements in respect of Permitted Liens);

 

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(iii) opinions of counsel (which counsel shall be reasonably satisfactory to the
Lead Arrangers and Collateral Agent) with respect to the creation and perfection
of the security interests in favor of Collateral Agent in such Collateral and
such other matters governed by the laws of each jurisdiction in which any Credit
Party or any personal property Collateral is located as the Lead Arrangers or
Collateral Agent may reasonably request, in each case in form and substance
reasonably satisfactory to the Lead Arrangers and Collateral Agent; and

 

(iv) evidence that each Credit Party shall have taken or caused to be taken any
other action, executed and delivered or caused to be executed and delivered any
other agreement, document and instrument (including without limitation, (i) a
Landlord Personal Property Collateral Access Agreement executed by the landlord
of any Leasehold Property in the United States and by the applicable Credit
Party and (ii) any intercompany notes evidencing Indebtedness permitted to be
incurred pursuant to Section 6.1(b)) and made or caused to be made any other
filing and recording (other than as set forth herein) reasonably required by the
Lead Arrangers and Collateral Agent.

 

(k) Environmental Reports. The Lead Arrangers and Administrative Agent shall
have received reports and other information, in form, scope and substance
reasonably satisfactory to Administrative Agent, regarding environmental matters
relating to the Facilities, which reports shall include a Phase I Report for
each of the Facilities specified by the Administrative Agent.

 

(l) Financial Statements; Projections. Banks shall have received from Xerium (i)
the Historical Financial Statements, (ii) the pro forma consolidated and
consolidating balance sheets of Xerium and its Subsidiaries as at the Closing
Date, and reflecting the consummation of the Transactions, which pro forma
financial statements shall be in form and substance reasonably satisfactory to
the Lead Arrangers and Administrative Agent, and (iii) the Projections.

 

(m) Evidence of Insurance. Collateral Agent shall have received a certificate
from each Borrower’s insurance broker or other evidence satisfactory to it that
all insurance required to be maintained pursuant to Section 5.5 is in full force
and effect, together with endorsements naming the Collateral Agent, for the
benefit of Banks, as additional insured and loss payee thereunder to the extent
required under Section 5.5.

 

(n) Opinions of Counsel to Credit Parties. Banks and their respective counsel
shall have received originally executed copies of the favorable written opinions
of Ropes & Gray LLP, Baker and McKenzie LLP, Baker & McKenzie GJBJ, Tokyo Aoyama
Aoki Law Office (Gaikokuho Joint Enterprise), Binder Grösswang Rechtsanwälte
OEG, Stewart McKelvey Stirling Scales, Bishops Solicitors, and Borenius &
Kemppinen Ltd., counsel for Credit Parties, and opinions of Blakes, Cassels and
Graydon LLP, Lapointe Rosenstein General Partnership, Machado, Meyer, Sendacz e
Opice Advogados, and Skadden, Arps, Slate, Meagher & Flom, LLP, counsel for the
Banks, in the form of Exhibit D (including, without limitation, (x) a
no-conflicts opinion with respect to material contracts of the Borrowers or any
of their respective subsidiaries and (y) an opinion that the extension of credit
pursuant to the terms of this Agreement does not violate Regulation T,
Regulation U or Regulation X of the Board of

 

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Governors of the Federal Reserve System or any other regulation thereof) and as
to such other matters as Administrative Agent or the Lead Arrangers may
reasonably request, dated as of the Closing Date and otherwise in form and
substance reasonably satisfactory to the Lead Arrangers and Administrative Agent
(and each Credit Party hereby instructs such counsel to deliver such opinions to
Agents and Banks).

 

(o) Fees. Each Borrower shall have paid to the Lead Arrangers and the Agents,
the fees payable on the Closing Date referred to in Section 2.11(d).

 

(p) Solvency Certificate. On the Closing Date, the Lead Arrangers and
Administrative Agent shall have received a Solvency Certificate from each
Borrower dated the Closing Date and addressed to Administrative Agent and Banks,
and in form, scope and substance satisfactory to the Lead Arrangers and
Administrative Agent, with appropriate attachments and demonstrating that after
giving effect to the consummation of the Transactions, each Borrower and its
Subsidiaries are and will be Solvent.

 

(q) Closing Date Certificate. Xerium and each other Borrower shall have
delivered to the Lead Arrangers and Administrative Agent an originally executed
Closing Date Certificate, together with all attachments thereto.

 

(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 Lead Arrangers and Administrative Agent, singly
or in the aggregate, materially impairs the Related Transactions, the financing
thereof or any of the other transactions contemplated by the Credit Documents or
the Related Agreements, 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
Arrangers and Administrative Agent and its counsel shall be satisfactory in form
and substance to the Lead Arrangers and Administrative Agent and such counsel,
and the Lead Arrangers and Administrative Agent and such counsel shall have
received all such counterpart originals or certified copies of such documents as
the Lead Arrangers and Administrative Agent may reasonably request.

 

(t) IPO Proceeds. Xerium shall have received gross Cash proceeds of at least
$160.0 million (calculated before underwriting fees) from the consummation of
the IPO and shall have used the net Cash proceeds therefrom to make payments of
Transaction Costs before utilizing the proceeds of the B Term Loans for such
purpose. All terms and conditions (and the documentation) in connection with the
consummation of the IPO shall be satisfactory to the Lead Arrangers and the
Requisite Banks.

 

(u) No Outstanding Indebtedness. After giving effect to the consummation of the
Transactions, the Borrowers and their respective subsidiaries shall have no
outstanding preferred equity, Indebtedness or contingent liabilities, except for
Indebtedness permitted under Section 6.1. Any Indebtedness permitted pursuant to
Section 6.1 (i) shall be reasonably satisfactory to the Lead Arrangers and the
Requisite Banks in their sole discretion.

 

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(v) No Material Adverse Effect. Since December 31, 2004, nothing shall have
occurred (and neither the Lead Arrangers nor the Requisite Banks shall have
become aware of any facts or conditions not previously known) which the Lead
Arrangers 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 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
and the other transactions contemplated hereby, there shall be no conflict with,
or default under, any Material Contract (including, without limitation, any such
agreements (i) entered into pursuant to the Transactions and (ii) in respect of
Indebtedness pursuant to Section 6.1), except such exceptions satisfactory to
the Lead Arrangers and Administrative Agent.

 

(y) Satisfaction with Legal, Tax and Accounting Matters. The Lead Arrangers and
the Requisite Banks shall be reasonably satisfied with all material legal, tax
and accounting matters relating to the Transactions and the other transactions
contemplated hereby, including, without limitation, the ability of the
Borrowers’ Subsidiaries to transfer funds to the Borrowers and the withholding
tax consequences thereof and the Borrowers’ plans and programs with respect to
managing currency risk exposure.

 

(z) No Material Adverse Change in Capital Markets. There shall not have occurred
and be continuing (i) any general suspension of trading in securities on the New
York or American Stock Exchange or in the NASDAQ National Market System (other
than circuit breakers), (ii) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or (c) any other
material adverse change in global banking or capital market conditions that has
had a material adverse effect on the syndication of leveraged bank credit
facilities, as the case may be, that the Agents determine makes it impracticable
to consummate the syndication of the Loans.

 

(aa) Clear Market. The Agents’ satisfaction that, immediately prior to and
during the marketing period for either the syndication of the Loans there shall
be no competing issues of debt or equity securities or commercial bank
facilities (other than the Credit Documents or other permitted indebtedness
thereunder) of Xerium or any of its Subsidiaries.

 

(bb) Leverage Ratio. The Leverage Ratio shall not be greater than 4.5 to 1.0.

 

(cc) Funds Flow Statement. The Lead Arrangers and Administrative Agent shall
have received the Funds Flow Statement.

 

(dd) Know-Your-Customer Rules. The Lead Arrangers and the Administrative Agent
shall have received the documents referred to in Section 5.15.

 

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(ee) Condition to Guaranty by Swiss Guarantor. Each Guarantor incorporated in
Switzerland (a “Swiss Guarantor”) shall deliver a copy of a resolution of its
shareholders stating that the shareholders resolve and approve the entering into
and the terms and conditions of, this Agreement, in particular the guaranty to
be provided under Section 7 for the purpose of securing the due and punctual
payment in full of all Guaranteed Obligations under this Agreement.

 

(ff) Ratings. No later than thirty (30) days prior to the Closing Date, the Lead
Arrangers and the Administrative Agent shall have received copies of the most
recently announced Borrowers’ senior secured debt rating by Moody’s and S&P
certified as true and correct by an officer of Xerium.

 

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 Revolving Commitments shall not
exceed the Revolving Commitments then in effect;

 

(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 or Continuation 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.

 

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(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.

 

(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.

 

3.4 Conditions to Tranche 2 Revolving Loan Credit Extensions. The obligation of
each Bank to make, convert or continue any Tranche 2 Revolving Loan is subject
to the satisfaction, or waiver in accordance with Section 10.6, of the
conditions set forth in Section 3.2 and the receipt by the Administrative Agent
of a copy of a tax opinion addressed to Xerium prepared by Xerium’s Brazil tax
counsel in form and substance reasonably acceptable to the Administrative Agent.

 

SECTION 4. REPRESENTATIONS AND WARRANTIES

 

In order to induce Banks and Issuing Bank to enter into this Agreement and 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 Closing Date, each Interest Payment

 

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Date and each Credit Date, that the following statements are true and correct
(it being understood and agreed that the representations and warranties made on
the Closing Date are deemed to be made concurrently with the consummation of the
Related Transactions contemplated hereby):

 

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 Closing Date both immediately before and immediately after giving effect to
the Related Transactions.

 

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.

 

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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.

 

4.8 Projections. On and as of the Closing Date, the Projections of Xerium and
its Subsidiaries for the period Fiscal Year 2005 through and including Fiscal
Year 2011 (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 Closing Date, management of Xerium
believed that the Projections were reasonable and attainable.

 

4.9 No Material Adverse Change. Since December 31, 2004, 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, 2004, 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 payments in respect of Existing Indebtedness and payments
in or contemplated by the Prospectus and except as permitted pursuant to Section
6.5.

 

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4.11 Adverse Proceedings, etc. 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.

 

(b) Real Estate. As of the Closing 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.

 

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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.

 

4.16 Material Contracts. Schedule 4.16 contains a true, correct and complete
list of all the Material Contracts in effect on the Closing 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 Public Utility Holding Company Act of 1935, 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.

 

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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
interpretations thereunder with respect to each Employee Benefit Plan, and have
performed all their obligations under each Employee Benefit Plan, other than any
noncompliance 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 noncompliance 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 Stowe-

 

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Woodward, Weavexx or any Affiliate of Stowe-Woodward or Weavexx 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 Stowe-Woodward, Weavexx or
any Affiliate of Stowe-Woodward or Weavexx 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
Stowe-Woodward, Weavexx or any Affiliate of Stowe-Woodward or Weavexx 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
Arrangers 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.

 

(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 or to consummate the Related Transactions 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 Related Transactions set forth in the Related
Agreements have been duly satisfied or, with the consent of Administrative Agent
and the Lead Arrangers, waived, and (ii) the Related Transactions have been
consummated in accordance with the Related Agreements and all applicable laws.

 

4.24 Compliance with Statutes, etc. 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

 

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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 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 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) [intentionally omitted];

 

(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;

 

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(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 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 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 Pre-Dividend Free
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

 

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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 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 Stowe-Woodward,
Weavexx or any Affiliate of Stowe-Woodward or Weavexx 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 Stowe-Woodward, Weavexx or any Affiliate of Stowe-Woodward or
Weavexx 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;

 

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(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;

 

(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; and

 

(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

 

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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 acceptable to the
Administrative Agent to 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

 

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that the Communications 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.

 

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
used or useful in the 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

 

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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.

 

5.7 [Intentionally Omitted].

 

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).

 

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;

 

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(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

 

(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.

 

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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, and
certificates as are similar to those described in Sections 3.1(b), 3.1(i),
3.1(j), 3.1(k) and 3.1(n). 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 similar to those described in Sections 3.1(i), 3.1(j)
and 3.1(k) 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.

 

5.12 Interest Rate Protection. For a period of three (3) years, commencing 90
days after the Closing Date, each Borrower shall maintain in effect one or more
Interest Rate Agreements in form and substance satisfactory to the
Administrative Agent to the extent necessary so that, for such period, interest
on Indebtedness of Xerium and its Subsidiaries in aggregate principal amount
equal to at least 50.0% of the aggregate outstanding principal amount of the B
Term Loans is covered by such Interest Rate Agreements.

 

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).

 

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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
this Agreement;

 

     (B) any change in the status of a Credit Party after the date of this
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
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.

 

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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 Closing 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 Closing 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.

 

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

 

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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 in an aggregate amount not to exceed $150,000,000 at any
time; 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, (iii) the proceeds of such
issuance are used to effect Permitted Acquisitions, permitted investments or
Capital Expenditures and/or concurrently utilized by the Borrowers to make
voluntary repayments of Revolving Loans (in accordance with Section 2.13) in an
aggregate principal amount equal to the aggregate principal amount of Revolving
Loans actually incurred to finance a Permitted Acquisition in the one hundred
eighty (180) day period prior to such issuance of Subordinated Debt;

 

(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;

 

(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 this 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)

 

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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;

 

(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;

 

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(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;

 

(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);

 

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(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 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;

 

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(b) so long as no Default or Event of Default has occurred and is continuing,
(i) during the period commencing on the Closing Date through but not including
December 31, 2006, Xerium may declare and pay dividends to the holders of Common
Stock quarterly on each Dividend Payment Date (commencing as of the Dividend
Payment Date which occurs in the first full Fiscal Quarter after the Closing
Date) in an aggregate amount not to exceed $10 million per Fiscal Quarter, and
(ii) during the period commencing on December 31, 2006 and thereafter, Xerium
may declare and pay dividends to the holders of Common Stock quarterly on each
Dividend Payment Date (commencing as of the Dividend Payment Date which occurs
in the first full Fiscal Quarter after December 31, 2006) in an amount not to
exceed 75% of Xerium’s Pre-Dividend Free Cash Flow for the four Fiscal Quarters
ended immediately prior to the payment of such dividends and for which a
Compliance Certificate has been delivered; 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
$5.0 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
Indebtedness or Capital 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.

 

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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); and

 

(j) other Investments in an aggregate amount not to exceed at any time
$5,000,000.

 

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.

 

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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

--------------------------------------------------------------------------------

September 30, 2005

   3.50:1.00

December 31, 2005

   3.50:1.00

March 31, 2006

   3.50:1.00

June 30, 2006

   4.00:1.00

September 30, 2006

   4.00:1.00

December 31, 2006

   4.00:1.00

March 31, 2007

   4.25:1.00

June 30, 2007

   4.25:1.00

September 30, 2007

   4.25:1.00

December 31, 2007

   4.25:1.00

March 31, 2008

   4.50:1.00

June 30, 2008

   4.50:1.00

September 30, 2008

   4.50:1.00

December 31, 2008

   4.50:1.00

March 31, 2009

   4.75:1.00

June 30, 2009

   4.75:1.00

September 30, 2009

   4.75:1.00

December 31, 2009

   4.75:1.00

March 31, 2010

   5.00:1.00

June 30, 2010

   5.00:1.00

September 30, 2010

   5.00:1.00

December 31, 2010

   5.00:1.00

March 31, 2011

   5.25:1.00

June 30, 2011

   5.25:1.00

September 30, 2011

   5.25:1.00

December 31, 2011

   5.25:1.00

March 31, 2012

   5.25:1.00

 

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(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:

 

Fiscal Quarter

--------------------------------------------------------------------------------

   Leverage Ratio

--------------------------------------------------------------------------------

September 30, 2005

   4.50:1.00

December 31, 2005

   4.50:1.00

March 31, 2006

   4.25:1.00

June 30, 2006

   4.00:1.00

September 30, 2006

   4.00:1.00

December 31, 2006

   4.00:1.00

March 31, 2007

   3.75:1.00

June 30, 2007

   3.75:1.00

September 30, 2007

   3.75:1.00

December 31, 2007

   3.75:1.00

March 31, 2008

   3.50:1.00

June 30, 2008

   3.50:1.00

September 30, 2008

   3.25:1.00

December 31, 2008

   3.25:1.00

March 31, 2009

   3.00:1.00

June 30, 2009

   3.00:1.00

September 30, 2009

   3.00:1.00

December 31, 2009

   3.00:1.00

March 31, 2010

   2.75:1.00

June 30, 2010

   2.75:1.00

September 30, 2010

   2.50:1.00

December 31, 2010

   2.50:1.00

March 31, 2011

   2.25:1.00

June 30, 2011

   2.25:1.00

September 30, 2011

   2.00:1.00

December 31, 2011

   2.00:1.00

March 31, 2012

   2.00:1.00

 

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(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

--------------------------------------------------------------------------------

September 30, 2005

   1.75:1.00

December 31, 2005

   1.75:1.00

March 31, 2006

   1.75:1.00

June 30, 2006

   1.75:1.00

September 30, 2006

   1.75:1.00

December 31, 2006

   1.75:1.00

March 31, 2007

   1.85:1.00

June 30, 2007

   1.85:1.00

September 30, 2007

   1.85:1.00

December 31, 2007

   1.85:1.00

March 31, 2008

   1.90:1.00

June 30, 2008

   1.90:1.00

September 30, 2008

   1.90:1.00

December 31, 2008

   1.90:1.00

March 31, 2009

   1.90:1.00

June 30, 2009

   1.90:1.00

September 30, 2009

   1.90:1.00

December 31, 2009

   1.90:1.00

March 31, 2010

   1.90:1.00

June 30, 2010

   1.90:1.00

September 30, 2010

   1.90:1.00

December 31. 2010

   1.90:1.00

March 31, 2011

   1.90:1.00

June 30, 2011

   1.90:1.00

September 30, 2011

   1.90:1.00

December 31, 2011

   1.90:1.00

March 31, 2012

   1.90:1.00

 

(d) Maximum Consolidated Capital Expenditures. Xerium shall not, and shall not
permit its Subsidiaries to, make or incur Consolidated Capital Expenditures, in
any Fiscal

 

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Year indicated below, in an aggregate amount for Xerium and its Subsidiaries in
excess of the corresponding amount set forth below opposite such Fiscal Year
(exclusive of Incremental Permitted Capital Expenditures):

 

Fiscal Year

--------------------------------------------------------------------------------

  

Consolidated

Capital
Expenditures

--------------------------------------------------------------------------------

2005

   $ 44,000,000

2006

   $ 44,000,000

2007

   $ 44,000,000

2008

   $ 44,000,000

2009

   $ 44,000,000

2010

   $ 50,000,000

2011

   $ 50,000,000

 

(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

 

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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
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, the consideration for which constitutes less than
$25,000,000 in the aggregate in any Fiscal Year; 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.

 

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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.

 

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.

 

6.14 Reserved.

 

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.

 

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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.

 

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 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

 

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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 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

 

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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.

 

(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;

 

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(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
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

 

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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 nonjudicial 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
or omission to assert or enforce or agreement or election not to 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,

 

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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.

 

(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,

 

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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.

 

7.6 Guarantors’ Rights of Subrogation, Contribution, etc. 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.

 

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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.

 

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
nonpayment 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

 

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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 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:

 

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(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”);

 

(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.

 

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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 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 Credit and Guaranty 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.

 

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(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
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

 

(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

 

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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

 

(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

 

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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:

 

(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;

 

(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;

 

(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

 

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(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 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

 

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(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

 

(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

 

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be unable, or shall fail generally, or shall admit in writing its inability, to
pay its debts as such debts become due; or the 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; or

 

(n) If a Borrower under a Stowe-Woodward Term Loan or Weavexx B Term Loan fails
to make an offer to prepay such Loan as required by Section 2.14(c) or fails to
make a prepayment of such Loan in the full amount as required as a result of
acceptance of any such offer by the Administrative Agent,

 

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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.

 

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SECTION 9. AGENTS

 

9.1 Appointment of Agents. Each of Citigroup Global Markets, Inc. and CIBC World
Markets plc is hereby appointed Lead Arranger hereunder, and each Bank hereby
authorizes each Lead Arranger to act as its agent in accordance with the terms
hereof and the other Credit Documents. Citigroup Global Markets, Inc. and CIBC
World Markets plc are each hereby appointed Syndication Agents hereunder, and
each Bank hereby authorizes each Syndication Agent 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. Each Syndication Agent and 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, neither Citigroup Global Markets, Inc. and CIBC World Markets plc,
in their respective capacities as Syndication Agents and Lead Arrangers, shall
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 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

 

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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 nor 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 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,

 

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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.

 

(a) Each Bank, by delivering its signature page to this Agreement and funding
its Xerium B Term Loan, XTI B Term Loan, Italia B Term Loan, Stowe-Woodward B
Term Loan, Weavexx B Term Loan, Austria B Term Loan, German B Term Loans and/or
Revolving Loans on the Closing Date, shall be deemed to have acknowledged
receipt of, and consented to and approved, each Credit Document and each other
document required to be approved by any Agent, Requisite Banks or Banks, as
applicable, on the Closing Date.

 

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.

 

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

 

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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 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

 

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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 acknowledge 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
Arrangers 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.

 

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,
Syndication Agent, 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

 

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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.

 

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.

 

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(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

 

  (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

 

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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;

 

(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;

 

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(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;

 

(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.

 

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(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.

 

(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 Arrangers);
subject, however, in the case of assignments of Revolving Loans or Revolving
Commitments to

 

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any such Person (except in the case of assignments made by or to the Lead
Arrangers), 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, Stowe-Woodward B Term Loan, Weavexx 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.

 

(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 Arrangers, 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

 

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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 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

 

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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.

 

(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.

 

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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 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

 

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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 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

 

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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.

 

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,

 

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(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 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
nonconfidential 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
nonconfidential 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 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.

 

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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 Effectiveness. This Agreement shall become effective upon the execution of
a counterpart hereof by each of the parties hereto and receipt by each Borrower
and Administrative Agent of written or telephonic notification of such execution
and authorization of delivery thereof.

 

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)) (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.

 

[Remainder of page intentionally left blank]

 

149

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first written above.

 

XERIUM TECHNOLOGIES, INC. By:   

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:    Thomas Gutierrez Title:    President XTI LLC By:   

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:    Thomas Gutierrez Title:    President XERIUM GERMANY HOLDING GMBH Signed
by Thomas Gutierrez as attorney for Xerium Germany Holding GmbH By:   

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

XERIUM ITALIA S.P.A. By:   

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:    Thomas Gutierrez Title:    Director STOWE-WOODWARD/MOUNT HOPE INC. By:
  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:    Thomas Gutierrez Title:    Chief Executive Officer

 

S-1

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WEAVEXX CORPORATION, a New Brunswick corporation By:   

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:    Thomas Gutierrez Title:    Chief Executive Officer HUYCK AUSTRIA GMBH
Signed by Thomas Gutierrez as attorney for Huyck Austria GmbH By:   

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

 

 

S-2

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Signed for and on behalf of HUYCK AUSTRALIA PTY. LIMITED by a duly appointed
attorney

in the presence of:

 

/S/ MICHAEL P. O’DONNELL

--------------------------------------------------------------------------------

     

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Signature of witness      

Signature of attorney (I have no notice of

revocation of the power of attorney under

which I sign this document)

Michael O’Donnell

--------------------------------------------------------------------------------

     

Thomas Gutierrez

--------------------------------------------------------------------------------

Name of witness (please print)       Name of attorney (please print)

 

HUYCK INDÚSTRIA E COMÉRCIO LTDA. By:   

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:    Thomas Gutierrez Title:    By Power of Attorney INDÚSTRIA E COMÉRCIO DE
TELAS S/A - NORTELAS

By:

  

/S/ MARCELO DE BARTOLO GODOI

--------------------------------------------------------------------------------

Name:

   Marcelo De Bartolo Godoi

Title:

   Officer

By:

  

/S/ EDUARDO FRACASSO

--------------------------------------------------------------------------------

Name:

   Eduardo Fracasso

Title:

   Officer WANGNER ITELPA INDÚSTRIA E COMÉRCIO LTDA.

By:

  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:

   Thomas Gutierrez

Title:

   By Power of Attorney

 

S-3

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XERIUM DO BRASIL LTDA.

By:

 

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:

  Thomas Gutierrez

Title:

  By Power of Attorney XERIUM SAS

By:

 

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:

  Thomas Gutierrez

Title:

  By Power of Attorney STOWE WOODWARD SAS

By:

 

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:

  Thomas Gutierrez

Title:

  By Power of Attorney ROBEC GMBH Signed by Thomas Gutierrez as attorney for
Robec GmbH

By:

 

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

STOWE WOODWARD AG Signed by Thomas Gutierrez as attorney for Stowe Woodward AG

By:

 

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

 

S-4

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STOWE WOODWARD FORSCHUNGS-UND
ENTWICKLUNGS GMBH Signed by Thomas Gutierrez as attorney for Stowe Woodward
Foreschungs-und Entwicklungs GmbH By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

WANGNER

BETEILIGUNGSGESELLSCHAFT MBH

Signed by Thomas Gutierrez as attorney for

Wangner Beteiligungsgesellschaft mbH

By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

WANGNER GMBH & CO. KG

Signed by Thomas Gutierrez as attorney for

Wangner GmbH & Co. KG

By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

WANGNER SERVICE GMBH

Signed by Thomas gutierrez as attorney for

Wangner Service GmbH

By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

 

S-5

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WANGNER

VERWALTUNGSGESELLSCHAFT MBH

Signed by Thomas Gutierrez as attorney for

Wangner Verwaltungsgesellschaft mbH

By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

HUYCK JAPAN LIMITED By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

    duly authorised for purposes of this agreement Name:   Thomas Gutierrez
Title:   Chief Executive Officer STOWE WOODWARD MÉXICO, S.A. DE C.V. By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:   Thomas Gutierrez Title:   Chief Executive Officer TIAG TRANSWORLD
INTERWEAVING GMBH By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:   Thomas Gutierrez Title:   By Power of Attorney HUYCK (UK) LIMITED Signed
by Thomas Gutierrez as attorney for Huyck (UK) Limited By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

STOWE-WOODWARD (UK) LIMITED Signed by Thomas Gutierrez as attorney for
Stowe-Woodward (UK) Limited By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

 

S-6

--------------------------------------------------------------------------------

XERIUM TECHNOLOGIES LIMITED Signed by Thomas Gutierrez as attorney for Xerium
Technologies Limited By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

HUYCK LIMITED Signed by Thomas Gutierrez as attorney for Huyck Limited By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

 

SIGNED for and on behalf of

   )      STOWE-WOODWARD LIMITED    )         

 

--------------------------------------------------------------------------------

         

at

       )    Name: Thomas Gutierrez

on

       )    Title: Chief Executive Officer

per their Attorney /S/ THOMAS GUTIERREZ

   )     

acting under Power of Attorney dated May     , 2005

   )     

before this witness /S/ MICHAEL P. O’DONNELL

   )                    Michael P. O’Donnell    

--------------------------------------------------------------------------------

        Witness

 

HUYCK LICENSCO INC. By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:   Thomas Gutierrez Title:   President HUYCK EUROPE, INC. By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:   Thomas Gutierrez Title:   President

 

S-7

--------------------------------------------------------------------------------

STOWE WOODWARD LLC By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:   Thomas Gutierrez Title:   President STOWE WOODWARD LICENSCO LLC By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:   Thomas Gutierrez Title:   President WEAVEXX CORPORATION, a Delaware
corporation By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:   Thomas Gutierrez Title:   President XERIUM INC. By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:   Thomas Gutierrez Title:   President XERIUM I (US) LIMITED By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:   Thomas Gutierrez Title:   President XERIUM III (US) LIMITED By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:   Thomas Gutierrez Title:   President

 

S-8

--------------------------------------------------------------------------------

XERIUM IV (US) LIMITED By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:   Thomas Gutierrez Title:   President XERIUM V (US) LIMITED By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:   Thomas Gutierrez Title:   President WANGNER ITELPA I LLC By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:   Thomas Gutierrez Title:   President WANGNER ITELPA II LLC By:  

/S/ THOMAS GUTIERREZ

--------------------------------------------------------------------------------

Name:   Thomas Gutierrez Title:   President

 

S-9

--------------------------------------------------------------------------------

CITIGROUP GLOBAL MARKETS INC., as Joint Lead Arranger, Joint Bookrunner and
Syndication Agent By:  

/S/ DAVID WIRDNAM

--------------------------------------------------------------------------------

Name:   David Wirdnam Title:   Director

 

S-10

--------------------------------------------------------------------------------

CITICORP NORTH AMERICA, INC. as Administrative Agent, Issuing Bank, Collateral
Agent and a Bank By:  

/S/ DAVID WIRDNAM

--------------------------------------------------------------------------------

Name:   David Wirdnam Title:   Vice President

 

S-11

--------------------------------------------------------------------------------

CITIBANK, N.A., CANADIAN BRANCH, as a Bank By:  

/S/ NIYOUSHA ZARINPOUR

--------------------------------------------------------------------------------

Name:   Niyousha Zarinpour Title:   Authorized Signer

 

S-12

--------------------------------------------------------------------------------

CITIBANK, N.A., as a Bank By:  

/S/ DAVID WIRDNAM

--------------------------------------------------------------------------------

Name:   David Wirdnam Title:   Vice President

 

S-13

--------------------------------------------------------------------------------

CIBC WORLD MARKETS PLC, as Joint Lead Arranger, Joint Bookrunner, Syndication
Agent, as an Issuing Bank By:  

/S/ ANIS BIBI

--------------------------------------------------------------------------------

Name:   Anis Bibi Title:   Executive Director

 

S-14

--------------------------------------------------------------------------------

APPENDIX A-1

TO 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 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 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 CREDIT AND GUARANTY AGREEMENT

 

Stowe-Woodward B Term Loan Commitments

 

Bank

--------------------------------------------------------------------------------

 

Stowe-Woodward

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 CREDIT AND GUARANTY AGREEMENT

 

Weavexx B Term Loan Commitments

 

Bank

--------------------------------------------------------------------------------

  

Weavexx

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 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 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 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 A-9

TO CREDIT AND GUARANTY AGREEMENT

 

Tranche 2 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-9-1

--------------------------------------------------------------------------------

APPENDIX B

TO 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

 

STOWE-WOODWARD/MOUNT HOPE INC.

Aird & Berlis

181 Bay Street

Suite 1800

Toronto, Ontario M5J279

Attention: Michael O’Donnell

Telecopier: 416-863-1515

 

WEAVEXX CORPORATION (CANADA)

Aird & Berlis

181 Bay Street

Suite 1800

Toronto, Ontario M5J279

Attention: Michael O’Donnell

Telecopier: 416-863-1515

 

APPENDIX B-1

--------------------------------------------------------------------------------

HUYCK AUSTRIA GMBH

Zeile 40

2640 Gloggnitz

Austria

Attention: Michael O’Donnell

Telecopier: 43-2662-410-159

 

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

 

APPENDIX B-2

--------------------------------------------------------------------------------

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

 

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

 

ROBEC GMBH

Kleine Heide 8

33790 Halle/Westfalen

Germany

Attention: Michael O’Donnell

Telecopier: 49-5201-8730-80

 

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

 

APPENDIX B-3

--------------------------------------------------------------------------------

STOWE WOODWARD FORSCHUNGS-UND

ENTWICKLUNGS GMBH

Am Langen Graben 22

52353 Düeren Germany

Attention: Michael O’Donnell

Telecopier: 49-242-184-05319

 

WANGNER BETEILIGUNGSGESELLSCHAFT MBH

Föehrstrasse 39

72760 Reutlingen

Germany

Attention: Michael O’Donnell

Telecopier: 49-712-130-6396

 

WANGNER GMBH & CO. KG

Föehrstrasse 39

72760 Reutlingen

Germany

Attention: Michael O’Donnell

Telecopier: 49-712-130-6396

 

WANGNER SERVICE GMBH

Föehrstrasse 39

72760 Reutlingen

Germany

Attention: Michael O’Donnell

Telecopier: 49-712-130-6396

 

WANGNER VERWALTUNGSGESELLSCHAFT MBH

Föehrstrasse 39

72760 Reutlingen

Germany

Attention: Michael O’Donnell

Telecopier: 49-712-130-6396

 

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-4

--------------------------------------------------------------------------------

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 (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 LIMITE

Thanet Way

Whitstable

Kent, CT5 3EG

England

Attention: Michael O’Donnell

Telecopier: 44-122-727-7532

 

HUYCK LIMITED

Thanet Way

Whitstable

Kent, CT5 3EG

England

Attention: Michael O’Donnell

Telecopier: 44-122-727-7532

 

APPENDIX B-5

--------------------------------------------------------------------------------

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: John Cormier

Telecopier: (508) 616-9486

 

APPENDIX B-6

--------------------------------------------------------------------------------

CITIGROUP GLOBAL MARKETS.,

as Joint Lead Arranger and Joint Bookrunner

 

Citibank, N.A.

390 Greenwich St., 1st Floor

New York, NY 10013

Attention: Wendy W. Zhang

Telecopier: (646) 291-1653

Email: wendy.w.zhang@citigroup.com

 

with a copy to:

 

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10036

Attention: Robert A. Copen

Telecopier: (212) 735-2000

E-mail: rcopen@skadden.com

 

APPENDIX B-7

--------------------------------------------------------------------------------

CIBC WORLD MARKETS PLC,

as Joint Lead Arranger, Joint Bookrunner, Syndication Agent,

and Issuing Bank

 

CIBC World Markets plc

Cottons Centre

Cottons Lane

London SE1 2QL

United Kingdom

Attention: Nick Burnham / Angela Large

Telecopier: 44 207 234 6085

E-mail: Angela.Large@cibc.co.uk

 

with a copy to:

 

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10036

Attention: Robert A. Copen

Telecopier: (212) 735-2000

E-mail: rcopen@skadden.com

 

APPENDIX B-8

--------------------------------------------------------------------------------

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: Wendy W. Zhang

Telecopier: (646) 291-1653

Email: wendy.w.zhang@citigroup.com

 

with a copy to:

 

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10036

Attention: Robert A. Copen

Telecopier: (212) 735-2000

E-mail: rcopen@skadden.com

 

APPENDIX B-9

--------------------------------------------------------------------------------

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:

 

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10036

Attention: Robert A. Copen

Telecopier: (212) 735-2000

E-mail: rcopen@skadden.com

 

APPENDIX B-10

--------------------------------------------------------------------------------

CITIBANK, N.A., as a Bank

 

Citibank, N.A.

390 Greenwich St., 1st Floor

New York, NY 10013

Attention: Wendy W. Zhang

Telecopier: (646) 291-1653

Email: wendy.w.zhang@citigroup.com

 

with a copy to:

 

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10036

Attention: Robert A. Copen

Telecopier: (212) 735-2000

E-mail: rcopen@skadden.com

 

APPENDIX B-11

--------------------------------------------------------------------------------

APPENDIX C

TO 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:

 

LOGO [g54041image001.jpg]   per cent. per annum  

 

  (b) in relation to a Loan in any currency other than sterling:

 

LOGO [g54041image002.jpg]   per cent. per annum  

 

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 the 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 the Agreement.

 

APPENDIX C-3