Exhibit 10.2
XERIUM TECHNOLOGIES,
INC.
PERFORMANCE AWARD
PROGRAM
This Xerium Technologies, Inc.
Performance Award Program (the “Program”) contains
rules supplemental to those set forth in the Xerium Technologies,
Inc. 2005 Equity Incentive Plan (the “EIP”). The
Program provides for the grant of the incentive award opportunities
(each, an “Award”) under and subject to the terms of
the EIP, which is incorporated herein by reference. In the event of
any inconsistency between the Program and applicable provisions of
the EIP, the EIP shall control. Capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in the
EIP.
1. Administration; Eligibility;
Features of Awards . The Program shall be administered by the
Committee as described in the EIP. The Committee may in its
discretion consult with outside advisors or internal Company
resources for purposes of making any determinations in connection
with its administration of the Program. Eligibility to participate
in the Program shall be limited to individuals who are selected in
accordance with the terms of the EIP to participate in the Program
from among those individuals who are eligible to participate in the
EIP (each, a “Participant”). Participation in any Award
shall not entitle a Participant to share in any future Awards or in
any other future awards of the Company or its subsidiaries. Each
Award shall entitle the holder, subject to satisfaction of the
performance conditions under the Award (and, to the extent the
Award is intended to qualify for the performance-based compensation
exception under Section 162(m) of the Internal Revenue Code of
1986, as amended (the “Code”), to the further
limitations of the EIP with respect thereto), to a benefit
determined under Section 2 below and Exhibit A (the
“Total Benefit Amount”) that shall be payable as
follows, subject to tax withholding as described in Section 5
below: (1) up to fifty (50%) of the Total Benefit Amount
may be paid in cash as the Committee may decide in its sole
discretion any time before payouts under the Program are made; and
(2) the balance of the Total Benefit Amount shall be payable
in the form of Restricted Stock Units (“RSUs”). The
number of RSUs deliverable in respect of all or part of an Award
shall be determined as described in Section 4
below.
2. Determination of Total Benefit
Amount . The Committee may determine that a portion of each
Participant’s Total Benefit Amount under an Award for any
calendar year or portion thereof (a “performance year”)
shall be earned solely by the Participant’s remaining
continuously employed by the Company or a subsidiary through the
date Awards are paid under the Program for the performance year
(the “Time-Based Portion”) as indicated on Exhibit
B hereto. The determination of the remainder of each
Participant’s Total Benefit Amount under an Award for the
performance year (the “Performance-Based Portion”)
shall be made in accordance with the provisions of Exhibit A
applicable to such Participant for such performance year. (The
Performance-Based Portion of the Total Benefit Amount is referred
to in Exhibit A as the Performance-Based Benefit
Amount”). All payouts under the Program, whether Time-Based
or Performance-Based, are conditioned on the Company’s being
in compliance with the financial covenants contained in
Section 6.8(a) (Interest Coverage Ratio Covenant),
(b) (Leverage Ratio Covenant) and (c) (Fixed Charge
Coverage Ratio Covenant) (collectively the “Financial
Covenants”) of the Credit and Guaranty Agreement dated as of
May 19, 2005,
entered into by and among the Company, certain
subsidiaries of the Company, Citigroup Global Markets, Inc., CIB
World Markets Corp. and other agents and banks party thereto, as
amended and in effect on May 30, 2008 (the “Credit
Agreement”) at the end of each of the four fiscal quarters in
the performance year. A breach of any of these Financial Covenants
for any quarter will result in no payouts under the Program for the
performance year, except as the Committee may otherwise expressly
determine in its discretion.
3. Terms of RSUs . The RSUs
payable under any Award shall be granted substantially in the form
of the Restricted Stock Units Agreement attached as Exhibit
C hereto (the “Restricted Stock Units Agreement”),
which provides that the RSUs shall be fully vested at grant and
payable 90 days thereafter.
4. Determination of Number of
RSUs Payable . The number of RSUs payable under any Award shall
be the quotient determined by dividing (x) by (y), where
(x) is that portion of the Total Benefit Amount, if any,
payable in RSUs and (y) is the greater of (1) three
dollars ($3.00) and (2) the average of the per-share closing
prices of the Stock (adjusted as appropriate to reflect any stock
splits, stock dividends or similar events) for the last twenty
(20) trading days of the performance year, rounded down to the
nearest whole number.
5. Latest Payment Date; Tax
Withholding . All payments, if any, under an Award shall be
made not later than by March 31 of the calendar year following
the performance year. The minimum tax withholding amount with
respect to any payments being made in cash shall be withheld from
such payments. The minimum tax withholding amount with respect to
any payments being made in RSUs shall be satisfied by means of
share withholding at the time the RSUs are settled as provided in
the Restricted Stock Units Agreement.
6. Intent to be Exempt from
Section 162(m) . Awards for the 2009 performance year are
not intended to qualify for the performance-based compensation
exception under Section 162(m) of the Code. In the case of any
Award for a subsequent performance year that is intended to so
qualify, (i) the Exhibit A performance goals with respect to
such Award shall be established by the Committee not later than
ninety (90) days after the commencement of the performance
year (or by such earlier date as is required by
Section 1.162-27(e)(2)(i) of the Treasury Regulations),
(ii) the Exhibit A performance goals, as so established, shall
be consistent with the eligible performance measures, if any,
approved by the shareholders of the Company for use in respect of
performance awards under the EIP and shall be objectively
determinable in compliance with Section 1.162-27(e)(2) of the
Treasury Regulations, and (iii) no portion of the Award shall
be paid unless and until the Committee has certified (as required
by Section 1.162-27(e)(5) of the Treasury Regulations) that
the performance goals have been achieved (or, if the performance
goals are expressed in terms that admit of varying payout levels
for different levels of performance, have been achieved at a level
sufficient to support the payment).
7. Nature of Awards . Awards
hereunder are intended to qualify as Stock Unit Awards under the
EIP, with any cash portion payable pursuant to Section 9(d) of
the EIP. The Program is unfunded and any cash payments by the
Company hereunder shall be made from the general assets of the
Company.
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8. Termination of Employment
. The Performance-Based Portion of an Award shall not be payable to
or in respect of a Participant, except as the Committee shall
otherwise expressly determine, unless the Participant is employed
by the Company or a subsidiary on December 31 of the
performance year. The Time-Based Portion of an Award shall not be
payable to or in respect of a Participant, except as the Committee
shall otherwise expressly determine, unless the Participant is
employed by the Company or a subsidiary on the date Awards are paid
for the performance year.
9. Availability of Stock .
If, when Awards become payable in respect of any performance year,
the number of shares of Stock needed to grant any RSUs under the
Awards exceeds the number of shares then available under the EIP,
the RSUs shall be granted conditionally so that the grant takes
effect when the shareholders approve an increase in the number of
shares available under the EIP. If the shareholders do not approve
such an increase so that all or part of the conditional RSUs are
not granted, the Company will pay out the value of any conditional
RSUs that were not granted in cash and determine their value by
reversing the calculation under Section 4 above used to
determine the number of such RSUs.
10. Treatment of Awards Upon a
Change in Control . If (a) the Company merges into or
combines with any other entity and, immediately following such
merger or combination, any Person or group of Persons acting in
concert holds 50% or more of the voting power of the entity
surviving such merger or combination (other than any Person or
group of Persons which held 50% or more of the Company’s
voting power immediately prior to such merger or combination or any
Affiliated Person of any such Person or member of such group);
(b) any Person or group of Persons acting in concert acquires
50% or more of the Company’s voting power; or (c) the
Company sells all or substantially all of its assets or business
for cash or for securities of another Person or group of Persons
(other than to any Person or group of Persons which held 50% or
more of the Company’s total voting power immediately prior to
such sale or to any Affiliated Person of any such Person or any
member of such group), then, unless the Committee provides for the
continuation or assumption of Awards or for the grant of new awards
in substitution therefor (which substitute awards, if any, may be
payable in cash or other property or a combination thereof) by the
surviving entity or acquiror, in each case on such terms and
subject to such conditions as the Committee may determine, with
respect to each Award not so assumed or continued:
(a) In the event such transaction
occurs on or after the close of the performance year with respect
to the Award, the Committee shall determine, acting in its sole and
reasonable discretion, prior to the occurrence of the transaction,
the extent to which the applicable performance metrics specified in
Exhibit A have been satisfied. If financial statements or other
relevant data are not available prior to the time of such
determination, the Committee shall make such determination based
upon the financial information and data then available to the
Company.
(b) In the event such transaction
occurs prior to the close of the performance year with respect to
the Award, the applicable performance metrics specified in Exhibit
A shall be determined as follows: (i) the performance year
shall be deemed to end on the effective date of such transaction;
and (ii) the extent to which the applicable performance
metrics specified in Exhibit A for the shortened performance year
described in clause (i) above have been achieved shall be
determined by the Committee acting in its sole
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and reasonable discretion based upon the
financial information available to the Company (it being understood
that the Committee may, to the extent it deems necessary,
extrapolate performance through the effective date of the
transaction based upon available data); (iii) the performance
determined pursuant to clause (ii) shall t
