FORM OF LYDALL, INC. PERFORMANCE SHARE AWARD AGREEMENT

Exhibit 10.2

FORM OF

LYDALL, INC.

PERFORMANCE SHARE AWARD AGREEMENT

THIS PERFORMANCE SHARE AWARD AGREEMENT (this "Agreement") is made and entered into as of the Date of Grant set forth in Exhibit A annexed hereto and between Lydall, Inc., a Delaware corporation (the "Company"), and the undersigned recipient (the "Recipient") of Performance Shares granted under the Amended and Restated Lydall 2003 Stock Incentive Compensation Plan (the "Plan"). All capitalized terms used but not defined in this Agreement shall have the same meanings that have been ascribed to them in the Plan, unless the context clearly requires otherwise.

1. Grant of Performance Shares . The Company hereby grants to the Recipient, pursuant to Section 6.3 of the Plan, the number of Performance Shares set forth in Exhibit A annexed hereto, subject to the terms and conditions set forth in the Plan and this Agreement. These Performance Shares are shares of Restricted Stock that are subject to restrictions, and vest based upon the achievement of the Performance Objectives, set forth in the Plan and this Agreement.

2. Acceptance of Award . The Recipient shall have no rights with respect to this Award unless he or she accepts the Award by signing and delivering to the Company a copy of this Agreement no later than the close of business on the date that is thirty (30) days after the Date of Grant.

3. Ownership of Performance Shares . As soon as practicable after the acceptance of the Award by the Recipient, the Company will cause the Performance Shares to be issued in book entry form in the name of the Recipient, whereupon they will be held for the benefit of the Recipient by the Company’s administrative agent (the "Administrative Agent") until the Performance Shares vest or are forfeited in accordance with the terms and conditions of the Plan and this Agreement. Upon such issue, the Recipient shall be the holder of record of the Performance Shares granted hereunder and will have, subject to the terms and conditions of the Plan and this Agreement, all rights of a shareholder with respect to such shares. Notwithstanding the foregoing, the Company shall retain custody of all Retained Distributions made or declared with respect to the Performance Shares, subject to the same restrictions, terms and conditions as are applicable to the Performance Shares, until such time, if ever, as the Performance Shares shall vest.

4. Performance Period. The Performance Period for the Performance Shares evidenced by this Agreement shall be the three-year period set forth in Exhibit A annexed hereto.

5. Performance Objectives. The actual number of shares of Common Stock to be issued and delivered to the Recipient will depend upon the adjusted earnings per share ("EPS") of the Company for the last full year of the Performance Period compared to the EPS target for such Period (the "EPS Target") established by the Committee, calculated as set forth in the following table:

For purposes of the foregoing, "EPS" means the diluted net income per share of Common Stock of the Company for the last year of the Performance Period, as set forth in the audited financial statements of the Company, adjusted positively or negatively if determined necessary or appropriate by the Committee to exclude the effects of extraordinary items, unusual or non-recurring events, changes in accounting principles, realized investment gains or losses, discontinued operations, acquisitions, divestitures, material restructuring or impairment charges and other similar items. The vesting percentage of the Performance Shares where performance achievement is between Threshold and Target will be scaled on a linear basis from 80% to 100%, and the vesting percentage of the Performance Shares where performance achievement is between Target and Maximum will be scaled on a linear basis from 100% to 120%. EPS will be rounded to the nearest whole cent, and the number of Performance Shares vesting will be rounded to the nearest whole share. All other calculations will be rounded to two decimal places.

6. Determination of Level of Performance Objectives Achieved . As soon as practicable following the completion of the Performance Period and the preparation of the Company’s audited financial statements for such period, the Committee shall (a) determine the EPS of the Company for the last full year of the Performance Period and (b) certify in writing, in accordance with the requirements of Section 162(m) of the Code to the extent applicable, the extent to which the Performance Objectives have been achieved, if at all, and the Vesting Percentage resulting therefrom (such certification being hereinafter referred to as the "Committee Certification"). In the event that, in determining the EPS of the Company for the last full year of the Performance Period, the Committee adjusts the diluted net income per share of Common Stock of the Company from that set forth in the audited financial statements of the Company, the Committee Certification shall include a brief statement setting forth the amount of the adjustment and the reasons therefor. The Performance Shares shall not vest until the Committee makes the Committee Certification.

7. Forfeiture of Non-Vested Performance Shares . All Performance Shares that do not vest as described above, as well as any Retained Distributions relating thereto, shall be forfeited, effective as of the date of the Committee Certification.

8. Restrictions; Forfeiture .

(a) If the Recipient’s employment with the Company or a subsidiary terminates for any reason whatsoever prior to the date on which the Committee Certification is made, then, effective upon the date of termination, all of Recipient’s Performance Shares, as well as any Retained Distributions relating thereto, shall automatically be forfeited to the Company. Any leave of absence approved by the Committee shall not be deemed to be a termination of employment resulting in a forfeiture of the Performance Shares.

(b) Neither the Performance Shares, nor the Recipient’s interest in any of the Performance Shares, may be encumbered, sold, assigned, transferred, pledged or otherwise disposed of at any time prior to the date of the Committee Certification. In the event any such action is taken, all of the Performance Shares evidenced by this Agreement, as well as any Retained Distributions relating thereto, shall thereupon automatically be forfeited to the Company, effective as of the date of such event.

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(c) All of the Recipient’s rights to, and interest in, the Performance Shares, as well as any Retained Distributions relating thereto, shall terminate immediately upon forfeiture without payment of consideration. All forfeited Performance Shares shall be delivered promptly to the Company by the Administrative Agent, and the Company shall direct the Transfer Agent and Registrar of the Company’s Common Stock to make appropriate entries upon its or their records.

(d) The Committee shall make all determinations authorized or required in connection with the terms and provisions of the Plan and this Agreement, including any determination as to whether an event