Amended and Restated*

Through 8/8/2001

DEFERRED COMPENSATION PLAN OF

ALBANY INTERNATIONAL CORP.

1.  Purpose

The purpose of this Plan (“Plan”) is to enable directors and certain employees of Albany International Corp. (the “Company”) to defer the receipt of compensation that they otherwise would have received currently in cash, and to receive the deferred amount, plus interest thereon, at a time which they choose when they make the original deferral election or subsequently as permitted by the Plan.  The Plan is intended to be an unfunded plan maintained by the Company primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees within the meaning of Sections 201, 301 and 401 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and shall be interpreted in a manner consistent with such intent.  As used herein, the term “Albany Group” shall mean the Company and all corporations which are, at the time, subsidiaries of the Company.

2.  Effective Date

The Plan shall be effective from and after January 1, 1990, until terminated as provided herein.

3.  Eligibility

All directors and all employees of the Company who are in the management incentive compensation group and other employees, who with respect to any year are approved for participation by the Compensation and Stock Option Committee (the “Committee”) of the Board of Directors of the Company (“eligible employees”) will be eligible to participate in the Plan.

4.  Compensation Covered by the Plan

The compensation covered by the Plan (“covered compensation”) will be any regular or bonus compensation payable to a director or an eligible employee by the Company.

* Reflects amendments dated November 7, 1997, May 25, 2001, June 15, 2001 and August 8, 2001.

5.  Election to Defer

Each director and eligible employee may, in lieu of receiving current covered compensation, elect to defer:

(a)           any designated percentage of his/her covered compensation; or

(b)           any designated dollar amount of his/her covered compensation.

Notwithstanding any other provisions of this Plan, no director or eligible employee may elect to defer any covered compensation under this Plan which, if not deferred, would be received by such director or eligible employee after December 31, 1995.

6.  Investment of Deferred Covered Compensation

(a)     As used herein, the term “Moody’s Rate” for any calendar month shall mean a rate equal to one-twelfth (1/12) of the average of the monthly composite yields on Moody’s Seasoned Corporate Bond Yield Index for the immediately preceding calendar year, as published by Moody’s Investors Service, Inc. in Moody’s Bond Record (or any successor thereto), or, if such monthly yield is no longer published, a substantially similar average selected by the Committee in its sole discretion.  As used herein, the term “Additional Rate” shall mean such additional monthly rate as the Committee, in its sole discretion, shall from time to time determine.  The Additional Rate as of January 1, 1990 shall be zero (0.0) percentage points and, effective from and after January 1, 1996 and until changed by the Committee, shall be one-quarter of one (0.25) percentage point.  The Committee, in its sole discretion, may change the Additional Rate at any time; provided that at no time shall the Additional Rate be less than zero (0.0) percentage points.

(b)     The Company will establish a bookkeeping account (each, an “Account”) for each director and eligible employee who has elected to defer the receipt of covered compensation under Section 5 (each, a “participant”).  As of the last day of each month, the Company shall credit such participant’s Account with the amount of covered compensation that, but for such election, would have been paid to him or her during that month.  As of the last day of each month, each Account of each participant will be credited with interest on the balance credited to such Account at the beginning of that month, calculated at a rate equal to the Moody’s Rate for such month plus the Additional Rate, except as otherwise provided in Sections 6(c), 6(d), 6(e) and 6(f) below.  The undistributed balance of the Account of a participant shall, from and after the date such participant is to commence to receive distributions thereof, bear interest for each month at a rate equal to the Moody’s Rate for such month plus the Additional Rate applicable to such Account, except as otherwise provided in Section 6(e) below.

(c)     The balance credited to the Account of a participant who initially elects to receive such balance pursuant to an election under Section 7(a)(1)(A) shall earn interest at the Moody’s Rate, except as otherwise provided in Section 6(d) below.

(d)     (1)  If a participant elects pursuant to Section 7(c) to redefer receipt of the balance credited to his/her Account to a later date certain pursuant to Section 7(a)(1)(A), interest on such balance shall continue to accrue at the Moody’s Rate.

(2)      If a participant elects pursuant to Section 7(c) to change his/her election from a date certain under Section 7(a)(1)(A) to a time permitted under Section 7(a)(1)(B), interest on the balance of such Account shall accrue interest from the date certain specified in the participant’s original deferral election until the date such participant receives such balance at a rate equal to the Moody’s Rate from time to time plus the Additional Rate in effect at the time the request becomes effective (subject to Sections 6(e) and 6(f) below).  Until such date certain specified in the participant’s original deferral election, such participant’s Account shall continue to accrue interest at the Moody’s Rate.

(e)    (1)     If a participant’s service as an employee of the Albany Group or as a director of the Company is terminated either (A)by the Albany Group for cause, as determined by the Committee in its sole discretion, or (B) voluntarily by such employee or director prior to the earlier to occur of (i) his/her attainment of age 55 with at least ten (10) years of service with the Albany Group or (ii) attainment of age 60, then such participant’s Account shall be deemed to have earned interest for the five (5) years immediately preceding the date on which all, or the first installment, of the balance of such Account is received by such participant at the Moody’s Rate, and such Account shall be recalculated to take into account such interest accrual at the Moody’s Rate.  In addition, after such date any undistributed balance in such participant’s Account shall also bear interest at the Moody’s Rate.

(2)      The service of a participant who has elected to receive the balance credited to his/her Account upon the later of his/her termination of service as a director of the Company or his/her termination of service as an employee of the Albany Group shall not be deemed “terminated” pursuant to Section 6(e)(1)(B) above if such participant continues to serve as either a director of the Company or an employee of the Albany Group.

(f)      In the case of an early distribution pursuant to Section 8(b), the portion of the participant’s Account so distributed shall be deemed to have earned interest at the Moody’s Rate from the date of the initial deferral until the time of such early distribution, and such Account shall be recalculated to take into account such interest accrual at the Moody’s Rate.

7.  Distribution of Deferred Compensation

(a)     At the time a participant makes his/her first election to defer pursuant to Section 5, he/she shall also make an election pursuant to this Section 7, as to the time and manner in which the balance credited to his/her Account shall be distributed.  Such election shall be irrevocable, except as provided in this Section 7 or in Section 8 hereof.

(1)      A participant shall be entitled to elect to receive, or to commence receiving, the balance credited to his/her Account:

(A)      on a date certain set by him/her; or

(B)       on the occurrence of his/her termination of service as an employee of the Albany Group or as a director of the Company.

Notwithstanding such election, a participant shall have the balance credited to his/her Account automatically distributed to him/her (or his/her designated beneficiary or beneficiaries), in the manner provided pursuant to Section 7(a)(2) but subject to the further provisions of this Section 7, upon the occurrence of his/her death or disability (as defined in the Company’s Pension Plus Plan, as amended from time to time).

(2)      A participant shall be entitled to elect to receive such balances in one of the following ways:

(A)      in a single lump sum in an amount equal to his/her Account balance;

(B)       in approximately equal monthly installments over a period of not more than thirty (30) years elected by the participant;

(C)       in a single lump sum equal to a percentage, elected by the participant, of the aggregate amount of the participant’s Account balance on the date payments are to commence, followed by (ii) payment of approximately equal monthly installments over a period of not more than thirty (30) years elected by the participant; or

 (D)      (i) in approximately equal monthly installments over a period of not more than (28) years elected by the participant, followed, within thirty (30) days of the final installment, by (ii) payment of a single lump sum equal to a percentage, elected by the participant, of the amount of the participant’s Account balance on the date payments are to commence.

Calculation of monthly installments pursuant to clauses (B), (C) and (D) above shall be made by the Company using such reasonable annuity payment calculation methods as the Company shall determine from time to time.

(b)     A participant may at any time elect to change his/her election under Section 7(a)(2) to any other election permitted under Section 7(a)(2).  Such an election shall be made in a written instrument filed with the Committee, and no more than three such changes of election may be made by any participant.  Unless the Committee, in its sole and absolute discretion, shall determine otherwise, no such change of election shall be effective if the termination of service that constitutes the triggering event for distribution to such participant has already occurred, or occurs within one (1) year of the date of such change of election; unless the termination of service is the result of the death or disability of a participant who, at the time such election was made, did not in good faith expect to die or become disabled within the next year.

(c)     A participant who has elected to receive the balances credited to his/her Accounts pursuant to Section 7(a)(1)(A) may, at any time prior to two years before the date certain specified in such election, change such date certain to a later date certain or to an event specified in Section 7(a)(1)(B).  Such a change shall be made in a written instrument filed with the Committee.  Not more than one such change shall be made by any participant.

(d)     Subject to the provisions contained in this Section 7 and in Section 8, all distributions of the balance credited to a participant’s Account shall be made, or shall commence, either on the date certain elected by the participant for such distribution or within thirty (30) days after any other triggering event under Section 7(a).  The Company may, in its sole and absolute discretion, delay, for a period of up to one (1) year, any payment to the extent that such payment would result in compensation to the participant that is not deductible for federal income tax purposes (whether by reason of Section 162(m) of the Internal Revenue Code of 1986 or otherwise).  Interest shall accrue on such delayed distributions at the same respective interest rates as were being applied to the balance in the participant’s Account immediately prior to the Company’s decision to delay such payment.

(e)     A participant may at any time designate a beneficiary or beneficiaries who shall receive, following the death of the participant, payments of the balances credited to his/her Account.  Such designation may be made in the initial election filed pursuant to Section 7(a), and may also be made or changed by the participant, at any time, by a written instrument filed with the Committee or by the participant’s will.  The beneficiary or beneficiaries so named shall receive payment of such balances either (i) in the manner last elected by the participant pursuant to this Section 7, or (ii) if elected by the participant in such instrument or will, a lump sum.

8.  Early Distributions

(a)     In the event of hardship, a participant, or a beneficiary of a deceased participant designated in accordance with clause (e) of Section 7, may, by a written instrument filed with the Committee, request an immediate distribution of all or a portion of the balances credited to the participant’s Account.  For purposes of this Section 8(a), a distribution is on account of hardship only if the distribution is made:

(1)      on account of an immediate and heavy financial need of such participant or beneficiary, occasioned by an unanticipated emergency caused by events beyond his/her control that would result in severe financial hardship if the distribution were not permitted;

(2)      in an amount required to satisfy such financial need; and

(3)      in circumstances in which the need cannot be satisfied from other resources that are reasonably available to the participant or beneficiary, such as through reimbursement or compensation by insurance or otherwise, by reasonable liquidation of his/her assets (to the extent such liquidation would not itself cause an immediate and heavy financial need), by cessation of further deferrals under the Plan, or by other permitted distributions or nontaxable (at the time of the loan) loans from other plans maintained by the Albany Group, or by borrowing from commercial sources on reasonable commercial terms.

          The Committee shall determine whether the requested distribution satisfies the requirements of this Section 8(a) on the basis of all relevant facts and circumstances.  Any distribution of less than 100% of the balance credited to the Account of a participant pursuant to this Section 8(a) shall be deemed to be a distribution of the earliest compensation which would have been paid had it not been deferred.

(b)     The Committee may, upon the written request of any participant, or any beneficiary of a deceased participant designated in accordance with clause (e) of Section 7, distribute to such participant or beneficiary all or a portion of the balances credited to his/her Account prior to the time when he/she would otherwise have been entitled to such distribution if the Committee determines, in its sole and absolute discretion, that such earlier distribution is warranted for good reasons and as a result of extraordinary circumstances.  Any distribution of less than 100% of the balance credited to the Account of a participant pursuant to this Section 8(b) shall be deemed to be a distribution of the earliest compensation which would have been paid had it not been deferred.

(c)     (1)     Upon the request of any participant, including a participant no longer serving as an employee of the Albany Group or as a director of the Company, or any beneficiary of a deceased participant designated in accordance with clause (e) of Section 7, a distribution of a portion or the entire balance credited to the Account of a participant shall be made at any time or times prior to the time at which he or she would have been entitled to receive, or to commence receiving, such balance in accordance with an election pursuant to Section 7 hereof; provided that there shall be withheld from each such distribution an amount equal to ten percent (10%) of the amount requested to be distributed.  Such participant or beneficiary shall forever forfeit, relinquish and waive any right to receive any such withheld amounts, or any earnings thereon.

(2)     Upon the request of any participant who at the time is serving as an employee of the Albany Group or a director of the Company and has not made known to the Company any present intention to terminate such service during the three years following such request, a distribution of a portion or the entire balance credited to the Account of a participant shall be made at any time or times prior to the time at which he or she would have been entitled to receive such amount in accordance with an election pursuant to Section 7 hereof; provided that (i) there shall be withheld from each such distribution an amount equal to five percent (5%) of the amount requested to be distributed, and (ii) such participant thereafter shall be precluded from deferring any subsequent compensation (including any compensation payable after such distribution that would have been deferred pursuant to a deferral election made prior to the distribution) under this Plan or any other deferred compensation plan of the Company during the period of three years following the date of each such distribution.  In the event that such participant’s service as an employee of the Albany Group or as a director of the Company is terminated by the Albany Group for cause, as determined by the Committee in its sole discretion, or voluntarily by such participant, in either case during any such three year period, the participant shall forever forfeit, relinquish and waive any right to receive the amount withheld from the withdrawal that triggered such period and any earnings thereon.  Any amount so withheld shall otherwise be distributed to such participant upon termination of his or her service during such period for any other reason, or upon expiration of such three-year period.

(3)     Any distribution of less than 100% of the balances credited to the Account of a participant pursuant to this Section 8(c) shall be deemed to be a distribution of the earliest compensation which would have been paid had it not been deferred.

9.  Manner of Election

Prior to January 1 of each year, beginning with 1990, each director and eligible employee shall be entitled to file an instrument with the Committee exercising his/her election under Section 5 of the Plan.  Such election shall be irrevocable with respect to the year following its date of filing.  If a director or eligible employee does not file such an instrument under the plan, his/her covered compensation shall be paid to him or her in cash on a non-deferred basis.  An election once filed shall continue in effect with respect to subsequent years unless revoked or amended by an instrument in writing filed with the Committee by the director or eligible employee.  Any such revocation or amendment shall be effective as of January 1 of the year next following the filing thereof.  Notwithstanding any other provisions of this Plan, no director or eligible employee may elect to defer any covered compensation under this Plan which, if not deferred, would be received by such director or eligible employee after December 31, 1995.

10.  Administration of Plan

The Plan shall be administered by the Compensation and Stock Option Committee of the Board of Directors of the Company.  The Committee shall interpret the Plan and make all decisions with respect to the rights of directors and eligible employees hereunder; provided, however, that no member of the Committee shall act on any matter in which such member has a particular or special interest.  The forms to be used for making elections pursuant to Section 5 as well as initial elections under Section 7(a) are attached hereto as Exhibits A and B, respectively.

11.  Funding

This Plan shall be unfunded.  Amounts payable hereunder shall be paid from the general assets of the Company.  The Company may establish a trust pursuant to a trust agreement and make contributions thereto for the purpose of assisting the Company in meeting its obligations in respect of benefits payable under the Plan.  Any such trust agreement shall contain procedures to the following effect:

(a)     In the event of the insolvency of the Company, the trust fund will be available to pay the claims of any creditor of the Company to whom a distribution may be made in accordance with state and federal bankruptcy laws.  The Company shall be deemed to be “insolvent” if the Company is subject to a pending proceeding as a debtor under the federal Bankruptcy Code (or any successor federal statute) or any state bankruptcy code.  In the event the Company becomes insolvent, the Board of Directors and chief executive officer of the Company shall notify the trustee of that event as soon as practicable.  Upon receipt of such notice, or if the trustee receives other written allegation of the Company's insolvency, the trustee shall cease making payments of benefits from the trust fund, shall hold the trust fund for the benefit of the Company's creditors, and shall take such steps as are necessary to determine within thirty (30) days whether the Company is insolvent.  In the case of the trustee's actual knowledge of or other determination of the Company's insolvency, the trustee will deliver assets of the trust fund to satisfy claims of the Company's creditors as directed by a court of competent jurisdiction;

(b)     The trustee shall resume payment of benefits under the trust agreement only after the trustee has determined that the Company is not insolvent (or is no longer insolvent, if the trustee had previously determined the Company to be insolvent) or upon receipt of an order of a court of competent jurisdiction requiring such payment.  If the trustee discontinues payment of benefits pursuant to paragraph (a) of this Section 11 and subsequently resumes such payment, the first payment on account of a participant following such discontinuance shall include an aggregate amount equal to the difference between the payments which would have been made on account of such participant under the trust agreement and the aggregate payments actually made on account of such participant by the Company during any such period of discontinuance, plus interest on such amount at a rate equivalent to the net rate of return earned by the trust fund during the period of such discontinuance.

12.  Reports to Participants

The Committee shall provide to each participant a report twice a year, as of each June 30 and December 31, detailing the status of that participant’s Account.

13.  Amendment or Termination

This Plan may be amended or terminated at any time by the Board of Directors of the Company or by the Committee.  Upon termination of the Plan, the Committee may distribute to each participant the balance credited to his/her Account at the time of such termination in the form of a lump sum or otherwise as it determines in its sole discretion.  The Company shall notify each participant and each beneficiary currently entitled to benefits under the Plan of termination of the Plan within ninety (90) days after such termination; provided that the failure to give such notice shall not affect the Company’s rights hereunder.

14.  Non-Assignability

Interests in covered compensation deferred or in a participant’s Account shall not be assignable or transferable or subject to attachment, garnishment, levy, execution or other legal or equitable process, except by will or the laws of descent and distribution.

15.  Plan Not a Contract of Employment

This Plan is not a contract of employment, and the terms of employment of any employee of the Albany Group shall not be affected in any way by the Plan or related instruments except as specifically provided in the Plan or such related instruments.  The establishment of the Plan shall not be construed as conferring any legal rights upon any employee for a continuation of employment, nor shall it interfere with the right of the Albany Group to discharge any employee and to treat him or her without regard to the effect which such treatment might have upon him or her as a participant.  Each participant and all persons who may have or claim any right by reason of his/her participation shall be bound by the terms of the Plan and all agreements entered into pursuant thereto.

16.  Construction

(a)     The Plan is intended to qualify as an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees as referred to in Section 201(2) of ERISA, and its terms shall be interpreted accordingly.  Otherwise, the laws of the State of New York shall control the interpretation and performance of the terms of the Plan.

(b)     If any provision of the Plan, or the application of any such provision to any person or circumstances, shall be invalid under any federal or state law, neither the application of such provision to persons or circumstances other than those as to which such provision is invalid nor any other provisions of the Plan shall be affected thereby.

Exhibit A

DEFERRED COMPENSATION PLAN OF

ALBANY INTERNATIONAL CORP.

Election as to Amount of Compensation to be Deferred

The undersigned, [a director] [an eligible employee] under the Deferred Compensation Plan of Albany International Corp., hereby elects as follows pursuant to Section 5 of such Plan:

Please withhold from my current covered compensation the following:

(check one only)

a.  ___% of my regular compensation and ___% of my bonus compensation.

b.  ___% of my covered compensation.

The foregoing shall be effective for the calendar year commencing January 1, ____ and shall remain in effect until revoked or amended by me, which revocation or amendment shall be effective on the January 1 thereafter.

Executed this _____ day of ____________, ____.

__________________________________

Signature

Exhibit B

DEFERRED COMPENSATION PLAN OF

ALBANY INTERNATIONAL CORP.

Election as to Time and Manner in which Deferred Compensation shall be Distributed

The undersigned, [a director] [an eligible employee] under the Deferred Compensation Plan of Albany International Corp., hereby elects as follows, pursuant to Section 7 of such Plan:

1.  Time of Distribution

The value of my deferred compensation shall be distributed to me, or such distribution shall commence:

(check one only)

a.  _____ on ____________ ____ ____

Month           Day   Year

b. _____ upon my termination of service as an employee of the Albany Group (whether or not I am then a director of the Company).

c. _____ upon the later of my termination of service as a director of the Company or as an employee of the Albany Group.

My Deferred Compensation Account will be distributed in the event of death, disability or termination.

2.  Manner of Distribution

Distribution shall be made as follows:

(check one only)

a.   _____ in a lump sum

b.     _____ in approximately equal monthly installments over ___ years (not to exceed 30)

c.     _____ in a lump sum equal to ___% of my Account balance on the date distribution commences, followed by approximately equal monthly installments over ___ years (not to exceed 30)

d.     _____ in approximately equal installments over ___ years (not to exceed 28), followed by a lump sum equal to ___% of my Account balance on the date distribution commences.

3.  Designation of Beneficiary

Upon my death, the following person(s) shall be entitled to receive the value of deferred compensation owing to me:

Name Address Relationship

This deferred compensation shall be paid to these persons

_____ in the manner otherwise payable to me

_____ in a lump sum

I understand that the foregoing elections under paragraphs 1 and 3 above are irrevocable, except as provided in Sections 7 or Section 8 of the Plan.

Executed this _____ day of ____________, ____.

__________________________________

Signature