Dresser-Rand

      Annual
Incentive Program (AIP)

      


      
 

      


      


      


      


      


      


      Effective
January 1, 2009

       

       

      
        
           

        

        
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      This
program document summarizes the Dresser-Rand Group and Affiliates’ Annual
Incentive Program (the “Program”) formerly referred to as the Annual Incentive
Matrix (AIM) program. The document is comprised of two sections; 1) the AIP
controlling language and 2) a schedule of the Program parameters (Program
Summary) which are subject to change each year.

      


      The
Program is a subplan of the 2008 Stock Incentive Plan (the “Plan”), and all
Awards under the Program are granted pursuant to Section 9 of the Plan, which is
hereby incorporated by reference.  Capitalized terms not specifically
defined herein have the meanings specified in the Plan.  In the event
of any conflict between the Program and the Plan, the terms of the Plan shall
control.

      


      


      Annual
Incentive Program Objectives:

      The
purpose of the Program is to reward eligible D-R employees based on performance
against financial and individual objectives as determined by the
Committee.  Eligible participants may include employees of
Dresser-Rand Group Inc. and its Affiliates that are selected for participation
in the Plan.

      


       

      Definitions:

       

      As used
in the AIP Summary, the following terms shall have the meanings set forth
below:

       

      (a)                      “Affiliate”
means, with respect to any referenced person or entity, any other person
controlling, controlled by, or under common control with such
person.

       

      (b)                      “Award”
means an award of an Incentive Stock Option, Nonqualified Stock Option, Stock
Appreciation Right, Common Share, Restricted Stock, Restricted Stock Unit or
Incentive Bonus granted to a Participant pursuant to the provisions of the Plan,
any of which the Committee may structure to qualify in whole or in part as a
Performance Award.

       

      (c)                      “Board”
means the board of directors of the Company.

       

      
        (d)                      “Change in Control” means the first to occur of any of the
following events:

      

       

      (i)                      during
any 12-month period, the members of the Board (the “Incumbent Directors”) cease
for any reason other than due to death or disability to constitute at least a
majority of the members of the Board, provided that any director whose election,
or nomination for election by the Company's stockholders, was approved by a vote
of at least a majority of the members of the Board who are at the time Incumbent
Directors shall be considered an Incumbent Director, other than  any
such individual whose initial assumption of office occurs  as a result
of an actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board;

       

      
        
           

        

        
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      (ii)           the
acquisition or ownership by any individual, entity or "group" (within the
meaning of  Section 13(d)(3)  of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)), other than the Company or any of its
Affiliates, or any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its Affiliates, of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or
more of the combined voting power of the Company's then outstanding voting
securities entitled to vote generally in the election of directors;

       

      (iii)           the
merger, consolidation or other similar transaction of the Company, as a result
of which the stockholders of the Company immediately prior to such merger,
consolidation or other transaction, do not, immediately thereafter, beneficially
own, directly or indirectly, more than 50% of the combined voting power of the
voting securities entitled to vote generally in the election of directors of the
merged, consolidated or other surviving company; and

       

      (iv)           the
sale, transfer or other disposition of all or substantially all of the assets of
the Company to one or more persons or entities that are not, immediately prior
to such sale, transfer or other disposition, Affiliates of the
Company.

      


       

      (e)                      A
“Change in Control” shall not be deemed to occur if the Company undergoes a
bankruptcy, liquidation or reorganization under the United States Bankruptcy
Code.

       

      (f)                      “Code”
means the Internal Revenue Code of 1986, as amended from time to time, and the
rulings and regulations issues thereunder.

       

      (g)                      “Committee”
means the Committee delegated the authority to administer the Plan in accordance
with Section 18 of the Plan.  To the extent the Committee has
delegated authority to any person(s) pursuant to Section 18(a)  of the
Plan, a reference to the Committee herein shall also include such
person(s).

       

      (h)                      “Common
Share” means a share of the Company’s common stock, par value $0.01 per share,
subject to adjustment as provided in Section 13 of the Plan.

       

      (i)                      “Company”
means Dresser-Rand Group Inc., a Delaware corporation, or Dresser-Rand Company,
a partnership, as applicable.

       

      (j)                      “Disability”
means, unless otherwise provided in an Award Agreement, any termination of a
Participant's employment under such circumstances that the Committee determines
to qualify as a Disability for purposes of the Plan; provided, that, in the case
of any Participant who, as of the date of determination, is party to an
effective services, severance, employment or similar agreement with the Company
or any Affiliate, "Disability" shall have the meaning, if any, specified in such
agreement.

       

      
        
           

        

        
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      (k)                      “Option”
means an Incentive Stock Option and/or a Nonqualified Stock Option granted
pursuant to Section 6 of the Plan.

       

      (l)                      “Participant”
means any individual described in Section 3 of the Plan to whom Awards have
been granted from time to time by the Committee and any authorized transferee of
such individual.

       

      (m)                      “Plan” means the Dresser-Rand Group
Inc. 2008 Stock Incentive Plan as  amended from time to
time.

       

      (n)                      “Qualifying
Performance Criteria” shall mean any one or more of the following performance
criteria, either individually, alternatively or in any combination, applied to
either the Company as a whole or to a business unit or Subsidiary or Affiliate,
either individually, alternatively or in any combination, and measured either
quarterly, annually or cumulatively over a period of years, on an absolute basis
or relative to a pre-established target, to previous years’ results or to a
designated comparison group, in each case as specified by the Committee: (i)
revenue growth; (ii) earnings before interest, taxes, depreciation and
amortization; (iii) earnings before interest, taxes and amortization; (iv)
operating income; (v) pre- or after-tax income; (vi) cash flow; (vii) cash flow
per share; (viii) net income; (ix) earnings per share; (x) return on equity;
(xi) return on invested capital; (xii) return on assets; (xiii) economic value
added (or an equivalent metric); (xiv) share price performance; (xv) total
shareholder return; (xvi) improvement in or attainment of expense levels; (xvii)
improvement in or attainment of working capital levels; or (xviii) debt
reduction.  To the extent consistent with Section 162(m) of the
Code, the Committee (A) shall appropriately adjust any evaluation of
performance under a Qualifying Performance Criteria to eliminate the effects of
charges for restructurings, discontinued operations, extraordinary items and all
items of gain, loss or expense determined to be extraordinary or unusual in
nature or related to the acquisition or disposal of a segment of a business or
related to a change in accounting principle all as determined in accordance with
standards established by opinion No. 30 of the Accounting Principles Board
(APA Opinion No. 30) or other applicable or successor accounting provisions, as
well as the cumulative effect of accounting changes, in each case as determined
in accordance with generally accepted accounting principles or identified in the
Company’s financial statements or notes to the financial statements, and (B) may
appropriately adjust any evaluation of performance under a Qualifying
Performance Criteria to exclude any of the following events that occurs during a
performance period: (i) asset write-downs, (ii) litigation, claims, judgments or
settlements, (iii) the effect of changes in tax law or other such laws or
provisions affecting reported results, (iv) the adverse effect of work stoppages
or slowdowns, (v) accruals for reorganization and restructuring programs
and (vi) accruals of any amounts for payment under this Plan or any other
compensation arrangement maintained by the Company.

      


      


      Program
Administration:

      The
Program shall be administered by the Committee, which shall have full authority
to interpret the Program, to establish rules and regulations relating to the
operation of the Program, to select Participants, to determine the amount of any
Awards and to make all determination and take all other actions necessary or
appropriate for the proper administration of the Program.  The
Committee may delegate any of all of its authority hereunder, provided that the
Committee shall in no event delegate its authority with respect to the
compensation of any Participant whose compensation the Board or Committee
reasonably believes may become subject to Section 162(m) of the
Code.  No member of the Committee shall be eligible to participate in
the Program.

      


      
        
           

        

        
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      Participants
and Target Award:

      Prior to
March 30th of the
Performance Period, or at such later time as may be permitted by applicable
provisions of the Code, the Committee shall establish (A) the eligible employees
who will be Participants in the Program, (B) each Participant's target Award for
such Performance Period or the formula for determining each Participant's Award
and (C) the applicable performance objective or objectives for such Performance
Period.

      


      


      Determination
of Awards:

      Payment
calculations will be based on the Participant’s annualized salary (or other rate
as determined by the committee) as of the final pay period of the Performance
Period.  Final calculated incentive payments are rounded up to the
nearest hundred dollars. All calculations are completed in USD and converted
using the D-R foreign exchange rates at the end of the Performance
Period.  Non-USD Awards are converted back to local currency after the
incentive payment has been rounded.

      


      


      Bonus
Pool:

      The
Program for a Performance Period may consist of one or more bonus pools, with
each Participant placed in one such pool.  The Committee shall approve the
structure of each such pool and designate the Participants in the pool, the
total amount of the pool, and such Participant's allocable percentage share of
such pool prior to March 30 of the Performance Period (or such later time as may
be permitted by applicable provisions of the Code).  To the extent a
pool includes "Covered Employees" within the meaning of Section 162(m) of the
Code, the pool shall be operated in compliance with the requirements of Section
162(m), which require that (i) each Participant's percentage share of the pool
must be established no later than 90 days after the commencement of the
applicable Performance Period, and (ii) the exercise of negative discretion with
respect to one Participant in the pool may not result in an increase in the
amount payable to any Covered Employee who is a Participant in such pool. 
Moreover, if the amount payable to each Participant in a pool that includes one
or more Covered Employees is stated in terms of a percentage of the pool, the
sum of the individual percentages of the pool may not exceed 100
percent.

      


      The Bonus
Pool performance goals, to the extent it covers or potentially covers Covered
Employees, will be based solely on Qualifying Performance
Criteria.  Satisfaction of these Criteria will enable a Participant to
earn 100% of his or her target bonus (or whatever applicable percentage is
indicated in the Program's metrics established for the Performance
Period).  The Committee may then take into account other criteria
(whether or not Qualifying Performance Criteria) and use negative discretion to
decrease a Participant's Incentive Bonus, but it may not use other criteria or
positive discretion to increase the Incentive Bonus for any Covered
Employee.

       

      
        
           

        

        
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      The same
objective financial goals can be used both to set the amount of the Bonus Pool
and to function as the Qualifying Performance Criteria to determine if an
Incentive Bonus (and the amount of the bonus) was earned.  The
Committee shall establish a minimum threshold for the Qualifying Performance
Criteria, below which no Incentive Bonus will be earned.  The
Committee shall also establish maximum limits on the Incentive Bonus payable at
various levels about this threshold that the Qualifying Performance Criteria are
satisfied, and the relationship between the various levels of Qualifying
Performance Criteria achieved and the amount of Incentive Bonus thereby
earned.

      


      


      Pro-rata
calculations:

      Participants
who become eligible for the Program during the Performance Period will receive
pro-rata payments based on the number of months during the Performance Period in
which they participate in the Program.  Participants will receive
credit for a month if they become eligible on or before the 15th day of
the month.

      


      Participants
who change positions during the Performance Period may experience a change in
Program objective, Target Awards, Individual Objectives (provided the Individual
Objectives associated with a position existed for at least four full months), or
the formula for determining each Participant’s Award. In this situation, the
Participant will receive a pro-rata payout for the incentive earned in each
position.  These pro-rata payments will be added together to arrive at
the total annual Program incentive payment.

      


      Notwithstanding
the foregoing, in the case of a newly hired Participant, the Committee may
provide for a guaranteed bonus, or a bonus that would exceed the bonus that
would otherwise be payable in the Program unless the Participant is a "covered
employee" (within the meaning of Section 162(m) of the Code),in which case no
guarantees or excess payments would apply

      


      If a
Participant transfers to a non-eligible position during the Performance Period,
such Participant is eligible for an Individual Payout for such Performance
Period, based on the number of months during the Performance Period in which
they were in an eligible position, based on the Individual Incentive Percentage
for the Participant’s annualized salary immediately prior to the Participant’s
transfer to a non-eligible pay category.  Participants will receive
credit for a month if they became non-eligible on or after the 15th day of
the month.

      


      


      Exclusions
and Adjustments:

      To the
extent consistent with Section 162(m) of the Code, the Committee
(A) shall appropriately adjust any evaluation of performance under a
Qualifying Performance Criteria to eliminate the effects of charges for
restructurings, discontinued operations, extraordinary items and all items of
gain, loss or expense determined to be extraordinary or unusual in nature or
related to the acquisition or disposal of a segment of a business or related to
a change in accounting principle all as determined in accordance with standards
established by opinion No. 30 of the Accounting Principles Board (APA
Opinion No. 30) or other applicable or successor accounting provisions, as well
as the cumulative effect of accounting changes, in each case as determined in
accordance with generally accepted accounting principles or identified in the
Company’s financial statements or notes to the financial statements, and (B) may
appropriately adjust any evaluation of performance under a Qualifying
Performance Criteria to exclude any of the following events that occurs during a
performance period: (i) asset write-downs, (ii) litigation, claims, judgments or
settlements, (iii) the effect of changes in tax law or other such laws or
provisions affecting reported results, (iv) the adverse effect of work stoppages
or slowdowns, (v) accruals for reorganization and restructuring programs
and (vi) accruals of any amounts for payment under this Plan or any other
compensation arrangement maintained by the Company.

      


      
        
           

        

        
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      Certification
by Committee:

      Unless
otherwise determined by the Committee, no payments shall be made hereunder in
respect of any Performance Period unless the Committee shall certify in writing
following the end of the Performance Period that the performance objectives
applicable to the Performance Period have been satisfied.  In all
events, no payments hereunder shall be made to any "covered employee" (within
the meaning of Section 162(m) of the Code) until after satisfaction of the
performance criteria has been certified by the Committee.

      


      


      Termination
of Employment:

      Unless
otherwise determined by the Committee and except as may otherwise be provided in
a Participant's written agreement with the Company or an Affiliate, if a
Participant's employment terminates for any reason prior to the date on which an
Award for a Performance Period is paid hereunder, such Participant shall forfeit
all rights to such Award, unless the Participant's employment terminates as a
result of Death, Severance, Disability or Retirement.  In such cases,
the Committee shall give consideration at its sole discretion to the payment of
an Award or partial Award with regard to the portion of the Performance Period
worked, but for Covered Employees, only to the extent that the performance
objectives have been satisfied.

      


      Employment
changes due to Severance, Retirement or Disability may result in a pro-rated
Award payment, based on full months of service, at the Committee's discretion,
but any such Award payments (i) will only be made after the end of the
Performance Period (at the same time as all other Award payments for such
Performance Period), and (ii) only to the extent that the performance
criteria were achieved.

      


      A
Participant is considered to have Retired if the Participant has at the time of
termination expressed in writing an intent not to engage in any form of business
conducted by the Company in a from satisfactory to the Company, has given the
Company at least one year’s advance written notice of the intention to retire,
and:

      


      1.  Has
attained the age of 62 and have 10 or more years of service; or

      2.  Has
attained the age of 65 and have 5 or more years of service

      


      Death of
Participant

      
        	
                 
      

              	
                1.

              	
                Upon
      the death of a Participant during a Performance Period, a prorated payment
      based on number of full months worked will be made to the Participant’s
      Beneficiary by March 15 following the Performance Period for US-paid
      Employees or April 1 for Participants not paid from the
  US.

              


      

      
        	
                 
      

              	
                2.

              	
                Upon
      the death of a Participant after a Performance Period, but before payment
      for that Year has been made, the full benefit otherwise due under the
      Program will be will be made to the Participant’s Beneficiary by March 15
      following the Performance Period for US-paid Employees or April 1 for
      Participants not paid from the US.

              


      

       

      
        
           

        

        
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      Beneficiary:

      Payment
for the benefit of a deceased Participant will be made in preference of the
following:

      


      
        	
                 
      

              	
                1.

              	
                As
      the participant specified as the Company life insurance
      beneficiary,

              


      

      
        	
                 
      

              	
                2.

              	
                for
      employees not covered in the Company life insurance policy or who
      otherwise have not specified a beneficiary award will be made as specified
      in the Last Will and Testament,

              


      

      
        	
                 
      

              	
                3.

              	
                Spouse,
      then

              


      

      
        	
                 
      

              	
                4.

              	
                Children

              


      

      


      


      Maximum
Amount Payable:

      The
maximum Award payable hereunder to any Participant with respect to any
Performance Period shall in no event exceed $6 million.

      


      


      Payment
of Awards:

      Following
the Performance Period, each Participant's Award for the Performance Period will
be determined in accordance with the terms of the Program, and the Participant
shall be eligible to receive payment of the Award.  Individual
Payments to actively employed, eligible Participants will be paid by March 15
following the Performance Period for US-paid Employees; or by April 1 for
Participants not paid from the US.

      


      The
Committee shall determine whether payment of the Award will be in cash, Common
Shares, the right to receive Common Shares, options or other similar Awards, and
whether any such payments will be subject to restrictions on transfer, vesting,
forfeiture or deferral requirements. Equity or equity-based Awards shall be
granted under the terms and conditions of the Plan.

      


      


      Change
in Control:

      Unless
otherwise determined by the Committee, and except as otherwise may be provided
in a Participant’s written agreement with the Company or Affiliate, upon a
Change in Control, this Program will automatically terminate and all
Participants will be vested and entitled to a prorated lump sum payment equal to
the Participant’s Individual Target Payout (using the annualized salary in
effect on the date of Change in Control) multiplied by the number of months of
the Performance Period, ending with the date the Change in Control Occurred,
divided by 12.  This payment will be made as soon as administratively
practicable following the Change in Control, but in no event later than 45 days
from the Change in Control.

      


      
        
           

        

        
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      No Right to
Awards:

      No
Participant or other person shall have any claim or right to be granted an Award
under this Program.  Neither the establishment of this Program, nor
any action taken hereunder, shall be construed as giving any Participant any
right to be retained in the employ of the Company, or participate hereunder in
the current or succeeding Performance Periods. Nothing contained in this Program
shall limit the ability of the Company to make payments or Awards to
Participants under any other Program, agreement or arrangement; provided,
however, that no payment under any other Program, agreement, or arrangement will
be made because of a failure of a Participant to earn an Award hereunder, and no
such payment outside of this Program will be in the nature of or in any way
related to make-whole payments for what would have been earned hereunder if the
performance goals had been met.

      


      


      Non-Transferability:

      The
rights and benefits of a Participant hereunder are personal to the Participant
and, except for any payments that may be made following a Participant's death,
shall not be subject to any voluntary or involuntary alienation, assignment,
pledge, transfer, encumbrance, attachment, garnishment or other
disposition.

      


      


      No Impact on
Benefits:

      Except as
may be required by law or otherwise be specifically stated under any employee
benefit plan, policy or program, no amount payable in respect of any Award shall
be treated as compensation for purposes of calculating a Participant's right
under any such plan, policy or program nor shall any Award be treated as
compensation for purposes of termination indemnities or other similar rights,
except as may be required by law.

      


      


      No Constraint on
Corporate Actions:

      Nothing
in this Program shall be construed (A) to limit, impair or otherwise affect the
Company's right or power to make adjustments, reclassifications, reorganizations
or changes of its capital or business structure, or to merge or consolidate, or
dissolve, liquidate, sell, or transfer all or any part of its business or assets
or (B) to limit the right or power of the Company or any of its Affiliates to
take any action which such entity deems to be necessary or
appropriate.

      


      


      Rights
of the Committee:

      Except as
provided below, the Committee has complete, unilateral discretion with respect
to all aspects of the operation, administration, design, features, benefits and
Awards under the Program and can change, terminate, or modify Awards, or
otherwise change any aspect of the Plan in its discretion prospectively or
retroactively regardless of anything stated in this
document.   Notwithstanding the above, with respect to a Covered
Employee, the Committee cannot (i) grant or change an Award, or the Qualified
Performance Criteria thereunder, after the deadline under Code Section 162(m)
for setting such Award (generally March 30 of a Performance Period for annual
Awards), (ii) deem its performance goals satisfied when they have not been met,
or (iii) use its discretion to increase the amount otherwise payable under any
Award.

       

      
        
           

        

        
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      Taxes:

      For U.S.
Participants, any Award received under the Program is taxable as supplemental
income in the year of payment and is subject to all applicable employment
withholding taxes in the year paid.  For Participants outside the
United States, country tax regulations will apply.

      


      Deductions:

       

      
        	
              	
                1. 

              	
                There
      shall be deducted from all Individual Payouts any taxes required to be
      withheld by national, Federal, state provincial or local governments and
      paid over to such government for the accounts of such
      Participants.

              


      

      


      
        
          	
                	
                  2. 

                	
                  The
      Company may deduct from an Individual Payout, at its sole discretion, any
      and all amounts determined by Company management to be owed to the Company
      by the Participant.

                


        

      

      


      


      Legal
Information:

      In all
events, whether any cash Award is paid to a Participant will depend on the
decision of the Committee (or its delegate, as appropriate).  All
Awards are subject to the sole discretion of the Committee or its delegate, and
nothing in this document or any other document describing or referring to the
Program shall confer any right whatsoever on any person to be considered for any
incentive commitments or Awards.

      


      This
document does not purport to be complete and is subject to and governed by
actions, rules and regulations of the Committee (or its delegate, as
appropriate).

      


      The
Program may be changed or discontinued at any time without notice or liability
at the sole discretion of the Committee.

      


      Awards
shall be subject to and governed by the specific terms and conditions of the
Program and the applicable Award.

      


      Nothing
contained herein shall require the Company to segregate any monies from its
general fund or to create any trusts, or to make any special deposits for
amounts payable to any Participant.

      


      The
Program is intended to be operated in accordance with the requirements of
Section 162(m) of the Code where applicable, and shall be interpreted consistent
with that intent.

      


      


      Affiliates:

      The
Committee, in its sole discretion, may approve the participation of employees of
a Dresser-Rand Affiliated Company in the Program.  Prior to the
selection of employees of an affiliated company to participate in the Program,
the Committee may require the Affiliate to consent to the participation of such
employee or employees in the Program and to the charging of such Affiliate with
the amount of any Individual Payout which may be made to such employee or
employees.

       

      
        
           

        

        
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      Recoupment:

      Every
participant in the Program is obligated to reimburse to the Company all or such
portion of any incentive compensation paid after April 1, 2009, that would not
have been provided but for such Participant’s intentional misconduct (including
knowingly creating a false document) that caused the material noncompliance of
the Company with any financial reporting requirement under the securities laws
requiring a restatement of the Company’s financial results.  The
Company may condition any payment under the Program to a Participant on such
Participant’s express agreement to honor this obligation and the other terms and
conditions of the Program.

      


      The
requirement under this Program that the participant provide such reimbursement
does not alter or affect the other rights and remedies that the Company may have
as a result of such intentional misconduct.

      


      


      Other
Provisions:

      No member
of the Committee, or employee of the Company, shall be liable for any act done,
or determination made in good faith, with respect to the administration of this
Program.  The Company indemnifies and holds harmless to the fullest
extend allowed by law such persons individually and collectively, from and
against any and all losses resulting from liability to which the Committee, or
the members of the Committee, or employee of the Company may be subjected by
reason of any act or conduct (except willful misconduct, fraud or gross
negligence) in their official capacities in the administration of the Program,
including all expenses reasonably incurred in their defense, in case the Company
fails to provide such defense.

      


      Any
provision of the Program prohibited by law shall be ineffective to the extent of
such prohibition without invalidating the remaining provisions.

      


      The terms
of this Program document supersede any written or verbal agreements,
representations, proposals or plans with respect to the subject matter hereof;
provided, however that the forgoing shall not act to supersede an existing
written agreement between a Participant and the Company that has been approved
by the Committee.

      

 

      IN
WITNESS WHEREOF, the Company has adopted this Program this 12th day of
February 2010.

      


       

      
        
          	 	 	DRESSER-RAND
      COMPANY	 
	 	 	 	 
	
                   

                	
                   

                	/s/
      James A. Garman    	 
	 	 	James
      A. Garman	 
	 	 	Vice
      President and Chief Administrative Officer	 
	 	 	 	 


        



      
        
           

        

        
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