**EXHIBIT10.3**DRESSER-RAND          CommercialHeadquarters          1200 West Sam Houston Parkway N.          Houston, TX 77043          Phone: 713-973-5377          Fax: 713-973-5323**Vincent R.Volpe Jr.***President & CEO*December 1, 2006LonnieArnettVice President, Controller and Chief Accounting OfficerDresser-Rand1200 W. Sam Houston Pkwy N.Houston, Texas 77043Dear Lonnie,Earlier this year you received a $200,000 bonus in recognition of thetremendous results you achieved within the corporate accountingfunction since joining Dresser-Rand. And you know better than anyone,while much has been accomplished, there is still much left to do inmeeting the remaining objectives of eliminating each of our itemizedmaterial weaknesses.Ourintent is to ensure that the company is making significant progressin implementing and managing its internal control environment. It isimportant to every member of the executive staff that we run ournewly public company with strict adherence to financial, electronicsystems, and human resource controls that mitigate any possibility ofpoor business practices due to unethical, illegal, or simplyuninformed actions. I recognize that this will involve significantadditional work, and I believe that these results should beappropriately rewarded.I ampleased to let you know that you will be eligible to receive anadditional special bonus in 2007. This bonus will have a maximumaward potential of $200,000. The bonus will be paid to you on apro-rata basis to the extent it is earned throughout the year. Thepro-rata payments will be based on the achievement of substantiveprogress toward the elimination of the company’s materialweaknesses and the establishment of appropriate financial internalcontrols. This bonus opportunity will remain the effect through thecompletion of the company’s FY2007 financial audit.You willalso be eligible to receive up to an additional $200,000 for theachievement of a 2007 financial audit indicating that thecompany’s material weaknesses have been substantiallyremediated. This bonus will be paid to you in 2008, as soon asreasonably possible following the completion of the audit to thecompany’s satisfaction.You mayelect to receive each of these bonuses in either cash or companystock by making such election in the manner designated by thecompany. The bonus amounts described in this letter are in additionto your annual AIM program eligibility.Inaddition to the performance bonuses outlined above you will also beeligible to receive a restricted stock grant valued at $500,000 onFebruary 15, 2007. The number of shares will be determined bydividing $500,000 by the closing DRC share price on February 15,2007. The shares would vest in three equal installments on each ofthe first three anniversaries of the grant
 

 
    date. You will be provided with a grant agreement for your    signature indicating all other details at the time of grant.     Of course, receipt and payment of any of the above incentives is    contingent on your continuing to be employed by the company both    on the date the incentive is earned and on the date the    incentive is paid with respect to any restricted stock. The    grant and vesting of such restricted stock would also be subject    to your signing the grant agreement and otherwise complying with    the terms therein.     Lonnie, once again I want to recognize, on behalf of the    company, your terrific contributions to Dresser-Rand and to    express my confidence in your ability to lead us through the    necessary actions to achieve these important objectives.     Best Regards,     /s/ Vincent R. Volpe, Jr.     Vincent R. Volpe, Jr.     VRV/lb****