THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Dresser-Rand Group Inc. (DRC)

4/17/2006 Proxy Information

Amended and Restated Limited Liability Company Agreement of Dresser-Rand Holdings, LLC

In connection with the acquisition, Dresser-Rand Holdings, LLC, our indirect parent, amended and restated its limited liability company agreement, governing, among other things, the terms under which senior management acquired common units and profit units in Dresser-Rand Holdings, LLC. The material terms of the Holdings LLC Agreement are summarized below.

Dresser-Rand Holdings, LLC Membership Interests

Pursuant to an agreement reached with management prior to our acquisition by funds affiliated with First Reserve, certain members of management were offered the opportunity in October 2004 to acquire common units in Dresser-Rand Holdings, LLC at the same price paid per unit by the funds affiliated with First Reserve in connection with the acquisition. Executives who purchased common units were also issued profit units in Dresser-Rand Holdings, LLC, which permit them to indirectly share in appreciation in the value of our shares. After a period of several weeks to evaluate the offer, certain of our executive officers, including our Chief Executive Officer and each of our four other most highly compensated executive officers, availed themselves of this opportunity in November 2004. Our Directors were not offered the opportunity to acquire common units or profit units in Dresser-Rand Holdings, LLC. The terms of the plan are set forth in the Amended and Restated Limited Liability Company Agreement of Dresser-Rand Holdings, LLC, which we refer to as the Holdings LLC Agreement. Under the terms of the Holdings LLC Agreement, management members whose capital contribution exceeds $100,000 are subject to a provision not to compete with us during the period for which they provide services to us and for a period of two years thereafter. The following contains a summary of the material terms of the Holdings LLC Agreement.

The only asset of Dresser-Rand Holdings, LLC is its ownership, through D-R Interholding, LLC, of our shares. The Holdings LLC Agreement permits the grant of the right to purchase common units to members of Dresser-Rand Holdings, LLC and the grant of profit units, consisting of one initial tranche of service units and five initial tranches of exit units, to certain management members who own common units. In October and November 2004, First Reserve, through its affiliated funds, and certain other members purchased 100,609,829 common units for an aggregate purchase price of $435.8 million. Messrs. Volpe, Nye, Riordan, Dickson and Chevrier respectively purchased 461,892, 57,737, 115,473, 115,425 and 60,000 common units in November 2004. In November 2004, Dresser-Rand Holdings, LLC issued 7,975,000 profit units to management members, with Messrs. Volpe, Nye, Riordan, Dickson and Chevrier respectively receiving 4,000,000, 400,000, 700,000, 400,000 and 400,000 of such profit units. During 2005, three additional management members became members of Dresser-Rand Holdings, LLC and purchased 303,735 common units for an aggregate purchase price of $1.3 million. These management members were also issued a total of 1,000,000 profit units.

The proceeds of all common unit issuances were used to acquire, through D-R Interholding, LLC, our shares. The proceeds from the dividends paid to shareholders in connection with our initial public offering were distributed to members of Dresser-Rand Holdings, LLC in accordance with the terms of the Holdings LLC Agreement. Affiliates of First Reserve received approximately $544.3 million, and the management members of Dresser-Rand Holdings, LLC received approximately $11.8 million in the aggregate, with Messrs. Volpe, Anthony, Nye, Riordan, Dickson and Chevrier, respectively, receiving approximately $3,779,192, $l,462,726, $441,237, $851,303, $757,544 and $453,645.

Dresser-Rand Holdings, LLC currently holds 54,196,981 shares of our common stock. The amount of proceeds that would be received by management members of Dresser-Rand Holdings, LLC in connection with a sale by Dresser-Rand Holdings, LLC depends on the amount of cash proceeds received by First Reserve compared to various multiples of First Reserve’s cost per share. If Dresser-Rand Holdings, LLC were to sell all of its shares, then it would generate proceeds equal to the number of shares of our common stock it holds multiplied by the average price per share at which the shares were sold. If these sales were to occur at an average price per share above $14.07, the management members would be fully vested in their profits units, and would receive approximately 9.6% of the net proceeds raised in such sales, with Messrs. Volpe, Anthony, Nye, Riordan, Dickson and Chevrier, respectively, receiving approximately 4.1%, 0.9%, 0.4%, 0.7%, 0.5% and 0.4% of the net proceeds.

All such payments to management would be from the proceeds of stock sales by Dresser-Rand Holdings, LLC, which may be effected through D-R Interholding, LLC, neither of which is consolidated in our financial statements. Though management would receive no payment from us in connection with any such offering, we would record a pre-tax and after-tax, non-cash compensation expense in connection with the exit units, and an increase in paid-in capital approximately equal to the fair value of such exit units at the grant date. Neither cash nor total stockholders’ equity would be impacted.

Amendment

First Reserve may amend the Holdings LLC Agreement, provided that no amendment is permitted that would adversely affect the management members as a class without the consent of a majority in interest, excluding profit units, of the management members.

Units Held by Certain of Our Managers

The units of Dresser-Rand Holdings, LLC consist of common units and profit units. Each common unit is entitled to receive an identical share of the profits and losses of Dresser-Rand Holdings, LLC, which it is anticipated will consist solely of amounts realized with respect to Dresser-Rand Holdings, LLC’s investment in our shares. Profit units consist of service units and five tranches of exit units, and as explained in more detail below, are each generally entitled to an identical share of the profits and losses of Dresser-Rand Holdings, LLC above the benchmark amount applicable to each profit unit, although the exit units are subject to the additional condition that the applicable performance-based conditions are satisfied. The benchmark amount of $4.33 for each profit unit was set at the initial per unit cost of the common units, which equated to the value of our shares at the time of the acquisition. Because the benchmark amount was set at this amount, profit units will share in distributions from Dresser-Rand Holdings, LLC only if there is any realized gain in the value of our shares. It is anticipated that any cash received by Dresser-Rand Holdings, LLC with respect to our shares that it owns will be promptly distributed to the holders of the common units and, to the extent applicable, the profit units.

As of March 2, 2006, approximately 98.4% of common units were held by First Reserve and approximately 1.6% were held by certain members of our management. The profit units are held exclusively by members of our management.

Terms of the Common Units, Service Units and the Exit Unit Tranches

The following is a summary of certain terms of the common units, service units and the five exit unit tranches and certain rights and restrictions applicable to those units.

A holder of units is entitled to one vote for each unit outstanding on a given record date, or other date as applicable, provided that if a management member ceases to provide services to or for the benefit of Dresser Rand Holdings, LLC, the units held by such management member will cease to have voting rights. Holders of profit units generally will not be entitled to distributions in respect of such units until such time as the amounts that would otherwise have been distributed in respect of each such unit equals the benchmark amount described above, except that Dresser-Rand Holdings, LLC may advance tax distributions to help cover any allocations of taxable income to them. Once this benchmark amount is achieved, profit units will participate proportionately in distributions.

Service units vest in five equal annual installments on the first five anniversaries of the issuance date, subject to the management member’s continued service to or for the benefit of Dresser-Rand Holdings, LLC. All of the service units will vest immediately prior to the occurrence of a change of control under the Holdings LLC Agreement. The initial public offering was not considered a change of control under the Holdings LLC Agreement. Although unvested service units are subject to forfeiture if a management member’s service terminates, management members are entitled to receive any distributions of profits and losses payable with respect to their unvested service units as long as they are providing services to or for the benefit of Dresser Rand Holdings, LLC at the time of the distribution.

Subject to the management member’s continued service to or for the benefit of Dresser-Rand Holdings, LLC management members will be entitled to receive a distribution of profits over and above the benchmark amount on their exit units upon the occurrence of a transaction where First Reserve receives cash, cash equivalents or marketable publicly-traded securities on or with respect to its common units, if the value First Reserve receives from the transaction, or the cumulative value resulting from any prior transactions, exceeds multiples of the initial price paid by First Reserve for its units ranging from 2.25 to 3.25. Any tranche of exit units that does not become vested in a transaction described in the preceding sentence that is a change of control under the Holdings LLC Agreement will automatically be cancelled and the holder will not be entitled to any distributions with respect to such cancelled exit units.

If a management member ceases to provide services to or for the benefit of Dresser-Rand Holdings, LLC, Dresser-Rand Holdings, LLC may liquidate the management member’s units in exchange for shares of our common stock. The actual number of shares of our common stock that a management member would receive will be determined at the time, and will have the same total value as the amount the management member would receive if Dresser-Rand Holdings, LLC were to sell all of its assets for cash and distribute the proceeds to its members.

Certain Rights and Restrictions Applicable to the Units

The units held by members are not transferable for a limited period of time except in certain circumstances. In addition, units held by management members may be repurchased by Dresser-Rand Holdings, LLC, and in certain cases, First Reserve, in the event that a management member is subject to an involuntary transfer of his or her units or if a management member receives a bona fide offer to purchase his or her units and such management member wants to accept such offer. First Reserve has the ability to force members to sell their units along with First Reserve if First Reserve decides to sell its units. Under certain conditions, First Reserve may convert each member’s units into an economically equivalent amount of security interests of any successor entity in connection with an initial public offering of such successor entity to Dresser-Rand Holdings, LLC under the Holdings LLC Agreement.

The management members that hold units are entitled to participate in certain sales by First Reserve. In addition, many of the restrictions on transfer will cease to apply in the event of an initial public offering of any successor entity to Dresser-Rand Holdings, LLC under the Holdings LLC Agreement.

Stockholders Agreement

In connection with the acquisition, we entered into a stockholders agreement with First Reserve and certain management stockholders, which has since been amended and restated. The stockholders agreement provides that our Board of Directors will consist of six members upon the consummation of certain offerings. The Board may be subsequently expanded by vote of the Board to include additional Directors, including such additional independent directors as may be required by applicable securities laws or the rules of any exchange on which shares of our common stock are traded. In December 2005, the Board of Directors expanded the Board to eight members. The stockholders agreement provides that for so long as First Reserve holds at least 5% of the outstanding shares of our common stock, it may designate all of the nominees for election to our Board of Directors other than any independent directors. All stockholders that are a party to the stockholders agreement are obligated to vote their shares in favor of such nominees. Independent directors will be designated for nomination by our Board of Directors, however such independent nominees must be reasonably acceptable to First Reserve for so long as its holds at least 5% of the outstanding shares of our common stock. Our Board of Directors currently consists of our Chief Executive Officer, four other Directors nominated by First Reserve, Michael L. Underwood, Louis A. Raspino and Philip R. Roth.

For so long as First Reserve holds at least 20% of the outstanding shares of our common stock, many significant decisions involving us require the approval of a majority of our Board of Directors and at least one Director designated for nomination by First Reserve who is also an officer of First Reserve Corporation. For example, the following transactions are subject to such approval requirements: any acquisition or sale of assets involving amounts in excess of one percent of sales during any twelve month period, or any acquisition of another business or any equity of another entity; any merger, consolidation, substantial sale of assets or dissolution involving us or any of our material subsidiaries; any declaration of dividends; the issuance of common stock or other securities of us or any of our material subsidiaries; and any amendment to our amended and restated certificate of incorporation or comparable organizational documents of our material subsidiaries. Although state law is ambiguous regarding the extent to which fiduciary duties can be waived by contract, to the extent permitted by law, First Reserve has no implied or express duty to us or other stockholders regarding the approval or disapproval of these transactions. In addition, to the extent permitted by law, the stockholders agreement specifically provides that First Reserve and its affiliates may engage in material business transactions with us, pursue acquisition opportunities that may be complementary to us or make investments in companies that compete directly or indirectly against us, and will not be deemed to breach any fiduciary duty.

The stockholders agreement provides that First Reserve will have the ability to require us to register its shares of our common stock and may also require us to make available shelf registration statements permitting sales of shares into the market from time to time over an extended period. In addition, in connection with other registered offerings by us, holders of shares of our common stock who are parties to the stockholders agreement will have the ability to exercise certain piggyback registration rights with respect to their shares. Also, we are obligated to pay the fees associated with any public offering of shares held by First Reserve and management stockholders.

The stockholders agreement has an indefinite term. The stockholders agreement may generally be terminated or amended with the written consent of the stockholders holding a majority of the shares of our common stock subject to the agreement; however, any amendment that materially and disproportionately prejudices an individual stockholder or a discrete group of stockholders must be consented to in writing by such individual or group.

Supply Agreement

We entered into a supply agreement with Ingersoll-Rand, expiring on December 31, 2009, whereby we supply Ingersoll-Rand with certain assembly units (an “FRG”) for Ingersoll-Rand’s “PET Star 4” product. There are no minimum order quantities under this agreement.

License Agreement

As contemplated by the equity purchase agreement, Dresser-Rand Company and Dresser-Rand A.S., each an indirect wholly-owned subsidiary of DRC, agreed to certain covenants with and granted intellectual property rights related to the development of Ingersoll-Rand’s 250 kilowatt microturbine to Ingersoll-Rand Energy Systems Corporation and the Energy Systems Division of Ingersoll-Rand. Pursuant to the terms of the license agreement, Energy Systems was granted a non-exclusive, worldwide right and license (without the right to sublicense) to practice and use any intellectual property owned by Dresser-Rand Company or Dresser-Rand A.S. relating to the 250 kilowatt microturbines, and to manufacture, use, market and sell microturbines with a generating capacity of 1,000 kilowatts or less. The license was granted without royalties.

Dresser-Rand Name

Our company’s name and principal mark is a combination of the names of our founder companies, Dresser Industries, Inc. and Ingersoll-Rand. We have acquired perpetual rights to use the “Rand” portion of our principal mark from Ingersoll-Rand as part of the sale agreement. Although initially owned by Dresser Industries, Inc., in the merger of Dresser Industries, Inc. with and into Halliburton, Halliburton acquired all of the rights to the use of the name “Dresser.” When Halliburton sold its Dresser Equipment Group in April of 2001, Halliburton also sold the right to the “Dresser” name, subject to existing licenses and certain limitations. The Dresser-Rand Entities held one of those existing licenses, which has since expired. In connection with the recent sale of the Dresser-Rand Entities by Ingersoll-Rand, we negotiated a replacement license for the right to use the “Dresser” name in our business from Dresser, Inc. (f/k/a Dresser Equipment Group), an affiliate of First Reserve, in perpetuity, for consideration of $1 million plus an additional $4 million payable over the next 9 years.