UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 Form 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Year Ended December 31, 2009
 or
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    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number 1-12691
 ION Geophysical Corporation
 (Exact Name of Registrant as Specified in Its Charter)
 Delaware(State or Other Jurisdiction of
Incorporation or Organization)
    
    22-2286646(I.R.S. Employer
Identification No.)
 2105 CityWest Blvd
Suite 400
Houston, Texas 77042-2839  (Address of Principal Executive Offices, Including Zip Code)
 (281) 933-3339  (Registrants Telephone Number, Including Area Code)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, $0.01 par value
    
    New York Stock ExchangeRights to Purchase Series A Junior Participating Preferred Stock
    
    New York Stock Exchange
 Securities registered pursuant to Section 12(g) of the Act:
None
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  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
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   DOCUMENTS INCORPORATED BY REFERENCE
 Document
    
    Parts Into Which IncorporatedPortions of the Proxy Statement for the Annual Meeting of Stockholders to be held May 26, 2010
    
    Part III




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TABLE OF CONTENTS
 PagePART IItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    17Item 1B. Unresolved Staff Comments
    
    
    34Item 2. Properties
    
    
    34Item 3. Legal Proceedings
    
    
    35Item 4. Reserved
    
    
    36PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    37Item 6. Selected Financial Data
    
    
    38Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    39Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    65Item 8. Financial Statements and Supplementary Data
    
    
    66Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    66Item 9A. Controls and Procedures
    
    
    66Item 9B. Other Information
    
    
    68PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    69Item 11. Executive Compensation
    
    
    69Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    69Item 13. Certain Relationships, Related Transactions and Director Independence
    
    
    69Item 14. Principal Accountant Fees and Services
    
    
    69PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    69Signatures
    
    
    75Index to Consolidated Financial Statements
    
    
    F-1
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PART I
 Preliminary Note: This Annual Report on Form 10-K contains forward-looking statements as
that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking
statements should be read in conjunction with the cautionary statements and other important factors
included in this Form 10-K . See Item 1A.  Risk Factors for a description of important factors
which could cause actual results to differ materially from those contained in the forward-looking
statements.
 Business  Intellectual Property
 
 Item 1. Business
   
    
    Land and marine seismic data acquisition equipment,
    
    Navigation, command & control, and data management software products,
    
    Planning services for survey design and optimization,
    
    Seismic data processing and reservoir imaging services, and
    
    Seismic data libraries.
  Managements Discussion and Analysis of
Financial Condition and Results of Operations  Executive Summary
 3




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
 
    
    Land Imaging Systems cable-based, cableless and radio-controlled seismic data acquisition
systems, digital and analog geophone sensors, vibroseis vehicles (i.e., vibrator trucks) and
source controllers for detonator and vibrator energy sources and also consisting of analog
geophone sensors. After we complete our land equipment joint venture with BGP, all of these
business lines, with the exception of analog geophone sensors, will become part of the joint
venture. See   Proposed Land Equipment Joint Venture with BGP.
    
    Marine Imaging Systems towed streamer and redeployable ocean bottom cable seismic data
acquisition systems and shipboard recorders, streamer positioning and control systems and
energy sources (such as air guns and air gun controllers).
    
    Data Management Solutions software systems and related services for navigation and data
management involving towed marine streamer and seabed operations.
    
    ION Solutions advanced seismic data processing services for marine and land environments,
seismic data libraries, and Integrated Seismic Solutions (ISS) services.
 Risk Factors Managements Discussion and Analysis of Financial Condition and
Results of Operations
 www.iongeo.com
  . www.sec.gov
 Seismic Industry Overview
   4




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Managements Discussion and Analysis of Financial
Condition and Results of Operations
 5




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ION Geophysicals Business Strategy
 Factors Affecting Long-Term Demand.
  
    
    Demand for both crude oil and natural gas should continue to increase as the financial health
of developed country economies gradually improves, and as demand in high-growth emerging
markets, like China and India, returns to or exceeds previous levels;
    
    E&P companies are focusing more on hydrocarbon reservoirs that are located in deeper waters
or deeper in the geologic column. These reservoirs are generally more complex or subtle than
the reservoirs that were discovered in prior decades and are located in unconventional
reservoir types, such as tar sand deposits or tight gas locked within hard rock or low
permeability shales. As a result, the process of finding and developing these hydrocarbon
deposits is proving to be more challenging, which in turn results in escalating costs and
increasing demands for newer and more efficient imaging technologies; and
    
    E&P companies are increasingly using seismic data to enhance production from known fields by
repeating time-lapse seismic surveys over a defined area. This trend should benefit seismic
companies such as ION by extending the utility of subsurface imaging beyond exploration and
into production monitoring, which can last for decades.
  Becoming a Broad-Based Seismic Provider.
 
    
    Our acquisition of Concept Systems Holdings Limited (Concept Systems) and its integrated
planning, navigation, command & control, and data management software and solutions for towed
streamer and seabed operations; and
    
    Our acquisition of GX Technology Corporation (GXT), and its advanced seismic data imaging
solutions services and seismic data libraries for the marine environment.
   Responses to the Global Downturn.
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
    
    All of our business segments saw decreases in revenues, with some segments experiencing
significant decreases. Our 2009 total net revenues declined 38% from our 2008 total net
revenues.
    
    Our acquisition of ARAM in 2008 and the $282 million of debt financing that we incurred to
finance the acquisition over-leveraged our company.
    
    As a result, we reacted by implementing numerous cost-savings programs, including reducing
our company-wide employee headcount by approximately 26%.
    
    We also began considering strategic alternatives.
  Products and Services  ION Systems Division  Proposed Land Equipment
Joint Venture with BGP
    7




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®  ®  Products and Services
  
    
    Increasing our market share and profitability in land acquisition systems and furthering the
commercialization of FireFly, our cableless full-wave land data acquisition system, and our
other land equipment technologies through our participation in the proposed land equipment
joint venture with BGP;
    
    Continuing to manage our cost structure to reflect current market and economic conditions
while keeping key strategic technology programs progressing with an overall goal of enabling
E&P companies to solve their complex reservoir problems most efficiently and effectively;
    
    Expanding our ION Solutions business in new regions with new customers and new land and
marine service offerings, including proprietary services for owners and operators of oil and
gas properties;
    
    Globalizing our ION Solutions data processing business by opening advanced imaging centers in
strategic locations, and expanding our presence in the land seismic processing segment, with
emphasis on serving the national oil companies;
    
    Developing and introducing our next generation of marine towed streamer products, with a goal
of developing markets beyond the new vessel market;
    
    Expanding our seabed imaging solutions business using our VectorSeis® Ocean (VSO)
acquisition system platform and derivative products to obtain technical and market leadership
in what we continue to believe is a very important and expanding market; and
    
    Leveraging our proposed land equipment joint venture with BGP to design and
deliver lower cost, more reliable land imaging systems to our worldwide customer base of land
acquisition contractors while concurrently tapping into a broader set of global geophysical
opportunities associated with the exploration, asset development, and production operations of
BGPs parent, CNPC.
 Full-Wave Digital
    8




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
    
    Scorpion®  our cable-based land acquisition system;
    
    VectorSeis Ocean (VSO)  our redeployable ocean bottom cable system for the seabed; and
    
    FireFly  our cableless full-wave land acquisition system.
 Segment Information
 
 
    
    Land Imaging Systems primarily consisting of the businesses to be pursued by the joint
venture with BGP, consisting of cable-based, cableless and radio-controlled seismic data
acquisition systems, digital geophone sensors, vibroseis vehicles (i.e., vibrator trucks) and
source controllers for detonator and vibrator energy sources and also consisting of analog
geophone sensors.
    
    Marine Imaging Systems towed streamer and redeployable ocean bottom cable seismic data
acquisition systems and shipboard recorders, streamer positioning and control systems and
energy sources (such as air guns and air gun controllers).
    
    Data Management Solutions software systems and related services for navigation and data
management involving towed marine streamer and seabed operations.
    
    ION Solutions advanced seismic data processing services for marine and land environments,
seismic data libraries, and Integrated Seismic Solutions (ISS) services.
 Notes to Consolidated Financial Statements.
 Products and Services
 Managements Discussion and Analysis of Financial Condition and Results of
Operations  Executive Summary
 ION Systems Division
 Land Imaging Systems Products
  Land Acquisition Systems. ®
  9




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®
  ®
   Geophones.
 Vibrators and Energy Sources. ®
  10




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Proposed Land Equipment Joint Venture with BGP
    Marine Imaging Systems Products
  Marine Acquisition Systems. TM
  Marine Positioning Systems. ® 
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Source and Source Control Systems. ®
 Data Management Solutions Products and Services
  Marine Imaging. ®
 Seabed Imaging. ®
 Survey Design, Planning and Optimization.
 Post-Survey Analysis Tools. ® ®
 ION Solutions Division Services
  Seismic Data Processing Services.
   12




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
  Integrated Seismic Solutions (ISS).
 Seismic Data Libraries.
 Product Research and Development
    13




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Selected Financial Data
  Markets and Customers
        Notes
to Consolidated Financial Statements
 Manufacturing Outsourcing and Suppliers
   14




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Competition
    Products and
Services ION Solutions Division Services
  15




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Intellectual Property
  Legal Proceedings
 ® ® ® ® ® ® ® ® ® ® ® ® ® ® ®                
 Regulatory Matters
   16




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Employees
   Financial Information by Segment and Geographic Area
 Notes to Consolidated Financial Statements.
 
 Item 1A. Risk Factors
  
    
    the expected effects of current and future worldwide economic conditions and demand for
oil and natural gas and seismic equipment and services;
    
    future compliance with our debt financial covenants;
    
    expectations regarding the completion of our proposed joint venture with BGP;
    
    future benefits to be derived from our proposed joint venture with BGP;
    
    future availability of cash to fund our operations and pay our obligations;
    
    the timing of anticipated sales;
    
    future levels of spending by our customers;
    
    future oil and gas commodity prices;
    
    future cash needs and future sources of cash, including availability under our revolving
line of credit facility;
    
    expected net revenues, income from operations and net income;
    
    the expected outcome of litigation and other claims against us regarding our business
plan, our technology and our financial condition and results of operations;
    
    expected gross margins for our products and services;
    
    future benefits to our customers to be derived from new products and services, such as
Scorpion and FireFly and our full-wave digital products and services;
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
    
    future growth rates for certain of our products and services;
    
    future sales to our significant customers;
    
    the degree and rate of future market acceptance of our new products and services;
    
    expectations regarding future mix of business and future asset recoveries;
    
    our expectations regarding oil and gas exploration and production companies and
contractor end-users purchasing our more expensive, more technologically advanced products
and services;
    
    the degree and rate of future market acceptance of our new products and services;
    
    expectations regarding future mix of business and future asset recoveries;
    
    anticipated timing and success of commercialization and capabilities of products and
services under development and start-up costs associated with their development;
    
    expected improved operational efficiencies from our full-wave digital products and
services;
    
    potential future acquisitions;
    
    future levels of capital expenditures;
    
    our ability to maintain our costs at consistent percentages of our revenues in the
future;
    
    the outcome of pending or threatened disputes and other contingencies;
    
    future demand for seismic equipment and services;
    
    future seismic industry fundamentals;
    
    the adequacy of our future liquidity and capital resources;
    
    future opportunities for new products and projected research and development expenses;
    
    success in integrating our acquired businesses;
    
    sufficient future profits to fully utilize our net operating losses;
    
    expectations regarding realization of deferred tax assets; and
    
    anticipated results regarding accounting estimates we make.
  We have a substantial amount of outstanding indebtedness, and we will need to pay or refinance our
existing indebtedness or incur additional indebtedness, which may adversely affect our operations.
Any failure to complete our proposed transactions with BGP could result in an event of default
under our credit obligations.
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
    
    increase our vulnerability to general adverse economic, competitive and industry
conditions;
    
    limit our ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions, general corporate purposes or other purposes on
satisfactory terms, or at all;
    
    require us to dedicate a substantial portion of our cash flow from operations to the
payment of our indebtedness, thereby reducing funds available to us for operations and any
future business opportunities;
    
    expose us to the risk of increased interest rates because certain of our borrowings,
including borrowings under our Amended Credit Facility, are at variable rates of interest;
    
    restrict us from making strategic acquisitions or cause us to make non-strategic
divestitures;
    
    limit our planning flexibility for, or ability to react to, changes in our business and
the industries in which we operate;
    
    limit our ability to adjust to changing market conditions; and
    
    place us at a competitive disadvantage to our competitors who may have less indebtedness
or greater access to financing.
    19




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There is no guarantee that we will complete our proposed joint venture with BGP, and, if we do
complete the joint venture, we may be subject to additional risks relating to our ability to
perform our obligations under the joint venture, including funding future joint venture capital
requirements.
  
    
    Two promissory notes (the Convertible Notes) issued to Bank of China under the Amended
Credit Facility for an aggregate principal amount of $40.0 million, both convertible into
 shares of our common stock; and
    
    A Warrant Issuance Agreement with BGP, under which we granted to BGP a warrant (the
Warrant) to purchase shares of our common stock that may be exercised in lieu of
conversion of the Convertible Notes.
   
    
    we may lose the anticipated benefits of our proposed joint venture with BGP, which would
include the potential savings from economies of scope and scale for our land seismic
business and potential benefits from combined technological and new product development
offerings;
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
    
    we may lose our ability to successfully refinance and restructure our senior secured
indebtedness on terms favorable to our company, as contemplated by the Term Sheet;
    
    our business and operations may be harmed to the extent that customers, suppliers and
other believe that our ability to successfully compete will be less effective without the
joint venture or there is customer or employee uncertainty surrounding the future direction
of our company;
    
    our results of operations, financial condition and cash flows may be adversely affected
due to marketplace reaction, reduced sales levels and weakened financial condition caused by
any of the factors mentioned above; and
    
    the exercise price under the Warrant and the conversion prices under the Convertible
Notes could be adjusted and reduced below their current amounts to considerably
lower-than-current-market-price levels.
  To comply with our indebtedness and other obligations, we will require a significant amount of cash
and will be required to satisfy certain debt financial covenants. Our ability to generate cash and
satisfy debt covenants depends on many factors beyond our control. Our failure to complete the
proposed joint venture and related transactions with BGP and refinance our existing bank
indebtedness could result in an event of default under our credit facilities.
      
    
    incurring additional indebtedness and issuing preferred stock;
    
    creating liens on our assets;
    
    making certain investments or restricted payments;
    
    consolidating or merging with, or acquiring, another business;
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
    
    selling or otherwise disposing of our assets;
    
    paying dividends and making other distributions with respect to capital stock, or
repurchasing, redeeming or retiring capital stock or subordinated debt; and
    
    entering into transactions with our affiliates.
      We are exposed to risks relating to the effectiveness of our internal controls.
  22




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Controls and Procedures
  If we, our option holders or others holding registration rights, sell additional shares of our
common stock in the future, the market price of our common stock could decline. Additionally, our
outstanding shares of Series D Preferred Stock, the Convertible Notes issued under our Amended
Credit Facility and our Warrant issued to BGP in connection with our proposed joint venture with
BGP are convertible into or exercisable for shares of our common stock. The conversion of the
Series D Preferred Stock or the Convertible Notes or the exercise of the Warrant would result in
dilution, and could result in substantial dilution, to existing stockholders. Sales in the open
market of the shares of common stock acquired upon such conversion or exercise may have the effect
of reducing the then-current market prices for our common stock.
   Legal Proceedings
 Legal Proceedings
   23




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The current economic and credit environment and lower oil and natural gas prices could continue to
have an adverse effect on customer demand for certain of our products and services, which in turn
would adversely affect our results of operations, our cash flows, our financial condition, our
ability to borrow and our stock price.
    24




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If capital expenditures for E&P companies remain at reduced levels compared to recent periods, the
demand for our products and services may remain weak and our results of operations will be
adversely affected.
  
    
    the supply of and demand for oil and gas;
    
    the level of prices, and expectations about future prices, of oil and gas;
    
    the cost of exploring for, developing, producing and delivering oil and gas;
    
    the ability of the Organization of Petroleum Exporting Countries (OPEC) to set and
maintain production levels for oil;
    
    the expected rates of declining current production;
    
    the discovery rates of new oil and gas reserves;
    
    weather conditions, including hurricanes, that can affect oil and gas operations over a
wide area, as well as less severe inclement weather that can preclude or delay seismic data
acquisition;
    
    domestic and worldwide economic conditions;
    
    political instability in oil and gas producing countries;
    
    technical advances affecting energy consumption;
    
    government policies regarding the exploration, production and development of oil and gas
reserves;
    
    the ability of oil and gas producers to raise equity capital and debt financing; and
    
    merger and divestiture activity among oil and gas companies and seismic contractors.
  25




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We derive a substantial amount of our revenues from foreign operations and sales, which pose
additional risks.
   
    
    disruption of oil and natural gas E&P activities;
    
    restriction of the movement and exchange of funds;
    
    inhibition of our ability to collect receivables;
    
    enactment of additional or stricter U.S. government or international sanctions;
    
    limitation of our access to markets for periods of time;
    
    expropriation and nationalization of our assets;
    
    political and economic instability, which may include armed conflict and civil
disturbance;
    
    currency fluctuations, devaluations, and conversion restrictions;
    
    confiscatory taxation or other adverse tax policies; and
    
    governmental actions that may result in the deprivation of our contractual rights.
   Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt
service obligations to increase significantly.
 
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
    
    require us to dedicate a greater portion of our cash flow for interest payments on our
indebtedness and our other financial obligations, thereby reducing the availability of our
cash flow to fund working capital and capital expenditures;
    
    limit our flexibility in planning for, or reacting to, changes in our business and the
industry in which we operate; and
    
    place us at a competitive disadvantage compared to our competitors that have
proportionately less debt.
  Our operating results may fluctuate from period to period, and we are subject to seasonality
factors.
   The technologies and businesses contributed by our company and BGP to the proposed joint venture
may prove difficult to integrate, disrupt our business, dilute stockholder value and divert
management attention.
   27




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
    
    increased costs associated with the transaction and operation of the new business and new
technologies and the management of geographically dispersed operations;
    
    risks associated with the assimilation of new technologies (including incorporating BGPs
land seismic equipment with our existing land seismic imaging product lines being
contributed to the joint venture), operations, sites, and personnel;
    
    difficulties in retaining and integrating key technical, sales and marketing personnel
and the possible loss of such employees and costs associated with their loss;
    
    difficulties associated with preserving relationships with our customers, partners and
vendors;
    
    risks that any technology developed by the joint venture may not perform as well as we
had anticipated;
    
    the diversion of managements attention and other resources from other business
operations and related concerns;
    
    the potential inability to replicate operating efficiencies in the joint ventures
operations;
    
    potential impairments of goodwill and intangible assets;
    
    the inability to generate revenues to offset associated transaction costs;
    
    the requirement to maintain uniform standards, controls and procedures; and
    
    the impairment of relationships with employees and customers as a result of the
integration of management personnel from different companies.
  Intangible assets and goodwill that we have recorded in connection with our acquisitions are
subject to impairment evaluations and, as a result, we could be required to write-off additional
goodwill and intangible assets, which may adversely affect our financial condition and results of
operations.
 Goodwill and Other
Intangible Assets
 Due to the international scope of our business activities, our results of operations may be
significantly affected by currency fluctuations .
  28




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We are exposed to risks related to complex, highly technical products.
   We rely on highly skilled personnel in our businesses, and if we are unable to retain or motivate
key personnel or hire qualified personnel, we may not be able to grow effectively.
  If we do not effectively manage our transitions into new products and services, our revenues may
suffer.
  29




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Technological change in the seismic industry requires us to make substantial research and
development expenditures.
  We invest significant sums of money in acquiring and processing seismic data for our ION Solutions
multi-client data library.
  The loss of any significant customer could materially and adversely affect our results of
operations and financial condition.
   Our ION Solutions and Data Management Solutions segments increase our exposure to the risks
experienced by more technology-intensive companies.
  
    
    future competition from more established companies entering the market;
    
    product obsolescence;
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
    
    dependence upon continued growth of the market for seismic data processing;
    
    the rate of change in the markets for these segments technology and services;
    
    research and development efforts not proving sufficient to keep up with changing market
demands;
    
    dependence on third-party software for inclusion in these segments products and
services;
    
    misappropriation of these segments technology by other companies;
    
    alleged or actual infringement of intellectual property rights that could result in
substantial additional costs;
    
    difficulties inherent in forecasting sales for newly developed technologies or
advancements in technologies;
    
    recruiting, training, and retaining technically skilled personnel that could increase the
costs for these segments, or limit their growth; and
    
    the ability to maintain traditional margins for certain of their technology or services.
  Reservoir Exploration Technology (RXT) has been a significant customer of our Marine Imaging
Systems segment. A loss of business from this customer could adversely affect our sales and
financial condition if RXT is not replaced by another customer or customers.
   We are subject to intense competition, which could limit our ability to maintain or increase our
market share or to maintain our prices at profitable levels.
 Business  Competition.
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Certain of our facilities could be damaged by hurricanes and other natural disasters, which could
have an adverse effect on our results of operations and financial condition.
   We have outsourcing arrangements with third parties to manufacture some of our products. If these
third party suppliers fail to deliver quality products or components at reasonable prices on a
timely basis, we may alienate some of our customers and our revenues, profitability, and cash flow
may decline. Additionally, the current global economic crisis could have a negative impact on our
suppliers, causing a disruption in our vendor supplies. A disruption in vendor supplies may
adversely affect our results of operations.
    Our outsourcing relationships may require us to purchase inventory when demand for products
produced by third-party manufacturers is low.
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We may be unable to obtain broad intellectual property protection for our current and future
products and we may become involved in intellectual property disputes.
   Legal Proceedings
 Our operations, and the operations of our customers, are subject to numerous government
regulations, which could adversely limit our operating flexibility.
  Our certificate of incorporation and bylaws, Delaware law, our stockholders rights plan, the terms
of our Series D Preferred Stock and contractual requirements under our agreement with Fletcher
contain provisions that could discourage another company from acquiring us.
  
    
    authorizing the issuance of blank check preferred stock without any need for action by
stockholders;
    
    providing for a dividend on our common stock, commonly referred to as a poison pill,
which can be triggered after a person or group acquires, obtains the right to acquire or
commences a tender or exchange offer to acquire, 20% or more of our outstanding common
stock;
    
    providing for a classified board of directors with staggered terms;
    
    requiring supermajority stockholder voting to effect certain amendments to our
certificate of incorporation and by-laws;
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
    
    eliminating the ability of stockholders to call special meetings of stockholders;
    
    prohibiting stockholder action by written consent;
    
    establishing advance notice requirements for nominations for election to the board of
directors or for proposing matters that can be acted on by stockholders at stockholder
meetings; and
    
    requiring an acquiring party to assume all of our obligations under our agreement with
Fletcher and the terms of the Series D Preferred Stock set forth in our certificates of
rights and designations for those series, including the dividend, liquidation, conversion,
voting and share registration provisions.
 Managements
Discussion and Analysis of Financial Condition and Results of Operations
 Note: The foregoing factors pursuant to the Private Securities Litigation Reform Act of 1995
should not be construed as exhaustive. In addition to the foregoing, we wish to refer readers to
other factors discussed elsewhere in this report as well as other filings and reports with the SEC
for a further discussion of risks and uncertainties that could cause actual results to differ
materially from those contained in forward-looking statements. We undertake no obligation to
publicly release the result of any revisions to any such forward-looking statements, which may be
made to reflect the events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
 
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
  SquareOperating Facilities
    
    Footage

    
    SegmentStafford, Texas
    
    
    281,000
    
    
    Land and Marine Imaging SystemsCalgary, Canada
    
    
    139,000
    
    
    Land Imaging Systems and ION SolutionsHouston, Texas
    
    
    106,000
    
    
    Global Headquarters and ION SolutionsHarahan, Louisiana
    
    
    93,000
    
    
    Marine Imaging SystemsLacombe, Louisiana
    
    
    87,000
    
    
    Marine Imaging SystemsJebel Ali, Dubai, United Arab Emirates
    
    
    40,000
    
    
    International Sales Headquarters and Land Imaging SystemsDenver, Colorado
    
    
    29,000
    
    
    ION SolutionsVoorschoten, The Netherlands
    
    
    29,000
    
    
    Land Imaging SystemsEdinburgh, Scotland
    
    
    15,000
    
    
    Data Management Solutions819,000
 Notes to
Consolidated Financial Statements.
  34




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Item 3. Legal Proceedings
 WesternGeco. WesternGeco L.L.C. v. ION Geophysical Corporation
  Fletcher.
 
    
    On July 10, 2009, Fletcher filed a books and records proceeding in the Delaware
Court of Chancery under Section 220(b) of the Delaware General Corporation Law, styled
Fletcher International, Ltd. v. ION Geophysical Corporation f/k/a Input/Output, Inc.
Fletchers complaint asked the Court to require us to produce for its inspection a broad range
of our documents and records relating to our ARAM acquisition and other matters. Section
220(b) allows stockholders of Delaware corporations to make a demand on the corporation for
access to certain books and records of the corporation, provided that such demand is made with
appropriate specificity and is made for a proper purpose. We responded by asserting that
Fletcher had not requested the information with appropriate specificity or for a proper
purpose as required by law. After a hearing on December 23, 2009, the court determined that
most of Fletchers stated purposes for requesting the information were not valid or did not
constitute proper purposes and issued a ruling denying in significant part the scope and
breadth of the inspection sought by Fletcher.
    
    Under our February 2005 agreement with Fletcher, the aggregate number of shares of
common stock issued or issuable to Fletcher upon conversion of the Series D Preferred Stock
could not exceed a designated maximum number of shares (the Maximum Number), and such
Maximum Number could be increased by Fletcher providing us with a 65-day notice of increase.
In November 2008, Fletcher exercised its right to increase the Maximum Number from 7,669,434
shares to 9,669,434 shares. On September 15, 2009, Fletcher delivered a second notice to us
that purported to increase the Maximum Number of shares of common stock issuable upon
conversion of our Series D Preferred Stock from 9,669,434 shares to 11,669,434 shares. Our
interpretation of the agreement with Fletcher gave Fletcher the right to issue only one notice
to increase the Maximum Number (which Fletcher had exercised on November 8, 2008). On November
6, 2009, we filed an action in the Court of Chancery of the State of Delaware, styled ION
Geophysical Corporation v. Fletcher International, Ltd.,seeking a declaration that, under the
agreement, Fletcher is permitted to deliver only one notice to increase the Maximum Number and
that its purported second notice is legally invalid. Please refer to Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations Liquidity and
Capital Resources  Sources of Capital.
    
    On November 25, 2009, Fletcher filed a lawsuit against us and each of our
directors in the Delaware Court of Chancery. In the lawsuit, styled Fletcher International,
Ltd. v. ION Geophysical Corporation, f/k/a Input/Output, Inc., ION International S.à r.l.,
James M. Lapeyre, Bruce S. Appelbaum, Theodore H. Elliott, Jr., Franklin Myers, S. James
Nelson, Jr., Robert P. Peebler, John Seitz, G. Thomas Marsh And Nicholas G. Vlahakis,Fletcher
alleges, among other things, that we violated Fletchers consent rights by ION International
S.à r.l., an indirect wholly-owned subsidiary of ION Geophysical Corporation, issuing a
convertible promissory note to the Bank of China in connection with the Bank of China bridge
loan funded on October 27, 2009, and that the directors violated their fiduciary duty to the
company by allowing ION International S.à r.l. to issue the note without Fletchers consent.
Fletcher is seeking a court order requiring ION International S.à r.l. to repay the $10
million advanced to ION
 35




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##### 



International S.à r.l. under the bridge loan and unspecified monetary damages. In the lawsuit,
Fletcher is not claiming that it had a right to consent to any note issued by ION Geophysical
Corporation, including the issuance by ION Geophysical Corporation of a $30 million convertible
promissory note to the Bank of China on October 27, 2009, as part of the bridge loan. We believe
that Fletcher did not have the right to consent to the issuance of the bridge loan note by ION
International S.à r.l. or any other promissory note and that the claims asserted by Fletcher in
the lawsuit are without merit. We further believe that the ultimate outcome of the lawsuit will
not result in a material adverse effect on our financial condition or results of operations. We
intend to defend the claims against us in this lawsuit vigorously.
 Greatbatch. Input/Output, Inc. and I/O Marine Systems, Inc. v. Wilson Greatbatch Technologies, Inc.,
Wilson Greatbatch, Ltd. d/b/a Electrochem Lithium Batteries, and WGL Intermediate Holdings, Inc.,
Civil Action No. 578-881, Division A, ®
 Sercel. Input/Output, Inc. et al
v. Sercel, Inc., (5-06-cv-00236)
 Other.
 
 Item 4. Reserved
 36




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##### 



PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
  Price RangePeriod
    
    High
    
    LowYear ended December 31, 2009:Fourth Quarter
    
    $
    6.56
    
    
    $
    3.07Third Quarter
    
    
    3.76
    
    
    
    1.88Second Quarter
    
    
    3.51
    
    
    
    1.53First Quarter
    
    
    4.60
    
    
    
    0.83Year ended December 31, 2008:Fourth Quarter
    
    $
    13.95
    
    
    $
    2.14Third Quarter
    
    
    17.61
    
    
    
    12.64Second Quarter
    
    
    18.26
    
    
    
    13.82First Quarter
    
    
    16.05
    
    
    
    11.04
  Managements Discussion and Analysis of Financial Condition and Results of Operations  Liquidity
and Capital Resources
   (d) Maximum Number(or ApproximateDollar(c) Total Number of
    
    
    Value) of SharesShares Purchased as
    
    
    That(a)
    
    
    (b)
    
    
    Part of Publicly
    
    
    May Yet Be PurchasedTotal Number of
    
    
    Average Price
    
    
    Announced Plans or
    
    
    Under the Plans orPeriod
    
    Shares Acquired
    
    
    Paid Per Share
    
    
    Program
    
    
    ProgramOctober 1, 2009 to October 31, 2009
    
    
    
    
    
    $
    
    
    
    Not applicable
    
    Not applicableNovember 1, 2009 to November 30, 2009
    
    
    173
    
    
    $
    2.53
    
    
    Not applicable
    
    Not applicableDecember 1, 2009 to December 31, 2009
    
    
    39,376
    
    
    $
    5.76
    
    
    Not applicable
    
    Not applicableTotal
    
    
    39,549
    
    
    $
    5.75
 37




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##### 



Item 6.
    
    Selected Financial Data
 Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Years Ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(In thousands, except for per share data)Statement of Operations Data:Product revenues
    
    $
    237,664
    
    
    $
    417,511
    
    
    $
    537,691
    
    
    $
    354,258
    
    
    $
    237,359Service revenues
    
    
    182,117
    
    
    
    262,012
    
    
    
    175,420
    
    
    
    149,298
    
    
    
    125,323Net revenues
    
    
    419,781
    
    
    
    679,523
    
    
    
    713,111
    
    
    
    503,556
    
    
    
    362,682Cost of products
    
    
    165,923
    
    
    
    289,795
    
    
    
    386,849
    
    
    
    252,647
    
    
    
    163,575Cost of services
    
    
    121,720
    
    
    
    181,980
    
    
    
    119,679
    
    
    
    91,592
    
    
    
    86,619Gross profit
    
    
    132,138
    
    
    
    207,748
    
    
    
    206,583
    
    
    
    159,317
    
    
    
    112,488Operating expenses:Research, development and engineering
    
    
    44,855
    
    
    
    49,541
    
    
    
    49,965
    
    
    
    37,853
    
    
    
    26,379Marketing and sales
    
    
    34,945
    
    
    
    47,854
    
    
    
    43,877
    
    
    
    40,651
    
    
    
    33,167General and administrative
    
    
    72,510
    
    
    
    70,893
    
    
    
    48,847
    
    
    
    40,865
    
    
    
    28,326Impairment of goodwill and intangible assets
    
    
    38,044
    
    
    
    252,283
    
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    190,354
    
    
    
    420,571
    
    
    
    142,689
    
    
    
    119,369
    
    
    
    87,872Income (loss) from operations
    
    
    (58,216
    )
    
    
    (212,823
    )
    
    
    63,894
    
    
    
    39,948
    
    
    
    24,616Interest expense, including amortization of non-cash debt discount
    
    
    (35,671
    )
    
    
    (12,723
    )
    
    
    (6,283
    )
    
    
    (5,770
    )
    
    
    (6,134
    )Interest income
    
    
    1,721
    
    
    
    1,439
    
    
    
    1,848
    
    
    
    2,040
    
    
    
    843Fair value adjustment of the warrant
    
    
    (29,401
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Impairment of cost method investment
    
    
    (4,454
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other income (expense)
    
    
    (4,023
    )
    
    
    4,200
    
    
    
    (3,992
    )
    
    
    (2,161
    )
    
    
    820Income (loss) before income taxes and change in accounting
principle
    
    
    (130,044
    )
    
    
    (219,907
    )
    
    
    55,467
    
    
    
    34,057
    
    
    
    20,145Income tax expense (benefit)
    
    
    (19,985
    )
    
    
    1,131
    
    
    
    12,823
    
    
    
    5,114
    
    
    
    1,366Net income (loss) before change in accounting principle
    
    
    (110,059
    )
    
    
    (221,038
    )
    
    
    42,644
    
    
    
    28,943
    
    
    
    18,779Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    398
    
    
    
    Net income (loss)
    
    
    (110,059
    )
    
    
    (221,038
    )
    
    
    42,644
    
    
    
    29,341
    
    
    
    18,779Preferred stock dividends and accretion
    
    
    3,500
    
    
    
    3,889
    
    
    
    2,388
    
    
    
    2,429
    
    
    
    1,635Preferred stock beneficial conversion charge
    
    
    
    
    
    
    68,786
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss) applicable to common shares
    
    $
    (113,559
    )
    
    $
    (293,713
    )
    
    $
    40,256
    
    
    $
    26,912
    
    
    $
    17,144Net income (loss) per basic share before change in accounting principle
    
    $
    (1.03
    )
    
    $
    (3.06
    )
    
    $
    0.49
    
    
    $
    0.33
    
    
    $
    0.22Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    Net income (loss) per basic share
    
    $
    (1.03
    )
    
    $
    (3.06
    )
    
    $
    0.49
    
    
    $
    0.34
    
    
    $
    0.22Net income (loss) per diluted share before change in accounting principle
    
    $
    (1.03
    )
    
    $
    (3.06
    )
    
    $
    0.45
    
    
    $
    0.32
    
    
    $
    0.21Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    Net income (loss) per diluted share
    
    $
    (1.03
    )
    
    $
    (3.06
    )
    
    $
    0.45
    
    
    $
    0.33
    
    
    $
    0.21
 38




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##### 



Years Ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(In thousands, except for per share data)Weighted average number of common shares outstanding
    
    
    110,516
    
    
    
    95,887
    
    
    
    81,941
    
    
    
    79,497
    
    
    
    78,600Weighted average number of diluted shares outstanding
    
    
    110,516
    
    
    
    95,887
    
    
    
    97,321
    
    
    
    95,182
    
    
    
    79,842Balance Sheet Data (end of year):Working capital
    
    $
    (59,018
    )
    
    $
    267,155
    
    
    $
    220,522
    
    
    $
    170,342
    
    
    $
    153,761Total assets
    
    
    748,186
    
    
    
    861,431
    
    
    
    709,149
    
    
    
    655,136
    
    
    
    537,861Long-term debt, net of current maturities
    
    
    6,249
    
    
    
    253,510
    
    
    
    9,842
    
    
    
    70,974
    
    
    
    71,541Stockholders equity
    
    
    282,468
    
    
    
    325,070
    
    
    
    476,240
    
    
    
    369,668
    
    
    
    327,545Other Data:Capital expenditures
    
    $
    2,966
    
    
    $
    17,539
    
    
    $
    11,375
    
    
    $
    13,704
    
    
    $
    5,304Investment in multi-client library
    
    
    89,635
    
    
    
    110,362
    
    
    
    64,279
    
    
    
    39,087
    
    
    
    19,678Depreciation and amortization (other than multi-client library)
    
    
    47,911
    
    
    
    33,052
    
    
    
    26,767
    
    
    
    22,036
    
    
    
    23,497Amortization of multi-client library
    
    
    48,449
    
    
    
    80,532
    
    
    
    37,662
    
    
    
    25,011
    
    
    
    10,707
 Managements Discussion and Analysis of Financial
Condition and Results of Operations  Executive Summary  Our Current Debt Levels,  
Liquidity and Capital Resources  Sources of Capital  Meeting our Liquidity Requirements  Proposed Joint Venture and Related Transactions with BGP
 
 Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Note: The following should be read in conjunction with our Consolidated Financial Statements
and related notes that appear elsewhere in this Annual Report on Form 10-K .
 Executive Summary
 Our Business.
  
    
    Land Imaging Systems cable-based, cableless and radio-controlled seismic data
acquisition systems, digital geophone sensors, vibroseis vehicles (i.e., vibrator trucks)
and source controllers for detonator and vibrator energy sources and also consisting of
analog geophone sensors. After we complete our land equipment joint venture with BGP, all of
these business lines, with the exception of analog geophone sensors, will become part of the
joint venture. See   Proposed Land Joint Venture with BGP.
    
    Marine Imaging Systems towed streamer and redeployable ocean bottom cable seismic data
acquisition systems and shipboard recorders, streamer positioning and control systems and
energy sources (such as air guns and air gun controllers).
    
    Data Management Solutions software systems and related services for navigation and
data management involving towed marine streamer and seabed operations.
    
    ION Solutions advanced seismic data processing services for marine and land
environments, seismic data libraries, and Integrated Seismic Solutions (ISS) services.
  
    
    Increasing our market share and profitability in land acquisition systems and furthering
the commercialization of FireFly,
 39




---



##### 



our cableless full-wave land data acquisition system, and our other land equipment
technologies through our participation in the proposed land equipment joint venture with BGP;
    
    Continuing to manage our cost structure to reflect current market and economic
conditions while keeping key strategic technology programs progressing with an overall goal
of enabling E&P companies to solve their complex reservoir problems most efficiently and
effectively;
    
    Expanding our ION Solutions business in new regions with new customers and new land and
marine service offerings, including proprietary services for owners and operators of oil and
gas properties;
    
    Globalizing our ION Solutions data processing business by opening advanced imaging
centers in new strategic locations, and expanding our presence in the land seismic
processing segment, with emphasis on serving the national oil companies;
    
    Developing and introducing our next generation of marine towed streamer products, with a
goal of developing markets beyond the new vessel market;
    
    Expanding our seabed imaging solutions business using our VectorSeis Ocean (VSO)
acquisition system platform and derivative products to obtain technical and market
leadership in what we continue to believe is a very important and expanding market; and
    
    Leveraging our proposed land equipment joint venture with BGP to design and deliver lower
cost, more reliable land imaging systems to our worldwide customer base of land acquisition
contractors, while concurrently tapping into a broader set of global geophysical
opportunities associated with the exploration, asset development, and production operations
of BGPs parent, CNPC.
 Our Current Debt Levels.
 Liquidity and Capital Resources  Sources of Capital Notes Payable, Long-term
Debt and Lease Obligations
 Liquidity and Capital Resources  Sources of Capital Notes Payable, Long-term Debt and Lease Obligations.
 Proposed Joint Venture with BGP.
 40




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##### 




    
    Two promissory notes (the Convertible Notes) issued to the Bank of China under the
Amended Credit Facility for an aggregate principal amount of $40.0 million, both convertible
into shares of our common stock; and
    
    A Warrant Issuance Agreement with BGP, under which we granted to BGP a warrant (the
Warrant) to purchase shares of our common stock that may be exercised in lieu of
conversion of the Convertible Notes.
  Proposed Joint Venture and Related Transactions with BGP.
 Waivers under Amended Credit Facility.
    Economic Conditions and Cost Containments.
  41




---



##### 



 Proposed Joint Venture and Related
Transactions with BGP
    2009 Developments.
 42




---



##### 




    
    In January 2009, we announced our first delivery of a multi-thousand station version 2.0
FireFly system equipped with digital, full-wave VectorSeis sensors to the worlds largest land
contractor. The deployment in the second quarter of 2009 (we recognized the revenue from this
sale in the fourth quarter of 2009) of this FireFly system occurred in a producing hydrocarbon
basin containing reservoirs that have proven difficult to image with conventional seismic
techniques.
    
    In March 2009, we announced that we had signed an agreement with The Polarcus Group of
Companies for the provision of seismic data processing services. Under the agreement, we will
provide hardware, software and geophysicists in order to support a seismic projects entire
imaging lifecycle, from the vessel to an onshore data processing center.
    
    In April 2009, we announced that a 6,100 station FireFly system will be utilized by a major
oil company to undertake two high channel count, multicomponent (full-wave) seismic
acquisition programs in northeast Texas, and, in July 2009, we announced that our client had
sanctioned the second phase of the program.
    
    In April 2009, we announced the first commercial sale of our cable-based ARIES II seismic
recording platform to one of the worlds largest geophysical services providers. The sale
includes two 5,000 channel ARIES II recording systems that the customer plans to deploy on
upcoming, high-channel count seismic surveys.
    
    In May 2009, we announced that an 8,000 station FireFly system will be utilized by Compania
Mexicana de Exploraciones (Comesa), an oilfield services company majority-owned by PEMEX, the
national oil company of Mexico, on three projects in Mexico.
    
    In May 2009, we announced that we had successfully acquired an additional 6,200 kilometers of
regional seismic data offshore Indias western coast as part of our ongoing IndiaSPAN
program. Another 3,800 kilometers has since been acquired off the east coast of India.
    
    In July 2009, we announced that we had successfully completed the data processing and
interpretation for ArgentineSPAN, a basin-scale seismic program offshore Argentina.
ArgentineSPAN contains approximately 11,800 kilometers of new, regional data.
    
    In July 2009, we announced that we had successfully acquired 5,000 kilometers of regional
seismic data covering the Bight Basin and Ceduna Sub-basin offshore southern Australia. Known
as BightSPAN, this latest addition to our global BasinSPAN seismic data library offers the
first regional geologic study of Australias deepwater southern coast.
    
    In October 2009, we announced our proposed joint venture with BGP and the related bridge
financing transactions. See  Proposed Joint Venture and Related Transactions with BGP.
    
    In January 2010, we announced that we had extended our BrasilSPAN program, which makes it
one of the largest 2-D seismic datasets in our multi-client data library. The program
currently contains 42,000 km of data off the coast of South America.
 Proposed Joint Venture and Related Transactions with BGP
   43




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##### 




    
    BGP will have purchased approximately 23.8 million shares of our common stock for $66.6
million and thereby own, before giving effect to the issuance of those shares, approximately
19.99% of our outstanding common stock.
    
    To the extent that shares are not purchased by BGP under the Warrant prior to closing,
the new revolving credit loans from Bank of China, evidenced by the Convertible Notes will
convert into approximately 14.3 million shares of ION common stock and will be credited
against the approximately 23.8 million shares of ION stock to be purchased by BGP at the
transaction closing.
 44




---



##### 




    
    ION will appoint a designee of BGP to its Board of Directors to serve with the current
nine members of IONs Board of Directors.
    
    BGP will arrange for our then-outstanding long-term debt under the Amended Credit
Facility (currently $101.6 million outstanding at February 22, 2010) to be refinanced at the
joint venture closing.
    
    We will use a portion of the proceeds from the transactions to pay off and retire our
outstanding indebtedness under our current revolving credit facility (after giving effect to
the $40.0 million in additional revolving credit borrowings under our existing Amended
Credit Facility, approximately $118.0 million is currently outstanding at February 22, 2010)
and $35.0 million in seller subordinated indebtedness incurred in connection with our
acquisition of ARAM in September 2008.
    
    We will receive a new $100 million revolving credit facility at the joint venture
closing.
    
    The $19.1 million (as of December 31, 2009) secured equipment financing transaction with
ICON will be assigned to and become indebtedness of the joint venture.
  
    
    Preferred access to BGP, currently the worlds largest land seismic contractor;
    
    Anticipated improved economies of scope and scale in our land data acquisition system
manufacturing and sales operations, enabling us to deliver products in a more timely manner
at an overall lower cost to its customers;
    
    Combining our strengths in land equipment technologies with BGPs emerging geophysical
product portfolio and expertise in operating land seismic acquisition crews, which should
permit new joint venture products to be designed and field-tested for reliability, quality
and productivity to the benefit of all customers; and
    
    Aligning the joint venture engineering teams to develop innovative, market-leading land
recording systems, 3C (full-wave) sensor and vibroseis products.
  Key Financial Metrics.
 Years Ended December 31,2009
    
    
    2008
    
    
    2007Net revenues:ION Systems Division:Land Imaging Systems
    
    $
    103,038
    
    
    $
    200,493
    
    
    $
    325,037Marine Imaging Systems
    
    
    103,024
    
    
    
    182,710
    
    
    
    177,685Data Management Solutions
    
    
    33,733
    
    
    
    37,240
    
    
    
    37,660Total ION Systems Division
    
    
    239,795
    
    
    
    420,443
    
    
    
    540,382ION Solutions Division
    
    
    179,986
    
    
    
    259,080
    
    
    
    172,729Total
    
    $
    419,781
    
    
    $
    679,523
    
    
    $
    713,111Income (loss) from operations:ION Systems Division:Land Imaging Systems
    
    $
    (39,126
    )
    
    $
    (13,662
    )
    
    $
    28,681Marine Imaging Systems
    
    
    29,632
    
    
    
    52,624
    
    
    
    44,727Data Management Solutions
    
    
    19,970
    
    
    
    22,298
    
    
    
    17,290Total ION Systems Division
    
    
    10,476
    
    
    
    61,260
    
    
    
    90,698ION Solutions Division
    
    
    27,747
    
    
    
    40,534
    
    
    
    21,646Corporate
    
    
    (58,395
    )
    
    
    (62,334
    )
    
    
    (48,450
    )
 45




---



##### 



Years Ended December 31,2009
    
    
    2008
    
    
    2007Impairment of goodwill and intangible assets
    
    
    (38,044
    )
    
    
    (252,283
    )
    
    
    Total
    
    $
    (58,216
    )
    
    $
    (212,823
    )
    
    $
    63,894Net income (loss) applicable to common shares
    
    $
    (113,559
    )
    
    $
    (293,713
    )
    
    $
    40,256Basic net income (loss) per common share
    
    $
    (1.03
    )
    
    $
    (3.06
    )
    
    $
    0.49Diluted net income per (loss) common share
    
    $
    (1.03
    )
    
    $
    (3.06
    )
    
    $
    0.45
  Proposed Joint Venture and Related Transactions with BGP
 Risk Factors
 Results of Operations
 Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
 Net Revenues.
  Gross Profit and Gross Profit Percentage.
 Research, Development and Engineering.
 46




---



##### 



Marketing and Sales. Executive Summary
 General and Administrative. Executive Summary
 Impairment of Intangible Assets.
 Interest Expense, including Amortization of a Non-Cash Debt Discount.  Proposed Joint Venture and Related
Transactions with BGP Liquidity and Capital Resources  Sources of Capital.
 Fair Value Adjustment of the Warrant.
 Impairment of Cost Method Investment
 Other Income (Expense).
 Income Tax (Benefit) Expense.
 47




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##### 



Preferred Stock Dividends. 1 2
 Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
 Net Revenues.
  Gross Profit and Gross Profit Percentage.
 Research, Development and Engineering.
 Marketing and Sales.
 48




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##### 



General and Administrative.
 Impairment of Goodwill and Intangible Assets.
 Income Tax Expense.
 Preferred Stock Dividends and Accretion. 1 2
 Adjustments from Preferred Stock Redemption and Conversion Features
 Liquidity and Capital Resources  Sources of Capital  Cumulative Convertible Preferred Stock
   49




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##### 



Preferred Stock Beneficial Conversion Charge
 Liquidity and Capital Resources
 Sources of Capital
 see Revolving Line of Credit and Term Loan
Facilities
  
    
    Our Amended Credit Facility, comprised of:
 
    
    An amended revolving line of credit sub-facility (including the additional $40.0
million of revolving credit indebtedness evidenced by the Convertible Notes); and
    
    A $125.0 million original principal amount term loan;
 
    
    A $20.0 million secured equipment financing term loan; and
    
    A $35.0 million Amended and Restated Subordinated Promissory Note.
 Revolving Line of Credit and Term Loan Facilities.
   50




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##### 



Private Placement of 18.5 Million Shares of Common Stock.
 Fifth Amendment to Amended Credit Facility.
 
    
    An increase in applicable maximum interest rate margins in the event that our leverage
ratio exceeds 2.25 to 1.0  from 4.5% to up to 5.5% for alternate base rate loans, and from
5.5% to up to 6.5% for LIBOR-rate loans;
    
    A modified restricted payments covenant that permitted us to apply up to $6.0 million of
our available cash on hand to prepay the indebtedness under the Jefferies bridge loan
agreement;
    
    A new defined term, Excess Cash Flow, and a new requirement for us to apply 50% of our
Excess Cash Flow, if any, calculated with respect to a just-completed fiscal year, to the
prepayment of the term loan under the Amended Credit Agreement if our fixed charge coverage
ratio or our leverage ratio for the just-completed fiscal year does not meet certain
requirements; and
    
    An amendment to fix the maximum revolving credit facility (accordion feature) amount to
which the Amended Credit Facility could be increased at $140.0 million.
  
    
    Incurring additional indebtedness (including capital lease obligations), granting or
incurring additional liens on our properties, pledging shares of our subsidiaries, entering
into certain merger or other similar transactions, entering into transactions with
affiliates, making certain sales or other dispositions of assets, making certain
investments, acquiring other businesses and entering into certain sale-leaseback
transactions with respect to certain of our properties;
    
    Paying cash dividends on our common stock and repurchasing and acquiring shares of our
common stock unless (i) there is no event of default under the Amended Credit Facility and
(ii) the amount of cash used for cash dividends, repurchases and acquisitions does not, in
the aggregate, exceed an amount equal to the excess of 30% of our domestic consolidated net
income for our most recently completed fiscal year over $15.0 million.
  
    
    maintain a minimum fixed charge coverage ratio (which must be not less than 1.10 to 1.0
for the fiscal quarter ended December 31, 2009; 1.15 to 1.0 for the fiscal quarter ending
March 31, 2010; 1.25 to 1.0 for the fiscal quarter ending June 30, 2010; 1.35 to 1.0 for the
fiscal quarter ending September 30, 2010; and 1.50 to 1.0 the fiscal quarter ending December
31, 2010 and thereafter);
    
    not exceed a maximum leverage ratio (3.00 to 1.0 for the fiscal quarters ended December
31, 2009; 2.75 to 1.0 for the fiscal quarter ending March 31, 2010 and June 30, 2010; 2.5 to
1.0 for the fiscal quarter ending September 30, 2010; and 2.25 to 1.0 the fiscal quarter
ending December 31, 2010 and thereafter); and
    
    maintain a minimum tangible net worth of at least 80% of our tangible net worth as of
September 18, 2008 (the date that we completed our acquisition of ARAM), plus 50% of our
consolidated net income for each quarter thereafter, and 80% of the proceeds from any
mandatorily convertible notes and preferred and common stock issuances for each quarter
thereafter.
 51




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##### 



,
  Sixth Amendment to Amended Credit Facility.
     52




---



##### 



Convertible Notes and Warrant.
        53




---



##### 



 Critical Accounting
Policies and Estimates  Fair Value of the Warrant.
 Secured Equipment Financing.
       Amended and Restated Subordinated Seller Note.
  54




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##### 



.
  
    
    qualifies as Long Term Junior Financing (as defined in the Amended Credit Agreement),
    
    results from a refinancing or replacement of the Amended Credit Facility such that the
aggregate principal indebtedness (including revolving commitments) thereunder would be in
excess of $275.0 million, or
    
    qualifies as unsecured indebtedness for borrowed money that is evidenced by notes or
debentures, has a maturity date of at least five years after the date of its issuance and
results in total gross cash proceeds to us of not less than $40.0 million,
   
    
    our obligations under the Amended Credit Facility,
    
    our liabilities with respect to capital leases and obligations that qualify as a
Sale/Leaseback Agreement (as that term is defined in the Amended Credit Agreement),
    
    guarantees of the indebtedness described above, and
    
    debentures, notes or other evidences of indebtedness issued in exchange for, or in the
refinancing of, the Senior Obligations described above, or any indebtedness arising from the
payment and satisfaction of any Senior Obligations by a guarantor.
   Private Placement of 18.5 Million Shares of Common Stock.
 55




---



##### 



Cumulative Convertible Preferred Stock
   Legal Proceedings Risk
Factors
 Meeting our Liquidity Requirements
   56




---



##### 



Cash Flow from Operations
   57




---



##### 



Cash Flow from Investing Activities
   Cash Flow from Financing Activities
   Inflation and Seasonality
  Future Contractual Obligations
  Contractual Obligations
    
    Total
    
    
    Less Than 1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    More Than 5 YearsNotes payable and long-term debt
    
    $
    279,562
    
    
    $
    275,905
    
    
    $
    1,324
    
    
    $
    1,798
    
    
    $
    535Interest on notes payable and long-term debt obligations
    
    
    16,628
    
    
    
    15,544
    
    
    
    713
    
    
    
    353
    
    
    
    18Equipment capital lease obligations
    
    
    6,475
    
    
    
    3,884
    
    
    
    2,591
    
    
    
    
    
    
    
    Operating leases
    
    
    46,330
    
    
    
    12,603
    
    
    
    18,469
    
    
    
    8,018
    
    
    
    7,240Product warranty
    
    
    5,088
    
    
    
    5,088
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations
    
    
    21,430
    
    
    
    21,430
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    375,513
    
    
    $
    334,454
    
    
    $
    23,097
    
    
    $
    10,169
    
    
    $
    7,793
 58




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##### 



 Revolving Line of Credit and Term
Loan Facilities Notes Payable, Long-term Debt and Lease Obligations.
 Notes
Payable, Long-term Debt and Lease Obligations.
  Critical Accounting Policies and Estimates  Fair
Value of the Warrant.
    Liquidity and Capital Resources
  Critical Accounting Policies and Estimates
  59




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##### 




    
    Revenue Recognition and Product Warranty.We derive revenue from the sale and rental of (i)
acquisition systems and other seismic equipment within our Land Imaging Systems and Marine
Imaging Systems segments; (ii) imaging services, multi-client surveys and licenses of
off-the-shelf data libraries within our ION Solutions segment; and (iii) navigation, survey
and quality control software systems within our Data Management Solutions segment.For the sales of acquisition systems and other seismic equipment, we follow the requirements of
ASC 605-10 Revenue Recognition and recognize revenue when (a) evidence of an arrangement
exists; (b) the price to the customer is fixed and determinable; (c) collectibility is reasonably
assured; and (d) the acquisition system or other seismic equipment is delivered to the customer
and risk of ownership has passed to the customer, or, in the limited case where a substantive
customer-specified acceptance clause exists in the contract, the later of delivery or when the
customer-specified acceptance is obtained.Our Land Imaging Systems segment receives rental income from the rental of seismic equipment.
The rental is in the form of operating leases as the lease terms range from a couple of days to
several months. Rental revenue is recognized on a straight line basis over the term of the
operating lease.Revenues from all imaging and other services are recognized when persuasive evidence of an
arrangement exists, the price is fixed or determinable, and collectibility is reasonably assured.
Revenues from contract services performed on a day-rate basis are recognized as the service is
performed.Revenues from multi-client surveys are recognized as the seismic data is acquired and/or
processed on a proportionate basis as work is performed. Under this method, we recognize revenues
based upon quantifiable measures of progress, such as kilometers acquired or days processed. Upon
completion of a multi-client seismic survey, the survey data is considered off-the-shelf and
licenses to the survey data are sold to customers on a non-exclusive basis. The license of a
completed multi-client survey is represented by the license of one standard set of data. Revenues
on licenses of completed multi-client data surveys are recognized when (a) a signed final master
geophysical data license agreement and accompanying supplemental license agreement are returned
by the customer; (b) the purchase price for the license is fixed or determinable; (c) delivery or
performance has occurred; and (d) no significant uncertainty exists as to the customers
obligation, willingness or ability to pay. In limited situations, we have provided the customer
with a right to exchange seismic data for another specific seismic data set. In these limited
situations, we recognize revenue at the earlier of the customer exercising its exchange right or
the expiration of the customers exchange right.When separate elements (such as an acquisition system, other seismic equipment and/or imaging
services) are contained in a single sales arrangement, or in related arrangements with the same
customer, we follow the requirements of ASC 605-25 Accounting for Multiple-Element Revenue
Arrangement,and allocate revenue to each element based upon its vendor-specific objective
evidence of fair value, so long as each such element meets the criteria for treatment as a
separate unit of accounting. We limit the amount of revenue recognized for delivered elements to
the amount that is not contingent on the future delivery of products or services. We generally do
not grant return or refund privileges to our customers. When undelivered elements, such as
training courses and engineering services, are inconsequential or perfunctory and not essential
to the functionality of the delivered elements, we recognize revenue on the total contract and
make a provision for the costs of the incomplete elements.For the sales of navigation, survey and quality control software systems, we follow the
requirements for these transactions of ASC 985-605 Software Revenue Recognition,because in
those systems the software is more than incidental to the arrangement as a whole. Following the
requirements of ASC 985-605 Applicability of AICPA Statement of Position 97-2 to Non-Software
Deliverables in an Arrangement Containing More-Than-Incidental Software,we consider the
hardware within these systems to be a software-related item because the software is essential to
the hardwares functionality. As a result, we recognize revenue from sales of navigation, survey
and quality control software systems when (a) evidence of an arrangement exists; (b) the price to
the customer is fixed and determinable; (c) collectibility is reasonably assured; and (d) the
software and software-related hardware is delivered to the customer and risk of ownership has
passed to the customer, or, in the limited case where a substantive customer-specified acceptance
clause exists in the contract, the later of delivery or when the customer-specified acceptance is
obtained. These arrangements generally include us providing related services, such as training
courses, engineering services and annual software maintenance. We allocate revenue to each
element of the arrangement based upon vendor-specific objective evidence of fair value of the
element or, if vendor-specific objective evidence is not available for the delivered element, we
apply the residual method.In addition to perpetual software licenses, we offer certain time-based software licenses. For
these time-based licenses, we recognize revenue ratably over the contract term, which is
generally two to five years.
 60




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##### 



We generally warrant that our manufactured equipment will be free from defects in workmanship,
material and parts. Warranty periods generally range from 30 days to three years from the date of
original purchase, depending on the product. We provide for estimated warranty as a charge to
costs of sales at the time of sale.
 
    
    Multi-Client Data Library.Our multi-client data library consists of seismic surveys that are
offered for licensing to customers on a non-exclusive basis. The capitalized costs include the
costs paid to third parties for the acquisition of data and related activities associated with
the data creation activity and direct internal processing costs, such as salaries, benefits,
computer-related expenses, and other costs incurred for seismic data project design and
management. For the years ended December 31, 2009, 2008 and 2007, we capitalized, as part of
our multi-client data library $3.8 million, $5.4 million, and $4.3 million, respectively, of
direct internal processing costs.Our method of amortizing the costs of a multi-client data library available for commercial sale
is the greater of (i) the percentage of actual revenue to the total estimated revenue multiplied
by the total cost of the project (the sales forecast method) or (ii) the straight-line basis over
a four-year period. The sales forecast method is our primary method of calculating amortization.
The total amortization period of four years represents the minimum period over which benefits
from these surveys are expected to be derived. We have determined the amortization period of four
years based upon our historical experience that indicates that the majority of our revenues from
multi-client surveys are derived during the acquisition and processing phases and during four
years subsequent to survey completion.Estimated sales are determined based upon discussions with our customers, our experience, and our
knowledge of industry trends. Changes in sales estimates may have the effect of changing the
percentage relationship of cost of services to revenue. In applying the sales forecast method, an
increase in the projected sales of a survey will result in lower cost of services as a percentage
of revenue, and higher earnings when revenue associated with that particular survey is
recognized, while a decrease in projected sales will have the opposite effect. Assuming that the
overall volume of sales mix of surveys generating revenue in the period was held constant in
2009, an increase in 10% in the sales forecasts of all surveys would have decreased our
amortization expense by approximately $3.2 million.We estimate the ultimate revenue expected to be derived from a particular seismic data survey
over its estimated useful economic life to determine the costs to amortize, if greater than
straight-line amortization. That estimate is made by us at the projects initiation. For a
completed multi-client survey, we review the estimate quarterly. If during any such review, we
determine that the ultimate revenue for a survey is expected to be more or less than the original
estimate of total revenue for such survey, we decrease or increase (as the case may be) the
amortization rate attributable to the future revenue from such survey. In addition, in connection
with such reviews, we evaluate the recoverability of the multi-client data library, and if
required under ASC 360 Accounting for the Impairment and Disposal of Long-Lived Assets, record
an impairment charge with respect to such data. There were no impairment charges during 2009 and
2008.
 
    
    Fair Value of the Warrant.We issued the Warrant to BGP as part of our proposed
joint venture with them, which included BGP arranging for the Bank of China to join as a new
lender to our Amended Credit Facility. The Warrant is required to be accounted for at its fair
value with changes in its fair value being recognized below income from operations in the
period of change. The fair value of the Warrant was determined using a Black-Scholes model
that the value of the features based upon certain key inputs. The key input for the
Black-Scholes model is the current market price of our common stock, the yield on our common
stock dividend payments (0%), risk-free interest rates, the expected term (March 31, 2010) and
our stocks historical and implied volatility. The most significant inputs are the current
market price of our common stock. Holding all other inputs constant, a 10% increase or
decrease in our common stock price would result in an increase or decrease in the fair value
of the warrant liability of $8.4 million and ($8.3 million), respectively.
    
    Reserve for Excess and Obsolete Inventories.Our reserve for excess and obsolete inventories
is based on historical sales trends and various other assumptions and judgments, including
future demand for our inventory and the timing of market acceptance of our new products.
Should these assumptions and judgments not be realized for reasons such as delayed market
acceptance of our new products, our valuation allowance would be adjusted to reflect actual
results. Our industry is subject to technological change and new product development that
could result in obsolete inventory. Our valuation reserve for inventory at December 31, 2009
was $30.6 million compared to $24.1 million at December 31, 2008. The majority of the increase
in our reserves for excess and obsolete inventory in 2009 related to our Marine Imaging
Systems mature acquisition systems and source products. The increase in our reserves for
excess and obsolete inventories in 2008 primarily related to our analog land acquisition
systems. As a result of the integration of ARAM into our Land Imaging Systems segment, at the
end of 2008, we evaluated and determined that market values of certain of our mature analog
products were lower than their then-current book values.
 61




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##### 




    
    Goodwill and Other Intangible Assets.For purposes of performing the impairment test for
goodwill as required by ASC 350, we established the following reporting units: Land Imaging
Systems (includes ARAM), Sensor Geophone, Marine Imaging Systems, Data Management Solutions,
and ION Solutions. To determine the fair value of our reporting units, we use a discounted
future returns valuation method. If we had established different reporting units or utilized
different valuation methodologies, our impairment test results could differ.ASC 350 requires us to compare the fair value of our reporting units to their carrying amount on
an annual basis to determine if there is potential goodwill impairment. If the fair value of the
reporting unit is less than its carrying value, an impairment loss is recorded to the extent that
the fair value of the goodwill within the reporting units is less than its carrying value.We completed our annual goodwill impairment testing as of December 31, 2008 and determined that
all of the goodwill within our Land Imaging Systems (including ARAM) and ION Solutions reporting
units were impaired. As a result, we recorded a goodwill impairment charge of $242.2 million.
The decrease in these reporting units fair value was primarily driven by the overall economic
and financial crisis and the decrease in the current demand for our land analog acquisition
products, especially within North America and Russia.We completed our annual goodwill impairment testing as of December 31, 2009 and determined that
no goodwill was impaired. Our remaining goodwill as of December 31, 2009 was comprised of $27.0
million in our Marine Imaging Systems and $25.1 million in our Data Management Solutions
reporting units. Our 2009 annual impairment test indicated that the fair value of these two
reporting units significantly exceeded their carrying values by over 50% for each business unit.
The analyses are based upon the operating forecasts approved annually by the Board of Directors,
which include assumptions about market and economic conditions. However, if our estimates or
related projections associated with the reporting units significantly change in the future, we
may be required to record further impairment charges. If the operational results of our segments
are lower than forecasted or the economic conditions are worse than expected, then the fair value
of our segments will be adversely affected.Our intangible assets other than goodwill relate to proprietary technology, patents, customer
relationships, trade names and non-compete agreements that are amortized over the estimated
periods of benefit (ranging from 4 to 20 years). Following the guidance of ASC 360, we review
the carrying values of these intangible assets for impairment if events or changes in the facts
and circumstances indicate that their carrying value may not be recoverable. Any impairment
determined is recorded in the current period and is measured by comparing the fair value of the
related asset to its carrying value. For the years ended December 31, 2009 and 2008, we
determined that certain of the intangible assets (customer relationships, trade names and
non-compete agreements) associated with our ARAM acquisition were impaired and recorded
impairment charges of $38.0 million and $10.1 million, respectively.Similar to our treatment of goodwill, in making these assessments we rely on a number of factors
including operating results, business plans, internal and external economic projections,
anticipated future cash flows and external market data. However, if our estimates or related
projections associated with the reporting units significantly change in the future, we may be
required to record further impairment charges.
    
    Accounts and Notes Receivable Collectibility.We consider current information and
circumstances regarding our customers ability to repay their obligations, such as the length
of time the receivable balance is outstanding, the customers credit worthiness and historical
experience, and consider an account or note impaired when it is probable that we will be
unable to collect all amounts due. When we consider a note receivable as impaired, we measure
the amount of the impairment based on the present value of expected future cash flows or the
fair value of collateral. We include impairment losses (recoveries) in our allowance for
doubtful accounts and notes through an increase (decrease) in bad debt expense.We record interest income on investments in notes receivable on the accrual basis of accounting.
We do not accrue interest on impaired loans where collection of interest according to the
contractual terms is considered doubtful. Among the factors we consider in making an evaluation
of the collectibility of interest are: (i) the status of the loan; (ii) the fair value of the
underlying collateral; (iii) the financial condition of the borrower; and (iv) anticipated future
events.
    
    Stock-Based Compensation.We account for stock based compensation under the recognition
provisions of ASC 718 Share-Based Payment.We estimate the value of stock option awards on
the date of grant using the Black-Scholes option pricing model. The determination of the fair
value of stock-based payment awards on the date of grant using an option-pricing model is
affected by our stock price as well as assumptions regarding a number of subjective variables.
These variables include, but are not limited
 62




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##### 



to, our expected stock price volatility over the term of the awards, actual and projected
employee stock option exercise behaviors, risk-free interest rate, and expected dividends.The accompanying financial statements for the twelve months ended December 31, 2009 include
approximately $3.3 million of stock-based compensation expense related to 2008, 2007 and 2006.
ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in
subsequent periods if actual forfeitures differ from those estimates. The prior-period
stock-based compensation expense relates to adjustments between estimated and actual forfeitures
which should have been recognized over the vesting period of such awards. Such amounts were not
deemed material with respect to either the results of prior years or the results and the trend of
earnings for the current year and were therefore recorded in 2009.In 2009, 2008 and 2007, we recognized $12.7 million, $8.3 million and $6.9 million, respectively,
of stock-based compensation expense related to our employees outstanding stock-based awards. The
total expense in 2009 was comprised of $1.2 million reflected in cost of sales, $0.8 million in
research and development expense, $1.5 million in marketing and sales expense, and $9.2 million
(including the $3.3 million stock-based compensation charge described above) in general and
administrative expense. In addition to the share-based compensation expense related to the
Companys plans, we recorded $0.8 million of share-based compensation expense in 2009 related to
employee stock appreciation rights. Pursuant to ASC 718, the stock appreciation rights are
considered liability awards and, as such, these amounts are accrued in the liability section of
the balance sheet.
 Recent Accounting Pronouncements
 Revenue Recognition Multiple Deliverable Revenue
Arrangements  a consensus of the FASB Emerging Issues Task Force
 Certain Revenue Arrangements
That Include Software Elements
 Fair Value Measurements and Disclosures,
Measuring Liabilities at Fair Value (Topic 820) .
 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles  a replacement of FASB Statement No. 162
 Interim Disclosures about Fair Value of
Financial Instruments
 63




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##### 



The Meaning of Other-Than-Temporary Impairment and
its Application to Certain Investments
 , Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities
 Credit and Sales Risks
   Certain Relationships and Related Party Transactions
   64




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##### 



Off-Balance Sheet Arrangements
  Indemnification
  
 Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
  Interest Rate Risk.
  Foreign Currency Exchange Rate Risk.
  Fair Value of the Warrant.
 65




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##### 



Item 8.
    
    Financial Statements and Supplementary Data
  
 Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
  Managements Report on Internal Control Over Financial Reporting
 (i)
    
    pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;(ii)
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of our management and directors; and(iii)
    
    provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a material
effect on the financial statements.
  Internal Control  Integrated Framework
 66




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##### 



Remediation of Material Weakness in Internal Control over Financial Reporting
  
    
    We implemented a quarterly certification requiring our global sales force to confirm that
all documentation related to sales transactions have been provided to Company management.
    
    Global sales personnel (including China) no longer have the authority to enter into sales
contracts without the review and approval of designated corporate management; and
    
    We provided further training and education on the Companys revenue recognition policies
and procedures and will continue to provide this training on an annual basis to our global
sales force.
  Changes in Internal Control
  Report of Independent Registered Public Accounting Firm
    67




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##### 



.
   
 
 Item 9B.
    
    Other Information
  68




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##### 



PART III
 
 Item 10.
    
    Directors, Executive Officers and Corporate Governance
 Item
1 Election of Directors,
 
 Item 11.
    
    Executive Compensation
 Executive
Compensation,
 
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
 Item 1 
Section 16(a) Beneficial Ownership Reporting Compliance,
 
 Item 13.
    
    Certain Relationships, Related Transactions and Director Independence
 Item 1 
Certain Transactions and Relationships,
 
 Item 14.
    
    Principal Accountant Fees and Services
 Principal
Auditor Fees and Services,
 
 PART IV
 
 Item 15.
    
    Exhibits and Financial Statement Schedules
 List of Documents Filed
 Financial Statements
  Financial Statement Schedules
    69




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##### 



(3) Exhibits
 3.1
    
    
    
    
    Restated Certificate of Incorporation dated September 24, 2007 filed on September 24,
2007 as Exhibit 3.4 to the Companys Current Report on Form 8-K and incorporated
herein by reference.3.2
    
    
    
    
    Amended and Restated Bylaws of ION Geophysical Corporation filed on September 24,
2007 as Exhibit 3.5 to the Companys Current Report on Form 8-K and incorporated
herein by reference.3.3
    
    
    
    
    Certificate of Ownership and Merger merging ION Geophysical Corporation with and into
Input/Output, Inc. dated September 21, 2007, filed on September 24, 2007 as Exhibit
3.1 to the Companys Current Report on Form 8-K and incorporated herein by reference.4.1
    
    
    
    
    Certificate of Rights and Designations of Series D-1 Cumulative Convertible Preferred
Stock, dated February 16, 2005 and filed on February 17, 2005 as Exhibit 3.1 to the
Companys Current Report on Form 8-K and incorporated herein by reference.4.2
    
    
    
    
    Certificate of Elimination of Series B Preferred Stock dated September 24, 2007,
filed on September 24, 2007 as Exhibit 3.2 to the Companys Current Report on Form
8-K and incorporated herein by reference.4.3
    
    
    
    
    Certificate of Elimination of Series C Preferred Stock dated September 24, 2007,
filed on September 24, 2007 as Exhibit 3.3 to the Companys Current Report on Form
8-K and incorporated herein by reference.4.4
    
    
    
    
    Certificate of Designation of Series D-2 Cumulative Convertible Preferred Stock dated
December 6, 2007, filed on December 6, 2007 as Exhibit 3.1 to the Companys Current
Report on Form 8-K and incorporated herein by reference.4.5
    
    
    
    
    Certificate of Designation of Series D-3 Cumulative Convertible Preferred Stock dated
February 20, 2008, filed on February 22, 2008 as Exhibit 3.1 to the Companys Current
Report on Form 8-K and incorporated herein by reference.4.6
    
    
    
    
    Certificate of Designations of Series A Junior Participating Preferred Stock of ION
Geophysical Corporation effective as of December 31, 2008, filed on January 5, 2009
as Exhibit 3.1 to the Companys Current Report on Form 8-K and incorporated herein by
reference.4.7
    
    
    
    
    Form of Senior Indenture, filed on December 19, 2008 as Exhibit 4.3 to the Companys
Registration Statement on Form S-3 (Registration No. 333-156362) and incorporated
herein by reference.4.8
    
    
    
    
    Form of Senior Note, filed on December 19, 2008 as Exhibit 4.4 to the Companys
Registration Statement on Form S-3 (Registration No. 333-156362) and incorporated
herein by reference.4.9
    
    
    
    
    Form of Subordinated Indenture, filed on December 19, 2008 as Exhibit 4.5 to the
Companys Registration Statement on Form S-3 (Registration No. 333-156362) and
incorporated herein by reference.4.10
    
    
    
    
    Form of Subordinated Note, filed on December 19, 2008 as Exhibit 4.6 to the Companys
Registration Statement on Form S-3 (Registration No. 333-156362) and incorporated
herein by reference.4.11
    
    
    
    
    Warrant to Purchase Shares of the Common Stock of ION Geophysical Corporation dated
October 27, 2009, issued by ION Geophysical Corporation to BGP Inc., China National
Petroleum Corporation, filed on October 29, 2009 as Exhibit 4.1 to the Companys
Current Report on Form 8-K/A and incorporated herein by reference.4.12
    
    
    
    
    Convertible Promissory Note, dated October 23, 2009, issued by ION Geophysical
Corporation to the Bank of China, New York Branch, filed on October 29, 2009 as
Exhibit 4.2 to the Companys Current Report on Form 8-K/A and incorporated herein by
reference.4.13
    
    
    
    
    Convertible Promissory Note, dated October 23, 2009, issued by ION International S.à
r.l. to the Bank of China, New York Branch, filed on October 29, 2009 as Exhibit 4.3
to the Companys Current Report on Form 8-K/A and incorporated herein by reference.**10.1
    
    
    
    
    Amended and Restated 1990 Stock Option Plan, filed on June 9, 1999 as Exhibit 4.2 to
the Companys Registration Statement on Form S-8 (Registration No. 333-80299), and
incorporated herein by reference.10.2
    
    
    
    
    Office and Industrial/Commercial Lease dated June 2005 by and between Stafford Office
Park II, LP as Landlord and Input/Output, Inc. as Tenant, filed on March 31, 2006 as
Exhibit 10.2 to the Companys Annual Report on Form 10-K for the year ended December
31, 2005, and incorporated herein by reference.10.3
    
    
    
    
    Office and Industrial/Commercial Lease dated June 2005 by and between Stafford Office
Park District as Landlord and Input/Output, Inc. as Tenant, filed on March 31, 2006
as Exhibit 10.3 to the Companys Annual Report on Form 10-K for the year ended
December 31, 2005, and incorporated herein by reference.
 70




---



##### 



**10.4
    
    
    
    
    Input/Output, Inc. Amended and Restated 1996 Non-Employee Director Stock Option Plan,
filed on June 9, 1999 as Exhibit 4.3 to the Companys Registration Statement on Form
S-8 (Registration No. 333-80299), and incorporated herein by reference.**10.5
    
    
    
    
    Amendment No. 1 to the Input/Output, Inc. Amended and Restated 1996 Non-Employee
Director Stock Option Plan dated September 13, 1999 filed on November 14, 1999 as
Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q for the fiscal quarter
ended August 31, 1999 and incorporated herein by reference.**10.6
    
    
    
    
    Employment Agreement dated effective as of May 22, 2006 between Input/Output, Inc.
and R. Brian Hanson, filed on May 1, 2006 as Exhibit 10.1 to the Companys Form 8-K,
and incorporated herein by reference.**10.7
    
    
    
    
    First Amendment to Employment Agreement dated as of August 20, 2007 between
Input/Output, Inc. and R. Brian Hanson, filed on August 21, 2007 as Exhibit 10.1 to
the Companys Current Report on Form 8-K and incorporated herein by reference.**10.8
    
    
    
    
    Second Amendment to Employment Agreement, dated as of December 1, 2008, between ION
Geophysical Corporation and R. Brian Hanson, filed on January 29, 2009 as Exhibit
10.2 to the Companys Current Report on Form 8-K and incorporated herein by
reference.**10.9
    
    
    
    
    Input/Output, Inc. Employee Stock Purchase Plan, filed on March 28, 1997 as Exhibit
4.4 to the Companys Registration Statement on Form S-8 (Registration No. 333-24125),
and incorporated herein by reference.**10.10
    
    
    
    
    Fourth Amended and Restated  2004 Long-Term Incentive Plan, filed as Appendix A to
the definitive proxy statement for the 2008 Annual Meeting of Stockholders of ION
Geophysical Corporation, filed on April 21, 2008, and incorporated herein by
reference.10.11
    
    
    
    
    Registration Rights Agreement dated as of November 16, 1998, by and among the Company
and The Laitram Corporation, filed on March 12, 2004 as Exhibit 10.7 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2003, and incorporated
herein by reference.**10.12
    
    
    
    
    Input/Output, Inc. 1998 Restricted Stock Plan dated as of June 1, 1998, filed on June
9, 1999 as Exhibit 4.7 to the Companys Registration Statement on S-8 (Registration
No. 333-80297), and incorporated herein by reference.**10.13
    
    
    
    
    Input/Output Inc. Non-qualified Deferred Compensation Plan, filed on April 1, 2002 as
Exhibit 10.14 to the Companys Annual Report on Form 10-K for the year ended December
31, 2001, and incorporated herein by reference.**10.14
    
    
    
    
    Input/Output, Inc. 2000 Restricted Stock Plan, effective as of March 13, 2000, filed
on August 17, 2000 as Exhibit 10.27 to the Companys Annual Report on Form 10-K for
the fiscal year ended May 31, 2000, and incorporated herein by reference.**10.15
    
    
    
    
    Input/Output, Inc. 2000 Long-Term Incentive Plan, filed on November 6, 2000 as
Exhibit 4.7 to the Companys Registration Statement on Form S-8 (Registration No.
333-49382), and incorporated by reference herein.**10.16
    
    
    
    
    Employment Agreement dated effective as of March 31, 2003, by and between the Company
and Robert P. Peebler, filed on March 31, 2003 as Exhibit 10.1 to the Companys
Current Report on Form 8-K and incorporated herein by reference.**10.17
    
    
    
    
    First Amendment to Employment Agreement dated September 6, 2006, between
Input/Output, Inc. and Robert P. Peebler, filed on September 7, 2006, as Exhibit 10.1
to the Companys Current Report on Form 8-K, and incorporated herein by reference.**10.18
    
    
    
    
    Second Amendment to Employment Agreement dated February 16, 2007, between
Input/Output, Inc. and Robert P. Peebler, filed on February 16, 2007 as Exhibit 10.1
to the Companys Current Report on Form 8-K, and incorporated herein by reference.**10.19
    
    
    
    
    Third Amendment to Employment Agreement dated as of August 20, 2007 between
Input/Output, Inc. and Robert P. Peebler, filed on August 21, 2007 as Exhibit 10.2 to
the Companys Current Report on Form 8-K and incorporated herein by reference.**10.20
    
    
    
    
    Fourth Amendment to Employment Agreement, dated as of January 26, 2009, between ION
Geophysical Corporation and Robert P. Peebler, filed on January 29, 2009 as Exhibit
10.1 to the Companys Current Report on Form 8-K and incorporated herein by
reference.**10.21
    
    
    
    
    Employment Agreement dated effective as of June 15, 2004, by and between the Company
and David L. Roland, filed on August 9, 2004 as Exhibit 10.5 to the Companys
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004, and
incorporated herein by reference.**10.22
    
    
    
    
    Employment Agreement, dated as of December 1, 2008, between ION Geophysical
Corporation and James R. Hollis,
 71




---



##### 



filed on January 29, 2009 as Exhibit 10.3 to the Companys Current Report on Form 8-K and incorporated herein by reference.**10.23
    
    
    
    
    GX Technology Corporation Employee Stock Option Plan, filed on August 9, 2004 as
Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2004, and incorporated herein by reference.10.24
    
    
    
    
    Concept Systems Holdings Limited Share Acquisition Agreement dated February 23, 2004,
filed on March 5, 2004 as Exhibit 2.1 to the Companys Current Report on Form 8-K,
and incorporated herein by reference.10.25
    
    
    
    
    Registration Rights Agreement by and between ION Geophysical Corporation and 1236929
Alberta Ltd. dated September 18, 2008, filed on November 7, 2008 as Exhibit 10.1 to
the Companys Quarterly Report on Form 10-Q and incorporated herein by reference.**10.26
    
    
    
    
    Form of Employment Inducement Stock Option Agreement for the Input/Output, Inc. 
Concept Systems Employment Inducement Stock Option Program, filed on July 27, 2004 as
Exhibit 4.1 to the Companys Registration Statement on Form S-8 (Reg. No.
333-117716), and incorporated herein by reference.**10.27
    
    
    
    
    Form of Employee Stock Option Award Agreement for ARAM Systems Employee Inducement
Stock Option Program, filed on November 14, 2008 as Exhibit 4.4 to the Companys
Registration Statement on Form S-8 (Registration No. 333-155378) and incorporated
herein by reference.10.28
    
    
    
    
    Agreement dated as of February 15, 2005, between Input/Output, Inc. and Fletcher
International, Ltd., filed on February 17, 2005 as Exhibit 10.1 to the Companys
Current Report on Form 8-K and incorporated herein by reference.10.29
    
    
    
    
    First Amendment to Agreement, dated as of May 6, 2005, between the Company and
Fletcher International, Ltd., filed on May 10, 2005 as Exhibit 10.2 to the Companys
Current Report on Form 8-K, and incorporated herein by reference.**10.30
    
    
    
    
    Input/Output, Inc. 2003 Stock Option Plan, dated March 27, 2003, filed as Appendix B
of the Companys definitive proxy statement filed with the SEC on April 30, 2003, and
incorporated herein by reference.10.31
    
    
    
    
    Amended and Restated Credit Agreement dated as of July 3, 2008, by and among ION
Geophysical Corporation, ION International S.À R.L., HSBC Bank USA, N.A., as
administrative agent, joint lead arranger and joint bookrunner, ABN AMRO
Incorporated, as joint lead arranger and joint bookrunner, and CitiBank, N.A., as
syndication agent, filed on July 8, 2008 as Exhibit 10.1 to the Companys Current
Report on Form 8-K and incorporated herein by reference.10.32
    
    
    
    
    First Amendment to Amended and Restated Credit Agreement and Domestic Security
Agreement, dated as of September 17, 2008, by and among ION Geophysical Corporation,
ION International S.À R.L., HSBC Bank USA, N.A., as administrative agent, joint lead
arranger and joint bookrunner, ABN AMRO Incorporated, as joint lead arranger and
joint bookrunner, and CitiBank, N.A., as syndication agent, filed on September 23,
2008 as Exhibit 10.1 to the Companys Current Report on Form 8-K and incorporated
herein by reference.10.33
    
    
    
    
    Third Amendment to Amended and Restated Credit Agreement dated as of December 29,
2008, by and among ION Geophysical Corporation, ION International S.À R.L., the
Guarantors and Lenders party thereto and HSBC Bank USA, N.A., as administrative
agent, filed on January 5, 2009 as Exhibit 10.3 to the Companys Current Report on
Form 8-K and incorporated herein by reference.10.34
    
    
    
    
    Fourth Amendment to Amended and Restated Credit Agreement and Foreign Security
Agreement, Limited Waiver and Release dated as of December 30, 2008, by and among ION
Geophysical Corporation, ION International S.À R.L., the Guarantors and Lenders party
thereto and HSBC Bank USA, N.A., as administrative agent, filed on January 5, 2009 as
Exhibit 10.4 to the Companys Current Report on Form 8-K and incorporated herein by
reference.10.35
    
    
    
    
    Fifth Amendment to Amended and Restated Credit Agreement dated effective as of June
1, 2009 by and among ION Geophysical Corporation, ION International S.à r.l., certain
other foreign and domestic subsidiaries of the ION Geophysical Corporation, HSBC Bank
USA, N.A., as administrative agent, joint lead arranger and joint bookrunner, ABN
AMRO Incorporated, as joint lead arranger and joint bookrunner, Citibank, N.A., as
syndication agent, and the lenders party thereto, filed on August 6, 2009 as Exhibit
10.1 to the Companys Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2009, and incorporated herein by reference.*10.36
    
    
    
    
    Sixth Amendment and Waiver to Amended and Restated Credit Agreement dated effective
as of October 23, 2009 by and among ION Geophysical Corporation, ION International
S.À R.L., the Guarantors and Lenders party thereto and HSBC Bank USA, N.A., as
administrative agent.**10.37
    
    
    
    
    Form of Employment Inducement Stock Option Agreement for the Input/Output, Inc.  GX
Technology Corporation Employment Inducement Stock Option Program, filed on April 4,
2005 as Exhibit 4.1 to the Companys Registration Statement on Form S-8 (Reg. No.
333-123831), and incorporated herein by reference.
 72




---



##### 



**10.38
    
    
    
    
    Consulting Services Agreement dated as of October 19, 2006, by and between GX
Technology Corporation and Michael K. Lambert, filed on October 24, 2006 as Exhibit
10.2 to the Companys Current Report on Form 8-K, and incorporated herein by
reference.**10.39
    
    
    
    
    First Amendment to Consulting Services Agreement dated as of January 5, 2007, by and
between GX Technology Corporation and Michael K. Lambert, filed on January 8, 2007 as
Exhibit 10.1 to the Companys Current Report on Form 8-K, and incorporated herein by
reference.**10.40
    
    
    
    
    Letter agreement dated October 19, 2006, by and between the Company and Michael K.
Lambert, filed on October 24, 2006 as Exhibit 10.1 to the Companys Current Report on
Form 8-K, and incorporated herein by reference.**10.41
    
    
    
    
    Severance Agreement dated as of December 1, 2008, between ION Geophysical Corporation
and Charles J. Ledet, filed on December 5, 2008 as Exhibit 10.1 to the Companys
Current Report on Form 8-K and incorporated herein by reference.10.42
    
    
    
    
    Consulting Agreement dated as of December 1, 2008, between ION Geophysical
Corporation and Charles J. Ledet, filed on December 5, 2008 as Exhibit 10.2 to the
Companys Current Report on Form 8-K and incorporated herein by reference.10.43
    
    
    
    
    Rights Agreement, dated as of December 30, 2008, between ION Geophysical Corporation
and Computershare Trust Company, N.A., as Rights Agent, filed as Exhibit 4.1 to the
Companys Form 8-A (Registration No. 001-12691) and incorporated herein by reference.10.44
    
    
    
    
    Amended and Restated Share Purchase Agreement, dated as of September 17, 2008, by and
among ION Geophysical Corporation, Aram Systems Ltd., Canadian Seismic Rentals Inc.
and the Sellers party thereto, filed on September 23, 2008 as Exhibit 2.1 to the
Companys Current Report on Form 8-K and incorporated herein by reference.10.45
    
    
    
    
    Assignment Agreement dated as of December 30, 2008 by and among 3226509 Nova Scotia
Company, ARAM Systems Ltd., Canadian Seismic Rentals Inc., Maison Mazel Ltd. and ION
Geophysical Corporation, filed on January 5, 2009 as Exhibit 10.1 to the Companys
Current Report on Form 8-K and incorporated herein by reference.10.46
    
    
    
    
    Release Agreement dated as of December 30, 2008 by and among ION Geophysical
Corporation, 3226509 Nova Scotia Company, ARAM Systems Ltd., Canadian Seismic Rentals
Inc., Maison Mazel Ltd. and the Sellers party thereto, filed on January 5, 2009 as
Exhibit 10.2 to the Companys Current Report on Form 8-K and incorporated herein by
reference.10.47
    
    
    
    
    Amended and Restated Subordinated Promissory Note dated December 30, 2008, made by
3226509 Nova Scotia Company in favor of Maison Mazel Ltd., filed on January 5, 2009
as Exhibit 10.6 to the Companys Current Report on Form 8-K and incorporated herein
by reference.**10.48
    
    
    
    
    ION Stock Appreciation Rights Plan dated November 17, 2008.10.49
    
    
    
    
    Form of Purchase Agreement dated as of June 1, 2009, for the offering and sale of
18,500,000 shares of common stock of ION Geophysical Corporation in
privately-negotiated transactions to accredited investors (as defined in Rule 501
under the Securities Act of 1933, as amended), by and between ION Geophysical
Corporation and the Purchasers named therein, filed on August 6, 2009 as Exhibit 10.2
to the Companys Quarterly Report on Form 10-Q for the quarterly period ended June
30, 2009, and incorporated herein by reference.10.50
    
    
    
    
    Canadian Master Loan and Security Agreement dated as of June 29, 2009 by and among
ICON ION, LLC, as lender, ION Geophysical Corporation and ARAM Rentals Corporation, a
Nova Scotia corporation, filed on August 6, 2009 as Exhibit 10.3 to the Companys
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009, and
incorporated herein by reference.10.51
    
    
    
    
    Master Loan and Security Agreement (U.S.) dated as of June 29, 2009 by and among ICON
ION, LLC, as lender, ION Geophysical Corporation and ARAM Seismic Rentals, Inc., a
Texas corporation, filed on August 6, 2009 as Exhibit 10.4 to the Companys Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2009, and incorporated
herein by reference.*10.52
    
    
    
    
    Term Sheet dated as of October 23, 2009 by and between ION Geophysical Corporation
and BGP Inc., China National Petroleum Corporation.*10.53
    
    
    
    
    Warrant Issuance Agreement dated as of October 23, 2009 by and between ION
Geophysical Corporation and BGP Inc., China National Petroleum Corporation.*10.54
    
    
    
    
    Registration Rights Agreement dated as of October 23, 2009 by and between ION
Geophysical Corporation and BGP Inc., China National Petroleum Corporation.
 73




---



##### 



*21.1
    
    
    
    
    Subsidiaries of the Company.*23.1
    
    
    
    
    Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.*24.1
    
    
    
    
    The Power of Attorney is set forth on the signature page hereof.*31.1
    
    
    
    
    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a).*31.2
    
    
    
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a).*32.1
    
    
    
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. §1350.*32.2
    
    
    
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. §1350.
 
 *
    
    Filed herewith.**
    
    Management contract or compensatory plan or arrangement. (b)
    
    Exhibits required by Item 601 of Regulation S-K.Reference is made to subparagraph (a) (3) of this Item 15, which is incorporated herein by
reference.(c)
    
    Not applicable.
 74




---



##### 



SIGNATURES
  ION GEOPHYSICAL CORPORATIONBy
    /s/ R. Brian HansonR. Brian HansonExecutive Vice President and Chief Financial Officer POWER OF ATTORNEY
   Name
    
    Capacities
    
    Date/s/ ROBERT P. PEEBLER

Robert P. Peebler
    
    Chief Executive Officer and Director
(Principal Executive Officer)
    
    March 1, 2010/s/ R. BRIAN HANSON

R. Brian Hanson
    
    Executive Vice President and Chief Financial
Officer (Principal Financial Officer)
    
    March 1, 2010/s/ MICHAEL L. MORRISON

Michael L. Morrison
    
    Vice President and Corporate Controller
(Principal Accounting Officer)
    
    March 1, 2010/s/ JAMES M. LAPEYRE, JR.
    
    Chairman of the Board of Directors and Director

    
    March 1, 2010James M. Lapeyre, Jr./s/ BRUCE S. APPELBAUM
    
    Director
    
    March 1, 2010Bruce S. Appelbaum/s/ THEODORE H. ELLIOTT, JR.
    
    Director
    
    March 1, 2010Theodore H. Elliott, Jr./s/ G. THOMAS MARSH
    
    Director
    
    March 1, 2010G. Thomas Marsh/s/ FRANKLIN MYERS
    
    Director
    
    March 1, 2010Franklin Myers/s/ S. JAMES NELSON, JR.
    
    Director
    
    March 1, 2010S. James Nelson, Jr./s/ JOHN N. SEITZ
    
    Director
    
    March 1, 2010John N. Seitz
 75




---



##### 



Name
    
    Capacities
    
    Date/s/ NICHOLAS G. VLAHAKIS
    
    Director
    
    March 1, 2010Nicholas G. Vlahakis
 76




---



##### 



ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
 
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageION Geophysical Corporation and Subsidiaries:Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets  December 31, 2009 and 2008
    
    
    F-3Consolidated Statements of Operations  Years ended December 31, 2009, 2008, and 2007
    
    
    F-4Consolidated Statements of Cash Flows  Years ended December 31, 2009, 2008, and 2007
    
    
    F-5Consolidated Statements of Stockholders Equity and Comprehensive Income (Loss) 
Years ended December 2009, 2008, and 2007
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7Schedule II  Valuation and Qualifying Accounts
    
    
    S-1
  F-1




---



##### 



Report of Independent Registered Public Accounting Firm
       
 F-2




---



##### 



ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 December 31,2009
    
    
    2008(In thousands,except share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    16,217
    
    
    $
    35,172Restricted cash
    
    
    1,469
    
    
    
    6,610Accounts receivable, net
    
    
    111,046
    
    
    
    150,565Current portion notes receivable, net
    
    
    13,367
    
    
    
    11,665Unbilled receivables
    
    
    21,655
    
    
    
    36,472Inventories
    
    
    202,601
    
    
    
    262,519Deferred income tax asset
    
    
    6,001
    
    
    
    4,382Prepaid expenses and other current assets
    
    
    23,145
    
    
    
    16,004Total current assets
    
    
    395,501
    
    
    
    523,389Notes receivable
    
    
    
    
    
    
    4,438Deferred income tax asset
    
    
    26,422
    
    
    
    11,757Property, plant, equipment and seismic rental equipment, net
    
    
    78,555
    
    
    
    59,129Multi-client data library, net
    
    
    130,705
    
    
    
    89,519Goodwill
    
    
    52,052
    
    
    
    49,772Intangible assets, net
    
    
    61,766
    
    
    
    107,443Other assets
    
    
    3,185
    
    
    
    15,984Total assets
    
    $
    748,186
    
    
    $
    861,431LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Notes payable and current maturities of long-term debt
    
    $
    271,132
    
    
    $
    38,399Accounts payable
    
    
    40,189
    
    
    
    94,586Accrued expenses
    
    
    65,893
    
    
    
    77,438Accrued multi-client data library royalties
    
    
    18,714
    
    
    
    28,044Fair value of the warrant
    
    
    44,789
    
    
    
    Deferred revenue
    
    
    13,802
    
    
    
    17,767Total current liabilities
    
    
    454,519
    
    
    
    256,234Long-term debt, net of current maturities
    
    
    6,249
    
    
    
    253,510Non-current deferred income tax liability
    
    
    1,262
    
    
    
    22,713Other long-term liabilities
    
    
    3,688
    
    
    
    3,904Total liabilities
    
    
    465,718
    
    
    
    536,361Commitments and contingenciesStockholders equity:Cumulative convertible preferred stock
    
    
    68,786
    
    
    
    68,786Common stock, $.01 par value; authorized 200,000,000 shares; outstanding 118,688,702 and
99,621,926 shares at December 31, 2009 and 2008, respectively, net of treasury stock
    
    
    1,187
    
    
    
    996Additional paid-in capital
    
    
    666,928
    
    
    
    619,198Accumulated deficit
    
    
    (411,548
    )
    
    
    (301,489
    )Accumulated other comprehensive income (loss)
    
    
    (36,320
    )
    
    
    (55,859
    )Treasury stock, at cost, 849,539 and 848,422 shares at December 31, 2009 and 2008, respectively
    
    
    (6,565
    )
    
    
    (6,562
    )Total stockholders equity
    
    
    282,468
    
    
    
    325,070Total liabilities and stockholders equity
    
    $
    748,186
    
    
    $
    861,431
  F-3




---



##### 



ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Years Ended December 31,2009
    
    
    2008
    
    
    2007(In thousands, except per share data)Product revenues
    
    $
    237,664
    
    
    $
    417,511
    
    
    $
    537,691Service revenues
    
    
    182,117
    
    
    
    262,012
    
    
    
    175,420Total net revenues
    
    
    419,781
    
    
    
    679,523
    
    
    
    713,111Cost of products
    
    
    165,923
    
    
    
    289,795
    
    
    
    386,849Cost of services
    
    
    121,720
    
    
    
    181,980
    
    
    
    119,679Gross profit
    
    
    132,138
    
    
    
    207,748
    
    
    
    206,583Operating expenses:Research, development and engineering
    
    
    44,855
    
    
    
    49,541
    
    
    
    49,965Marketing and sales
    
    
    34,945
    
    
    
    47,854
    
    
    
    43,877General and administrative
    
    
    72,510
    
    
    
    70,893
    
    
    
    48,847Impairment of goodwill and intangible assets
    
    
    38,044
    
    
    
    252,283
    
    
    
    Total operating expenses
    
    
    190,354
    
    
    
    420,571
    
    
    
    142,689Income (loss) from operations
    
    
    (58,216
    )
    
    
    (212,823
    )
    
    
    63,894Interest expense, including amortization of a non-cash debt discount
    
    
    (35,671
    )
    
    
    (12,723
    )
    
    
    (6,283
    )Interest income
    
    
    1,721
    
    
    
    1,439
    
    
    
    1,848Fair value adjustment of the warrant
    
    
    (29,401
    )
    
    
    
    
    
    
    Impairment of cost method investment
    
    
    (4,454
    )
    
    
    
    
    
    
    Other income (expense)
    
    
    (4,023
    )
    
    
    4,200
    
    
    
    (3,992
    )Income (loss) before income taxes
    
    
    (130,044
    )
    
    
    (219,907
    )
    
    
    55,467Income tax (benefit) expense
    
    
    (19,985
    )
    
    
    1,131
    
    
    
    12,823Net income (loss)
    
    
    (110,059
    )
    
    
    (221,038
    )
    
    
    42,644Preferred stock dividends and accretion
    
    
    3,500
    
    
    
    3,889
    
    
    
    2,388Preferred stock beneficial conversion charge
    
    
    
    
    
    
    68,786
    
    
    
    Net income (loss) applicable to common shares
    
    $
    (113,559
    )
    
    $
    (293,713
    )
    
    $
    40,256Earnings per share:Basic net income (loss) per share
    
    $
    (1.03
    )
    
    $
    (3.06
    )
    
    $
    0.49Diluted net income (loss) per share
    
    $
    (1.03
    )
    
    $
    (3.06
    )
    
    $
    0.45Weighted average number of common shares outstanding:Basic
    
    
    110,516
    
    
    
    95,887
    
    
    
    81,941Diluted
    
    
    110,516
    
    
    
    95,887
    
    
    
    97,321
  F-4




---



##### 



ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended December 312009
    
    
    2008
    
    
    2007(In thousands)Cash flows from operating activities:Net income (loss)
    
    $
    (110,059
    )
    
    $
    (221,038
    )
    
    $
    42,644Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation and amortization (other than multi-client library)
    
    
    47,911
    
    
    
    33,052
    
    
    
    26,767Amortization of multi-client data library
    
    
    48,449
    
    
    
    80,532
    
    
    
    37,662Stock-based compensation expense related to stock options, nonvested stock, and
employee stock purchases
    
    
    12,671
    
    
    
    8,306
    
    
    
    6,875Bad debt expense
    
    
    3,528
    
    
    
    4,852
    
    
    
    437Amortization of debt discount
    
    
    6,732
    
    
    
    816
    
    
    
    Fair value adjustment of the warrant
    
    
    29,401
    
    
    
    
    
    
    
    Fair value adjustment of preferred stock redemption features
    
    
    
    
    
    
    (1,215
    )
    
    
    Impairment of goodwill and intangible assets
    
    
    38,044
    
    
    
    252,283
    
    
    
    Impairment of cost method investment
    
    
    4,454
    
    
    
    
    
    
    
    Deferred income tax
    
    
    (38,150
    )
    
    
    (17,549
    )
    
    
    2,960Excess tax benefit from stock-based compensation
    
    
    
    
    
    
    (328
    )
    
    
    Profit on sale of rental assets
    
    
    (524
    )
    
    
    (3,190
    )
    
    
    Change in operating assets and liabilities:Accounts and notes receivable
    
    
    41,936
    
    
    
    37,673
    
    
    
    (14,348
    )Unbilled receivables
    
    
    14,817
    
    
    
    (14,084
    )
    
    
    6,211Inventories
    
    
    18,582
    
    
    
    (89,998
    )
    
    
    (11,270
    )Accounts payable, accrued expenses and accrued royalties
    
    
    (72,140
    )
    
    
    46,160
    
    
    
    8,674Deferred revenue
    
    
    (4,188
    )
    
    
    (6,088
    )
    
    
    (16,203
    )Other assets and liabilities
    
    
    10,522
    
    
    
    1,531
    
    
    
    3,351Net cash provided by operating activities
    
    
    51,986
    
    
    
    111,715
    
    
    
    93,760Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (2,966
    )
    
    
    (17,539
    )
    
    
    (11,375
    )Investment in multi-client data library
    
    
    (89,635
    )
    
    
    (110,362
    )
    
    
    (64,279
    )Business acquisition
    
    
    
    
    
    
    (242,835
    )
    
    
    Cash of acquired business
    
    
    
    
    
    
    10,677
    
    
    
    Proceeds from the sale of fixed assets and rental equipment
    
    
    1,972
    
    
    
    5,434
    
    
    
    386Increase in cost method investments
    
    
    (59
    )
    
    
    
    
    
    
    (700
    )Other investing activities
    
    
    (950
    )
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (91,638
    )
    
    
    (354,625
    )
    
    
    (75,968
    )Cash flows from financing activities:Borrowings under revolving line of credit
    
    
    77,000
    
    
    
    235,000
    
    
    
    175,000Repayments under revolving line of credit
    
    
    (25,000
    )
    
    
    (169,000
    )
    
    
    (175,000
    )Net proceeds from issuance of debt
    
    
    19,218
    
    
    
    160,308
    
    
    
    Net proceeds from issuance of stock
    
    
    38,220
    
    
    
    
    
    
    
    Payments on notes payable and long-term debt
    
    
    (81,517
    )
    
    
    (18,082
    )
    
    
    (8,424
    )Costs associated with debt amendments
    
    
    (4,630
    )
    
    
    
    
    
    
    Issuance of preferred stock
    
    
    
    
    
    
    35,000
    
    
    
    5,000Payment of preferred dividends
    
    
    (3,500
    )
    
    
    (3,889
    )
    
    
    (2,375
    )Proceeds from employee stock purchases and exercise of stock options
    
    
    286
    
    
    
    6,323
    
    
    
    8,038Restricted stock cancelled for employee minimum income taxes
    
    
    (345
    )
    
    
    (1,660
    )
    
    
    (1,314
    )Excess tax benefit from stock-based compensation
    
    
    
    
    
    
    328
    
    
    
    Purchases of treasury stock
    
    
    (3
    )
    
    
    (39
    )
    
    
    (117
    )Net cash provided by financing activities
    
    
    19,729
    
    
    
    244,289
    
    
    
    808Effect of change in foreign currency exchange rates on cash and cash equivalents
    
    
    968
    
    
    
    (2,616
    )
    
    
    753Net increase (decrease) in cash and cash equivalents
    
    
    (18,955
    )
    
    
    (1,237
    )
    
    
    19,353Cash and cash equivalents at beginning of period
    
    
    35,172
    
    
    
    36,409
    
    
    
    17,056Cash and cash equivalents at end of period
    
    $
    16,217
    
    
    $
    35,172
    
    
    $
    36,409
  F-5




---



##### 



ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND
COMPREHENSIVE INCOME (LOSS)
 AccumulatedOtherCumulative Convertible
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    Comprehensive
    
    
    
    
    
    
    TotalPreferred Stock
    
    
    Common Stock
    
    
    Paid  In
    
    
    Accumulated
    
    
    Income
    
    
    Treasury
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    (Loss)
    
    
    Stock
    
    
    EquityBalance at January 1, 2007
    
    
    
    
    
    $
    
    
    
    
    80,123,486
    
    
    $
    810
    
    
    $
    493,605
    
    
    $
    (123,095
    )
    
    $
    4,859
    
    
    $
    (6,511
    )
    
    $
    369,668Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,644
    
    
    
    
    
    
    
    
    
    
    
    42,644Other comprehensive income:Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    601
    
    
    
    
    
    
    
    601Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,245Preferred
stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,388
    )
    
   
    
    
    
    
    
    
    
    
    
    
    
    
    (2,388
    )Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,875
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,875Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (8,548
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (117
    )
    
    
    (117
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    1,036,794
    
    
    
    10
    
    
    
    6,960
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,970Vesting of restricted stock units/awards
    
    
    
    
    
    
    
    
    
    
    455,307
    
    
    
    4
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted stock cancelled for employee
minimum income taxes
    
    
    
    
    
    
    
    
    
    
    (91,732
    )
    
    
    
    
    
    
    (1,314
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,314
    )Issuance of stock for the ESPP
    
    
    
    
    
    
    
    
    
    
    113,763
    
    
    
    2
    
    
    
    1,068
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,070Conversion of 5.5% convertible senior notes
    
    
    
    
    
    
    
    
    
    
    12,212,964
    
    
    
    122
    
    
    
    52,030
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,152Issuance of treasury stock
    
    
    
    
    
    
    
    
    
    
    5,574
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    79Balance at December 31, 2007
    
    
    
    
    
    
    
    
    
    
    93,847,608
    
    
    
    948
    
    
    
    556,867
    
    
    
    (80,451
    )
    
    
    5,460
    
    
    
    (6,584
    )
    
    
    476,240Comprehensive income:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (221,038
    )
    
    
    
    
    
    
    
    
    
    
    (221,038
    )Other comprehensive loss:Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61,319
    )
    
    
    
    
    
    
    (61,319
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (282,357
    )Preferred
stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,889
    )
    
   
    
    
    
    
    
    
    
    
    
    
    
    
    (3,889
    )Reclassification of preferred stock to equity
    
    
    70,000
    
    
    
    68,786
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,786Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,306
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,306Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (2,745
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39
    )
    
    
    (39
    )Issuance of stock for ARAM acquisition
    
    
    
    
    
    
    
    
    
    
    3,629,211
    
    
    
    36
    
    
    
    48,922
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,958Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    656,166
    
    
    
    6
    
    
    
    4,842
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,848Vesting of restricted stock units/awards
    
    
    
    
    
    
    
    
    
    
    550,083
    
    
    
    5
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted stock cancelled for employee
minimum income taxes
    
    
    
    
    
    
    
    
    
    
    (101,991
    )
    
    
    
    
    
    
    (1,660
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,660
    )Issuance of stock for the ESPP
    
    
    
    
    
    
    
    
    
    
    109,943
    
    
    
    1
    
    
    
    1,474
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,475Conversion of 5.5% convertible senior notes
    
    
    
    
    
    
    
    
    
    
    925,926
    
    
    
    9
    
    
    
    3,996
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,005Tax benefits from stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    271
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    271Issuance of treasury stock
    
    
    
    
    
    
    
    
    
    
    7,725
    
    
    
    
    
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    126Other equity adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2008
    
    
    70,000
    
    
    
    68,786
    
    
    
    99,621,926
    
    
    
    996
    
    
    
    619,198
    
    
    
    (301,489
    )
    
    
    (55,859
    )
    
    
    (6,562
    )
    
    
    325,070Comprehensive income:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110,059
    )
    
    
    
    
    
    
    
    
    
    
    (110,059
    )Other comprehensive loss:Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,539
    
    
    
    
    
    
    
    19,539Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (90,520
    )Preferred
stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,500
    )
    
   
    
    
    
    
    
    
    
    
    
    
    
    
    (3,500
    )Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,671
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,671Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (1,117
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )Issuance of stock
    
    
    
    
    
    
    
    
    
    
    18,500,000
    
    
    
    185
    
    
    
    38,035
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,220Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    9,837
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21Vesting of restricted stock units/awards
    
    
    
    
    
    
    
    
    
    
    528,284
    
    
    
    5
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted stock cancelled for employee
minimum income taxes
    
    
    
    
    
    
    
    
    
    
    (79,878
    )
    
    
    
    
    
    
    (99
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99
    )Issuance of stock for the ESPP
    
    
    
    
    
    
    
    
    
    
    109,650
    
    
    
    1
    
    
    
    263
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    264Tax benefits from stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    344
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    344Balance at December 31, 2009
    
    
    70,000
    
    
    $
    68,786
    
    
    
    118,688,702
    
    
    $
    1,187
    
    
    $
    666,928
    
    
    $
    (411,548
    )
    
    $
    (36,320
    )
    
    $
    (6,565
    )
    
    $
    282,468
  F-6




---



##### 



ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (1) Summary of Significant Accounting Policies
 General Description and Principles of Consolidation.
 Overview and Proposed Joint Venture with BGP.
   ®  ®
 Restructuring Activities.
 F-7




---



##### 



Notes
Payable, Long-term Debt and Lease Obligations.
  
    
    Two promissory notes (the Convertible Notes) issued to Bank of China under the Amended
Credit Facility as amended by the Sixth Amendment, both convertible into shares of the
Companys common stock; and
    
    A Warrant Issuance Agreement with BGP, under which the Company granted BGP a warrant (the
Warrant) to purchase shares of the Companys common stock that may be exercised in lieu of
conversion of the Convertible Notes.
 Term Sheet with BGP
and Bridge Financing Transactions.
    F-8




---



##### 



Use of Estimates.
 Cash and Cash Equivalents.
 Accounts and Notes Receivable.
  Inventories.
 Property, Plant, Equipment and Seismic Rental Equipment.
 YearsMachinery and equipment
    
    
    3-8Buildings
    
    
    10-20Rental equipment
    
    
    2-7Leased equipment and other
    
    
    1-10
 F-9




---



##### 



Multi-Client Data Library.
 December 31,2009
    
    
    2008Gross costs of multi-client data creation
    
    $
    337,516
    
    
    $
    247,881Less accumulated amortization
    
    
    (206,811
    )
    
    
    (158,362
    )Total
    
    $
    130,705
    
    
    $
    89,519
  Accounting for the Impairment and Disposal of Long-Lived Assets,
 Computer Software.
 Cost Method Investments.
 F-10




---



##### 



 Cost Method Investment.
 Financial Instruments.
  Goodwill and Other Intangible Assets.
 
Goodwill.
  Intangible Assets.
  Estimated Useful Life(Years)Proprietary technology
    
    
    4-8Customer relationships
    
    
    8Patents
    
    
    5-20Trade names
    
    
    5Non-compete agreements
    
    
    5
  Estimated Economic Life(Years)Customer relationships
    
    
    15Intellectual property rights
    
    
    5
 F-11




---



##### 



Fair Value Fair Value Measurements,
 
    
    Goodwill and Intangible Assets.In 2008 and 2009, the Company performed a
valuation of its goodwill and intangible asset balances. Both valuations were performed using
Level 3 inputs. The fair value of these assets was estimated using a discounted cash flow
model, which included a variety of inputs. The key inputs for the model included the
operational five-year forecast for the Company, the then-current market discount factor and
the forecasted cash flows related to each intangible asset. The forecasted operational and
cash flow amounts were determined using the current activity levels in the Company as well as
the current and expected short-term market conditions. For further information, see Note 9 
Goodwilland Note 10  Intangible Assets.
 
    
    Warrant.The Warrant issued to BGP in October 2009 had an initial fair value of
$15.4 million, which was comprised of Level 2 inputs and was listed on the balance sheet as a
current liability. On December 31, 2009, the Warrant was re-valued at approximately $44.8
million. For further information, see Note 12  Notes Payable, Long-Term Debt and Lease
Obligations.
 The Warrant is the only material transactions currently requiring recurring fair value
calculations. The fair value of the Warrant was estimated using a Black-Scholes model, which
includes a variety of inputs. The key inputs for the Black-Scholes model include the current
market price of the Companys common stock, the yield on the common stock dividend payments (0%),
risk-free interest rates, the expected term (March 31, 2010) and the Company stocks historical
and implied volatility.
 
    
    Cost Method Investments. In 2009, the Company performed a fair value analysis
based upon Level 3 inputs, utilizing current financial data and operational forecasts with the
main drivers in the calculation being the investments forecasted cash flows and its current
obligations. For further information, see Note 8  Cost Method Investment.
 Revenue Recognition and Product Warranty.
 Revenue Recognition
    F-12




---



##### 



Accounting for Multiple-Element
Revenue Arrangement,
 Software Revenue Recognition, Applicability of AICPA Statement of Position 97-2 to Non-Software Deliverables in an
Arrangement Containing More-Than-Incidental Software
   Research, Development and Engineering.
 Income Taxes.  Income Taxes
 Comprehensive Net Income (Loss).
 F-13




---



##### 



Net Income (Loss) per Common Share.
  Term Sheet with BGP and Bridge Financing
Transactions.
 Cumulative Convertible Preferred Stock  Legal
Matters.
   Years Ended December 31,2009
    
    
    2008
    
    
    2007Net income (loss) applicable to common shares
    
    $
    (113,559
    )
    
    $
    (293,713
    )
    
    $
    40,256Income impact of assumed convertible debt conversion
    
    
    
    
    
    
    
    
    
    
    3,694Net income (loss) after impact of assumed convertible debt conversion
    
    $
    (113,559
    )
    
    $
    (293,713
    )
    
    $
    43,950Weighted average number of common shares outstanding
    
    
    110,516
    
    
    
    95,887
    
    
    
    81,941Effect of dilutive stock awards
    
    
    
    
    
    
    
    
    
    
    2,629Effect of assumed convertible debt conversion
    
    
    
    
    
    
    
    
    
    
    12,751Weighted average number of diluted common shares outstanding
    
    
    110,516
    
    
    
    95,887
    
    
    
    97,321Net income (loss) per basic share
    
    $
    (1.03
    )
    
    $
    (3.06
    )
    
    $
    0.49Net income (loss) per diluted share
    
    $
    (1.03
    )
    
    $
    (3.06
    )
    
    $
    0.45
 Foreign Currency Gains and Losses.
 Concentration of Credit and Foreign Sales Risks.
 F-14




---



##### 



Stock-Based Compensation. Share-Based Payment
  Recent Accounting Pronouncements. Revenue Recognition 
Multiple Deliverable Revenue Arrangements  a consensus of the FASB Emerging Issues Task Force
 Certain Revenue Arrangements
That Include Software Elements
 Fair Value Measurements and Disclosures,
Measuring Liabilities at Fair Value (Topic 820) .
 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles  a replacement of FASB Statement No. 162
 F-15




---



##### 



Interim Disclosures about Fair Value of
Financial Instruments
 The Meaning of Other-Than-Temporary Impairment and
its Application to Certain Investments
 , Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities
 Subsequent Events. Subsequent Events,
 (2) Term Sheet with BGP and Bridge Financing Transactions
      F-16




---



##### 



 Notes Payable,
Long-Term Debt and Lease Obligations.
  
    
    BGP will have purchased approximately 23.8 million shares of the Companys common stock
for $66.6 million and thereby own, before giving effect to the issuance of those shares,
approximately 19.99% of the Companys outstanding common stock.
    
    To the extent that shares are not purchased by BGP under the Warrant prior to closing,
the new revolving credit loans from Bank of China, evidenced by the Convertible Notes will
convert into approximately 14.3 million shares of ION common stock and will be credited
against the approximately 23.8 million shares of ION stock to be purchased by BGP at the
transaction closing.
 F-17




---



##### 




    
    ION will appoint a designee of BGP to its Board of Directors to serve with the current
nine members of IONs Board of Directors.
    
    BGP will arrange for the Companys then-outstanding long-term debt under the Amended
Credit Facility (currently $101.6 million outstanding at February 22, 2009) to be refinanced
at the joint venture closing.
    
    ION will use a portion of the proceeds from the transactions to pay off and retire the
Companys outstanding indebtedness under its current revolving credit facility (after giving
effect to the $40.0 million in additional revolving credit borrowings under the existing
Amended Credit Facility, approximately $118.0 million, excluding the non-cash debt discount,
is currently outstanding at February 22, 2009) and $35.0 million in seller subordinated
indebtedness incurred in connection with the acquisition of ARAM in September 2008.
    
    ION will receive a new $100 million revolving credit facility at the joint venture
closing.
    
    The $19.1 million (as of December 31, 2009) secured equipment financing transaction with
ICON will be assigned to and become indebtedness of the joint venture.
 (3) ARAM Acquisition
   Fair values of assets and liabilities:Net current assets
    
    $
    69,827Property, plant, equipment and seismic rental equipment
    
    
    24,026Net other long-term assets
    
    
    2,480Intangible assets
    
    
    101,800Goodwill
    
    
    173,836Deferred tax liability
    
    
    (31,723
    )Capital lease obligations
    
    
    (3,453
    )Total allocated purchase price
    
    
    336,793Less non-cash consideration  issuance of common stock
    
    
    (48,958
    )Less issuance of seller notes
    
    
    (45,000
    )Less cash of acquired business
    
    
    (10,677
    )Cash paid for acquisition, net of cash acquired
    
    $
    232,158
  F-18




---



##### 



 Goodwill 
Intangible Assets.
  Years ending December 312008
    
    
    2007Pro forma net revenues
    
    $
    741,982
    
    
    $
    838,022Pro forma income (loss) from operations
    
    $
    (201,603
    )
    
    $
    91,994Pro forma net income (loss)
    
    $
    (302,890
    )
    
    $
    42,931Pro forma basic net income (loss) per common share
    
    $
    (3.08
    )
    
    $
    0.50Pro forma diluted net income (loss) per common share
    
    $
    (3.08
    )
    
    $
    0.46
 (4) Accounts and Notes Receivable
  December 31,2009
    
    
    2008Accounts receivable, principally trade
    
    $
    116,720
    
    
    $
    156,250Less allowance for doubtful accounts
    
    
    (5,674
    )
    
    
    (5,685
    )Accounts receivable, net
    
    $
    111,046
    
    
    $
    150,565
  December 31,2009
    
    
    2008Notes receivable and accrued interest
    
    $
    13,438
    
    
    $
    16,103Less allowance for doubtful notes
    
    
    (71
    )
    
    
    Notes receivable, net
    
    
    13,367
    
    
    
    16,103Less current portion notes receivable, net
    
    
    13,367
    
    
    
    11,665Long-term notes receivable
    
    $
    
    
    
    $
    4,438
  Years Ended December 31,2009
    
    
    2008
    
    
    2007Balance at beginning of period
    
    $
    
    
    
    $
    3,351
    
    
    $
    4,530Additions charged to bad debt expense
    
    
    71
    
    
    
    
    
    
    
    Write-offs charged against the allowance
    
    
    
    
    
    
    (3,351
    )
    
    
    (1,179
    )Balance at end of period
    
    $
    71
    
    
    $
    
    
    
    $
    3,351
 (5) Inventories
  December 31,2009
    
    
    2008Raw materials and subassemblies
    
    $
    111,022
    
    
    $
    104,862Work-in-process
    
    
    10,129
    
    
    
    20,698Finished goods
    
    
    112,068
    
    
    
    161,065Reserve for excess and obsolete inventories
    
    
    (30,618
    )
    
    
    (24,106
    )Total
    
    $
    202,601
    
    
    $
    262,519
 F-19




---



##### 



(6) Supplemental Cash Flow Information and Non-Cash Activity
  Years Ended December 31,2009
    
    
    2008
    
    
    2007Net cash paid during the period for:Interest
    
    $
    24,051
    
    
    $
    5,251
    
    
    $
    3,370Income taxes
    
    
    22,184
    
    
    
    14,894
    
    
    
    7,470
  Term Sheet with BGP
and Bridge Financing Transactions
  ARAM Acquisition above
   (7) Property, Plant, Equipment and Seismic Rental Equipment
  December 31,2009
    
    
    2008Land
    
    $
    25
    
    
    $
    25Buildings
    
    
    15,710
    
    
    
    15,697Machinery and equipment
    
    
    90,656
    
    
    
    103,377Lease and seismic rental equipment
    
    
    65,856
    
    
    
    18,329Furniture and fixtures
    
    
    4,735
    
    
    
    4,834Other
    
    
    1,187
    
    
    
    5,722Total
    
    
    178,169
    
    
    
    147,984Less accumulated depreciation
    
    
    (99,614
    )
    
    
    (88,855
    )Property, plant, equipment and seismic rental equipment, net
    
    $
    78,555
    
    
    $
    59,129
  F-20




---



##### 



 Notes Payable, Long-term Debt and Lease Obligations
 (8) Cost Method Investment
    (9) Goodwill
    Land
    
    
    Marine
    
    
    DataImaging
    
    
    Imaging
    
    
    Management
    
    
    ION SolutionsSystems
    
    
    Systems
    
    
    Solutions
    
    
    Division
    
    
    TotalBalance at January 1, 2008
    
    $
    3,478
    
    
    $
    26,984
    
    
    $
    32,278
    
    
    $
    90,405
    
    
    $
    153,145Goodwill acquired during the year
    
    
    173,836
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    173,836Impact of acquisition net operating losses
    
    
    
    
    
    
    
    
    
    
    (730
    )
    
    
    (3,496
    )
    
    
    (4,226
    )Impact of foreign currency translation adjustments
    
    
    (22,064
    )
    
    
    
    
    
    
    (8,760
    )
    
    
    
    
    
    
    (30,824
    )Impairment losses
    
    
    (155,250
    )
    
    
    
    
    
    
    
    
    
    
    (86,909
    )
    
    
    (242,159
    )Balance at December 31, 2008
    
    
    
    
    
    
    26,984
    
    
    
    22,788
    
    
    
    
    
    
    
    49,772Impact of foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    2,280
    
    
    
    
    
    
    
    2,280Balance at December 31, 2009
    
    $
    
    
    
    $
    26,984
    
    
    $
    25,068
    
    
    $
    
    
    
    $
    52,052
 F-21




---



##### 



(10) Intangible Assets
   December 31, 2009Gross
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Impairments
    
    
    NetProprietary technology
    
    $
    84,864
    
    
    $
    (19,907
    )
    
    $
    (33,311
    )
    
    $
    31,646Customer relationships
    
    
    45,415
    
    
    
    (18,833
    )
    
    
    (4,733
    )
    
    
    21,849Trade names
    
    
    11,389
    
    
    
    (6,164
    )
    
    
    
    
    
    
    5,225Patents
    
    
    3,689
    
    
    
    (2,964
    )
    
    
    
    
    
    
    725Intellectual property rights
    
    
    4,550
    
    
    
    (2,871
    )
    
    
    
    
    
    
    1,679Non-compete agreements
    
    
    919
    
    
    
    (277
    )
    
    
    
    
    
    
    642Total
    
    $
    150,826
    
    
    $
    (51,016
    )
    
    $
    (38,044
    )
    
    $
    61,766
 December 31, 2008Gross
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Impairments
    
    
    NetProprietary technology
    
    $
    80,755
    
    
    $
    (11,997
    )
    
    $
    
    
    
    $
    68,758Customer relationships
    
    
    50,641
    
    
    
    (15,065
    )
    
    
    (5,130
    )
    
    
    30,446Trade names
    
    
    14,516
    
    
    
    (4,260
    )
    
    
    (4,207
    )
    
    
    6,049Patents
    
    
    3,689
    
    
    
    (2,735
    )
    
    
    
    
    
    
    954Intellectual property rights
    
    
    3,050
    
    
    
    (2,514
    )
    
    
    
    
    
    
    536Non-compete agreements
    
    
    1,575
    
    
    
    (89
    )
    
    
    (786
    )
    
    
    700Total
    
    $
    154,226
    
    
    $
    (36,660
    )
    
    $
    (10,123
    )
    
    $
    107,443
  Years Ended December 31,2010
    
    $
    12,2812011
    
    $
    10,6042012
    
    $
    9,3342013
    
    $
    8,4112014
    
    $
    6,767
 F-22




---



##### 



(11) Accrued Expenses
  December 31,2009
    
    
    2008Compensation, including compensation-related taxes and commissions
    
    $
    20,144
    
    
    $
    24,446Accrued multi-client data library acquisition costs
    
    
    13,890
    
    
    
    17,654Accrued taxes (primarily income taxes)
    
    
    11,159
    
    
    
    6,143Product warranty
    
    
    5,088
    
    
    
    10,526Other
    
    
    15,612
    
    
    
    18,669Total accrued expenses
    
    $
    65,893
    
    
    $
    77,438
  Years Ended December 31,2009
    
    
    2008
    
    
    2007Balance at beginning of period
    
    $
    10,526
    
    
    $
    13,439
    
    
    $
    6,255Opening balance for accruals for warranties for acquired entity
    
    
    
    
    
    
    845
    
    
    
    Accruals (expirations) for warranties issued/expired during the period
    
    
    (2,121
    )
    
    
    4,624
    
    
    
    13,074Settlements made (in cash or in kind) during the period
    
    
    (3,317
    )
    
    
    (8,382
    )
    
    
    (5,890
    )Balance at end of period
    
    $
    5,088
    
    
    $
    10,526
    
    
    $
    13,439
 (12) Notes Payable, Long-term Debt and Lease Obligations
 December 31,Obligations
    
    2009
    
    
    2008$140.0 million revolving line of credit
    
    $
    118,000
    
    
    $
    66,000Term loan facility
    
    
    101,563
    
    
    
    120,313Secured Equipment Financing
    
    
    19,080
    
    
    
    Bridge loan
    
    
    
    
    
    
    40,816Amended and restated subordinated seller note
    
    
    35,000
    
    
    
    35,000Subordinated seller note
    
    
    
    
    
    
    10,000Facility lease obligation
    
    
    4,174
    
    
    
    4,610Equipment capital leases and other notes payable
    
    
    8,220
    
    
    
    15,170Unamortized non-cash debt discount
    
    
    (8,656
    )
    
    
    Total
    
    
    277,381
    
    
    
    291,909Current portion of notes payable, long-term debt and lease obligations
    
    
    (271,132
    )
    
    
    (38,399
    )Non-current portion of notes payable, long-term debt and lease obligations
    
    $
    6,249
    
    
    $
    253,510
 Revolving Line of Credit and Term Loan  Amended Credit Facility.
  F-23




---



##### 




    
    Increased applicable maximum interest rate margins in the event that the Companys leverage
ratio exceeds 2.25 to 1.0  from 4.5% to up to 5.5% for alternate base rate loans, and from
5.5% to up to 6.5% for LIBOR-rate loans;
 
    
    Modified a restricted payments covenant, permitting the Company to apply up to $6.0 million
of its available cash on hand to prepay the indebtedness under the Jefferies bridge loan
agreement;
 
    
    Added a requirement for the Company to apply 50% of its Excess Cash Flow, if any,
calculated with respect to a just-completed fiscal year, to the prepayment of the term loan
under the Amended Credit Agreement if the Companys fixed charge coverage ratio or its
leverage ratio for the just-completed fiscal year did not meet certain requirements; and
 
    
    Modified the Amended Credit Agreement to prohibit any increase in the revolving commitments
under the Amended Credit Facility until the Company had delivered its compliance certificate
for the period ending September 30, 2009, and then only if certain fixed charge coverage ratio
and leverage ratio requirements were met.
  
    
    Incurring additional indebtedness (including capital lease obligations), granting or
incurring additional liens on the Companys properties, pledging shares of the Companys
subsidiaries, entering into certain merger or other similar transactions, entering into
transactions with affiliates, making certain sales or other dispositions of assets, making
certain investments, acquiring other businesses and entering into certain sale-leaseback
transactions with respect to certain of the Companys properties; or
 
    
    Paying cash dividends on the Companys common stock and repurchasing and acquiring shares of
the Companys common stock unless (i) there is no event of default under the Amended Credit
Facility and (ii) the amount of cash used for cash dividends, repurchases and acquisitions
does not, in the aggregate, exceed an amount equal to the excess of 30% of IONs domestic
consolidated net income for the Companys most recently completed fiscal year over $15.0
million.
  
    
    Maintain a minimum fixed charge coverage ratio (which must be not less than 1.10 to 1.0 for
the fiscal quarter ended December 31, 2009; 1.15 to 1.0 for the fiscal quarter ending March
31, 2010; 1.25 to 1.0 for the fiscal quarter ending June 30, 2010; 1.35 to 1.0 for the fiscal
quarter ending September 30, 2010; and 1.50 to 1.0 the fiscal quarter ending December 31, 2010
and thereafter);
 
    
    Not exceed a maximum leverage ratio (3.00 to 1.0 for each of the fiscal quarters ended
December 31, 2009; 2.75 to 1.0 for the fiscal quarter ending March 31, 2010 and June 30, 2010;
2.5 to 1.0 for the fiscal quarter ending September 30, 2010; and 2.25 to 1.0 the fiscal
quarter ending December 31, 2010 and thereafter); and
 
    
    Maintain a minimum tangible net worth of at least 80% of the Companys tangible net worth as
of September 18, 2008 (the date that the Company completed its acquisition of ARAM), plus 50%
of the Companys consolidated net income for each quarter thereafter, and 80% of the proceeds
from any mandatorily convertible notes and preferred and common stock issuances for each
quarter thereafter.
  F-24




---



##### 



Term Sheet
with BGP and Bridge Financing Transactions.
       Convertible Notes and Warrant.
  F-25




---



##### 



Determining Whether an Instrument (or
Embedded Feature) Is Indexed to an Entitys Own Stock,
 Secured Equipment Financing.
 F-26




---



##### 



Amended and Restated Subordinated Seller Note.
   
    
    qualifies as Long Term Junior Financing (as defined in the Amended Credit Agreement),
 
    
    results from a refinancing or replacement of the Amended Credit Facility such that the
aggregate principal indebtedness (including revolving commitments) thereunder would be in
excess of $275.0 million, or
 F-27




---



##### 




    
    qualifies as unsecured indebtedness for borrowed money that is evidenced by notes or
debentures, has a maturity date of at least five years after the date of its issuance and
results in total gross cash proceeds to the Company of not less than $40.0 million,
 then ION Sub is obligated to repay in full from the total proceeds from such financing the
then-outstanding principal of and interest on the Amended and Restated Subordinated Note.
  
    
    the Companys obligations under the Amended Credit Facility,
 
    
    the Companys liabilities with respect to capital leases and obligations that qualify as a
Sale/Leaseback Agreement (as that term is defined in the Amended Credit Agreement),
 
    
    guarantees of the indebtedness described above, and
 
    
    debentures, notes or other evidences of indebtedness issued in exchange for, or in the
refinancing of, the Senior Obligations described above, or any indebtedness arising from the
payment and satisfaction of any Senior Obligations by a guarantor.
   Bridge Loan.
 Subordinated Seller Note
 Facility Lease Obligation.
 F-28




---



##### 



Equipment Capital Leases.
  Notes Payable and
    
    
    Capital LeaseYears Ended December 31,
    
    Long-Term Debt
    
    
    Obligations2010
    
    $
    275,905
    
    
    $
    4,1822011
    
    
    610
    
    
    
    2,4252012
    
    
    714
    
    
    
    2952013
    
    
    832
    
    
    
    2014
    
    
    966
    
    
    
    2015 and thereafter
    
    
    535
    
    
    
    Less: Unamortized non-cash debt discount
    
    
    (8,656
    )
    
    
    Total
    
    $
    270,906
    
    
    
    6,902Imputed interest
    
    
    
    
    
    
    (427
    )Net present value of equipment capital lease obligations
    
    
    
    
    
    
    6,475Current portion of equipment capital lease obligations
    
    
    
    
    
    
    3,884Long-term portion of equipment capital lease obligations
    
    
    
    
    
    $
    2,591
 (13) Cumulative Convertible Preferred Stock
 
  
    
    The conversion price for the Series D-1 Preferred Stock was $7.869 per share;
 
    
    The conversion price for the Series D-2 Preferred Stock was $16.0429 per share; and
 
    
    The conversion price for the Series D-3 Preferred Stock was $14.7981 per share.
 F-29




---



##### 




    
    satisfy all future redemption obligations by distributing only cash, or a combination of cash
and common stock, or
 
    
    reset the conversion prices of all of the outstanding shares of Series D Preferred Stock to
the Minimum Price, in which event Fletcher would have no further rights to redeem its shares
of Series D Preferred Stock.
     
    
    Fletcher is no longer permitted to redeem its shares of Series D Preferred Stock,
 
    
    the Company is required to pay all future dividends on the Series D Preferred Stock in cash
and may not pay such dividends in shares of its common stock, and
 
    
    the Maximum Number of shares of common stock into which the shares of Series D Preferred
Stock may be converted is 9,669,434 shares.
   
    
    Beneficial conversion charge  The reset of the conversion prices triggered a contingent
beneficial conversion feature. Following the guidance of ASC 470-20, Application of Issue No.
98-5 to Certain Convertible Instruments,the Company recorded a beneficial conversion charge
of $68.8 million during the year ended December 31, 2008. This charge was calculated at its
intrinsic value at the original commitment date. The total charge was limited to the amount of
proceeds allocated to the convertible instruments.
 
    
    Classification of preferred stock  The Company originally classified the preferred stock
outside of stockholders equity on the balance sheet below total liabilities. However, with
the termination of the redemption rights, there are no other provisions that could require
cash redemption. Therefore, in the fourth quarter of 2008, the Company reclassified the
preferred stock to stockholders equity.
 F-30




---



##### 




    
    Elimination of rights of redemption  The outstanding shares of the Series D-2 Preferred
Stock and the Series D-3 Preferred Stock were subject to the accounting guidance contained in
ASC Topic 815-10: Determining the Nature of a Host Contract Related to a Hybrid Financial
Instrument Issued in the Form of a Share under FASB Statement No. 133(ASC 815-10). ASC
815-10 became effective on a prospective basis on July 1, 2007, and the additional guidance
and clarification of ASC 815-10 applies to transactions occurring after July 1, 2007. Under
ASC 815-10, the redemption features of the Series D-2 Preferred Stock and the Series D-3
Preferred Stock were embedded derivatives that were required to be bifurcated and accounted
for separately at their fair value. The fair value of the redemption features had been
classified as a liability on the balance sheet of the Company and, on a quarterly basis,
changes in the fair value of these redemption features had been reflected in the income
statement below income from operations. However, after the resetting of the conversion prices,
Fletcher has no further rights to redeem its shares. Therefore, the redemption obligation
was eliminated, resulting in a positive fair value adjustment of $1.2 million for the year
ended December 31, 2008.
 ION Geophysical Corporation v.
Fletcher International, Ltd.,  Legal Matters.
 (14) Stockholders Equity and Stock-Based Compensation
 Stockholder Rights Plan
  Stock Option Plans
    Option Price
    
    
    
    
    
    
    
    
    
    
    Availableper Share
    
    
    Outstanding
    
    
    Vested
    
    
    for GrantJanuary 1, 2007
    
    $
    1.73-$30.00
    
    
    
    6,824,648
    
    
    
    4,335,587
    
    
    
    696,286Increase in shares authorized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,400,000Granted
    
    
    13.52-16.03
    
    
    
    1,381,200
    
    
    
    
    
    
    
    (1,381,200
    )Vested
    
    
    
    
    
    
    
    
    
    
    968,250
    
    
    
    Exercised
    
    
    1.73-12.45
    
    
    
    (1,036,794
    )
    
    
    (1,036,794
    )
    
    
    Cancelled/forfeited
    
    
    3.35-30.00
    
    
    
    (329,413
    )
    
    
    (66,601
    )
    
    
    279,544
 F-31




---



##### 



Option Price
    
    
    
    
    
    
    
    
    
    
    Availableper Share
    
    
    Outstanding
    
    
    Vested
    
    
    for GrantRestricted stock granted out of option plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (473,708
    )Restricted stock forfeited or cancelled for
employee minimum income taxes and returned to the
plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90,122December 31, 2007
    
    
    1.73-24.63
    
    
    
    6,839,641
    
    
    
    4,200,442
    
    
    
    1,611,044Increase in shares authorized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000,000Granted
    
    
    3.00-16.39
    
    
    
    1,886,950
    
    
    
    
    
    
    
    (1,886,950
    )Vested
    
    
    
    
    
    
    
    
    
    
    913,915
    
    
    
    Exercised
    
    
    1.73-13.52
    
    
    
    (656,166
    )
    
    
    (656,166
    )
    
    
    Cancelled/forfeited
    
    
    3.35-24.63
    
    
    
    (587,150
    )
    
    
    (308,850
    )
    
    
    378,800Restricted stock granted out of option plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (454,983
    )Issuance of inducement stock options in acquisition
    
    
    14.10
    
    
    
    410,000
    
    
    
    
    
    
    
    Restricted stock forfeited or cancelled for
employee minimum income taxes and returned to the
plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    187,496December 31, 2008
    
    
    1.73-16.39
    
    
    
    7,893,275
    
    
    
    4,149,341
    
    
    
    835,407Granted
    
    
    1.07-5.44
    
    
    
    635,750
    
    
    
    
    
    
    
    (635,750
    )Vested
    
    
    
    
    
    
    
    
    
    
    1,089,478
    
    
    
    Exercised
    
    
    1.73-3.00
    
    
    
    (9,837
    )
    
    
    (9,837
    )
    
    
    Cancelled/forfeited
    
    
    3.00-16.39
    
    
    
    (753,000
    )
    
    
    (186,300
    )
    
    
    564,950Restricted stock granted out of option plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (568,874
    )Restricted stock forfeited or cancelled for
employee minimum income taxes and returned to the
plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    215,140December 31, 2009
    
    $
    1.07-$16.39
    
    
    
    7,766,188
    
    
    
    5,042,682
    
    
    
    410,873
  WeightedAverage Exercise
    
    
    Weighted
    
    
    
    
    
    
    WeightedPrice of
    
    
    Average
    
    
    
    
    
    
    Average ExerciseOutstanding
    
    
    Remaining
    
    
    
    
    
    
    Price of VestedOption Price per Share
    
    Outstanding
    
    
    Options
    
    
    Contract Life
    
    
    Vested
    
    
    Options$1.07 $1.73
    
    
    33,522
    
    
    $
    1.34
    
    
    
    5.5
    
    
    
    13,522
    
    
    $
    1.732.49  3.80
    
    
    1,892,850
    
    
    $
    2.97
    
    
    
    7.9
    
    
    
    669,288
    
    
    $
    2.933.85  5.81
    
    
    844,441
    
    
    $
    5.31
    
    
    
    7.1
    
    
    
    326,691
    
    
    $
    5.105.94  9.01
    
    
    2,350,375
    
    
    $
    6.60
    
    
    
    4.1
    
    
    
    2,326,625
    
    
    $
    6.589.08  14.03
    
    
    1,326,350
    
    
    $
    10.36
    
    
    
    5.7
    
    
    
    1,081,353
    
    
    $
    10.2714.10  16.39
    
    
    1,318,650
    
    
    $
    15.17
    
    
    
    8.1
    
    
    
    625,203
    
    
    $
    15.29Totals
    
    
    7,766,188
    
    
    $
    7.65
    
    
    
    6.3
    
    
    
    5,042,682
    
    
    $
    7.86
  Weighted AverageWeighted Average
    
    
    Remaining
    
    
    AggregateWeighted Average
    
    
    Grant Date Fair
    
    
    Contractual Life in
    
    
    IntrinsicNumber of Shares
    
    
    Exercise Price
    
    
    Value
    
    
    Years
    
    
    Value (000s)Total outstanding at January 1, 2009
    
    
    7,893,275
    
    
    $
    8.11
    
    
    
    
    
    
    
    7.1Options granted
    
    
    635,750
    
    
    $
    4.90
    
    
    $
    3.17Options exercised
    
    
    (9,837
    )
    
    $
    2.17Options cancelled
    
    
    (186,300
    )
    
    $
    10.04Options forfeited
    
    
    (566,700
    )
    
    $
    10.28Total outstanding at December 31, 2009
    
    
    7,766,188
    
    
    $
    7.65
    
    
    
    
    
    
    
    6.3
    
    
    $
    6,263Options exercisable and vested at
December 31, 2009
    
    
    5,042,682
    
    
    $
    7.86
    
    
    
    
    
    
    
    5.0
    
    
    $
    2,327
  F-32




---



##### 



Restricted Stock and Restricted Stock Unit Plans
   Number of Shares/UnitsTotal nonvested at January 1, 2009
    
    
    876,542Granted
    
    
    574,874Vested
    
    
    (531,043
    )Forfeited
    
    
    (142,368
    )Total nonvested at December 31, 2009
    
    
    778,005
  Employee Stock Purchase Plan
  Stock Appreciation Rights Plan
   F-33




---



##### 



Valuation Assumptions
  Years Ended December 312009
    
    
    2008
    
    
    2007Risk-free interest rates
    
    
    1.6%  2.4
    %
    
    
    1.5%  3.4
    %
    
    
    3.4%  4.9
    %Expected lives (in years)
    
    
    3.6  5.5
    
    
    
    4.7  5.0
    
    
    
    4.5  5.0Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    75.0%  91.9
    %
    
    
    44.7%  83.2
    %
    
    
    45.0%  53.3
    %
  (15) Segment and Geographic Information
   Years Ended December 31,2009
    
    
    2008
    
    
    2007Net revenues:ION Systems Division:Land Imaging Systems
    
    $
    103,038
    
    
    $
    200,493
    
    
    $
    325,037Marine Imaging Systems
    
    
    103,024
    
    
    
    182,710
    
    
    
    177,685Data Management Solutions
    
    
    33,733
    
    
    
    37,240
    
    
    
    37,660Total ION Systems Division
    
    
    239,795
    
    
    
    420,443
    
    
    
    540,382ION Solutions Division
    
    
    179,986
    
    
    
    259,080
    
    
    
    172,729Total
    
    $
    419,781
    
    
    $
    679,523
    
    
    $
    713,111Income (loss) from operations:ION Systems Division:Land Imaging Systems
    
    $
    (39,126
    )
    
    $
    (13,662
    )
    
    $
    28,681Marine Imaging Systems
    
    
    29,632
    
    
    
    52,624
    
    
    
    44,727Data Management Solutions
    
    
    19,970
    
    
    
    22,298
    
    
    
    17,290Total ION Systems Division
    
    
    10,476
    
    
    
    61,260
    
    
    
    90,698ION Solutions Division
    
    
    27,747
    
    
    
    40,534
    
    
    
    21,646Corporate and other
    
    
    (58,395
    )
    
    
    (62,334
    )
    
    
    (48,450
    )Impairment of goodwill and intangible assets
    
    
    (38,044
    )
    
    
    (252,283
    )
    
    
    Total
    
    $
    (58,216
    )
    
    $
    (212,823
    )
    
    $
    63,894Depreciation and amortization (including multi-client data library):ION Systems Division:Land Imaging Systems
    
    $
    26,204
    
    
    $
    9,094
    
    
    $
    4,036Marine Imaging Systems
    
    
    1,456
    
    
    
    1,655
    
    
    
    1,383Data Management Solutions
    
    
    2,665
    
    
    
    3,145
    
    
    
    3,329Total ION Systems Division
    
    
    30,325
    
    
    
    13,894
    
    
    
    8,748ION Solutions Division
    
    
    62,930
    
    
    
    96,995
    
    
    
    53,220Corporate and other
    
    
    3,105
    
    
    
    2,695
    
    
    
    2,461Total
    
    $
    96,360
    
    
    $
    113,584
    
    
    $
    64,429
 F-34




---



##### 



December 31,2009
    
    
    2008Total assets:ION Systems Division:Land Imaging Systems
    
    $
    316,895
    
    
    $
    398,473Marine Imaging Systems
    
    
    107,883
    
    
    
    146,877Data Management Solutions
    
    
    40,133
    
    
    
    41,293Total ION Systems Division
    
    
    464,911
    
    
    
    586,643ION Solutions Division
    
    
    221,596
    
    
    
    222,206Corporate and other
    
    
    61,679
    
    
    
    52,582Total
    
    $
    748,186
    
    
    $
    861,431
 December 31,2009
    
    
    2008Total assets by geographic area:North America
    
    $
    520,454
    
    
    $
    644,165Europe
    
    
    56,413
    
    
    
    63,560Middle East
    
    
    111,056
    
    
    
    113,324Latin America
    
    
    50,374
    
    
    
    34,608Other
    
    
    9,889
    
    
    
    5,774Total
    
    $
    748,186
    
    
    $
    861,431
   Years Ended December 31,2009
    
    
    2008
    
    
    2007North America
    
    $
    152,995
    
    
    $
    272,567
    
    
    $
    267,673Europe
    
    
    92,760
    
    
    
    202,170
    
    
    
    179,064Asia Pacific
    
    
    67,199
    
    
    
    57,470
    
    
    
    131,683Commonwealth of Independent States (CIS)
    
    
    4,739
    
    
    
    30,051
    
    
    
    52,247Africa
    
    
    25,435
    
    
    
    31,693
    
    
    
    37,116Middle East
    
    
    42,403
    
    
    
    32,872
    
    
    
    29,311Latin America
    
    
    34,250
    
    
    
    52,700
    
    
    
    16,017Total
    
    $
    419,781
    
    
    $
    679,523
    
    
    $
    713,111
  (16) Income Taxes
  Years Ended December 31,2009
    
    
    2008
    
    
    2007Domestic
    
    $
    (91,646
    )
    
    $
    (82,811
    )
    
    $
    36,453Foreign
    
    
    (38,398
    )
    
    
    (137,096
    )
    
    
    19,014Total
    
    $
    (130,044
    )
    
    $
    (219,907
    )
    
    $
    55,467
  Years Ended December 31,2009
    
    
    2008
    
    
    2007Current:Federal
    
    $
    526
    
    
    $
    58
    
    
    $
    2,499State and local
    
    
    74
    
    
    
    208
    
    
    
    (222
    )Foreign
    
    
    17,565
    
    
    
    18,414
    
    
    
    7,586Deferred (U.S. and foreign)
    
    
    (38,150
    )
    
    
    (17,549
    )
    
    
    2,960Total income tax (benefit) expense
    
    $
    (19,985
    )
    
    $
    1,131
    
    
    $
    12,823
 F-35




---



##### 



Years Ended December 31,2009
    
    
    2008
    
    
    2007Expected income tax expense at 35%
    
    $
    (45,515
    )
    
    $
    (76,967
    )
    
    $
    19,414Alternate minimum tax
    
    
    526
    
    
    
    58
    
    
    
    2,499Foreign taxes (tax rate differential and foreign tax differences)
    
    
    4,288
    
    
    
    2,367
    
    
    
    29,865Nondeductible financing
    
    
    12,646
    
    
    
    
    
    
    
    Nondeductible goodwill
    
    
    
    
    
    
    84,756
    
    
    
    State and local taxes
    
    
    74
    
    
    
    269
    
    
    
    (282
    )Deferred tax asset valuation allowance
    
    
    6,531
    
    
    
    (9,613
    )
    
    
    (39,266
    )Nondeductible expenses
    
    
    1,465
    
    
    
    261
    
    
    
    593Total income (benefit) tax expense
    
    $
    (19,985
    )
    
    $
    1,131
    
    
    $
    12,823
  December 31,2009
    
    
    2008Current deferred:Deferred income tax assets:Accrued expenses
    
    $
    5,428
    
    
    $
    8,812Allowance accounts
    
    
    10,965
    
    
    
    9,557Inventory
    
    
    (257
    )
    
    
    (103
    )Total current deferred income tax asset
    
    
    16,136
    
    
    
    18,266Valuation allowance
    
    
    (5,405
    )
    
    
    (4,401
    )Net current deferred income tax asset
    
    
    10,731
    
    
    
    13,865Deferred income tax liabilities:Unbilled receivables
    
    
    (4,945
    )
    
    
    (9,877
    )Net current deferred income tax asset (liability)
    
    $
    5,786
    
    
    $
    3,988Non-current deferred:Deferred income tax assets:Net operating loss carryforward
    
    $
    26,268
    
    
    $
    4,632Basis in research and development
    
    
    26,087
    
    
    
    26,674Basis in property, plant, equipment and seismic rental equipment
    
    
    3,492
    
    
    
    2,122Tax credit carryforwards and other
    
    
    11,836
    
    
    
    9,533Total non-current deferred income tax asset
    
    
    67,683
    
    
    
    42,961Valuation allowance
    
    
    (27,721
    )
    
    
    (24,697
    )Net non-current deferred income tax asset
    
    
    39,962
    
    
    
    18,264Deferred income tax liabilities:Basis in identified intangibles
    
    
    (14,802
    )
    
    
    (29,220
    )Net non-current deferred income tax asset (liability)
    
    $
    25,160
    
    
    $
    (10,956
    )
 Accounting for
Income Taxes,
 F-36




---



##### 



Accounting for Uncertainty in Income
Taxes  an Interpretation of FASB Statement No. 109
    (17) Operating Leases
 Lessee.
  Years Ended December 31,2010
    
    $
    12,6032011
    
    
    10,0752012
    
    
    8,3942013
    
    
    4,6082014
    
    
    3,410Total
    
    $
    39,090
 (18) Benefit Plans
 4 01(k) .
 Supplemental executive retirement plan.
 F-37




---



##### 



(19) Legal Matters
 WesternGeco. WesternGeco L.L.C. v. ION Geophysical Corporation
  Fletcher.
 
    
    On July 10, 2009, Fletcher filed a books and records proceeding in the Delaware
Court of Chancery under Section 220(b) of the Delaware General Corporation Law, styled
Fletcher International, Ltd. v. ION Geophysical Corporation f/k/a Input/Output, Inc.
Fletchers complaint asked the Court to require the Company to produce for its inspection a
broad range of the Companys documents and records related to the ARAM acquisition and other
matters. Section 220(b) allows stockholders of a Delaware corporation to make a demand on the
corporation for access to certain books and records of the corporation, provided that such
demand is made with appropriate specificity and is made for a proper purpose. The Company
responded by asserting that Fletcher had not requested the information with appropriate
specificity or for a proper purpose as required by law. After a hearing on December 23, 2009,
the court determined that most of Fletchers stated purposes for requesting the information
were not valid or did not constitute proper purposes and issued a ruling denying in
significant part the inspection sought by Fletcher.
 
    
    Under our February 2005 agreement with Fletcher, the aggregate number of shares of
common stock issued or issuable to Fletcher upon conversion of the Series D Preferred Stock
could not exceed a designated maximum number of shares (the Maximum Number), and such
Maximum Number could be increased by Fletcher providing us with a 65-day notice of increase.
In November 2008, Fletcher exercised its right to increase the Maximum Number from 7,669,434
shares to 9,669,434 shares. On September 15, 2009, Fletcher purported to deliver a second
notice to the Company that purported to increase the Maximum Number of shares of common
stock issuable upon conversion of the Series D Preferred Stock from 9,669,434 shares to
11,669,434 shares. The Companys interpretation of the agreement with Fletcher gave Fletcher
the right to issue only one notice to increase the Maximum Number (which Fletcher had
exercised in November 2008). On November 6, 2009, the Company filed an action in the Court of
Chancery of the State of Delaware, styled ION Geophysical Corporation v. Fletcher
International, Ltd.,seeking a declaration that, under the agreement, Fletcher is permitted to
deliver only one notice to increase the Maximum Number and that its purported second notice is
legally invalid.
 
    
    On November 25, 2009, Fletcher filed a lawsuit against the Company and each of its
directors in the Delaware Court of Chancery. In the lawsuit, styled Fletcher International,
Ltd. v. ION Geophysical Corporation, f/k/a Input/Output, Inc., ION International S.à r.l.,
James M. Lapeyre, Bruce S. Appelbaum, Theodore H. Elliott, Jr., Franklin Myers, S. James
Nelson, Jr., Robert P. Peebler,
 F-38




---



##### 



John Seitz, G. Thomas Marsh And Nicholas G. Vlahakis,Fletcher alleges, among other things, that
the Company violated Fletchers consent rights by ION International S.à r.l., an indirect
wholly-owned subsidiary of ION Geophysical Corporation, issuing a promissory note to the Bank of
China in connection with the Bank of China bridge loan funded on October 27, 2009, and that the
directors violated their fiduciary duty to the company by allowing ION International S.à r.l. to
issue the note without Fletchers consent. Fletcher is seeking a court order requiring ION
International S.à r.l. to repay the $10 million advanced to ION International S.à r.l. under the
bridge loan and unspecified monetary damages. In the lawsuit, Fletcher is not claiming that it
had a right to consent to any note issued by ION Geophysical Corporation, including the issuance
by ION Geophysical Corporation of a $30 million promissory note to the Bank of China on October
27, 2009, as part of the bridge loan. The Company believes that Fletcher did not have the right
to consent to the issuance of the bridge loan note by ION International S.à r.l. or any other
promissory note and that the claims asserted by Fletcher in the lawsuit are without merit. The
Company further believes that the ultimate outcome of the lawsuit will not result in a material
adverse effect on the Companys financial condition or results of operations. The Company intends
to defend the claims against it in this lawsuit vigorously.
 Greatbatch. Input/Output, Inc. and I/O Marine Systems, Inc. v. Wilson Greatbatch Technologies,
Inc., Wilson Greatbatch, Ltd. d/b/a Electrochem Lithium Batteries, and WGL Intermediate Holdings,
Inc., Civil Action No. 578-881, Division A, ®
 Sercel. Input/Output,
Inc. et al v. Sercel, Inc., (5-06-cv-00236) ® ® ® ®
 Other.
 (20) Restructuring Activities
  F-39




---



##### 



Term Sheet with BGP and Bridge Financing Transactions
 (21)
    
    Selected Quarterly Information  (Unaudited)
  Three Months EndedYear Ended December 31, 2009
    
    March 31
    
    
    June 30
    
    
    September 30
    
    
    December 31Product revenues
    
    $
    59,476
    
    
    $
    52,038
    
    
    $
    51,263
    
    
    $
    74,887Service revenues
    
    
    47,414
    
    
    
    37,219
    
    
    
    51,107
    
    
    
    46,377Total net revenues
    
    
    106,890
    
    
    
    89,257
    
    
    
    102,370
    
    
    
    121,264Gross profit
    
    
    33,696
    
    
    
    29,976
    
    
    
    34,629
    
    
    
    33,837Impairment of intangible assets
    
    
    38,044
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) from operations
    
    
    (44,576
    )
    
    
    (7,511
    )
    
    
    (1,559
    )
    
    
    (4,570
    )Interest expense, including amortization of a non-cash debt discount
    
    
    (7,417
    )
    
    
    (6,861
    )
    
    
    (6,380
    )
    
    
    (15,013
    )Fair value adjustment of the warrant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,401
    )Impairment of cost method investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,454
    )Interest and other income
    
    
    462
    
    
    
    (5,869
    )
    
    
    2,120
    
    
    
    985Income tax expense (benefit)
    
    
    (13,963
    )
    
    
    (4,510
    )
    
    
    131
    
    
    
    (1,643
    )Preferred stock dividends
    
    
    875
    
    
    
    875
    
    
    
    875
    
    
    
    875Net income (loss) applicable to common shares
    
    $
    (38,443
    )
    
    $
    (16,606
    )
    
    $
    (6,825
    )
    
    $
    (51,685
    )Net income (loss) per basic and diluted share
    
    $
    (0.39
    )
    
    $
    (0.16
    )
    
    $
    (0.06
    )
    
    $
    (0.44
    )
 Three Months EndedYear Ended December 31, 2008
    
    March 31
    
    
    June 30
    
    
    September 30
    
    
    December 31Product revenues
    
    $
    93,034
    
    
    $
    104,360
    
    
    $
    140,332
    
    
    $
    79,785Service revenues
    
    
    47,125
    
    
    
    76,305
    
    
    
    78,197
    
    
    
    60,385Total net revenues
    
    
    140,159
    
    
    
    180,665
    
    
    
    218,529
    
    
    
    140,170Gross profit
    
    
    48,394
    
    
    
    58,021
    
    
    
    72,621
    
    
    
    28,712Impairment of goodwill and intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    252,283Income (loss) from operations
    
    
    10,295
    
    
    
    19,736
    
    
    
    31,574
    
    
    
    (274,428
    )Interest expense
    
    
    (487
    )
    
    
    (652
    )
    
    
    (1,592
    )
    
    
    (9,992
    )Interest and other income
    
    
    789
    
    
    
    793
    
    
    
    (364
    )
    
    
    4,421Income tax expense (benefit)
    
    
    2,059
    
    
    
    3,524
    
    
    
    3,760
    
    
    
    (8,212
    )Preferred stock dividends
    
    
    910
    
    
    
    908
    
    
    
    925
    
    
    
    1,146Preferred stock beneficial conversion charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,786Net income (loss) applicable to common shares
    
    $
    7,628
    
    
    $
    15,445
    
    
    $
    24,933
    
    
    $
    (341,719
    )Net income (loss) per basic share
    
    $
    0.08
    
    
    $
    0.16
    
    
    $
    0.26
    
    
    $
    (3.43
    )Net income (loss) per diluted share
    
    $
    0.08
    
    
    $
    0.16
    
    
    $
    0.25
    
    
    $
    (3.43
    )
 
 (22)
    
    Related Parties  F-40




---



##### 



F-41




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##### 



SCHEDULE II
ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
 ChargedBalance at
    
    
    (Credited)Beginning
    
    
    to Costs and
    
    
    
    
    
    
    Balance atYear Ended December  31, 2007
    
    of Year
    
    
    Expenses
    
    
    Deductions
    
    
    End of Year(In thousands)Allowances for doubtful accounts
    
    $
    2,801
    
    
    $
    437
    
    
    $
    (563
    )
    
    $
    2,675Allowances for doubtful notes
    
    
    4,530
    
    
    
    
    
    
    
    (1,179
    )
    
    
    3,351Warranty
    
    
    6,255
    
    
    
    13,074
    
    
    
    (5,890
    )
    
    
    13,439Valuation allowance on deferred tax assets
    
    
    76,324
    
    
    
    (39,266
    )
    
    
    355
    
    
    
    37,413
 Acquired
    
    
    ChargedBalance at
    
    
    Reserves
    
    
    (Credited)Beginning
    
    
    during the
    
    
    to Costs and
    
    
    
    
    
    
    Balance atYear Ended December  31, 2008
    
    of Year
    
    
    period
    
    
    Expenses
    
    
    Deductions
    
    
    End of Year(In thousands)Allowances for doubtful accounts
    
    $
    2,675
    
    
    $
    
    
    
    $
    4,852
    
    
    $
    (1,842
    )
    
    $
    5,685Allowances for doubtful notes
    
    
    3,351
    
    
    
    
    
    
    
    
    
    
    
    (3,351
    )
    
    
    Warranty
    
    
    13,439
    
    
    
    845
    
    
    
    4,624
    
    
    
    (8,382
    )
    
    
    10,526Valuation allowance on deferred tax assets
    
    
    37,413
    
    
    
    
    
    
    
    (9,613
    )
    
    
    1,298
    
    
    
    29,098
 ChargedBalance at
    
    
    (Credited)Beginning
    
    
    to Costs and
    
    
    
    
    
    
    Balance atYear Ended December  31, 2009
    
    of Year
    
    
    Expenses
    
    
    Deductions
    
    
    End of Year(In thousands)Allowances for doubtful accounts
    
    $
    5,685
    
    
    $
    3,457
    
    
    $
    (3,468
    )
    
    $
    5,674Allowances for doubtful notes
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    71Warranty
    
    
    10,526
    
    
    
    (2,121
    )
    
    
    (3,317
    )
    
    
    5,088Valuation allowance on deferred tax assets
    
    
    29,098
    
    
    
    6,531
    
    
    
    (2,503
    )
    
    
    33,126
 S-1




---



##### 



3.1
    
    
    
    Restated Certificate of Incorporation dated September 24, 2007 filed on September 24,
2007 as Exhibit 3.4 to the Companys Current Report on Form 8-K and incorporated
herein by reference.3.2
    
    
    
    Amended and Restated Bylaws of ION Geophysical Corporation filed on September 24,
2007 as Exhibit 3.5 to the Companys Current Report on Form 8-K and incorporated
herein by reference.3.3
    
    
    
    Certificate of Ownership and Merger merging ION Geophysical Corporation with and into
Input/Output, Inc. dated September 21, 2007, filed on September 24, 2007 as Exhibit
3.1 to the Companys Current Report on Form 8-K and incorporated herein by reference.4.1
    
    
    
    Certificate of Rights and Designations of Series D-1 Cumulative Convertible Preferred
Stock, dated February 16, 2005 and filed on February 17, 2005 as Exhibit 3.1 to the
Companys Current Report on Form 8-K and incorporated herein by reference.4.2
    
    
    
    Certificate of Elimination of Series B Preferred Stock dated September 24, 2007,
filed on September 24, 2007 as Exhibit 3.2 to the Companys Current Report on Form
8-K and incorporated herein by reference.4.3
    
    
    
    Certificate of Elimination of Series C Preferred Stock dated September 24, 2007,
filed on September 24, 2007 as Exhibit 3.3 to the Companys Current Report on Form
8-K and incorporated herein by reference.4.4
    
    
    
    Certificate of Designation of Series D-2 Cumulative Convertible Preferred Stock dated
December 6, 2007, filed on December 6, 2007 as Exhibit 3.1 to the Companys Current
Report on Form 8-K and incorporated herein by reference.4.5
    
    
    
    Certificate of Designation of Series D-3 Cumulative Convertible Preferred Stock dated
February 20, 2008, filed on February 22, 2008 as Exhibit 3.1 to the Companys Current
Report on Form 8-K and incorporated herein by reference.4.6
    
    
    
    Certificate of Designations of Series A Junior Participating Preferred Stock of ION
Geophysical Corporation effective as of December 31, 2008, filed on January 5, 2009
as Exhibit 3.1 to the Companys Current Report on Form 8-K and incorporated herein by
reference.4.7
    
    
    
    Form of Senior Indenture, filed on December 19, 2008 as Exhibit 4.3 to the Companys
Registration Statement on Form S-3 (Registration No. 333-156362) and incorporated
herein by reference.4.8
    
    
    
    Form of Senior Note, filed on December 19, 2008 as Exhibit 4.4 to the Companys
Registration Statement on Form S-3 (Registration No. 333-156362) and incorporated
herein by reference.4.9
    
    
    
    Form of Subordinated Indenture, filed on December 19, 2008 as Exhibit 4.5 to the
Companys Registration Statement on Form S-3 (Registration No. 333-156362) and
incorporated herein by reference.4.10
    
    
    
    Form of Subordinated Note, filed on December 19, 2008 as Exhibit 4.6 to the Companys
Registration Statement on Form S-3 (Registration No. 333-156362) and incorporated
herein by reference.4.11
    
    
    
    Warrant to Purchase Shares of the Common Stock of ION Geophysical Corporation dated
October 27, 2009, issued by ION Geophysical Corporation to BGP Inc., China National
Petroleum Corporation, filed on October 29, 2009 as Exhibit 4.1 to the Companys
Current Report on Form 8-K/A and incorporated herein by reference.4.12
    
    
    
    Convertible Promissory Note, dated October 23, 2009, issued by ION Geophysical
Corporation to the Bank of China, New York Branch, filed on October 29, 2009 as
Exhibit 4.2 to the Companys Current Report on Form 8-K/A and incorporated herein by
reference.4.13
    
    
    
    Convertible Promissory Note, dated October 23, 2009, issued by ION International S.à
r.l. to the Bank of China, New York Branch, filed on October 29, 2009 as Exhibit 4.3
to the Companys Current Report on Form 8-K/A and incorporated herein by reference.**10.1
    
    
    
    Amended and Restated 1990 Stock Option Plan, filed on June 9, 1999 as Exhibit 4.2 to
the




---



##### 



Companys Registration Statement on Form S-8 (Registration No. 333-80299), and
incorporated herein by reference.10.2
    
    
    
    Office and Industrial/Commercial Lease dated June 2005 by and between Stafford Office
Park II, LP as Landlord and Input/Output, Inc. as Tenant, filed on March 31, 2006 as
Exhibit 10.2 to the Companys Annual Report on Form 10-K for the year ended December
31, 2005, and incorporated herein by reference.10.3
    
    
    
    Office and Industrial/Commercial Lease dated June 2005 by and between Stafford Office
Park District as Landlord and Input/Output, Inc. as Tenant, filed on March 31, 2006
as Exhibit 10.3 to the Companys Annual Report on Form 10-K for the year ended
December 31, 2005, and incorporated herein by reference.**10.4
    
    
    
    Input/Output, Inc. Amended and Restated 1996 Non-Employee Director Stock Option Plan,
filed on June 9, 1999 as Exhibit 4.3 to the Companys Registration Statement on Form
S-8 (Registration No. 333-80299), and incorporated herein by reference.**10.5
    
    
    
    Amendment No. 1 to the Input/Output, Inc. Amended and Restated 1996 Non-Employee
Director Stock Option Plan dated September 13, 1999 filed on November 14, 1999 as
Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q for the fiscal quarter
ended August 31, 1999 and incorporated herein by reference.**10.6
    
    
    
    Employment Agreement dated effective as of May 22, 2006, between Input/Output, Inc.
and R. Brian Hanson filed on May 1, 2006 as Exhibit 10.1 to the Companys Form 8-K,
and incorporated herein by reference.**10.7
    
    
    
    First Amendment to Employment Agreement dated as of August 20, 2007 between
Input/Output, Inc. and R. Brian Hanson, filed on August 21, 2007 as Exhibit 10.1 to
the Companys Current Report on Form 8-K and incorporated herein by reference.**10.8
    
    
    
    Second Amendment to Employment Agreement, dated as of December 1, 2008, between ION
Geophysical Corporation and R. Brian Hanson, filed on January 29, 2009 as Exhibit
10.2 to the Companys Current Report on Form 8-K and incorporated herein by
reference.**10.9
    
    
    
    Input/Output, Inc. Employee Stock Purchase Plan, filed on March 28, 1997 as Exhibit
4.4 to the Companys Registration Statement on Form S-8 (Registration No. 333-24125),
and incorporated herein by reference.**10.10
    
    
    
    Fourth Amended and Restated 2004 Long-Term Incentive Plan, filed as Appendix A to the
definitive proxy statement for the 2008 Annual Meeting of Stockholders of ION
Geophysical Corporation, filed on April 21, 2008, and incorporated herein by
reference.10.11
    
    
    
    Registration Rights Agreement dated as of November 16, 1998, by and among the Company
and The Laitram Corporation, filed on March 12, 2004 as Exhibit 10.7 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2003, and incorporated
herein by reference.**10.12
    
    
    
    Input/Output, Inc. 1998 Restricted Stock Plan dated as of June 1, 1998, filed on June
9, 1999 as Exhibit 4.7 to the Companys Registration Statement on S-8 (Registration
No. 333-80297), and incorporated herein by reference.**10.13
    
    
    
    Input/Output Inc. Non-qualified Deferred Compensation Plan, filed on April 1, 2002 as
Exhibit 10.14 to the Companys Annual Report on Form 10-K for the year ended December
31, 2001, and incorporated herein by reference.**10.14
    
    
    
    Input/Output, Inc. 2000 Restricted Stock Plan, effective as of March 13, 2000, filed
on August 17, 2000 as Exhibit 10.27 to the Companys Annual Report on Form 10-K for
the fiscal year ended May 31, 2000, and incorporated herein by reference.**10.15
    
    
    
    Input/Output, Inc. 2000 Long-Term Incentive Plan, filed on November 6, 2000 as
Exhibit 4.7 to the Companys Registration Statement on Form S-8 (Registration No.
333-49382), and incorporated by reference herein.**10.16
    
    
    
    Employment Agreement dated effective as of March 31, 2003, by and between the Company
and Robert P. Peebler, filed on March 31, 2003, as Exhibit 10.1 to the Companys
Current Report on Form 8-K and incorporated herein by reference.




---



##### 



**10.17
    
    
    
    First Amendment to Employment Agreement dated September 6, 2006, between
Input/Output, Inc. and Robert P. Peebler, filed on September 7, 2006, as Exhibit 10.1
to the Companys Current Report on Form 8-K, and incorporated herein by reference.**10.18
    
    
    
    Second Amendment to Employment Agreement dated February 16, 2007, between
Input/Output, Inc. and Robert P. Peebler, filed on February 16, 2007 as Exhibit 10.1
to the Companys Current Report on Form 8-K, and incorporated herein by reference.**10.19
    
    
    
    Third Amendment to Employment Agreement dated as of August 20, 2007 between
Input/Output, Inc. and Robert P. Peebler, filed on August 21, 2007 as Exhibit 10.2 to
the Companys Current Report on Form 8-K and incorporated herein by reference.**10.20
    
    
    
    Fourth Amendment to Employment Agreement, dated as of January 26, 2009, between ION
Geophysical Corporation and Robert P. Peebler, filed on January 29, 2009 as Exhibit
10.1 to the Companys Current Report on Form 8-K and incorporated herein by
reference.**10.21
    
    
    
    Employment Agreement dated effective as of June 15, 2004, by and between the Company
and David L. Roland, filed on August 9, 2004 as Exhibit 10.5 to the Companys
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004, and
incorporated herein by reference.**10.22
    
    
    
    Employment Agreement, dated as of December 1, 2008, between ION Geophysical
Corporation and James R. Hollis, filed on January 29, 2009 as Exhibit 10.3 to the
Companys Current Report on Form 8-K and incorporated herein by reference.**10.23
    
    
    
    GX Technology Corporation Employee Stock Option Plan, filed on August 9, 2004 as
Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2004, and incorporated herein by reference.10.24
    
    
    
    Concept Systems Holdings Limited Share Acquisition Agreement dated February 23, 2004,
filed on March 5, 2004 as Exhibit 2.1 to the Companys Current Report on Form 8-K,
and incorporated herein by reference.10.25
    
    
    
    Registration Rights Agreement by and between ION Geophysical Corporation and 1236929
Alberta Ltd. dated September 18, 2008, filed on November 7, 2008 as Exhibit 10.1 to
the Companys Quarterly Report on Form 10-Q and incorporated herein by reference.**10.26
    
    
    
    Form of Employment Inducement Stock Option Agreement for the Input/Output, Inc. 
Concept Systems Employment Inducement Stock Option Program, filed on July 27, 2004 as
Exhibit 4.1 to the Companys Registration Statement on Form S-8 (Reg. No.
333-117716), and incorporated herein by reference.**10.27
    
    
    
    Form of Employee Stock Option Award Agreement for ARAM Systems Employee Inducement
Stock Option Program, filed on November 14, 2008 as Exhibit 4.4 to the Companys
Registration Statement on Form S-8 (Registration No. 333-155378) and incorporated
herein by reference.10.28
    
    
    
    Agreement dated as of February 15, 2005, between Input/Output, Inc. and Fletcher
International, Ltd., filed on February 17, 2005 as Exhibit 10.1 to the Companys
Current Report on Form 8-K and incorporated herein by reference.10.29
    
    
    
    First Amendment to Agreement, dated as of May 6, 2005, between the Company and
Fletcher International, Ltd., filed on May 10, 2005 as Exhibit 10.2 to the Companys
Current Report on Form 8-K, and incorporated herein by reference.**10.30
    
    
    
    Input/Output, Inc. 2003 Stock Option Plan, dated March 27, 2003, filed as Appendix B
of the Companys definitive proxy statement filed with the SEC on April 30, 2003, and
incorporated herein by reference.10.31
    
    
    
    Amended and Restated Credit Agreement dated as of July 3, 2008, by and among ION
Geophysical Corporation, ION International S.À R.L., HSBC Bank USA, N.A., as
administrative agent, joint lead arranger and joint bookrunner, ABN AMRO
Incorporated, as joint lead arranger and joint bookrunner, and CitiBank, N.A., as
syndication agent, filed on July 8, 2008 as Exhibit 10.1 to the Companys Current
Report on Form 8-K and incorporated herein by reference.10.32
    
    
    
    First Amendment to Amended and Restated Credit Agreement and Domestic Security
Agreement, dated as of September 17, 2008, by and among ION Geophysical Corporation,
ION International S.À R.L., HSBC Bank USA, N.A., as administrative agent, joint lead
arranger and joint




---



##### 



bookrunner, ABN AMRO Incorporated, as joint lead arranger and
joint bookrunner, and CitiBank, N.A., as syndication agent, filed on September 23,
2008 as Exhibit 10.1 to the Companys Current Report on Form 8-K and incorporated
herein by reference.10.33
    
    
    
    Third Amendment to Amended and Restated Credit Agreement, dated as of December 29,
2008, by and among ION Geophysical Corporation, ION International S.À R.L., the
Guarantors and Lenders party thereto and HSBC Bank USA, N.A., as administrative
agent, filed on January 5, 2009 as Exhibit 10.3 to the Companys Current Report on
Form 8-K and incorporated herein by reference.10.34
    
    
    
    Fourth Amendment to Amended and Restated Credit Agreement and Foreign Security
Agreement, Limited Waiver and Release dated as of December 30, 2008, by and among ION
Geophysical Corporation, ION International S.À R.L., the Guarantors and Lenders party
thereto and HSBC Bank USA, N.A., as administrative agent, filed on January 5, 2009 as
Exhibit 10.4 to the Companys Current Report on Form 8-K and incorporated herein by
reference.10.35
    
    
    
    Fifth Amendment to Amended and Restated Credit Agreement dated effective as of June
1, 2009 by and among ION Geophysical Corporation, ION International S.à r.l., certain
other foreign and domestic subsidiaries of the ION Geophysical Corporation, HSBC Bank
USA, N.A., as administrative agent, joint lead arranger and joint bookrunner, ABN
AMRO Incorporated, as joint lead arranger and joint bookrunner, Citibank, N.A., as
syndication agent, and the lenders party thereto, filed on August 6, 2009 as Exhibit
10.1 to the Companys Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2009, and incorporated herein by reference.*10.36
    
    
    
    Sixth Amendment and Waiver to Amended and Restated Credit Agreement dated effective
as of October 23, 2009 by and among ION Geophysical Corporation, ION International
S.À R.L., the Guarantors and Lenders party thereto and HSBC Bank USA, N.A., as
administrative agent.**10.37
    
    
    
    Form of Employment Inducement Stock Option Agreement for the Input/Output, Inc.  GX
Technology Corporation Employment Inducement Stock Option Program, filed on April 4,
2005 as Exhibit 4.1 to the Companys Registration Statement on Form S-8 (Reg. No.
333-123831), and incorporated herein by reference.**10.38
    
    
    
    Consulting Services Agreement dated as of October 19, 2006, by and between GX
Technology Corporation and Michael K. Lambert, filed on October 24, 2006 as Exhibit
10.2 to the Companys Current Report on Form 8-K, and incorporated herein by
reference.**10.39
    
    
    
    First Amendment to Consulting Services Agreement dated as of January 5, 2007, by and
between GX Technology Corporation and Michael K. Lambert, filed on January 8, 2007 as
Exhibit 10.1 to the Companys Current Report on Form 8-K, and incorporated herein by
reference.**10.40
    
    
    
    Letter agreement dated October 19, 2006, by and between the Company and Michael K.
Lambert, filed on October 24, 2006 as Exhibit 10.1 to the Companys Current Report on
Form 8-K, and incorporated herein by reference.**10.41
    
    
    
    Severance Agreement dated as of December 1, 2008, between ION Geophysical Corporation
and Charles J. Ledet, filed on December 5, 2008 as Exhibit 10.1 to the Companys
Current Report on Form 8-K and incorporated herein by reference.10.42
    
    
    
    Consulting Agreement dated as of December 1, 2008, between ION Geophysical
Corporation and Charles J. Ledet, filed on December 5, 2008 as Exhibit 10.2 to the
Companys Current Report on Form 8-K and incorporated herein by reference.10.43
    
    
    
    Rights Agreement, dated as of December 30, 2008, between ION Geophysical Corporation
and Computershare Trust Company, N.A., as Rights Agent, filed as Exhibit 4.1 to the
Companys Form 8-A (Registration No. 001-12691) and incorporated herein by reference.10.44
    
    
    
    Amended and Restated Share Purchase Agreement, dated as of September 17, 2008, by and
among ION Geophysical Corporation, Aram Systems Ltd., Canadian Seismic Rentals Inc.
and the Sellers party thereto, filed on September 23, 2008 as Exhibit 2.1 to the
Companys Current Report on Form 8-K and incorporated herein by reference.10.45
    
    
    
    Assignment Agreement dated as of December 30, 2008 by and among 3226509 Nova Scotia
Company, ARAM Systems Ltd., Canadian Seismic Rentals Inc., Maison Mazel Ltd. and ION
Geophysical Corporation, filed on January 5, 2009 as Exhibit 10.1 to the Companys
Current




---



##### 



Report on Form 8-K and incorporated herein by reference.10.46
    
    
    
    Release Agreement dated as of December 30, 2008 by and among ION Geophysical
Corporation, 3226509 Nova Scotia Company, ARAM Systems Ltd., Canadian Seismic Rentals
Inc., Maison Mazel Ltd. and the Sellers party thereto, filed on January 5, 2009 as
Exhibit 10.2 to the Companys Current Report on Form 8-K and incorporated herein by
reference.10.47
    
    
    
    Amended and Restated Subordinated Promissory Note dated December 30, 2008, made by
3226509 Nova Scotia Company in favor of Maison Mazel Ltd., filed on January 5, 2009
as Exhibit 10.6 to the Companys Current Report on Form 8-K and incorporated herein
by reference.**10.48
    
    
    
    ION Stock Appreciation Rights Plan dated November 17, 2008.10.49
    
    
    
    Form of Purchase Agreement dated as of June 1, 2009, for the offering and sale of
18,500,000 shares of common stock of ION Geophysical Corporation in
privately-negotiated transactions to accredited investors (as defined in Rule 501
under the Securities Act of 1933, as amended), by and between ION Geophysical
Corporation and the Purchasers named therein, filed on August 6, 2009 as Exhibit 10.2
to the Companys Quarterly Report on Form 10-Q for the quarterly period ended June
30, 2009, and incorporated herein by reference.10.50
    
    
    
    Canadian Master Loan and Security Agreement dated as of June 29, 2009 by and among
ICON ION, LLC, as lender, ION Geophysical Corporation and ARAM Rentals Corporation, a
Nova Scotia corporation, filed on August 6, 2009 as Exhibit 10.3 to the Companys
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009, and
incorporated herein by reference.10.51
    
    
    
    Master Loan and Security Agreement (U.S.) dated as of June 29, 2009 by and among ICON
ION, LLC, as lender, ION Geophysical Corporation and ARAM Seismic Rentals, Inc., a
Texas corporation, filed on August 6, 2009 as Exhibit 10.4 to the Companys Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2009, and incorporated
herein by reference.*10.52
    
    
    
    Term Sheet dated as of October 23, 2009 by and between ION Geophysical Corporation
and BGP Inc., China National Petroleum Corporation.*10.53
    
    
    
    Warrant Issuance Agreement dated as of October 23, 2009 by and between ION
Geophysical Corporation and BGP Inc., China National Petroleum Corporation.*10.54
    
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    Registration Rights Agreement dated as of October 23, 2009 by and between ION
Geophysical Corporation and BGP Inc., China National Petroleum Corporation.*21.1
    
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    Subsidiaries of the Company.*23.1
    
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    Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.*24.1
    
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    The Power of Attorney is set forth on the signature page hereof.*31.1
    
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    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a).*31.2
    
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    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a).*32.1
    
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    Certification of Chief Executive Officer Pursuant to 18 U.S.C. §1350.*32.2
    
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    Certification of Chief Financial Officer Pursuant to 18 U.S.C. §1350.
 
 *
    
    Filed herewith.**
    
    Management contract or compensatory plan or arrangement.