Document:

exv10w52

Exhibit 10.52

PROJECT PINGPONG

TERM SHEET

We have set forth below in this term sheet (this “Term Sheet”) the terms upon which to
negotiate and agree on the Definitive Transaction Documents (as defined in Article (A)(1.5))
between BGP Inc., China National Petroleum Corporation, a company organized under the laws of the
People’s Republic of China (“PRC”) (“California”) and ION Geophysical Corporation,
a company organized under the laws of the State of Delaware, United States of America
(“Indiana”) (and their affiliates as applicable) for the proposed establishment of a joint
venture, the purchase of equity interest in Indiana by California, the refinancing of certain
existing debt of Indiana and the provision of a new credit facility to Indiana and the
collaboration in other areas as set forth below. California and Indiana are each referred to
herein as a “Party” and together as the “Parties”. The Parties intend that
following the execution of this Term Sheet, California shall enter into certain agreements for the
provision of Bridge Financing (as defined below) to Indiana on terms and conditions set forth
herein.

Except for the provisions of Article (F) (which are unconditional), the transactions contemplated by this Term Sheet (other than the Bridge Financing (as defined in Article (A)(1.2)) and the
related Definitive Transaction Documents are conditioned upon, among other things, the receipt of
applicable regulatory approvals (and favorable review of certain voluntary regulatory approvals),
the simultaneous consummation of each of the Transactions (as defined in Article (A)(1.1)) and the
satisfactory completion of confirmatory business, accounting, financial, legal, regulatory and tax
due diligence as set forth herein. The consummation of the Bridge Financing is conditional upon
the terms set forth in the related Bridge Financing agreement(s) between the Parties.

This Term Sheet supersedes all prior understandings and discussions between the Parties with
respect to the subject matters of this Term Sheet. The Definitive Transaction Documents, when
agreed to and executed, will supersede this Term Sheet in all respects.

The terms set out below are confidential information subject to the Non-Disclosure Agreement
between the Parties, dated as of August 7, 2009 (the “NDA”), provided that, if any
disclosure obligation or any transactions involving equity securities or debt of Indiana
contemplated in this Term Sheet conflicts with any provision of the NDA, the provision in this Term
Sheet shall prevail and Indiana acknowledges its invitation for California to enter into those
provisions with Indiana.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Article	 	 	Description	 	 
	(A)

	 	Overall Transactions	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	1	 	Transactions and Best
Efforts	 	 	1.1	 	 	This Term Sheet contemplates the following transactions (collectively,
the “Transactions”):	 	 
	 

	 	 	 	 	 	 	 	(a)
	 	the Equity Investment (as defined in Article (C)(1));	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(b)
	 	the formation of the JV (as defined in Article (D) (3.1)) and the
associated transactions contemplated under Article (C) (the “JV Transaction”);	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(c)
	 	the New Credit Facility (as defined in Article (E)); and	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(d)
	 	the Refinancing (as defined in Article (E)).	 	 

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Article	 	 	Description	 	 
	 	 	 	 	 	1.2	 	 	 The Parties additionally intend for the bridge financing to be provided
in accordance with Article (B) of this Term Sheet (the “Bridge Financing”) and the
related agreement(s) between the Parties.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	1.3	 	 	Each of the Equity Investment, the JV Transaction, the New Credit
Facility and the Refinancing shall be completed contemporaneously with each other as
contemplated by this Term Sheet and the related Definitive Transaction Documents.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	1.4	 	 	Each Party shall negotiate in good faith and use its best efforts to
negotiate and enter into, within the Exclusivity Period (as defined in Article (F)3)),
the definitive transaction documents (together with any other ancillary agreements and
documents) embodying the terms set forth in this Term Sheet and other terms as both
Parties may subsequently agree (collectively, the “Definitive Transaction Documents”).	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	1.5	 	 	 As soon as practicable, but not later than 30 days after the execution
of this Term Sheet (or such later date as the Parties may agree), the Parties shall
jointly submit to the Committee on Foreign Investment in the United States (“CFIUS”) a
draft voluntary notice relating to the Transactions pursuant to the Exon-Florio
Provision of the Defense Production Act of 1950, 50 U.S.C. app. § 2170, as amended
(“Exon-Florio”) and, as soon as practicable, a final Exon-Florio notice. The Parties
each, to their fullest ability, shall timely provide CFIUS with any additional or
supplemental information requested by CFIUS or its member agencies during the
Exon-Florio review process. Each of the Parties, in cooperation with each other,
shall take all commercially reasonable steps advisable, necessary or desirable to
finally and successfully complete the Exon-Florio review process as promptly as
practicable. Neither California nor Indiana shall be required to agree to any
structural or conduct remedy or condition pursuant to the reviews contemplated by this
paragraph that would, in its sole judgment, be expected to have a material adverse
effect on the business of the JV, as contemplated by the Parties, the value of the
Equity Investment, the remaining business of the Party outside of the JV Business, or
any other aspect of the expected value of the Transactions to the Party after giving
effect to the transactions contemplated by this Term Sheet.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	1.6	 	 	 Each Party shall, with regard to the review of the transactions
contemplated hereby, (i) promptly inform and provide the other Party with a copy of
any material communication received by such Party from CFIUS and (ii) permit the other
Party reasonable time and notice (subject to the limitation that, with respect to
responses to inquiries from CFIUS during the Exon-Florio review process, such Party
may not preclude the other Party from responding within the timeframe required under
the CFIUS regulations, 31 C.F.R. Sec. 800.403(a)(3)) to (x) review and comment in
advance on any material communication to be made or delivered to CFIUS, including any
proposed understanding, undertakings, or agreements, (y) consult with the other Party
in advance of any meeting or conference with CFIUS and (z) attend and participate in
such meetings and conferences (to the extent permitted by	 	 

2

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Article	 	 	Description	 	 
	 	 	 	 	 	 	 	 	CFIUS).	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	1.7	 	 	 In addition, each of the Parties shall use its reasonable best efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other Parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the execution, delivery and performance of the Definitive Transaction
Documents or the consummation of the Transactions, including (i) the obtaining of all
necessary actions or non-actions, waivers, consents and approvals from governmental
entities and the making of all necessary registrations and filings (including filings
with governmental entities, if any) and the taking of all reasonable steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or proceeding
by, any governmental entity, (ii) the obtaining of all necessary consents, approvals
or waivers from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Term Sheet or any
Definitive Transaction Document or the consummation of the Transactions, including
seeking to have any stay or temporary restraining order entered by any court or other
governmental entity vacated or reversed and (iv) the execution and delivery of any
additional instruments necessary to consummate the Transactions and to fully carry out
the purposes of this Term Sheet.	 	 
	 	 	 
	2	 	Definitive

Transaction Documents	 	 	2.1	 	 	The Definitive Transaction Documents currently contemplated by the
Parties for the Transactions are set forth below (provided that the listed documents
may change in response to changes to the plan of implementation of the Transactions):
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(a)	 	With respect to the Equity Investment (as further described in Article
(C)):
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	· a share subscription agreement; and	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	· a registration rights agreement	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(b)	 	With respect to the JV (as further described in Article (D)):
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	· the organizational documents of the JV, which shall include matters related to
the governance of the JV set forth in Article (D);	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	· a shareholders’ agreement between the Parties;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	· the JV SPA (as defined in Article (D)3.1)), which will provide for the
acquisition by California from Indiana of 51% of the equity interest in the JV with a
consideration in cash and the value of certain assets (such assets, the “California
Transferred Assets”);	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	· an assignment and transfer agreement, pursuant to which Indiana transfers to
the JV the Indiana Transferred Assets (as set forth in Article (D)(3.1));	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	· if not included in the JV SPA, an assignment and transfer agreement, pursuant
to which California transfers to the JV the California Transferred Assets (as set
forth in Article (D)(3.1));	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	· certain intellectual property agreements embodying the	 	 

3

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Article	 	 	Description	 	 
	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	principles and providing for the arrangements with respect to the transfer and assign by California
of certain intellectual property rights used in or necessary for the conduct or
operation of the JV Business (as defined in (D)6));
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	·	 	 	certain intellectual property agreements embodying the principles and
providing for the arrangements with respect to the Indiana JV Business IP (as set
forth in Article (D) (2.3));
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	·	 	 	employee agreements with respect to certain designated key employees of the JV;
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	.	 	 	certain service agreements relating to certain services to be provided by the
Parties hereto to the JV;
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	·	 	 	certain sales agreements;
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	·	 	 	certain operating policies and compliance policies; and
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(c)	 	With respect to the New Credit Facility:
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	·	 	 	one or more agreements with regard to the New Credit Facility arrangements
involving Indiana.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(d)	 	With respect to the Refinancing:
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	·	 	 	one or more agreements with regard to the Refinancing arrangements involvig Indiana.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(e)	 	In general:
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	·	 	 	any documents, agreements or procedures mutually agreed by the Parties in
connection with an order or request of any governmental entity.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	2.2	 	 	The Definitive Transaction Documents shall reflect the terms of the
Transactions as set forth in this Term Sheet, and any schedule and/or exhibits hereto,
and such other terms as subsequently agreed to between the Parties.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	2.3	 	 	The Parties agree that they shall use their best efforts to work
diligently and in good faith to cause the closing of the Transactions (the “Closing”)
to occur as soon as possible after the signing of the Definitive Transaction Documents
and no later than the latest to occur of (i) December 31, 2009 or (ii) ten (10)
business days following the date on which all regulatory approvals (including
receiving clearance from CFIUS to complete the Transactions) have been obtained, but
in any event no later than March 31, 2010 (such date, the “Outside Date”).
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	2.4	 	 	In connection with the provision of the Bridge Financing, the Parties
and the other parties named therein shall simultaneously enter into the following
documents (the “Bridge Financing Documents”):
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	·	 	 	Sixth Amendment to that certain Amended and Restated Credit Agreement, dated
as of July 3, 2008 (the “Credit Agreement”), among Indiana, its subsidiary and the
guarantors and lenders named therein, as amended;
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	·	 	 	Warrant Issuance Agreement between Indiana and California (including Form of
Warrant);

4

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Article	 	 	 	 	Description
	 
	 

	 	 	 	 	 	 	 	 	 	·
	 	Convertible Promissory Note and Foreign Convertible Promissory Note issued by
Indiana to a lender arranged by California; and
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	·
	 	Registration Rights Agreement between California and Indiana.
	 
	3	 	Additional

Collaboration	 	 	3.1	 	 	The Parties shall set forth the terms and conditions of the following
additional collaborations in the Definitive Transaction Documents, all as subject to
any regulatory approvals (including receiving clearance from CFIUS to complete the
Transactions) and any licensing and other requirements as may be necessary:

	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(a)	 	California shall commit to purchasing from the JV certain products that
are offered for sale by the JV on arms-length terms (which may include preferential
rates and/or discounts, such as customary volume discounts), subject to such products
being acceptable to customers of California and being comparable to or better than (in
terms of price, quality, technology, reliability, delivery terms and other aspects)
similar products that are or would be offered by independent third parties; and
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(b)	 	California shall commit to purchasing from Indiana marine streamers and
Indiana’s Intelligent Acquisition IATM streamer technologies for California’s vessel
“BGP Prospector” on terms and conditions to be agreed to by the Parties and at price,
quality, technology, reliability and delivery terms and other aspects no less
favorable to California and Indiana than would prevail in an arm’s-length transaction
with independent third parties under similar circumstances and market positions.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	3.2	 	 	Furthermore, the Parties hereby express their desire to provide each
other with preference in the following future business opportunities, provided in each
case that the terms and conditions (including price, quality, technology, reliability
and delivery) are no less favorable to the other Party than that would prevail in a
transaction with a third party and that, if applicable, the purchased services or
products are acceptable to the other Party’s customers (and it being understood that
no binding agreement is intended herein):
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(a)	 	Indiana’s choice of contractors for its multi-client business/Solutions division;
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(b)	 	Indiana’s choice of contractors for its outsourced manufacturing and
production of other equipment outside the scope of the JV Business;
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(c)	 	Indiana’s provision of data processing and analysis services (utilizing
Indiana’s data processing and analysis technologies) to California and/or the JV,
subject to compliance with applicable US export control laws; and
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(d)	 	California’s future purchases from Indiana of non-JV Business equipment
and services, subject to compliance with applicable US export control laws.

5

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Article	 	 	 	 	Description
	 
	4	 	Registration Rights;
Resale	 	 	4.1	 	 	Notwithstanding anything to the contrary in the NDA, California shall
have the right to freely acquire, dispose or otherwise transfer (i) any equity
securities of Indiana that California (or an affiliate) acquires pursuant to the
relevant Definitive Transaction Documents and (ii) any debt or equity securities or
warrants of Indiana that California (or the lender or other third party arranged by
it) acquires in connection with the Bridge Financing.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	4.2	 	 	Indiana shall provide the (i) usual and customary registration rights
with respect to shares of common stock of Indiana (the “Common Stock”) issued to
California (or lender or other third party arranged by California who holds such
Common Stock) pursuant to any of the Transactions, including the Bridge Financing, and
shall file with the U.S. Securities and Exchange Commission (the “SEC”) a registration
statement registering such shares promptly and in any event within 20 business days
after the issuance of such Common Stock and use its best efforts to cause such
registration statement to be declared effective by the SEC within 60 days after the
issuance of such Common Stock and continuously maintain thereafter the effectiveness
of such registration statement while California (or lender or other third party
arranged by it) holds any shares of such issued Common Stock and (ii) cause such
Common Stock issued pursuant to the Transactions to be listed on the New York Stock
Exchange (the “NYSE”), subject only to the official notice of the issuance of such
shares, prior to the issuance of such Common Stock.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	(B)

	 	Bridge Financing	 	 	 	 	 	 	 	 	 	 
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	1	 	Bridge Financing	 	 	1.1	 	 	Simultaneously with the signing of this Term Sheet, the Parties shall
execute the Bridge Financing Documents contemplated as of the date hereof, and,
subject to the signing of, and entering into legal effect of, each of the Bridge
Financing Documents by the relevant parties thereto, California or a financial
institution arranged by California shall provide such Bridge Financing in accordance with the terms and conditions contained therein.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	(C)

	 	Purchase of Equity
Interest	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	1	 	Common Stock to be
Purchased	 	 	1.2	 	 	Immediately after the Closing, California (or its affiliate) (together
with any subsequent permitted transferee, “Holder”) will have purchased enough shares
of the Common Stock so that, as a result, California would own 19.99% of the issued
and outstanding shares of the Common Stock on a pre-issuance basis (the “Equity
Investment”). Indiana shall issue such shares of Common Stock constituting the Equity
Investment in a primary issuance (including by conversion of the Bridge Financing or
the exercise of the warrants associated therewith). Other details of the Equity
Investment shall be set forth in the Definitive Transaction Documents.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	2	 	Issuance Price and
Use of Proceeds	 	 	2.1	 	 	The price to be paid by California for the purchase of the primary
shares of the Common Stock under the Equity Investment at the Closing shall be US$2.80
per share. The purchase price shall be paid to Indiana in lawful currency of the
United States by wire transfer of immediately available funds.

6

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Article	 	 	 	 	Description
	 
	 	 	 	 	 	2.2	 	 	Use by Indiana of the proceeds of the Equity Investment shall be limited
to use in working capital and repayment of existing indebtedness.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	3	 	Board Representation	 	 	3.1	 	 	So long as Holder owns at least 10% of the outstanding shares of the
Common Stock (i) Holder shall have the right, but not the obligation, to nominate one
director (the “California Director”) to the Board of Directors of Indiana (the
“Indiana Board”) and (ii) upon such nomination, Indiana shall appoint the California
Director to the Indiana Board and shall use its best efforts to ensure that the
California Director remains on the Indiana Board.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	3.2	 	 	Indiana shall use its best efforts to appoint the California Director to
one or more committees of the Indiana Board to the extent that the California Director
meets the applicable regulatory requirements on qualifications.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	4	 	Information Rights	 	 	4.1	 	 	Holder shall enjoy information rights and certifications as to such
information substantially similar to those enjoyed by other shareholders of similar
stature. Notwithstanding the foregoing sentence, Holder shall have access to Indiana’s
products, software, and technology only to the extent permitted by applicable U.S.
export control laws and any licenses held by Indiana thereunder, provided that Indiana
shall use its best efforts to procure all such licenses, if and when required, so that
Holder would be afforded access to information substantially similar to those enjoyed
by other shareholders of similar stature. Indiana may require that such access be
preceded by certification of Holder that no products, software, or technology will be
reexported, transferred, or conveyed except in compliance with U.S. export control
laws.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	4.2	 	 	Except with respect to (i) information and discussion relating to
competition with California, (ii) related party transactions with California; (iii)
conflicts of interest involving the California Director and (iv) as may be restricted
or prohibited by applicable laws (which include U.S. export control laws) or voluntary
agreements with any governmental entity (including CFIUS or a member agency of CFIUS),
the California Director shall have access to information available to any other
members of the Indiana Board. The foregoing sentence’s reference to “applicable law”
shall include, but not be limited to, U.S. export control laws, and, the California
Director shall have access to Indiana’s products, software, and technology only to the
extent permitted by applicable U.S. export control laws and any licenses held by
Indiana thereunder, provided that Indiana shall use its best efforts to procure all
such licenses, if and when required, so that the California Director would be afforded
access to information available to any other members of the Indiana Board. Indiana
may require that such access be preceded by certification of California that no
products, software, or technology will be re-exported, transferred, or conveyed except
in compliance with U.S. export control laws. The California Director shall at all
times comply with policies, regulations and laws applicable to all the other directors
of the Indiana Board.

7

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Article	 	 	 	 	 	 	Description
	 
	5	 	Liquidity of Equity
Investment; Anti-
Dilution Rights	 	 	5.1	 	 	The registration, listing and transfer rights relating to the Equity Investment are as set forth above in Article (A)(4) above.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	5.2	 	 	In the event of a further issuance of the Common Stock or securities
convertible into, exercisable or exchangeable for the Common Stock (“Common Stock
Equivalent Securities”), Holder shall have the right to subscribe for such securities
to maintain its proportional shareholding prior to the issuance of such securities.
Such subscription by Holder shall be made at the issue price received by Indiana
(i.e., net of all underwriting discounts). In the case of an issuance or sale of
Common Stock Equivalent Securities for a consideration in whole or in part other than
cash, including securities acquired in exchange therefor (other than securities by
their terms so exchangeable), the consideration shall be deemed to be the fair value
thereof as determined from the methodology implied in the definitive documents in
connection with such an issuance, which methodology and calculations Indiana shall
provide to Holder. Indiana shall provide (i) reasonable notice (at least 48 hours in
cases described in the preceding sentence or three (3) business days in all other
cases) to Holder of any issuance of the Common Stock or Common Stock Equivalent
Securities and (ii) the same information to Holder as to other potential subscribers
of such securities to enable Holder to make an informed decision. Holder shall have
the later of (i) two (2) business days and (ii) the deadline by which other potential
subscribers have to commit to subscribe. The foregoing does not apply to any issuance
pursuant to (a) equity compensation awards pursuant to existing plans and programs
approved by the Indiana Board (and additional plans and programs substantially similar
with the existing plans and programs), (b) inducement equity compensation awards
issued to employees pursuant to rules of the New York Stock Exchange or (c) equity
compensation awards or plans adopted by Indiana in connection with an acquisition of a
business.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	6	 	Representations and
Warranties	 	 	6.1	 	 	Indiana shall provide to California customary representations and
warranties in the share subscription agreement with respect to the Equity Investment.
Indiana shall further provide representations, warranties and covenants as may be
requested by California in connection with any export control matters and conduct of
business questions reasonably determined by California to be necessary in ensuring
California’s compliance with applicable laws.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	7	 	Indemnification	 	 	7.1	 	 	Indiana shall provide the California Director with indemnity and
Director and Officer (D&O) liability insurance coverage to the same extent as provided
to all other members of the Indiana Board.
	 
	(D)

	 	Joint Venture	 	 	 	 	 	 	 	 	 	 
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	1	 	Preparatory Committee	 	 	1.1	 	 	Upon the signing of this Term Sheet, the Parties shall establish a
preparatory committee for the JV and nominate their respective representatives to
participate in such committee for mutual consultation on the matters set forth in this
Article (D) and to coordinate and effect any necessary action to form the JV.

8

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Article	 	 	 	 	 	 	Description
	 
	 	 	 	 	 	1.2	 	 	Such preparatory committee shall, among other tasks, (i) prepare a
business plan as soon as possible, which shall be finalized prior to the signing of
the Definitive Transaction Documents and shall become the Initial Business Plan (as
defined in Article (D)(11)); (ii) discuss with and recommend to the JV Board (as
defined in Article (D)(8.1)) the candidates, positions and titles for the Executive
Management of the JV, and (iii) discuss, develop and recommend to the JV Board an
organizational plan for the JV, including a transition plan for the period after
Closing.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	2	 	Formation of the
Holding Entity; Indiana’s
Transfer of Assets	 	 	2.1	 	 	Indiana and/or California shall establish one or more wholly-owned
subsidiaries in legal form and under the laws of jurisdiction(s) to be mutually agreed
upon by the Parties after taking into account all relevant considerations (including
those with respect to tax) (“Holdco”).
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	2.2	 	 	Indiana and/or California shall engage in a reorganization (the
“Reorganization”) prior to the Closing in accordance with one or more plans to be
mutually agreed upon by the Parties.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	2.3	 	 	Assets: As part of the Reorganization (and subject to tax structure),
Indiana shall transfer to Holdco free and clear of all mortgages, charges, pledges,
liens or claims or security interests (“Encumbrances”) (except for the ICON Capital
Financing (as defined below) and other customary immaterial permitted Encumbrances)
all tangible and intangible assets necessary to or principally used in the conduct or
operation of the JV Business as presently conducted and operated by Indiana (or
license certain Intellectual Property to Holdco as described below or provide Holdco
with the benefits of assets not transferred to Holdco through services to be mutually
agreed by the Parties as provided in Article (D)(4.2)), including all research &
development operations within the scope of the JV Business and the ARAM Rental
Business, but excluding the Indiana Excluded Assets (the “Indiana Transferred
Assets”).
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Without limiting the effect of the foregoing, the following arrangements shall be made
with respect to the following categories of the Indiana Transferred Assets:
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(a)	 	Specified Assets: Indiana will transfer to Holdco certain tangible and
intangible assets as set forth in Schedule (D)(2.3)(a) (it being understood that this
schedule, with respect to tangible assets, and all schedules relating to tangible
assets in this Term Sheet reflect only assets in the aggregate and that the Parties
shall agree upon detailed schedules for purposes of the Definitive Transaction
Documents and that each schedule in this Term Sheet represents such information to the
best of such preparing Party’s knowledge and may be updated and supplemented by mutual
agreement of the Parties in the Definitive Transaction Documents);
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(b)	 	Intellectual Property: Indiana will transfer and assign or license all
intellectual property (including all patents, trademarks, trade dress, copyrights,
software, trade secrets, inventions, know-how, formulae, processes,

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	 	 	 	 	 	 	 	 	procedures,customer lists, supplier lists, market surveys and marketing know-how, along with all
other intellectual property and goodwill of the business connected with the use of the
foregoing and all registrations or applications in connection with the foregoing) (the
foregoing, “Intellectual Property”) rights to be used in or necessary for the conduct
or operation of the JV Business as presently conducted and operated by Indiana (the
“Indiana JV Business IP”) as follows:
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(i)
	 	Indiana shall transfer and assign to Holdco ownership of all Indiana JV
Business IP owned or held by it that is used primarily in the conduct of the JV
Business (the “Transferred Indiana JV Business IP”) and shall list such Intellectual
Property with appropriate labeling on Schedule (D)(2.3)(b)(i);
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(ii)
	 	Where requested by Indiana, Holdco shall grant to Indiana an exclusive,
perpetual, non-sublicensable (except to wholly-owned subsidiaries), non-assignable,
royalty-free license for such Transferred Indiana JV Business IP to be used
substantially in the manner as such Intellectual Property is presently used by Indiana
and solely for use (a) in connection with providing services to the JV or (b) in
Indiana’s businesses that are outside the scope of the JV Business (the “Indiana
Business Field”).
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(iii)
	 	With respect to the Indiana JV Business IP not constituting the
Transferred Indiana JV Business IP, Indiana shall provide a list of such Intellectual
Property with appropriate labeling on Schedule (D)(2.3)(b)(iii), and shall grant to
Holdco an exclusive, perpetual, irrevocable, non-terminable, sublicensable,
assignable, royalty-free license for such Indiana JV Business IP solely for use within
the scope of the JV Business;
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(iv)
	 	Subject to Subsection (v) below, Indiana shall assign and transfer to
Holdco (i) all agreements under which Indiana is licensed or otherwise permitted by a
third party to use any Indiana JV Business IP, and (ii) all agreements identified by
California under which a third party is licensed or otherwise permitted to use any
Indiana JV Business IP owned by Indiana ((i) and (ii) collectively, the “Intellectual
Property Contracts) and provide a list of such contracts under Schedule
(D)(2.3)(b)(iv);
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(v)
	 	If for any reason Indiana is unable, after exercising best efforts, to
obtain appropriate consents for an Intellectual Property Contract to be assigned and
transferred pursuant to Section 2.3(b)(iv), Indiana shall procure a new, equivalent
contract providing

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	 	 	 	 	 	 	 	 	 	Holdco with the same or substantially similar rights and benefits as the Intellectual Property Contract that was not assigned and transferred, provided
that if the procurement of a new contract is prohibitively expensive or impracticable,
the Parties shall discuss and mutually agree upon a course of action;
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(vi)
	 	Each Party shall provide a customary covenant as to non-assertion of
its contributed Intellectual Property rights against Holdco, provided that Holdco
shall have the right to assert its intellectual property rights with respect to the
Indiana JV Business IP against Indiana if Indiana continues to use such Intellectual
Property following the Closing and in the absence or outside the scope of any license
from the JV;
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(vii)
	 	Subject to compliance with U.S. export control laws, Indiana shall
agree to deliver all notebooks, databases, source code, documents and other materials
embodying the Indiana JV Business IP to Holdco (the Parties agree that Indiana shall
be permitted to retain a copy of all such materials only to the extent of legally
mandated retention purposes) and shall agree to reasonably make available for
consultation with Holdco (and the subsequent JV) any employees involved in the
development of such Indiana JV Business IP; and
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(viii)
	 	Indiana shall acknowledge that it has transferred or licensed all
Indiana JV Business IP and that it retains or is licensed no Indiana JV Business IP
that is not included in the Transferred Indiana JV Business IP, the Intellectual
Property Contracts or otherwise not licensed to the JV, the absence of which would
materially and adversely affect the JV’s conduct and operation of the JV Business.
If, despite Indiana’s best efforts with respect to the foregoing, following the
Closing, should Indiana discover any Indiana JV Business IP that should have been
transferred or licensed to the JV, it shall promptly transfer and assign or license
such Intellectual Property to the JV in accordance with the terms herein.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(c)	 	Contracts: Indiana will transfer and assign to Holdco, and Holdco will
assume from Indiana, all contracts and agreements held by Indiana necessary to or
principally used in the conduct or operation of the JV Business as presently conducted
and operated by Indiana (the “Indiana JV Contracts”), except for such contracts agreed
to by the Parties for which arrangements have been made and by which the JV Business
will not be adversely affected.
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(i)
	 	Indiana shall use its best efforts to inform its affected suppliers and
customers of the formation

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	 	 	 	 	 	 	 	 	 	 	 	of the JV and use best efforts to transition such supplier and customer contracts (and their administration) to the JV in a manner not disruptive
to the JV Business.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	(ii)
	 	Indiana shall assign and transfer to Holdco all insurance policies that
are held by Indiana and that are to be used in or necessary to the conduct or
operation of the JV Business or procure substantially equivalent insurance policies
for the JV to take effect immediately follow the Closing, provided that if the consent
to transfer or assignment or the procurement of such new insurance policies is
prohibitively expensive or impracticable, the Parties shall discuss and mutually agree
upon a course of action.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	(iii)
	 	A schedule of Indiana JV Contracts and their arrangements identified
as of the signing of this Term Sheet shall be set forth in Schedule (D)(2.3)(c)(iv).
The Parties shall agree on the list of Indiana JV Contracts prior to the signing of
the Definitive Transaction Documents.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(d)	 	ARAM Rental Business: The ARAM equipment rental business is owned and operated through two wholly-owned subsidiaries of Indiana:
ARAM Rentals Corporation (“ARC”) and ARAM Seismic Rentals, Inc. (“ASRI”) (collectively, the “ARAM Rental
Business”). Indiana intends to transfer the ARAM Rental Business to Holdco through an
assignment of the stocks of ASRI and ARC or their parent companies. The Parties
acknowledge that the assets of the ARAM Rental Business are secured by master loan and
security agreements between ARC and ICON Ion, LLC and ASRI and ICON Ion, LLC,
respectively (the “ICON Capital Financing”), that ARC and ASRI are borrowers under the
ICON Capital Financing, that Indiana is and after the Closing will remain a guarantor
of the ICON Capital Financing and that the security interest in the assets of the ARAM
Rental Business will remain with such assets after their transfer to the JV. As consideration for Indiana remaining as guarantor for the ICON Capital Financing
(pursuant to the terms of such ICON Capital Financing), at the Closing, the JV shall
execute and deliver a guarantee in favor of Indiana on substantially the same terms to
the guarantee provided by Indiana to ICON Ion, LLC.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	2.4	 	 	The “Indiana Excluded Assets” are as specifically agreed to by the
Parties and set forth on Schedule (D)(2.4) (including certain amounts of accounts
receivable of Indiana for which California or one of its subsidiaries is the payor).
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	2.5	 	 	Following the signing of this Term Sheet, the Parties may by mutual
agreement update the schedules set forth in this Article (D)2) and elsewhere in this
Article (D), which shall form the basis of the relevant schedules in the Definitive
Transaction

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	Article	 	 	 	 	 	 	Description
	 
	 	 	 	 	 	 	 	 	Documents.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	2.6	 	 	Each Party will use its best efforts to procure any consents of third
parties required to effect the transactions described in this Article (D). Each Party
shall provide the other Party with commercially reasonable assistance as shall be
requested by the other Party from time to time in procuring such consents of third
parties.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	2.7	 	 	From the signing of this Term Sheet to the Closing, except for the
Reorganization, Indiana shall maintain and operate its JV Business in the ordinary
course and substantially as presently conducted.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	3	 	California’s
Acquisition of Equity
Interest and Formation
of JV;	 	 	3.1	 	 	California shall enter into a share purchase agreement (the “JV SPA”)
the effect of which is that at the Closing:
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(a)	 	California shall purchase, and Indiana shall sell, 51% of the equity
interests of Holdco;
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(b)	 	in consideration for the transfer of the aforesaid 51% of the equity
interests of Holdco, California shall (i) pay to Indiana US$108.5 million in lawful
currency of the United States and (ii) subject to satisfactory completion of due
diligence by Indiana, transfer and assign to Holdco certain assets of California that
the Parties agree are useful to the JV Business. The California Transferred Assets are listed on Schedule (D)(3.1)(b)  and include:
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	(i)
	 	Certain land seismic recording systems under development;
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	(ii)
	 	Certain production lines relating to auxiliary equipment;
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	(iii)
	 	certain manufacturing facility and land relating to the manufacturing
of the ES109 recording system
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	(iv)
	 	All equity owned by California in the sales and marketing company, which equals 80% of the total issued and outstanding equity of such company;
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	(v)
	 	All Intellectual Property owned or held by California to be used
primarily in the conduct or operation of the California Transferred Assets (the
“California JV Business IP”); and
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	(vi)
	 	All contracts and agreements held by California primarily in the
conduct or operation of the California Transferred Assets, but excluding any and all
contracts related to the provision or receipt of goods or services in or related to
Cuba, Iran, Myanmar (Burma), North Korea, Syria and Sudan, and any other government,
country or person or entity, including such persons and entities that are identified
on the List of Specially Designated Nationals and Blocked Persons (“SDNs”), that is
the target of U.S. economic sanctions administered by the U.S. Treasury Department’s
Office of Foreign Assets Control (“OFAC”) (the “California JV Contracts”). The
Parties shall agree

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	 	 	 	 	 	 	 	 	 	 	 	on the list of California JV Contracts prior to such transfer;
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(c)	 	California agrees to the same arrangements, commitments,
representations, undertakings and agreements with regard to the California Transferred
Assets as Indiana made or is required to make in Section 2.3 with regard to the
Indiana Transferred Assets, if applicable;
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(d)	 	a shareholders’ agreement entered into by California and Indiana shall
become effective and Holdco shall adopt new articles of association providing for the
remaining provisions of this Article (D) (following such change, Holdco shall be
referred to herein as the “JV”).
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	3.2	 	 	On and following the Closing, California (or an affiliate thereof) shall
hold 51% of the equity interest of the JV and Indiana (or an affiliate thereof) shall
hold 49% of the equity interest of the JV (each such percentage ownership of the JV, a
“Percentage Interest”).
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	3.3	 	 	The Parties shall provide customary representations and warranties to
each other in the JV SPA, including with respect to the assets (including Intellectual
Property), contracts, employees, the shares of Holdco, services available to it and
the consents obtained. Without in any way limiting the scope of customary
representations and warranties to be provided in the JV SPA, Indiana shall
specifically provide representations and warranties to the effect that (i) it owns or
has the right to use, and will transfer and assign to the JV, all Indiana Transferred
Assets except as otherwise agreed to by the Parties and identified in the JV SPA, (ii)
together with any services provided by Indiana to be mutually agreed between the
Parties pursuant to Article (D)(4.2) and any license of Intellectual Property by
Indiana, the Indiana Transferred Assets constitute all the assets, properties,
contracts and rights necessary for the JV Group (as defined in Article (D)(32.2)) to
conduct the JV Business in all material respects as presently conducted by Indiana,(iii)there are no material undisclosed liabilities regarding the Indiana Transferred
Assets whether contingent or fixed except as those that have been disclosed to
California in writing prior to the signing of this Term Sheet, (iv) Indiana has
complied with all applicable laws and (v) the transactions contemplated by the
Definitive Transaction Documents would not contravene or result in a default under any
contract of Indiana or any law applicable to the JV Business, subject, in each case,
to customary qualifications. Without in any way limiting the scope of customary
representations and warranties to be provided in the JV SPA, California shall
specifically provide representations and warranties in the JV SPA with regard to the
California Transferred Assets that are substantially similar to the representations
and warranties that Indiana provides with respect to the Indiana Transferred Assets.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	3.4	 	 	The Parties shall provide customary indemnities to each other, including
with respect to their respective representations and warranties as to the assets
contributed.

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	 	 	 	 	 	3.5	 	 	The Parties agree that, after the signing of this Term Sheet, if either
Party reasonably believes that any tangible or intangible asset that is necessary to
the JV Business is not transferred or assigned to the JV (or, where the transfer or
assignment of such asset is not permissible, no substitute arrangement has been made),
the Party to whom the asset belongs shall agree to have such transferred and assigned
to the JV (or, where the transfer or assignment of such asset is not practicable, to
make substitute arrangements that provide the JV with substantially similar benefits
as if the asset has been transferred and assigned to the JV).
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	3.6	 	 	The Parties acknowledge that the California Transferred Assets to be
contributed to the JV by California will require additional capital expenditures for
which California will contribute up to US$9.5 million (the “Additional California
Cap-Ex”) (which the Parties agree constitutes part of the value of the California
Transferred Assets) and which Additional California Cap-Ex will not be used for
working capital. California agrees to pay such funding amounts of the Additional
California Cap-Ex into the JV when and as necessary in connection with the JV building
a manufacturing facility on the California-contributed land. If the total Additional
California Cap-Ex is below US$9.5 million, California agrees to contribute an amount
equal to the shortfall to another capital expenditure project of the JV to be
identified by the JV Board. Such funding by California shall not be deemed to be an
additional capital contribution or loan by California and California shall not receive
any additional shares of the JV as a result of the funding.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	3.7	 	 	All direct or indirect taxes shall be borne by the Party obligated to
pay such taxes under law, including any tax liability incurred in connection with the
operation of the JV Business conducted by such Party prior to the Closing and any
liability for taxes resulting from the assignment or transfer of any Indiana
Transferred Assets and any California Transferred Assets, as applicable, in connection
with the Closing.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	3.8	 	 	The Parties shall further discuss on the structure and jurisdiction of
the JV based on tax and other considerations.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	4	 	Employees and Service
Agreements	 	 	4.1	 	 	As part of the formation of the JV, Indiana and California agree as
follows:
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(a)	 	Indiana and California shall use their best efforts to ensure the
stability of the operations and personnel of the JV Business;
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(b)	 	The Parties agree that Indiana’s contributions to the JV Business shall
form the core operations of the JV and as such, Indiana is in the best position to
identify those key JV Business personnel of Indiana necessary to the full functioning
of the JV Business (including all management, technology and research & development
personnel) (such persons, the “Key Employees”). Therefore, Indiana shall provide
California with a list of such Key Employees it identifies and the Parties shall
either (i) cause the Key Employees to become employed by the JV by transferring

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	Article	 	Description
	 
	 

	 	 	 	 	 	 	 	 	 	to the JV the stock of the corporate entity that employs the Key Employees (and receiving
their acknowledgement as to such transfer) or (ii) use their best efforts to cause the
Key Employees to terminate employment with Indiana and become employed by the JV or
its subsidiaries pursuant to a comparable offer of employment from the JV, unless
Indiana has obtained California’s consent in writing to not take such action with
regard to such Key Employees;
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(c)
	 	California shall take the same actions described in Subsection (b) above
with regard to its key employees for the California Transferred Assets, if applicable;
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(d)
	 	Indiana and California shall jointly identify to each other all of their
respective employees necessary or primarily related to the JV Business and shall make
all appropriate arrangements (including using best efforts for such employees to be
employed by, seconded or provide services to the JV) to make the services of such
employees available to the JV, subject to any applicable U.S. export control licenses
or authorizations;
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(e)
	 	Without the JV’s prior written consent (which consent shall not be
unreasonably withheld), from the Closing until the fifth anniversary of the Closing,
neither Party may directly or indirectly (i) solicit or accept the employment of any
employees of the JV or (ii) hire, re-hire, agree to have as a contractor or otherwise
employ such employees of the JV;
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(f)
	 	All Intellectual Property developed by employees of the JV after the
Closing shall belong to the JV.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	4.2	 	 	In connection with the establishment of the JV, Indiana and California
shall enter into one or more services agreement(s) with the JV, providing for such
additional services as the JV may require from Indiana and California and as Indiana
and California are capable and willing to provide, in order to operate the JV
Business, and the JV shall provide appropriate licenses of its Intellectual Property
as necessary for the provision of such services; provided that the foregoing shall not
be construed as excusing either Party from the transfer of the Indiana Transferred
Assets and the California Transferred Assets, as applicable, or the obligation with
regard to any Key Employees, and the Parties hereby agree that they intend only for a
limited amount of ancillary assets used in the conduct of the JV Business (and not any
critical or core assets) contributed by each Party to be provided as a service.
	 
	5	 	Name,
Headquarters
and Facilities	 	 	5.1	 	 	The name of the JV shall be mutually agreed by the Parties.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	5.2	 	 	The principal headquarters of the JV shall be determined by the JV Board.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	5.3	 	 	The locations of the facilities and operations of the JV Group shall be
determined by the JV Board after taking into account the best commercial interests of
the JV and applicable U.S. export control laws.

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	6	 	Scope of the JV	 	 	6.1	 	 	The scope of the JV Group shall be the business of designing,
development, engineering, manufacturing, research and development, distribution, sales
and marketing and field support of land-based equipment used in seismic data
acquisition for the energy and petroleum industry, including any and all existing
products and technologies comprising Indiana’s Scorpion®, Aries®, FireFly®, Pelton,
vibroseis, eVib, Connex and land VectorSeis® product lines and businesses and any
research & development of, improvements of and new products by the JV based on the
forgoing products including the ARAM Rental Business, but excluding any Excluded
Business (collectively, the “JV Business”). The Parties agree that the JV itself may
conduct the JV Business or may be engaged solely in the business of holding
investments in its subsidiaries, which subsidiaries may engage in the JV Business.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	6.2	 	 	The “Excluded Business” shall mean:
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(a)
	 	the analog sensor businesses of Indiana and California; and
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(b)
	 	the businesses of certain companies in which California or Indiana is a
minority owner as of the date of this Term Sheet that are listed on Schedule
(D)(6.2)(b).
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	6.3	 	 	The scope of the JV Business may be revised only by mutual agreement of
the Parties.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	6.4	 	 	The JV’s objective will be to maximize its value and economic profits
for its shareholders.
	 
	7	 	Term	 	 	7.1	 	 	The term of the JV shall commence on the Closing and will have an
initial term of thirty (30) years and shall automatically renew for additional five
(5) year terms (collectively, the “Term”), unless one Party notifies the other Party
in writing of its intent not to renew at least 180 days prior to the expiration of any
term. Following expiration of the Term, Article (D)(30) shall apply.
	 
	8	 	Future Capital

Contributions	 	 	8.1	 	 	From time to time, the Board of Directors of the JV (the “JV Board”) may
determine that the JV shall require additional equity to fund the then effective
Business Plan (as defined in Article (D)(11)). In such event, the Board shall have the
right to require the Parties to make a proportional mandatory additional capital
contribution (“Additional Capital Contribution”).
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	8.2	 	 	If one Party fails to make all or any portion of an Additional Capital
Contribution, then the other Party who has contributed its entire portion of such
Additional Capital Contribution may elect to advance all or a portion of the
non-contributing Party’s unpaid portion of such Additional Capital Contribution to the
JV as a loan by the contributing Party to the non-contributing Party, bearing interest
at an annual rate equal to the “prime” rate plus an applicable margin. If such loan
is not repaid with all accrued interest within ninety (90) days, then such
contributing Party shall have the right to elect to cause the remaining unpaid portion
of the capital advance to be converted into an additional capital contribution to the
JV by the contributing Party. In such event, the value of the new shares of the JV
shall be calculated with respect

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	 	 	 	 	 	 	 	 	to the then fair market value of the JV as agreed to
by the Parties or as determined by a mutually acceptable, reputable international
independent valuation firm retained by the JV.
	 
	9	 	Allocations of
Profits and Losses	 	 	9.1	 	 	Profits and losses of the JV (for financial, accounting and tax
purposes) shall be allocated to each Party pro rata in proportion to its Percentage
Interest.
	 
	10	 	Distributions;
Distribution Policy	 	 	10.1	 	 	Distributions to the Parties shall be made to each Party on a pro rata
basis in proportion to its Percentage Interest and shall be made by the JV to the
Parties when and as declared by the JV Board.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	10.2	 	 	The JV shall make distributions in accordance with the JV Board’s
dividend and distribution policy. The initial policy of the JV Board with respect to
dividends and distributions to the JV’s shareholders, whether by distribution of
earnings and profits, returns of capital or other available profits shall be set forth
in more detail in the Definitive Transaction Documents (the “Dividend and Distribution
Policy”).
	 
	11	 	Business Plan and
Annual Operating Plan	 	 	11.1	 	 	California and Indiana will mutually agree to an initial five-year
business plan for the JV prior to the entering into of Definitive Transaction
Documents to be effective after the Closing (the “Initial Business Plan”). California
and Indiana agree to present the Initial Business Plan to the JV Board and procure
that their respective representatives on the JV Board to vote for the approval and
adoption of the Initial Business Plan.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	11.2	 	 	Subsequent five-year business plans (the “Subsequent Business Plans”
and, together with the Initial Business Plan, the “Business Plans”) for the JV will be
prepared by the Executive Management (as defined in Article (D)(17)) for approval by
the JV Board.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	11.3	 	 	The Parties shall cause the JV to operate within the parameters set
forth in the then-effective Business Plan.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	11.4	 	 	Each fiscal year, the Executive Management shall prepare an annual
operating budget and plan of the JV based on the then effective Business Plan (the
“Annual Operating Plan”) for approval by the JV Board.
	 
	12	 	Governance Structure
of JV	 	 	12.1	 	 	The shareholders of the JV shall elect the members of the JV Board as
set forth in Article (D)(14) and be entitled to vote in approving the Fundamental
Matters as set forth in Article(D)(13).
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	12.2	 	 	Except as otherwise set forth in the shareholders’ agreement or the
JV’s governing documents, the JV Board shall be responsible for approving all matters
related to the JV, including the appointment of the Executive Management, except as
prohibited by applicable law.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	12.3	 	 	The Board shall delegate its powers with respect to the management and
operation of the JV to the Executive Management as provided in the organizational
documents of the JV.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	12.4	 	 	The Executive Management shall report to the JV Board and be
responsible for the day-to-day operations of the JV as set forth in

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	 	 	 	 	 	 	 	 	Article (D)(17).
	 
	13	 	Shareholder Votes
and Fundamental Matters	 	 	13.1	 	 	All resolutions of the shareholders shall require a simple majority,
except for any resolution on a Fundamental Matter, which shall require the approval of
shareholders holding at least 70% of the voting power.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	13.2	 	 	The following are “Fundamental Matters”:
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(a)
	 	amending or waiving any terms of the organizational documents of the JV
(other than mere technical amendments having no effect on the rights of the
shareholders of the JV);
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(b)
	 	winding up or liquidating or adopting a plan to effect the dissolution
of the JV;
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(c)
	 	a sale of all or substantially all assets of the JV;
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(d)
	 	a change in the size or function of the JV Board; and
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(e)
	 	mergers, statutory share exchanges, amalgamations, consolidations and
similar corporate changes of such nature as provided by applicable law.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	13.3	 	 	Subject to applicable law and the matters set forth in Section 13.2
above, all decisions and actions that may be legally taken by the JV Board shall be
within the JV Board’s sole jurisdiction.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	13.4	 	 	Written resolutions in lieu of shareholder meetings shall be permitted.
	 
	14	 	Board Authority and
Composition	 	 	14.1	 	 	The JV Board shall be the ultimate decision making body of the JV and
shall review and consider such matters as it may deem proper.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	14.2	 	 	The JV Board shall have 7 directors, consisting initially of 4
directors appointed by California (each, a “California JV Director”) and 3 directors
appointed by Indiana (each, an “Indiana JV Director” and together with the California
JV Directors, the “JV Directors”), which shall be appropriately adjusted following
changes in the ownership of equity interest of the JV.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	14.3	 	 	Following the resignation, retirement or removal of a JV Director, the
replacement of such vacancy shall be made by the Party who initially appointed such
director.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	14.4	 	 	The JV Board shall be chaired by a California JV Director and shall
have as a vice-chair an Indiana JV Director.
	 
	15	 	Meetings of the Board	 	 	15.1	 	 	The JV Board shall meet quarterly as convened by the chairman, the
vice-chairman or as required by applicable law. Each JV Director shall be given
notice of the JV Board meeting location, agenda and any other accompanying materials
at least ten (10) business days prior to a meeting and shall be given a reasonable
opportunity to attend even if their attendance is not required in order to obtain
quorum. At the request of any JV Director given at least two (2) business days in
advance of the meeting date, the JV shall provide video-conferencing for the conduct
of such meeting.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	15.2	 	 	The quorum for meetings of the JV Board shall be 4 directors (5 in the
case of JV Board meetings held for the purpose of approving

19

 

	 	 	 	 	 	 	 	 	 	 	 
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	 	 	 	 	 	 	 	 	resolutions on the
specific matters set forth in Article (D)(16.1). If such quorum shall not be present
at any meeting of the JV Board, the directors present shall adjourn the meeting and
promptly give notice of when the next JV Board will be reconvened.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	15.3	 	 	The JV Board shall be permitted to act by written resolutions in lieu
of meetings of the JV Board provided that such written resolutions are circulated to
all JV Directors at least ten (10) business days prior to the adoption of such
resolution, subject to any bona fide exigent circumstances that demand more prompt
action.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	15.4	 	 	The minutes of the JV Board, any resolutions made by the JV Board and
information provided to the JV Board (including meeting agendas) shall be in both
Chinese and English and copies shall be circulated to all JV Directors.
	 
	16	 	Actions of the Board	 	 	16.1	 	 	The JV Board shall be entitled to take actions with the affirmative
vote of a simple majority of the outstanding members of the Board, except for the
following actions (each, a “Reserved Matter”), which shall require the approval of at
least 5 directors:
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(a)
	 	conducting any material business that is not within the scope of the JV
Business;
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(b)
	 	any change of the timing of the fiscal year, the financial reporting
standard or the auditor of the JV;
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(c)
	 	material changes to the Initial Business Plan;
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(d)
	 	approving or changing the Dividend and Distribution Policy;
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(e)
	 	approving or changing the JV’s policies and practices applicable to
Related-Party Transactions (as defined in Article (D)(26));
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(f)
	 	the admission of any new shareholder of the JV resulting from issuances
of new equity interest of the JV (except for the issuance of new equity interest to
affiliates of California or Indiana);
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(g)
	 	authorize, approve or require any Additional Capital Contribution in
excess of the amount of capital expenditure and working capital needs contemplated
under the Business Plans or such other amount as approved by the Board in compliance
with the voting requirements of this subsection; and
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(h)
	 	any action that would increase the indebtedness of the JV beyond that
contemplated within the Business Plans or such other amount as may be approved by the
Board in compliance with the voting requirements of this subsection.
	 
	17	 	Executive Management	 	 	17.1	 	 	The “Executive Management” of the JV shall be appointed by the JV Board
and shall be identified and agreed to as quickly as possible by the preparatory
committee for the JV after the execution of this Term Sheet.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	17.2	 	 	The JV Board shall appoint additional members of Executive Management
in its discretion. In recognition of the importance of

20

 

	 	 	 	 	 	 	 	 	 	 	 
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	 	 	 	 	 	 	 	 	management continuity and
stability to the JV, the JV Board shall give considerable weight to maintaining the
appointment of the member of the Executive Management members to retain talents for
the long-term.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	17.3	 	 	The Executive Management shall be responsible for the day-to-day
operations of the JV, including:
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(a)
	 	Execution of the Business Plans, including marketing, development and
pricing strategies;
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(b)
	 	Providing monthly management reports on key commercial, financial,
technological and/or marketing developments and such other reports as the JV Board may
request; and
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(c)
	 	Such other matters as may be appropriate or as may be requested or
delegated by the JV Board.
	 
	18	 	Employee Related

Matters	 	 	18.1	 	 	Following the Closing,
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(a)
	 	The Parties shall endeavor to maintain the stability and continuity of
the JV’s employees to ensure the smooth operation of the JV Business.
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(b)
	 	Unless otherwise agreed, new employees of the JV shall be employed by
the JV, as the JV Board may determine to be appropriate. At the request of the JV,
the Parties shall provide additional human resources support functions, including, if
necessary, available and permissible under applicable benefits plans, secondment
arrangements and/or benefits and insurance, for such employees. If either Party
provides such services, the JV shall reimburse such Party all costs it incurs as a
result of such services.
	 
	19	 	Marketing,
Distribution and Additional
Support	 	 	19.1	 	 	Each Party shall provide such support to the JV as may be necessary to
conduct the JV Business, including sales, marketing and distribution and other support
services that may be necessary to ensure that such Party’s contributions to the JV
Business may operate at least as well as prevailed prior to the Closing (subject to
any arrangements under the Business Plan). If either Party provides such services, the
JV shall reimburse such Party all costs it incurs as a result of such services.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	19.2	 	 	The JV Board shall choose the provider(s) of marketing and sales
services to the JV, which shall initially be Indiana. Indiana shall be obligated to
provide such services for two (2) years following the establishment of the JV (for the
avoidance of doubt, the JV’s use of Indiana’s marketing and sales services shall not
confer upon Indiana any exclusive right to provide such or any other services to the
JV), although the JV may decline such services at any time.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	19.3	 	 	It is the intention of the Parties to have the JV establish its own
marketing and sales personnel and networks within two (2) years following the
establishment of the JV, and Indiana shall provide the JV with all reasonable
assistance and support to the JV in its effort to build its own marketing and sales
networks and sales team. If, after the expiration of such two (2) year period, the JV
has not yet fully established its own marketing and sales personnel and

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	 	 	 	 	 	 	 	 	networks, at
the request of the JV, Indiana shall continue to use best efforts to assist the JV to
provide such services (or parts thereof) for which the JV lacks its own capability on
comparable terms until the JV can fully establish its own capability in such area.
	 
	20	 	Branding	 	 	20.1	 	 	The JV shall have ownership of and right to use all brands and trade
names of the existing products of the Parties to be contributed to the JV Business.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	20.2	 	 	The JV shall determine the brands and trade names of its new products
and product lines developed and operated by the JV Business.
	 
	21	 	Certain Intellectual

Property Considerations	 	 	21.1	 	 	The JV shall acquire ownership of any Intellectual Property developed
by it or its subsidiaries after the Closing in the course of its business, including
any improvements it makes to any Intellectual Property licensed from any Party.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	21.2	 	 	Indiana shall grant an irrevocable, perpetual, royalty-free license to
the JV (for use solely in the JV Business) for all improvements on the Indiana JV
Business IP made by Indiana following the Closing.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	21.3	 	 	The JV shall grant an irrevocable, perpetual, royalty-free license to
Indiana (for use solely in the Indiana Business Field) for all improvements on Indiana
JV Business IP made by the JV following the Closing.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	21.4	 	 	The JV shall have customary rights with respect to infringement actions
by third parties with respect to any Intellectual Property licensed by the Parties,
including indemnification from the licensor regarding such claims.
	 
	22	 	Non-Competition	 	 	22.1	 	 	Each of California and Indiana agrees that, during the Term of the JV,
it and its subsidiaries shall not compete anywhere in the world directly in the
businesses that are within the scope of the JV Business other than any Excluded
Business. In the event a Party (the “Acquirer”) acquires, incidentally as part of a
larger transaction, a business that competes directly with the businesses that are
within the scope of the JV (a “Competing Business”), the Acquirer shall undertake to
dispose of such Competing Business within a reasonable period of time.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	22.2	 	 	Subject to the foregoing, the Parties acknowledge and agree that each
Party shall be permitted to conduct its businesses in the ordinary course with
competitors of the JV and that either Party may conduct businesses with competitors of
the other Party.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	22.3	 	 	Each Party agrees that in furtherance of the JV, the Parties shall
cooperate on such matters outside the scope of the JV Business from time to time as
may be agreed between the Parties.
	 
	23	 	Financial Reporting	 	 	23.1	 	 	The fiscal year of the JV shall begin on January 1 and end on December
31.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	23.2	 	 	The JV shall prepare and maintain their accounts and financial
statements, and maintain internal controls, in accordance with, and otherwise comply
with the applicable provisions of United States Generally Accepted Accounting
Principles (“U.S. GAAP”) and until

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	 	 	 	 	 	 	 	 	the end of the year 2013 shall produce financial
statements in accordance with both U.S. GAAP and the Internal Financing Reporting
Standards, as adopted by the International Accounting Standards Board and endorsed by
the European Union (“IFRS”), after which the JV shall only be required to produce
financial statements in accordance with IFRS, unless otherwise agreed to by the
Parties.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	23.3	 	 	The JV Board shall determine the auditor of the JV from among the
following audit firms (or their successors or affiliated entities in different
geographic regions): Ernst & Young, PricewaterhouseCoopers, Deloitte Touche Tohmatsu
and KPMG.
	 
	24	 	Audit Rights	 	 	24.1	 	 	The Definitive Transaction Documents shall grant California and Indiana
the right to inspect and audit, at their respective expense, the books, records,
facilities, operations and assets of the JV.
	 
	25	 	Information Rights	 	 	25.1	 	 	The JV shall produce unaudited quarterly financial statements and
business reports and audited annual financial statements for the Parties.
	 
	26	 	Related-Party

Transactions	 	 	26.1	 	 	The JV shall receive in all transactions between a Party or any of its
affiliates, on the one hand, and the JV or any of its subsidiaries, on the other hand
(each, a “Related-Party Transaction”), terms (including potential customary volume
discounts) no less favorable to the JV than those that would have prevailed in a
transaction with independent third parties in an arm’s-length transaction under
similar circumstances and market positions, provided that in all transactions the JV
shall be obligated to provide to California and Indiana terms that are at least as
favorable as those provided to third parties including with respect to, quality,
payment terms, price and delivery terms.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	26.2	 	 	All Related-Party Transactions, other than those in the ordinary course
of business, shall be approved by the JV Board in the same manner as an addition to
the policies and practices applicable to Related Party Transactions required by
Section 16.1, unless such Related Party Transaction has previously been approved,
including:
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(a)
	 	licenses of certain intellectual property by Indiana to the JV and by
the JV to the Parties as contemplated in this Term Sheet at Closing;
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(b)
	 	agreement relating to marketing, sales and distribution channels and
networks of the Parties;
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(c)
	 	secondment arrangements of employees; and
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(d)
	 	services agreements with respect to other support functions to be
provided by Indiana or California to the JV.
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	26.3	 	 	Related-Party Transactions that are in the ordinary course of business,
including those in the ordinary course of business such as the purchase of products by
California from the JV and the supply of products by Indiana to the JV, shall be
approved by the JV Board or the Executive Management (if so delegated by the JV Board)
consistent with the policies and practices required by Section 26.1 above. Each
quarter, a written summary of all

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	Article	 	Description	 	 
	 	 	 
	 	 	 	 	 	 	 	 	material Related Party Transactions and purchases by
either Party from the JV performed during the preceding quarter, including a
description of the pricing, payment and other principal terms of such transactions,
shall be delivered to the JV Board pursuant to the specific provisions of the JV
organizational documents.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	26.4	 	 	If a Party or its affiliate offers terms and conditions (including as
to quality and reliability) to the JV that are at least as favorable to the JV as
terms and conditions that are or would be offered by an independent third party, the
JV and the JV Board shall give preference to dealing with such Party or its affiliate.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	27	 	Transfers of
Ownership Interests	 	 	27.1	 	 	Neither Party may directly or indirectly transfer (including by a
Change of Control) or assign its interests and rights in the JV without the prior
written consent of the other Party, except that:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(a)	 	California may transfer all or any part of its equity interest in the JV
as required under applicable law, regulation or government policy where such law,
regulation or government policy mandates that California shall no longer be the holder
of such equity interest of the JV, provided that such transferee agrees to be bound by
all terms applicable to the ownership of the JV including becoming a party to all
applicable agreements, subject to applicable law (each, a “Permitted California
Transfer”);	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(b)	 	either Party may transfer pursuant to a Change of Control provided that
it complies with the procedures for a Right of First Refusal to the other Party as to
its equity interest in the JV and that the transferee is not a competitor of the other
Party;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(c)	 	On or after the fifth (5th) anniversary of the Closing,
following compliance with the procedures for a Right of First Refusal to the other
Party, any Party may transfer or assign its interests in the JV to a person other than
a direct competitor of the JV and the other Party; provided that such transferee
agrees to abide by all terms applicable to the ownership of the JV including becoming
a party to all applicable agreements;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	A “Change of Control” means the (i) acquisition, directly or indirectly, by a third
party or group consisting of third parties of beneficiary ownership in excess of 50%
of the outstanding shares of the common stock of a Party or voting power of
outstanding voting securities entitled to vote in the election of directors of the
Party or (ii) consummation of a merger, consolidation, amalgamation or similar
business combination between a Party and any other third party, excluding, in each
case, any Permitted California Transfer.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	A “Right of First Refusal” means a right of first refusal on customary terms and
procedures.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	28	 	Deadlock and
Dispute
Resolution
Procedures	 	 	28.1	 	 	In the event of any dispute between the Parties related to the JV
(including a disagreement related to the operation or governance of the JV and a
breach by either Party or the JV of its obligations) or the consistent and repeated
failure (on at least two separate	 	 

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	Article	 	Description	 	 
	 	 	 
	 	 	 	 	 	 	 	 	occasions) by the JV Board or Parties to resolve any
matter (or obtaining quorum on such matter), in addition to any other remedies
required by applicable law:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(a)	 	The chief executive officers of California and Indiana shall discuss the
dispute in good faith on a regular basis for a period of thirty (30) days (or a lesser
period if both Parties agree that a resolution is not forthcoming) following the
occurrence of the dispute, in an effort to resolve the dispute;	 	 
	 
	 	 	 	 	 	 	 	 	(b)	 	If no agreement is reached by the end of the discussion period described
above, then the dispute will be referred to non-binding mediation for a period of not
greater than sixty (60) days after the conclusion of the discussion period described
above, in a forum according to customary procedures to be agreed to in the Definitive
Transaction Documents (provided that if the nature of the dispute is not conducive to
resolution by mediation, the Parties may mutually agree to forego the mediation
process); and	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(c)	 	If no resolution is reached at the conclusion of the mediation process
described above, then either Party may refer the dispute to arbitration as provided in
this Term Sheet.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	28.2	 	 	Notwithstanding the foregoing, at any time after the fifth (5th)
anniversary of the Closing and prior to the eighth (8th) anniversary of the Closing,
following the occurrence of (i) any failure to resolve as to any Fundamental Matter or
Reserved Matter, (ii) a dispute over a material breach of the terms of the JV or (iii)
a fundamental disagreement by the Indiana JV Directors or Indiana with respect to any
significant management or operational matter concerning the JV that has been raised
and discussed at least once at a meeting of the JV Board and has not been resolved;
provided that, in each case, such dispute has undergone the procedures set forth in
Article (D)(28.1) above but prior to arbitration (a “Deadlock”), Indiana shall have
the right to elect to require California to purchase all of shares in the JV held by
Indiana for the then fair market value of shares of the JV as of the date of the
Deadlock Notice (as defined below) (such a sale, the “Deadlock Sale”). The Deadlock
Sale right and fair market value of such shares shall be as follows:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(a)	 	If Indiana elects to exercise its Deadlock Sale right as described
above, it shall deliver a written notice (the “Deadlock Notice”) to California and the
JV within twenty (20) business days following the occurrence of a Deadlock.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(b)	 	For a period of ten (10) business days following delivery of the
Deadlock Notice, Indiana and California shall attempt in good faith to reach agreement
on the fair market value of Indiana’s shares in the JV. If the Parties cannot agree
on such value within the designated time period, Indiana and California shall, within
ten (10) business days, agree upon two internationally recognized investment banking
firms with expertise in valuing companies engaged in	 	 

25

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Article	 	Description	 	 
	 	 	 
	 	 	 	 	 	 	 	 	 	 	businesses similar or related to
the JV Business. The Parties shall jointly be responsible for the fees and expenses
of the selected investment banks.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(c)	 	Within twenty (20) business days of the selection of the investment
banks pursuant to Clause (b) above, each such investment bank shall independently
determine, by using commonly accepted valuation techniques, the enterprise value of
the entire JV on a 100% basis. The JV shall provide the investment banks with prompt
access to such information of the JV as the investment banks may reasonably request to
enable them to prepare their appraisal. On the thirty (30th) business day (or earlier
or later if reasonably requested by such investment banks) following the selection of
the two investment banks, each investment bank shall deliver its valuation report of
the JV to the Parties and the enterprise value of the JV shall be equal to the average
(mean) of the valuations determined by the two investment banks. The Parties shall
then derive the value of Indiana’s JV shares by subtracting the JV’s net debt from the
JV’s enterprise value and multiplying the resulting value by Indiana’s percentage
ownership in the JV.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(d)	 	The JV shall provide the investment banks with prompt access to such
information of the JV as the investment banks may reasonably request to enable them to
prepare their appraisal. On the thirty (30th) business day (or earlier or later if
reasonably requested by such investment banks) following the selection of the two
investment banks, each investment bank shall deliver its valuation report of Indiana’s
JV shares to the Parties, and the fair market value of Indiana’s JV shares shall be
equal to the average (mean) of the valuations determined by the two investment banks.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(e)	 	The Parties shall use their best efforts to obtain all governmental and
other approvals and make all notifications necessary to complete the Deadlock Sale.
The Deadlock Sale shall be completed within twenty (20) business days after
determination of the fair market value for Indiana’s shares as described above
(whether by investment banks or by agreement of the Parties) or, if all necessary
approvals are not obtained or if California has insufficient funds to acquire such
equity interest in the JV in a Deadlock Sale by such date, within ten (10) business
days after the receipt of all such approvals or expiration of an additional ninety
(90) day grace period during which California may raise additional funding. Upon
completion of the Deadlock Sale, all of the JV equity interest owned by Indiana shall
be transferred to California, free and clear of all Encumbrances, and California shall
pay the purchase price to Indiana in lawful currency of the United States by wire
transfer of immediately available funds.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	28.3	 	 	During the process of the Deadlock Sale, the Parties and the JV	 	 

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	Article	 	Description	 	 
	 	 	 
	 

	 	 	 	 	 	 	 	shall use their best efforts to continue to operate the JV in the ordinary course of business.
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	29	 	Withdrawals;
Winding
Up, Liquidation
and
Dissolution	 	 	29.1	 	 	No Party shall withdraw from the JV or take any action to dissolve,
terminate or liquidate the JV or to require apportionment or appraisal of the JV or
any of its assets except as expressly permitted by the terms of the Definitive
Transaction Documents concerning the JV, and each Party shall waive any rights to take
such actions under applicable law.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	29.2	 	 	The JV shall dissolve upon (a) the written agreement of both Parties or
(b) a termination of the JV.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	29.3	 	 	Upon dissolution of the JV, all the business and affairs of the JV will
be promptly liquidated and wound up and the remaining assets of the JV shall be
distributed to the owners of the JV in accordance with their ownership percentages.	 	 
	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	30	 	Termination	 	 	30.1	 	 	The JV shall terminate if one of the following events shall have
occurred:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	•
	 	the written agreement of all shareholders of the JV;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	•
	 	the expiration of the Term of the JV;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	•
	 	the sale of all or substantially all of the assets of the JV;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	•
	 	the dissolution of the JV; or	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	•
	 	at the election of a Party, if the other Party enters into bankruptcy,
insolvency, liquidation or similar creditor protection.	 	 
	 
	 	 	 	 	 	30.2	 	 	Following the date of such termination (the “Termination Date”), the JV
shall promptly cease operations and wind up its business in accordance with Section 29.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	31	 	Sale Upon

Material

Breach	 	 	31.1	 	 	Upon a material breach by either Party of the terms of any Definitive
Transaction Documents concerning the JV that materially impedes in the conduct of the
JV Business by the JV which is not cured within a period of two (2) months following
notice of such breach to such Party (a “Triggering Event”), the other Party (the
“Non-Triggering Party”) shall at its sole discretion have the right to buy all of the
equity interest in the JV held by the Party undergoing the Triggering Event and those
held by affiliates of such Party (the “Trigger Purchase”) for 80% of the then fair
market value of shares of the JV in accordance with procedures similar to that for a
Deadlock Sale.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	32	 	Compliance

with Law	 	 	32.1	 	 	The JV shall at all times be in material compliance with applicable
laws. For the avoidance of doubt, the JV shall at all times comply with the
applicable requirements of the U.S. Foreign Corrupt Practices Act (15 U.S.C. §§
78dd-1, et seq.) (“FCPA”) and as well as applicable non-U.S. law implementing the OECD
Convention on Combating Bribery of Foreign Public Officials in International Business
or other non-U.S. anti-bribery conventions and anti-corruption and anti-bribery laws
(collectively, the “anti-bribery laws”); U.S. economic sanctions administered by OFAC;
all U.S. statutory and regulatory requirements and export and import control laws and
regulations related to the export or transfer of	 	 

27

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Article	 	Description	 	 
	 	 	 
	 	 	 	 	 	 	 	 	commodities, software and technology,
including the Arms Export Control Act (22 U.S.C. § 2778), the International Traffic in
Arms Regulations (ITAR) (22 C.F.R. § 120 et seq.), the Export Administration
Regulations (15 C.F.R. § 730 et seq.) and associated executive orders (collectively
the “Export Control Laws”); and anti-boycott laws, regulations and guidelines of the
United States, including Section 999 of the Internal Revenue Code and the regulations
and guidelines issued pursuant thereto and the Export Administration Regulations
administered by the U.S. Department of Commerce, as relating to anti-boycott matters
(the “anti-boycott laws”).	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	32.2	 	 	Without limiting the foregoing, the Parties shall cause the JV and its
subsidiaries (the “JV Group”) to adopt and enforce compliance policies designed to
prevent, and not to engage in, any business relationships or transactions between the
JV Group and (i) any countries targeted by U.S. economic sanctions administered by
OFAC, (ii) any SDN or other entity or individual targeted by the U.S. economic
sanctions administered by OFAC, or any entity or individual directly or indirectly
owned or controlled by any SDN or other person so targeted or (iii) any of the Parties
or their affiliates that would further the activities of those described clauses (i)
and (ii) of the foregoing. In addition, the Parties shall cause the JV Group to adopt
and enforce policies to ensure compliance with (i) the FCPA and the anti-bribery laws
and (ii) all Export Control Laws, especially with respect to the assets contributed to
the JV Group by Indiana and any products, services or technologies that make use of
such contributed assets.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	32.3	 	 	The Parties shall specify further details with respect to the foregoing
in the shareholders’ agreement between the Parties and the Parties shall cause the JV
Group to implement appropriate policies and procedures to ensure compliance with the
foregoing and cause the JV Group to abide by such policies and procedures.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	(E)	 	Refinancing and Credit Facility
	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	1	 	Refinancing	 	 	1.1	 	 	The Parties agree that Indiana’s currently existing US$110.8 million
term A loan shall be refinanced by certain commercial lender(s) procured by California
at terms reasonably satisfactory to both Parties (the “Refinancing”). The refinanced
debt shall be held by Indiana. The Parties acknowledge and agree that the Refinancing
is an integral part of the Transactions to be completed by the Closing and that all
parts of the Transactions shall occur concurrently or simultaneously.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	1.2	 	 	The Parties agree that the principles of the Refinancing shall be as
follows:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(a)	 	The final maturity date shall be no sooner than December 31, 2015;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(b)	 	The interest rate spread shall be tighter than those under the existing
Credit Agreement; and	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(c)	 	The covenants in connection with the long-term financing shall be more
favorable (less stringent) than that under the existing Credit Agreement.	 	 

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	Article	 	Description	 	 
	 	 	 
	 	 	 	 	 	 	 	 	(d)	 	In addition to other customary terms and conditions, the Refinancing
(and the New Credit Facility) will be secured by a first priority lien over
substantially all of Indiana’s assets.	 	 
	 
	 	 	 	 	 	1.3	 	 	The Parties shall negotiate and enter into definitive Refinancing
agreements to be agreed to by the Parties.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	2	 	Credit Facility	 	 	2.1	 	 	The Parties agree that certain commercial lender(s) procured by
California shall arrange and extend to Indiana a new revolving line of credit in the
amount of US$100 million (the “New Credit Facility”), which may be combined with the
Refinancing, at terms reasonably satisfactory to both Parties. The Parties agree that
the principal terms of the New Credit Facility shall be the same as the principal
terms of the Refinancing. The Parties further acknowledge and agree that the New
Credit Facility is an integral part of the Transactions to be completed by the Closing
and that all parts of the Transactions shall occur concurrently or simultaneously.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	2.2	 	 	The Parties shall negotiate and enter into definitive New Credit
Facility agreements to be agreed to by the Parties.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	(F)

	 	Other Terms	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	1	 	Confidentiality	 	 	1.1	 	 	The contents of this Term Sheet are confidential and shall be subject to
the terms of the Non-Disclosure Agreement, dated as of August 7, 2009.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	1.2	 	 	Neither Party shall issue a press release, make an announcement or make
any disclosure relating to the Bridge Financing, the Equity Investment, the JV, the
New Credit Facility and the Refinancing, this Term Sheet or any matters referred to or
contemplated herein, including the existence of this and the status of the
Transactions, without the express written consent of the other Party, except as may be
required to comply with the requirements of any applicable law, rules or regulations
of any stock exchange upon which the securities of a Party are listed or quoted, in
which case such Party shall, prior to such disclosure, consult with and provide an
opportunity to the other Party to comment on the contents of such disclosure.
Notwithstanding the foregoing, the Parties hereby agree that the contents of this Term
Sheet and the matters referred to or contemplated herein may be provided to and
discussed with CFIUS and any other governmental entity in furtherance of seeking
Transaction approvals.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	2	 	Representations
and Warranties	 	 	2.1	 	 	Each Party hereby represents and warrants that:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(a)	 	it is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(b)	 	it has the requisite corporate power and has been duly authorized to
enter into this Term Sheet;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(c)	 	no consent, approval, license, permit, order, waiver, authorization,

registration, declaration, notice or filing	 	 

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	Article	 	Description	 	 
	 	 	 
	 	 	 	 	 	 	 	 	 	 	(“Consent”) is required to be obtained by
it from, or to be given by it, or made by it with any governmental authority or any
other Person in connection with the execution, delivery and performance by it of this
Term Sheet, except for certain regulatory and corporate approvals and third party
consents listed on Schedule (F)(2.1)(c) and no Consent is required for the
consummation of the Transactions, other than (i) the review of the Transactions by
CFIUS under Exon-Florio, (ii) filings required pursuant to the U.S. Hart-Scott-Rodino
Antitrust Improvements Act of 1976, if any, and (iii) applicable PRC government
approvals in connection with Transactions and such other Consents as may be identified
by the Parties;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(d)	 	the execution, delivery and performance of this Term Sheet by it and the
consummation of the transactions contemplated hereby does not and will not (i)
violate, conflict with or result in the breach of any provision of its organizational
or governance documents; (ii) in any material respect, conflict with or violate any
Law applicable to it or any of its material assets or properties; or (iii) in any
material respect, conflict with, or result in a violation or breach of or constitute a
default under, any material contract to which it is a party or by which its assets,
rights and properties are bound;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(e)	 	there are no material undisclosed liabilities whether contingent or
fixed relating to such Party or to the JV Business except as that has been disclosed
to the other Party in writing prior to the signing of this Term Sheet; and	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(f)	 	no regulatory investigation or other legal proceeding (other than those
arising from the Transactions) against any Party shall have been initiated or
threatened against such Party.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	2.2	 	 	Indiana hereby further represents and warrants: (i) Schedule (F)(2.2)
contains a complete and accurate list of export classifications and export licenses
for the products of each of the Indiana group companies that are to be contributed to
the JV Group and that are to be retained by Indiana for the conduct of its business;
(ii) none of the Indiana group companies provides any products or services to the
United States Government (including any department, agency, committee, or other body
thereof); (iv) none of the Indiana group companies produces or trades in: (A) defense
articles and defense services, and related technical data covered by the United States
Munitions List (USML), which is set forth in the ITAR, or any other article or service
covered in the ITAR; (B) articles and services for which commodity jurisdiction
requests under 22 C.F.R. § 120.4 are pending; (C) products and technology subject to
export authorization administered by the Department of Energy (10 C.F.R. part 810) or
export licensing requirements administered by the Nuclear Regulatory Commission (10
C.F.R. part 110); or (D) Select Agents and Toxins (7 C.F.R. part 331; 9 C.F.R. part
121; and 42 C.F.R. part 73); (v) each of the Indiana group companies is, and has at
all times been, in	 	 

30

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Article	 	Description	 	 
	 	 	 
	 	 	 	 	 	 	 	 	compliance with all statutory and regulatory requirements under the
FCPA, as well as any applicable anti-bribery laws in each jurisdiction in which such
Indiana group company operates and, in each case, is without notice of violation
thereof; (vi) (A) no company of the Indiana group companies or any of its affiliates
does business with, sponsors, or provides assistance or support to, the government of,
or any person located in, any country (including Cuba, Iran, Myanmar (Burma), North
Korea, Syria or Sudan), or with any SDN or other person or entity targeted by any U.S.
economic sanctions administered by OFAC; (B) no company of the Indiana group companies
is owned or controlled (within the meaning of the Foreign Assets Control Regulations
(31 C.F.R. §§ 500-598) (“OFAC regulations”)) by any targeted government or SDN or
other targeted person or entity; (C) the proceeds of the Transactions received by
Indiana will not be used (directly or indirectly) to fund any operations in, finance
any investments or activities in or make any payments to, any targeted country, or to
fund, finance or make any payments to any targeted person or entity; and (D) all of
the companies of the Indiana group companies are, and have at all times been, in
compliance in all respects with applicable provisions of the OFAC regulations; (vii)
all of the Indiana group companies are, and have at all times been, without notice of
violation in any material respect of and in compliance in all material respects with
the anti-boycott laws including all reporting requirements, and is not a party to any
agreement requiring it to participate in or cooperate with the Arab boycott of Israel,
including any agreement to provide boycott-related information or to refuse to do any
business with any person or entity for boycott-related reasons; and (viii) all of the
Indiana group companies are, and have at all times been, in compliance with all Export
Control Laws and no Indiana group company has sold, exported, re-exported,
transferred, diverted or otherwise disposed of any products, software or technology
(including products derived from or based on such technology) to any destination or
person prohibited by the Export Control Laws, without obtaining prior authorization
from the competent government authorities as may be required by those laws.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	2.3	 	 	Indiana, as a publicly listed company in the United States, further
represents and warrants that it complies with all applicable United States securities
laws and regulations and NYSE rules in all material respects.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	3	 	Exclusivity	 	 	3.1	 	 	During the period from the execution of this Term Sheet to the Outside
Date (the “Exclusivity Period”), Indiana shall not and shall cause its subsidiaries,
affiliates and representatives not to, directly or indirectly, initiate, solicit,
encourage or otherwise facilitate any inquiries or the making by any third party of
any proposal or offer with respect to any transaction contemplating any acquisition or
purchase of any equity of Indiana or any of its businesses (or joint venture, pledge,
transfer or disposal of any material assets), any merger or other business combination
involving Indiana or any strategic arrangement with respect to contemplating a sale,
joint venture, pledge, transfer or disposal of any material assets to be used in the
JV Business (each, a “Restricted Transaction”).	 	 

31

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Article	 	Description	 	 
	 	 	 
	 	 	 	 	 	3.2	 	 	In addition, during the Exclusivity Period, Indiana shall not and shall
cause its subsidiaries, affiliates and representatives not to, directly or indirectly,
engage in any negotiations concerning, or provide any confidential information or data
to, or have any discussions with, any person relating to a Restricted Transaction, or
otherwise knowingly facilitate any effort or attempt to make or implement any
Restricted Transaction. During the Exclusivity Period, Indiana shall and shall cause
its subsidiaries, affiliates and representatives to promptly inform California of any
communications or attempts at communications by any third party relating to a
Restricted Transaction. Parties may extend such Exclusivity Period by mutual
agreement in writing.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	3.3	 	 	During the Exclusivity Period, California shall not and shall cause its
subsidiaries, affiliates and representatives not to, directly or indirectly, initiate,
solicit, encourage or otherwise facilitate any inquiries or the making by any third
party of any proposal or offer with respect to any transaction relating to the JV
Business that would be inconsistent or interfere with the transactions contemplated by
the Parties in this Term Sheet (a, “California Restricted Transaction”).	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	3.4	 	 	In addition, during the Exclusivity Period, California shall not and
shall cause its subsidiaries, affiliates and representatives not to, directly or
indirectly, engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to a
California Restricted Transaction, or otherwise knowingly facilitate any effort or
attempt to make or implement any California Restricted Transaction. During the
Exclusivity Period, California shall and shall cause its subsidiaries, affiliates and
representatives to promptly inform Indiana of any communications or attempts at
communications by any third party relating to a California Restricted Transaction.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	4	 	Conditions to Entry
into Definitive
Transaction
Documents	 	 	4.1	 	 	Each Party shall negotiate in good faith and use its best efforts to
negotiate and enter into, within the Exclusivity Period, the Definitive Transaction
Documents embodying the terms set forth in this Term Sheet and other terms as both
Parties may subsequently agree.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	4.2	 	 	Each Party’s obligations to enter into Definitive Transaction Documents
shall be conditional upon (“Mutual Signing Conditions”):	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(a)	 	no indication or statement from the relevant regulatory agencies that
the Transactions would not be approved, would be objected to or would be sanctioned or
otherwise be required to be altered from the terms contemplated herein or that
California’s business and operations would be required to be altered;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(b)	 	no regulatory order prohibiting the transactions contemplated by the
Definitive Transaction Documents shall have been issued by any governmental agency;
and	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(c)	 	no assignment for the benefit of creditors or bona fide proceeding been
instituted by or against the other Party or its subsidiaries seeking to adjudicate any
of them as	 	 

32

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Article	 	Description	 	 
	 	 	 
	 

	 	 	 	 	 	 	 	 	 	bankrupt or insolvent or seeking their liquidation, winding up or
reorganization or any other relief from creditors being sought; and
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(d)	 	no fact or circumstance arising during such Party’s due diligence
investigation of the other Party, which findings lead to the discovery of any material
issues in the other Party’s JV Business and, in the case of Indiana, Indiana’s
financial condition, business and operations that materially changes such Party’s
reasonable expectations with respect to the other Party’s relevant business, prospects
and results of operations from that prevailing as of the date of this Term Sheet;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	4.3	 	 	California’s obligations to enter into Definitive Transaction Documents
shall be further conditional upon (“California Signing Conditions”):	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(a)	 	no material adverse event or condition occurring that has resulted in a
material adverse effect as to Indiana, including its business, prospects and results
of operations;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(b)	 	no notice of default being issued and no declaration of acceleration by
any holders of any material liability of Indiana and its subsidiaries (including,
without limitation, the Bridge Financing) or any default or material breach under such
material liability;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(c)	 	no material breach by Indiana of any of its representations or
warranties as set forth in Article (F)(2) or the obligations under this Term Sheet,
except for such breaches which have been cured or compensated by Indiana within 20
business days following their discovery; and	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(d)	 	the representations and warranties of Indiana set forth in Article
(F)(2) continuing to be true and correct in all material respects as if such
representations and warranties had been made on such subsequent dates until the
Definitive Transaction Documents are entered into, except for such breaches which have
been cured or compensated by Indiana within 20 business days following their
discovery.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	4.4	 	 	Indiana’s obligations to enter into Definitive Transaction Documents
shall be further conditional upon (“Indiana Signing Conditions”):	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(a)	 	no material adverse event or condition occurring that has resulted in a
material adverse effect as to California’s ability to effect the Transactions,
including its business, prospects and results of operations of its JV Business; and	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(b)	 	no material breach by California of any of its representations or
warranties as set forth in Article (F)(2) or the obligations under this Term Sheet,
except for such breaches which have been cured or compensated by California within 20
business days following their discovery; and	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(c)	 	the representations and warranties of California set forth in	 	 

33

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Article	 	Description	 	 
	 	 	 
	 	 	 	 	 	 	 	 	 	 	Article
(F)(2) continuing to be true and correct in all material respects as if such
representations and warranties had been made on such subsequent dates until the
Definitive Transaction Documents are entered into, except for such breaches which have
been cured or compensated by California within 20 business days following their
discovery.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	5	 	Termination
of TermSheet;
Fees Payable	 	 	5.1	 	 	Each Party’s obligations under this Term Sheet may be terminated at any
time prior to the entering into of Definitive Transaction Documents:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(a)	 	by written agreement of the Parties;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(b)	 	by either Party by giving notice of such termination to the other Party
if any of the Mutual Signing Conditions for the entering into of Definitive
Transaction Documents have not been or are not capable of being satisfied as of the
Outside Date (or earlier if it becomes apparent any such Mutual Signing Condition is
not capable of being satisfied);	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(c)	 	by California if any of the California Signing Conditions have not been
satisfied as of the Outside Date (or earlier if it becomes apparent that any such
California Signing Condition is not capable of being satisfied), subject to a cure
period of twenty (20) business days; or	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(d)	 	by Indiana if any of the Indiana Signing Conditions have not been
satisfied as of the Outside Date (or earlier if it becomes apparent that any such
Indiana Signing Condition is not capable of being satisfied), subject to a cure period
of twenty (20) business days.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	5.2	 	 	If this Term Sheet shall be terminated in accordance with Article
(F)(5.1) immediately above, a fee of US$5 million payable by wire transfer in
immediately available funds shall be made within ten (10) business days as follows:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(a)	 	No amounts shall be payable by either Party if this Term Sheet is
terminated in accordance with Article (F)(5.1)(a) or Article (F)(5.1)(b);	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(b)	 	Indiana shall pay to California such US$5 million in the event that
California terminates this Term Sheet pursuant to Article (F)(5.1)(c);	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(c)	 	California shall pay to Indiana such US$5 million in the event that
Indiana terminates this Term Sheet pursuant to Article (F)(5.1)(d).	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	5.3	 	 	The Definitive Transaction Documents shall also provide for an
appropriate reciprocal break-up fee in the event that a Party does not comply with its
obligations to complete the Transactions in accordance with the Definitive Transaction
Documents.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	6	 	Conditions to
the Closing	 	 	6.1	 	 	The closing of the Transactions shall be subject to customary closing
conditions to be set forth in the Transaction Documents, including, without
limitation:	 	 

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	Article	 	Description	 	 
	 	 	 
	 	 	 	 	 	 	 	 	(a)	 	obtaining regulatory approvals required under applicable laws,
regulations and required third-party consents;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(b)	 	the prior or simultaneous closing of all parts of the Transactions;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(c)	 	either (i) CFIUS shall have provided notice to the Parties to the effect
that a review or investigation of the Transactions has been concluded, and that a
determination has been made that there are no unresolved U.S. national security
concerns or (ii) CFIUS shall have provided notice to the Parties to the effect that a
review or investigation of the Transactions has been concluded, and that a
determination has been made that mitigation efforts are necessary to resolve the U.S.
national security concerns of CFIUS and California and Indiana shall have agreed on
such mitigation efforts and entered into such agreements that permit CFIUS to
determine that there are no unresolved U.S. national security concerns or (iii) the
period of time for any applicable review process by CFIUS and any subsequent
Presidential decision whether to take action under Exon-Florio shall have expired, and
the President of the United States shall not have taken action to block or prevent the
consummation of the Transactions under Exon-Florio on the basis that they threaten to
impair the national security of the United States or otherwise;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(d)	 	obtaining all required import and export licenses in connection with the
JV Business and the Equity Investment; and	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(e)	 	with respect to the Equity Investment:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	(i)
	 	the filing of the application for listing of the shares to be issued
under the Equity Investment on the NYSE;	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(f)	 	with respect to the JV:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	(i)
	 	the formation of Holdco and satisfactory completion of the transactions
contemplated in Article (D)2) and satisfactory completion of the policies, procedures
and arrangements contemplated in Article (D)(32); and	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(g)	 	other customary closing conditions.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	7	 	Miscellaneous	 	 	7.1	 	 	Subject to Article (G), this Term Sheet shall be binding on the Parties.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	7.2	 	 	Use of the word “including” in this Term Sheet shall mean “including
without limitation”.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	7.3	 	 	No person not a party to this Term Sheet shall have any right under the
Contracts (Rights of Third Parties) Act 1999 to enforce any provision of this Term
Sheet.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	8	 	No Third

Beneficiaries	 	 	8.1	 	 	This Term Sheet shall inure to the benefit of and be binding (subject to
Article (G)) upon the parties hereto and their respective successors. Nothing in this
Term Sheet, express or implied, is	 	 

35

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Article	 	Description	 	 
	 	 	 
	 	 	 	 	 	 	 	 	intended to confer upon any person other than
California or Indiana or their respective successors, any rights or remedies under or
by reason of this Term Sheet.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	9	 	Severability	 	 	9.1	 	 	In case any provision (or part of a provision) of this Term Sheet shall
be invalid, illegal, unenforceable or otherwise cannot be given legal effect, the
validity, legality, enforceability and legal effectiveness of the remaining provisions
(or remaining part of the affected provision) shall not in any way be affected or
impaired thereby.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	10	 	No Assignment	 	 	10.1	 	 	No party to this Term Sheet may, whether by contract, operation of law
or otherwise, assign any of its rights or delegate any of its obligations under this
Term Sheet without the prior written consent of the other parties hereto, and any
purported assignment without such consent shall be void and without effect, it being
understood that California’s obligations with respect to Bridge Financing, Refinancing
and New Credit Facility may be undertaken by one or more lenders arranged by
California.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	11	 	Governing Law	 	 	11.1	 	 	This Term Sheet shall be governed by the laws of England and Wales
without regard to the conflict of law principles thereof.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	12	 	Arbitration	 	 	12.1	 	 	All disputes in connection with either this Term Sheet, any Transaction
Documents or other documents subsequently executed, or the breach, termination,
interpretation or validity thereof, shall be finally settled by the Hong Kong
International Arbitration Centre (the “HKIAC”) pursuant to UNCITRAL Rules, with
California, on the one hand, being entitled to designate one arbitrator, and with
Indiana, on the other hand, being entitled to designate one arbitrator, while the
third arbitrator will be selected by agreement between the two designated arbitrators
or, failing such agreement within ten (10) calendar days of initial consultation
between the two arbitrators, by the HKIAC pursuant to its arbitration rules.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	12.2	 	 	If any Party fails to designate its arbitrator within twenty (20)
calendar days after the designation of the first of the three arbitrators, the HKIAC
shall have the authority to designate any person whose interests are neutral to the
Parties as the second of the three arbitrators.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	12.3	 	 	The arbitration shall be conducted in both Chinese and English.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	(G)

	 	Effectiveness	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	1	 	Effective of
Term Sheet	 	 	1.1	 	 	Except for Article (B), Article (F) and this Article (G), which shall be
effective upon the execution of this Term Sheet, other provisions of this Term Sheet
shall be subject to and conditioned upon the receipt of approval of this Term Sheet
from each of the National Development and Reform Commission of the PRC and the
Ministry of Commerce of the PRC.	 	 

[Remainder of page intentionally left blank]

36

 

IN WITNESS WHEREOF, each of the Parties has caused this Term Sheet to be executed by a duly
authorized officer as of October 23, 2009.

	 	 	 	 	 
	 	BGP INC., CHINA NATIONAL PETROLEUM CORPORATION

 	 
	 	By:  	/s/ Wang Tiejun
 	 
	 	 	Name:  	Wang Tiejun 	 
	 	 	Title:  	President 	 
	 
	 	ION GEOPHYSICAL CORPORATION

 	 
	 	By:  	/s/ Robert P. Peebler
 	 
	 	 	Name:  	Robert P. Peebler 	 
	 	 	Title:  	Chief Executive Officer 	 
	 

-37-

 

List of Schedules

	 	1.	 	Schedule (D)(2.3)(a): Tangible and intangible assets to be transferred by Indiana to
Holdco.
	 
	 	2.	 	Schedule (D)(2.3)(b)(i): Transferred Indiana JV Business IP.
	 
	 	3.	 	Schedule (D)(2.3)(b)(iii): Indiana JV Business IP not constituting the Transferred
Indiana JV Business IP.
	 
	 	4.	 	Schedule (D)(2.3)(b)(iv): Intellectual Property Contracts.
	 
	 	5.	 	Schedule (D)(2.3)(c)(iv): Indiana JV Contracts and their arrangements.
	 
	 	6.	 	Schedule (D)(2.4): Indiana Excluded Assets.
	 
	 	7.	 	Schedule (D)(3.1)(b): California Transferred Assets.
	 
	 	8.	 	Schedule (D)(6.2)(b): Companies in which California or Indiana is a minority owner and
whose businesses are parts of the Excluded Business.
	 
	 	9.	 	Schedule (F)(2.1)(c): Certain regulatory and corporate approvals and third party
consents.
	 
	 	10.	 	Schedule (F)(2.2): Export classification.

-38-exv10w53

EXHIBIT 10.53

 

Warrant Issuance Agreement

Dated as of October 23, 2009

between

ION Geophysical Corporation,

and

BGP Inc., China National Petroleum Corporation

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	Recitals 
	 	 	1	 
	 
	 	 	 	 
	Article I

Issuance; Closing
	 
	 	 	 	 
	1.1 Issuance
	 	 	1	 
	1.2 Terms of Warrant
	 	 	1	 
	1.3 Closing
	 	 	1	 
	1.4 Interpretation
	 	 	3	 
	 
	 	 	 	 
	Article II

Representations and Warranties
	 
	 	 	 	 
	2.1 Disclosure
	 	 	3	 
	2.2 Representations and Warranties of Company
	 	 	3	 
	2.3 Representations and Warranties of Investor
	 	 	7	 
	 
	 	 	 	 
	Article III

Covenants
	 
	 	 	 	 
	3.1 Certain Actions by Company
	 	 	8	 
	3.2 SEC Reports; NYSE Listing; Registration Statement
	 	 	8	 
	3.3 Use of Proceeds
	 	 	8	 
	3.4 Sufficiency of Common Shares
	 	 	8	 
	3.5 Change of Control
	 	 	9	 
	 
	 	 	 	 
	Article IV

Additional Agreements
	 
	 	 	 	 
	4.1 Expenses
	 	 	9	 
	4.2 Best Efforts
	 	 	9	 
	4.3 Transfers
	 	 	9	 
	4.4 Investor Filings
	 	 	10	 
	 
	 	 	 	 
	Article V

Indemnity
	 
	 	 	 	 
	5.1 Indemnification of Investor
	 	 	10	 
	5.2 Conduct of Claims
	 	 	10	 

- i -

 

	 	 	 	 	 
	 	 	Page	 
	Article VI

Miscellaneous
	6.1 Termination
	 	 	11	 
	6.2 Amendment
	 	 	11	 
	6.3 Waiver of Conditions
	 	 	11	 
	6.4 Counterparts and Facsimile
	 	 	11	 
	6.5 Governing Law; Submission to Jurisdiction, Etc.
	 	 	12	 
	6.6 Notices
	 	 	12	 
	6.7 Entire
Agreement, Etc.
	 	 	13	 
	6.8 Definitions of “Subsidiary”, “affiliate” and “person”
	 	 	13	 
	6.9 Assignment
	 	 	13	 
	6.10 Severability
	 	 	13	 
	6.11 No Third Party Beneficiaries
	 	 	14	 
	6.12 Further Assurances
	 	 	14	 

- ii -

 

LIST OF ANNEXES AND SCHEDULES

	 	 	 
	ANNEX A:

	 	FORM OF WARRANT
	 
	 	 
	ANNEX B:

	 	FORM OF REGISTRATION RIGHTS AGREEMENT
	 
	 	 
	ANNEX C:

	 	CHIEF FINANCIAL OFFICER’S CERTIFICATE
	 
	 	 
	ANNEX D:

	 	FORM OF LEGAL OPINION
	 
	 	 
	SCHEDULE 2.2(b):

	 	COMPANY’S CAPITAL STRUCTURE
	 
	 	 
	SCHEDULE 4.3(a):

	 	PERSONS TO WHOM WARRANT SHALL NOT BE TRANSFERRED

- iii -

 

INDEX OF DEFINED TERMS

	 	 	 
	 	 	Location of
	        
        Term	 	Definition
	affiliate
	 	6.8(b)
	Agreement
	 	Preamble
	Bankruptcy Exceptions
	 	2.2(d)(i)
	Beneficial Ownership
	 	3.5
	Board
	 	2.2(l)
	Bridge Funding
	 	Recital A
	Business Day
	 	1.4
	Change of Control
	 	3.5
	Closing
	 	1.3(a)
	Closing Date
	 	1.3(a)
	Commission
	 	2.1(a)
	Common Shares
	 	Recital B
	Company
	 	Preamble
	Company’s Knowledge
	 	2.2(l)
	control
	 	6.8(b)
	Convertible Notes
	 	1.3(c)
	Credit Agreement
	 	Recital A
	Exchange Act
	 	2.1(a)
	GAAP
	 	2.2(e)(i)
	Governmental Entities
	 	2.2(d)(iii)
	HKIAC
	 	6.5(b)
	Indemnified Party
	 	5.1
	Indemnifying Party
	 	5.2(a)
	Investor
	 	Preamble
	Investor Material Adverse Effect
	 	1.3(c)
	ION International
	 	Recital A
	Issuance
	 	1.1
	Material Adverse Effect
	 	1.3(d)(i)
	New Lender
	 	Recital A
	NYSE
	 	2.2(k)
	person
	 	6.8(c)
	Previously Disclosed
	 	2.1(a)
	Proceeding
	 	5.1
	Registration Rights Agreement
	 	Recital D
	SEC Reports
	 	2.1(a)
	Securities Act
	 	Recital C
	Subsidiary
	 	6.8(a)
	Transaction Documents
	 	2.1(b)
	Transaction Term Sheet
	 	2.2(l)
	Transfer
	 	4.3(a)
	Warrant
	 	Recital B
	Warrant Shares
	 	Recital B

- iv -

 

          This Warrant Issuance Agreement, dated October 23, 2009 (this “Agreement”),
between ION Geophysical Corporation, a corporation organized under the laws of the State of
Delaware (the “Company”), and BGP Inc., China National Petroleum Corporation, a company
organized under the laws of the People’s Republic of China (the “Investor”).

Recitals:

WHEREAS:

          A. The Investor has (i) arranged for Bank of China, New York Branch (the “New Lender”)
to provide certain financing to the Company and (ii) provided assurance to the New Lender for the
benefit of the Company ((i) and (ii) collectively, the “Bridge Funding”) as evidenced in
(x) the Amended and Restated Credit Agreement dated as of July 3, 2008 (as amended, modified and
supplemented from time to time (including by the Sixth Amendment to the Amended and Restated Credit
Agreement), the “Credit Agreement”), among the Company, ION International S.À.R.L., a
Luxembourg private limited company (société à responsabilité limitée) (“ION
International”), the guarantors, HSBC Bank USA, N.A., ABN AMRO Incorporated, as Joint Lead
Arranger and Joint Bookrunner and the lenders named therein and (y) an agreement between the
Investor and the New Lender;

          B. In consideration for the Bridge Funding, the Company agrees to issue to the Investor a
warrant (the “Warrant”), in substantially the form of warrant attached hereto as Annex
A, to purchase such number of shares of the Common Stock of the Company, par value US$0.01 per
share (“Common Shares”), as specified in the Warrant (such Common Shares issuable pursuant
to the Warrant, the “Warrant Shares”);

          C. The Warrant shall be issued to the Investor without being registered under the United
States Securities Act of 1933, as amended (the “Securities Act”), in reliance upon
exemptions from the registration requirements thereunder; and

          D. Resales of the Warrant Shares shall be registered under the Securities Act, pursuant to a
Registration Rights Agreement (the “Registration Rights Agreement”) in substantially the
form attached hereto as Annex B.

          NOW, THEREFORE, in consideration of the premises, and of the representations, warranties,
covenants and agreements set forth herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:

Article I

Issuance; Closing

          1.1 Issuance. On the terms and subject to the conditions set forth in this Agreement,
the Company agrees to issue to the Investor at the Closing, the Warrant (the “Issuance”).

          1.2 Terms of Warrant. After the Issuance, the rights and obligations of the holder of
the Warrant shall be governed by the terms set forth in the Warrant.

          1.3 Closing.

          (a) On the terms and subject to the conditions set forth in this Agreement, the closing
of the Issuance (the “Closing”) will take place at the offices of Sullivan & Cromwell
LLP, 28th Floor, Nine Queen’s Road Central, Hong Kong, at 9:30 p.m., Hong Kong
time, October 27, 2009

 

 

or as soon as practicable thereafter, or at such other place, time and date as shall be
agreed between the Company and the Investor. The time and date on which the Closing occurs
is referred to in this Agreement as the “Closing Date”.

          (b) Subject to the fulfillment or waiver of the conditions to the Closing in this
Section 1.3, at the Closing, the Company will deliver the Warrant, as evidenced by one or
more certificates dated the Closing Date and bearing appropriate legends as hereinafter
provided for, in consideration for the Bridge Funding.

          (c) The obligation of the Company to consummate the Closing is also subject to the
fulfillment (or waiver by the Company) at or prior to the Closing of the following
conditions: (i) the representations and warranties of the Investor set forth in this
Agreement shall be true and correct as though made on and as of the Closing Date (other than
representations and warranties that by their terms speak as of another date, which
representations and warranties shall be true and correct as of such date), except to the
extent that the failure of such representations and warranties to be so true and correct,
individually or in the aggregate, does not have and would not be reasonably likely to have an
Investor Material Adverse Effect and (ii) the simultaneous execution of the documentation for
the Bridge Funding (including, but not limited to, certain convertible promissory note(s)
issued by the Company and/or ION International pursuant to the Credit Agreement (such
convertible promissory notes issued upon the execution of the documentation for the Bridge
Funding and other similar convertible promissory notes issued after such time collectively,
the “Convertible Notes”)). “Investor Material Adverse Effect” means a
material adverse effect on the ability of the Investor to consummate the Issuance and the
other transactions contemplated by the Transaction Documents.

          (d) The obligation of the Investor to consummate the Closing is also subject to the
fulfillment (or waiver by the Investor) at or prior to the Closing of each of the following
conditions:

     (i) the representations and warranties of the Company set forth in this Agreement
shall be true and correct as though made on and as of the Closing Date (other than
representations and warranties that by their terms speak as of another date, which
representations and warranties shall be true and correct as of such date), except to the
extent that the failure of such representations and warranties to be so true and correct,
individually or in the aggregate, does not have and would not be reasonably likely to have
a Material Adverse Effect. “Material Adverse Effect” means a material adverse
effect on (i) the business, results of operation or financial condition of the Company and
its consolidated Subsidiaries taken as a whole or (ii) the ability of the Company to timely
consummate the Issuance and the other transactions contemplated by the Transaction
Documents;

     (ii) the Company shall have duly executed and delivered the Warrant in substantially
the form attached hereto as Annex A to the Investor or its designee(s);

     (iii) the Company shall have duly executed and delivered to the Investor or its
designee(s) the Registration Rights Agreement in substantially the form attached hereto as
Annex B;

     (iv) the chief financial officer of the Company shall have duly executed and delivered
the certificate, dated as of the Closing Date, certifying the representation and warranties
of the Company in Section 2.2(l) and substantially in the form attached hereto as Annex
C; and

2

 

     (v) the company shall, or shall cause its legal counsel to, have delivered to the
Investor a customary validity and “no registration” opinion, dated as of the Closing Date,
reasonably satisfactory to the Investor, in substantially the form attached hereto as
Annex D.

          1.4 Interpretation. When a reference is made in this Agreement to “Recitals”,
“Articles”, “Sections” or “Annexes”, such reference shall be to a Recital, Article or Section of,
or Annex to, this Agreement unless otherwise indicated. The terms defined in the singular have a
comparable meaning when used in the plural, and vice versa. References to “herein”, “hereof”,
“hereunder” and the like refer to this Agreement as a whole and not to any particular section or
provision, unless the context requires otherwise. The table of contents and headings contained in
this Agreement are for reference purposes only and are not part of this Agreement. Whenever the
words “include”, “includes” or “including” are used in this Agreement, they shall be deemed
followed by the words “without limitation”. No rule of construction against the draftsperson shall
be applied in connection with the interpretation or enforcement of this Agreement, as this
Agreement is the product of negotiation between sophisticated parties advised by counsel. All
references to “US$” mean the lawful currency of the United States of America. Except as expressly
stated in this Agreement, all references to any statute, rule or regulation are to the statute,
rule or regulation as amended, modified, supplemented or replaced from time to time (and, in the
case of any statute, include any rules and regulations promulgated under such statute) and to any
section of any statute, rule or regulation include any successor to the section. References to a
“Business Day” shall mean any day except Saturday, Sunday and any day which shall be a
legal holiday or a day on which banking institutions in the City of New York, New York, United
States of America, or Beijing, People’s Republic of China generally are authorized or required by
law or other governmental actions to close.

Article II

Representations and Warranties

          2.1 Disclosure.

          (a) “Previously Disclosed” means information set forth or incorporated in the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 or its other
reports and forms filed with the United States Securities and Exchange Commission (the
“Commission”) (such reports and forms, the “SEC Reports”) under
Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) on or after December 31, 2008 but prior to the date hereof.

          (b) For purposes of this Agreement, the term “Transaction Documents” refers
collectively to this Agreement, the Registration Rights Agreement and the Warrant, in each
case, as amended, modified or supplemented from time to time in accordance with their
respective terms.

          2.2 Representations and Warranties of Company. Except as Previously Disclosed, the
Company represents and warrants to the Investor that as of the date hereof:

          (a) Organization, Authority and Subsidiaries. The Company has been duly
incorporated and is validly existing as a corporation in good standing under the laws of the
State of Delaware, with corporate power and authority to own its properties and conduct its
business in all material respects as currently conducted, and, has been duly qualified as a
foreign corporation for the transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties, or conducts any business so as
to require such qualification (except where the failure to be so qualified would not be
reasonably likely to have a Material Adverse Effect). Each

3

 

Subsidiary of the Company has been duly organized and is validly existing in good
standing under the laws of its jurisdiction of organization.

          (b) Capitalization. Set forth in Schedule 2.2(b) is the Company’s capital
structure immediately prior to the Closing Date. All of the outstanding Common Shares are,
and all shares of capital stock which may be issued pursuant to outstanding stock options,
warrants or other convertible rights will be, when issued and paid for in accordance with the
respective terms thereof, duly authorized, validly issued, fully paid and non-assessable,
free of any preemptive rights in respect thereof and issued in compliance with all applicable
state and federal laws concerning issuance of securities. As of the date hereof, except as
set forth in Schedule 2.2(b), and except for Common Shares or other securities issued upon
conversion, exchange, exercise or purchase associated with the securities, options, warrants,
rights and other instruments referenced in Schedule 2.2(b), no shares of capital stock or
other voting securities of the Company were outstanding, no equity equivalents, interests in
the ownership or earnings of the Company or other similar rights were outstanding, and there
were no existing options, warrants, calls, subscriptions or other rights or agreements or
commitments relating to the capital stock of the Company or any of its Subsidiaries or
obligating the Company or any of its Subsidiaries to issue, transfer, sell or redeem any
 shares of capital stock, or other equity interest in, the Company or any of its Subsidiaries
or obligating the Company or any of its Subsidiaries to grant, extend or enter into any such
option, warrant, call, subscription or other right, agreement or commitment.

          (c) Warrant and Warrant Shares. The Warrant has been duly authorized and, when
executed and delivered as contemplated hereby, will constitute a valid and legally binding
obligation of the Company in accordance with its terms, and the Warrant Shares have been duly
authorized and when issued upon exercise of the Warrant against payment therefor in
accordance with the terms of the Warrant will be validly issued, fully paid and
non-assessable.

          (d) Authorization, Enforceability.

     (i) The Company has the corporate power and authority to execute and deliver this
Agreement and the other Transaction Documents and to carry out its obligations hereunder
and thereunder. The execution, delivery and performance by the Company of this Agreement
and the other Transaction Documents to which it is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Company, and no further approval or authorization is
required on the part of the Company in connection herewith and therewith. This Agreement
and the other Transaction Documents are or will be valid and binding obligations of the
Company enforceable against the Company in accordance with their respective terms, except
as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors’ rights generally and general
equitable principles, regardless of whether such enforceability is considered in a
proceeding at law or in equity (“Bankruptcy Exceptions”).

     (ii) The execution, delivery and performance by the Company of this Agreement and the
other Transaction Documents and the consummation of the transactions contemplated hereby
and thereby and compliance by the Company with any of the provisions hereof and thereof,
will not (i) violate, conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration of, or result in the
creation of, any lien, security interest, charge or encumbrance upon any of the properties
or assets of the Company or any Subsidiary under any of the terms, conditions or provisions
of (A) its certificate of incorporation and by-laws or (B) any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement, contract or other instrument or
obligation to

4

 

which the Company or any Subsidiary is a party or by which it or any Subsidiary may be
bound, or to which the Company or any Subsidiary or any of the properties or assets of the
Company or any Subsidiary may be subject, or (ii) violate any law, statute, rule or
regulation or any judgment, ruling, order, writ, injunction, business license, decree or
other regulatory restriction applicable to the Company or any Subsidiary or any of their
respective properties or assets.

     (iii) Except as contemplated in the Transaction Term Sheet, the Warrant and/or the
Convertible Notes, no notice to, filing with, exemption or review by, or authorization,
consent or approval of, any United States of America, People’s Republic of China or other
national, state, provincial, local and other governmental or regulatory authorities
(collectively, “Governmental Entities”), is required to be made or obtained by the
Company in connection with the consummation by the Company of the Issuance.

          (e) Company Financial Statements.

     (i) The consolidated financial statements of the Company and its consolidated
Subsidiaries included or incorporated by reference in the SEC Reports filed prior to the
Closing, present fairly in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates indicated therein and the
consolidated results of their operations for the periods specified therein; and such
financial statements were prepared in conformity with generally accepted accounting
principles in the United States of America (“GAAP”) applied on a consistent basis
(except as may be noted therein).

     (ii) Ernst & Young LLP is an independent registered public accounting firm of the
Company as required by the Exchange Act and the rules and regulations of the Commission and
the Public Company Accounting Oversight Board.

          (f) Reports.

     (i) Since December 31, 2008, the Company has complied in all material respects with
the filing requirements of Sections 13(a) and 15(d) of the Exchange Act.

     (ii) The SEC Reports filed by the Company prior to the Closing, when they became
effective or were filed with the Commission, as the case may be, conformed in all material
respects to the requirements of the Securities Act or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder, and none of such documents, when
they became effective or were filed with the Commission, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances in which they
were made, not misleading.

     (iii) The Company is in compliance with the applicable requirements of the
Sarbanes-Oxley Act of 2002 that are effective as of the date hereof. The financial
statements of the Company included in the SEC Reports comply in all material respects with
applicable accounting requirements and rules and regulations of the Commission with respect
thereto as in effect at the time of filing.

          (g) No Material Adverse Effect. Since the most recent SEC Report, no fact,
circumstance, event, change, occurrence, condition or development has occurred that,
individually or in the aggregate, has had or would be reasonably likely to have a material
adverse effect.

5

 

          (h) Exemption from Registration. An exemption from registration under the
Securities Act (including the exemption under Regulation S, Section 4(2), and/or Regulation D
of the Securities Act) is available for the issuance of the Warrant and the Warrant Shares.

          (i) Solvency. The sum of the assets of the Company, both at a fair valuation
and at present fair salable value, exceeds its liabilities, including contingent liabilities.
The Company has sufficient capital or access to capital with which to conduct its business as
presently conducted and as proposed to be conducted. The Company has not incurred debt, and
does not intend to incur debt, beyond its ability to pay such debt as it matures. For
purposes of this paragraph, “debt” means any liability on a claim, and “claim” means (x) a
right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or
unsecured, or (y) a right to an equitable remedy for breach of performance if such breach
gives rise to a payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.
With respect to any such contingent liabilities, such liabilities are computed at the amount
which, in light of all the facts and circumstances existing at the time, represents the
amount which can reasonably be expected to become an actual or matured liability. In
addition, no assignment for the benefit of creditors or bona fide proceeding has been
instituted by or against the Company or its Subsidiaries seeking to adjudicate any of them as
bankrupt or insolvent or seeking their liquidation, winding up or reorganization and no other
relief from creditors has been sought.

          (j) Form S-3. The Company is eligible to use Form S-3 to register securities
under the Securities Act.

          (k) NYSE. The Company satisfies all continued listing criteria of the New York
Stock Exchange (the “NYSE”) in respect of the Common Shares. No present set of facts
or circumstances will (with the passage of time or the giving of notice or both or neither)
cause any of the Common Shares to be delisted from the NYSE. All of the Warrant Shares will,
when issued, be duly listed and admitted for trading on all of the markets where Common
Shares are traded, including the NYSE.

          (l) Certain Certifications. To the best of the Company’s Knowledge, (i) there
is no current or threatened investigation or proceeding (other than those arising from the
transactions contemplated by the Term Sheet, dated as of October 23, 2009 between the Company
and Investor (the “Transaction Term Sheet”)) against the Company by any Governmental
Entities; (ii) there is no current or threatened shareholder lawsuit against the Company
alleging a violation of fiduciary duties or applicable securities laws (other than those in
existence at the time of the execution of the Transaction Term Sheet and disclosed to the
Investor); (iii) the Company, as a publicly listed company on the NYSE, complies in all
material respects with all applicable U.S. securities laws and regulations and all NYSE
rules; (iv) no representation or warranty by the Company for itself or on behalf of its
Subsidiaries in Section 2.2 of this Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary to make any statement in any such
representation or warranty not misleading; (v) the Company has reserved for issuance, free of
preemptive or similar rights, a sufficient number of shares of authorized and unissued
Warrant Shares to effectuate the exercise of the Warrant at the initial exercise price of
such Warrant and (vi) except as set forth in the SEC Reports, each of the Company and its
Subsidiaries has complied in all material respects with each applicable law, rule or
regulation to which the Company or any such Subsidiary or its respective business,
operations, assets or properties is or has been subject and no event has occurred and no
circumstance exists that constitutes a violation of, conflict with or failure on the part of
the Company or any of its Subsidiaries to comply with, any law, rule or regulation.
“Company’s Knowledge” means the actual knowledge, after due inquiry, of the executive
management and the board of directors (the “Board”) of the Company, as of the date
hereof

6

 

          2.3 Representations and Warranties of Investor. The Investor hereby represents and
warrants to the Company that as of the date hereof:

          (a) Authorization, Enforceability.

     (i) The Investor has the power and authority, corporate or otherwise, to execute and
deliver this Agreement and the Registration Rights Agreement and to carry out its
obligations hereunder and thereunder. The execution, delivery and performance by the
Investor of this Agreement and the Registration Rights Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by all necessary
action on the part of the Investor, and no further approval or authorization is required on
the part of the Investor or any other party for such authorization to be effective. This
Agreement and the Registration Rights Agreement are or will be valid and binding
obligations of the Investor enforceable against the Investor in accordance with their
respective terms, except as the same may be limited by Bankruptcy Exceptions.

     (ii) Other than such as have been made or obtained, no notice to, filing with,
exemption or review by, or authorization, consent or approval of, any Governmental Entity
is required to be made or obtained by the Investor in connection with the consummation by
the Investor of the Issuance except for any such notices, filings, exemptions, reviews,
authorizations, consents and approvals the failure of which to make or obtain would not be
reasonably likely to have an Investor Material Adverse Effect.

          (b) Investment Purposes. The Investor acknowledges that the Warrant and the
Warrant Shares have not been registered under the Securities Act or under any state
securities laws. The Investor (i) is acquiring the Warrant pursuant to an exemption or
exception from registration under the Securities Act solely for investment purposes for its
own account with no present intention to distribute them to any person in violation of the
Securities Act or any applicable state securities laws; (ii) will not sell or otherwise
dispose of any of the Warrant or the Warrant Shares, except in compliance with the
registration requirements or exemption provisions of the Securities Act and any applicable
state securities laws; (iii) has such knowledge and experience in financial and business
matters and in investments of this type that it is capable of evaluating the merits and risks
of the Issuance and of making an informed investment decision, and has conducted a review of
the business and affairs of the Company that it considers sufficient and reasonable for
purposes of making the Issuance, (iv) is able to bear the economic risk of the Issuance and
at the present time is able to afford a complete loss of such investment and (v) is an
“accredited investor” (as that term is defined by Rule 501 of Regulation D under the
Securities Act).

          (c) Legend. The Investor agrees that all certificates or other instruments
representing the Warrant and the Warrant Shares will bear a legend substantially to the
following effect:

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION
STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR
SUCH LAWS. THIS INSTRUMENT IS ISSUED PURSUANT TO A WARRANT ISSUANCE AGREEMENT,
DATED OCTOBER 23, 2009, BETWEEN THE ISSUER OF THE WARRANT AND THE INVESTOR
REFERRED TO THEREIN, A COPY OF WHICH IS ON FILE WITH THE

7

 

ISSUER. THE SECURITIES REPRESENTED BY THIS INSTRUMENT MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS OF THIS INSTRUMENT. ANY
SALE OR OTHER TRANSFER NOT IN COMPLIANCE WITH THE TERMS OF THIS INSTRUMENT WILL BE
VOID.”

In the event that (i) the Warrant or the Warrant Shares become registered under the Securities Act
or (ii) the Warrant Shares are eligible to be transferred without restriction in accordance with
Rule 144 under the Securities Act, the Company shall issue new certificates or other instruments
representing the Warrant or Warrant Shares, which shall not contain such portion of the above
legend that is no longer applicable; provided that the Investor surrenders to the Company
the previously issued certificates or other instruments.

Article III

Covenants

          3.1 Certain Actions by Company. From the date of the Closing, as long as (i) the
Investor holds the Warrant or (ii) any principal amount, whether or not then outstanding, under
the Bridge Funding is capable of being converted to Common Shares in accordance the Convertible
Notes, the Company shall not make any recommendation to the Company’s shareholders or take other
actions through the Board that would materially and adversely affect the rights of the Investor or
its permitted assignees or transferees under the terms of the Warrant (or the Warrant Shares),
subject to applicable laws, including laws governing the fiduciary duties of the Board, and the
certificate of incorporation and by-laws of the Company.

          3.2 SEC Reports; NYSE Listing; Registration Statement. For so long as the Warrant has
not been fully exercised or expired, the Company shall (i) file with the Commission in a timely
manner all reports and other documents required to be filed by the Company pursuant to the Exchange
Act; (ii) maintain the eligibility of the Common Shares for listing on the NYSE; (iii) regain the
eligibility of the Common Shares for listing or quotation on all markets and exchanges including
the NYSE in the event that the Common Shares are delisted by the NYSE or any other applicable
market or exchange; (iv) obtain a listing on another national securities exchange or Nasdaq’s
National Market System if the Common Shares are delisted by the NYSE and NYSE eligibility cannot be
regained; (v) cause the representations and warranties contained in Section 2.2 to be and remain
true and correct, except those representations and warranties which address matters only as of a
particular date, which shall be true and correct as of such date and (vi) (x) file with the
Commission a registration statement for the purpose of registering the resales of the Warrant
Shares, (y) use its best efforts to cause such registration statement to be declared effective by
the Commission and (z) continuously maintain thereafter the effectiveness of such registration
statement.

          3.3 Use of Proceeds. If any part of the Warrant is exercised prior to the closing of
the transactions contemplated by the Transaction Term Sheet between the Company and the Investor,
the Company shall use the proceeds it receives from such exercise for working capital needs and
shall not use such proceeds for the prepayment of any indebtedness (except to the extent required
by Section 2.09(d) of the Credit Agreement).

          3.4 Sufficiency of Common Shares. During the period from the Closing Date until the
date on which the Warrant has been fully exercised or expired, the Company shall at all times have
reserved for issuance, free of preemptive or similar rights, a sufficient number of shares of
authorized and unissued Warrant Shares to effectuate such exercise. If, at any time for any
reason, insufficient Common Shares are authorized, the Company shall use its best efforts to amend
its certificate of incorporation to permit the exercise in full of the Warrant. Nothing in this
Section 3.4 shall preclude the Company from satisfying its obligations in respect of the exercise
of the Warrant by delivery of the Common Shares which

8

 

are held in the treasury of the Company. As
soon as practicable, the Company shall, at its expense, cause the

 Warrant Shares to be listed on the NYSE no later than the time at which they become freely
transferable in the public market under the Securities Act, subject to official notice of issuance.

          3.5 Change of Control. The Company agrees that it shall not enter into an agreement
which would result in a Change of Control unless such agreement expressly obligates the person(s)
acquiring control to assume all of the Company’s obligations under this Agreement and the other
Transaction Documents. A “Change of Control” means the (i) acquisition, directly or
indirectly, by a third party or group consisting of third parties of Beneficial Ownership in excess
of 50% of the outstanding shares of the Common Shares or voting power of outstanding voting
securities entitled to vote in the election of directors of the Board or (ii) consummation of a
merger, consolidation, amalgamation or similar business combination between the Company and any
third party. “Beneficial Ownership” shall be determined in accordance with Rules 13d-3 and
13d-5 under the Exchange Act, including the provision that any member of a “group” shall be deemed
to have Beneficial Ownership of all securities Beneficially Owned by other members of the group,
and except that the exclusion in Rule 13d-3(d)(1)(i) for rights to acquire securities that are not
exercisable “within 60 days” shall not apply.

Article IV

Additional Agreements

          4.1 Expenses. Unless otherwise provided in any Transaction Document executed by the
Company and the Investor, each of the parties hereto will bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated under the
Transaction Documents, including fees and expenses of its own financial or other consultants,
investment bankers, accountants and counsel.

          4.2 Best Efforts. Subject to the terms and conditions of this Agreement, each of the
parties will use its best efforts in good faith to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary, proper or desirable, or advisable under applicable
laws, so as to permit consummation of the Issuance as promptly as practicable and otherwise to
enable consummation of the transactions contemplated hereby and shall use commercially reasonable
efforts to cooperate with the other party to that end.

          4.3 Transfers.

          (a) The Investor shall be able to directly or indirectly transfer, sell, contract to
sell, assign, pledge, convey, lend, hypothecate, grant any option to purchase, purchase any
option to sell, make any short sale or otherwise encumber or dispose of (including entering
into any swap or other arrangement that transfers to another, in whole or in part, any of the
economic consequence of ownership interests) all or parts of the Warrant, the Warrant Shares
and the rights and obligations of the Investor under this Agreement in connection with a
Transfer of the Warrant, without any consent from, but with notice to (it being understood
that such notice shall not be construed as a condition to the effectiveness of the Transfer),
the Company. Each transaction referenced in the previous sentence is called a
“Transfer”. Notwithstanding the foregoing, the Investor shall not Transfer any part
of the Warrant or any Warrant Share to the Company’s competitors identified in Schedule
4.3(a).

          (b) Person(s) to whom the Investor Transfers parts or all of the Warrant shall (x)
assume the rights and obligations of the Investor under this Agreement and (y) be able to
exercise the Warrant according to the terms of the Warrant.

9

 

          (c) Notwithstanding Section 4.3(a) above, the Warrant and the Warrant Shares will be,
when issued, restricted securities under the Securities Act and may not be offered or sold
except pursuant to an effective registration statement or an available exemption from
registration under the Securities Act. Accordingly, the Investor shall not, directly or
through others, offer or sell the Warrant or any Warrant Share except pursuant to a
registration statement or an exemption from registration under the Securities Act, if
available.

          4.4
Investor Filings. The Investor shall make such filings with the Commission as may
be required or as the Investor may deem necessary or advisable in connection with the transactions
contemplated in this Agreement, including any filing under Sections 13(d) and 16(a), as may be
applicable, of the Exchange Act and the rules and regulations promulgated thereunder.

Article V

Indemnity

          5.1 Indemnification of Investor. The Company hereby agrees to indemnify the Investor
and each of its officers, directors, employees, consultants, agents, attorneys, accountants,
advisors and affiliates and each person that controls any of the foregoing persons (each an
“Indemnified Party”) against any claim, demand, action, liability, damages, loss, cost or
expense (including reasonable legal fees and expenses incurred by such Investor Indemnified Party
in investigating or defending any such proceeding) (all of the foregoing, including associated
costs and expenses being referred to herein as a “Proceeding”), that it may incur directly
or indirectly in connection with or as a result of any of the transactions contemplated hereby
arising out of or based upon:

          (a) any untrue or alleged untrue statement of a material fact in a SEC Report by the
Company or any of its affiliates or any person acting in its or their behalf or omission or
alleged omission to state therein any material fact necessary in order to make the
statements, in the light of the circumstances under which they were made, not misleading by
the Company or any of its affiliates or any person acting on its or their behalf;

          (b) any of the representations or warranties made by the Company herein being untrue,
incorrect or misleading at the time such representation or warranty was made; and

          (c) any breach or non-performance by the Company of any of its covenants, agreements or
obligations under this Agreement.

          5.2 Conduct of Claims.

          (a) Whenever a claim for indemnification shall arise under Section 5.1, the Indemnified
Party shall notify the Company in writing of the Proceeding and the facts constituting the
basis for such claim in reasonable detail;

          (b) The Company shall have the right to retain the counsel of its choice in connection
with such Proceeding and to participate at its own expense in the defense of any such
Proceeding; provided, however, that counsel to the Company shall not (except with the consent
of the relevant Indemnified Party) also be counsel to such Indemnified Party. In no event
shall the Company be liable for fees and expenses of more than one counsel (in addition to
any local counsel) separate from its own counsel for the Indemnified Party in connection with
any one action or separate but similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances; and

10

 

          (c) The Company shall not, without the prior written consent of the Indemnified Party
(which consent shall not be unreasonably withheld), settle or compromise or consent to the
entry of any judgment with respect to any litigation, or any investigation or proceeding by
any Governmental Entity, commenced or threatened, or any claim whatsoever in respect of which
indemnification could be sought under this Article V unless such settlement, compromise or
consent (A) includes an unconditional release of each Indemnified Party from all liability
arising out of such litigation, investigation, proceeding or claim and (B) does not include a
statement as to or an admission of fault, culpability or a failure to act by or on behalf of
any Indemnified Party.

Article VI

Miscellaneous

          6.1 Termination. This Agreement may be terminated at any time prior to the Closing:

          (a) by the Investor if the Closing shall not have occurred by the fifth
(5th) calendar day following the date of this Agreement;
provided that in the event the Closing has not occurred by such fifth
(5th) calendar day, the parties shall consult in good faith to
determine whether to extend the term of this Agreement; provided further, that the
right to terminate this Agreement under this Section 6.1(a) shall not be available to the
Investor if its breach of any representation or warranty or failure to perform any obligation
under this Agreement shall have caused or resulted in the failure of the Closing to occur on
or prior to such fifth (5th) calendar day;

          (b) by the Investor if an assignment for the benefit of creditors or a bona fide
proceeding has been instituted by or against the Company or its Subsidiaries seeking to
adjudicate any of them as bankrupt or insolvent or seeking their liquidation, winding up or
reorganization or any other relief from creditors has been sought;

          (c) by either the Investor or the Company in the event that any Governmental Entity
shall have issued an order, decree or ruling or taken any other action restraining, enjoining
or otherwise prohibiting the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and nonappealable; or

          (d) by the mutual written consent of the Investor and the Company.

In the event of termination of this Agreement as provided in this Section 6.1, this Agreement shall
forthwith become void and there shall be no liability on the part of either party hereto, except
that nothing herein shall relieve either party from liability for any breach of this Agreement.

          6.2 Amendment. No amendment of any provision of this Agreement will be effective
unless made in writing and signed by a duly authorized officer or representative of each party
hereto.

          6.3 Waiver of Conditions. The conditions to each party’s obligation to consummate the
Issuance are for the sole benefit of such party and may be waived by such party in whole or in part
to the extent permitted by applicable laws. No waiver will be effective unless it is in a writing
signed by a duly authorized officer or representative of the waiving party that makes express
reference to the provision or provisions subject to such waiver.

          6.4 Counterparts and Facsimile. For the convenience of the parties hereto, this
Agreement may be executed in any number of separate counterparts, each such counterpart being
deemed to be an original instrument, and all such counterparts will together constitute the same
agreement. Executed

11

 

signature pages to this Agreement may be delivered by facsimile and such facsimiles will be
deemed as sufficient as if actual signature pages had been delivered.

          6.5 Governing Law; Submission to Jurisdiction, Etc.

          (a) This Agreement will be governed by and construed in accordance with the laws of the
State of New York, without giving effect to the conflict of laws principles thereof.

          (b) Each of the parties hereto agrees all disputes arising among the parties in
connection with the Transaction Documents, or the breach, termination, interpretation or
validity thereof, shall be finally settled by the Hong Kong International Arbitration Centre
(the “HKIAC”) pursuant to UNCITRAL Rules with the Company, on the one hand, being
entitled to designate one arbitrator, and with the Investor, on the other hand, being
entitled to designate one arbitrator, while the third arbitrator will be selected by
agreement between the two designated arbitrators or, failing such agreement, within 10
calendar days of initial consultation between the two arbitrators, by the HKIAC pursuant to
its arbitration rules. If any party fails to designate its arbitrator within 20 calendar
days after the designation of the first of the three arbitrators, the HKIAC shall have the
authority to designate any person whose interests are neutral to the parties as the second of
the three arbitrators. The arbitration shall be conducted in English. To the extent
consistent with UNCITRAL Rules, each of the parties hereto shall cooperate with the others in
provision of information during any discovery process relating to arbitrations in connection
with the Transaction Documents. The parties hereto further agree that, to the extent
consistent with UNCITRAL Rules, the parties shall be entitled to seek temporary and permanent
injunctive relief from the arbitrators without the necessity of proving actual damages and
without posting a bond or other security.

          (c) Each of the parties hereto agrees that notice may be served upon such party at the
address and in the manner set forth for such party in Section 6.6.

          (d) To the extent permitted by applicable laws, each of the parties hereto hereby
unconditionally waives trial by jury in any legal action or proceeding relating to the
Transaction Documents or the transactions contemplated hereby or thereby.

          6.6 Notices. Any notice, request, instruction or other document to be given hereunder
by any party to the other will be in writing and will be deemed to have been duly given (a) on the
date of delivery if delivered personally, or by facsimile, upon confirmation of receipt, or (b) on
the second Business Day following the date of dispatch if delivered by a recognized next-day
courier service. All notices hereunder shall be delivered as set forth below, or pursuant to such
other instructions as may be designated in writing by the party to receive such notice.

	 	(A)	 	If to the Investor:

BGP Inc., China National Petroleum Corporation

No. 189, West Fanyang Street,

Zhou Zhou 072751, Hebei

People’s Republic of China

Attention: Mr. Yueliang Guo

Facsimile: (+86-10) 8120 1636

with a copy to:

Sullivan & Cromwell, LLP

28th Floor

12

 

Nine Queen’s Road

Hong Kong

Attention: Chun Wei

Facsimile: (+852) 2522 2280

	 	(B)	 	If to the Company:

ION Geophysical Corporation

2105 CityWest Blvd.

Suite 400

Houston, Texas 77042-2839

United States of America

Attention: Mr. David L. Roland

Facsimile: (+001-281) 879 3600

          6.7 Entire Agreement, Etc. This Agreement (including the Annexes and Schedules
hereto) and the other Transaction Documents constitute the entire agreement, and supersede all
other prior agreements, understandings, representations and warranties, both written and oral,
among the parties, with respect to the subject matter hereof.

          6.8 Definitions of “Subsidiary”, “affiliate” and “person”. (a) Unless otherwise
stated, when a reference is made in this Agreement to a Subsidiary of a person, the term
“Subsidiary” means those entities of which such person owns or controls more than 50% of
the outstanding equity securities either directly or through an unbroken chain of entities as to
each of which more than 50% of the outstanding equity securities is owned directly or indirectly by
its parent.

          (b) The term “affiliate” means, with respect to any person, any person directly
or indirectly controlling, controlled by or under common control with, such other person.
For purposes of this definition, “control” when used with respect to any person,
means the possession, directly or indirectly, of the power to cause the direction of
management and policies of such person, whether through the ownership of voting securities,
by contract or otherwise.

          (c) The term “person” means any individual, corporation, trust, association,
company, partnership, joint venture, limited liability company, joint stock company,
Governmental Entities or other entity.

          6.9 Assignment. Neither this Agreement nor any right, remedy, obligation nor
liability arising hereunder or by reason hereof shall be assignable by any party hereto without the
prior written consent of the other parties, and any attempt to assign any right, remedy, obligation
or liability hereunder without such consent shall be void, except (i) an assignment, in the case of
a merger or consolidation where such party is not the surviving entity, or a sale of substantially
all of its assets, to the entity which is the survivor of such merger or consolidation or the
purchaser in such sale or (ii) a Transfer by Investor in accordance with Section 4.3 hereof.

          6.10 Severability. If any provision of this Agreement or a Transaction Document, or
the application thereof to any person or circumstance, is determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the
application of such provision to persons or circumstances other than those as to which it has been
held invalid or unenforceable, will remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially adverse to any party.
Upon such determination, the parties shall negotiate in good faith in an effort to agree upon a
suitable and equitable substitute provision to effect the original intent of the parties.

13

 

          6.11 No Third Party Beneficiaries. Nothing contained in this Agreement, expressed or
implied, is intended to confer upon any person or entity other than the Company and the Investor
(and the transferees to which an assignment is made in accordance with this Agreement), any
benefits, rights, or remedies.

          6.12 Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as any other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.

[Remainder of page intentionally left blank]

14

 

     In
Witness Whereof, this Agreement has been duly executed and delivered by the duly
authorized officers of the parties hereto as of the date first herein above written.

	 	 	 	 	 
	 	ION GEOPHYSICAL CORPORATION

 	 
	 	By:  	/s/ David L. Roland
 	 
	 	 	Name:  	David L. Roland 	 
	 	 	Title:  	Senior Vice President, General Counsel and
	 
	 	 	Corporate Secretary 	 
	 
	 	BGP INC., CHINA NATIONAL PETROLEUM CORPORATION

 	 
	 	By:  	/s/ Wang Tiejun
 	 
	 	 	Name:  	Wang Tiejun 	 
	 	 	Title:  	President 	 
	 

15

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