Document:

exv10w2

Exhibit 10.2

SENIOR INCREASING RATE NOTE

			
	$40,816,327.53
	 	September 18, 2008

New York, New York

     For value received, ION Geophysical Corporation a Delaware corporation (the “Borrower”),
promises to pay to the order of Jefferies Finance CP Funding LLC or its assigns (the “Lender”) the
principal sum of FORTY MILLION EIGHT HUNDRED SIXTEEN THOUSAND THREE HUNDRED TWENTY-SEVEN UNITED
STATES DOLLARS AND FIFTY-THREE CENTS ($40,816,327.53) and to pay interest on the outstanding
principal of this Senior Increasing Rate Note (this “Note”), in accordance with the terms of this
Note.

     1. Maturity. The Borrower shall repay the unpaid principal in full, together with all
accrued and unpaid interest thereon, on December 31, 2008 (the “Maturity Date”). All payments
under this Note whether for interest, fees, if any, or principal shall be paid in United States
dollars in immediately available funds and shall be applied first against accrued and unpaid
interest, then against any unpaid fees and then against principal.

     2. Interest. Interest shall accrue and be payable in arrears on the unpaid principal
balance of this Note monthly on the same day of each month corresponding to the date hereof (or if
such day is not a business day, then on the next succeeding business day) and on the Maturity Date,
commencing on the date hereof and continuing until repayment of this Note, in full, at the rate of
13.50% per annum, calculated on the basis of a 360-day year and actual days elapsed; provided that
for any day occurring on or subsequent to the date that is two months after the date hereof such
rate shall be 14.00% per annum. After the occurrence and during the continuation of a Default or
an Event of Default, the outstanding principal amount of this Note and all other amounts payable
hereunder shall bear interest at 4.00% above the rate then applicable to such principal amount and
be payable in cash on demand.

     3. Optional Prepayment. The Borrower may prepay, in whole or in part, at any time,
without premium or prepayment penalty, any unpaid principal balance hereof or accrued and unpaid
interest thereon (to the date of such prepayment) prior to the Maturity Date. All payments
hereunder shall be credited first to accrued but unpaid interest, and then to principal.

     4. Ranking. This Note shall constitute a senior debt obligation of the Borrower and
shall rank equally in right of payment with all other existing and future senior debt obligations
of the Borrower (including the Senior Credit Facility) and senior in right of payment with all
existing and future subordinated debt obligations of the Borrower.

     5. Representations and Warranties. The Borrower for itself and for its Subsidiaries
represents and warrants to the Lender both as of the date hereof and the date that the ARAM
Acquisition is consummated that:

     (a) Organization. Each Obligor and its Subsidiaries (i) is duly organized,
validly existing and if applicable, in good standing under the Laws of the jurisdiction of its
organization, (ii) has the requisite power and authority to conduct its business in each
jurisdiction as it is presently being conducted, and (iii) is duly qualified or licensed to
conduct business and if applicable, is in good standing, in each such jurisdiction other than
any jurisdiction where the failure to so qualify, could not reasonably be expected to result in
a Material Adverse Effect. No proceeding to dissolve any Obligor is pending or, to the
Borrower’s knowledge, threatened.

     (b) Authority Relative to the Note Documents. Each Obligor has the power and
authority to execute and deliver the Note Documents to which it is a party and to perform its
obligations thereunder. The Transactions have been duly authorized by all necessary corporate,
limited liability company or partnership action on the part of each Obligor that is a party thereto. Each
Note

 

 

Document to which an Obligor is a party has been duly and validly executed and delivered
by such Obligor party thereto and constitutes the legal, valid and binding obligations of such
Obligor, enforceable against such Obligor in accordance with their respective terms, subject to
the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws
affecting creditors’ rights and remedies generally and to the effect of general principles of
equity (regardless of whether enforcement is considered in a proceeding at Law or in equity).

     (c) No Violation. The Transactions will not:

     (i) result in a breach of the articles or certificate of incorporation, bylaws,
partnership agreement or limited liability company agreement of the Borrower or any other
Obligor or any resolution adopted by the Board of Directors, shareholders, partners,
members or managers of any Obligor;

     (ii) result in the imposition of any Lien on any of the Equity Interests of any
Obligor or any of its assets other than the Liens created under the Senior Credit
Facility;

     (iii) result in, or constitute an event that, with the passage of time or giving of
notice or both, would be, a breach, violation or default (or give rise to any right of
termination, cancellation, prepayment or acceleration) under (i) any agreement to which
any Obligor or any of its Subsidiaries is a party, under which any Obligor or any of its
Subsidiaries have or may acquire rights or obligations or by which its properties or
assets may be bound or (ii) under any Governmental Approval held by, or relating to the
business of the Borrower or any of its Subsidiaries, in each case that could reasonably be
expected to have a Material Adverse Effect;

     (iv) require any Obligor to obtain any consent, waiver, approval, exemption,
authorization or other action of, or make any filing with or give any notice to, any
Person except (A) such as have been obtained or made and are in full force and effect, (B)
consents, waivers, approvals, exemptions, authorizations other actions, filings and
notices the failure of which to obtain or make could not reasonably be expected to have a
Material Adverse Effect or (C) a Current Report on Form 8-K to be made with the Commission
pursuant to the Securities Exchange Act of 1934 (“Exchange Act”) describing this Note and
the Guaranty; or

     (v) violate any Law or Order applicable to any Obligor or by which its properties or
assets may be bound, except where such violation could not reasonably be expected to
result in a Material Adverse Effect.

     (d) Litigation. No action, suit or proceeding is pending as of the date hereof
before any Governmental Authority or arbitration panel, or to the knowledge of the Borrower or
any of its Subsidiaries, is threatened, (i) (A) involving the Transactions (other than as
described in clause (ii) below), or (B) against any Obligor or any of its Subsidiaries
regarding the business or assets owned or used by the Borrower or any of its Subsidiaries that,
individually or in the aggregate, if in either case was adversely determined could reasonably
be expected to have a Material Adverse Effect or (ii) which purports to affect the legality,
validity or enforceability of this Note or any other Note Document.

     (e) Investment Company Status. Neither the Borrower nor any of its Subsidiaries
is an “investment company” as defined in, or subject to regulation under, the Investment
Company Act of 1940, as amended.

     (f) Solvency. With respect to the Borrower on a consolidated basis with its
Subsidiaries, immediately following the making of the loan evidenced hereby and after giving
effect to the application of the proceeds thereof, and with respect to each Guarantor, as of
the date hereof, (a) the
fair market value of its assets will exceed its debts and liabilities; (b) the present
fair saleable value of its property will be greater than the amount that will be required to
pay the probable liability of its

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debts and other liabilities; (c) it will be able to pay its
debts and liabilities as they become absolute and mature; and (d) it will not have unreasonably
small capital with which to conduct its business as such business is now conducted and is
proposed to be conducted following the date hereof.

     (g) Disclosure. The Borrower has disclosed to the Lender all agreements,
instruments and corporate or other restrictions to which it or any of its Subsidiaries is
subject, and all other matters known to it, that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect. None of the other reports,
financial statements, certificates or other information furnished by or on behalf of any
Obligor to the Lender in connection with the negotiation of this Note or delivered hereunder
(as modified or supplemented by other information so furnished prior to the date hereof)
contains any material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they were made, not
materially misleading; provided that, with respect to projected financial information, the
Borrower represents only that such information was prepared in good faith based upon
assumptions believed to be reasonable at the time.

     (h) Margin Stock. No part of the loan evidenced hereby shall be used at any time,
to purchase or carry margin stock (within the meaning of Regulation U) or to extend credit to
others for the purpose of purchasing or carrying any margin stock. Neither the Borrower nor
any of its Subsidiaries is engaged principally, or as one of its important activities, in the
business of extending credit for the purposes of purchasing or carrying any such margin stock.
No part of the proceeds of the loan evidenced hereby will be used for any purpose which
violates, or which is inconsistent with, any regulations promulgated by the Board.

     (i) Senior Credit Facility Representations and Warranties. The representations
and warranties of the Borrower set forth in the Senior Credit Facility and each other Loan
Document (as defined therein) are true and correct in all material respects; provided, that to
the extent such representations and warranties were made as of a specific date, the same shall
be true and correct in all material respects as of such specific date. No Default (as defined
in the Senior Credit Facility) exists.

     (j) Guarantors. Each Domestic Subsidiary of the Borrower that is a Domestic
Guarantor is a party to the Guaranty.

     6. Covenants.

     (a) Financial Statements; Other Notices and Information. The Borrower will furnish to
the Lender:

     (i) Within ten (10) days after the Borrower is required to file the same with the
Commission, copies of the annual reports, quarterly reports and current reports containing
financial statements and related financial information (or copies of such portions of any of
the foregoing as the Commission may from time to time by rules and regulations prescribe) that
the Borrower may be required to file with the Commission pursuant to Section 13(a) or Section
15(d) of the Exchange Act; provided, however, that the foregoing shall not be deemed to require
the Borrower to furnish any current reports filed with the Commission that consist solely or
primarily of the Borrower’s public announcement that its quarterly financial results of
operations and related financial information each fiscal quarter have been filed; provided,
further, however, that if the Borrower is not required to file information, documents or
reports pursuant to either of said Sections, then within ten (10) days after the date that the
Borrower would have been required to file the same, the Borrower will furnish to the Lender
such of the supplementary and periodic information, documents and reports which may be required
pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, in respect of a
security
listed and registered on a national securities exchange as may be prescribed from time to
time in such rules and regulations; and

     (ii) concurrently with its delivery of any certificate, request, notice, report or other
information or communication to the Senior Credit Facility
Administrative Agent or any Senior Credit Facility

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Lender under or pursuant to the Senior Credit Facility, a copy of the same to
the Lender; provided that the foregoing shall not apply to routine communications between or
among the Borrower or any of its Subsidiaries and the Senior Credit Facility Administrative
Agent or the Issuing Lender, Borrowing Requests, Interest Election Requests or other similar
requests, notices, information or communication (it being understood and agreed that the
Borrower shall in any event provide to the Lender any certificate, request, notice, report or
other information or communication that is provided to the Senior Credit Facility
Administrative Agent or any Senior Credit Facility Lender under or pursuant to Section 5.01 or
5.02 of the Senior Credit Facility unless otherwise provided to the Lender pursuant to
clause (i) above), or any agreements, information or communications with respect to
commitment, underwriting, arrangement or administrative agency fees (except to the extent
relating to any consideration to or for the benefit of any Senior Credit Facility Lender for or
as an inducement to any consent, waiver or amendment of any of the terms or provisions of the
Senior Credit Facility on any day occurring after the date hereof but prior to the occurrence
of the Maturity Date).

     (b) Notices of Material Events. The Borrower will furnish to the Lender promptly and,
in any event, within five (5) Business Days after acquiring knowledge thereof, written notice of
the following:

     (i) the occurrence of any Default of which the Borrower has knowledge; and

     (ii) the filing or commencement of any action, suit or proceeding by or before any
arbitrator or Governmental Authority against or affecting any Obligor or any Subsidiary thereof
that, if adversely determined, could reasonably be expected to result in a Material Adverse
Effect or that in any manner questions the validity of the Note Documents.

Each notice delivered under this clause (b) shall be accompanied by a statement of a
Financial Officer or other executive officer of the Borrower setting forth the details of the event
or development requiring such notice and any action taken or proposed to be taken with respect
thereto.

     (c) Books and Records; Inspection Rights. The Borrower will, and will cause each of
its Subsidiaries to, keep proper books of record and account in which full, true and correct
entries are made of all dealings and transactions in relation to its business and activities. The
Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by
the Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make
extracts from its books and records, and to discuss its affairs, finances and condition with its
officers and independent accountants, all at such reasonable times and as often as reasonably
requested.

     (d) Use of Proceeds. The Borrower covenants and agrees that the proceeds of the loan
evidenced hereby will be used only to consummate the ARAM Acquisition and pay fees and expenses in
connection therewith. The Borrower covenants and agrees that no part of the proceeds of the loan
evidenced hereby will be used, whether directly or indirectly, for any purpose that entails a
violation of any of the Regulations of the Board, including Regulations T, U and X.

     (e) Additional Guarantors. The Borrower shall at all times cause each Domestic
Subsidiary that becomes a Domestic Guarantor to become a party to the Guaranty.

     (f) Further Assurances. The Borrower will, and will cause each other Obligor to, at
its own cost and expense, execute, acknowledge and deliver all such further acts, documents and
assurances as may from
time to time be reasonably necessary or as the Lender may from time to time reasonably request
in order to carry out the intent and purposes of the Note Documents and the Transactions.

     (g) Constitutive Documents. The Borrower will not, and will not permit any of its
Subsidiaries to, amend its charter or by-laws or other constitutive documents in any manner that
would adversely and materially affect the rights of the Lender under the Note Documents or its
ability to enforce the same.

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     (h) Nature of Business. The Borrower shall not, and shall not permit any of its
Subsidiaries to, engage in any business that is substantially different from the businesses of the
types conducted by the Borrower and its Subsidiaries on the date hereof and businesses reasonably
related thereto.

     (i) Indebtedness.

     (i) Section 6.01 of the Senior Credit Facility (as in effect on the date hereof) is
incorporated by reference herein as if originally appearing herein; provided, that as
incorporated by reference herein (i) clause (a) thereof shall be amended and restated in its
entirety to read as follows “(a) Indebtedness created hereunder or under any of the Loan
Documents, including renewals, extensions and refinancings hereof or thereof in an aggregate
principal amount outstanding at any time not to exceed $235,000,000;”; (ii) Schedule 6.01
referred to in clause (b) thereof, shall instead refer to Schedule I hereto; (iii)
clause (k) thereof shall be amended and restated in its entirety to read as follows “(k)
Subject to the provisions of Section 6.01(s), purchase money Indebtedness, including all
extensions, renewals, refinancings and modifications thereof;”; (iv) clause (l) thereof shall
be amended and restated in its entirety to read as follows “(l) Subject to the provisions of
Section 6.01(s), Subordinated Indebtedness;”; (v) clause (r) thereof shall be amended and
restated in its entirety to read as follows “(r) Indebtedness of the Borrower or any Subsidiary
under the ARAM Sellers’ Note, the Subordinated Seller Note and any guarantee thereof; and” and
(vi) clause (s) thereof shall be amended and restated in its entirety to read as follows “(s)
Anything herein to the contrary notwithstanding, the Indebtedness permitted in paragraphs (g),
(i), (j), (k), (l) and (p) of this Section 6.01 shall not in the aggregate exceed $20,000,000
at any time outstanding.”

     (ii) Not in limitation but in furtherance of Section 4, the Borrower will not
incur, and will not permit any Guarantor to incur, subject to clause (i) of this
Section 6(i), any Indebtedness that is contractually subordinated in right of payment
to any other Indebtedness of the Borrower or such Guarantor unless such Indebtedness is also
contractually subordinated in right of payment to this Note and the Guaranty on substantially
identical terms; provided, however, that no Indebtedness will be deemed to be contractually
subordinated in right of payment to any other Indebtedness of the Borrower solely by virtue of
being unsecured or by virtue of being secured on a first or junior Lien basis.

     (iii) The Borrower will not, and will not permit any of its Subsidiaries to, directly or
indirectly, repay or prepay all or any portion of the principal amount of either the ARAM
Sellers’ Note or the Subordinated Seller Note unless prior, or substantially contemporaneous
with, any such repayment or prepayment, the principal amount of this Note, together with all
accrued and unpaid interest, fees, if any, and all other monetary obligations that are
outstanding hereunder or under any other Note Document have, or will be, paid in full in
accordance with the terms of this Note.

     (j) Drag-Along Fee. The Borrower will not, and will not permit any of its
Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any Senior Credit Facility Lender for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Senior Credit Facility on any day occurring
after the date hereof but prior to the occurrence of the Maturity Date (or if earlier, the date
that this Note is paid in full) unless such consideration is also paid to the Lender as if (i) the
loan evidenced hereby constituted an extension of credit or a commitment in respect thereof under
the Senior Credit Facility and (ii) the Lender had consented to such consent, waiver or
amendment (it being understood and agreed for the avoidance of doubt that to the extent that
the terms of the payment of such consideration provides for an “early” consent fee to be paid to
any Senior Credit Facility Lender that consents to such consent, waiver or amendment by a certain
deadline that is higher than that to be paid if its consent is provided thereafter, the
consideration to be paid hereunder shall be the higher amount); provided, that notwithstanding
anything to the contrary in the foregoing, if such consideration is to be paid to any Senior Credit
Facility Lender subsequent to the Maturity Date, such consideration shall be paid to the Lender no
later than the Maturity Date (or if earlier, the date that this

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Note is paid in full). Not in
limitation of the immediately preceding sentence but by means of example, if any Senior Credit
Facility Lender is offered a waiver fee to waive any default under the Senior Credit Facility equal
to 15 basis points of its Revolving Credit Exposures, unused Revolving Loan Commitments, Term Loan
Commitments or outstanding Term Loans at such time, as applicable, then the Borrower shall pay to
the Lender a fee equal to 15 basis points on the loan evidenced hereby on the earlier of (x) the
date such waiver fee is paid to such Senior Credit Facility Lender and (y) the Maturity Date as
provided in the proviso to the immediately preceding sentence even if the payment of such waiver
fee requires such Senior Credit Facility Lender to be a Senior Credit Facility Lender under the
Senior Credit Facility subsequent to the Maturity Date as a condition to the payment thereof.

     7. Events of Default. If any of the following events (each, an “Event of Default”)
shall occur:

     (a) the Borrower shall fail to pay any principal amount of this Note when and as the same
shall become due and payable, whether at the due date thereof or otherwise;

     (b) the Borrower shall fail to pay any interest on this Note or any fee or other amount
(other than an amount referred to in clause (a) above) payable under this Note or the
other Note Documents, when and as the same shall become due and payable, and such failure shall
continue unremedied for a period of five (5) Business Days;

     (c) any representation or warranty made or deemed made by or on behalf of the Borrower or
any Subsidiary in or in connection with this Note, any other Note Document or any amendment or
modification hereof or waiver hereunder or thereunder, or in any report, certificate, financial
statement or other document furnished pursuant to or in connection with this Note or any
amendment or modification hereof or waiver hereunder, shall prove to have been incorrect when
made or deemed made in any material respect (provided, that such materiality qualifier shall
not apply in instances where a specific representation contains a materiality or Material
Adverse Effect qualifier);

     (d) the Borrower shall fail to observe or perform any covenant, condition or agreement
contained in clause (a), (b), (d), (h) or (i) of
Section 6;

     (e) the Borrower shall fail to observe or perform any covenant, condition or agreement
contained in this Note (other than those specified in clause (a), (b) or
(d) of this Section), and such failure shall continue unremedied for a period of thirty
(30) days following the earlier of the date on which (i) such failure first became known to any
officer of the Borrower and (ii) the Lender notifies the Borrower of such failure;

     (f) the Borrower or any Subsidiary shall fail to make any payment (whether of principal,
premium, if any, or interest and regardless of amount) in respect of any Material Indebtedness,
when and as the same shall become due and payable after giving effect to any applicable grace
period;

     (g) any event or condition occurs that results in any Material Indebtedness becoming due
prior to its scheduled maturity or that enables or permits (with or without the giving of
notice, the lapse of time or both) the holder or holders of such Material Indebtedness or any
trustee or agent on its or their behalf to cause such Material Indebtedness to become due, or
to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled
maturity; provided that this clause (g) of this
Section shall not apply to secured Indebtedness that becomes due as a result of the
voluntary sale or transfer of the property or assets securing such Indebtedness;

     (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed
seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any of
its Subsidiaries or their debts, or of a substantial part of their assets, under any Federal,
state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect
or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar
official for the Borrower or any of its Subsidiaries or for a substantial part of any of their
assets, and, in any such case, such

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proceeding or petition shall continue undismissed for sixty
(60) days or an order or decree approving or ordering any of the foregoing shall be entered;

     (i) the Borrower or any of its Subsidiaries shall (i) voluntarily commence any proceeding
or file any petition seeking liquidation, reorganization or other relief under any Federal,
state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate
manner, any proceeding or petition described in
clause (h) of this Section, (iii) apply
for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for the Borrower or any of its Subsidiaries or for a substantial part of
any of their assets, (iv) file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (v) make a general assignment for the benefit of creditors
or (vi) take any action for the purpose of effecting any of the foregoing; or

     (j) the Borrower or any of its Subsidiaries shall become unable, admit in writing its
inability, or fail generally to pay its debts as they become due;

then, and in every such event (other than an event with respect to the Borrower or any Guarantor
described in clause (h) or (i) of this Section), and at any time thereafter during
the continuance of such event, the Lender may by notice to the Borrower, take any or all of the
following actions, at the same or different times: (i) declare the principal amount of this Note
then outstanding to be due and payable in whole or in part (in which case any principal not so
declared to be due and payable may thereafter be declared to be due and payable), and thereupon the
principal of this Note so declared to be due and payable, together with premium, if any, and
accrued interest thereon and all fees and other monetary obligations of the Borrower outstanding
hereunder, shall become due and payable immediately, without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower; and in case of any event
described in clause (h) or (i) of this Section shall occur with respect to the
Borrower or any Guarantor, the principal of this Note then outstanding, together accrued interest
thereon and all fees and other monetary obligations of the Borrower outstanding hereunder, shall
automatically become due and payable, without presentment, demand, protest notice of acceleration
or the intent to accelerate or any other notice of any kind, all of which are hereby waived by the
Borrower, and (ii) exercise any or all of the remedies available to it under any of the Note
Documents, at Law or in equity.

     8. Definitions.

     (a) Defined Terms. As used in this Note and each other Note Document, the following
terms have the meanings specified below:

     “Default” means any event or condition that constitutes an Event of Default or that upon
notice, lapse of time or both would, unless cured or waived, become an Event of Default.

     “Fee Letter” means the confidential letter agreement dated September 18, 2008, between the
Borrower and the Lender pertaining to certain fees payable to the Lender in connection with the
transactions contemplated hereby.

     “Guarantor” means each Subsidiary of the Borrower that is a party to the Guaranty as of the
date hereof and each other Subsidiary of the Borrower that is required, pursuant to Section
6(e), to become a party to the Guaranty.

     “Guaranty” means the Guaranty, dated as of the date hereof, made by GX Technology Corporation,
a Texas corporation, ION Exploration Products (U.S.A.), Inc., a Delaware corporation, and I/O
Marine Systems, Inc., a Louisiana corporation, as the same may be amended, supplemented, restated
or otherwise modified from time to time.

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     “Material Adverse Effect” means a material adverse effect on (i) the business, assets,
operations, property or condition (financial or otherwise) of the Borrower and its Subsidiaries
taken as a whole, (ii) the ability of any of the Obligors to perform its obligations under the Note
Documents to which such Obligor is a party, (iii) the validity or enforceability of any of the Note
Documents, or (iv) the rights and remedies of the Lender under the Note Documents.

     “Note Document” means this Note, the Fee Letter, the Guaranty and any other agreements and
documents executed and delivered in connection with this Note.

     “Obligors” means, collectively, the Borrower and each Guarantor.

     “Senior Credit Facility” means that certain Amended and Restated Credit Agreement, dated as of
July 3, 2008, among, inter alios, the Borrower, ION International S.à r.l., a Luxembourg private
limited company (société à responsabilité limitée), as the foreign borrower, the other Subsidiaries
of the Borrower that are party thereto, as guarantors, the lenders party thereto, HSBC Bank USA,
N.A., as administrative agent, as amended pursuant to that certain First Amendment to Amended and
Restated Credit Agreement and Domestic Security Agreement, dated as of September 17, 2008, as such
amended credit agreement may be further amended, supplemented, restated or otherwise modified from
time to time.

     “Senior Credit Facility Administrative Agent” means the Administrative Agent as defined in the
Senior Credit Facility.

     “Senior Credit Facility Lender” means a Lender as defined in the Senior Credit Facility.

     “Subordinated Seller Note” means that certain $10,000,000 unsecured subordinated promissory
note, dated September 18, 2008, made by 3226509 Nova Scotia Company, a Nova Scotia unlimited
liability company, in favor of 1236929 Alberta Ltd., an Alberta corporation.

     “Transactions” means the execution, delivery and performance by the Borrower and the
Guarantors of Note Documents to which they are party, the borrowing of the loan evidenced hereby,
the use of the proceeds thereof and the consummation of the ARAM Acquisition.

     (b) Terms Generally. The definitions of terms herein shall apply equally to the
singular and plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The
word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the
context requires otherwise (i) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or other document as
from time to time amended, supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (ii) any reference herein to any Person
shall be construed to include such Person’s successors and
permitted assigns, (iii) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Note in its entirety and not to any particular
provision hereof, (iv) all references herein to Sections shall be construed to refer to Sections of
this Note and (v) the words “asset” and “property” shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and properties, including cash,
securities, accounts and contract rights.

     (c) Senior Credit Facility Definitions. Unless otherwise defined herein or the
context otherwise requires, terms used in this Note and each other Note Document have the meanings
provided in the Senior Credit Facility (as in effect on the date hereof).

     9. Miscellaneous.

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     (a) Original Issue Discount. The Borrower acknowledges and agrees that although the
loan evidenced hereby was funded with original issue discount of 2.0%, it is nevertheless obligated
to repay the Lender $40,816,327.53 in principal, together with payments of any accrued interest
thereon and all other fees and other amounts that may be become due hereunder, in accordance with
the terms hereof.

     (b) Guaranty of Note. The payment of the principal of and interest on this Note and
all fees and other amounts due hereunder have been unconditionally guaranteed by the Guarantors
pursuant to the provisions of the Guaranty.

     (c) Waiver of Presentment. The Borrower and any and all endorsers, guarantors
(including the Guarantors) and sureties severally waive grace, demand, presentment for payment,
notice of dishonor, default, acceleration or intent to accelerate, protest and notice of protest
and diligence in collecting and bringing of suit against any party hereto, and agree to all
renewals, extensions or partial payments hereon and to any release or substitution of security
herefor, in whole or in part, with or without notice, before or after maturity.

     (d) Notices.

     All notices and other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or registered mail or sent by
telecopy, as follows:

     if to the Borrower, to:

ION Geophysical Corporation

2105 CityWest Blvd., Suite 400

Houston, Texas 77042

Attention: Chief Financial Officer

Telecopy No.: 281-879-3674

Telephone No. (for confirmation): 281-879-3645

     with a copy to:

ION Geophysical Corporation

2105 CityWest Blvd., Suite 400

Houston, Texas 77042

Attention: David L. Roland, Esq., General Counsel

Telecopy No.: 281-879-3600

Telephone No. (for confirmation): 281-552-3308

     and

Mayer Brown LLP

700 Louisiana St., Suite 3400

Houston, Texas 77002-2730

Attention: Marc Folladori, Esq.

Telecopy No.: 713-238-4888

Telephone No.: 713-238-3000

     if to the Lender, to:

Jefferies Finance CP Funding LLC

c/o Jefferies Finance LLC

520 Madison Avenue

New York, New York 10022

Attention: General Counsel, Jefferies Finance

9

 

Each of the Borrower and the Lender may change its address or telecopy number for notices and other
communications hereunder by notice to (i) in the case of the Borrower, to the Lender and (ii) in
the case of the Lender, to the Borrower in accordance with the terms of this Section. All notices
and other communications given in accordance with the provisions of this Note shall be deemed to
have been given on the date of the receipt thereof.

     (e) Waivers; Amendments.

     (i) No failure or delay by the Lender in exercising any right or power hereunder or under
any other Note Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Lender hereunder or under any other Note
Document are cumulative and are not exclusive of any rights or remedies that it would otherwise
have. No waiver of any provision of this Note or any other Note Document or consent to any
departure by the Borrower herefrom or any Guarantor therefrom shall in any event be effective
unless the same shall be permitted by paragraph (ii) of this clause (e), and
then such waiver or consent shall be effective only in the specific instance and for the
purpose for which given. Without limiting the generality of the foregoing, the making of the
loan evidenced hereby shall not be construed as a waiver of any Default, regardless of whether
the Lender may have had notice or knowledge of such Default at the time.

     (ii) Except as otherwise provided herein or in any other Note Document, neither this Note
nor the other Note Documents nor any provision hereof or thereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into by the Borrower
and the Lender.

     (f) Expenses; Indemnity; Damage Waiver.

     (i) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the
Lender, including the fees, charges and disbursements of one primary law firm as counsel and
consultants for the Lender, in connection with the due diligence undertaken by the Lender with
respect to the financing contemplated by this Note, the preparation and administration of this
Note and the other Note Documents or any amendments, modifications or waivers of the provisions
hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be
consummated), and (ii) all reasonable out-of-pocket expenses incurred by the Lender for fees,
charges and disbursements of one primary law
firm as counsel, local counsel as needed and consultants for the Lender and all other
reasonable out-of-pocket expenses of the Lender, in connection with the enforcement or
protection of its rights in connection with this Note or any other Note Document during the
existence of a Default or an Event of Default (whether or not any waiver or forbearance has
been granted in respect thereof), including its rights under this clause (f), or in
connection with the loan evidenced hereby, including all such out-of-pocket expenses incurred
during any workout, restructuring or negotiations in respect of the loan evidenced hereby.

     (ii) The Borrower shall indemnify the Lender, and each Related Party of the Lender (each
such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any
and all losses, claims, damages, liabilities and related expenses, including the fees, charges
and disbursements of any counsel for any Indemnitee, incurred by or asserted against any
Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery
of this Note or any other Note Document or any agreement or instrument contemplated hereby, the
performance by the Obligors of their respective obligations hereunder and thereunder, as
applicable, or the consummation of the Transactions or any other transactions contemplated
hereby, (ii) the loan evidenced hereby or the use of the proceeds therefrom, (iii) any actual
or alleged presence or release of Hazardous Materials on or from any property owned or operated
by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way
to the Borrower or any of its

10

 

Subsidiaries, or (iv) any actual claim, litigation, investigation
or proceeding relating to any of the foregoing, whether based on contract, tort or any other
theory and regardless of whether any Indemnitee is a party thereto; and whether or not caused
by the ordinary, sole or contributory negligence of any Indemnitee; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a court of competent jurisdiction by
final and nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such Indemnitee (IT BEING UNDERSTOOD THAT IT IS THE INTENTION OF THE BORROWER AND
EACH GUARANTOR THAT EACH OF THE INDEMNITEES BE INDEMNIFIED IN THE CASE OF ITS OWN NEGLIGENCE
(OTHER THAN GROSS NEGLIGENCE), REGARDLESS OF WHETHER SUCH NEGLIGENCE IS SOLE OR CONTRIBUTORY,
ACTIVE OR PASSIVE, IMPUTED, JOINT OR TECHNICAL).

     (iii) To the extent permitted by applicable Law, neither the Borrower nor any Guarantor
shall assert, and each of the Borrower and each Guarantor hereby waives, any claim against any
Indemnitee, on any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection with, or as a
result of, this Note or any other Note Document or any agreement or instrument contemplated
hereby, the Transactions, the loan evidenced hereby or the use of the proceeds thereof.

     (iv) All amounts due under this clause (f) shall be payable promptly after receipt
of a request therefor by the Borrower.

     (g) Successors and Assigns. The provisions of this Note shall be binding upon and
inure to the benefit of each of the Borrower, the Lender and their respective successors and
assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its
rights or obligations hereunder without the prior written consent of the Lender (and any attempted
assignment or transfer by the Borrower without such consent shall be null and void). The Lender
may assign or otherwise transfer all or any portion of its rights or obligations hereunder without
the consent of the Borrower; provided, that no such assignment or transfer may be made by the
Lender to any Person listed on Schedule II hereto or any of their respective controlled
Affiliates. Nothing in this Note, expressed or implied, shall be construed to confer upon any
Person (other than the Borrower, the Lender and their respective successors and assigns permitted
hereby and, to the extent expressly contemplated hereby, the Related Parties of the Lender)
any legal or equitable right, remedy or claim under or by reason of this Note.

     (h) Survival. All covenants, agreements, representations and warranties made by the
Borrower herein and each Guarantor in the Guaranty and in the certificates or other instruments
delivered in connection with Note or any other Note Document shall be considered to have been
relied upon by the Lender and shall survive the execution and delivery of this Note and the making
of note evidenced hereby, regardless of any investigation made by any such other party or on its
behalf and notwithstanding that the Lender may have had notice or knowledge of any Default or
incorrect representation or warranty at the time the loan evidenced hereby was made, and shall
continue in full force and effect as long as the principal of this Note or any accrued interest
thereon or any fee or any other amount payable under this Note is outstanding and unpaid. The
provisions of clause (f) of this Section shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated hereby, the repayment of the loan
evidenced hereby or the termination of this Note or any provision hereof.

     (i) Counterparts; Integration; Effectiveness. This Note may be executed in
counterparts and may be delivered in original or facsimile form (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of which when taken
together shall constitute a single contract. This Note and the other Note Documents constitute the
entire contract among the parties relating to the subject matter hereof and supersede any and all
previous agreements and understandings, oral or written, relating to the subject matter hereof.
This Note shall become effective when it shall have

11

 

been executed by the Borrower and the Lender,
and thereafter shall be binding upon and inure to the benefit of the Borrower, the Lender and their
respective successors and permitted assigns. Delivery of an executed counterpart of a signature
page of this Note by telecopy shall be effective as delivery of a manually executed counterpart of
this Note.

     (j) Severability. Any provision of this Note held to be invalid, illegal or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without affecting the validity, legality and
enforceability of the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

     (k) Right of Setoff. The Lender and each of its Affiliates is hereby authorized at
any time that an Event of Default shall have occurred and is continuing and from time to time, to
the fullest extent permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other obligations at any time owing by
the Lender or such Affiliate to or for the credit or the account of the Borrower or any Guarantor
against any and all of the obligations of the Borrower and each Guarantor now or hereafter existing
under this Note or any other Note Document held by the Lender, irrespective of whether or not the
Lender shall have made any demand under this Note or such other Note Document and although such
obligations may be unmatured. The rights of the Lender under this clause (k) are in
addition to other rights and remedies (including other rights of setoff) which the Lender may have.

     (l) Governing Law; Jurisdiction; Consent to Service of Process.

     (i) THIS NOTE AND THE OTHER NOTE DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAW
PRINCIPLES).

     (ii) THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS
PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK
SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF
NEW
YORK SITTING IN NEW YORK COUNTY, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR ANY OTHER NOTE DOCUMENT, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE BORROWER AND THE LENDER HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR, TO THE EXTENT PERMITTED BY
LAW, IN SUCH FEDERAL COURT. EACH OF THE BORROWER AND THE LENDER AGREES THAT A FINAL JUDGMENT
IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS
BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS NOTE OR ANY
OTHER NOTE DOCUMENT SHALL AFFECT ANY RIGHT THAT THE LENDER MAY OTHERWISE HAVE TO BRING ANY
ACTION OR PROCEEDING RELATING TO THIS NOTE OR ANY OTHER NOTE DOCUMENT AGAINST THE BORROWER OR
ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

     (iii) THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT
MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR
ANY OTHER NOTE DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (ii) OF THIS CLAUSE
(l). EACH OF THE BORROWER AND THE LENDER HERETO HEREBY

12

 

IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION
OR PROCEEDING IN ANY SUCH COURT.

     (iv) THE BORROWER HEREBY APPOINTS CT CORPORATION SYSTEM (THE “PROCESS AGENT”) WITH AN
OFFICE ON THE DATE HEREOF OF 111 EIGHTH AVENUE, NEW YORK, NEW YORK 10011, AS ITS AGENT TO
RECEIVE ON BEHALF OF IT SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS
WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE MAY BE MADE BY MAILING BY
CERTIFIED MAIL A COPY OF SUCH PROCESS TO THE BORROWER IN CARE OF THE PROCESS AGENT AT THE
PROCESS AGENT’S ABOVE ADDRESS, WITH A COPY TO SUCH PERSON AT ITS ADDRESS SPECIFIED HEREIN AND
THE BORROWER HEREBY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO RECEIVE SUCH SERVICE ON THEIR
BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, THE BORROWER ALSO IRREVOCABLY CONSENTS TO THE
SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING BY CERTIFIED
MAIL OF COPIES OF SUCH PROCESS TO IT AND ITS SUBSIDIARIES SPECIFIED HEREIN. THE BORROWER
AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY MANNER PROVIDED BY LAW.

     (v) EACH OF THE BORROWER AND THE LENDER IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE
MANNER PROVIDED FOR NOTICES IN CLAUSE (d) OF THIS SECTION 9. NOTHING IN THIS
NOTE WILL AFFECT THE RIGHT OF THE BORROWER OR THE LENDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.

     (m) WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE LENDER HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH OF THE BORROWER
AND THE LENDER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS NOTE AND EACH OTHER NOTE DOCUMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS CLAUSE (m).

     (n) Headings. Section and clause headings used herein are for convenience of
reference only, are not part of this Note and shall not affect the construction of, or be taken
into consideration in interpreting, this Note.

     (o) Confidentiality. The Lender agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (i) to its and its
Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and
other advisors (it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep such Information
confidential), (ii) to the extent requested by any regulatory authority, (iii) to the extent
required by applicable laws or regulations or by any subpoena or similar legal process, (iv) to any
other party to this Note, (v) in connection with the exercise of any remedies hereunder or any
suit, action or proceeding relating to this Note or any other Note Document or

13

 

the enforcement of
rights hereunder or thereunder, (vi) subject to an agreement containing provisions substantially
the same as those of this clause (o), to any assignee of or participant in, or any
prospective assignee of or participant in, any of its rights or obligations under this Note, (vii)
with the consent of the Borrower or (viii) to the extent such Information (A) becomes publicly
available other than as a result of a breach of this clause (o) or (ii) becomes available
to the Lender on a non-confidential basis from a source other than the Borrower. For the purposes
of this clause (o), “Information” means all information received from the Borrower or its
Affiliates relating to the Borrower and its Subsidiaries or their business, other than any such
information that is available to the Lender on a non-confidential basis prior to disclosure by the
Borrower or any of its Affiliates; provided that, in the case of information received from the
Borrower after the date hereof, such information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of Information as provided in
this clause (o) shall be considered to have complied with its obligation to do so if such
Person has exercised the same degree of care to maintain the confidentiality of such Information as
such Person would accord to its own confidential information.

     (p) Interest Rate Limitation. It is the intention of the Borrower, the Guarantors and
the Lender to conform strictly to applicable interest, usury and criminal laws and, anything herein
to the contrary notwithstanding, the obligations of the Borrower and the Guarantors to the Lender
under this Note or any other Note Document shall be subject to the limitation that payments of
interest shall not be required to the extent that receipt thereof would be contrary to provisions
of law applicable to the Lender limiting rates of interest which may be charged or collected by the
Lender. Accordingly, if the transactions contemplated hereby or thereby would be illegal,
unenforceable, usurious or criminal under laws applicable to the Lender (including the laws of any
jurisdiction whose laws may be mandatorily applicable to the Lender notwithstanding anything to the
contrary in this Note or any other Note Document then, in that event, notwithstanding anything to
the contrary in this Note or any other Note Document, it is agreed as follows:

     (i) the provisions of this clause (p) shall govern and control;

     (ii) the aggregate of all consideration which constitutes interest under applicable law
that is contracted for, taken, reserved, charged or received under this Note or any other Note
Document or otherwise in connection with this Note or any other Note Document by the Lender
shall under no circumstances exceed the maximum amount of interest allowed by applicable law
(such maximum lawful interest rate, if any, with respect to the Lender herein called the
“Highest Lawful Rate”), and any excess shall be cancelled automatically and if theretofore paid
shall be credited to the Borrower by the Lender (or, if such consideration shall have been paid
in full, such excess refunded to the Borrower);

     (iii) all sums paid, or agreed to be paid, to the Lender for the use, forbearance and
detention of the indebtedness of the Borrower to the Lender hereunder or under any other Note
Document shall, to the extent permitted by laws applicable to the Lender be amortized,
prorated, allocated and spread throughout the full term of such indebtedness until payment in
full so that the actual rate of interest is uniform throughout the full term thereof;

     (iv) if at any time the interest provided pursuant to this clause (p) or any other
clause of this Note or any other Note Document, together with any other fees (including in the
form of original issue discount) or compensation payable pursuant to this Note or any other
Note Document and deemed interest under laws applicable to the Lender, exceeds that amount
which would have accrued at the Highest Lawful Rate, the amount of interest and any such fees
or compensation to accrue to the Lender pursuant to this Note or such other Note Document shall
be limited, notwithstanding anything to the contrary in this Note or any other Note Document,
to that amount which would have accrued at the Highest Lawful Rate, but any subsequent
reductions, as applicable, shall not reduce the interest to accrue to the Lender pursuant to
this Note or such other Note Document below the

14

 

Highest Lawful Rate until the total amount of
interest accrued pursuant to this Note or such other Note Document, as the case may be, and
such fees or compensation deemed to be interest equals the amount of interest which would have
accrued to the Lender if a varying rate per annum equal to the interest provided pursuant to
any other relevant clause or Section hereof (other than this clause (p)) or thereof, as
applicable, had at all times been in effect, plus the amount of fees which would have been
received but for the effect of this Section; and

     (v) with the intent that the rate of interest herein shall at all times be lawful, and if
the receipt of any funds owing hereunder or under any other agreement related hereto (including
any of the other Note Documents) by the Lender would cause the Lender to charge the Borrower a
criminal rate of interest, the Lender agrees that it will not require the payment or receipt
thereof or a portion thereof which would cause a criminal rate of interest to be charged by the
Lender, and if received the Lender will return such funds to Borrowers so that the rate of
interest paid by the Borrower shall not exceed a criminal rate of interest from the date this
Note was made by the Borrower.

     (q) USA Patriot Act. The Lender hereby notifies the Borrower that pursuant to the
requirements of the USA Patriot Act (Title III of Pub. L. 107 56 (signed into law October 26,
2001)) (the “Act”), it is required to obtain, verify and record information that identifies the
Borrower, which information includes the name and address of the Borrower and other information
that will allow such Lender to identify the Borrower in accordance with the Act.

     (r) Final Agreement of the Borrower, the Guarantor and the Lender. THIS NOTE AND THE
OTHER NOTE DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE BORROWER, THE GUARANTORS AND THE
LENDER WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE BORROWER, THE GUARANTORS
AND THE LENDER. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
AMONG THE BORROWER, THE GUARANTORS AND THE LENDER WITH RESPECT TO THE SUBJECT MATTER HEREOF OR
THEREOF.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

15

 

     This Note has been duly executed and delivered by the Borrower by an officer thereunto duly
authorized as of the date hereof.

	 	 	 	 	 	 	 
	 	 	ION GEOPHYSICAL CORPORATION, as Borrower	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ R. Brian Hanson
 

R. Brian Hanson
	 	 
	 

	 	Title:
	 	Executive Vice President and Chief	 	 
	 

	 	 	 	Financial Officer	 	 

	 	 	 	 	 	 	 
	Accepted and agreed as of the date hereof:	 	 	 	 
	JEFFERIES FINANCE CP FUNDING LLC, as Lender	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ E. Joseph Hess
 

Name: E. Joseph Hess
	 	 	 	 
	 

	 	Title: Managing Director	 	 	 	 

16

 

SCHEDULE I

OTHER INDEBTEDNESS

($000s)

	 	 	 	 	 
	Convertible senior notes
	 	US$	3,240	 
	Equipment capital leases
	 	 	12,709	 
	Facility lease obligation
	 	 	4,772	 
	Other notes payable
	 	 	638	 
	 
	 	 	 
	Total
	 	US$	21,359	 
	 
	 	 	 

Schedule Iexv10w3

Exhibit 10.3

THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT WITH RESPECT THERETO UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.

3226509 NOVA SCOTIA COMPANY 

 PROMISSORY NOTE

(Guaranteed by ION GEOPHYSICAL CORPORATION)

September 18, 2008

			
	 
	US$35,000,000.00
	 	Calgary, Alberta

     FOR VALUE RECEIVED, 3226509 NOVA SCOTIA COMPANY, a Nova Scotia unlimited liability company, as
the “Company”, promises to pay to 1236929 ALBERTA LTD., an Alberta corporation, as
“Payee”, in lawful money of the United States of America, the principal sum of THIRTY-FIVE
MILLION AND NO/100 DOLLARS (US$35,000,000.00), together with accrued interest thereon at such rates
and at such time or times as provided for herein. This Promissory Note (the “Note”) is
issued pursuant to that certain Amended and Restated Share Purchase Agreement by and among ION
Geophysical Corporation, a Delaware corporation and the indirect owner of all of the outstanding
equity interests of the Company (“ION”), the Payee, ARAM Systems Ltd., Canadian Seismic
Rentals Inc. and the other “Sellers” (as that term is defined therein), dated as of September 17,
2008 (as such agreement may be further amended, restated, modified or supplemented, the “Share
Purchase Agreement”).

     Capitalized terms used herein that are not defined in this Note shall have the respective
meanings assigned to such terms in the Share Purchase Agreement.

     The following is a statement of the rights of Payee and the conditions to which this Note is
subject, and to which the Payee hereof, by the acceptance of this Note, agrees:

     1. Definitions. As used in this Note, the following capitalized terms have the
following meanings:

          (a) “Company” means the entity executing this Note and its successors and permitted
assignees.

          (b) “Payee” shall mean the Person specified in the introductory paragraph of this
Note, or any Person who shall at such time be the permitted assignee of this Note.

 

 

          (c) “Senior Credit Facility” shall mean that certain Amended and Restated Credit
Agreement dated July 3, 2008 by and among ION, ION International S.à r.l, the guarantors party
thereto and the lenders party thereto, as amended by that certain First Amendment thereto dated
September 17, 2008, as same may be further amended, modified or supplemented.

          (d) “Senior Indebtedness” shall mean the principal of (and premium, if any), unpaid
interest on and amounts reimbursable, fees, expenses, penalties, costs of enforcement and other
amounts due in connection with (i) the obligations of ION and its Subsidiaries under the Senior
Credit Facility, (ii) the indebtedness of ION under its 5.50% Convertible Senior Notes due 2008,
(iii) indebtedness of ION under certain short-term bridge loans extended to ION by Jefferies
Funding LLC and its designees and assignees contemporaneously with the issuance of this Note by ION
(the “Short Term Bridge Loans”), (iv) the liabilities of ION and its Subsidiaries with
respect to capital leases and obligations under its facility sale-leaseback facility, (v) all
guaranties by ION and its Subsidiaries of the obligations described in clauses (i) — (iv) above,
and (vi) any debentures, notes or other evidence of indebtedness issued in exchange for, or in the
refinancing of, such Senior Indebtedness, or any indebtedness arising from the payment and
satisfaction of such Senior Indebtedness by a guarantor.

     2. Interest. Accrued interest on this Note shall be payable at such time as the
outstanding principal amount hereof shall be paid, as provided herein. The Company promises to pay
interest on the unpaid principal amount hereof for the period from (and including) the date of the
making of this Note to (but excluding) the date that the Indebtedness under this Note shall be paid
in full. Interest on the unpaid principal amount of this Note shall accrue at the rate of nine
percent (9%) per annum (based on a year of 365 or 366 days, as the case may be), except as provided
in Sections 2(a) and 2(b) below.

          (a) In the event that the outstanding indebtedness under this Note is not paid in full on or
before the later to occur of the following: (i) December 17, 2008 and (ii) the date that is
forty-five (45) days following the Financial Statements Delivery Date (such later date being
referred to herein as the “Interest Change Date”), then commencing on (and including) the
date that immediately follows the Interest Change Date, interest on the unpaid principal amount of
this Note shall accrue thereafter until paid at a rate equal to twelve percent (12%) per annum; and

          (b) In the event that the outstanding indebtedness under this Note is not paid in full on or
before March 18, 2009, then commencing on (and including) March 19, 2009, interest on the unpaid
principal amount of this Note shall accrue thereafter until paid at a rate equal to fifteen percent
(15%) per annum.

     3. Payment of Interest and Principal. The indebtedness under this Note shall be
payable as set forth herein. The Company shall pay accrued interest hereunder (a) upon the payment
or prepayment of any principal amount owing under this Note (but only on the principal amount so
prepaid or paid) and (b) on the Maturity Date (as defined below). The outstanding principal
balance of this Note, together with all accrued and unpaid interest thereon, shall be due and
payable on the date (the “Maturity Date”) that is the earlier to occur of: (i) September
18, 2009 and (ii) the date that both (x) the Escrow Funds (in an amount equal to

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the then-outstanding principal amount of this Note, plus the Interest Amount) have been paid and deposited in
escrow pursuant to the terms of Section 1.5(a)(i) of the Share Purchase Agreement, and (y)
the Incremental Interest Amount has been paid in full to Payee pursuant to the terms of Section
1.5(a)(ii) of the Share Purchase Agreement. Such payment into escrow of the Escrow Funds and
payment to Payee of the Incremental Interest Amount by the Company shall be deemed to be the
payment in full of the outstanding indebtedness evidenced by this Note, whereupon Payee shall mark
this Note as “Cancelled” and surrender this Note to the Company. This Note may be prepaid, at any
time, in whole or in part, with each such prepayment being applied first to accrued and unpaid
interest, and then to outstanding principal, upon one (1) Business Day’s prior written notice,
without premium or penalty. Whenever any payment to be made hereunder shall be stated to be due on
a day that is not a Business Day, the payment shall be made on the next succeeding Business Day and
such extension of time shall be included in the computation of the amount of interest due
hereunder.

     4. Right of Set-Off. The Company shall have the right to withhold and set off against
any amount due hereunder, the amount of (a) any indemnification of money Damages to which the
Company (or any Buyer Indemnified Person) is entitled under Article 8 of the Share Purchase
Agreement, but only subject to and in accordance with the terms of Section 8.11(a) thereof,
and (B) any purchase price adjustments payable by Sellers pursuant to Section 1.5 of the
Share Purchase Agreement, but only subject to and in accordance with the terms of Section
1.5(a)(v) thereof.

     5. Events of Default. The occurrence of any of the following shall constitute an
“Event of Default” under this Note:

          (a) Failure to Pay. The Company shall fail in any material respect to pay (i) any principal
payment on the due date thereof as provided herein or (ii) any interest or other payment required
under the terms of this Note on the date due, and such payment shall not have been made within ten
(10) Business Days of the Company’s receipt of Payee’s written notice to the Company of such
failure to pay; provided, however, that any exercise by the Company in good faith of its
right of setoff pursuant to Section 4 above, whether or not ultimately determined to be
justified, shall not constitute an Event of Default hereunder;

          (b) Breach of Covenants. The Company shall fail in any material respect to observe or perform
any covenant, obligation, condition or agreement contained in this Note and (i) such failure shall
continue for thirty (30) days, or (ii) if such failure is not curable within such thirty (30) day
period, but is reasonably capable of cure within sixty (60) days, then either (A) such failure
shall continue for sixty (60) days or (B) the Company shall not have commenced curative measures in
a manner reasonably satisfactory to Payee within such initial thirty (30) day period;

          (c) Voluntary Bankruptcy or Insolvency Proceedings. The Company shall (i) apply for or
consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a
substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its
debts generally as they mature, (iii) make a general assignment for the benefit of its or any of
its creditors, (iv) be dissolved or liquidated in full or in part, (v) become “insolvent” (as such
term may be defined or interpreted under applicable statutory authority), (vi) commence a

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voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in
effect or consent to any such relief or to the appointment of or taking possession of its property
by any official in an involuntary case or other proceeding commenced against it or (vii) take any
action for the purpose of effecting any of the foregoing;

          (d) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a
receiver, trustee, liquidator or custodian of the Company or of all or a substantial part of the
property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization
or other relief with respect to the Company or the debts thereof under any bankruptcy, insolvency
or other similar law now or hereafter in effect shall be commenced, and an order for relief entered
or such proceeding shall not be dismissed or discharged within sixty (60) days of such
commencement; or

          (e) Senior Indebtedness. ION shall be in default under the terms of any Senior Indebtedness
where (i) such default has resulted in the acceleration of such Senior Indebtedness prior to its
stated maturity, and (ii) the principal amount at maturity of such Senior Indebtedness under which
there has been such a default aggregates $20.0 million or more.

     6. Rights of Payee upon Default. Upon the occurrence or existence of any Event of
Default (other than any Event of Default referred to in Sections 5(c) or 5(d)
hereof), and at any time thereafter during the continuance of such Event of Default, Payee may, by
written notice to the Company, declare all outstanding obligations payable by the Company hereunder
to be immediately due and payable without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived, anything contained herein to the contrary
notwithstanding. Upon the occurrence or existence of any Event of Default described in
Sections 5(c) or 5(d) hereof, immediately and without notice, all outstanding
obligations payable by the Company hereunder shall automatically become immediately due and
payable, without presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived, anything contained herein. In addition to the foregoing remedies, upon
the occurrence or existence of any Event of Default, Payee may exercise any other right, power or
remedy granted to it otherwise permitted to it by law, either by suit in equity or by action at
law, or both.

     7. Guarantee. The payment of principal of and interest on this Note is guaranteed by
ION pursuant to the terms of that certain Guaranty dated as of September 18, 2008, and Payee shall
be entitled to the benefits of such Guaranty.

     8. Special Company Covenants.

          (a) The Company agrees that until all outstanding indebtedness under this Note is paid in
full, ION shall not, and shall cause its Subsidiaries not to, incur, assume, suffer to exist or
issue any indebtedness or debt security other than (i) indebtedness created under the Senior Credit
Facility, including renewals, extensions, and refinancings thereof, in an aggregate principal
amount at any one time outstanding not to exceed US$235,000,000, (ii) this Note; (iii) the
outstanding 5.50% Convertible Senior Notes due 2008, (iv) equipment financing facilities, capital
leases and/or sale/leaseback arrangements in an aggregate amount not to exceed US$44,000,000 at any
time outstanding, (v) indebtedness existing as of the date hereof until such

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amounts are repaid; (vi) indebtedness of ION owed to a Subsidiary and of a Subsidiary owed to
ION or any other Subsidiary, (vii) indebtedness arising under any hedging agreement permitted under
the Senior Credit Facility, (viii) letters of credit and /or bank guarantees not issued under the
Senior Credit Facility up to an aggregate maximum amount at any time of US$6,600,000, (ix)
indebtedness of any entity that becomes a Subsidiary after the date hereof, in an aggregate amount
not to exceed US$44,000,000, provided that such indebtedness exists at the time such entity
becomes a Subsidiary and is not created in contemplation of or in connection with such entity
becoming a Subsidiary, (x) purchase money indebtedness, (xi) unsecured indebtedness subordinate in
right of payment to the indebtedness arising under this Note, (xii) indebtedness arising on account
of deferred charges, deferred workers compensation liabilities, or deferred employee medical
liabilities, (xiii) any financed insurance premiums, (xiv) indemnities and surety obligations
arising in the ordinary course of business, (xv) obligations consisting of trade payables
(including trade notes payable) that are not more than ninety (90) days past due, (xvi) other
unsecured indebtedness (including notes payable) that shall not exceed, at any time outstanding, in
the aggregate, US$45,000,000, (xvii) indebtedness (the “Refinancing Debt”) incurred in the
form of “Bridge Loans”, “Notes”, “Exchange Notes” and/or “Term Loans” as such terms are defined in
that certain Commitment Letter dated August 28, 2008 by and between Jefferies Finance LLC and ION,
in an aggregate principal amount not to exceed US$175,000,000, provided that the proceeds
of the Refinancing Debt are used to repay in full (A) the outstanding revolving credit loan
indebtedness under the Senior Credit Facility originally incurred contemporaneously with the
issuance of this Note and (B) the outstanding indebtedness under the Short Term Bridge Loans,
(xviii) indebtedness under the Short Term Bridge Loans in an aggregate principal amount outstanding
not to exceed $41,000,000 at any one time, (xix) guarantees by ION of any indebtedness of a
Subsidiary and by any Subsidiary of any indebtedness of ION or any other Subsidiary to the extent
that such indebtedness is permitted under the foregoing clauses (i) through (xviii); provided,
however, anything herein to the contrary notwithstanding, indebtedness permitted in clauses (iv),
(ix), (x), (xi) and (xvi) shall not in the aggregate exceed $20,000,000 at any time outstanding.

          (b) In addition, the Company agrees that at such time that ION incurs the Refinancing Debt and
applies a portion of the proceeds thereof to the payment in full of (i) the outstanding revolving
credit loan indebtedness under the Senior Credit Facility originally incurred contemporaneously
with the issuance of this Note and (ii) the outstanding indebtedness under the Short Term Bridge
Loans, the total proceeds from such Refinancing Debt shall also include amounts sufficient to repay
in full, which at such time shall be applied to repay in full, the then-outstanding principal of
and interest on the indebtedness under this Note.

     9. Successors and Assigns. Subject to the restrictions on transfer described in
Section 10 below, the rights and obligations of the Payee shall be binding upon and benefit
the successors, assigns and transferees of the Payee.

     10. Waiver and Amendment. Any provision of this Note may be amended, waived or
modified only upon the prior written consent of the Company and Payee.

     11. Transfer of this Note. This Note shall not be assigned or transferred by Payee
without the express prior written consent of the Company, which consent shall not be unreasonably
withheld; provided, however, that if an Event of Default has occurred and remains

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uncured, then Payee’s rights and obligations under this Note shall be freely assignable by
Payee so long as Payee and its assignee comply with all applicable securities laws in relation to
such assignment.

     12. Notices. All notices, requests, demands, claims, instructions and other
communications hereunder shall be in writing. Any notice, request, demand, claim, instruction or
other communication to be given hereunder by either party to the other shall be sent by facsimile
(with confirmation received of the recipient’s number) to the number stated below or shall be
delivered personally or sent by registered or certified mail (postage prepaid and return receipt
requested) to the address stated below.

If to the Company:

c/o ION Geophysical Corporation

2105 CityWest Blvd, Suite 400

Houston, Texas 77042-2839

Attention: R. Brian Hanson

Facsimile: (281) 879-3674

Copy to (which shall not constitute notice):

ION Geophysical Corporation

2105 CityWest Blvd, Suite 400

Houston, Texas 77042-2839

Attention: David L. Roland

Facsimile: (281) 879-3600

And

Mayer Brown LLP

700 Louisiana Street, Suite 3400

Houston, Texas 77002

Attention: Marc H. Folladori

Facsimile: (713) 238-4696

If to Payee:

161 Lochend Drive

Cochrane, Alberta T4C 2H2

Attention: Donald G. Chamberlain

Facsimile: (403) 932-2438

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Copy to (which shall not constitute notice):

Borden Ladner Gervais LLP

1000 Canterra Tower

400 Third Avenue S.W.

Calgary, Alberta T2P 4H2

Attention:   David C. Whelan

Facsimile:   (403) 266-1395

or at such other facsimile number or address for a party as shall be specified by like notice. Any
notice which is delivered personally in the manner provided herein shall be deemed to have been
duly given to the party to whom it is directed upon actual receipt by such party. Any notice which
is sent by facsimile or addressed and mailed in the manner herein provided shall be conclusively
presumed to have been duly given to the party to which it is addressed on the date indicated on the
facsimile confirmation or the postal receipt. Any party may change the address to which notices,
requests, demands, claims and other communications hereunder are to be delivered by giving the
other party notice in the manner herein set forth.

     13. Payment. All payments hereunder shall be made in lawful money of the United
States of America.

     14. Governing Law. This Note and all actions arising out of or in connection with
this Note shall be governed by and construed in accordance with the laws of the Province of
Alberta, without regard to the conflicts of law provisions thereof or of any other jurisdiction.

     15. Submission to Jurisdiction. Each party to this Note irrevocably and
unconditionally attorns to the jurisdiction of the courts of the Province of Alberta in any Action
arising out of or relating to this Note and agrees that all claims in respect of such Action may be
heard and determined in any such court. Each party also agrees not to bring any Action arising out
of or relating to the this Note in any other court. Each party waives any objection to venue in
any such Action and any defense of inconvenient forum to the maintenance of any Action so brought
and waives any bond, surety or other security that might be required of any other party with
respect thereto and waives any right to elect trial by jury. Any party may make service on any
other party by sending or delivering a copy of the process to the party to be served at the address
and in the manner provided for the giving of notices in Section 12. Nothing in this
Section 15 will affect the right of any party to bring any Action arising out of or
relating to this Note in any other court or to serve legal process in any other manner permitted at
Law or in equity. Each party agrees that a final judgment in any Action so brought shall be
conclusive and may be enforced by Action on the judgment or in any other manner provided at Law or
in equity.

[Signature page follows]

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     IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the date first written
above.

	 	 	 	 	 	 	 
	 	 	3226509 NOVA SCOTIA COMPANY	 	 
	 	 	a Nova Scotia unlimited liability company (the	 	 
	 	 	“Company”)	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ David L. Roland	 	 
	 

	 	 	 	 

	 	 
	 

	 	Name:	 	David L. Roland	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	Vice President	 	 
	 

	 	 	 	 	 	 

	 	 	 	 	 
	 
	 	 	 	 
	ACCEPTED AND AGREED TO BY:	 	 
	 
	 	 	 	 
	1236929 ALBERTA LTD. (the “Payee”)	 	 
	 
	 	 	 	 
	By:
	 	/s/ Donald Chamberlain	 	 
	 

	 	 

	 	 
	Name:
	 	Donald Chamberlain	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Title:
	 	President

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