Document:

EX-4.18

Table of Contents

Exhibit 4.18

SUBSCRIPTION AGREEMENT

among

COMPAGNIE GÉNÉRALE DE GÉOPHYSIQUE

and

ONEX PARTNERS LP

ONEX AMERICAN HOLDINGS II LLC

ONEX US PRINCIPALS LP

CGG EXECUTIVE INVESTCO, LLC

ONEX CORPORATION

US$84,980,000 7.75% Convertible Subordinated Bonds due 2012

Dated 27 September 2004

Confidential material has been redacted where indicated by the following symbol: [*]

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	1.
	 	DEFINITIONS	 	 	4	 
	2.
	 	ISSUE OF THE BONDS AND SUBSCRIPTION	 	 	4	 
	3.
	 	CONDITIONS PRECEDENT TO THE ISSUE AND SUBSCRIPTION OF THE BONDS	 	 	5	 
	4.
	 	PAYMENT OF THE SUBSCRIPTION PRICE	 	 	8	 
	5.
	 	ARRANGEMENT FEE AND EXPENSES	 	 	8	 
	6.
	 	REPRESENTATIONS AND WARRANTIES	 	 	10	 
	7.
	 	COVENANTS OF THE COMPANY	 	 	19	 
	8.
	 	MUTUAL COVENANTS	 	 	21	 
	9.
	 	COVENANTS OF THE SUBSCRIBERS	 	 	21	 
	10.
	 	GOVERNANCE	 	 	22	 
	11.
	 	TAX	 	 	24	 
	12.
	 	INDEMNIFICATION	 	 	24	 
	13.
	 	NOTICES	 	 	26	 
	14.
	 	MISCELLANEOUS	 	 	27	 
	15.
	 	SUBSTITUTION OF SUBSCRIBERS	 	 	28	 
	16.
	 	CONFIDENTIALITY	 	 	28	 
	17.
	 	EXCLUSIVITY	 	 	29	 
	18.
	 	GOVERNING LAW AND JURISDICTION	 	 	29	 
	19.
	 	OTHER AGREEMENTS	 	 	29	 

 

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THIS SUBSCRIPTION AGREEMENT (the “Agreement”) is made on 27 September 2004

AMONG:

	(1)	 	COMPAGNIE GÉNÉRALE DE GÉOPHYSIQUE, a French société anonyme with a share capital of
23,363,436 euros having its registered office at 1, rue Léon Migaux-Massy, 91300 with
registered number 969 202 241 RCS Evry (the “Company”), and
	 
	(2)	 	ONEX PARTNERS LP, a limited partnership organised under the laws of Delaware with its
registered office at 1209, Orange Street, Wilmington, Delaware 19801, U.S.A. c/o The
Corporation Trust Company,
	 
	(3)	 	ONEX AMERICAN HOLDINGS II LLC, a limited liability company organised under the laws of
Delaware with its registered office at 15, East Dover Street, Dover (Kent County), Delaware
19901, U.S.A.,
	 
	(4)	 	ONEX US PRINCIPALS LP, a limited partnership organised under the laws of Delaware with its
registered office at United Corporate Services, 15 E. North Street, Dover, Delaware 19901,
U.S.A.,
	 
	(5)	 	CGG EXECUTIVE INVESTCO, LLC, a limited liability company organised under the laws of Delaware
with its registered office at 874, Walker Road, Suite C, Dover (Kent County), Delaware, 19904,
U.S.A.,
	 
	(6)	 	ONEX CORPORATION, a corporation organised under the laws of the Province of Ontario with its
registered office at 161, Bay Street, P.O. Box 700, Toronto, Ontario M5J 2S1, Canada (“Onex”)
(Onex Corporation being a party to this Agreement solely with respect to sections 5.1, 5.3,
5.4 and 8.1).

The parties mentioned under (2) to (5) above shall be referred to collectively as the “Subscribers”
and individually as a “Subscriber”.

PREAMBLE

WHEREAS, on 20 September 2004, the Board of Directors of the Company approved in principle the
issuance to the Subscribers of US$84,980,000 nominal amount 7.75% Convertible Subordinated Bonds
due 2012 (the “Bonds”), which Bonds are convertible into new ordinary shares with a 2 euros par
value of the Company (each a “Share”) and are redeemable in cash or, in certain circumstances, at
the option of the Company at Maturity, for new and/or existing Shares;

 

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WHEREAS, the issuance of the Bonds by the Company to the Subscribers is subject to a number of
conditions, and in particular, the approval by the shareholders of the Company at the Shareholders’
Meeting (as defined in section 3.1.2); and

WHEREAS, the purpose of this Agreement is to define the terms and conditions of the subscription of
the Bonds by the Subscribers.

THE PARTIES HEREBY AGREE as follows:

1.     DEFINITIONS

In this Agreement:

	1.1	 	Terms beginning with capitalised letters shall have the meaning given to them in the
Terms and Conditions (as defined in section 2.2) save for the terms expressly defined in this
Agreement.
	 
	1.2	 	A reference to a section or schedule, unless the context otherwise requires, is a
reference to a section or schedule to this Agreement.
	 
	1.3	 	An expression of notice, agreement, waiver or satisfaction, pursuant to the terms of
this Agreement, by one Subscriber will constitute notice, agreement, waiver or satisfaction
for all the Subscribers.
	 
	1.4	 	The headings and sub-titles are for information purposes only and have no bearing on
the interpretation of this Agreement.

2.     ISSUE OF THE BONDS AND SUBSCRIPTION

	2.1	 	On the Issue Date (as defined in section 4.1), upon the terms and subject to the
conditions of this Agreement, the Company agrees to issue to the Subscribers, and the
Subscribers undertake to subscribe for, the Bonds for the Subscription Price (as defined in
section 4.2) in accordance with the allocation set forth in schedule A.
	 
	2.2	 	The Company and the Subscribers each agree that the terms and conditions of the Bonds
(the “Terms and Conditions”), if and when issued in accordance with the terms and subject to
the conditions of this Agreement, shall be the terms and conditions set forth in schedule B
(the “Draft Terms and Conditions”) together with any amendments or modifications expressly and
specifically required (a) by the Autorité des Marchés Financiers (the “AMF”) or (b) by reason
of any change in laws and regulations coming into force prior to the Issue Date.

 

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3.     CONDITIONS PRECEDENT TO THE ISSUE AND SUBSCRIPTION OF THE BONDS

	3.1	 	Mutual Conditions

The obligation of the Company to issue the Bonds to the Subscribers and the obligation of the
Subscribers to subscribe and pay for the Bonds shall be subject to the prior satisfaction or waiver
by each of the Company and the Subscribers of the following conditions:

	 	3.1.1	 	the receipt of all governmental and regulatory approvals necessary for the
issuance of the Bonds to the Subscribers and the issuance of Shares pursuant to the
Bonds, including the approval by the AMF (visa) on the Note d’Opération (the “Note
d’Opération”) filed with the AMF on 20 September 2004 and all approvals required to
permit the issuance and listing on the first market (Premier Marché) of Euronext Paris
S.A. of up to 4,599,900 Shares as soon as (i) the Bonds are converted in whole or in
part into Shares in accordance with the Terms and Conditions (“Conversion of Bonds”),
(ii) the Bonds are redeemed by the Company at maturity in accordance with the Terms and
Conditions through the issuance of new Shares (“Redemption of Bonds”), or (iii) Shares
are issued by the Company for purposes of paying interest which has accrued on the
Bonds in accordance with the Terms and Conditions (“Share Interest Payment”);
	 
	 	3.1.2	 	the approval by shareholders of the Company at the ordinary and
extraordinary general meeting of the shareholders of the Company held in accordance
with section 7.1 hereof (the “Shareholders’ Meeting”) of (a) the issuance of the Bonds
to the Subscribers and the issuance of Shares pursuant to the Bonds, (b) the creation
and reservation of the Shares into which the Bonds may be converted, redeemed or issued
as payment of interest, in favour of the holders of the Bonds, and (c) the
corresponding suppression of shareholders’ preferential subscription rights on the
Bonds and the Shares into which the Bonds may be converted, redeemed or issued as
payment of interest; and
	 
	 	3.1.3	 	(i) there shall not be in effect any statute, regulation, order, decree or
judgment in any jurisdiction which makes illegal or enjoins or prevents any of the
matters set forth in section 3.1.2; and (ii) there shall not have been commenced by any
unrelated third party, and be continuing, any action, proceedings or order which seeks
to prevent or enjoin the completion of any of the matters referred to in section 3.1.2
and/or any action required to be taken by the Board of Directors in order to cause the
issuance of the Bonds to the Subscribers.

	3.2	 	Company’s Conditions

The obligation of the Company to issue the Bonds to the Subscribers shall be subject to prior
satisfaction of the following further conditions, either of which may be waived in whole or in part
by the Company:

	 	3.2.1	 	the Subscribers shall have paid the Subscription Price (as defined in
section 4.2) to the Company on the Issue Date in accordance with the terms and subject
to the conditions of this Agreement;

 

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	 	3.2.2	 	there shall have been no amendments or modifications to any of sections 3.2
to 3.8, inclusive, 5.1 to 5.7, inclusive, 6.1 or 6.2 of the Draft Terms and Conditions
that are, individually or in the aggregate, adverse to the Company from a financial
point of view; provided, however, that the Company shall be entitled to
the benefit of this condition only if the Company has fully complied with its covenants
in section 7.7;
	 
	 	3.2.3	 	the representations and warranties of the Subscribers set out in section 6.2
of this Agreement shall be true and accurate in all respects as though expressly made
at and as of the Issue Date; and
	 
	 	3.2.4	 	the Subscribers shall have delivered to the Company a certificate signed by
the Officers of the Subscribers in the form set out in schedule C.

	3.3	 	Subscriber’s Conditions

The obligation of the Subscribers to subscribe for the Bonds shall be subject to the prior
satisfaction of the following further conditions, any of which may be waived in whole or in part by
the Subscribers:

	 	3.3.1	 	the Company shall have delivered to the Subscribers all of the documents and
information specified in schedule D in form and in substance satisfactory to the
Subscribers;
	 
	 	3.3.2	 	(a) the Company shall have complied with its obligations pursuant to section
7.4 below and (b) the Subscribers shall be reasonably satisfied with the results of
their due diligence investigations (conditions (a) and (b) will be deemed to have been
satisfied if the Subscribers shall not have notified the Company to the contrary in
writing on or prior to 22 October 2004);
	 
	 	3.3.3	 	no material adverse change shall have occurred in the business, affairs,
assets, financial performance or condition or prospects of the Company or of the Group
(as defined in section 6.1.1) (a “Material Adverse Event”) between 1 September 2004 and
the Issue Date;
	 
	 	3.3.4	 	there shall not have been any change in national or international financial,
political or economic conditions, currency exchange rates, exchange controls or banking
and capital markets conditions as would be likely to materially prejudice dealings in
the Shares or the value of the Shares, the rights of the Subscribers under the Bonds,
the value of the Bonds or the obligations of the Company under the Bonds;
	 
	 	3.3.5	 	the representations and warranties of the Company set out in section 6.1
shall be true and accurate in all respects as though expressly made at and as of the
Issue Date;
	 
	 	3.3.6	 	the Company shall have satisfied all of the covenants on its part to be
performed or satisfied hereunder on or before the Issue Date;

 

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	 	3.3.7	 	all third-party approvals required under any credit facility, indenture,
contractual or other obligation binding or affecting the Company in connection with the
issuance of the Bonds to the Subscribers and the issuance of Shares upon conversion of
the Bonds shall have been received on terms satisfactory to the Subscribers;
	 
	 	3.3.8	 	the Company shall have delivered to the Subscribers a certificate signed by
an Officer of the Company in the form set out in schedule E;
	 
	 	3.3.9	 	Mr. Andrew J. Sheiner shall have been elected to the Board of Directors of
the Company, such appointment becoming effective upon the payment by the Subscribers of
the Subscription Price to the Company;
	 
	 	3.3.10	 	the Registration Rights Agreement executed and delivered by the Company in
the form set out in schedule F (the “Registration Rights Agreement”) shall remain in
full force and effect;
	 
	 	3.3.11	 	the Subscribers shall have received legal opinions from counsel to the
Company, the substantial forms of which are set out in schedules G and H, that are
reasonably satisfactory in form and scope to the Subscribers; and
	 
	 	3.3.12	 	there shall have been no amendments or modifications to any of sections 3.2
to 3.8, inclusive, 5.1 to 5.7, inclusive, 6.1 or 6.2 of the Draft Terms and Conditions
that are, individually or in the aggregate, adverse to the Subscribers from a financial
point of view (including, for clarity, provisions in respect of timing and process).

	 	 	The Subscribers shall promptly notify the Company if they have conclusively determined that
one or more of the conditions set forth in this section 3.3 will not be satisfied by the
Company on the Issue Date or waived by the Subscribers.
	 
	3.4	 	Failure to Satisfy Conditions Precedent

	 	3.4.1	 	Except as otherwise agreed upon by the Subscribers and the Company, if the
mutual conditions referred to in section 3.1 have not been satisfied (or waived in
whole or in part by both the Subscribers and the Company, in writing), either the
Subscribers or the Company can terminate this Agreement and, as a result, the
Subscribers will cease to have any obligation to subscribe to the Bonds and the Company
will cease to have any obligation to issue the Bonds.
	 
	 	3.4.2	 	Except as otherwise waived in whole or in part by the Subscribers in writing
on or before the Issue Date, if the conditions precedent set forth in section 3.3 have
not been satisfied and the Subscribers have so notified the Company, the Subscribers
can terminate this Agreement and, as a result, the Subscribers will cease to have any
obligation to subscribe to the Bonds and the Company will cease to have any obligation
to issue the Bonds.
	 
	 	3.4.3	 	Except as otherwise waived in whole or in part by the Company in writing on
or before the Issue Date, if the condition precedent set forth in section 3.2 has not
been satisfied and the Company has so notified the Subscribers, the Company

 

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	 	 	 	can terminate this Agreement and, as a result, the Subscribers will cease to have
any obligation to subscribe to the Bonds and the Company will cease to have any
obligation to issue the Bonds.
	 
	 	3.4.4	 	If the Subscribers or the Company terminate this Agreement pursuant to
sections 3.4.1, 3.4.2 or 3.4.3 above, each party shall cease to have any obligation or
liability to each other under this Agreement, except as described in sections 5.3 and
14.4.

	4.	 	PAYMENT OF THE SUBSCRIPTION PRICE
	 
	4.1	 	The issue of the Bonds shall take place on the day (the “Issue Date”) that is (i) three
(3) Business Days after the later of the date of the Shareholders’ Meeting and the date that
all required regulatory approvals for the issuance of the Bonds and the issuance of Shares
upon conversion of the Bonds have been obtained by the Company or (ii) such other date agreed
upon by the Company and the Subscribers in writing; provided that in no event shall
the Issue Date be any later than 31 December 2004. If the Issue Date does not occur on or
prior to 31 December 2004, this Agreement will terminate automatically on 1 January 2005,
except as described in sections 5.3 and 14.4. The Issue Date shall be a Business Day and
shall be notified by the Company to the Subscribers no later than three (3) Business Days
prior to such date.
	 
	4.2	 	On the Issue Date, and in accordance with the terms and subject to the conditions of
this Agreement, the Subscribers shall pay to the Company in US Dollars an aggregate amount
equal to 100% of the principal amount of the Bonds (being US$ 84,980,000) (the “Subscription
Price”) and the Company shall issue the Bonds to the Subscriber in accordance with the
allocation set forth in schedule A.
	 
	4.3	 	Payment Terms

	 	4.3.1	 	The Subscription Price will be paid into an account of the Company
denominated in US Dollars in accordance with the transfer instructions to be delivered
to the Subscribers not later than three (3) Business Days prior to the Issue Date.
	 
	 	4.3.2	 	The Company shall ensure that promptly following the issue of the Bonds the
necessary recordings are made in the shareholders’ register held by BNP Paribas
Securities Services acting on behalf of the Company.

	5.	 	ARRANGEMENT FEE AND EXPENSES
	 
	5.1	 	The Company undertakes to pay, upon subscription of the Bonds by the Subscribers, to
Onex a cash arrangement fee equal to US$ [*].
	 
	5.2	 	Furthermore, the Company, upon subscription of the Bonds by the Subscribers, shall on
demand pay in cash to the Subscribers the amount of all reasonable and duly evidenced
out-of-pocket costs and expenses incurred by the Subscribers in connection with the
transactions contemplated by this Agreement up to a maximum amount of US$ [*] (including legal
fees incurred up to the Issue Date).

 

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	5.3	 	In the event that the condition precedent in section 3.1.2 is not satisfied as at the
Latest Approval Date (as defined in section 7.1), then, provided that the Subscribers
have not delivered to the Company prior to the earlier of the date of the Shareholders’
Meeting and the Latest Approval Date written notice that they have conclusively determined
that one or more of the conditions set forth in section 3.3 will not be satisfied by the
Company on the Issue Date or waived by the Subscribers, the Company shall pay or cause to be
paid a breakage fee of US$ 5,500,000 in cash to Onex (the “Breakage Fee”) within five (5)
Business Days after the earlier of:

	 	5.3.1	 	the date of the Shareholders’ Meeting;
	 
	 	5.3.2	 	29 October 2004, if the Latest Approval Date (as defined in section 7.1) is
not extended in accordance with section 7.1;
	 
	 	5.3.3	 	30 November 2004, if the Latest Approval Date is extended in accordance with
section 7.1 (other than clause (i) thereof, in which case clause 5.3.1 above shall
apply) to a date that is after 29 October 2004 and on or before 30 November 2004; and
	 
	 	5.3.4	 	31 December 2004, if the Latest Approval Date is extended in accordance with
section 7.1 to a date that is after 30 November 2004 and on or before 31 December 2004.

	 	 	In the event the Company pays or causes to be paid the Breakage Fee in accordance with the
provisions of this section 5.3, the Company shall not be liable to the Subscribers for the
reimbursement of the Subscribers’ out-of-pocket expenses as described in section 5.2, nor
for any other form of liability or payment of damages, indemnification, compensation of
losses, costs and/or expenses to the benefit of the Subscribers, which the Subscribers
expressly acknowledge and agree, and the Subscribers shall be deemed to waive any right of
action against the Company as well as any right under this Agreement, including any right to
damages or any form of indemnification from the Company for any reason whatsoever in
connection with or in relation to this Agreement or the transactions contemplated therein,
in all cases other than as provided in section 12.4. This Agreement shall automatically
terminate upon payment of the Breakage Fee, save for this section 5.3 and sections 12 (to
the extent provided in section 12.4), 13, 14 (excluding section 14.4), 16, 17 and 18.
	 
	5.4	 	All consideration due from the Company under this Agreement shall be deemed to be
exclusive of any value added tax (“VAT”). If VAT is chargeable thereon, an amount equal to
such VAT (in addition to the consideration in respect of which it is chargeable) shall be paid
to the Subscribers or to Onex, as applicable, in addition to and at the same time as the
relevant consideration.
	 
	5.5	 	Where this Agreement requires the Company to reimburse the Subscribers for any costs
or expenses incurred by the Subscribers, the Company shall also at the same time pay and
indemnify the Subscribers against all VAT incurred by the Subscribers in respect of the costs
or expenses save to the extent that the Subscribers are entitled to repayment or credit in
respect of such VAT.

 

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	6.	 	REPRESENTATIONS AND WARRANTIES
	 
	6.1	 	Representations and Warranties of the Company
	 
	 	 	The Company represents and warrants to the Subscribers and agrees with the Subscribers, as
follows:

	 	6.1.1	 	Corporate Existence and Power
	 
	 	 	 	The Company and each of the companies controlled by it within the meaning of
Article L.233-3 of the Code de commerce (collectively hereinafter the
“Subsidiaries” and, individually, a “Subsidiary”, and the Company and its
Subsidiaries collectively hereinafter the “Group”) are duly organised and validly
existing pursuant to laws and regulations currently in effect and are duly
qualified to do business and are in good standing in each jurisdiction in which
their respective ownership or lease of property or the conduct of their respective
businesses requires such qualification, and possess, both in France and abroad, all
material permits, licenses, approvals and authorizations that are necessary to
conduct their respective businesses. The Company is registered with the commercial
and companies registry of Evry under no. 969 202 241, its bylaws have been approved
in compliance with all applicable law and the members of its Board of Directors and
the chairman of such Board of Directors have been duly appointed and perform their
respective duties in compliance with French law.
	 
	 	6.1.2	 	The Company has a share capital as of the date hereof of 23,363,436 euros
represented by 11,681,718 ordinary shares of the same class giving their holders
identical rights and all of the issued and outstanding share capital of the Company has
been validly issued and is fully paid.
	 
	 	6.1.3	 	Except as set forth in the Document de Référence filed with the AMF on 10 May 2004 and all subsequent publicly filed updates and amendments thereto (the
“Document de Référence”), the Company’s annual report on Form 20-F for the year ended 31 December 2003 (the “CGG 20-F”) and Schedule I, there are no outstanding shares,
securities, options, commitments, instruments or warrants giving access to a portion of
the capital or voting rights of the Company nor any other
undertakings to issue such shares, securities, options, commitments, instruments or warrants.
	 
	 	6.1.4	 	Enforceability
	 
	 	 	 	This Agreement, the Terms and Conditions and the Registration Rights Agreement have
been duly authorized and, when executed and delivered by the Company, will
constitute valid and legally binding agreements which shall be enforceable against
the Company in accordance with their terms.

 

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	 	6.1.5	 	Validity of Bonds and Shares

	 	(a)	 	On the Issue Date, the Bonds will have been validly authorised by the
requisite corporate approvals including all necessary approvals of the Board
of Directors and the shareholders of the Company;
	 
	 	(b)	 	On the Issue Date, subject to the payment of the Subscription Price
by the Subscribers, the Bonds will be validly issued and will constitute
binding obligations of the Company enforceable in accordance with the Terms
and Conditions;
	 
	 	(c)	 	As of the date of this Agreement, the Board of Directors has taken
all actions presently within its power and required by law to cause the
issuance of the Bonds to the Subscribers;
	 
	 	(d)	 	Upon completion of the issuance of the Bonds, the Bonds shall be
validly issued, freely transferable and fully paid and there are not at the
date of this Agreement and there shall not be at the Issue Date any options,
commitments, warrants or other subscription, purchase, pre-emption rights or
third-party rights with respect to the Bonds;
	 
	 	(e)	 	On the Issue Date, the Bonds shall be issued entirely outside France;
and
	 
	 	(f)	 	The Shares to be issued upon conversion, or issued or delivered upon
redemption or payment of interest of the Bonds have been duly authorised by
the Company and are, in the case of existing Shares and in the case of new
Shares will be upon their issuance, validly issued and fully paid and free
from any right of pledge or usufruct, preferential subscription right (droit
préférentiel de souscription) or priority subscription period (délai de
priorité).

	 	6.1.6	 	Compliance with Law

	 	(a)	 	The Company has not since 1 January 2003 violated the continuous
disclosure provisions provided by any law, regulation or stock exchange rule
applicable to the Company.
	 
	 	(b)	 	Neither the Company nor any of its Subsidiaries has since 1 January
2003 violated any applicable provision of any law, regulation or stock
exchange rule not referred to in paragraph (a) above, except for violations of
laws, regulations or rules that have not had and will not have, individually
or in the aggregate, a Material Adverse Effect (as defined in section 6.1.8).

	 	6.1.7	 	Compliance of Contemplated Transactions with Agreements, By-Laws and Laws

	 	(a)	 	The Company has all third-party approvals required under any credit
facility, indenture, contractual or other obligation binding or affecting the
Company in connection with (A) the issuance of the Bonds to the Subscribers
and (B) the issuance of Shares upon conversion of the Bonds;

 

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	 	(b)	 	The issuance, subscription, conversion and transfer of the Bonds, the
use of the proceeds therefrom, the execution and performance of this Agreement
and the Registration Rights Agreement by the Company and the performance by
the Company of its obligations pursuant to the Terms and Conditions (x) do not
and shall not violate any legislation, regulation or decision applicable to
the Company or any of its Subsidiaries, or the provisions of its or their
by-laws (y) do not and shall not constitute a breach of any indenture,
mortgage, deed of trust, loan agreement (including but not limited to the
revolving credit facility agreement (the “Senior Credit Facility”) dated 12
March 2004 by and between the Company as principal company, the Company, CGG
Marine and Sercel as borrowers, Natexis Banques Populaires as arranger,
Natexis Banques Populaires as agent and the Lenders (as such term is used in
the Senior Credit Facility) and the Indenture (the “Indenture” ) dated as of
22 November 2002, among the Company, any Guarantors (as such term is used in
the Indenture) and The Chase Manhattan Bank as trustee, relating to the
Company’s Series A and Series B 10-5/8% Senior Notes due 2007 or other
agreement or other instrument binding upon the Company or any judgment, order
or decree of any governmental body, agency or court having jurisdiction over
the Company except in such case as would not have a Material Adverse Effect,
and (z) do not and shall not constitute an event of default allowing any
creditor to accelerate any indebtedness for borrowed money contracted or
guaranteed by the Company or any of its Subsidiaries.
	 
	 	(c)	 	Except for the approval (visa) of the AMF on the Note d’Opération, no
consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required to be obtained by the Company for the
performance by the Company of its obligations under this Agreement, the
Registration Rights Agreement and the Bonds or for the consummation by the
Company of the transactions contemplated by this Agreement;
	 
	 	(d)	 	The issuance of the Bonds hereunder, in accordance with the terms and
subject to the conditions of this Agreement, outside of France does not
require any decision, publication, notice or authorization to or by the
Company or any administrative authority, other than such as have been obtained
or shall be obtained by the Company by the Issue Date; and
	 
	 	(e)	 	All the Shares that are to be delivered pursuant to the Terms and
Conditions shall be capable of being immediately listed on Euronext Paris S.A.
and shall be so listed when delivered.

	 	6.1.8	 	Default; Compliance

	 	(a)	 	Since 1 January 2004, no event has occurred or circumstance arisen
that, had the Bonds already been issued, would (whether or not with the giving
of notice and/or the passage of time and/or the fulfilment of any other

 

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	 	 	 	requirement) constitute an event described under section 3.6 or 3.7 of the
Terms and Conditions;
	 
	 	(b)	 	Neither the Company nor any of its Subsidiaries is in default in the
performance of or observance of any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan agreement
(including but not limited to the Senior Credit Facility and the Indenture),
lease or other agreement or instrument to which it is a party or by which it
may be bound or to which any of its properties may be subject, for which the
failure to perform or observe (i) has had or would be likely to have a
material adverse effect on the business, affairs, assets, financial
performance or condition, or prospects of the Company or of the Group, taken
as a whole, or (ii) materially adversely affects or would be likely to
materially adversely affect the capacity of the Company to perform its
obligations under the Bonds and this Agreement (both (i) and (ii), a “Material
Adverse Effect”);

	 	6.1.9	 	Financial Statements
	 
	 	 	 	The audited consolidated and statutory financial statements of the Company for the
fiscal years ended 31 December 2003, 2002 and 2001 (the “Annual Accounts”) as
certified by the statutory auditors of the Company as they appear (or are
incorporated by reference) in the Document de Référence and the audited
consolidated financial statements for the fiscal years ended
31 December 2003, 2002
and 2001 (the “20-F Annual Accounts”) as they appear in the CGG 20-F give a true
and fair view of the financial position of the Company and its consolidated
Subsidiaries and of their financial results as at the dates on which such accounts
were closed; the Annual Accounts and the 20-F Annual Accounts have been prepared in
conformity with generally accepted accounting principles in France; the Annual
Accounts and the 20-F Annual Accounts have been certified by the Company’s
statutory auditors as required under French and U.S. law, respectively.
	 
	 	6.1.10	 	No Material Change
	 
	 	 	 	Since 1 January 2004 (or in the case of subclause (5) below, 1 September 2004), and
except as set forth in the Document de Référence and the CGG 20-F, (1) there has
been no variation in the total amount of the share capital and the premiums related
to the share capital of the Company nor have the reserves been distributed except
as may occur as a result of the exercise of a stock option issued pursuant to the
stock option plans described in the Document de Référence; (2) no securities or
options exercisable either presently or in the future for shares of the Company
have been granted other than with respect to the issuance of the Bonds; (3) except,
with respect to this subclause (3) only, for any transaction or agreement entered
into or action taken with respect to Petroleum Geo-Services ASA after the date of
this Agreement but on or before the Issue Date, neither the Company nor any of its
Subsidiaries has entered into any transactions, other than those entered into in
the ordinary course of

 

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	 	 	 	business, which, individually or in the aggregate, would be material for the
Company or the Group; (4) neither the Company nor any of its Subsidiaries has
sustained any loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree which has or would reasonably be
expected to have a Material Adverse Effect; (5) there has not occurred any Material
Adverse Event; and (6) there has been no significant change in the methods used by
the Company to establish its audited consolidated and statutory financial
statements.
	 
	 	6.1.11	 	Indebtedness
	 
	 	 	 	The total “net debt” of the Company, as defined and set forth on page 35 of the CGG
20-F, has not materially changed since 31 December 2003, except for the increase
linked to the financing necessary to the acquisitions made by Sercel described in
Section 7.1.a of the Document de Référence filed with the AMF on 10 May 2004, the
aggregate amount of such financing being 33.9 million euros.
	 
	 	6.1.12	 	Litigation
	 
	 	 	 	Except as set forth in the Document de Référence and the CGG 20-F, neither the
Company nor any of its Subsidiaries is involved in, has received written notice of
or, to the best of the Company’s knowledge, has been threatened to become involved
in, any administrative or arbitration proceeding that has, or is likely to have,
taken alone or together with other proceedings, a Material Adverse Effect.
	 
	 	6.1.13	 	Note d’Opération, Document de Référence and CGG 20-F
	 
	 	 	 	As of their respective dates, the information contained in the Note d’Opération and
the Document de Référence is true and accurate and includes, to the extent required
by applicable laws and regulations, all the information required for investors to
form a judgement on the value of the assets and liabilities, the business, the
financial situation, the financial results and the future prospects of the Company
and its Subsidiaries and nothing has been omitted which would affect the
reliability of this information. As of 1 June 2004, the information contained in
the CGG 20-F was true and complete in all material respects and did not contain any
untrue statement of a material fact and did not omit to state a material fact
required by applicable law or regulation to be stated therein or necessary in order
to make the statements therein not misleading in light of the circumstances under
which they were made.
	 
	 	6.1.14	 	No Manipulation of Securities Prices
	 
	 	 	 	Neither the Company nor any of its Subsidiaries has taken or will take, directly or
indirectly, any action designed to, or that constitutes or might reasonably be
expected to, cause or result in manipulation of the price of any security of the
Company to facilitate the issuance, or resale of the Bonds.

 

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	 	6.1.15	 	Investment Company Act
	 
	 	 	 	The Company is not and, after giving effect to the issuance of the Bonds and
applying the net proceeds thereof, will not be an “investment company”, or an
entity “controlled” by an “investment company”, as such terms are defined in the
United States Investment Company Act of 1940, as amended.
	 
	 	6.1.16	 	PFIC
	 
	 	 	 	The Company was not a “passive foreign investment company” (“PFIC”) within the
meaning of Section 1297 of the U.S. Internal Revenue Code of 1986 as amended, for
the year ended 31 December 2003, and taking into account the proceeds from the
issuance of Bonds believes that it will not become a PFIC for the year ended 31
December 2004 and does not expect to become a PFIC for any future taxable year.
	 
	 	6.1.17	 	No General Solicitation in the U.S.
	 
	 	 	 	Neither the Company, nor any affiliate of the Company (as defined in Rule 501(b) of
the U.S. Securities Act of 1933, as amended (the “Securities Act”)), nor any person
acting on its or their behalf has offered or sold the Bonds or the Shares to be
issued upon Conversion of Bonds, Redemption of Bonds or Share Interest Payment by
means of any general solicitation or general advertising as those terms are used in
Regulation D under the Securities Act or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act.
	 
	 	6.1.18	 	Directed Selling Efforts
	 
	 	 	 	Neither the Company nor any affiliate (as defined in Rule 405 under the Securities
Act) has engaged or will engage in any directed selling efforts (within the meaning
of Regulation S of the Securities Act) with respect to the Bonds or the Shares to
be issued or delivered upon Conversion of Bonds, Redemption of Bonds or Share
Interest Payment.
	 
	 	6.1.19	 	Foreign Issuer
	 
	 	 	 	The Company is a “foreign issuer” as such term is defined in Rule 902(e) of
Regulation S of the Securities Act.
	 
	 	6.1.20	 	No Substantial U.S. Market Interest
	 
	 	 	 	The Company reasonably believes that there is no “Substantial U.S. market interest”
within the meaning of Rule 902(j) of Regulation S of the Securities Act in the
Company’s debt securities or Shares.
	 
	 	6.1.21	 	No Integration with Other Offerings
	 
	 	 	 	Within the preceding six months neither the Company, nor any of its affiliates (as
defined in Rule 501(b) of the Securities Act), nor any other person acting on its
or their behalf has offered or sold to any person any bonds, or any securities

 

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	 	 	 	of the same or a similar class as the Bonds or Shares, other than Bonds offered or
sold to the Subscribers hereunder. The Company will take reasonable precautions
designed to ensure that any offer or sale, direct or indirect, in the United States
or to any U.S. person (as defined in Rule 902 of Regulation S of the Securities
Act) of any Bonds, Shares or any substantially similar security issued by the
Company, within six months subsequent to the date on which the distribution of the
Bonds has been completed, is made under restrictions and other circumstances
reasonably designed not to affect the status of the offer of the Bonds and the
Shares to be issued upon Conversion of Bonds, Redemption of Bonds or Share Interest
Payment as transactions exempt from the registration provisions of the Securities
Act, other than such actions as are contemplated by the Registration Rights
Agreement.
	 
	 	6.1.22	 	Registration under the Securities Act

	 	(a)	 	Except as provided for in the registration rights agreements dated as
of (x) 10 December 1999 between The Beacon Group Energy Investment Fund II,
L.P. and the Company, (y) 22 November 2000 between the Company, RBC Dominion
Securities Corporation, Salomon Brothers International Limited, Credit
Lyonnais and CIBC World Markets Corp. and (z) 8 February 2002 between the
Company and RBC Dominion Securities Corporation and Salomon Smith Barney,
Inc., there are no contracts, agreements or understandings between the Company
and any person granting such person the right to require the Company (i) to
offer or sell Shares to or for such person or (ii) to file a registration
statement under the Securities Act, or a prospectus or similar document under
the securities laws of any country other than the U.S., with respect to any
securities of the Company;
	 
	 	(b)	 	Subject to the accuracy of the representations and warranties of the
Subscribers contained in sections 6.2.4, 6.2.8, 6.2.9, 6.2.10, 6.2.11, 9.6 and
9.7, the Securities Act does not require that the Bonds be registered
thereunder to permit the offer, sale and delivery of the Bonds in the manner
contemplated by this Agreement and the Terms and Conditions; and
	 
	 	(c)	 	Subject to the accuracy of the representations and warranties of the
Subscribers contained in sections 6.2.4, 6.2.8, 6.2.9, 6.2.10, 6.2.11, 9.6 and
9.7, the Securities Act does not require that the Shares issuable upon a
Conversion of Bonds, Redemption of Bonds or Share Interest Payment be
registered under the Securities Act.

	 	6.1.23	 	Stamp Taxes
	 
	 	 	 	No registration, stamp, documentary, issue, transfer, stock exchange or other tax
or duty (other than fixed duties and stamp taxes, the amount of which is nominal)
is payable in France in connection with the creation, issue or delivery of the
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	 	 	 	or the Terms and Conditions and with the creation, issue or delivery of the Shares
(including upon the payment of interests on the Bonds by way of the delivery or
issuance of Shares).
	 
	 	6.1.24	 	Withholding
	 
	 	 	 	Provided that the Subscribers do not hold any Shares in the Company, the Company is
not required under the laws of France to make any deduction for or on account of
any tax, levy, impost, duty, withholding, assessment or governmental charge of
whatever nature levied, imposed, collected, withheld, deducted or assessed by the
Republic of France or a political subdivision or other authority thereof or therein
having power to tax (a “Tax”) from any payment of principal or interest under the
Bonds regardless of whether these payments are made in cash or in Shares.
	 
	 	6.1.25	 	Payment of Taxes
	 
	 	 	 	Except in each case as would not have a Material Adverse Effect, each of the
Company and its Subsidiaries have filed all tax returns which have been required to
be filed and have paid all taxes shown thereon and all assessments received by them
or any of them to the extent that such taxes have become due and are not being
contested in good faith, and there is no tax deficiency which has been or is
expected to be asserted or threatened against the Company or any of its
Subsidiaries.

	6.2	 	Representations and Warranties of the Subscribers

The Subscribers represent and warrant to the Company that:

	 	6.2.1	 	Onex Partners LP and Onex US Principals LP are limited partnerships duly
organised and validly existing under the laws of Delaware and Onex American Holdings II
LLC and CGG Executive Investco, LLC are limited liability companies organised under the
laws of Delaware.
	 
	 	6.2.2	 	This Agreement has been duly authorized, executed and delivered by or on
behalf of each of the Subscribers and shall be binding on and enforceable against the
Subscribers in accordance with its terms.
	 
	 	6.2.3	 	The execution and delivery by the Subscribers of, and the performance by the
Subscribers of their obligations under, this Agreement will not contravene (i) any
applicable law, (ii) the constating documents or limited partnership agreement
governing the affairs of the relevant Subscriber, or (iii) any agreement or other
instrument binding upon any of the Subscribers or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over any of the Subscribers.
	 
	 	6.2.4	 	Neither the Subscribers nor any of their affiliates (as defined in Rule 405
under the Securities Act) or any person acting on behalf of any of them has engaged or
will engage in any directed selling efforts (within the meaning of Regulation S

 

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	 	 	 	of the Securities Act) with respect to the Bonds or the Shares to be issued upon
Conversion of Bonds, Redemption of Bonds or Share Interest Payment.
	 
	 	6.2.5	 	No Subscriber is a French resident for French taxation purposes or has its
effective seat of management in France and no Subscriber has or will allocate the Bonds
(and/or the returns thereon) to a French branch or subsidiary it may have.
	 
	 	6.2.6	 	No Subscriber is holding any shares of the Company.
	 
	 	6.2.7	 	The Subscribers have, or have access to, the necessary financial means in
order to fully subscribe and pay for the Bonds.
	 
	 	6.2.8	 	The Subscribers are each “accredited investors” as defined in Rule 501(a) of
Regulation D under the Securities Act and the Subscribers are also knowledgeable,
sophisticated and experienced in making, and are qualified to make, decisions with
respect to an investment decision like that involved in the purchase of the Bonds and
are not acquiring the Bonds, the Shares to be issued upon Conversion of Bonds,
Redemption of Bonds or Share Interest Payment with a view to their distribution.
	 
	 	6.2.9	 	The Subscribers understand that (i) their acquisition of the Bonds pursuant
to this Agreement and, subject to the provisions of the Registration Rights Agreement,
the Shares to be issued upon Conversion of Bonds, Redemption of Bonds or Share Interest
Payment, have not been registered under the Securities Act or registered or qualified
under any state securities law, (ii) the Bonds and, subject to the provisions of the
Registration Rights Agreement, the Shares to be issued on Conversion of Bonds,
Redemption of Bonds or Share Interest Payment are “restricted securities” under the
federal securities laws inasmuch as they are being acquired or will be acquired from
the Company in transactions not involving a public offering and (iii) the Bonds, the
Shares to be issued on Conversion of the Bonds, Redemption of Bonds or Share Interest
Payment, therefore cannot be resold, and agrees that it will not resell the Bonds, the
Shares to be issued on Conversion of the Bonds Redemption of Bonds or Share Interest
Payment, unless they are registered under the Securities Act or pursuant to an
exemption from registration. In connection herewith, the Subscribers represent that
they are familiar with SEC Rule 144, as presently in effect, and understand the resale
limitations imposed thereby and by the Securities Act.
	 
	 	6.2.10	 	Each Subscriber represents and agrees that neither it nor any of its
affiliates (as defined in Rule 501(b) of the Securities Act) nor any person acting on
its or their behalf has engaged or will engage in any form of general solicitation or
general advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer and sale of the Bonds, or the Shares to be issued upon
Conversion of Bonds, Redemption of Bonds or Share Interest Payment in the United
States.
	 
	 	6.2.11	 	Each Subscriber undertakes that, insofar as the Shares to be issued or
delivered on Conversion of Bonds, Redemption of Bonds or Share Interest Payment are

 

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	 	 	 	“restricted securities” as defined in Rule 144(a)(3) under the Securities Act, it
will not deposit any such Shares in any unrestricted American depositary receipt
facility of the Company, including, without limitation, the Company’s American
Depositary Receipt Facility maintained by The Bank New York.
	 
	 	6.2.12	 	No consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required to be obtained by the Subscribers for the
performance by the Subscribers of their obligations under this Agreement, the
Registration Rights Agreement and the Bonds or for the consummation by the Subscribers
of the transactions contemplated by this Agreement

7.     COVENANTS OF THE COMPANY

The Company covenants with the Subscribers as follows:

	7.1	 	The Company will convene the Shareholders’ Meeting within the time contemplated in
this section 7.1, shall use its reasonable best efforts to obtain a quorum of shareholders on
first call, and shall propose and recommend to the Shareholders’ Meeting, inter alia, the
following:

	 	7.1.1	 	the approval by shareholders of the Company at the Shareholders’ Meeting of
(a) the issuance of the Bonds to the Subscribers and the issuance of Shares pursuant to
the Bonds, (b) the creation and reservation of the Shares into which the Bonds may be
converted, redeemed or issued as payment of interest, in favour of the holders of the
Bonds, (c) the corresponding suppression of shareholders’ preferential subscription
rights on the Bonds and the Shares into which the Bonds may be converted, redeemed or
issued as payment of interest, (d) the corresponding delegation to the Board of
Directors to complete the issuance of Bonds to the Subscribers, and (e) the amendment
of the by-laws (statuts) of the Company to permit the appointment of observers
(censeurs);
	 
	 	7.1.2	 	the election of Mr. Andrew J. Sheiner to the Board of Directors of the
Company;
	 
	 	7.1.3	 	The agenda of the Shareholders’ Meeting shall also contain a proposal for
the approval of an offering of Shares in accordance with Art. L. 443-5 of the French
Labor Code.
	 
	 	 	 	The Shareholders’ Meeting shall be held on 29 October 2004 (on first call) or such later
date (i) on or before 15 November 2004 (on second call) as may be required by either the
Subscribers or the Company due solely to a failure to achieve quorum at the Shareholders’
Meeting convened on first call on a date not later than 29 October 2004, (ii) on or before
30 November 2004 as may be required by either the Subscribers or the Company due solely to a
delay by the AMF in issuing its approval (visa) on the Note d’Opération or (iii) on or
before 31 December 2004 as the Subscribers may agree in writing in their sole and absolute
discretion. The date by which the Shareholders’ Meeting is required by this section 7.1 to
be held is herein referred to as the “Latest Approval Date”.

 

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	7.2	 	The Company shall prepare and file the Note d’Opération (including an update of the
Document de Référence) provided for in section 3.1.1 and use its reasonable best efforts to
obtain the registration (visa) of the AMF needed to issue the Bonds in accordance with the
Terms and Conditions by no later than 28 October 2004.
	 
	7.3	 	If, following publication of the Note d’Opération and the Document de Référence and
prior to the Issue Date, any event shall occur or condition exist as a result of which it is
required as a matter of French law to amend or supplement the Note d’Opération and the
Document de Référence, in order to make the statements therein not misleading or in order for
the Note d’Opération and Document de Référence to comply with applicable law, the Company
shall promptly notify the Subscribers and prepare and furnish, at its own expense, to the
Subscribers, an amended Note d’Opération and Document de Référence.
	 
	7.4	 	Between the date of this Agreement and 22 October 2004, for the purposes of due
diligence of the Subscribers, the Company shall permit the Subscribers and the advisors of the
Subscribers whose identity shall be notified to the Company reasonable access during business
hours to such members of the Company’s management team and to such business, financial, legal,
human resources, marketing and other information, and such facilities and assets of the
Company, as the Subscribers may reasonably request and is reasonably necessary and customary
in this type of transaction. This obligation is subject to (i) any confidentiality
undertaking entered into by the Company with unrelated third parties, provided that
the Company shall use its reasonable best efforts to promptly obtain any required consent to
permit the disclosure of information that is subject to such undertaking and (ii) applicable
laws and regulations (including guidelines from the AMF) regarding the disclosure of material
information.
	 
	7.5	 	The Company shall use the proceeds of the Subscription Price for general corporate
purposes as determined in its sole discretion.
	 
	7.6	 	The Company shall seek and use its reasonable best efforts to obtain, on terms
satisfactory to the Subscribers in their sole and absolute discretion, (i) all third-party
approvals required under any credit facility, indenture, contractual or other obligation
binding or affecting the Company in connection with the issuance of the Bonds to the
Subscribers and the issuance of Shares upon conversion of the Bonds and (ii) all regulatory
approvals required to be obtained by the Company in connection with the issuance of the Bonds
to the Subscribers and the issuance of Shares upon conversion of the Bonds.
	 
	7.7	 	The Company shall use its reasonable best efforts to obtain the approval of the AMF
to issue the Bonds on the Terms of Conditions that would result in the satisfaction of the
conditions set forth in sections 3.2.2 and 3.3.12;
	 
	7.8	 	The Company will not, and will not cause or permit any of its Subsidiaries to enter
into or approve any transaction or matter or take any other action that would cause any of the
representations and warranties of the Company hereunder to be untrue or any of the conditions
herein to be unsatisfied as at the Issue Date or that would render the transactions
contemplated hereby incapable of completion on the terms set forth.

 

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	7.9	 	Transferability of Shares

	 	7.9.1	 	All of the Shares to be delivered upon a Conversion of Bonds, Redemption of
Bonds or Share Interest Payment will be, when delivered, fully paid, free and clear of
any charges, liens or encumbrances and freely transferable;
	 
	 	7.9.2	 	At the time of the delivery of Shares, upon a Conversion of Bonds,
Redemption of Bonds or Share Interest Payment, as the case may be, there will exist no
options, commitments, warrants or other subscription, purchase or third-party rights
with regard to such Shares; and
	 
	 	7.9.3	 	The Company will be, immediately prior to any Redemption of Bonds or Share
Interest Payment pursuant to which the Company will deliver existing Shares to the
holder of the Bonds, the sole owner of, with full legal title to, all the existing
Shares that will be delivered upon Redemption of Bonds or Share Interest Payment.

	7.10	 	In connection with the issuance of Shares to be issued upon Conversion of Bonds,
neither the Company nor any person acting on its behalf will take any action which would
result in the Shares to be issued upon Conversion of Bonds being exchanged by the Company
other than with the Company’s existing security holders exclusively where no commission or
other remuneration is paid or given directly or indirectly for soliciting such exchange.

8.     MUTUAL COVENANTS

	8.1	 	If the Company intends to make all or any part of any payment due upon a Redemption of
Bonds or Share Interest Payment by the delivery of Shares, then each of the Company and its
Subsidiaries, the Subscribers and Onex shall, and Onex and the Subscribers shall cause their
Affiliates (as defined in section 10.4) to, refrain from trading the Shares from the next
Business Day after the date of notice that Shares will be delivered until the date on which
calculation of the payment amount is to be determined. It is specified for the avoidance of
doubt that this provision will not apply to any market making activity carried out on a
discretionary basis by an investment service provider acting on behalf of the Company or any
of its Subsidiaries.

9.     COVENANTS OF THE SUBSCRIBERS

	9.1	 	Prior to the second anniversary of the Issue Date, the Subscribers together with their
Affiliates will not acquire Shares such that they would be required under applicable French
law to make an offer for all of the Shares that they do not then own. This provision shall
lapse if a public offer is filed by an acquirer not affiliated nor acting in concert with the
Subscribers with a view to acquiring all of the Shares and all equity related securities of
the Company.

	9.2	 	Upon and after the Issue Date, the Subscribers together with their Affiliates
undertake not to transfer any Bonds to an entity which holds Shares in the Company and further
undertake not to hold Shares and Bonds for a period of more than five (5) Business Days.

 

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	9.3	 	The Subscribers shall deliver to the Company on the Issue Date a certificate of
limited partnership with respect to Onex Partners LP and Onex US Principals LP and a
certificate of formation with respect to Onex American Holdings II LLC and CGG Executive
Investco, LLC.

	9.4	 	The Subscribers shall deliver to the Company on the Issue Date a certificate
confirming that the Subscribers do not hold any shares in the Company as of the Issue Date.

	9.5	 	The Subscribers shall deliver to the Company on the date hereof and on the Issue Date
the certificate set out in schedule J confirming the power of the signatories to the Agreement
and the Registration Rights Agreement acting on behalf of the Subscribers.

	9.6	 	Each Subscriber undertakes that if, at some future time, it wishes to offer, sell,
pledge, transfer or otherwise dispose of any of the Bonds or Shares to be issued on Conversion
of Bonds, Redemption of Bonds or Share Interest Payment, it will not, directly or indirectly,
offer, sell, pledge, transfer or otherwise dispose of any of the Bonds or such Shares except
in compliance with the Securities Act, applicable state securities laws and the respective
rules and regulations promulgated thereunder and if:

	 	(a)	 	the Bonds or such Shares are sold in accordance with Regulation S under the
Securities Act;
	 
	 	(b)	 	the Bonds or such Shares, if sold in the United States, are sold another
“accredited investor” as defined in Rule 501(a) of Regulation D under the Securities
Act or a “qualified institutional buyer” as defined in Rule 144A under the Securities
Act, in a transaction not involving a public offering under the Securities Act;
	 
	 	(c)	 	the Bonds or such Shares, if sold in the United States, are sold pursuant to
the exemption provided by Rule 144 under the Securities Act; or
	 
	 	(d)	 	the Bonds or such Shares, if sold in the United States, are sold pursuant to
an effective registration statement under the Securities Act.

	9.7	 	Each Subscriber undertakes that in connection with any transfer referred to in clause
9.6(b), it shall obtain from the transferee an executed letter in the form of Annex A to the
Terms and Conditions and deliver the same to the Fiscal Agent prior to any such transfer, and
that any such transfer shall be in a minimum of US$500,000 nominal value of Bonds (or the
equivalent amount in Shares).

10.     GOVERNANCE

	10.1	 	The Subscribers are entitled to propose the appointment of one member of the Board of
Directors of the Company (subject to proportional increase if the Board of Directors of the
Company increases in size beyond 11 members). The Subscribers have proposed the appointment
of Mr. Andrew J. Sheiner as member of the Board of Directors of the Company (the “Subscriber
Board Member”). The Board of Directors of the Company has approved such proposal and
undertakes to propose and recommend the appointment of Mr. Andrew J. Sheiner for approval at
the Shareholders’ Meeting. The Subscriber Board Member will be entitled to a seat on the
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	 	 	committee, or any committee with similar duties and responsibilities subject to the
provisions of sections 10.3 and 10.4.
	 
	10.2	 	In the event that the Subscriber Board Member is incapacitated, dies, resigns,
retires or is removed by the Subscribers during his mandate, the Subscribers shall be entitled
to propose at a shareholders’ meeting of the Company or, if practically possible, at a meeting
of the Board of Directors, the appointment of a new Subscriber Board Member. For this
purpose, the Subscribers shall advise the identity of the new Subscriber Board Member to the
Company five (5) Business Days before the meeting of the Board of Directors convening the
shareholders’ meeting (or the meeting of the Board of Directors, as the case may be) at which
it wishes to propose the appointment of the new Subscriber Board Member. Subject to sections
10.3 and 10.4, the Subscribers shall further be entitled to propose the renewal of the mandate
of the Subscriber Board Member(s) or the appointment of a new Subscriber Board Member.
	 
	10.3	 	In the event the Company appoints additional directors so that the number of members
composing the Board of Directors exceeds 11 members (including the Subscriber Board Member),
then the Subscribers shall be entitled to nominate a total number of members equal to the
greater of one and the number (F) determined in accordance with the following formula (rounded
down if F includes a fractional amount that is less than 0.5 and rounded up if F includes a
fractional amount that is 0.5 or greater):

F = [(A + B x C) / D] x E

	 	A = 	 	Number of Shares held by the Subscribers and their Affiliates
	 
	 	B = 	 	Number of Bonds held by the Subscribers and their Affiliates
	 
	 	C = 	 	Conversion Ratio (as defined in the Terms and Conditions) per Bond
	 
	 	D = 	 	Total number of outstanding Shares on a partially-diluted basis (giving
effect to the conversion of the Bonds but not to the conversion, exercise or exchange
of any other convertible or exchangeable security)
	 
	 	E = 	 	Total number of members of the Board

	10.4	 	In the event that the aggregate of (a) the nominal amount of Bonds then held by the
Subscribers and each of the corporations, partnerships, trusts, or unincorporated
organizations of each Subscriber that such Subscriber, directly or indirectly, controls, or is
controlled by or is under common control with such entity (“control” for the foregoing
purposes being defined as the power derived from holding, directly or indirectly, a majority
of the voting rights of an entity other than a limited partnership or, in the case of a
limited partnership, a majority of the voting rights of the general partner thereof)
(collectively hereinafter the “Affiliates”), (b) the product of the number of Shares then held
by the Subscribers and their Affiliates that were received upon a Redemption of Bonds or Share
Interest Payment and the Current Market Value as determined for purposes of each such payment,
(c) the product of the number of Shares then held by the Subscribers and their Affiliates that
were received upon a Conversion of Bonds and the effective conversion price per Share at which
they were issued and (d) the product of the number of any other Shares then held by the
Subscribers and their Affiliates and by their respective gross purchases prices is less than
US$30 million, then the entitlement

 

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	  	  	  referred to in sections 10.1 and 10.3 will lapse and the Subscriber shall cause the
Subscriber Board Member(s) to consent to removal.

	10.5	 	To the extent that the Subscribers do not exercise their common right to propose the
appointment of one or, if applicable, more members of the Board of Directors of the Company,
the Subscribers shall nevertheless be entitled to appoint one observer (“censeur”) who shall
have the right to attend all meetings of the Board of Directors of the Company. The observer
shall be entitled to receive all the same materials and information as the members of the
Board of Directors receive in respect of a particular meeting of the Board of Directors. The
provisions of sections 10.2 to 10.4 above shall apply mutatis mutandis to the Subscribers’
entitlement to appoint an observer.

11.     TAX

The Company shall pay and, within five (5) Business Days of demand, indemnify the Subscribers
against, any duly evidenced cost, loss or liability that the Subscribers incur in relation to any
stamp duty, registration or other similar Tax payable in connection with the issue of the Bonds,
the conversion or reimbursement of the Bonds or the payment of interest thereon, the entry into,
performance and enforcement of this Agreement and the issue and/or delivery of Shares resulting
from a Conversion of Bonds, Redemption of Bonds or Share Interest Payment.

12.     INDEMNIFICATION

	12.1	 	The Subscribers will indemnify and hold harmless the Company against any and all loss,
liability, claim, damage and expense (including, without limitation, reasonable legal fees and
other expenses incurred in connection with any suit, action, proceeding or investigation or
any claim asserted, as such fees and expenses are incurred) whatsoever, as incurred, arising
out of or relating to or resulting from any breach of the Subscribers’ representations,
warranties and covenants under this Agreement.

	12.2	 	The Company will indemnify and hold harmless the Subscribers against any and all
loss, liability, claim, damage and expense (including, without limitation, reasonable legal
fees and other expenses incurred in connection with any suit, action, proceeding or
investigation or any claim asserted, as such fees and expenses are incurred) whatsoever, as
incurred, arising out of or relating to or resulting from:

	 	12.2.1	 	any breach of any of the Company’s representations, warranties and
covenants under this Agreement; or
	 
	 	12.2.2	 	any untrue statement of a material fact contained or alleged to be
contained in the CGG 20-F or the Note d’Opération or the Document de Référence or
caused by any omission or alleged omission to state therein a material fact required by
applicable law or regulation to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made, not
misleading.

	12.3	 	Promptly after (x) receipt by an indemnified party under section 12.1 or 12.2 above
of notice of the commencement by a third party of any action in respect of which a claim is to
be made against an indemnifying party under such section or (y) the indemnified

 

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	 	 	party becoming aware of any fact that the indemnified party reasonably expects may give rise
to a claim by the indemnified party under section 12.1 or 12.2 above (whether in respect of
a third party claim or otherwise), such indemnified party shall notify the indemnifying
party in writing; provided that the omission so to notify the indemnifying party or
any delay in so notifying shall not relieve the indemnifying party from liability
hereunder, except to the extent that the indemnifying party is materially prejudiced by such
omission or delay. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in the defence of such action and, to the extent that
it shall wish, jointly with any other indemnifying party similarly notified, to assume the
defense thereof provided that (i) it proceeds with such defense on a timely basis, (ii) the
assumption of defense does not conflict with the interests of the indemnified party, (iii)
counsel selected by the indemnifying party is reasonably satisfactory to such indemnified
party (which shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party). After notice from the indemnifying party to such indemnified party of
its election so to assume the defense of any such action (and for such time as the
conditions set forth in clauses (i), (ii) and (iii) above continue to be satisfied), the
indemnifying party shall not be liable to such indemnified party for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of investigation
and the reasonable costs of complying with its discovery and other continuing obligations in
respect of such action. No indemnifying party shall, without the written consent of the
relevant indemnified party, such consent not to be unreasonably withheld, effect the
settlement or compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or potential
party to such action or claim) unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability arising out of such
action or claim and (ii) 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.
	 
	 	 	The indemnifying party shall not be liable for any settlement of any proceeding effected
without its written consent, such consent not to be unreasonably withheld, but if settled
with such consent or if there shall be a final judgment for the plaintiff, the indemnifying
party shall continue to be obliged hereunder to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment. If the indemnifying
party shall not have provided its written consent to any settlement proposed to be accepted
by the indemnified party, the indemnifying party shall, at the option of the indemnified
party upon written notice and to the extent that it has not already done so, assume the
defense of any such action.
	 
	12.4	 	Upon payment of the Breakage Fee by the Company to Onex in accordance with section
5.3, neither the Subscriber nor the Company will be entitled to any right to indemnification
pursuant to this section 12 other than (a) in respect of claims made or actions or proceedings
commenced by any third party and (b) in respect of claims arising from any breach on or after
the payment of the Breakage Fee by (x) the Company or the

 

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	 	 	Subscriber of their respective obligations under section 16, or (y) the Company of
its obligations under section 17 hereof.

	13.	 	NOTICES
	 
	13.1	 	Any notices or other communications required or permitted hereunder shall be
sufficiently given if in writing and personally delivered or sent by registered or certified
mail, return receipt requested, postage prepaid, overnight delivery service such as DHL or if
sent by facsimile transmission with confirmation of receipt addressed as follows or to such
other address as the relevant party shall have given notice of pursuant hereto:

	 	 	 
	If to the Subscribers, to:

	 	c/o Onex Partners LP

c/o Onex Advisors Partners LP

161, Bay Street, P.O. Box 700

Toronto, Ontario, Canada M5J 2S1

Attention: Nigel Wright/Andrew Sheiner

Tel: + 1 (416) 362 7711

Fax: + 1 (416) 362 5765
	 
	 	 
	With a copy to:

	 	Shearman & Sterling LLP

114 avenue des Champs Elysées

75008 Paris, France

Attention: Sami Toutounji

Tel: + 33 1 53 89 70 00

Fax: + 33 1 53 89 70 70
	 
	 	 
	If to the Company, to:

	 	Compagnie Générale de Géophysique

Tour Maine-Montparnasse

33, avenue du Maine

75755 Paris Cedex 15 France

Attention: Michel Ponthus/Béatrice Place-Faget

Tel: + 33 1 64 47 45 00

Fax: + 33 1 64 47 34 29
	 
	 	 
	With a copy to:

	 	Linklaters

25, rue de Marignan

75008 Paris, France

Attention: Thomas N. O’Neill III

Tel: + 33 1 56 43 56 43

Fax: + 33 1 43 59 41 96

	 	 	All such notices and other communications shall be deemed to have been given (w) if by personal
delivery, on the day of such delivery; (x) if by registered or certified mail, on the seventh day
after the mailing thereof; (y) if by overnight delivery service such as DHL, on the next business
day after the mailing thereof; and (z) if by fax, on the next day following the day on which such
fax was sent with receipt thereof confirmed by answer back.

 

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	14.	 	MISCELLANEOUS
	 
	14.1	 	Should any clause or section of this Agreement be void, unenforceable, illegal or
inapplicable, all other clauses or sections shall remain valid and binding on the parties. The
parties further agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
	 
	14.2	 	The schedules to this Agreement form an integral part of this Agreement.
	 
	14.3	 	The fact that the Subscribers or the Company have not exercised any right to which
they are entitled under this Agreement, as well as any delay by the Subscribers or the Company
in the exercise of the said rights, does not amount to a waiver of such rights, even where
such omission or delay is the fault of the party who is entitled to such right. Similarly,
the partial exercise of any right or the use of only one of the proceedings available to the
Subscribers or the Company shall not prevent the Subscribers or the Company from fully
exercising that right or exhausting all available proceedings. The remedies envisaged in this
Agreement do not exclude recourse to legal proceedings (except as provided for in section
5.3).
	 
	14.4	 	The provisions of this Agreement shall remain in full force and effect after the
signing thereof and the completion of the issue and delivery of the Bonds to the Subscribers
on the Issue Date. In case of termination of this Agreement in accordance with its terms,
sections 5.3, 6 (Representations and Warranties), 12 (Indemnification), 13 (Notices), 16
(Confidentiality), 17 (Exclusivity) and 18 (Governing Law and Jurisdiction) in this Agreement
shall remain in full force and effect (it being understood that the representations and
warranties in section 6 are given only as of the date of this Agreement and the Issue Date),
provided that upon payment of the Breakage Fee by the Company to Onex in accordance
with section 5.3, the provisions of section 5.3 will prevail to the extent of any
inconsistency with this section 14.4.
	 
	14.5	 	This Agreement shall not confer any rights or remedies upon any party other than the
parties to this Agreement and their respective successors and permitted assignees or
transferees.

 

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	15.	 	SUBSTITUTION OF SUBSCRIBERS

At any time after the Issue Date, the Subscribers shall have the right to nominate, by written
notice to the Company, an Affiliate of the Subscribers or a related co-investor acquiring Bonds
from any Subscriber or any subsequent transferee contemplated by this section 15 to succeed to and
be substituted for the continuing rights and obligations of the Subscribers under this Agreement (a
“Substitution”) with such effect as if such nominated Affiliate or related co-investor of the
Subscribers had been named as a Subscriber herein, provided that sections 9.1, 6.2
(Representations and Warranties of the Subscribers), 12 (Indemnification), 13 (Notices), 16
(Confidentiality) and 18 (Governing Law and Jurisdiction) shall remain in full force and effect
with respect to any Subscriber after a Substitution (but for the avoidance of doubt, shall also
bind the successor Affiliate or related co-investor). As from the date of such Substitution,
subject to the preceding sentence, any Subscriber that ceases to hold any Bonds shall be relieved
of its obligations hereunder to the extent included in such Substitution, and such obligations
shall be fully vested in the successor Affiliate or related co-investor.

	16.	 	CONFIDENTIALITY

Except (x) with the prior written consent of the other parties hereto or (y) if the
information is otherwise publicly available, including in any filing required by law or otherwise
made with any governmental or regulatory authority or stock exchange, unless such information was
made publicly available by either the Company or the Subscribers in breach of this Agreement, the
Company and the Subscribers shall not disclose the content of this Agreement, nor the transactions
contemplated in this Agreement and the information received in this context to any third party
except to their Affiliates, business partners, consultants, financial and legal advisors, members
of their respective boards of directors and of their Affiliates and except insofar as is required
by applicable law, regulations, legal process or the rules or requirements of any relevant
securities, regulatory authority or stock exchange (each, a “Required Disclosure”). Prior to any
Required Disclosure, the party that is required to make the disclosure shall inform the other party
to the extent reasonably possible and permissible. The parties will use their reasonable best
efforts to coordinate any disclosure, including any Required Disclosure, such that the information
being provided is consistent as to scope and content. This Agreement and the terms of this
Agreement may be disclosed by the Company to any financial institution lending monies to the
Company or with a view to obtain such financing so long as such financial institutions agree in
writing and on similar terms as contained in this section 16 to maintain the content of this
Agreement confidential.

 

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	17.	 	EXCLUSIVITY

For the period commencing on the date hereof and ending 26 November 2004, the Company shall
not, directly or indirectly, (i) effect or offer, propose or agree to effect any sale of equity or
equity-linked securities in connection with financing a transaction involving the Company and
Petroleum Geo-Services, (ii) solicit or respond to inquiries, offers, requests or proposals in
respect of any such potential transaction or matter or (iii) take any step in furtherance of or
assist or encourage any person in respect of or in connection with any of the foregoing, in each
case, without first informing the Subscribers.

	18.	 	GOVERNING LAW AND JURISDICTION

This Agreement shall be governed by and construed in accordance with the laws of the French
Republic, and the parties irrevocably submit to the Commercial Court of Paris (Tribunal de Commerce
de Paris), which shall have exclusive jurisdiction to hear and decide any suit, action, dispute or
proceeding relating to this Agreement (“Proceedings”), and for this purpose each party irrevocably
submits to the jurisdiction of the Tribunal de Commerce de Paris. Each party waives any objection
it might at any time have to the Tribunal de Commerce de Paris being nominated as the forum to hear
and decide Proceedings, and agrees not to claim that the Tribunal de Commerce de Paris is not an
appropriate or convenient forum.

	19.	 	OTHER AGREEMENTS

This Agreement supersedes any previous agreement between the Company and the Subscribers in
relation to its subject matter, and in particular the term sheet executed on 1 September 2004.

IN WITNESS of which this Agreement has been duly executed in Paris in two (2) originals and two (2)
sets of schedules on the date first above written.

 

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IN WITNESS of which this Agreement has been duly executed in Paris in two (2) originals and two (2)
sets of schedules on the date first above written.

	 	 	 	 	 
	COMPAGNIE GÉNÉRALE DE GÉOPHYSIQUE	 	CGG EXECUTIVE INVESTCO, LLC
	/s/ Robert Brunck

By:    Robert Brunck

Title: Chairman and Chief Executive Officer	 	
By:
	 	/s/ Robert M. Le Blanc

Name:  Robert M. Le Blanc

Title:    Director
	 	 	
By:
	 	/s/ Donald West

Name:  Donald West

Title:    Director

	 	 	 	 	 	 	 
	
ONEX PARTNERS LP,

by Onex Partners GP LP, its general partner

by Onex Partners Manager GP LP, its agent,

by Onex Partners Manager GP Inc., its general partner
	 	ONEX AMERICAN HOLDINGS II LLC
	By:	 	
/s/ Donald West

Name:  Donald West

Title:    Managing Director
	 	By:
	 	/s/ Eric J. Rosen

Name:  Eric J. Rosen

Title:    Director
	By:	 	
/s/ Eric J. Rosen

Name:  Eric J. Rosen

Title:    Managing Director
	 	By:
	 	/s/ Donald West

Name:  Donald West

Title:    Director

 

	 	 	 	 	 	 	 
	
ONEX CORPORATION
	 	ONEX US PRINCIPALS LP

by Onex American Holdings GP LLC,

its general partner
	By:	 	
/s/ Nigel S. Wright

Name:  Nigel S. Wright

Title:    Managing Director
	 	By:
	 	/s/ Eric J. Rosen

Name:  Eric J. Rosen

Title:    Director
	By:	 	
/s/ Andrew J. Sheiner

Name:  Andrew J. Sheiner

Title:    Managing Director
	 	By:
	 	/s/ Donald West

Name:  Donald West

Title:    Director

(solely with respect to sections 5.1, 5.3, 5.4 and 8.1)<PAGE>

                                                                    EXHIBIT 10.7

                               MOVADO GROUP, INC.

                              AMENDED AND RESTATED

                    DEFERRED COMPENSATION PLAN FOR EXECUTIVES

                                                          Effective June 1, 1995
                                  Amended and Restated Effective January 1, 1998
                                  Amended and Restated Effective January 1, 2002
                                    Amended and Restated Effective June 17, 2004

                                       1
<PAGE>

                               MOVADO GROUP, INC.
                              AMENDED AND RESTATED
                    DEFERRED COMPENSATION PLAN FOR EXECUTIVES

                                Table of Contents

<TABLE>
<CAPTION>
                                                                                                         Page
                                                                                                         ----
<S>                                                                                                      <C>
                                                    ARTICLE I
                                                   Definitions

1.1      Account........................................................................................   5
1.2      Administrator..................................................................................   5
1.3      Base Salary....................................................................................   5
1.4      Change in Control..............................................................................   5
1.5      Class Year Account.............................................................................   7
1.6      Code...........................................................................................   8
1.7      Company........................................................................................   8
1.8      Company Stock..................................................................................   8
1.9      Compensation...................................................................................   8
1.10     Effective Date.................................................................................   8
1.11     Eligible Employee..............................................................................   8
1.12     Employee.......................................................................................   8
1.13     Employers......................................................................................   8
1.14     Employer Contribution..........................................................................   8
1.15     ERISA..........................................................................................   8
1.16     Group I Employee...............................................................................   8
1.17     Group II Employee..............................................................................   8
1.18     Matching Contribution..........................................................................   9
1.19     Participant....................................................................................   9
1.20     Plan...........................................................................................   9
1.21     Plan Year......................................................................................   9
1.22     Salary Deferrals...............................................................................   9
1.23     Salary Deferral Election.......................................................................   9
1.24     Total and Permanent Disability.................................................................   9
1.25     Trust..........................................................................................   9
1.26     Trustee........................................................................................   9
1.27     Year of Service................................................................................   9

                                                   ARTICLE II
                                                  Participation

2.1      Eligibility for Participation..................................................................  10
2.2      Commencement of Participation..................................................................  10
2.3      Benefits.......................................................................................  10
</TABLE>

                                       2
<PAGE>

<TABLE>
<S>                                                                                                       <C>
                                                   ARTICLE III
                                                  Contributions

3.1      Salary Deferrals...............................................................................  11
3.2      Matching Contributions.........................................................................  12
3.3      Company Stock..................................................................................  12
3.4      Employer Contributions.........................................................................  13
3.5      Time of Contributions..........................................................................  13
3.6      Form of Contributions..........................................................................  14

                                                   ARTICLE IV
                                                     Vesting

4.1      Vesting........................................................................................  14

                                                    ARTICLE V
                                                    Accounts

5.1      Accounts.......................................................................................  15
5.2      Investments, Gains and Losses..................................................................  16
5.3      Forfeitures....................................................................................  17

                                                   ARTICLE VI
                                                  Distributions

6.1      Payment........................................................................................  17
6.2      Commencement of Payment........................................................................  17

                                                   ARTICLE VII
                                                  Beneficiaries

7.1      Beneficiaries..................................................................................  19
7.2      Lost Beneficiary...............................................................................  19

                                                  ARTICLE VIII
                                                     Funding

8.1      Prohibition Against Funding....................................................................  20
8.2      Deposits in Trust..............................................................................  20
8.3      Indemnification of Trustee.....................................................................  21
8.4      Withholding of Employee Contributions..........................................................  21

                                                   ARTICLE IX
                                                Claims Procedure

9.1      General........................................................................................  21
9.2      Claim Review...................................................................................  21
9.3      Right of Appeal................................................................................  22
9.4      Review of Appeal...............................................................................  22
9.5      Designation....................................................................................  22
</TABLE>

                                        3
<PAGE>

<TABLE>
<S>                                                                                                       <C>
                                                    ARTICLE X
                                           Administration of the Plan

10.1     Committee as Administrator.....................................................................  23
10.2     Actions Taken by the Committee.................................................................  23
10.3     Bond and Compensation..........................................................................  23
10.4     Duties of the Committee........................................................................  23
10.5     Employers to Furnish Information...............................................................  24
10.6     Expenses.......................................................................................  24
10.7     Indemnification................................................................................  25

                                                   ARTICLE XI
                                               General Provisions

11.1     No Assignment..................................................................................  25
11.2     No Employment Rights...........................................................................  25
11.3     Incompetence...................................................................................  26
11.4     Identity.......................................................................................  26
11.5     Other Benefits.................................................................................  26
11.6     No Liability...................................................................................  26
11.7     Insolvency.....................................................................................  26
11.8     Amendment and Termination......................................................................  27
11.9     Employer Determinations........................................................................  27
11.10    Construction...................................................................................  27
11.11    Governing Law..................................................................................  27
11.12    Severability...................................................................................  28
11.13    Headings.......................................................................................  28
11.14    Terms..........................................................................................  28
11.15    Approval of IRS................................................................................  28
11.16    Term...........................................................................................  28
</TABLE>

                                       4
<PAGE>

                               MOVADO GROUP, INC.

                              AMENDED AND RESTATED

                    DEFERRED COMPENSATION PLAN FOR EXECUTIVES

            Movado Group, Inc., a New York corporation, Swiss-Am, Inc., a New
Jersey corporation, and Movado Retail Group, Inc., a New Jersey corporation,
hereby adopt this Amended and Restated Movado Group, Inc. Deferred Compensation
Plan for Executives.

                                   ARTICLE I
                                  DEFINITIONS

      1.1   ACCOUNT. The bookkeeping account established for each Participant as
provided in Section 5.1 hereof.

      1.2   ADMINISTRATOR. The committee appointed pursuant to ARTICLE X.

      1.3   BASE SALARY.

            (a) The amount payable to a Participant by the Employers as basic
salary attributable to services performed in a Plan Year. Base Salary shall only
include regularly scheduled salary payable throughout the year, as determined by
the Employers, and shall not include bonuses or irregular remuneration.

            (b) Notwithstanding subsection (a), for those Employees classified
by an Employer as sales executives, the term Base Salary shall only include base
salary and shall not include commissions and bonuses.

      1.4   CHANGE IN CONTROL. The occurrence during the term of the Plan of:

            (a) The commencement (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934 (the "Act")) of a tender offer for more than
twenty percent (20%) of the Company's outstanding shares of capital stock having
voting power in the election of directors (the "Voting Securities").

                                       5
<PAGE>

            (b) An acquisition (other than directly from the Company) of any
voting securities of the Company by any "Person" (as the term is used for
purposes of section 13(d) or 14(d) of the Act) immediately after which such
Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated
under the Act) of twenty percent (20%) or more of the combine l voting power of
the Company's then outstanding Voting Securities, provided, however that in
determining whether a Change in Control has occurred, Voting Securities which
are acquired in a "Non-Control Acquisition") (as hereinafter defined) shall not
constitute an acquisition) which would cause a Change in Control. A Non-Control
Acquisition shall mean an acquisition by (1) an employee benefit plan (or a
trust forming a part thereof or a trustee thereof acting solely in its capacity
as trustee) maintained by the Company or by any corporation or other Person of
which a majority of its voting power or its voting equity securities or equity
interest as owned, directly or indirectly, by the Company (for purposes of this
definition, a subsidiary); (2) the Company or its subsidiaries; or (3) any
Person who files in connection with such acquisition a Schedule 13D which
expressly disclaims any intention to seek control of the Company and does not
expressly reserve the right to seek such control; provided, however, that any
amendment to such statement of intent which either indicates an intention or
reserves the right to seek control shall be deemed an "acquisition" of the
securities of the Company reported in such filing as beneficially owned by such
Person for purposes of this paragraph.

            (c) The individuals who, as of July 1, 2002, are members of the
board (the "Incumbent Board"), ceasing for any reason to constitute at least
two-thirds (2/3) of the members of the board; provided, however, that if the
election, or nomination for election by the Company's common stockholders, of
any new director was approved by a vote of at least two-thirds (2/3) of the
Incumbent Board, such new director shall, for purposes of this Plan, be
considered as a member of the Incumbent Board; provided further, however, that
no individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11 promulgated under the
Act) or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board (a "Proxy Contest") including by reason
of any agreement intended to avoid or settle any Election Contest or Proxy
Contest.

                                       6
<PAGE>

            (d) Approval by stockholders of the Company of:

                  (1) merger, consolidation or reorganization involving the
Company, unless such merger, consolidation or reorganization is a "Non-Control
Transaction," i.e., meets each of the requirements described in (i), (ii) or
(iii) below: (i) the stockholders of the Company, immediately before such
merger, consolidation or reorganization, own, directly or indirectly,
immediately following such merger, consolidation or reorganization, at least
seventy percent (70%) if the outstanding voting securities of the corporation
resulting from such merger, consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their ownership of the
voting securities immediately before such merger, consolidation or
reorganization; or (ii) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for such merger,
consolidation or reorganization constitute at least two-thirds (2/3) of the
members of the board of director of the Surviving Corporation immediately
following the consummation of such merger, consolidation or reorganization; and
(iii) no Person other than the Company, any subsidiary, any employee benefit
plan (or any trust forming a part thereof or a trustee thereof acting solely in
its capacity as trustee) maintained by the Company, the Surviving Corporation,
or any Subsidiary, or any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of twenty percent (20%)
or more of the then outstanding Voting Securities has Beneficial Ownership of
thirty percent (30%) or more of the combined voting power of the Surviving
Corporation's then outstanding voting securities immediately following the
consummation of such merger, consolidation or reorganization.

                  (2) A complete liquidation or dissolution of the Company.

                  (3) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other than a
transfer to an affiliate).

      1.5   CLASS YEAR ACCOUNT. The bookkeeping subaccounts established for each
Participant as provided in section 5.1 hereof.

                                       7
<PAGE>

      1.6   CODE. The Internal Revenue Code of 1986, as amended.

      1.7   COMPANY. Movado Group, Inc., a New York corporation.

      1.8   COMPANY STOCK. Common stock of the Company.

      1.9   COMPENSATION. The Participant's Base Salary, bonuses and other
remuneration from the Employer.

      1.10  EFFECTIVE DATE. The Plan was originally effective on June 1, 1995.
This amendment and restatement is effective _____ 2004.

      1.11  ELIGIBLE EMPLOYEE. An Employee of an Employer who is a management or
highly compensated Employee within the meaning of sections 201(2), 301(a)(3) and
401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended.

      1.12  EMPLOYEE. Any person employed by an Employer.

      1.13  EMPLOYERS. Movado Group, Inc., a New York corporation; Swiss-Am,
Inc., a New Jersey corporation, and Movado Retail Group, Inc., a New Jersey
corporation.

      1.14  EMPLOYER CONTRIBUTION. A discretionary contribution made by the
Employers to the Trust that is credited to one or more Participant's Accounts in
accordance with the terms of Section 2.3 hereof.

      1.15  ERISA. The Employee Retirement Income Security Act of 1974, as
amended.

      1.16  GROUP I EMPLOYEE. An Employee. who is designated as a Group I
Employee by an Employer in Schedule A attached hereto, as such schedule may be
amended by the Employer from time to time.

      1.17  GROUP II EMPLOYEE. An Employee who is designated as a Group II
Employee by an Employer in Schedule A attached hereto, as such schedule may be
amended by the Employer from time to time.

                                       8
<PAGE>

      1.18  MATCHING CONTRIBUTION. A contribution made by the Employers to the
Trust that is credited to one or more Participant's Accounts in accordance with
the terms of Section 3.2 hereof.

      1.19  PARTICIPANT. An Eligible Employee who has become a Participant as
provided in Section 3.1 and whose Account has not been fully distributed.

      1.20  PLAN. The Amended and Restated Movado Group, Inc. Deferred
Compensation Plan for Executives.

      1.21  PLAN YEAR. The twelve (12) month period ending December 31.

      1.22  SALARY DEFERRALS. The portion of Compensation that a Participant
elects to defer in accordance with Section 3.1 hereof.

      1.23  SALARY DEFERRAL ELECTION. The separate written agreement, submitted
to the Administrator, by which an Eligible Employee agrees to participate in
this Plan and make Salary Deferral hereunder.

      1.24  TOTAL AND PERMANENT DISABILITY. Any medically determinable physical
or mental disorder hat renders a Participant incapable of continuing in the
employment of an Employer and is (expected to continue for the remainder of a
Participant's life, as determined by the Administrator in its sole discretion.

      1.25  TRUST. The Trust under the Plan.

      1.26  TRUSTEE. The trustee under the Trust and any successor Trustee
appointed pursuant to the Trust.

      1.27  YEAR OF SERVICE. A Participant's twelve (12) month period of
employment with an Employer beginning on the Participant's first day of
employment with the Employer. Periods of employment of less than twelve (12)
full months shall not constitute a Year of Service.

                                        9
<PAGE>

                                   ARTICLE II
                                  PARTICIPATION

      2.1   ELIGIBILITY FOR PARTICIPATION.

            (a) The Employers shall determine which Eligible Employees shall
become Participants and the category of benefits, under Section 2.3, to which
they will be entitled. The Employers' determination under this Section 2.1 and
under Section 2.3 shall be set forth in Schedule A, attached hereto.

            (b) An Employer may determine that a Participant shall cease being a
Participant as of any date specified by it; provided, however, that the Employer
may not reduce the Account of such Participant as of the date such determination
is made. Such determination shall be specified in Schedule B.

      2.2   COMMENCEMENT OF PARTICIPATION.

            (a) Each Eligible Employee selected to become a Participant
(pursuant to Section 1.1) shall become a Participant as of the date specified by
an Employer, as set forth in Schedule A.

            (b) Notwithstanding subsection (a), a Salary Deferral Election with
respect to a Plan year shall not be effective except to the extent it complies
with Section 3.1.

      2.3   BENEFITS. The Employers shall determine, from time to time, whether
a Participant is to be treated as a Group I or Group II Employee. An Employer
may change the classification of any Participant as of any date specified by it;
provided, however, that the Account of such Participant shall not be reduced by
such change of classification. The classification of any Participant shall be
set forth in Schedule A. Participants shall cease to contribute hereunder after
they cease to be employed by any of the Employers.

                                       10
<PAGE>

                                  ARTICLE III
                                 CONTRIBUTIONS

      3.1   SALARY DEFERRALS.

            (a) The Employers shall credit to the Account of a Participant an
amount equal to the amount designated in the Participant's Salary Deferral
Election for each Plan Year. Such amounts shall not be made available to such
Participant, except as provided in ARTICLE VI, and hall reduce such
Participant's Compensation from an Employer in accordance with the provisions of
the applicable Salary Deferral Election; provided, however, that all such
amounts shall be subject to the rights of the general creditors of each of the
Employers as provided in ARTICLE VIII.

            (b) Each Eligible Employee shall deliver a Salary Deferral Election
to his or her Employer before any Salary Deferrals become effective. Such Salary
Deferral Election shall be void with respect to any Salary Deferral unless
submitted before the beginning of the calendar year during which the amount to
be deferred will be earned; provided, however, that in the year in which this
Plan is first adopted or an Employee is first eligible to participate, such
Salary Deferral election may be filed within thirty (30) days of the date on
which this Plan is adopted or the date on which an Employee is first eligible to
participate, respectively, with respect to Compensation earned during the
remainder of the calendar year.

            (c) The Salary Deferral Election shall designate the amount of
Compensation deferred by each Participant and such other items as the
Administrator may prescribe. Such designations shall remain effective unless
amended as provided in subsection (d), below. There shall be no maximum limit on
the Salary Deferrals permitted for each Participant.

            (d) A Participant may amend his or her Salary Deferral Election from
time to time for any Plan Year that has not yet commenced. If a Participant
amends his or her Salary Deferral Election in a given Plan Year to reduce or
discontinue Salary Deferrals for the balance of that Plan Year, then the
Participant's Account shall be reduced by ten

                                       11
<PAGE>

percent (10%) of such unpaid amount, with such reduction being made from the
Participant's Salary Deferral subaccount (or such other subaccount as the
Administrator shall determine).

      3.2   MATCHING CONTRIBUTIONS.

            (a) Each Employer shall also credit to the Account of each
Participant who is its Employee, who is a Group I Employee and who makes Salary
Deferrals a Marching Contribution in an amount equal to one hundred percent
(100%) of the Salary Deferrals contributed by such Participant up to a maximum
of ten percent (10%) of such Participant's Base Salary.

            (b) Each Employer shall also credit to the Account of each
Participant who is its Employee, who is a Group II Employee and who makes Salary
Deferrals a Marching Contribution in an amount equal to one hundred percent
(100%) of the Salary Deferrals contributed by such Participant up to a maximum
of five percent (5%) of such Participant's Base Salary.

            (c) Matching Contributions for a Plan Year will be credited to the
Account of a Participant under this Section 3.2 only if such Participant is an
Employee on the last day of such Plan Year. The requirement set forth in this
Section 3.2(c) shall be waived in the event of: (i) the death of a Participant
during such Plan Year, (ii) the termination of the Participant's employment
after having incurred a Total and Permanent Disability during such Plan Year, or
(iii) the termination of the Participant's employment during such Plan Year
after having reached the age of sixty-five (65).

            (d) Twenty percent (20%) of the Matching Contributions for a
Participant shall be made in rights to Company Stock, as determined under
Section 3.3.

            (e) Matching Contributions for a Plan Year shall be made no earlier
than the last day of each quarter of such Plan Year. Matching Contributions made
during a Plan Year shall remain subject to all conditions specified in this
Plan, including those in subsection (c) above.

      3.3   COMPANY STOCK.

                                       12
<PAGE>

            (a) Matching Contributions for a Participant in the form of rights
to Company Stock shall consist of bookkeeping credits to the Accounts and Class
Year Accounts for such Participant. Such credits will initially be determined by
crediting to such Participant's Accounts and Class Year Accounts the number of
shares (including fractional shares) of Company Stock that such Matching
Contribution could purchase based upon the value of the Company Stock at the end
of the month in which such Matching Contribution is made (or credited). All
determinations of the value of Company Stock will be made by the Treasurer of
the Company in his or he sole discretion.

            (b) Dividends declared on Company Stock shall not be credited to the
Account and Class Year Accounts of any Participant.

            (c) When a Participant or Beneficiary is entitled to a distribution
pursuant to ARTICLE VI with respect to his or her rights to Company Stock, the
Company shall issue to the Participant or Beneficiary the number of shares of
Company Stock that equal the number of full shares then credited in such
Participant's Accounts. The Company shall pay any fractional shares in cash. If
payment to the Participant or Beneficiary is being made in installments, the
Administrator, in its sole discretion, shall determine whether such Company
Stock shall be paid in like installments, as a lump-sum in connection with such
installments or in any other manner consistent with such installment payments.

      3.4   EMPLOYER CONTRIBUTIONS. The Employers reserve the right to make
discretionary contributions to Participants' Accounts in such amount and in such
manner as may be determined by the Employers.

      3.5   TIME OF CONTRIBUTIONS.

            (a) Salary Deferrals shall be transferred to the Trust as soon as
administratively feasible following each payroll period. Matching Contributions
(other than Company Stock or the rights to Company Stock) and Option Deferrals
shall be transferred to the Trust no later than thirty (30) days following the
last day of the Plan Year. The Employers shall also transmit at the same time
any necessary instructions regarding the allocation of such amounts among the
Accounts of Participants.

                                       13
<PAGE>

            (b) Employer Contributions shall be transferred to the Trust at such
time as the Employers shall determine. The Employers shall also transmit at that
time any necessary instructions regarding the allocation of such amounts among
the Accounts of Participants.

      3.6   FORM OF CONTRIBUTIONS. All Salary Deferrals, Matching Contributions
and Employs Contributions to the Trust shall be made in the form of cash or cash
equivalents of United States currency, except as otherwise provided herein.
Notwithstanding the foregoing, Salary Referrals may be made in the form of
Company Stock or rights to Company Stock which the Participant would otherwise
be entitled to receive as Compensation.

                                   ARTICLE IV
                                     VESTING

      4.1   VESTING.

            (a) Except as otherwise provided herein, a Participant shall have a
nonforfeitable right to the vested portion of his or her Class Year Accounts;
provided, however, that all such amounts shall be subject to the rights of the
general creditors of the Employers as provide in ARTICLE VII.

            (b) Each Class Year Account of a Participant will vest twenty
percent (20%) if the Participant is still an Employee on the last day of each
Plan Year beginning with the Plan Year of such Class Year Account. Thereafter,
such Class Year Account shall vest an additional twenty percent (20%) on the
last day of each Plan Year as long as the Participant is still an Employee and
therefore shall be fully vested on the last day of the fourth Plan Year
following the first plan Year of such Class Year Account if the Participant is
still then an Employee. Further vesting shall cease once a Participant is no
longer an Employee.

            (c) The portion of a Participant's Class Year Accounts attributable
to Salary Deferral and Option Deferrals, and earnings thereon, shall be fully
vested.

                                       14
<PAGE>

            (d) A Participant who attains the age of sixty-five (65) shall be
fully vested in the amounts credited to all of his or her Accounts.

            (e) A Participant who has a termination of employment due to Total
and Permanent Disability shall be fully vested in the amounts credited to all of
his or her Class Year Account.

            (f) If a Change in Control occurs, all amounts attributable to
Matching Contributions shall be fully vested as of the effective date of such
Change in Control.

            (g) Any amounts credited to a Participant's Class Year Accounts that
arc not vested a the time of his or her termination of employment with an
Employer shall be forfeited. The Administrator shall determine the extent to
which such forfeiture shall consist of rights to Company Stock.

                                   ARTICLE V
                                    ACCOUNTS

      5.1   ACCOUNTS.

            (a) (1) The Administrator shall establish and maintain a bookkeeping
account in the name of each Participant. Unless otherwise directed by the
Employers, the Trustee shall also maintain and invest separate omnibus accounts
that correspond to each Participant's Account.

                (2) The Administrator may also establish any subaccounts that it
feels may be appropriate. The Administrator shall also establish and maintain
subaccounts in each Participant's Account that shall be denominated as Class
Year Accounts. The Administrator shall all ) establish and maintain subaccounts
in each Participant's Account for rights to Company Stock.

            (b) (1) Each Participant's Account shall be credited with Salary
Deferrals (as specified in the Participant's Salary Deferral Election), any
Matching Contributions allocable thereto, any Option Deferrals, any Employer
Contributions and any earnings or losses on the foregoing. Each Participant's
Account shall be reduced by any

                                       15
<PAGE>

distributions made plus any federal and state tax withholding and any social
security withholding tax as may be required by law.

                (2) Separate Class Year Accounts for a Participant shall consist
of each Participant's Salary Deferrals, Option Deferrals, Matching Contributions
and Employer Contributions that are made with respect to a given Plan Year and
any earnings or losses on such amounts Class Year Accounts shall be separately
maintained for a Participant for each Plan Year un I such Class Year Accounts
are fully vested (as provided in ARTICLE IV), at which time successfully vested
Class Year Accounts shall be merged.

      5.2   INVESTMENTS, GAINS AND LOSSES.

            (a) (1) By written investment directions to the Administrator, each
Participant shall direct the investment of his or her Account (other than the
subaccount for rights to Company Stock) among the investment funds available
under this Plan. The Administrator may require separate investment directions
with respect to each Class Year Account of a Participant. In the absence of
timely instructions, a Participant's Account shall be invested in a money market
fund as selected by the Administrator. In accordance with rules established by
the Administrator, each Participant shall be allowed to modify his or her
investment directions (or the initial investment made in the absence of
directions from the Participant) with respect to all or any portion of his or
her Account, effective as of the first day following the date of modification
(or such other time specified by the Administrator). A Participant's change of
investment directions shall apply to the existing balance in his or her Account
and to future amounts o be credited thereto, as the Participant may elect.

                (2) Notwithstanding subsection (a)(1), neither the Administrator
nor the Trustee are obligated to follow any investment instruction received by a
Participant pursuant to subsection (a)(1).

                (3) The Employers, or the Trustee if an Employer so directs,
shall, from time to time, establish the investment funds available under the
Plan.

            (b) The Administrator shall adjust the amounts credited to each
Participant's Account to reflect Salary Deferrals, Option Deferrals, Matching
Contributions,

                                       16
<PAGE>

Employer Contributions, investment experience, distributions and any other
appropriate adjustments. Such adjustments its shall be made as frequently as is
administratively feasible.

      5.3   FORFEITURES. Any forfeitures from a Participant's Account shall
continue to be held in the Trust, shall be separately invested and shall be used
to reduce succeeding Matching Contributions and Employer Contributions until
such forfeitures have been entirely so applied. If no further Matching
Contributions or Employee Contributions will be made, then such forfeitures
shall be returned to the Employer that made such contribution.

                                   ARTICLE VI
                                  DISTRIBUTIONS

      6.1   PAYMENT.

            (a) (1) Benefits shall be paid in roughly equal annual installments
over a period of ten (10) years payable in January of each year.

                (2) Notwithstanding subsection (a)(1), the Administrator, in its
sole discretion may pay any amounts due to a Participant in a lump-sum.

            (b) In the event that a Participant who is a former Employee and who
is receiving installment payments under subsection (a)(1) is determined by the
Administrator to be providing services for a competitor of an Employer within
two (2) years after his or her terminate m of employment with an Employer, then
all remaining amounts due such Participant under the Plan shall be paid in a
lump sum.

            (c) Payment may be made in Company Stock to the extent the
Participant's Account has been denominated in Company Stock (under Section 3.3
or otherwise). Otherwise, payment shall be made in cash.

      6.2   COMMENCEMENT OF PAYMENT.

            (a) Except as otherwise provided herein, payments to a Participant
shall commence in the January immediately after the calendar year in which the
Participant has had a terminal )n of employment with an Employer.

                                       17
<PAGE>

            (b) The Administrator may permit an early distribution (before the
date set forth in Section 6.2(a)) of part or all of any deferred amounts;
provided, however, that such distribution shall be made only if the
Administrator, in its sole discretion, determines that the Participant has
experienced an unforeseen emergency that is caused by an event beyond the
control of the Participant and that would result in severe financial hardship to
the Participant if early distribution were not permitted. Any distribution
pursuant to this subsection is limited to the amount it necessary to meet the
hardship.

            (c) Upon the death of a Participant, all amounts credited to his or
her Account shall be fully vested and shall be paid to his or her beneficiary or
beneficiaries, as determined under ARTICLE VII hereof.

            (d) (1) A Participant who has experienced a hardship, as determined
by the Administrator, in its sole discretion, shall be permitted to receive, in
a lump-sum payment, a distribution of up to fifty percent (50%) of the vested
portion of his or her Account exclusive of the subaccount for Company Stock;
provided, however, that ten percent (10%) of the amount designated for
distribution shall be treated as a forfeiture under Section 5.3 from the balance
of the Participant's Account.

                (2) A Participant who receives a hardship distribution under
subsection (d)(1) shall not receive any Matching Contributions or Employer
Contributions and shall not be permitted to make any further Salary Deferrals
for the balance of the Plan Year and for the following Plan Year.

                (3) A Participant shall not be permitted to receive more than
two (2) hardship distributions under subsection (d)(1).

            (e) (1) A Participant who filed an election under this subsection
(e) shall receive distribution from the vested portion of his or her Account in
accordance with that election; provided, however, that amounts in the
Participant's Account distributed under this subsection (e) shall not include
Matching Contributions or Employer Contributions.

                (2) An election under this subsection (e) shall be made with
the Administrator on a form prescribed by the Administrator. The election shall
only be valid if

                                       18
<PAGE>

filed at least two (2) years before the date of distribution; provided, however,
that a Participant may amend an otherwise valid election to defer the date of
distribution as long as that amendment is filed with the Administrator at least
six (6) months before the otherwise applicable date of distribution.

                                  ARTICLE VII
                                 BENEFICIARIES

      7.1   BENEFICIARIES. Each Participant may from time to time designate one
or more persons who may be any one or more members of such Participant's family
or other persons, administrators, trusts, foundations or other entities) as his
or her beneficiary under this Plan. Such designation shall be made on a form
prescribed by the Administrator. Each Participant may at any time and from time
to time, change any previous beneficiary designation, without notice to or
consent of any previously designated beneficiary, by amending his or her
previous designation on a form prescribed by the Administrator. If the
beneficiary does not survive the Participant (or is otherwise unavailable to
receive payment) or if no beneficiary is validly designated, then the amounts
payable under this Plan shall be paid to the Participant's surviving spouse, if
any, and, if none, to the Participant's estate and such person shall be deemed
to be a beneficiary hereunder. If more than one person is the beneficiary of a
deceased Participant, each such person shall receive a pro rata share of any
death benefit payable unless otherwise designated on the applicable form. If a
beneficiary who is receiving benefits dies, all benefits that were payable to
such beneficiary shall then be payable to the estate of that beneficiary.

      7.2   LOST BENEFICIARY.

            (a) All Participants and beneficiaries shall have the obligation to
keep the Administrator informed of their current address until such time as all
benefits due have been paid.

            (b) If a Participant or beneficiary cannot be located by the
Administrator exercising due diligence, then, in its sole discretion, the
Administrator may presume that the Participant or beneficiary is deceased for
purposes of this Plan and all unpaid amounts (net

                                       19
<PAGE>

of due diligence expenses) owed to the Participant or beneficiary shall be paid
accordingly or, if a beneficiary cannot be so located, then such amounts may be
forfeited. Any such presumption of death shall be final, conclusive and binding
on all parties.

                                  ARTICLE VIII
                                     FUNDING

      8.1   PROHIBITION AGAINST FUNDING. Should any investment be acquired in
connection with the liabilities assumed under this Plan, it is expressly
understood and agreed that the Participants and beneficiaries shall not have any
right with respect to, or claim against, such assets nor shall any such purchase
be construed to create a trust of any kind or a fiduciary relationship between
the Employers and the Participants, their beneficiaries or any other person. Any
such assets (including any amounts deferred by a Participant or contributed by
the Employers pursuant to ARTICLE III hereof) shall be and remain a part of the
general, unpledged, unrestricted assets of the Employers, subject to the claims
of its general creditors. It is the express intention of the parties hereto that
this arrangement shall be unfunded for tax purposes and for purposes of Title I
of ERISA. Each Participant and beneficiary shall be required to look to the
provisions of this Plan and to the Employers themselves for enforcement of any
and all benefits due under this Plan, and to the extent any such person acquires
a right to receive payment under this Plan, such right shall be no greater than
the right of any unsecured general creditor of the Employers. The Employers or
the Trust shall be designated the owner and beneficiary of any investment
acquired in connection with its obligation under this Plan.

      8.2   DEPOSITS IN TRUST. Notwithstanding Section 8.1, or any other
provision of this Plan to the contrary, the Employers may deposit into the Trust
any amounts they deem appropriate to pay the benefits under this Plan. The
amounts so deposited may include all contributions made pursuant to a Salary
Deferral Election by a Participant, any Employer Contributions and any Matching
Contributions.

                                       20
<PAGE>

      8.3   INDEMNIFICATION OF TRUSTEE.

            (a) The Trustee shall not be liable for the making, retention, or
sale of any investment or reinvestment made by it, as herein provided, nor for
any loss to, or diminution of, the Trust assets, unless due to its own
negligence, willful misconduct or lack of good faith.

            (b) Such Trustee shall be indemnified and saved harmless by the
Employers from and against all personal liability to which it may be subject by
reason of any act done or omitted to be done in its official capacity as Trustee
in good faith in the administration of this Plan and the Trust, including all
expenses reasonably incurred in its defense in the event an Employer fails to
provide such defense upon the request of the Trustee. The Trustee is relieved of
all responsibility in connection with its duties hereunder to the fullest extent
permitted by law, short of breach of duty to the beneficiaries.

      8.4   WITHHOLDING OF EMPLOYEE CONTRIBUTIONS. The Administrator is
authorized to make any and all necessary arrangements with the Employers in
order to withhold the Participant's Salary Deferrals under Section 3.1 hereof
from his or her pay. The Administrator shall determine the amount and timing of
such withholding.

                                   ARTICLE IX
                                CLAIMS PROCEDURE

      9.1   GENERAL. In the event that a Participant or his or her beneficiary
does not receive any Plan benefit that is claimed, such Participant or
beneficiary shall be entitled to consideration and review as provided in this
ARTICLE IX. Such consideration and review shall be conducted in a manner
designed to comply with section 503 of ERISA.

      9.2   CLAIM REVIEW. Upon receipt of any written claim for benefits, the
Administrator shall be notified and shall give due consideration to the claim
presented. If the claim is denied to any extent by the Administrator, the
Administrator shall furnish the claimant with a written notice setting forth (in
a manner calculated to be understood by the claimant):

                                       21
<PAGE>

            (a) the specific reason or reasons for denial of the claim;

            (b) a specific reference to this Plan provisions on which the denial
is based;

            (c) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of why such
material or information is necessary; and

            (d) an explanation of the provisions of this ARTICLE IX.

      9.3   RIGHT OF APPEAL. A claimant who has a claim denied under Section 9.2
may appeal to the Administrator for reconsideration of that claim. A request for
reconsideration under this Section 9.3 must be filed by written notice within
sixty (60) days after receipt by the claimant of the notice of denial under
Section 9.2.

      9.4   REVIEW OF APPEAL. Upon receipt of an appeal, the Administrator shall
promptly take action to give due consideration to the appeal. Such consideration
may include a hearing of the parties involved, if the Administrator feels such a
hearing is necessary. In preparing for the appeal, the claimant shall be given
the right to review pertinent documents and the right to submit in writing a
statement of issues and comments. After consideration of the merits of the
appeal, the Administrator shall issue a written decision which shall be binding
on all parties. The decision shall be written in a manner calculated to be
understood by the claimant and shall specifically state its reasons and
pertinent Plan provisions on which it relies. The Administrator's decision shall
be issued within sixty (60) days after the appeal is filed, except that if a
hearing is held the decision may be issued within one hundred twenty (120) days
after the appeal is filed.

      9.5   DESIGNATION. The Administrator may designate one or more of its
members or any other person of its choosing to make any determination otherwise
required under this ARTICLE IX.

                                       22
<PAGE>

                                   ARTICLE X
                           ADMINISTRATION OF THE PLAN

      10.1  COMMITTEE AS ADMINISTRATOR. The committee designated in this Section
10.1 shall be the Administrator. The name of the committee shall be the Deferred
Compensation Committee and shall consist of such individuals, corporations or
other entities as the Employers shall from time to time appoint. Until otherwise
designated by the Employers, the members of the Deferred Compensation Committee
shall be those persons holding the following positions (or their nearest
equivalent) at the Company: Chief Financial Officer; Treasurer; President and
Chief Operating Officer; and Vice President, Human Resources.

      10.2  ACTIONS TAKEN BY THE COMMITTEE. All resolutions or other actions
taken by the Deferred Compensation Committee at a meeting shall be by the
affirmative vote of a majority of those present at the meeting. More than half
of the members must be present to constitute a quorum or a meeting. Any member
of the Deferred Compensation Committee may sign any document or instrument
requiring the signature of the Deferred Compensation Committee or otherwise act
on behalf of the Deferred Compensation Committee, unless otherwise directed by
the Deferred Compensation Committee. The Deferred Compensation Committee may
adopt such additional rules of procedures and conduct as it deems appropriate.

      10.3  BOND AND COMPENSATION. The members of the Deferred Compensation
Committee shall serve without bond, except as otherwise required by law, and
without remuneration for their services as such.

      10.4  DUTIES OF THE COMMITTEE. The Deferred Compensation Committee shall
undertake all duties assigned to it under the Plan and Trust and shall undertake
all actions, express or implied, necessary for the proper administration of the
Plan. All actions and decisions of the Deferred Compensation Committee shall be
made in its sole discretion, unless expressly otherwise provided in the Plan.
The Deferred Compensation Committee's duties and responsibilities include, but
are not limited to, the following:

            (a) adopting and enforcing such rules and regulations that it deems
necessary or appropriate for the administration of the Plan in accordance with
applicable law;

                                       23
<PAGE>

            (b) interpreting the Plan, in its sole discretion, with its good
faith interpretation thereof to be final and conclusive on any Employee, former
Employee, Participant, former Participant, beneficiary or other party;

            (c) deciding all questions concerning the Plan, including the
eligibility of any person to participate in the Plan in accordance with the Plan
provisions;

            (d) computing the amounts to be distributed to any Participant,
former Participant or beneficiary in accordance with the provisions of the Plan,
determining the person or persons to whom such amounts will be distributed and
determining when such amounts will be distributed;

            (e) authorizing the payment of distributions;

            (f) keeping such records and submitting such filings, elections,
applications, returns or other documents or forms as may be required under the
Code and applicable regulations, or under other federal, state or local law and
regulations; and

            (g) appointing such agents, counsel, accountants and consultants as
may be required to assist in administering the Plan.

      10.5  EMPLOYERS TO FURNISH INFORMATION. To enable the Deferred
Compensation Committee to perform its functions, the Employers shall supply full
and timely information to the Deferred Compensation Committee on all matters
relating to the remuneration of all Participants, their retirement, death or
other cause of separation from service, and such other pertinent acts as the
Deferred Compensation Committee may require.

      10.6  EXPENSES. All expenses of Plan administration and operation,
including the fees of any agents or counsel employed and including any expenses
attributable to a termination of the Plan, shall be paid by the Employers. To
the extent that the Employers may be liable for social security or other
withholding tax, the Administrator, in its sole discretion, may charge such
expenses to the benefits due to the applicable Participant or Beneficiary.

                                       24
<PAGE>

      10.7  INDEMNIFICATION. The Employers hereby agree to indemnify each and
every member of the Deferred Compensation Committee or Employee acting on behalf
of the Deferred Compensation Committee for any expenses or liabilities (other
than those due to willful misconduct) actually incurred in or arising out of the
performance of their duties under the Plan, including but not limited to,
litigation expenses and attorneys fees.

                                   ARTICLE XI
                               GENERAL PROVISIONS

      11.1  NO ASSIGNMENT. Benefits or payments under this Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors of the Participant
or the Participant's beneficiary, whether voluntary or involuntary, and any
attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber,
attach or garnish the same shall not be valid, nor shall any such benefit or
payment be in any way liable for or subject to the debts, contracts,
liabilities, engagement or torts of any Participant or beneficiary, or any other
person entitled to such benefit or payment pursuant to the terms of this Plan,
except to such extent as may be required by law. If any Participant or
beneficiary or any other person entitled to a benefit or payment pursuant to the
terms of this Plan becomes bankrupt or attempts to anticipate, alienate, sell,
transfer, assign, pledge, encumber, attach or garnish any benefit or payment
under this Plan, in whole or in part, or if any attempt is made to subject any
such benefit or payment, in whole or in part, to the debts, contracts,
liabilities, engagements or torts of the Participant or beneficiary or any other
person entitled to any such benefit or payment pursuant to the terms of this
Plan, then such benefit or payment, in the discretion of the Administrator,
shall cease and terminate with respect to such Participant or beneficiary, or
any other such person.

      11.2  NO EMPLOYMENT RIGHTS. Participation in this Plan shall not be
construed to confer upon any Participant the legal right to be retained in the
employ of the Employers, or give a Participant or beneficiary, or any other
person, any right to any payment whatsoever, except to the extent of the
benefits provided for hereunder. Each Participant shall remain subject to
discharge to the same extent as if this Plan had never been adopted.

                                       25
<PAGE>

      11.3  INCOMPETENCE. If the Administrator determines that any person to
whom a benefit is payable under this Plan is incompetent by reason of physical
or mental disability, the Administrator shall have the power to cause the
payments becoming due to such person to be made to another for his or her
benefit without responsibility of the Administrator or the Employers to see to
the application of such payments. Any payment made pursuant to such power shall,
as to such payment, operate as a complete discharge of the Employers, the
Administrator and the Trustee.

      11.4  IDENTITY. If, at any time, any doubt exists as to the identity of
any person entitled to any payment hereunder or the amount or time of such
payment, the Administrator shall be entitled to hold such sum until such
identity or amount or time is determined or until an order of a court of
competent jurisdiction is obtained. The Administrator shall also be entitled to
pay such sum into court in accordance with the appropriate rules of law. Any
expenses incurred by the Employers, Administrator, and Trust incident to such
proceeding or litigation shall be charged against the Account of the affected
Participant.

      11.5  OTHER BENEFITS. The benefits of each Participant or beneficiary
hereunder shall be in addition to any benefits paid or payable to or on account
of the Participant or beneficiary under any other pension, disability, annuity
or retirement plan or policy whatsoever.

      11.6  NO LIABILITY. No liability shall attach to or be incurred by any
employee, officer, director or manager of an Employer, Trustee or any
Administrator under or by reason of the terms, conditions and provisions
contained in this Plan, or for the acts or decisions taken or made hereunder or
in connection herewith; and as a condition precedent to the establishment of
this Plan or the receipt of benefits thereunder, or both, such liability, if
any, is expressly waived and released by each Participant and by any and all
persons claiming under or through any Participant or any other person. Such
waiver and release shall be conclusively evidenced by any act or participation
in or the acceptance of benefits or the making of any election under this Plan.

      11.7  INSOLVENCY. Should an Employer be considered insolvent (as defined
by the Trust), such Employer, through its board of directors and chief executive
officer, shall give

                                       26
<PAGE>

immediate written notice of such to the Administrator of this Plan and the
Trustee. Upon receipt of such notice, the Administrator or Trustee shall cease
to make any payments to Participants who were Employees of the Employer or their
beneficiaries and shall hold any and all assets attributable to such Employer
for the benefit of the general creditors of that Employer.

      11.8  AMENDMENT AND TERMINATION.

            (a) Except as otherwise provided in this Section 11.8, the Employers
shall have the sole authority to modify, amend or terminate this Plan; provided,
however, that any modification or termination of this Plan shall not reduce,
alter or impair, without the consent of a Participant, a Participant's right to
any amounts already credited to his or her Account on the day before the
effective date of such modification or termination. Following such termination,
payment of such credited amounts may be made in a single-sum payment if the
Employers so designate. Any such decision to pay in a single sum shall apply to
all Participants.

            (b) Any funds remaining in the Trust after termination of this Plan
and satisfaction of all liabilities to Participants and others, shall be
returned to the Employers.

      11.9  EMPLOYER DETERMINATIONS. Any determinations, actions or decisions of
the Employers (including but not limited to, Plan amendments and Plan
termination) shall be made by the board of directors of the Employers in
accordance with their established procedures or by such other individuals,
groups or organizations that have been properly delegated by the board of
directors to make such determination or decision.

      11.10 CONSTRUCTION. All questions of interpretation, construction or
application arising under or concerning the terms of this Plan shall be decided
by the Administrator, in its sole and final discretion, whose decision shall be
final, binding and conclusive upon all persons.

      11.11 GOVERNING LAW. This Plan shall be governed by, construed and
administered in accordance with the applicable provisions of ERISA, and any
other applicable federal law, provided however, that to the extent not preempted
by federal law this Plan shall be

                                       27
<PAGE>

governed by, construed and administered under the laws of the State of New York,
other than its laws respecting choice of law.

      11.12 SEVERABILITY. If any provision of this Plan is held invalid or
unenforceable, its invalidity or unenforceability shall not affect any other
provision of this Plan and this Plan shall be construed and enforced as if such
provision had not been included therein. If the inclusion of any Employee (or
Employees) as a Participant under this Plan would cause this Plan to fail to
comply with the requirements of sections 201(2), 301(a)(3) and 401(a)(1) of
ERISA, then this Plan shall be severed with respect to such Employee or
Employees, who shall be considered to be participating in a separate
arrangement.

      11.13 HEADINGS. The headings contained herein are inserted only as a
matter of convenience and for reference and in no way define, limit, enlarge or
describe the scope or intent of this Plan nor in any way shall they affect this
Plan or the construction of any provision thereof.

      11.14 TERMS. Capitalized terms shall have meanings as defined herein.
Singular nouns shall be read as plural, masculine pronouns shall be read as
feminine, and vice versa, as appropriate.

      11.15 APPROVAL OF IRS. If an Employer seek a private letter ruling from
the Internal Revenue Service and the Internal Revenue Service does not issue a
ruling acceptable to the Employees regarding this Plan, then this Plan (and the
Trust), at the election of the Employers, shall be void ab initio and all Salary
Deferrals shall be returned to the Employees who made such contributions and all
Employer Contributions and Matching Contributions shall be returned to the
Employer that made such contributions.

      11.16 TERM OF PLAN. This Plan shall continue in effect, unless sooner
terminated as provided herein, for a term expiring on June 17, 2014. Such term
may be extended only by the affirmative vote of a majority of the votes cast by
the shareholders of Movado Group, Inc., present in person or represented by
proxy, at a duly called meeting of such shareholders. Any expiration of this
Plan under this Section 11.16, shall be treated in the same manner as
termination of the Plan under Section 11.8.

                                       28

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