Document:

EX-4.7

 

Translation
for information purposes only

Exhibit 4.7

COMPAGNIE GÉNÉRALE DE GÉOPHYSIQUE

Société Anonyme with a share capital of 34,954,658 euros

Registered office: 1, rue Léon Migaux

91300 Massy

Evry Trade and Company Register No.: 969 202 241

FREE SHARE ALLOCATION

OF COMPAGNIE GÉNÉRALE DE GÉOPHYSIQUE

GENERAL REGULATIONS

Board of Directors’ Meeting of May 11, 2006

 

 

1 Framework of the free share allocation

	1.1	 	Context and general principle of free share allocation
	 
	 	 	The purpose of these rules is to manage the free share allocation scheme implemented for
the benefit of certain of the staff members and executive management of Compagnie Générale
de Géophysique (hereinafter “CGG” or the “Company”) and of Affiliated
Companies1 (hereinafter the “Beneficiaries”).
	 
	 	 	This regulation allows the Beneficiaries to receive one or several free shares of CGG (the
“Allocation”), whose stock is currently listed on the Eurolist compartment A of
Euronext-Paris (hereinafter the “CGG Shares”) under the terms stated by the regulation of
the Autorité des Marchés Financiers (French Securities Commission).
	 
	 	 	The CGG Shares are effectively allocated only at the later of those two dates: either 11
May 2008 or the date of the general meeting of shareholders convened to approve the 2007
financial statements (hereinafter the “Allocation Period”), provided that the allocation
conditions and criteria established by the Board of Directors are observed on that
allocation date. During the Allocation Period, the Beneficiaries are not the owners of the
CGG Shares. The Beneficiaries can become the owners of the CGG Shares only after the final
allocation thereof, at the end of the Allocation Period (hereafter the “Final
Allocation”). The date of the Final Allocation marks the starting point of the retention
period of two years during which the Beneficiaries are formally forbidden to sell the CGG
Shares allocated to them (hereinafter the “Retention Period”).
	 
	 	 	Beneficiaries are reminded that the change in the price of the CGG Shares and,
consequently, the acquisition capital gain and the potential sale capital gain obtained
through the sale of said CGG Shares at the end of the Retention Period, will largely
depend on the Company’s performance and especially on its financial results. The
Beneficiaries are thus linked with the Company’s performance through the change in share
value.
	 
	 	 	The financial benefit obtained through the Allocation of CGG free Shares is related to a
special tax and social contribution advantage (see paragraph 6 below). Beneficiaries
should find out the tax status that applies to them on the relevant date.
	 
	1.2	 	Please note that, if need be, this Allocation of CGG Shares is an offer reserved to
the Beneficiaries restrictively designated by the Board of Directors and consequently does not
represent an offer made to the public.
	 
	 	 	Nothing in this plan forms part of the contract of employment of a Beneficiary. The rights
and obligations arising from the employment relationship between the Beneficiary and the
Company or its Affiliated Companies are separate from, and are not affected by, this plan.
Participation in the regulation does not create any right to, or expectation of, continued
employment.

 

			
	1	 	“Affiliated Companies” means any company or
economic interest group which has a direct or indirect affiliation with
the Company:
	 
	 	 	- a company or economic interest group in which the Company owns,
directly or indirectly, at least 10% of the capital or voting rights;
	 
	 	 	- a company or economic interest group which owns, directly or
indirectly, at least 10% of the capital or voting rights of the Company;
	 
	 	 	- a company or economic interest group in which at least 50% of the capital
or voting rights are owned, directly or indirectly, by a company that owns,
directly or indirectly, at least 50% of the capital or voting rights of the
Company.

2

 

	1.3	 	Legal framework
	 
	 	 	This regulation to allocate CGG Shares is subject to the French legal and regulatory
provisions in effect on the date hereof, that govern free share allocation schemes, namely
articles L.225-197-1 et seq. of the commercial code and articles 212-4 and 212-5 of the
general regulation of the Autorité des Marchés Financiers.
	 
	1.4	 	Authorisation of the Extraordinary Shareholders’ Meeting of May 11, 2006
	 
	 	 	Pursuant to these provisions, the Company’s Extraordinary Shareholders’ Meeting held on 11
May, 2006 adopted a nineteenth resolution authorizing the Board of Directors to proceed
with the Allocation of free CGG Shares for the benefit of the employees of CGG and/or of
the Affiliated Companies within the meaning of article L225-197-2 of the commercial code
or of certain categories of the latter, as well as for the benefit of the officers and
directors of the Company and of the Affiliated Companies, defined by the law under the
terms of article L 225-197-1 et seq. of the commercial code.
	 
	1.5	 	Decision to grant free shares
	 
	1.5.1	 	The Board of Directors, which may, at any time, within the limits of the
authorisation granted to it by the Extraordinary Shareholders’ Meeting, decide to grant free
            shares to one or several Beneficiaries, decided on 11 May 2006 to allocate CGG Shares to the
Beneficiaries under the terms and conditions described in this plan. This Allocation decision
represents the starting date of the Allocation Period.
	 
	1.5.2	 	The Beneficiaries of the Allocation that has been conducted pursuant to this plan
need not make any payment to the Company.
	 
	1.5.3	 	Individual ceiling: no CGG Share can be freely allocated to the staff members,
employees or executive managers (Chairman of the Board of Directors, managing director, deputy
managing director or Chief Executive Officer) who own more than 10% of the share capital of
the Company or who would own more than 10% of the share capital after the Allocation.
	 
	1.6	 	Indicative schedule for the operation

	 	 	 	 	 
	 

	 	11 May 2006
	 	Board of Directors’ Decision
	 

	 	11 May 2008
	 	Final Allocation of CGG Shares
	 

	 	11 May 2010
	 	Expiration of the Retention Period of CGG Shares allocated

	 	 	This schedule is purely indicative and is based on the assumption that the CGG annual
general meeting convened to approve the 2007 financial statements is held before 11 May
2008. If this is not the case, the date of the Final Allocation shall be the date of such
shareholder’s meeting. The Retention Period shall consequently expire two years after the
date of such meeting.

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	2	 	Characteristics of the free Allocation of CGG Shares
	 
	2.1	 	Maximum number of CGG Shares to be allocated
	 
	 	 	The CGG Shares freely allocated to the Beneficiaries will either be new shares to be
issued, or existing shares owned by the Company.
	 
	 	 	Pursuant to the nineteenth resolution approved by the extraordinary shareholders’ meeting
held on May 11, 2006, the total number of CGG Shares allocated to Beneficiaries may not
exceed 1% of the share capital existing on the date on which the Board of Directors
decides to allocate the Shares, subject to the adjustments provided in section 7 and in
Appendix 1. In this scope, on May 11, 2006, the Board of Directors decided to allocate
53,200 CGG Shares.
	 
	2.2	 	Potential capital increase as a result of the allocation decision of the Board of
Directors on May 11, 2006.
	 
	 	 	In case of a free share allocation of 53,200 CGG shares performed entirely through an
issue of new CGG Shares, the nominal amount of the resulting capital increase would be
106,400 euros (before any adjustments)
	 
	 	 	In case of an allocation performed entirely through an issue of new CGG Shares, the Board
of Directors has decided to debit 106,400 euros from the “Other reserves” account or any
other available reserve account and allocate it to a special reserve account. This amount
corresponds to the par value of the shares to be issued.
	 
	2.3	 	Allocation of CGG Shares and commitment of the Beneficiaries
	 
	 	 	The Board of Directors’ decision to freely allocate CGG Shares represents an irrevocable
commitment of the Company in favour of the Beneficiaries.
	 
	 	 	Beneficiaries will be individually notified of the Allocation by the Chairman acting
through a Board of Directors’ delegation.
	 
	 	 	Eligible Beneficiaries will be informed of the special conditions applicable to the free
Allocation of CGG Shares by letter, sent to their home address or delivered to them by
hand, which will state:

	 	 	 	 	 
	 

	 	-
	 	the number of CGG free Shares freely allocated to them;
	 

	 	-
	 	the term of the Allocation Period;
	 

	 	-
	 	the term of the Retention Period;
	 

	 	-
	 	the conditions and criteria which need to be satisfied for the Allocation to
become final at the end of the Allocation Period;
	 

	 	-
	 	any other obligation concerning them;
	 

	 	-
	 	the general terms and conditions of the regulation;
	 

	 	-
	 	their right to accept or refuse the free Allocation of CGG Shares through a
receipt confirmation form or a receipt refusal form that must be returned to the
Company at the latest by 30 July 2006, to which a second form will be attached,
containing a commitment to observe the Retention Period.

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	 	 	A copy of this plan will be attached thereto.
	 
	 	 	Beneficiaries will have to inform the Company of their choice (acceptance or refusal) with
respect to the Allocation of CGG free Shares, by returning to the Company, before 30 July
2006, at their option:

	 	 	 	 	 
	 

	 	-
	 	the receipt confirmation form, amounting to formal acceptance of all terms and
conditions of this plan and commitment to observe the Retention Period;
	 

	 	-
	 	the refusal confirmation form duly completed and signed.

	 	 	Should they fail to respond by 30 July 2006, they will be deemed to have accepted.
	 
	3	 	Conditions for the Free Allocation of CGG Shares and Beneficiaries’ rights during the
Allocation Period
	 
	3.1	 	Duration of the Allocation Period
	 
	 	 	Beneficiaries will take advantage of the Final Allocation of CGG Shares and become the
owners of the free CGG Shares after the expiration of the later of those two dates: either
11 May 2008 or the date of the general meeting of shareholders convened to approve the
2007 financial statements, and subject to presence condition set forth in paragraphs
3.2.1. being met and the Board of Directors’ finding that the performance conditions
mentioned in paragraph 3.2.2 have been met.
	 
	3.2	 	General conditions and final allocation criteria
	 
	 	 	The free Allocation of CGG Shares to Beneficiaries will become final only on the date
mentioned above and subject to:

	 	 	 	- the observance of the presence conditions mentioned below;
	 
	 	 	 	- the fulfilment of the performance conditions mentioned below.

	3.2.1	 	Presence conditions
	 
	3.2.2.1	 	Employee, or officer (mandataire social) of the Group
	 
	 	 	The free Allocation of CGG Shares to Beneficiaries is strictly related to a persons
capacity as employee or officer of CGG or of the Affiliated Companies of CGG (CGG and the
Affiliated Companies of CGG are jointly designated hereafter as the “Group”).
	 
	 	 	The Final Allocation of free CGG Shares is consequently reserved for any Beneficiary
(employee or officer) designated during the initial Allocation, linked to CGG or to an
Affiliated Company through an employment contract or a corporate appointment in effect on
the Final Allocation date.
	 
	 	 	In case of termination of the employment contract or corporate appointment of the
Beneficiary, for any reason whatsoever, effective before the end of the Allocation Period,
the Beneficiary will lose any right to the Final Allocation of the CGG Shares.
	 
	3.2.2.2	 	Exceptions

	 	•	 	Notwithstanding the provisions of paragraph 3.2.1 (a) above, should the loss of
the capacity of an employee or officer of the Group during the Allocation Period be
due to one of the following reasons, the CGG free Shares allocated will be treated as
follows:

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	 	•	 	Retirement or early retirement: Beneficiaries retain their right to the CGG
Shares, even though they are no longer bound by an employment contract, but they
remain subject to the other conditions of this plan.
	 
	 	•	 	Death: pursuant to the provisions of article L.225-197-3 of the commercial code,
the successors or beneficiaries (ayant-droits) of the Beneficiaries, may, if they so
desire, request the Allocation of CGG Shares within six months of the date of death.
	 
	 	 	 	Upon the expiration of this six (6) month-term, the successors or beneficiaries of
the Beneficiary will definitively lose the right to request the Allocation of CGG
Shares.
	 
	 	 	 	In any case, the Final Allocation of CGG Shares will take place only upon the
expiration of the Allocation Period, subject to the observance of the collective
performance conditions.
	 
	 	•	 	2nd and 3rd category disability, within the meaning of article L.341-4 of the
Social Security code: Beneficiaries may preserve their right to the free Allocation
of CGG Shares, but they will remain subject to the other conditions of this plan.
	 
	 	•	 	An Affiliated Company leaving the Group, if the Beneficiary is the employee or
officer of such company: the benefit of the right to the free Allocation of CGG
Shares is maintained by the Beneficiary, but will be subject to the other terms and
conditions of this plan.
	 
	 	•	 	Termination for economic reasons: the Beneficiaries keep the benefit of the right
to the free Allocation of CGG Shares, but they will be subject to the other
conditions of this plan.

	3.2.2	 	Performance conditions
	 
	 	 	In addition to fulfilling the presence condition set forth in paragraph 3.2.1, the free
Allocation of CGG Shares shall become final provided the performance conditions set forth
below are complied with. Such performance conditions shall be determined under constant
accounting principles. The fulfilment of each of these performance conditions will entitle
each Beneficiary to be allocated on a final basis half of the number initially allocated
to such Beneficiary for each performance condition fulfilled.
	 
	3.2.2.1	 	Achievement of an annual consolidated average net earning per share of €7.30 for
the fiscal years ended on December 31, 2006 and 2007 (the “Period”)
	 
	 	 	The fulfilment of such condition shall be determined on the basis of the consolidated
financial statements of each fiscal year of the Period as approved by the Annual General
Meeting of Shareholders.
	 
	 	 	The net earning per share shall be calculated for each fiscal year of the Period by
dividing net consolidated income attributable to shareholders by the weighted average
number of shares outstanding over each fiscal year of the Period. For the purposes of
such calculation, any variation of the Convertible bonds 7.75% November 4, 2004 / November
4, 2012 as shown in the consolidated statement of operations on the line “variance on
derivative convertible bonds” shall be excluded from the income.
	 
	 	 	Net earning per share over the Period shall be the average net earning per share of both
fiscal years of the Period calculated as described above.

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	 	 	This condition may be revised in case of a stock-split or reverse stock-split of CGG
Shares.
	 
	3.2.2.2	 	Achievement of an average annual pre-tax rate of return on capital employed over
the Period (the “Return Rate”) at the Group level, or the Services segment level or the
Products segment level depending on the sector to which each beneficiary is assigned
	 
	 	 	The average annual pre-tax rate of return on capital employed shall be determined at Group
level, Services segment level or Products segment level (hereinafter collectively the
“Sectors” and individually the “Sector”), depending on the Sector to which each
Beneficiary respectively belongs.
	 
	 	 	The Sector to which any beneficiary belongs shall be determined as of the date of this
plan, i.e. May 11, 2006.
	 
	 	 	The average annual pre-tax rate of return on capital employed to be achieved for each
Sector shall be:

	 	•	 	22% at Group level
	 
	 	•	 	15% at Services segment level
	 
	 	•	 	50% at Products segment level.

	 	 	The fulfilment of such conditions shall be determined on the basis of the consolidated
financial statements of each fiscal year of the Period as approved by the Annual General
Meeting of Shareholders.
	 
	 	 	The Return Rate of each sector for each fiscal year of the Period shall be calculated by
dividing the operating income of the Sector (including Argas contribution for the Services
segment and the Group) by the average capital employed of the fiscal year of the
considered Sector.
	 
	 	 	The Return Rate of the Period shall be the average return rates of both fiscal years of
the Period calculated as described above.
	 
	3.2.2.3	 	Determination of the fulfilment of the performance conditions and consequence on
Final Allocation of the CGG free Shares.
	 
	 	 	The Allotment of the portion of the CGG free Shares corresponding to the fulfilment of
each performance condition shall be final, subject to fulfilment of the presence condition
provided by paragraph 3.2.2, upon fulfilment of 100% or more of such performance
condition.
	 
	 	 	In the event either performance condition is not a 100% or more fulfilled but is fulfilled
by at least two-thirds, the corresponding portion of the CGG Shares corresponding to the
fulfilment of such condition shall be calculated on a prorata basis, on a linear scale
decreasing from a 100% to 50%. (see example in Appendix 2). If the CGG Shares are not a
whole number, their numbers shall be rounded down to the nearest whole number.
	 
	 	 	In the event one performance condition is not fulfilled up to two-thirds, the
corresponding portion of the CGG Shares corresponding to the fulfilment of such condition
shall not be allocated. Should both performance conditions not be fulfilled up to
two-thirds, no CGG Shares will be allocated.

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	3.2.2.4	 	Change of perimeter further to one or several external growth transactions
	 
	 	 	In the event of a change of perimeter further to one or several external growth
transactions (acquisition of companies or assets, merger, asset contribution from third
parties) resulting in an increase of the revenues greater than 25% over the Period, the
CGG Shares shall be finally allocated to each Beneficiary upon fulfilment of the
performance condition set forth in paragraph 3.2.1 only and of the presence conditions set
forth in paragraph 3.2.1.
	 
	3.3	 	Delivery of CGG Shares
	 
	 	 	At the end of the Allocation Period, i.e. on 11 May 2008 (or at such date as mentioned in
paragraph 3.1.), the Company, subject to the Beneficiary’s observance of the acquisitions
conditions and criteria established by the Board, will transfer to the Beneficiary the
number of CGG Shares established by the Board according to the formula mentioned below.
	 
	 	 	The Beneficiary becomes the owner of the CGG Shares and thus a shareholder, but is obliged
to keep the CGG Shares during the Retention period established by the Board.
	 
	4	 	Rights and obligations attached to the CGG Shares finally allocated during the Retention
Period
	 
	4.1	 	Type and category of CGG Shares allocated
	 
	 	 	The CGG Shares will entitle a Beneficiary, as of the Final Allocation, to all the rights
attached to the common stock that comprises the share capital of CGG on the date this plan
is established, except for the special case of dividends described in paragraph 4.2.2
below.
	 
	4.2	 	Right attached to the CGG Shares allocated.
	 
	4.2.1	 	They will be subject to all the provisions of the by-laws and to the decisions of
the Shareholders’ Meeting.
	 
	4.2.2	 	Despite the restriction on transfer of the CGG Shares (as indicated in paragraph
4.3), the Beneficiary of a Final Allocation can, during the Retention Period, exercise, like
any other Beneficiary, the rights attached to the Shares allocated, and in particular:

	 	 	 	- the pre-emptive subscription right;
	 
	 	 	 	- the information right;
	 
	 	 	 	- the right to participate in the shareholders’ meetings;
	 
	 	 	 	- the right to vote;
	 
	 	 	 	- the right to dividends and potential non-appropriated reserves, if any,

	 	 	The CGG Shares allocated after the decision to distribute dividends taken by the
shareholders’ meeting approving the financial statements for year N will carry rights to
dividends only as of the date of the decision to distribute dividends taken by the
shareholders’ meeting approving the financial statements closed in year N+1.
	 
	4.2.3	 	Each new share carries rights to the ownership of corporate assets, distribution
of profits, and liquidation premium in proportion to the share capital that it represents,
taking into

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	 	 	account, if applicable, the amortized and non-amortized or paid-up and non-paid-up capital,
the par value of the shares and the rights of shares of different categories.
4.3 Non-transferability of CGG Shares during the Retention Period
	 
	 	 	The CGG Shares shall be non-transferable prior to the expiration of the Retention Period,
i.e. until 11 May 2010 (or such date as is set out in paragraph 3.1).
	 
	 	 	Each Beneficiary undertakes to retain such shares and may not convert them to bearer form
for a period of two years after the CGG Shares have been effectively allocated at the
conclusion of the Allocation Period, i.e., until 11 May 2010 (or such date as is mentioned
in paragraph 3.1).
	 
	 	 	Therefore, the Beneficiary may not transfer, assign (by any means, including in case of
public offering contribution, donation, company contribution, etc.) or convert to bearer
shares the allocated CGG Shares until after the expiration of the retention term set forth
above.
	 
	4.4	 	Form of the allocated CGG Shares
	 
	 	 	The new CGG Shares must be registered in an account opened, in the name of their owner, in
the registers of the Company with a specific indication of their non-transferability; such
registration to be performed in accordance with the terms and conditions stipulated by all
regulatory and legal provisions in effect.
	 
	4.5	 	Listing of the CGG Shares
	 
	 	 	The new CGG Shares issued for the purposes of this plan shall be included in a combined
application for admission trading on Eurolist Euronext Paris.
	 
	 	 	They shall be traded on the same line as the existing CGG Shares at the conclusion of the
Retention Period.
	 
	5	 	CGG Shares after the Retention Period
	 
	 	 	After the Retention period, the CGG Shares shall become available and the Beneficiary
shall be able to transfer them freely.
	 
	 	 	However, since these shares are listed for trading on a regulated market and in order to
avoid any insider trading risk, the CGG Shares cannot be transferred during any “blackout
period” as set forth below pursuant to section L. 225-197-1, I, paragraph 3 of the French
Commerce Code:

	 	 	 	- Within ten trading sessions preceding and following the date on which the
Company’s annual consolidated financial statements are published;
	 
	 	 	 	- Within a period from the date on which the corporate bodies of the Company became
aware of information that, if it were disclosed, could have a negative effect on the
price of the stock of the Company, and the date ten stock exchange trading sessions
following when such information was disclosed.

	6	 	Tax treatment applicable to Beneficiaries who are French residents
	 
	 	 	This presentation of tax treatments is provided for informational purposes. It
corresponds to the French legislation in effect as at the date when this plan was issued.
The

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	 	 	Beneficiary shall note that as at the date hereof, the French tax administration had not
yet commented on the tax treatment laid down by the law.
	 
	 	 	The Beneficiary shall be responsible for learning about any amendments to the applicable
tax treatment.
	 
	6.1	 	Capital gain from the acquisition
	 
	 	 	The capital gain from the acquisition, which is equal to the value of the CGG Shares as at
the date of the Final Allocation, shall be taxed at a flat rate of 30%.
	 
	 	 	The Beneficiary may however elect to have the capital gain from the acquisition taxed as
income in accordance with the regulations applicable to salaries and wages.
	 
	 	 	The capital gain from the acquisition shall then be subject to social security
contributions at a total effective rate currently set at 11% (“Social Security
Contributions”), i.e., a 8.2% generalized social security contribution (“CSG”), a 0.5%
social security deficit contribution (“CRDS”), a 2% social security contribution, and a
0.3% supplemental social security contribution.
	 
	 	 	The capital gain from the acquisition shall be taxed in the year in which the CGG Shares
were sold.
	 
	6.2	 	Capital gain on the disposal
	 
	 	 	The capital gain on the disposal, which corresponds to the difference between the disposal
price of CGG Shares and their value as at the Final Allocation date shall be taxed in
accordance with the general tax treatment of capital gains on the disposal of marketable
securities at the total effective rate currently set at 27% (or 16% plus Social Security
Contributions at 11%).
	 
	 	 	The capital gain on disposals shall only be taxed if the Beneficiary and the Beneficiary’s
tax unit have realized disposals of marketable securities for an amount exceeding a
threshold currently set at 15,000 euros in the course of the calendar year in question.
	 
	 	 	Any capital losses on disposals shall be chargeable to the capital gains on the disposal
of other marketable securities realized by the taxpayer for the same year and the ten
years thereafter.
	 
	6.3	 	Wealth tax
	 
	 	 	Subject to comments from the tax administration, the CGG Shares should, as at their Final
Allocation, be included in the basis for the calculation of the wealth tax.
	 
	7	 	Preservation of Beneficiaries’ rights in case of financial transactions
	 
	 	 	Whenever the Company wishes to perform, in the course of the Allocation Period, any
financial transactions affecting the number and value of the CGG Shares (as determined by
reference to its market price at the opening of trading as of 11 May 2006), it shall take
all necessary measures in order to preserve the rights of the Beneficiaries by adjusting
the number of CGG Shares that could be freely allocated to them at the conclusion of the
Allocation Period in accordance with the methods listed below.
	 
	 	 	These measures are comparable to those provided by the laws and regulations pertaining to
the protection of the rights of Beneficiaries of stock purchase or subscription options.

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	 	 	Such adjustment shall be made with a view to making equivalent, to the nearest hundredth
of a share, the value of the CGG Shares that shall be allocated after the execution of the
envisaged transaction and the value of the CGG Shares allocated prior to the execution of
the transaction. If the CGG Shares are not a whole number, their number shall be rounded
down to the nearest whole number.
	 
	 	 	Should the Company perform a transaction requiring that the rights of the Beneficiaries be
preserved, the Company shall inform the Beneficiaries thereof by registered mail no later
than the day prior to the beginning of such transaction. After each adjustment, the new
number of allocated CGG Shares shall be communicated to the Beneficiaries by registered
mail.
	 
	 	 	In case of adjustment, the Board of Directors of the Company shall report on the
calculation details and results for such adjustment in its next annual report.
	 
	 	 	Should the Company perform transactions for which an adjustment has not been performed
under this paragraph and should subsequent legislation or regulations set forth an
adjustment, the Company shall perform such adjustment in accordance with applicable legal
or regulatory provisions and with the practices in this matter on the main market on which
the Company’s shares are listed for trading.
	 
	 	 	The calculation methods applicable to such adjustment, if any, based on the type of
transaction concerned are presented in Appendix 1.
	 
	8	 	Reduction of beneficiaries’ rights in case of a capital decrease due to losses
	 
	 	 	In case of a capital decrease due to losses realized by a decrease either in the par
value of CGG Shares or in the number thereof, the rights of the Beneficiaries shall be
reduced accordingly as if the Beneficiaries had been shareholders prior to the date on
which the capital decrease became final.
	 
	9	 	Amendment of this plan and of the individual terms and interpretation
	 
	 	 	This plan may be amended by the Board of Directors if new legislation would have an
unfavourable impact on the Company or on the Company’s financial statements or would
increase the cost of such a plan for the Company.
	 
	 	 	Subject to the scenarios set forth in the paragraph above, no amendment that could affect
the rights of the Beneficiaries may be made to this plan.
	 
	 	 	Furthermore, the Board of Directors is responsible for interpreting the provisions of this
plan, as needed.
	 
	 	 	This plan shall prevail in case of conflict of interpretation between the letter with the
announcement of the free issue and the plan itself.

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Appendix 1

Adjustment methods for financial transactions

affecting the rights of the Beneficiaries

The following adjustments shall be made should CGG perform a financial transaction such as
those listed below except if the law, as it may be amended, should set forth a different adjustment
mechanism in which case the latter shall prevail:

	(a)	 	Should shares of stock carrying pre-emptive subscription rights be issued, the new number of
CGG Shares that could be allocated to each Beneficiary at the conclusion of the Allocation
Period shall be equal to the product of the number of CGG Shares allocated prior to the
beginning of the transaction and the following adjustment factor:

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	1+	 	Value of the pre-emptive subscription right	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Value of the CGG Share after the pre-emptive	 	 
	 

	 	 	 	subscription right has been detached	 	 

	 	 	For the calculation of this adjustment factor, the value of the pre-emptive subscription
right and the value of the CGG Share after the pre-emptive subscription right has been
detached shall be determined based on the average of the prices quoted on the market
during all the trading sessions included in the subscription period.
	 
	(b)	 	In case of a free allocation of CGG Shares to shareholders, the new number of CGG Shares that
could be allocated to each Beneficiary at the conclusion of the Allocation Period shall be
equal to the product of the number of CGG Shares allocated prior to the beginning of this
transaction and the following adjustment factor:

	 	 	 	 	 
	 

	 	1 +
	 	Number of Shares to which each old CGG Shares are
	 

	 	 	 	entitled

	(c)	 	In case of distribution of reserves or premiums, in cash or in kind, the new number of CGG
Shares that could be allocated to each Beneficiary at the end of the Allocation Period shall
be equal to the product of the number of CGG Shares allocated prior to the beginning of the
transaction and the following adjustment factor:

	 	 	 	 	 
	 

	 	 	 	1/ [1 – (amount per CGG distribution shares / CGG
	 

	 	 	 	Share value prior to the distribution)]

	 	 	For the calculation of this adjustment factor, the value of the CGG Shares prior to the
distribution shall be equal to the weighted average price of the last three trading
sessions preceding such distribution.

12

 

	 	 	Example:
	 
	 	 	Thus, if the value of a CGG Share prior to the distribution was equal to 100, the
distribution of reserves or premiums of 15 would lead to the adjustment of the number (N)
of CGG Shares that are part of the free allocation by multiplying it by 1/ [1-(15/100)] =
1.176. Globally, the result would offset the impairment of the free CGG Shares as a result
of the distribution since: N x 100 = N x 1.17 x (100-15 = 85).
	 
	(d)	 	Should an amendment be made to profit appropriation, the new number of CGG Shares that could
be allocated to each Beneficiary at the conclusion of the Allocation Period shall be equal to
the product of the number of CGG Shares allocated prior to the beginning of the transaction
and the following adjustment factor:

	 	 	 	 	 
	 

	 	 	 	1/ [1 –((decrease in the right to dividends per share /
	 

	 	 	 	value of the CGG Share prior to this amendment)]

	 	 	For the calculation of this adjustment factor, the value of the CGG Shares prior to the
amendment shall be equal to the weighted average price of the last three trading sessions
preceding such amendment.
	 
	(e)	 	In case of repayment of capital, the new number of CGG Shares that could be allocated to each
Beneficiary at the conclusion of the Allocation Period shall be equal to the product of the
number of CGG Shares allocated prior to the beginning of the transaction and the following
adjustment factor:

	 	 	 	 	 
	 

	 	1/1 -
	 	1/ [1- (amount per CGG Shares for the repayment /
	 

	 	 	 	value of the CGG share prior to the repayment)]

	 	 	For the calculation of this adjustment factor, the value of the CGG Shares prior to the
repayment shall be equal to the weighted average price of the last three trading sessions
preceding such repayment.
	 
	(f)	 	In case of the consolidation of the Company into another company or in case of a merger with
one or more other companies to form a new company or in case of a spin-off, the Beneficiaries
may exercise their rights in the company resulting from such merger or in the company or
companies resulting from such spin-off.
	 
	 	 	The new number of CGG Shares that could be allocated to each Beneficiary at the end of the
Allocation Period shall be determined by adjusting the number of CGG Shares planned for
allocation prior to the beginning of the transaction in light of the exchange ratio of CGG
Shares against the CGG Shares of the consolidating company or against the Shares of the
company or companies resulting from the spin-off.
	 
	 	 	Such company or companies would have subrogated as of right the Company in its obligations
to the Beneficiaries, namely for the application of the provisions of this paragraph
intended to preserve the rights of the Beneficiaries in case of financial transactions.

13

 

	(g)	 	Should the Company purchase its own Shares at an acquisition price exceeding the stock market
price, the new number of CGG Shares that could be allocated to each Beneficiary at the
conclusion of the Allocation Period shall be equal to the product of the number of CGG Shares
allocated prior to the beginning of the transaction and the following adjustment factor:

	 	 	 	 	 	 	 
	 

	 	1 + Pc % x
	 	Acquisition price – Share Value	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Share Value	 	 

	 	 	For the calculation of this adjustment factor, the value of the CGG Shares shall be equal
to the weighted average price of the last three trading sessions preceding the acquisition
or the acquisition right where “Pc%” means percentage acquired capital.

	(h)	 	In case of a reverse stock split of CGG Shares, the new number of CGG Shares that could be
allocated to each Beneficiary at the conclusion of the Allocation Period shall be equal to the
product of the number of CGG Shares allocated prior to the beginning of the transaction and
the following adjustment factor:

	 	 	 
	 

	 	Number of CGG Shares comprised in the capital
	 

	 	after the reverse split
	 	 	 
	 

	 	Number of CGG Shares comprised in the capital
	 

	 	prior to the reverse split

	(i)	 	In case of an increase of the par value of CGG Shares, the par value of the CGG Shares that
could be obtained by the Beneficiaries shall be increased accordingly.

	(j)	 	In case of a free issue of financial instrument(s) other than CGG Shares, the new number of
CGG Shares that could be allocated to each Beneficiary at the conclusion of the Allocation
Period shall be determined as follows:

	 	•	 	If the free subscription right is quoted, the new number of CGG Shares that could
be allocated to each Beneficiary at the conclusion of the Allocation Period shall be
equal to the product of the number of CGG Shares allocated prior to the beginning of
the transaction and the following adjustment factor:

	 	 	 	 	 
	 

	 	1 +
	 	Value of the free subscription right
	 	 	 	 	 
	 

	 	 	 	Value of the CGG Share after the free
	 

	 	 	 	subscription right has been detached

	 	 	 	For the calculation of this adjustment factor, the value of the subscription right
and the value of the CGG Share prior to detaching the free subscription right shall
be determined based on the weighted average price of the first three trading
sessions

14

 

	 	 	 	on the Eurolist market of Euronext after the free subscription right has been
detached.
	 
	 	•	 	If the free subscription right is not quoted, the new number of CGG Shares that
could be allocated to each Beneficiary at the conclusion of the Allocation Period
shall be equal to the product of the number of CGG Shares allocated prior to the
beginning of the transaction and the following adjustment factor:

	 	 	 	 	 
	 

	 	 	 	Value of the allocated financial
	 

	 	1 +
	 	instrument(s)
	 	 	 	 	 
	 

	 	 	 	Value of the CGG Share after the free
	 

	 	 	 	subscription right has been detached

	 	 	 	For the calculation of this adjustment factor, the value of the financial
instrument(s) allocated and the value of the CGG Shares after the free subscription
right has been detached shall be determined based on the weighted average of the
prices of the first three trading sessions on the Eurolist market of Euronext after
the free subscription right has been detached.
	 
	 	 	 	Absent a quotation of the financial instrument(s) allocated on a regulated market
of Euronext Paris S.A., their value shall be determined as stated above, by
reference to the main regulated or similar market on which it is (they are) quoted.
Failing that, their value shall be determined by an internationally recognised
expert designated by the Company, whose opinion shall not be subject to appeal.

15

 

Annexe 2

Example of free allocation of CGG shares at the end of the Allocation

period (paragraph 3.2)

For a beneficiary fulfilling the presence condition set forth in paragraph 3.2.1 upon Final
Allocation, belonging to the Services segment and having been allocated a maximum number of 150 CGG
shares on May 11, 2006, the rules governing the fulfilment of the performance conditions will apply
as follows :

	 	a)	 	Achievement of an annual consolidated average net earning per share of €7.30, for
fiscal years ended on December 31, 2006 and on December 31, 2007 (the “Period”)
corresponding to a maximum allocation of 75 CGG Shares (see paragraphs 3.2.2.1 and
3.2.2.3).
	 
	 	 	 	The net earning as calculated over the Period:

	 	-	 	equals or exceeds €7.30: 75 shares are allocated.
	 
	 	-	 	is less than €7.30 but exceeds € 4.86 (corresponding to a
fulfilment of the condition up to two-third – see paragraph 3.2.2.3) : the
number of CGG shares allocated is reduced and calculated on a linear scale
decreasing from 100% to 50%, i.e. the number of shares allocated on a final basis
will range from 74 to 38. For example, if the net earning as calculated amounts to
€ 6.50, then 62 shares will be allocated.
	 
	 	-	 	equals € 4.86: 37 shares will be allocated.
	 
	 	-	 	is less than €4.86: no shares will be allocated.

	 	b)	 	Achievement of an average annual pre-tax rate of return on capital employed over the
Period of the Services Segment of 15%, (the “Rate of Return”), corresponding to a maximum
allocation of 75 CGG Shares (see paragraphs 3.2.2.1 and 3.2.2.3).
	 
	 	 	 	The Rate of Return as calculated over the Period:

	 	-	 	equals or exceeds 15,00%: 75 shares are allocated.
	 
	 	-	 	is less than 15,00% but exceeds 10,00% (corresponding to
a fulfilment of the condition up to two-third – see paragraph 3.2.2.3): the
number of CGG shares allocated is reduced and calculated on a linear scale
decreasing from 100% to 50%, i.e. the number of shares allocated on a final basis
will range from 74 to 38. For example, if the Rate of Return as calculated amounts
to 11.20 %, then 46 shares will be allocated.
	 
	 	-	 	equals to 10,00% : 37 shares will be allocated.
	 
	 	-	 	is less than 10,00% : no shares will be allocated.

16EX-4.8

 

Translation for information purposes only

Exhibit 4.8.

COMPAGNIE GÉNÉRALE DE GÉOPHYSIQUE- VERITAS

Société Anonyme with a share capital of 54,447,070 euros

Registered office: Tour Maine Montparnasse, 33 avenue du Maine, 75015 Paris

ParisTrade and Company Register No.: 969 202 241

FREE SHARE ALLOCATION

GENERAL REGULATIONS

Board of Directors’ Meeting of March 23, 2007

 

 

	1	 	Framework of the free share allocation
	 
	1.1	 	Context and general principle of free share allocation
	 
	 	 	The purpose of these rules is to manage the free share allocation scheme implemented for
the benefit of certain of the staff members and executive management of Compagnie Générale
de Géophysique — Veritas (hereinafter “CGG VERITAS” or the “Company”) and of Affiliated
Companies1 (hereinafter the “Beneficiaries”).
	 
	 	 	This regulation allows the Beneficiaries to receive one or several free shares of CGG
VERITAS (the “Allocation”), whose stock is currently listed on the Eurolist compartment A
of Euronext-Paris (hereinafter the “CGG VERITAS Shares”) under the terms stated by the
regulation of the Autorité des Marchés Financiers (French Securities Commission).
	 
	 	 	The CGG VERITAS Shares are effectively allocated only at the later of those two dates:
either March 23, 2009 or the date of the general meeting of shareholders convened to
approve the 2008 financial statements (hereinafter the “Allocation Period”), provided that
the allocation conditions and criteria established by the Board of Directors are observed
on that allocation date. During the Allocation Period, the Beneficiaries are not the
owners of the CGG VERITAS Shares. The Beneficiaries can become the owners of the CGG
VERITAS Shares only after the final allocation thereof, at the end of the Allocation
Period (hereafter the “Final Allocation”). The date of the Final Allocation marks the
starting point of the retention period of two years during which the Beneficiaries are
formally forbidden to sell the CGG VERITAS Shares allocated to them (hereinafter the
“Retention Period”).
	 
	 	 	Beneficiaries are reminded that the change in the price of the CGG VERITAS Shares and,
consequently, the acquisition capital gain and the potential sale capital gain obtained
through the sale of said CGG VERITAS Shares at the end of the Retention Period, will
largely depend on the Company’s performance and especially on its financial results. The
Beneficiaries are thus linked with the Company’s performance through the change in share
value.
	 
	 	 	The financial benefit obtained through the Allocation of CGG VERITAS free Shares is
related to a special tax and social contribution advantage (see paragraph 6 below).
Beneficiaries should find out the tax status that applies to them on the relevant date.
	 
	1.2	 	Please note that, if need be, this Allocation of CGG VERITAS Shares is an offer
reserved to the Beneficiaries restrictively designated by the Board of Directors and
consequently does not represent an offer made to the public.
	 
	 	 	Nothing in this plan forms part of the contract of employment of a Beneficiary. The rights
and obligations arising from the employment relationship between the Beneficiary and the
Company or its Affiliated Companies are separate from, and are not affected by, this

 

			
	1	 	“Affiliated Companies” means any company or
economic interest group which has a direct or indirect affiliation with
the Company:
	 
	 	 	- a company or economic interest group in which the Company owns,
directly or indirectly, at least 10% of the capital or voting rights;
	 
	 	 	- a company or economic interest group which owns, directly or
indirectly, at least 10% of the capital or voting rights of the Company;
	 
	 	 	- a company or economic interest group in which at least 50% of the capital
or voting rights are owned, directly or indirectly, by a company that owns,
directly or indirectly, at least 50% of the capital or voting rights of the
Company.

2

 

plan. Participation in the regulation does not create any right to, or expectation of,
continued employment.

	1.3	 	Legal framework
	 
	 	 	This regulation to allocate CGG VERITAS Shares is subject to the French legal and
regulatory provisions in effect on the date hereof, that govern free share allocation
schemes, namely articles L.225-197-1 et seq. of the commercial code and articles 212-4 and
212-5 of the general regulation of the Autorité des Marchés Financiers.
	 
	1.4	 	Authorisation of the Extraordinary Shareholders’ Meeting of May 11, 2006
	 
	 	 	Pursuant to these provisions, the Company’s Extraordinary Shareholders’ Meeting held on 11
May, 2006 adopted a nineteenth resolution authorizing the Board of Directors to proceed
with the Allocation of free CGG VERITAS Shares for the benefit of the employees of CGG
VERITAS and/or of the Affiliated Companies within the meaning of article L225-197-2 of the
commercial code or of certain categories of the latter, as well as for the benefit of the
officers and directors of the Company and of the Affiliated Companies, defined by the law
under the terms of article L 225-197-1 et seq. of the commercial code.
	 
	1.5	 	Decision to grant free shares
	 
	1.5.1	 	The Board of Directors, which may, at any time, within the limits of the
authorisation granted to it by the Extraordinary Shareholders’ Meeting, decide to grant free
shares to one or several Beneficiaries, decided on March 23, 2007 to allocate CGG VERITAS
Shares to the Beneficiaries under the terms and conditions described in this plan. This
Allocation decision represents the starting date of the Allocation Period.
	 
	1.5.2	 	The Beneficiaries of the Allocation that has been conducted pursuant to this plan
need not make any payment to the Company.
	 
	1.5.3	 	Individual ceiling: no CGG VERITAS Share can be freely allocated to the staff
members, employees or executive managers (Chairman of the Board of Directors, managing
director, deputy managing director or Chief Executive Officer) who own more than 10% of the
share capital of the Company or who would own more than 10% of the share capital after the
Allocation.
	 
	1.6	 	Indicative schedule for the operation

	 	 	 	 	 
	 

	 	March 23, 2007
	 	Board of Directors’ Decision
	 
	 	 	 	 
	 

	 	March 23, 2009
	 	Final Allocation of CGG VERITAS Shares
	 
	 	 	 	 
	 

	 	March 23, 2011
	 	Expiration of the Retention Period of CGG VERITAS Shares
	 

	 	 	 	allocated

This schedule is purely indicative and is based on the assumption that the CGG annual
general meeting convened to approve the 2008 financial statements is held before March 23,
2009. If this is not the case, the date of the Final Allocation shall be the date of such
shareholder’s meeting. The Retention Period shall consequently expire two years after the
date of such meeting.

3

 

	2	 	Characteristics of the free Allocation of CGG VERITAS Shares
	 
	2.1	 	Maximum number of CGG VERITAS Shares to be allocated
	 
	 	 	The CGG VERITAS Shares freely allocated to the Beneficiaries will either be new shares to
be issued, or existing shares owned by the Company.
	 
	 	 	Pursuant to the nineteenth resolution approved by the extraordinary shareholders’ meeting
held on May 11, 2006, the total number of CGG VERITAS Shares allocated to Beneficiaries
may not exceed 1% of the share capital existing on the date on which the Board of
Directors decides to allocate the Shares, subject to the adjustments provided in section 7
and in Appendix 1. In this scope, on March 23, 2007, the Board of Directors decided to
allocate 81,750 CGG VERITAS Shares.
	 
	2.2	 	Potential capital increase as a result of the allocation decision of the Board of
Directors on March 23, 2007.
	 
	 	 	In case of a free share allocation of 81,750 CGG VERITAS shares performed entirely through
an issue of new CGG VERITAS Shares, the nominal amount of the resulting capital increase
would be 163,500 euros (before any adjustments)
	 
	 	 	In case of an allocation performed entirely through an issue of new CGG VERITAS Shares,
the Board of Directors has decided to debit 163,500 euros from the “Other reserves”
account or any other available reserve account and allocate it to a special reserve
account. This amount corresponds to the par value of the shares to be issued.
	 
	2.3	 	Allocation of CGG VERITAS Shares and commitment of the Beneficiaries
	 
	 	 	The Board of Directors’ decision to freely allocate CGG VERITAS Shares represents an
irrevocable commitment of the Company in favour of the Beneficiaries.
	 
	 	 	Beneficiaries will be individually notified of the Allocation by the Chairman acting
through a Board of Directors’ delegation.
	 
	 	 	Eligible Beneficiaries will be informed of the special conditions applicable to the free
Allocation of CGG VERITAS Shares by letter, sent to their home address or delivered to
them by hand, which will state:

	 	-	 	the number of CGG VERITAS free Shares freely allocated to them;
	 
	 	-	 	the term of the Allocation Period;
	 
	 	-	 	the term of the Retention Period;
	 
	 	-	 	the conditions and criteria which need to be satisfied for the Allocation to
become final at the end of the Allocation Period;
	 
	 	-	 	any other obligation concerning them;
	 
	 	-	 	the general terms and conditions of the regulation;
	 
	 	-	 	their right to accept or refuse the free Allocation of CGG VERITAS Shares through
a receipt confirmation form or a receipt refusal form that must be returned to the
Company at the latest by June 15 ,2007, to which a second form will be attached,
containing a commitment to observe the Retention Period.

A copy of this plan will be attached thereto.

4

 

Beneficiaries will have to inform the Company of their choice (acceptance or refusal) with
respect to the Allocation of CGG VERITAS free Shares, by returning to the Company, before
June 15, 2007, at their option:

	 	-	 	the receipt confirmation form, amounting to formal acceptance of all terms and
conditions of this plan and commitment to observe the Retention Period;
	 
	 	-	 	the refusal confirmation form duly completed and signed.
	 
	 	Should they fail to respond by June 15, 2007, they will be deemed to have accepted.

	3	 	Conditions for the Free Allocation of CGG VERITAS Shares and Beneficiaries’ rights during
the Allocation Period
	 
	3.1	 	Duration of the Allocation Period
	 
	 	 	Beneficiaries will take advantage of the Final Allocation of CGG VERITAS Shares and become
the owners of the free CGG VERITAS Shares after the expiration of the Allocation Period as
of the later of those two dates: either March 23, 2009 or the date of the general meeting
of shareholders convened to approve the 2008 financial statements, and subject to presence
condition set forth in paragraphs 3.2.1. being met and the Board of Directors’ finding
that the performance conditions mentioned in paragraph 3.2.2 have been met.
	 
	3.2	 	General conditions and final allocation criteria
	 
	 	 	The free Allocation of CGG VERITAS Shares to Beneficiaries will become final only on the
date mentioned above and subject to:

	 	-	 	the observance of the presence conditions mentioned below;
	 
	 	-	 	the fulfilment of the performance conditions mentioned below.

	3.2.1	 	Presence conditions
	 
	3.2.1.1	 	Employee, or officer (mandataire social) of the Group
	 
	 	 	The free Allocation of CGG VERITAS Shares to Beneficiaries is strictly related to a
persons capacity as employee or officer of CGG VERITAS or of the Affiliated Companies of
CGG VERITAS (CGG VERITAS and the Affiliated Companies of CGG VERITAS are jointly
designated hereafter as the “Group”).
	 
	 	 	The Final Allocation of free CGG VERITAS Shares is consequently reserved for any
Beneficiary (employee or officer) designated during the initial Allocation, linked to CGG
VERITAS or to an Affiliated Company through an employment contract or a corporate
appointment in effect on the Final Allocation date.
	 
	 	 	In case of termination of the employment contract or corporate appointment of the
Beneficiary, for any reason whatsoever, effective before the end of the Allocation Period,
the Beneficiary will lose any right to the Final Allocation of the CGG VERITAS Shares.
	 
	3.2.1.2	 	Exceptions

	 	•	 	Notwithstanding the provisions of paragraph 3.2.1 (a) above, should the loss of
the capacity of an employee or officer of the Group during the Allocation Period be
due to one of the following reasons, the CGG VERITAS free Shares allocated will be
treated as follows:

5

 

	 	•	 	Retirement or early retirement: Beneficiaries retain their right to the CGG
VERITAS Shares, even though they are no longer bound by an employment contract, but
they remain subject to the other conditions of this plan.
	 
	 	•	 	Death: pursuant to the provisions of article L.225-197-3 of the commercial code,
the successors or beneficiaries (ayant-droits) of the Beneficiaries, may, if they so
desire, request the Allocation of CGG VERITAS Shares within six months of the date of
death.
	 
	 	 	 	Upon the expiration of this six (6) month-term, the successors or beneficiaries of
the Beneficiary will definitively lose the right to request the Allocation of CGG
VERITAS Shares.
	 
	 	 	 	In any case, the Final Allocation of CGG VERITAS Shares will take place only
upon the expiration of the Allocation Period, subject to the observance of the
collective performance conditions.
	 
	 	•	 	2nd and 3rd category disability, within the meaning of article L.341-4 of the
Social Security code: Beneficiaries may preserve their right to the free Allocation
of CGG VERITAS Shares, but they will remain subject to the other conditions of this
plan.
	 
	 	•	 	An Affiliated Company leaving the Group, if the Beneficiary is the employee or
officer of such company: the benefit of the right to the free Allocation of CGG
VERITAS Shares is maintained by the Beneficiary, but will be subject to the other
terms and conditions of this plan.
	 
	 	•	 	Termination for economic reasons: the Beneficiaries keep the benefit of the right
to the free Allocation of CGG VERITAS Shares, but they will be subject to the other
conditions of this plan.

	3.2.2	 	Performance conditions
	 
	 	 	In addition to fulfilling the presence condition set forth in paragraph 3.2.1, the free
Allocation of CGG VERITAS Shares shall become final provided the performance conditions
set forth below are complied with. Such performance conditions shall be determined under
constant accounting principles. The fulfilment of each of these performance conditions
will entitle each Beneficiary to be allocated on a final basis half of the number
initially allocated to such Beneficiary for each performance condition fulfilled.
	 
	 	 	3.2.2.1 Achievement of an annual consolidated average net earning per share of €8.60 for
the fiscal years ended on December 31, 2007 and 2008 (the
“Period”)

	 
	 	 	The fulfilment of such condition shall be determined on the basis of the consolidated
financial statements of each fiscal year of the Period as approved by the Annual General
Meeting of Shareholders.
	 
	 	 	The net earning per share shall be calculated for each fiscal year of the Period by
dividing net consolidated income attributable to shareholders by the weighted average
number of shares outstanding over each fiscal year of the Period. Net earning per share
over the Period shall be the average net earning per share of both fiscal years of the
Period calculated as described above.
	 
	 	 	This condition may be revised in case of a stock-split or reverse stock-split of CGG
VERITAS Shares.

6

 

	3.2.1.1	 	Achievement of an average operating income over the Period (the “Operating
income”) at the Group level, or the Services segment level taking into account whether the
beneficiary belongs to the Western or the Eastern Hemisphere, or the Products segment level
depending on the sector to which each beneficiary is assigned
	 
	 	 	The Operating income shall be determined at Group level, Services segment level taking
into account whether the beneficiary belongs to the Western or the Eastern Hemisphere, or
Products segment level (hereinafter collectively the “Sectors” and individually the
“Sector”), depending on the Sector to which each Beneficiary respectively belongs.
	 
	 	 	The Sector to which any beneficiary belongs shall be determined as of the date of this
plan, i.e. March 23, 2007.
	 
	 	 	The Operating income to be achieved for each Sector shall be:

	 	•	 	U.S.$ 621 million at Group level
	 
	 	•	 	U.S.$ 258 million at Products segment level
	 
	 	•	 	U.S.$ 436 million at Services segment level (including Argas contribution) and
within the Services segment:

	 	-	 	Eastern Hemisphere : U.S.$183 million (including Argas contribution);
	 
	 	-	 	Western Hemisphere : U.S.$282 million.

The fulfilment of these conditions for the beneficiaries belonging to the Support services
or the products lines of the Services segment shall be determined on the basis of the
average operating income achieved by the Services (including Argas contribution) segment
over the Period

The fulfilment of these conditions for the beneficiaries belonging to the Western
Hemisphere shall be determined on the basis of:

	 	-	 	50% the average operating income achieved by the Services (including
Argas contribution) segment over the Period; and
	 
	 	-	 	50% of the average operating income achieved by the Western Hemisphere.

The fulfilment of these conditions for the beneficiaries belonging to the Eastern
Hemisphere shall be determined on the basis of :

	 	-	 	50% the average operating income achieved by the Services (including
Argas contribution) segment over the Period; and
	 
	 	-	 	50% of the average operating income achieved by the Eastern Hemisphere
(including Argas contribution).

The fulfilment of such conditions shall be determined on the basis of the consolidated
financial statements of each fiscal year of the Period as approved by the Annual General
Meeting of Shareholders.

The Operating income over the Period shall be equal to the average of the operating income
achieved over the two fiscal years of the Period.

The Operating income is expressed in US dollars based on the exchange rate of U.S.$1.30 for
1€ used for the budget. The fulfilment of the above condition shall be

7

 

determined on the basis of the audited operating income disclosed in € and converted into
US dollar by using the average exchange rate used by the consolidation department to
determine the revenues in US dollar.

	3.2.1.2	 	Determination of the fulfilment of the performance conditions and consequence on
Final Allocation of the CGG VERITAS free Shares.
	 
	 	 	The Allotment of the portion of the CGG VERITAS free Shares corresponding to the
fulfilment of each performance condition shall be final, subject to fulfilment of the
presence condition provided by paragraph 3.2.2, upon fulfilment of 100% or more of such
performance condition.
	 
	 	 	In the event either performance condition is not a 100% or more fulfilled but is fulfilled
by at least two-thirds, the corresponding portion of the CGG VERITAS Shares corresponding
to the fulfilment of such condition shall be calculated on a prorata basis, on a linear
scale decreasing from a 100% to 50%. (see example in Appendix 2). If the CGG VERITAS
Shares are not a whole number, their numbers shall be rounded down to the nearest whole
number.
	 
	 	 	In the event one performance condition is not fulfilled up to two-thirds, the
corresponding portion of the CGG VERITAS Shares corresponding to the fulfilment of such
condition shall not be allocated. Should both performance conditions not be fulfilled up
to two-thirds, no CGG VERITAS Shares will be allocated.
	 
	3.2.1.3	 	Change of perimeter further to one or several external growth transactions
	 
	 	 	In the event of a change of perimeter further to one or several external growth
transactions (acquisition of companies or assets, merger, asset contribution from third
parties) resulting in an increase of the revenues greater than 25% over the Period, the
CGG VERITAS Shares shall be finally allocated to each Beneficiary upon fulfilment of the
performance condition set forth in paragraph 3.2.1 only and of the presence conditions set
forth in paragraph 3.2.1.
	 
	3.3	 	Delivery of CGG VERITAS Shares
	 
	 	 	At the end of the Allocation Period, i.e. on March 23, 2009 (or at such date as mentioned
in paragraph 3.1.), the Company, subject to the Beneficiary’s observance of the
acquisitions conditions and criteria established by the Board, will transfer to the
Beneficiary the number of CGG VERITAS Shares established by the Board according to the
formula mentioned below.
	 
	 	 	The Beneficiary becomes the owner of the CGG VERITAS Shares and thus a shareholder, but is
obliged to keep the CGG VERITAS Shares during the Retention period established by the
Board.
	 
	4	 	Rights and obligations attached to the CGG VERITAS Shares finally allocated during the
Retention Period
	 
	4.1	 	Type and category of CGG VERITAS Shares allocated
	 
	 	 	The CGG VERITAS Shares will entitle a Beneficiary, as of the Final Allocation, to all the
rights attached to the common stock that comprises the share capital of CGG VERITAS on the
date this plan is established, except for the special case of dividends described in
paragraph 4.2.2 below.

8

 

	4.2	 	Right attached to the CGG VERITAS Shares allocated.
	 
	4.2.1	 	They will be subject to all the provisions of the by-laws and to the decisions of
the Shareholders’ Meeting.
	 
	4.2.2	 	Despite the restriction on transfer of the CGG VERITAS Shares (as indicated in
paragraph 4.3), the Beneficiary of a Final Allocation can, during the Retention Period,
exercise, like any other Beneficiary, the rights attached to the Shares allocated, and in
particular:

	 	-	 	the pre-emptive subscription right;
	 
	 	-	 	the information right;
	 
	 	-	 	the right to participate in the shareholders’ meetings;
	 
	 	-	 	the right to vote;
	 
	 	-	 	the right to dividends and potential non-appropriated reserves, if any,

The CGG VERITAS Shares allocated after the decision to distribute dividends taken by the
shareholders’ meeting approving the financial statements for year N will carry rights to
dividends only as of the date of the decision to distribute dividends taken by the
shareholders’ meeting approving the financial statements closed in year N+1.

	4.2.3	 	Each new share carries rights to the ownership of corporate assets, distribution
of profits, and liquidation premium in proportion to the share capital that it represents,
taking into account, if applicable, the amortized and non-amortized or paid-up and non-paid-up
capital, the par value of the shares and the rights of shares of different categories.
	 
	4.3	 	Non-transferability of CGG VERITAS Shares during the Retention Period
	 
	 	 	The CGG VERITAS Shares shall be non-transferable prior to the expiration of the Retention
Period, i.e. until March 23, 2009 (or such date as is set out in paragraph 3.1).
	 
	 	 	Each Beneficiary undertakes to retain such shares and may not convert them to bearer form
for a period of two years after the CGG VERITAS Shares have been effectively allocated at
the conclusion of the Allocation Period, i.e., until March 23, 2009 (or such date as is
mentioned in paragraph 3.1).
	 
	 	 	Therefore, the Beneficiary may not transfer, assign (by any means, including in case of
public offering contribution, donation, company contribution, etc.) or convert to bearer
shares the allocated CGG VERITAS Shares until after the expiration of the retention term
set forth above.
	 
	4.4	 	Form of the allocated CGG VERITAS Shares
	 
	 	 	The new CGG VERITAS Shares must be registered in an account opened, in the name of their
owner, in the registers of the Company with a specific indication of their
non-transferability; such registration to be performed in accordance with the terms and
conditions stipulated by all regulatory and legal provisions in effect.
	 
	4.5	 	Listing of the CGG VERITAS Shares
	 
	 	 	The new CGG VERITAS Shares issued for the purposes of this plan shall be included in a
combined application for admission trading on Eurolist by Euronext Paris.

9

 

	 	 	They shall be traded on the same line as the existing CGG VERITAS Shares at the conclusion
of the Retention Period.
	 
	5	 	CGG VERITAS Shares after the Retention Period
	 
	 	 	After the Retention period, the CGG VERITAS Shares shall become available and the
Beneficiary shall be able to transfer them freely.
	 
	 	 	However, since these shares are listed for trading on a regulated market and in order to
avoid any insider trading risk, the CGG VERITAS Shares cannot be transferred during any
“blackout period” as set forth below pursuant to section L. 225-197-1, I, paragraph 3 of
the French Commerce Code:

	 	-	 	Within ten trading sessions preceding and following the date on which the
Company’s annual consolidated financial statements are published;
	 
	 	-	 	Within a period from the date on which the corporate bodies of the Company became
aware of information that, if it were disclosed, could have a negative effect on the
price of the stock of the Company, and the date ten stock exchange trading sessions
following when such information was disclosed.

	6	 	Tax treatment applicable to Beneficiaries who are French residents
	 
	 	 	This presentation of tax treatments is provided for informational purposes. It
corresponds to the French legislation in effect as at the date when this plan was issued.
The Beneficiary shall note that as at the date hereof, the French tax administration had
not yet commented on the tax treatment laid down by the law.
	 
	 	 	The Beneficiary shall be responsible for learning about any amendments to the applicable
tax treatment.
	 
	6.1	 	Capital gain from the acquisition
	 
	 	 	The capital gain from the acquisition, which is equal to the value of the CGG VERITAS
Shares as at the date of the Final Allocation, shall be taxed at a flat rate of 30%.
	 
	 	 	The Beneficiary may however elect to have the capital gain from the acquisition taxed as
income in accordance with the regulations applicable to salaries and wages.
	 
	 	 	The capital gain from the acquisition shall then be subject to social security
contributions at a total effective rate currently set at 11% (“Social Security
Contributions”), i.e., a 8.2% generalized social security contribution (“CSG”), a 0.5%
social security deficit contribution (“CRDS”), a 2% social security contribution, and a
0.3% supplemental social security contribution.
	 
	 	 	The capital gain from the acquisition shall be taxed in the year in which the CGG VERITAS
Shares were sold.
	 
	6.2	 	Capital gain on the disposal
	 
	 	 	The capital gain on the disposal, which corresponds to the difference between the disposal
price of CGG VERITAS Shares and their value as at the Final Allocation date shall be taxed
in accordance with the general tax treatment of capital gains on the disposal of
marketable securities at the total effective rate currently set at 27% (or 16% plus Social
Security Contributions at 11%).

10

 

	 	 	The capital gain on disposals shall only be taxed if the Beneficiary and the Beneficiary’s
tax unit have realized disposals of marketable securities for an amount exceeding a
threshold currently set at €20,000 in the course of the calendar year in question.
	 
	 	 	Any capital losses on disposals shall be chargeable to the capital gains on the disposal
of other marketable securities realized by the taxpayer for the same year and the ten
years thereafter.
	 
	6.3	 	Wealth tax
	 
	 	 	Subject to comments from the tax administration, the CGG VERITAS Shares should, as at
their Final Allocation, be included in the basis for the calculation of the wealth tax.
	 
	7	 	Preservation of Beneficiaries’ rights in case of financial transactions
	 
	 	 	Whenever the Company wishes to perform, in the course of the Allocation Period, any
financial transactions affecting the number and value of the CGG VERITAS Shares (as
determined by reference to its market price at the opening of trading as of March 23,
2007), it shall take all necessary measures in order to preserve the rights of the
Beneficiaries by adjusting the number of CGG VERITAS Shares that could be freely allocated
to them at the conclusion of the Allocation Period in accordance with the methods listed
below.
	 
	 	 	These measures are comparable to those provided by the laws and regulations pertaining to
the protection of the rights of Beneficiaries of stock purchase or subscription options.
	 
	 	 	Such adjustment shall be made with a view to making equivalent, to the nearest hundredth
of a share, the value of the CGG VERITAS Shares that shall be allocated after the
execution of the envisaged transaction and the value of the CGG VERITAS Shares allocated
prior to the execution of the transaction. If the CGG VERITAS Shares are not a whole
number, their number shall be rounded down to the nearest whole number.
	 
	 	 	Should the Company perform a transaction requiring that the rights of the Beneficiaries be
preserved, the Company shall inform the Beneficiaries thereof by registered mail no later
than the day prior to the beginning of such transaction. After each adjustment, the new
number of allocated CGG VERITAS Shares shall be communicated to the Beneficiaries by
registered mail.
	 
	 	 	In case of adjustment, the Board of Directors of the Company shall report on the
calculation details and results for such adjustment in its next annual report.
	 
	 	 	Should the Company perform transactions for which an adjustment has not been performed
under this paragraph and should subsequent legislation or regulations set forth an
adjustment, the Company shall perform such adjustment in accordance with applicable legal
or regulatory provisions and with the practices in this matter on the main market on which
the Company’s shares are listed for trading.
	 
	 	 	The calculation methods applicable to such adjustment, if any, based on the type of
transaction concerned are presented in Appendix 1.

11

 

	8	 	Reduction of beneficiaries’ rights in case of a capital decrease due to losses
	 
	 	 	In case of a capital decrease due to losses realized by a decrease either in the par
value of CGG VERITAS Shares or in the number thereof, the rights of the Beneficiaries
shall be reduced accordingly as if the Beneficiaries had been shareholders prior to the
date on which the capital decrease became final.
	 
	9	 	Amendment of this plan and of the individual terms and interpretation
	 
	 	 	This plan may be amended by the Board of Directors if new legislation would have an
unfavourable impact on the Company or on the Company’s financial statements or would
increase the cost of such a plan for the Company.
	 
	 	 	Subject to the scenarios set forth in the paragraph above, no amendment that could affect
the rights of the Beneficiaries may be made to this plan.
	 
	 	 	Furthermore, the Board of Directors is responsible for interpreting the provisions of this
plan, as needed.
	 
	 	 	This plan shall prevail in case of conflict of interpretation between the letter with the
announcement of the free issue and the plan itself.

12

 

Appendix 1

Adjustment methods for financial transactions

affecting the rights of the Beneficiaries

The following adjustments shall be made should CGG VERITAS perform a financial transaction
such as those listed below except if the law, as it may be amended, should set forth a different
adjustment mechanism in which case the latter shall prevail:

	 	(a)	 	Should shares of stock carrying pre-emptive subscription rights be issued, the new number of
CGG VERITAS Shares that could be allocated to each Beneficiary at the conclusion of the
Allocation Period shall be equal to the product of the number of CGG VERITAS Shares allocated
prior to the beginning of the transaction and the following adjustment factor:

	 	 	 	 	 	 	 
	 

	 	1 +
	 	Value of the pre-emptive subscription right
 

Value of the CGG VERITAS Share after the pre-
	 	 
	 

	 	 	 	emptive subscription right has been detached	 	 

For the calculation of this adjustment factor, the value of the pre-emptive subscription
right and the value of the CGG VERITAS Share after the pre-emptive subscription right has
been detached shall be determined based on the average of the prices quoted on the market
during all the trading sessions included in the subscription period.

	(b)	 	In case of a free allocation of CGG VERITAS Shares to shareholders, the new number of CGG
VERITAS Shares that could be allocated to each Beneficiary at the conclusion of the Allocation
Period shall be equal to the product of the number of CGG VERITAS Shares allocated prior to
the beginning of this transaction and the following adjustment factor:

	 	 	 	 	 	 	 
	 

	 	1 +
	 	Number of Shares to which each old CGG VERITAS Shares are entitled
	 	 

	(c)	 	In case of distribution of reserves or premiums, in cash or in kind, the new number of CGG
VERITAS Shares that could be allocated to each Beneficiary at the end of the Allocation Period
shall be equal to the product of the number of CGG VERITAS Shares allocated prior to the
beginning of the transaction and the following adjustment factor:

	 	 	 	 	 	 	 
	 

	 	 
	 	1/ [1 — (amount per CGG VERITAS distribution shares 
	 	 
	 

	 	 	 	/ CGG VERITAS Share value prior to the distribution)]	 	 

13

 

For the calculation of this adjustment factor, the value of the CGG VERITAS Shares prior
to the distribution shall be equal to the weighted average price of the last three trading
sessions preceding such distribution.

Example:

Thus, if the value of a CGG VERITAS Share prior to the distribution was equal to 100, the
distribution of reserves or premiums of 15 would lead to the adjustment of the number (N)
of CGG VERITAS Shares that are part of the free allocation by multiplying it by 1/
[1-(15/100)] = 1.176. Globally, the result would offset the impairment of the free CGG
VERITAS Shares as a result of the distribution since: N x 100 = N x 1.17 x (100-15 = 85).

	(d)	 	Should an amendment be made to profit appropriation, the new number of CGG VERITAS Shares
that could be allocated to each Beneficiary at the conclusion of the Allocation Period shall
be equal to the product of the number of CGG VERITAS Shares allocated prior to the beginning
of the transaction and the following adjustment factor:

	 	 	 	 	 	 	 
	 

	 	 
	 	1/ [1 —((decrease in the right to dividends per share /
	 	 
	 

	 	 	 	value of the CGG VERITAS Share prior to this	 	 
	 

	 	 	 	amendment)]	 	 

For the calculation of this adjustment factor, the value of the CGG VERITAS Shares prior
to the amendment shall be equal to the weighted average price of the last three trading
sessions preceding such amendment.

	(e)	 	In case of repayment of capital, the new number of CGG VERITAS Shares that could be allocated
to each Beneficiary at the conclusion of the Allocation Period shall be equal to the product
of the number of CGG VERITAS Shares allocated prior to the beginning of the transaction and
the following adjustment factor:
	 
	 	 	1/ [1- (amount per CGG VERITAS Shares
for the 

1/1 — repayment / value of
the CGG VERITAS share prior to the repayment)]
	 
	 	 	For the calculation of this adjustment factor, the value of the CGG VERITAS Shares prior
to the repayment shall be equal to the weighted average price of the last three trading
sessions preceding such repayment.
	 
	(f)	 	In case of the consolidation of the Company into another company or in case of a merger with
one or more other companies to form a new company or in case of a spin-off, the Beneficiaries
may exercise their rights in the company resulting from such merger or in the company or
companies resulting from such spin-off.
	 
	 	 	The new number of CGG VERITAS Shares that could be allocated to each Beneficiary at the
end of the Allocation Period shall be determined by adjusting the number of CGG VERITAS
Shares planned for allocation prior to the beginning of the transaction in light of the
exchange ratio of CGG VERITAS Shares against the CGG VERITAS Shares of the

14

 

	 	 	consolidating company or against the Shares of the company or companies resulting from the
spin-off.
	 
	 	 	Such company or companies would have subrogated as of right the Company in its obligations
to the Beneficiaries, namely for the application of the provisions of this paragraph
intended to preserve the rights of the Beneficiaries in case of financial transactions.
	 
	(g)	 	Should the Company purchase its own Shares at an acquisition price exceeding the stock market
price, the new number of CGG VERITAS Shares that could be allocated to each Beneficiary at the
conclusion of the Allocation Period shall be equal to the product of the number of CGG VERITAS
Shares allocated prior to the beginning of the transaction and the following adjustment
factor:

	 	 	 	 	 	 	 
	 

	 	1 + Pc % x
	 	Acquisition price — Share Value
 

Share Value
	 	 

For the calculation of this adjustment factor, the value of the CGG VERITAS Shares shall
be equal to the weighted average price of the last three trading sessions preceding the
acquisition or the acquisition right where “Pc%” means percentage acquired capital.

	(h)	 	In case of a reverse stock split of CGG VERITAS Shares, the new number of CGG VERITAS Shares
that could be allocated to each Beneficiary at the conclusion of the Allocation Period shall
be equal to the product of the number of CGG VERITAS Shares allocated prior to the beginning
of the transaction and the following adjustment factor:

	 	 	 	 	 	 	 
	 

	 	 
	 	Number of CGG VERITAS Shares comprised in	 	 
	 

	 	 	 	the capital after the reverse split
 

Number of CGG VERITAS Shares comprised in
	 	 
	 

	 	 	 	the capital prior to the reverse split	 	 

	(i)	 	In case of an increase of the par value of CGG VERITAS Shares, the par value of the CGG
VERITAS Shares that could be obtained by the Beneficiaries shall be increased accordingly.
	 
	(j)	 	In case of a free issue of financial instrument(s) other than CGG VERITAS Shares, the new
number of CGG VERITAS Shares that could be allocated to each Beneficiary at the conclusion of
the Allocation Period shall be determined as follows:
	 
	•	 	If the free subscription right is quoted, the new number of CGG VERITAS Shares
that could be allocated to each Beneficiary at the conclusion of the Allocation
Period shall be equal to the product of the number of CGG VERITAS Shares allocated
prior to the beginning of the transaction and the following adjustment factor:

15

 

	 	 	 	 	 	 	 
	 

	 	1 +
	 	Value of the free subscription right
 

Value of the CGG VERITAS Share after
	 	 
	 

	 	 	 	the free subscription right has been detached	 	 

For the calculation of this adjustment factor, the value of the subscription right
and the value of the CGG VERITAS Share prior to detaching the free subscription
right shall be determined based on the weighted average price of the first three
trading sessions on the Eurolist market of Euronext after the free subscription
right has been detached.

	•	 	If the free subscription right is not quoted, the new number of CGG VERITAS Shares
that could be allocated to each Beneficiary at the conclusion of the Allocation
Period shall be equal to the product of the number of CGG VERITAS Shares allocated
prior to the beginning of the transaction and the following adjustment factor:

	 	 	 	 	 	 	 
	 

	 	1 +
	 	Value of the allocated financial instrument(s)
 

Value of the CGG VERITAS Share after
	 	 
	 

	 	 	 	the free subscription right has been	 	 
	 

	 	 	 	detached	 	 

For the calculation of this adjustment factor, the value of the financial
instrument(s) allocated and the value of the CGG VERITAS Shares after the free
subscription right has been detached shall be determined based on the weighted
average of the prices of the first three trading sessions on the Eurolist market of
Euronext after the free subscription right has been detached.

Absent a quotation of the financial instrument(s) allocated on a regulated market
of Euronext Paris S.A., their value shall be determined as stated above, by
reference to the main regulated or similar market on which it is (they are) quoted.
Failing that, their value shall be determined by an internationally recognised
expert designated by the Company, whose opinion shall not be subject to appeal.

16

 

Annexe 2

Example of free allocation of CGG VERITAS shares at the end of the

Allocation period (paragraph 3.2)

For a beneficiary fulfilling the presence condition set forth in paragraph 3.2.1 upon Final
Allocation, belonging to the support services of the Services segment and having been allocated a
maximum number of 150 CGG VERITAS shares on March 23, 2007, the rules governing the fulfilment of
the performance conditions will apply as follows:

	 	a)	 	Achievement of an annual consolidated average net earning per share of €8.60, for
fiscal years ended on December 31, 2007 and on December 31, 2008 (the “Period”)
corresponding to a maximum allocation of 75 CGG VERITAS Shares (see paragraphs 3.2.2.1 and
3.2.2.3).
	 
	 	 	 	The net earning as calculated over the Period:

	 	-	 	equals or exceeds €8.60: 75 shares are allocated.
	 
	 	-	 	is less than €8.60 but exceeds €5.73 (corresponding to a
fulfilment of the condition up to two-third — see paragraph 3.2.2.3) : the
number of CGG VERITAS shares allocated is reduced and calculated on a linear scale
decreasing from 100% to 50% and rounded up to the nearest whole number, i.e. the
number of shares allocated on a final basis will range from 75 to 38. For example,
if the net earning as calculated amounts to €7.00, then the number of shares
definitively allocated shall be (75-38)/(8.60-5.73)x(7.00-5.73)+38, i.e. 55 shares
will be allocated.
	 
	 	-	 	equals €5.73: 37 shares will be allocated.
	 
	 	-	 	is less than €5.73: no shares will be allocated.

	 	b)	 	Achievement of an annual average operating income of U.S.$436 million (including
Argas) over the Period, corresponding to a maximum allocation of 75 CGG VERITAS Shares
(see paragraphs 3.2.2.1 and 3.2.2.3).
	 
	 	 	 	The operating income as calculated over the Period:

	 	-	 	equals or exceeds U.S.$436 million: 75 shares are allocated.
	 
	 	-	 	is less than U.S.$436 million but exceeds U.S. $291 million
(corresponding to a fulfilment of the condition up to two-third — see
paragraph 3.2.2.3): the number of CGG VERITAS shares allocated is reduced and
calculated on a linear scale decreasing from 100% to 50% and rounded up to the
nearest whole number, i.e. the number of shares allocated on a final basis will
range from 75 to 38. For example, if the operating income is U.S. $350 million
then the number of shares definitively allocated shall be
(75-38)/(436-291)x(350-291)+38, i.e. 54 shares.
	 
	 	-	 	equals to U.S.$291 million : 37 shares will be allocated.
	 
	 	-	 	is less than U.S. $291 million : no shares will be allocated.

17

 

 4

I  — Definition of the stock option plan

French Company Law enables French companies to grant to all or part of their staff the right
to subscribe to stock options.

The General Meeting dated May 11, 2006 authorized the Board of Directors to issue stock options.

The Company took advantage of this possibility to put in place a new plan.

A stock option provides the right, applicable only on request from the beneficiary, to subscribe to
new shares, which are purchased at a predetermined price.

The Board of Directors of the Company designated you on March 23, 2007 as a beneficiary under this
plan and you have already received a letter informing you of the number of stock-options offered to
you and of the price at which you may subscribe them.

These regulations detail the various clauses, governing the stock option plan, as it concerns you.

II — The option price

The price of the option has been determined on the basis of the average opening market prices
listed at the twenty sessions of Euronext Paris preceding March 23, 2007. After rounding, this
amounts to € 151,98.

This unit price cannot be modified for the term of the validity of the options; it may only be
adjusted, according to the law, if the Company were to proceed with financial operations affecting
its capital. Adjustments affecting both the unit price and the number of shares under option will
however have no effect on the overall value of the option for each beneficiary.

Beneficiaries will be informed in good time of the new subscription price and the new number of
shares to which they are entitled to subscribe.

III — Vesting period and exercise period

III.1 – Vesting period

Options accrue rights by third every year during a three-year period starting from March 23, 2007.
All rights will be accrued as of March 24, 2010.

The accrued rights are calculated for each ended 12-month period.

As an example, a beneficiary of an option giving right to acquire 1000 shares who
would leave the Group in December 2007 will have no accrued rights and would not be
entitled to acquire any stock. In December 2008, he would be able to acquire 333
shares, the remaining 667 options being expired.

III.2 – Duration of the options

Allocation of the options was decided by the Board of Directors of the Company on March 23, 2007,
so beneficiaries will be able to exercise their options at any time up to and including March 23,
2015, subject to accrued rights.

Options are exercised in one or several occasions for the accrued part on request from the
beneficiaries, who decide to do so in their own discretion, in function of their individual
financial resources and movements of the market price of CGG share, however subject always to
insiders rules.

 

 

 5

IV — Obligation to keep the stocks for French tax residents

IV.1 – Obligation to keep

During the first four years of the Plan, beneficiaries who are French tax residents are committed
to keep under the registered form the shares they receive as a result of the exercise of their
stock options, (such exercise cannot take place before March 24, 2008) from the acquisition date
until March 23, 2011 included.

As an example, a beneficiary who exercises his option on March 23, 2009 would not
be entitled to sell or transfer his shares to the bearer form before March 24,
2011. A beneficiary who exercises his option on March 24, 2011 would be free to
sell the shares on the same day.

IV.2 – Exceptions

However, the above obligation for French tax residents to keep shares under the registered form
until March 24, 2011 included will not apply in the following events:

	Ø	 	lay off or redundancy (corresponding to the French concept of “Licenciement Economique”);
	 
	Ø	 	death;
	 
	Ø	 	in the event of take over bid or public offer of exchange, the beneficiaries will not be obligated to keep the shares
acquired before or during the take over.

V — Conditions of employment

The option, which is herein granted, is strictly linked to your status of employee of the
Group.

Consequently, the accrued rights will be lost in case of departure from the Group except in
the cases listed as “Exceptions” hereunder.

Beneficiaries shall be deemed to have lost the status of employee of CGG Veritas or an affiliate (a
company in which CGG Veritas holds directly or indirectly at least 30% of the capital) on the date
of termination of the service contract, i.e. at the end of the required notice period, regardless
the cause or the author of the termination. Such beneficiaries will be able to exercise their
accrued rights before the end of their notice period. If applicable, they will remain subject to
the obligations to keep their shares set forth in paragraph IV.1.

Exceptions

If a beneficiary ceases to be employee of the Group for one of the following reasons, the options
and the conditions of exercise will be treated as follows :

	Ø	 	Death: the heirs of a deceased beneficiary will be entitled to
exercise all or part of the option within a six month period from
the date of beneficiary’s death. At the end of this six month
period, the option will expire.
	 
	Ø	 	Lay off (French concept of “licenciement
économique”): options may
be exercised entirely at any time from the date of the lay off
until March 23, 2015 without obligation to comply with the
obligation to keep the shares.
	 
	Ø	 	Retirement, early retirement (“pre retraite” as such term is
construed under French Law): beneficiaries will continue to
benefit from their options until May 10, 2014 but remain subject
to all the terms and conditions of the plan such as but not
limited to the vesting period and obligation to keep the shares.

 

 

 6

	Ø	 	Affiliate leaving the Group : the beneficiaries, employees of such
affiliate, will continue to benefit from their options but remain
subject to all the terms and conditions of the plan such as but
not limited to the vesting period and accrual of rights or the
obligation to keep the shares.

As mentioned above, only death and redundancy (lay off) will allow the exercise of the option
without complying with the obligation to keep the shares; beneficiaries leaving the group for the
other reasons listed above will have to comply with such obligation.

Furthermore, in the case of a beneficiary leaving the Group under a mutual arrangement with the
employer, the Company may contemplate, on a case-by-case basis, maintaining the beneficiary’s right
to the stock options. Such pursuance of the rights will follow the rules applicable for a
retirement.

VI — Exercise of the option

VI.1 — In order to exercise an option, you should use the forms included in Exhibit 1 as
follows:

	 	1.	 	Request for the irrevocable exercise of options (Form N°1):

The original of this form (corresponding to an exercise of option financed by the beneficiary) must
be sent to the Company, Corporate Legal Affairs at CGG Veritas, Tour Maine Montparnasse, BP 191, 33
avenue du Maine, 75755 Paris Cedex (Béatrice PLACE-FAGET/Corinne CHEVALLET), along with a check to
the order of BNP PARIBAS Securities Services for the full subscription price.

	 	2.	 	Request for the irrevocable exercise of options and sale (Form N°2)

This form (corresponding to an exercise of option financed directly on the proceeds of the sale of
the shares issued as a result of such exercise and sold immediately afterwards) can be sent to the
Company either at the address mentioned in paragraph 1, or by fax at the following number 33 1 64
47 34 29 or by e-mail at the following address
beatrice.place-faget@cggveritas.com or
corinne.chevallet@cggveritas.com .

	 	3.	 	Authorization given by French tax residents to BNP-PARIBAS Securities Services to
deduct from the sale proceeds an amount equal to the amount of the social security
contributions (Form N°3)

This form shall be sent to the Company by French tax residents (at the address or fax or e-mail
addresses indicated in paragraph 1 above) for any sale of shares resulting from the exercise of
options before March 24, 2011 in the restricted cases enumerated in paragraph IV.2

	 	4.	 	Letter to be executed by US tax residents (Form N°4)

All US tax residents shall include with the form for the exercise of their options the letter
identified in Exhibit 1 as Form N°4.

	 	5.	 	Undertaking to keep the shares under the registered form (Form N°5)

In the event the options are exercised before March 24, 2011 included, beneficiaries who are French
tax residents shall include an undertaking to keep the stocks under the registered form with its
exercise form.

VI.2 — Within eight days from the date of receipt of the all documents listed in VI.1 above, CGG
Veritas will execute all formalities in order for you to acquire the status of CGG’ Veritas’
shareholder.

 

 

 7

The option shall be deemed to be exercised on the date of receipt by CGG Veritas of the complete
file, provided however that conditions related to the Vesting Period and the Status of Employee are
fulfilled.

Your shares will be issued as registered shares in your name. Shares will be registered in an
account opened with the Bank entrusted with the management of the registered shares (BNP-PARIBAS).

VII — Suspension period

VII.1 — Conditions

CGG Veritas’ Board of Directors or, upon delegation from the Board, the Chairman and CEO may
suspend for a period which shall not exceed three months, any exercise of option in case of:

	–	 	Financial operation requiring a prior and strict knowledge of the number of CGG Veritas’ stocks.
	 
	–	 	Adjustment affecting the unit price as provided by French Company law.

VII.2 — Notice

Within five (5) days from the Suspension decision of the Board of Directors or of the Chairman and
C.E.O., beneficiaries will be informed by internal memorandum and/or by e-mail, general or
individual:

	–	 	that a Suspension period has been instituted in accordance with point VII.1 above;
	 
	–	 	the duration of the Suspension.

If applicable, beneficiaries will be informed of the new subscription price and new number of stock
to which they are entitled to subscribe.

VII.3 — Transitory Period

To the extent possible, the beneficiaries will be allowed a reasonable time period between the
receipt of the above-mentioned notice and the entry into effect of the suspension period during
which they may exercise their options, in whole or in part.

Each beneficiary hereby expressly acknowledges that the allowed time period, if any, may be
extremely reduced if so required by the envisaged financial operations.

At the end of this transitory period, Beneficiaries shall not be entitled to exercise their options
until expiry of the Suspension Period.

VII.4 — Confidentiality

Beneficiaries undertake not to divulge any information related to the Suspension and the cause
thereof.

VIII — Listing of new shares

New CGG Veritas shares acquired under the stock option plan are freely transferable at any
time, except where the obligation to keep applies in accordance with paragraph IV above.

However, there is no right to dividend with respect to profit from the previous financial year. For
this reason, two cases may be envisaged during the year of exercise:

 

 

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VIII.1 — The shares acquired are assimilated to existing shares

From the date on which dividend is paid or the date of the Annual Ordinary Meeting of Stockholders,
until 31 December of that year, the new shares will be listed on the regular line of Eurolist of
the Eurolist by Euronext at the same rate as existing shares (ISIN : FR0000120164).

VIII.2 — The shares acquired are not assimilated to existing shares

From 1 January until the date on which dividend is paid or, if no dividend is paid, until the date
of the Annual Ordinary Meeting of shareholders, the new shares will not be listed at the same rate
as existing shares, but on a separate line (separate index). After the date on which dividend is
paid or, if no dividend is paid, after the date of the Annual Ordinary Meeting of Shareholders, the
shares will be transferred to the regular line (ISIN : FR0000120164) and assimilated to existing
shares.

For example: The last Annual Ordinary Meeting of shareholders took place on May
11, 2006. All shares acquired by the exercise of stock options between January 1,
2006 and May 11, 2006 were listed on a separate line until May 11, 2006, at which
date they were transferred to Index 0000120164 and assimilated to existing shares.
On the other hand, shares acquired by the exercise of stock options between May
11, 2006 and December 31, 2006 were listed directly on the 0000120164 line.

Finally, it should be noted that non-assimilated new shares usually have a below par rating
compared with shares sold on the 0000120164 line (this is on account of low trading levels even
when no dividend is due from the preceding financial year).

IX — Order for sale

The order for (i) simply transferring the shares from registered form to bearer form for a
later sale (Exhibit 2 – Form N°1) or (ii) for transferring the shares from registered form
to bearer form for immediate sale (Exhibit 2 – Form N°2) shall be sent to:

	 	(i)	 	the Company (at the postal address or fax number of e-mail address indicated in
paragraph 1.4.2. in the event of such an order being given before March 23, 2011 included,
	 
	 	(ii)	 	directly to the Bank at the following fax number 33 1 55 77 95 33. after March 24,
2011.

In addition to indicating the number of shares to be sold, certain details may be given to the Bank
concerning the order for sale on the stock market:

	–	 	order at best. This order bears no instructions. It is carried out at the opening of the next
trading day of Euronext Paris (which is generally when the greatest number of stocks are
exchanged).

	–	 	order at a minimum price of. This order sets a minimum rate at which the seller agrees to
transfer his stocks. It will therefore be carried out only if the listed rate is equal or
superior to this minimum. CGG shares are listed continuously and there may be fairly
substantial differences between the rates applied to various transactions carried out during
the same session. Limited orders tend therefore to be more reliable than discretionary orders.
Such order shall remain valid until the end of the calendar month and shall thereafter be
renewed for the next month.

 

 

 9

X — The financial advantages of the stock option plan

In being associated with the expansion of the Group and the evolution of the CGG share market
price, beneficiaries who exercise their options can make profits in two ways when selling the
stocks:

	–	 	gain on the purchase price equal to the difference between the price listed on the Stock
Exchange the day the option is actually exercised and the subscription price of the option,
and ;

	–	 	gain on the sale price equal to the difference between the price at which the stocks are
sold and the price listed on the Stock Exchange the day the option is exercised.

Examples

	 	 	 	 	 
	 	 	Hypothesis
	(On the basis of a subscription price of €151.98)
	 	 	 	 
	Stock subscription price (a)
	 	€	151.98	 
	Value on the Stock market of the CGG Stock on the date
of option exercise (b)
	 	€	170	 
	Gain on the purchase price (b — a)
	 	€	18.02	 
	Sale price (c)
	 	€	185	 
	Gain on the sale price (c — b)
	 	€	15	 

XI — Taxation of the advantages

The summary hereunder applies only to French tax residents who, as such, are subject to French
Tax legislation. General information may be provided to other residents, upon request, on the
relevant foreign tax rules. However, foreign beneficiaries should revert to their tax advisor.

XI.1 — Taxation on gains on the purchase price

Taxation on gains on the purchase price varies depending on whether or not the beneficiary sells
his shares before the end of a four-year period starting from the date of allocation of the option,
i.e. from March 23, 2007 to March 23, 2011 included and depending on the time period during which
the beneficiary continues to hold the shares.

It should be noted that if the shares are transferred from registered shares to bearer shares, they
are considered as sold.

• Failure to comply with the fiscal four-year period (in practice, pursuant to the obligation to
keep the shares imposed on each beneficiary by section IV, sale of shares during this four-year
period is only allowed in the cases specified in section IV.2).

In this case, the gain on the purchase price is considered as additional salary and as such is
subject to income tax. The gain is added to the revenues for the year during which the stocks are
sold and not for the year in which the option is exercised. However, after deductions applicable to
salaries, tax is spread according to the “quotient” system so as to take into account the length of
time for which the options have been held.

Furthermore, in this case, the gain on the purchase price will also be subject to all French social
security contributions (i.e. about 25 %).

 

 

 10

It is again noted that if, during the fiscal four-year period, the acquired shares are simply
transferred from registered shares to bearer shares, without being sold the gain is likewise
subject to income tax and social security contributions.

Exceptions:

As an exception, tax exemption on the gain on the purchase price applies if the shares are sold or
transferred from registered shares to bearer shares before the expiry of the fiscal four-year
period in the following cases:

	–	 	dismissal
	 
	–	 	retirement imposed by the employer
	 
	 	 	In the above two cases, the options must have been acquired by the
beneficiary at least 3 months before date of the event in question.
	 
	–	 	invalidity corresponding to classification in the second or third
category defined in Article 310 of the French “Code de la Sécurité
Sociale”.
	 
	–	 	death.

• Compliance with the fiscal four-year period and of the two-year period of holding

	Ø	 	The gain on the purchase price, up to 152 500€, is taxed at the
rate of 30% plus 11% with respect to social contributions (i.e.
41%).
	 
	Ø	 	The gain on the purchase price above 152 500€ is taxed at the
rate of 40% plus 11% for social contributions (i.e. 51%).

The beneficiary may always decide, at his sole discretion, to be taxed on the basis of income tax.

This tax treatment may be optimized if the beneficiary keeps the shares acquired during a two-year
period, i.e. if he does not sell them before a two-year period from the date of acquisition.

	Ø	 	In that case, the gain on the purchase price up to €152 500
will be taxed at the rate of 16% plus 11% for social contributions
i.e. 26%.
	 
	Ø	 	The part of the gain exceeding €152 500 will be taxed at the
rate of 30% plus 11% for social contributions (i.e. 41%).

This specific rule will apply only if the shares have been kept under the registered
form during at least a two-year period. This two-year period is to be computed from the
end of the fiscal four-year period.

In consequence thereof, if the stocks were subscribed 1 year before the end of the fiscal period, a
beneficiary must hold the stocks during a three-year period if he wants to optimize the taxation.

The above taxation will apply only if the total value of sales (including shares’ sales unrelated
to the present stock option plan) made by the beneficiary during the year of the sale exceeds the
threshold determined on an annual basis by the French Tax authorities (€20 000 for fiscal 2007).

The beneficiary may always decide, at his sole option, to be taxed on the basis of income tax.

XI.2 — Taxation on gains made on the sale of stocks

The gain made on the sale of shares is taxed at the regular rate for capital gains. The tax rate is
therefore 16.% (for fiscal 2007) plus around 11% with respect to social security contributions, if
the total value of sales (including shares’ sales unrelated to the present stock option plan) made
by the beneficiary during the year of the sale or transfer exceeds the threshold determined on an
annual basis by the taxation authorities (€20 000 for fiscal 2007).

 

 

 11

XI.3- Declaration commitments

Company’s obligations

Each year, the Company has to provide tax authorities with a certificate including the name of
beneficiaries who have exercised options during the preceding year, the dates of the exercise,
the number of shares acquired and the subscription price.

Each year until the expiry of the four-year tax period during which shares are sold or transferred
from registered shares to bearer shares, the Company has to declare, dates of sale or of
transfer to bearer shares, date of attribution and the date of the option exercise, the number
of shares, the subscription price and the price listed on the Stock Exchange the day the
option is exercised.

Beneficiary’s obligation

The year during which the option is exercised, the beneficiary shall append to his tax
declaration the statement that will be communicated to him by the Bank.

The year during which the stocks are sold or are transferred from registered stocks to bearer
stocks before the expiry of the four-year tax period, the beneficiary will state on his tax
declaration :

	–	 	the difference between the share market price on the day the option is exercised and the
subscription price,
	 
	–	 	the gain made on the sale of shares, equal to the difference between the price at which the
shares are sold and the market price of the share on the day the option is exercised, only if
the total annual value of stocks sales (including shares’ sales unrelated to the present stock
option plan) exceeds the annual threshold determined by the taxation authorities (€20 000
for fiscal 2007).

*

* *

 

 

 12

EXHIBITS

 

 

EXHIBIT N°1

FORMS FOR THE EXERCISE OF STOCK-OPTIONS

Form N°1 : Request for the irrevocable exercise of stock-options

Form N°2 : Request for the irrevocable exercise of stock-options and sale

Form N°3 : Authorization given to BNP-PARIBAS Securities Services to deduct from the sale proceeds
an amount equal to the amount of the social security contributions (French tax residents)

Form N°4 : Letter to be executed by US tax residents

Form N°5 : Undertaking to keep the shares under the registered form

 

 

EXHIBIT N°2

FORMS FOR THE TRANSFER OF THE SHARES TO BEARER FORM AND SALE

Form N°1 : Request for the transfer of the shares to bearer form

Form N°2 : Request for the transfer of the shares to bearer form for immediate sale

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