THIS PROMISSORY
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
WITH RESPECT THERETO UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
3226509 NOVA SCOTIA
COMPANY
PROMISSORY NOTE
(Guaranteed by ION GEOPHYSICAL
CORPORATION)
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US$35,000,000.00
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Calgary, Alberta
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FOR VALUE
RECEIVED , 3226509 NOVA SCOTIA COMPANY, a Nova Scotia unlimited
liability company, as the “ Company ”, promises
to pay to 1236929 ALBERTA LTD., an Alberta corporation, as “
Payee ”, in lawful money of the United States of
America, the principal sum of THIRTY-FIVE MILLION AND NO/100
DOLLARS (US$35,000,000.00), together with accrued interest thereon
at such rates and at such time or times as provided for herein.
This Promissory Note (the “ Note ”) is issued
pursuant to that certain Amended and Restated Share Purchase
Agreement by and among ION Geophysical Corporation, a Delaware
corporation and the indirect owner of all of the outstanding equity
interests of the Company (“ ION ”), the Payee,
ARAM Systems Ltd., Canadian Seismic Rentals Inc. and the other
“Sellers” (as that term is defined therein), dated as
of September 17, 2008 (as such agreement may be further
amended, restated, modified or supplemented, the “ Share
Purchase Agreement ”).
Capitalized terms
used herein that are not defined in this Note shall have the
respective meanings assigned to such terms in the Share Purchase
Agreement.
The following is a
statement of the rights of Payee and the conditions to which this
Note is subject, and to which the Payee hereof, by the acceptance
of this Note, agrees:
1.
Definitions . As used in this Note, the following
capitalized terms have the following meanings:
(a)
“ Company ” means the entity executing
this Note and its successors and permitted assignees.
(b)
“ Payee ” shall mean the Person specified
in the introductory paragraph of this Note, or any Person who shall
at such time be the permitted assignee of this Note.
(c)
“ Senior Credit Facility ” shall mean
that certain Amended and Restated Credit Agreement dated
July 3, 2008 by and among ION, ION International S.à r.l,
the guarantors party thereto and the lenders party thereto, as
amended by that certain First Amendment thereto dated
September 17, 2008, as same may be further amended, modified
or supplemented.
(d)
“ Senior Indebtedness ” shall mean the
principal of (and premium, if any), unpaid interest on and amounts
reimbursable, fees, expenses, penalties, costs of enforcement and
other amounts due in connection with (i) the obligations of
ION and its Subsidiaries under the Senior Credit Facility,
(ii) the indebtedness of ION under its 5.50% Convertible
Senior Notes due 2008, (iii) indebtedness of ION under certain
short-term bridge loans extended to ION by Jefferies Funding LLC
and its designees and assignees contemporaneously with the issuance
of this Note by ION (the “ Short Term Bridge Loans
”), (iv) the liabilities of ION and its Subsidiaries
with respect to capital leases and obligations under its facility
sale-leaseback facility, (v) all guaranties by ION and its
Subsidiaries of the obligations described in clauses (i) —
(iv) above, and (vi) any debentures, notes or other
evidence of indebtedness issued in exchange for, or in the
refinancing of, such Senior Indebtedness, or any indebtedness
arising from the payment and satisfaction of such Senior
Indebtedness by a guarantor.
2.
Interest . Accrued interest on this Note shall be payable at
such time as the outstanding principal amount hereof shall be paid,
as provided herein. The Company promises to pay interest on the
unpaid principal amount hereof for the period from (and including)
the date of the making of this Note to (but excluding) the date
that the Indebtedness under this Note shall be paid in full.
Interest on the unpaid principal amount of this Note shall accrue
at the rate of nine percent (9%) per annum (based on a year of 365
or 366 days, as the case may be), except as provided in
Sections 2(a) and 2(b) below.
(a) In
the event that the outstanding indebtedness under this Note is not
paid in full on or before the later to occur of the following:
(i) December 17, 2008 and (ii) the date that is
forty-five (45) days following the Financial Statements
Delivery Date (such later date being referred to herein as the
“ Interest Change Date ”), then commencing on
(and including) the date that immediately follows the Interest
Change Date, interest on the unpaid principal amount of this Note
shall accrue thereafter until paid at a rate equal to twelve
percent (12%) per annum; and
(b) In
the event that the outstanding indebtedness under this Note is not
paid in full on or before March 18, 2009, then commencing on
(and including) March 19, 2009, interest on the unpaid
principal amount of this Note shall accrue thereafter until paid at
a rate equal to fifteen percent (15%) per annum.
3.
Payment of Interest and Principal . The indebtedness under
this Note shall be payable as set forth herein. The Company shall
pay accrued interest hereunder (a) upon the payment or
prepayment of any principal amount owing under this Note (but only
on the principal amount so prepaid or paid) and (b) on the
Maturity Date (as defined below). The outstanding principal balance
of this Note, together with all accrued and unpaid interest
thereon, shall be due and payable on the date (the “
Maturity Date ”) that is the earlier to occur of:
(i) September 18, 2009 and (ii) the date that both
(x) the Escrow Funds (in an amount equal to
-2-
the
then-outstanding principal amount of this Note, plus the Interest
Amount) have been paid and deposited in escrow pursuant to the
terms of Section 1.5(a)(i) of the Share Purchase
Agreement, and (y) the Incremental Interest Amount has been paid in
full to Payee pursuant to the terms of Section 1.5(a)(ii) of
the Share Purchase Agreement. Such payment into escrow of the
Escrow Funds and payment to Payee of the Incremental Interest
Amount by the Company shall be deemed to be the payment in full of
the outstanding indebtedness evidenced by this Note, whereupon
Payee shall mark this Note as “Cancelled” and surrender
this Note to the Company. This Note may be prepaid, at any time, in
whole or in part, with each such prepayment being applied first to
accrued and unpaid interest, and then to outstanding principal,
upon one (1) Business Day’s prior written notice,
without premium or penalty. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business
Day, the payment shall be made on the next succeeding Business Day
and such extension of time shall be included in the computation of
the amount of interest due hereunder.
4.
Right of Set-Off . The Company shall have the right to
withhold and set off against any amount due hereunder, the amount
of (a) any indemnification of money Damages to which the
Company (or any Buyer Indemnified Person) is entitled under
Article 8 of the Share Purchase Agreement, but only
subject to and in accordance with the terms of
Section 8.11(a) thereof, and (B) any purchase
price adjustments payable by Sellers pursuant to
Section 1.5 of the Share Purchase Agreement, but only
subject to and in accordance with the terms of Section
1.5(a)(v) thereof.
5.
Events of Default . The occurrence of any of the following
shall constitute an “Event of Default” under this
Note:
(a)
Failure to Pay . The Company shall fail in any material
respect to pay (i) any principal payment on the due date
thereof as provided herein or (ii) any interest or other
payment required under the terms of this Note on the date due, and
such payment shall not have been made within ten (10) Business
Days of the Company’s receipt of Payee’s written notice
to the Company of such failure to pay; provided, however ,
that any exercise by the Company in good faith of its right of
setoff pursuant to Section 4 above, whether or not
ultimately determined to be justified, shall not constitute an
Event of Default hereunder;
(b)
Breach of Covenants . The Company shall fail in any material
respect to observe or perform any covenant, obligation, condition
or agreement contained in this Note and (i) such failure shall
continue for thirty (30) day
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