3226509 NOVA SCOTIA COMPANY SUBORDINATED PROMISSORY NOTE

Exhibit 10.4

THIS SUBORDINATED 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
SUBORDINATED PROMISSORY NOTE

(Guaranteed by ION GEOPHYSICAL CORPORATION)

September 18, 2008

      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 TEN MILLION AND NO/100 DOLLARS (US$10,000,000.00), together with accrued interest thereon at such rates and at such time or times as provided for herein. This Subordinated 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 Obligations ” shall mean all principal (and premium, if any), interest (including, without limitation, interest occurring after an insolvency, bankruptcy or similar proceeding, whether or not such interest is an allowed claim in any such proceeding), amounts reimbursable, fees, expenses, penalties, indemnities, costs of enforcement and other amounts due or that may become due in connection with (i) the obligations of ION and its Subsidiaries under the Senior Credit Facility, (ii) the short-term bridge loans extended to ION by Jefferies Finance CP Funding LLC and evidenced by that certain Senior Increasing Rate Note dated September 18, 2008 made by ION in favor of Jefferies Finance CP Funding LLC or its assignees (the “ Short Term Bridge Loans ”), (iii) all guaranties by ION and its Subsidiaries of the obligations described in clauses (i) — (ii) above, and (iv) any debentures, notes or other evidence of indebtedness issued in exchange for, or in the refinancing of, such Senior Obligations.

          (e) “ Subordinated Obligations ” shall mean all obligations with respect to this Note, including, without limitation, principal, premium, if any, interest payable pursuant to the terms of this Note (including, without limitation, upon acceleration or otherwise), together with and including any amounts received or receivable upon the exercise of rights of action (including, without limitation, claims for damages) or otherwise in respect of this Note.

      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. Subject to the provisions of Section 7 hereof, 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 ten percent (10%) 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 thirteen percent (13%) 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 sixteen percent (16%) per annum.

      3.  Payment of Interest and Principal . The indebtedness under this Note shall be payable as set forth herein. Subject to the provisions of Section 7 hereof, 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 one (1) day immediately following the “Maturity Date” as defined in the Senior ARAM Note (the “ Maturity Date ”). 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.  [Intentionally Omitted] .

      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;

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

          (c) Voluntary Bankruptcy or Insolvency Proceedings . The Company shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated in full or in part, (v) become “insolvent” (as such term may be defined or interpreted under applicable statutory authority), (vi) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it or (vii) take any action for the purpose of effecting any of the foregoing;

          (d) Involuntary Bankruptcy or Insolvency Proceedings . Proceedings for the appointment of a receiver, trustee, liquidator or custodian of the Company or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to the Company or the debts thereof under

any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced, and an order for relief entered or such proceeding shall not be dismissed or discharged within sixty (60) days of such commencement; or

          (e) Material Indebtedness . ION shall be in default under the terms of (i) any Senior Obligations, (ii) the indebtedness of ION under its 5.50% Convertible Senior Notes due 2008, (iii) the liabilities of ION and its Subsidiaries with respect to capital leases and obligations under its facility sale-leaseback facility, (iv) the indebtedness of Company under that certain Promissory Note, in an aggregate principal amount of US $35,000,000, made to the favor of Payee, dated as of the date hereof (the “Senior ARAM Note”), or (v) any guaranties by ION and its Subsidiaries of any of the foregoing obligations where (x) such default has resulted in the acceleration of such obligations prior to its stated maturity, and (y) the principal amount at maturity of such obligations under which there has been such a default aggregates $20.0 million or more.

      6.  Rights of Payee upon Default . Upon the occurrence or existence of any Event of Default (other than any Event of Default referred to in Sections 5(c) or 5(d) hereof), and at any time thereafter during the continuance of such Event of Default, Payee may, by written notice to the Company, declare all outstanding obligations payable by the Company hereunder to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein to the contrary notwithstanding; provided , that so long as any Senior Obligat