Republic of France		Tour Maine-Montparnasse		Not Applicable
(State or Other Jurisdiction of Incorporation or Organization)		33 avenue de Maine BP 191 75755 Paris CEDEX 15 France (33) 1 64 47 45 00		(I.R.S. Employer Identification No.)

Beatrice Place-Faget Corporate General Counsel Tour Maine-Montparnasse 33, avenue du Maine 75755 Paris Cedex 15 +33 1 64 47 45 00		Thomas N. O’Neill III Linklaters  25, rue de Marignan 75008 Paris France +33 1 56 43 56 43		William P. Rogers, Jr. Cravath, Swaine & Moore LLP City Point One Ropemaker Street London EC2Y 9HR United Kingdom +44 207 453 1000

			Amount to be
			Registered/Proposed
			Maximum			Amount of
Title of Each Class of			Aggregate			Registration
Securities to be Registered			Offering Price			Fee
Senior Notes			$ 600,000,000(1)			$          (3)
Guarantees of Senior Notes			(2)			None

(1)	Estimated solely for the purpose of calculating the registration fee.
(2)	No separate consideration will be received for the Guarantees.
(3)	The Registrants have elected to rely on Rule 456(b) and Rule 457(r) of the Securities Act of 1933, as amended, to defer payment of the registration fee.

---

 

Name and Address, Including Zip
Code and Telephone Number,
Including Area Code, of			State or Other		I.R.S. Employer
Principal Executive Offices			Jurisdiction of Incorporation		Identification No.
CGG Americas Inc.			Texas			74 - 1596771
	16430 Park Ten Place Houston, Texas 77084 (1) 281 646 2400
CGG Canada Services Ltd.			Alberta, Canada
	450, 808-4th Avenue SW Calgary, Alberta TP3 E8 Canada (1) 403 266 1011
CGG Marine Resources Norge A/ S			Norway
	OH Bangs Vei 70 N-1363 Høvik Norway (47) 67 11 34 72
Sercel, Inc.			Oklahoma			73 - 1396603
	17200 Park Row Houston, Texas 77084 (1) 281 492 6688
Sercel Canada Ltd.			New Brunswick, Canada
	1108 55th Avenue, NE Calgary, Alberta TZE 6Y Canada (1) 403 275 3544
Sercel Australia Pty Ltd.			New South Wales, Australia
	274 Victoria Road
	Rydalmere, New South Wales 2116
	Australia (61) 2 8832 5500
CGGVeritas Services Inc.			Delaware			20 - 8026762
	10300 Town Park Drive Houston, Texas 77072 (1) 832 351 8300
Veritas DGC Land Inc.			Delaware			76 - 0542437
	10300 Town Park Drive Houston, Texas 77072 (1) 832 351 8300
Veritas Geophysical Corporation			Delaware			74 - 1813790
	10300 Town Park Drive Houston, Texas 77072 (1) 832 351 8300
Veritas Investments Inc.			Delaware			76 - 0569069
	c/o Corporation Trust Center 1209 Orange Street Wilmington, DE 19801
Viking Maritime Inc.			Delaware			76 - 0677405
	c/o Corporation Trust Center 1209 Orange Street Wilmington, DE 19801

2

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Name and Address, Including Zip
Code and Telephone Number,
Including Area Code, of			State or Other		I.R.S. Employer
Principal Executive Offices			Jurisdiction of Incorporation		Identification No.
Veritas Geophysical (Mexico) LLC			Delaware			76 - 0670383
	c/ o Corporation Trust Center 1209 Orange Street Wilmington, DE 19801
Veritas DGC Asia Pacific Ltd.			Delaware			74 - 2007144
	10300 Town Park Drive Houston, Texas 77072 (1) 832 351 8300
Alitheia Resources Inc.			Delaware			56 - 2475147
	10300 Town Park Drive Houston, Texas 77072 (1) 832 351 8300

*

This registration statement comprises a filing on Form F-3 with respect to the securities of Compagnie Générale de Géophysique-Veritas, CGG Canada Services Ltd., CGG Marine Resources Norge A/ S, Sercel Canada Ltd. and Sercel Australia Pty Ltd. and a filing on Form S-3 with respect to the securities of CGG Americas Inc., Sercel, Inc., CGGVeritas Services Inc., Veritas DGC Land Inc., Veritas Geophysical Corporation, Veritas Investments Inc., Viking Maritime Inc., Veritas Geophysical (Mexico) LLC, Veritas DGC Asia Pacific Ltd. and Alitheia Resources Inc.

3

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The information in this preliminary prospectus is not complete and may be changed. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Underwriting

Price to

discounts

Proceeds to

public(1)

and commissions

issuer

Additional notes

New notes

(1)	In the case of the additional notes, plus accrued and unpaid interest from and including November 15, 2006 to but excluding the delivery date and in the case of the new notes, plus accrued and unpaid interest from and including the issue date of the new notes to but excluding the delivery date.

BNP PARIBAS		Natexis Bleichroeder Inc.

Calyon Securities		SOCIETE GENERALE

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		Page
Prospectus Summary			1
Risk Factors			22
Exchange Rates			36
Use of Proceeds			37
Capitalization			38
The Veritas Merger			40
Selected Historical Consolidated Financial and Operating Information of CGG			42
Selected Historical Consolidated Financial Data of Veritas			46
Unaudited Pro Forma Condensed Combined Financial Information			48
Management’s Discussion and Analysis of Financial Condition and Results of Operations			74
Our Business			109
Business of CGG			114
Business of Veritas			125
Directors, Senior Management and Employees			129
Principal Shareholders			140
Description of Certain Indebtedness			142
Description of the Additional Notes			145
Description of the New Notes			189
Taxation			233
Underwriting			239
Legal Matters			248
Experts			248
Service of Process and Enforcement of Liabilities			248
General Information			249
Index to Financial Statements			F-1

i

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ii

---

 

	(a)	it is a qualified investor within the meaning of the law in that Relevant Member State implementing Article 2(1)(e) of the Prospectus Directive; and

	(b)	in the case of any notes acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, (i) the notes acquired by it in the offer have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than qualified investors, as that term is defined in the Prospectus Directive, or in circumstances in which the prior consent of the underwriters has been given to the offer or resale; or (ii) where notes have been acquired by it on behalf of persons in any Relevant Member State other than qualified investors, the offer of those notes to it is not treated under the Prospectus Directive as having been made to such persons. For the purposes of this representation, the expression an “offer of notes to the public” in relation to any notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any notes to be offered so as to enable an investor to decide to purchase or subscribe for the notes, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71/ EC and includes any relevant implementing measure in each Relevant Member State.

iii

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iv

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	•	incorporated documents are considered part of this prospectus;
	•	we can disclose important information to you by referring you to those documents; and
	•	information that we file with the Commission after the date of this prospectus and incorporate by reference herein automatically updates and supersedes this prospectus and information previously incorporated by reference herein.

SEC Filing		Filing Date
CGG’s Form 20-F for the fiscal year ended December 31, 2005			May 9, 2006

	•	all annual reports on Form 20-F we file with the Commission; and
	•	any future reports furnished on Form 6-K that indicate that they are incorporated by reference in this prospectus.

	Compagnie Générale de Géophysique-Veritas
	Tour Maine-Montparnasse
	33 avenue de Maine
	BP 191
	75755 Paris CEDEX 15
	Attention: Investor Relations Officer
	Tel: (33) 1 64 47 45 00

v

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	•	our ability to develop an integrated strategy for CGGVeritas;
	•	difficulties and delays in achieving synergies and cost savings;
	•	our substantial indebtedness;
	•	changes in international economic and political conditions and, in particular, in oil and gas prices;
	•	exposure to the credit risk of customers;
	•	our ability to finance our operations on acceptable terms;
	•	the timely development and acceptance of our new products and services;
	•	the complexity of products sold;
	•	changes in demand for seismic products and services;
	•	the effects of competition;
	•	the social, political and economic risks of our global operations;
	•	the costs and risks associated with pension and post-retirement benefit obligations;
	•	changes to existing regulations or technical standards;
	•	existing or future litigation;
	•	difficulties and costs in protecting intellectual property rights and exposure to infringement claims by others;
	•	the costs of compliance with environmental, health and safety laws;
	•	the timing and extent of changes in currency exchange rates and interest rates;
	•	the accuracy of our assessment of risks related to acquisitions, projects and contracts and whether these risks materialize;
	•	our ability to integrate successfully the businesses or assets we acquire, including Veritas;
	•	our ability to monitor existing and targeted partnerships;

vi

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	•	our ability to sell our seismic data library;
	•	our ability to access the debt and equity markets during the periods covered by the forward-looking statements, which will depend on general market conditions and on our credit ratings for our debt obligations; and
	•	our success at managing the risks of the foregoing.

vii

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2

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3

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4

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5

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6

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7

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8

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9

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10

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11

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12

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13

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14

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15

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16

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17

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18

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19

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20

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21

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	We are subject to certain risks related to acquisitions, including the merger, and these risks may materially adversely affect our revenues, expenses, operating results and financial condition.

	We are subject to risks related to our international operations that could harm our business and results of operations.

	•	instability of foreign economies and governments;
	•	risks of war, terrorism, civil disturbance, seizure, renegotiation or nullification of existing contracts; and
	•	foreign exchange restrictions, sanctions and other laws and policies affecting taxation, trade and investment.

22

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	We invest significant amounts of money in acquiring and processing seismic data for multi-client surveys and for our data library without knowing precisely how much of the data we will be able to sell or when and at what price we will be able to sell the data.

	•	We may not fully recover the costs of acquiring and processing the data through future sales. The amounts of these data sales are uncertain and depend on a variety of factors, many of which are beyond our control. In addition, the timing of these sales is unpredictable and sales can vary greatly from period to period. Technological or regulatory changes or other developments could also materially adversely affect the value of the data.
	•	The value of our multi-client data could be significantly adversely affected if any material adverse change occurs in the general prospects for oil and gas exploration, development and production activities in the areas where we acquire multi-client data.
	•	Any reduction in the market value of such data will require us to write down our recorded value, which could have a significant material adverse effect on our results of operations.

23

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	Our results of operations may be significantly affected by currency fluctuations.

	Our working capital needs are difficult to forecast and may vary significantly, which could result in additional financing requirements that we may not be able to meet on satisfactory terms, or at all.

	Technological changes and new products and services are frequently introduced in the market, and our technology could be rendered obsolete by these introductions, or we may not be able to develop and produce new and enhanced products on a cost-effective and timely basis.

	We rely on significant customers, so the loss of a single customer or a few customers could have a material adverse effect on our operating revenues and business.

24

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	The nature of our business subjects us to significant ongoing operating risks for which we may not have adequate insurance or for which we may not be able to procure adequate insurance on economical terms, if at all.

	A reduction in our seismic fleet could materially adversely affect our operating revenues and business.

	Compliance with internal controls procedures and evaluations and attestation requirements will require significant efforts and resources and may result in the identification of significant deficiencies or material weaknesses.

	We depend on proprietary technology and are exposed to risks associated with the misappropriation or infringement of that technology.

25

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	A failure to attract and retain qualified employees may materially adversely affect our future business and operations.

	The financial statements and other financial information of Veritas presented in this prospectus and used to prepare the unaudited pro forma condensed combined financial information presented in this prospectus and the pro forma financial information itself may not be indicative of the results of Veritas as part of our group.

26

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	CGG and Veritas have had losses in the past and we cannot assure that we will be profitable in the future.

	We depend on capital expenditures by the oil and gas industry, and reductions in such expenditures may have a material adverse effect on our business.

	•	demand for oil, natural gas and natural gas liquids;
	•	worldwide political, military and economic conditions, including political developments in the Middle East, economic growth levels and the ability of OPEC to set and maintain production levels and prices for oil;
	•	levels of oil and gas production;
	•	the price and availability of alternative fuels;
	•	policies of governments regarding the exploration for and production and development of oil and gas reserves in their territories; and
	•	global weather conditions.

	We are subject to intense competition, which could limit our ability to maintain or increase our market share or to maintain our prices at profitable levels.

27

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	We have high levels of fixed costs that are incurred regardless of our level of business activity.

	Our land and marine seismic acquisition revenues vary significantly during the year.

	Our business is subject to governmental regulation, which may adversely affect our future operations.

	Our substantial debt could adversely affect our financial health and prevent us from fulfilling our obligations.

	•	make it more difficult to satisfy our obligations with respect to the notes;
	•	increase our vulnerability to general adverse economic and industry conditions;
	•	require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;

28

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	•	limit our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate;
	•	place us at a competitive disadvantage compared to our competitors that have less debt; and
	•	limit, along with the financial and other restrictive covenants of our indebtedness, among other things, our ability to borrow additional funds.

	Our debt agreements contain restrictive covenants that may limit our ability to respond to changes in market conditions or pursue business opportunities.

	•	incur or guarantee additional indebtedness or issue preferred shares;
	•	pay dividends or make other distributions;
	•	purchase equity interests;
	•	create or incur certain liens;
	•	create or incur restrictions on the ability to pay dividends or make other payments to us;
	•	enter into transactions with affiliates;
	•	issue or sell capital stock of subsidiaries;
	•	engage in sale-and-leaseback transactions; and
	•	sell assets or merge or consolidate with another company.

	If we are unable to comply with the restrictions and covenants in the indentures and debt agreements governing the notes and other debt, there could be a default under the terms of these indentures and agreements, which could result in an acceleration of repayment.

29

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	We and our subsidiaries may incur substantially more debt.

	To service our indebtedness, we will require a significant amount of cash, and our ability to generate cash will depend on many factors beyond our control.

	Our results of operations could be materially adversely affected by changes in interest rates.

	Your right to receive payments on the notes is effectively junior to most of our existing indebtedness and possibly all of our future borrowings.

30

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	We will rely in part on our subsidiaries for funds necessary to meet our financial obligations, including the notes.

	Although the occurrence of specific change of control events affecting us will permit you to require us to repurchase your notes, we may not be able to repurchase your notes.

	Certain affiliates or associated entities of underwriters participating in this offering will receive the net proceeds of this offering, which may present a conflict of interest.

31

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	Insolvency laws in France may not be as favorable to you as U.S. or other insolvency laws.

32

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	•	the opening of judicial reorganization or safeguard proceedings against such company, or
	•	the existence of the state of suspension of payments (i.e., the inability to pay due debts out of available assets) against such company

	Courts, under certain circumstances, may void the guarantees of the notes provided by certain of our subsidiaries.

33

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	•	a guarantor delivered its guarantee with the intent to defeat, hinder, delay, defraud or otherwise interfere with its existing or future creditors;
	•	the guarantor did not receive fair consideration or benefit for the delivery of the guarantee and the guarantor was insolvent at the time it delivered the guarantee;
	•	the guarantor delivered its guarantee in contravention of laws relating to the provision of financial assistance;
	•	the guarantor was insolvent at the time of execution of the guarantee or was rendered insolvent by reason of its execution of the guarantee or the observance of its obligations under the guarantee;
	•	a reasonable person in the guarantor’s circumstances would not have entered into the transaction having regard to the benefits (if any) to the guarantor, the detriment to the guarantor and the respective benefits to other parties;
	•	the guarantor was engaged, or was about to engage, in a business or transaction for which its remaining assets constituted unreasonably small capital to carry on its business;
	•	the guarantor intended to incur, or believed it would incur, debts beyond its ability to pay the debts as they matured;
	•	the guarantor was a defendant in an action for money damage, or had a judgment for money damages docketed against it (if, in either case, after final judgment, the judgment is unsatisfied); or
	•	the availability of certain equitable remedies that are in the discretion of the courts.

	Judgments of U.S. courts may not be enforceable against CGGVeritas.

	A trading market for the new notes may not develop and a trading market for the notes may not continue to exist.

34

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35

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		Dollars per euro exchange rate
Year ended December 31,		Period-end				High				Low				Average(1)
2002			1.05				1.05				0.86				0.95
2003			1.26				1.26				1.04				1.14
2004			1.35				1.36				1.18				1.24
2005			1.18				1.35				1.17				1.24
2006			1.32				1.33				1.19				1.26
Year ended July 31,
2002			0.98				1.02				0.86				0.91
2003			1.12				1.19				0.96				1.06
2004			1.20				1.29				1.08				1.20
2005			1.21				1.36				1.19				1.27
2006			1.28				1.30				1.17				1.22
Nine months ended September 30,
2005			1.21				1.35				1.19				1.26
2006			1.27				1.30				1.19				1.25
Three months ended October 31,
2005			1.20				1.25				1.19				1.22
2006			1.28				1.29				1.25				1.27
Month
July 2006			—				1.28				1.25				—
August 2006			—				1.29				1.27				—
September 2006			—				1.28				1.26				—
October 2006			—				1.28				1.25				—
November 2006			—				1.33				1.27				—
December 2006			—				1.33				1.31				—
January 2007 (through January 26)			—				1.33				1.29				—

(1)	The annual average rate is the average of the Noon Buying Rates on the last business day of each month.

36

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37

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	•	on an historical CGG basis; and
	•	as adjusted to reflect the merger and the financing transactions.

			As at September 30, 2006
															Other Pro
															Forma
															Adjustments
			CGG				Veritas								for the
			Actual				Actual								Merger and
			September 30,				October 31,				Pro Forma				the
			2006				2006				Consistency				Financing				As
			(IFRS)				(U.S. GAAP)				Adjustments(1)				Transactions				Adjusted
			(in € millions)
Cash and cash equivalents				169				280				0				(148	)(2)			301
Bank overdrafts				11				—				—				—				11
Current portion of financial debt				44				122				(3	)			(103	)			61
	Capital lease (current portion)							1												1
	Other financial debt (current including accrued interest)			44																44
	Veritas convertible notes							121				(3	)			(103	)(3)			15
Financial debt				387								—				1,244				1,631
	Capital lease			50																50
	Other financial debt (including accrued interest)			82																82
	Senior facilities															778	(4)			778
	Senior notes due 2015			255												233	(5)			488
	Senior notes due 2017															233	(5)			233
Total financial debt (including bank overdrafts)				442				122				(3	)			1,141				1,702
Shareholders’ equity				851				592				(5	)			968	(6)			2,406
Minority interests				24																24
Total shareholders’ equity and minority interests				874				592				(5	)			968				2,429
Net debt/(Cash)				273				(157	)			(3	)			(1,288	)			1,402

(1)	Adjustments to Veritas’ consolidated balance sheet as at October 31, 2006 have been made to ensure consistency of accounting principles with CGG under IFRS. See Notes 2 and 3 to our unaudited pro forma condensed combined financial statements included elsewhere in this prospectus.

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(2)	Net effect of pro forma adjustment on cash as described in Note 4.2.5 to our unaudited pro forma condensed combined financial statements included elsewhere in this prospectus.
(3)	See discussion in Note 4.1.1.1 to our unaudited pro forma condensed combined financial statements included elsewhere in this prospectus.
(4)	Net proceeds of $1.0 billion from the term loan facility.
(5)	The assumed net proceeds of the offering of the notes hereby.
(6)	Reflects the net impact of the shares issued as consideration in connection with the merger.

39

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	The Merger

	Merger Rationale

	•	the combination of CGG and Veritas took place in a strong business environment. Decreasing reserves of oil and gas companies have been coupled with growing energy consumption sustained by long-term demand, particularly in China and India. This environment has created a need to accelerate the pace of exploration in new areas, to revisit existing exploration areas with new technologies and to optimize reservoir management to maximize recovery rates. Seismic technology plays a key role in this process and CGGVeritas, with its combined technology and worldwide geographic fit, is expected to be well positioned to compete to lead and meet the industry’s needs;
	•	the combination of CGG and Veritas creates a strong global pure-play seismic company, offering a broad range of seismic services, and, through Sercel, geophysical equipment to the industry across all markets. The business, geographic and client complementarities of CGG and Veritas are expected to respond to the growing demand for seismic imaging and reservoir solutions. CGGVeritas is expected to be well positioned to provide an improved technological advanced product offering in seismic services as most oil and gas companies attempt to replace diminishing reserves in a more complex exploration environment, to strengthen long-term relationships with a broad range of clients and to improve financial performance through business cycles;
	•	the combination of CGG and Veritas brings together two companies with strong technological foundations in the geophysical services and equipment market. Both CGG and Veritas have a long tradition in providing seismic services both onshore and offshore. In particular, Veritas’ strong offshore positions will effectively complete the repositioning to offshore that CGG has been implementing during the last few years. Both companies already use a broad range of Sercel technologies for their data acquisition activities, thereby providing a homogeneous equipment base for the combined CGGVeritas. In addition, Veritas’ strong focus on North America fits well with CGG’s international presence. Combining the two customer bases is expected to provide a good balance between national oil companies (a strong position of CGG), major oil and gas operators (a strong position of both CGG and Veritas) and U.S.-based operators, both majors and independent (a strong position of Veritas). The

40

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		combined technology and know-how of the two companies will strengthen research and development capabilities to best serve the CGGVeritas client base with a broader range of technologies that CGGVeritas would be able to deliver more rapidly to the market;
	•	the addition of Veritas’ fleet of seven vessels creates a combined seismic services business operating the world’s leading seismic fleet of 20 vessels, including 14 high capacity 3D vessels. Capacity in the combined fleet is well balanced between large (more than 10 streamers), medium (six to eight streamers) and smaller sizes, with all vessels equipped with Sercel’s solid or fluid streamers. The combined fleet will provide highly flexible fleet management potential with a balanced distribution of fully owned, chartered, new built and significantly depreciated capacity. Additionally, most of the vessels in the combined fleet have been recently equipped with relatively new technology which will provide CGGVeritas with a fleet that can be managed without significant investments in the near term;
	•	offshore multi-client services benefits from two complementary, recent vintage, well-positioned seismic data libraries. For example, the Veritas library will bring to CGG complementary data in the Gulf of Mexico, with Veritas data library being positioned in the Western and Central Gulf while CGG’s data library is in the Central and Eastern Gulf. Data merging from the CGG and Veritas libraries will provide potential for cross imaging enhancement and value creation. All these benefits take place in a market where a global library portfolio is increasingly attractive to clients;
	•	CGG’s and Veritas’ respective offerings for land acquisition services represent strong geographical and technological complementarities for high-end positioning and further development of local partnerships. Veritas’ strong presence in the western hemisphere, in particular North America and particularly in multi-client surveys, complements CGG’s main geographic footprint in the eastern hemisphere and its strong focus on the Middle East. In addition, CGG’s and Veritas’ technological complementarities will enhance CGGVeritas’ land offering, ranging from exploration seismic to field seismic monitoring;
	•	CGG’s and Veritas’ respective positions in data processing and imaging as well as the skills and reputation of their experts and geoscientists, allows CGGVeritas to create the industry reference in this segment, with particular strengths in advanced technologies such as depth imaging, 4D processing and reservoir characterization as well as a close link with clients through dedicated centers;
	•	the merger will not affect Sercel’s open technology approach. Sercel will pursue its strategy of maintaining leading edge technology, offering new generations of differentiating products and focusing on key markets; and
	•	with a combined workforce of 7,000 staff operating worldwide, including Sercel, CGGVeritas will, through continued innovation, be an industry leader in seismic technology, services and equipment with a broad base of customers including independent, international and national oil companies.

41

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	•	as at and for the nine months ended September 30, 2006 and 2005 in accordance with both IFRS and U.S. GAAP;
	•	as at and for the years ended December 31, 2005 and 2004 in accordance with IFRS; and
	•	as at and for each of the five years in the period ending December 31, 2005 in accordance with U.S. GAAP.

42

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			As at and for the nine
			months ended								As at and for the
			September 30,								year ended
											December 31,
			2006				2005
			(unaudited)				(unaudited)				2005				2004
			(in € millions, except for
			per share and ratio data)
Amounts in accordance with IFRS:
Statement of Operations Data:
Operating revenues				955.6				607.5				869.9				687.4
Other revenues from ordinary activities				1.4				1.2				1.9				0.4
Cost of operations				(636.7	)			(473.2	)			(670.0	)			(554.0	)
Gross profit				320.3				135.5				201.8				133.8
Research and development expenses, net				(27.8	)			(23.6	)			(31.1	)			(28.8	)
Selling, general and administrative expenses				(86.9				(64.2	)			(91.2	)			(78.6	)
Other revenues (expenses)				12.0				2.7				(4.4	)			19.3
Operating income				217.6				45.0				75.1				45.7
Cost of financial debt, net				(19.2	)			(26.7	)			(42.3	)			(27.8	)
Derivative and other expenses on convertible bonds				(23.0	)			(38.0	)			(11.5	)			(23.5	)
Other financial income (loss)				(8.4				1.3				(14.5	)			0.8
Income taxes				(54.9	)			(18.5	)			(26.6	)			(10.9	)
Equity in income of affiliates				8.9				9.6				13.0				10.3
Net income (loss)				121.0				(27.3	)			(6.8	)			(5.4	)
Attributable to minority interests				1.2				0.6				(1.0	)			(1.0	)
Attributable to shareholders				119.8				(27.9	)			(7.8	)			(6.4	)
Net income (loss) per share:
	Basic(1)			6.92				(2.37	)			(0.64	)			(0.55	)
	Diluted(2)			6.78				(2.37	)			(0.64	)			(0.55	)
Other Ratios:
Ratio of earnings to fixed charges(3)				10.9	x			1.7	x			1.4	x			1.8	x
Balance Sheet Data (at period end):
Cash and cash equivalents				168.7								112.4				130.6
Working capital(4)				254.0								154.1				116.4
Property, plant & equipment, net				485.0								480.1				204.1
Multi-client surveys				69.8								93.6				124.5
Total assets				1,751.7								1,565.1				971.2
Financial debt(5)				430.8								400.3				249.6
Stockholders’ equity				850.5								698.5				393.2
Other Historical Financial Data:
ORBDA(6)				359.9				148.9				229.5				172.5
Capital expenditures (property, plant & equipment)(7)				117.2				75.4				125.1				49.8
Capital expenditures for multi-client surveys				38.9				19.2				32.0				51.1
Net debt(8)				273.0				500.5				297.2				121.8
Net debt(8)/ ORBDA(6)												1.3	x			0.7x

43

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			As at and for the nine
			months ended
			September 30,
											As at and for the year ended December 31,
			2006				2005
			(unaudited)				(unaudited)				2005				2004				2003				2002				2001
			(in € millions, except for per share, ratio and operational data)
Amounts in accordance with U.S. GAAP:
Statement of Operations Data:
Operating revenues				967.7				601.6				860.8				709.5				645.6				719.0				795.0
Operating income				215.0				38.2				61.9				55.0				42.7				81.9				48.6
Net income (loss)				94.0				(15.3	)			8.3				(20.2	)			3.1				15.1				9.3
Per share amounts:
	Basic common stock holder(1)			5.43				(1.30	)			0.69				(1.73	)			0.27				1.29				0.80
	Diluted common stock holder(9)			5.32				(1.30	)			0.67				(1.73	)			0.26				1.29				0.80
Other Ratios:
Ratio of earnings to fixed charges(3)				8.8	x			2.0	x			1.6	x			1.4	x			0.5	x			2.2	x			2.0	x
Balance Sheet Data (at period end):
Total assets				1,751.2								1,573.8				975.8				924.2				1,036.8				1,008.0
Financial debt(5)				436.7								416.7				266.5				232.4				307.8				279.5
Stockholders’ equity				811.7								689.5				372.2				413.4				431.0				456.4
Operational Data (end of period):
Land teams in operations				8				12				11				8				12				14				12
Operational streamers(10)				44				52				46				39				42				42				48
Data processing centers				31				30				27				26				26				26				26

(1)		Basic per share amounts under IFRS and U.S. GAAP have been calculated on the basis of 17,318,957 issued and outstanding shares in the nine month period ended September 30, 2006, 11,765,118 issued and outstanding shares in the nine month period ended September 30, 2005, 12,095,925 issued and outstanding shares in 2005 and 11,681,406 issued and outstanding shares in 2004. Basic per share amounts under U.S. GAAP have been calculated on the basis of 11,680,718 issued and outstanding shares in 2003 and 2002 and 11,609,393 issued and outstanding shares in 2001.
(2)		Diluted per share amount under IFRS has been calculated on the basis of 17,675,616 issued and outstanding shares in the nine month period ended September 30, 2006, 13,451,097 issued and outstanding shares in the nine month period ended September 30, 2005, 12,095,925 issued and outstanding shares in 2005 and 11,681,406 issued and outstanding shares in 2004. For the nine-month period ended September 30, 2005, the effect of convertible bonds was anti-dilutive.
(3)		For purposes of calculating the ratio of earnings to fixed charges, earnings in IFRS consist of income (loss) from consolidated companies before income taxes, excluding derivative and other expenses on convertible bonds included in CGG’s income statement for the relevant period included elsewhere in this prospectus. Earnings under U.S. GAAP consist of income from consolidated companies before income taxes and minority interests, excluding equity in income of affiliates included in CGG’s income statement for the relevant period included elsewhere in this prospectus. Fixed charges under each of IFRS and U.S. GAAP consist of net cost of financial debt (including amortization fees). For the year ended December 31, 2003, our earnings were insufficient to cover fixed charges by €13.5 million under U.S. GAAP.
(4)		Working capital consists of trade accounts and notes receivable, inventories and work-in-progress, tax assets, other current assets and assets held for sale less trade accounts and notes payable, accrued payroll costs, income tax payable, advance billings to customers, current provisions and other current liabilities.
(5)		“Financial debt” means total financial debt, including current maturities, capital leases and accrued interest but excluding bank overdrafts.
(6)		A discussion of “ORBDA” (Operating Result Before Depreciation and Amortization, previously denominated “Adjusted EBITDA”), including (i) a reconciliation to net cash provided by operating activities and (ii) the reasons why our management believes that a presentation of ORBDA provides useful information to investors regarding our financial condition and results of operations, is found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — ORBDA”.
(7)		“Capital expenditures” is defined as purchases of property, plant and equipment plus equipment acquired under capital lease.

44

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	The following table presents a reconciliation of capital expenditures to purchases of property, plant and equipment and equipment acquired under capital lease for the periods indicated:

		For the nine months								For the year
		ended September 30,								ended
										December 31,
		2006				2005
		(unaudited)				(unaudited)				2005				2004
		(in € millions)
Purchase of property, plant and equipment			117.0				61.8				107.7				41.1
Equipment acquired under capital lease			0.2				13.6				17.4				8.7
Capital expenditures			117.2				75.4				125.1				49.8

(8)		“Net debt” means bank overdrafts, financial debt including current portion (including capital lease debt) net of cash and cash equivalents. A discussion of net debt, including (i) a reconciliation of net debt to financing items of the CGG balance sheet and (ii) the reasons why our management believes that a presentation of net debt provides useful information to investors regarding our financial condition and results of operations, is found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Net Debt”.
(9)		Diluted per share amounts under U.S. GAAP have been calculated on the basis of 17,675,616 issued and outstanding shares in the nine month period ended September 30, 2006, 13,451,097 issued and outstanding shares in the nine month period ended September 30, 2005, 12,378,209 issued and outstanding shares in 2005, 11,681,406 issued and outstanding shares in 2004, 11,760,630 issued and outstanding shares in 2003, 11,680,718 issued and outstanding shares in 2002 and 11,609,393 issued and outstanding shares in 2001. In 2002 and 2001, the effects of stock options were not dilutive (as a result of applying the treasury stock method).
(10)		Data includes Exploration Resources ASA’s streamers (from and including December 31, 2005) and excludes streamers of vessels in transit or dry-dock.

45

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		As at and for the three
		months ended October 31,								As at and for the year ended July 31,
		2006				2005
		(unaudited)				(unaudited)				2006(1)				2005(2)				2004(3)				2003(4)				2002(5)
		(in $ millions, except per share amount)
Statement of Operations Data:
Revenues			230.8				168.7				822.2				634.0				564.5				501.8				452.2
Cost of services			165.8				136.7				623.2				519.0				495.7				423.2				347.9
Research and development			5.4				4.9				22.9				18.9				15.5				11.6				11.5
General and administrative			11.4				8.9				43.2				31.9				25.5				27.2				23.8
Operating income (loss)			37.9				18.3				132.9				64.2				27.8				(12.1	)			(.83	)
Interest expense			2.2				1.5				7.2				4.0				18.9				18.5				13.6
Interest income			(5.0	)			(1.9	)			(12.0	)			(5.3	)			(1.6	)			(.96	)			(1.4	)
Gain on involuntary conversion of assets			—				(2.0	)			(2.0	)			(9.9	)			—				—				—
Other (income) expense, net			0.3				(.13	)			.12				(.88	)			1.6				1.2				5.8
Provision (benefit) for income tax expense			13.2				9.0				57.2				(6.8	)			3.7				28.3				5.2
Net income (loss)			27.5				11.8				82.2				83.0				5.2				(59.1	)			(24.1	)
Net income (loss) per common share — basic			0.77				0.34				2.33				2.45				0.16				(1.77	)			(.74	)
Net income (loss) per common share — diluted			0.68				0.32				2.08				2.37				0.15				(1.77	)			(.74	)
Balance Sheet Data (at period end):
Cash and cash equivalents			353.8				228.0				402.0				249.4				116.3				72.1				10.0
Property and equipment, net			141.9				128.8				110.6				127.9				121.7				149.7				189.8
Multi-client data library			324.1				333.3				296.6				316.8				313.2				373.1				338.8
Total assets			1,175.6				954.5				1,158.0				966.6				776.2				790.9				781.4
Long-term debt (including current maturities)			155.0				155.0				155.0				155.0				155.0				194.2				140.0
Stockholders’ equity			749.8				607.8				710.5				582.5				489.7				487.5				520.7
Other Historical Financial Data:
ORBDA(6)			123.5				81.6				383.7				265.9				278.3

46

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(1)		Includes a gain on involuntary conversion of assets of $2.0 million.
(2)		Includes a gain on involuntary conversion of assets of $9.9 million and a release of deferred tax valuation allowances of $36.9 million.
(3)		Includes charges of $22.1 million related to a change in multi-client accounting policies and $7.4 million related to debt refinancing. The change in multi-client accounting policies may affect the comparability between periods and is more fully described in Note 1 to the Veritas audited consolidated financial statements included elsewhere in this prospectus.
(4)		Includes charges of $39.3 million for goodwill impairment, $4.9 million for impairment of a multi-client survey, $7.6 million loss related to the sale of Veritas’ (RC)2 software operations and $21.0 million related to deferred tax asset valuation allowances.
(5)		Includes charges of $55.3 million for impairment of multi-client surveys, $14.6 million for costs of a terminated merger and $6.5 million valuation allowance for deferred tax assets.
(6)		A discussion of “ORBDA” (Operating Result Before Depreciation and Amortization, previously denominated “Adjusted EBITDA”), including (i) a reconciliation to net cash provided by operating activities and (ii) the reasons why our management believes that a presentation of ORBDA provides useful information to investors regarding our financial condition and results of operations, is found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — ORBDA”.

47

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	•	under U.S. GAAP, the price of CGG ADSs was $32.44, the average price of CGG ADSs for the period beginning two days before and ending two days after September 5, 2006 (the date that the merger was announced);
	•	under IFRS, the price of CGG ADSs was $40.50, the closing price on the closing date of the merger;
	•	each outstanding share of Veritas common stock was converted in the merger into the right to receive either (i) 2.25 CGG ADSs (with respect to 50.664% of Veritas’ total common stock) or (ii) $75.00 in cash (with respect to 49.336% of Veritas’ total common stock);
	•	the cash consideration paid by CGG in connection with the merger was financed by a $1.0 billion term loan facility, the issuance of $600 million in notes offered hereby and cash on hand; and
	•	each employee option to purchase shares of Veritas common stock pursuant to any stock option plan, program or arrangement of Veritas outstanding at the time of the merger, whether or not vested, has been cancelled and converted into the right to receive, for each share of Veritas common stock subject to such option, an amount in cash equal to the excess, if any, of $75.00 over the exercise price per share under such option (less any applicable withholding taxes).

48

---

 

49

---

 

						Historical												Other
						Exploration												pro forma
						Resources												adjustments for the								Combined
						and related												merger and the								pro forma
		Historical				pro forma				Historical				Pro forma				financing								income
		CGG 12				adjustments				Veritas 12				adjustments				transactions								statement 12
		months				8 months				months				12 months				12 months								months
		ended				ended				ended				ended				ended								ended
		December 31,				August 31,				January 31,				December 31,				December 31,								December 31,
		2005				2005				2006				2005				2005								2005
		IFRS				IFRS				U.S. GAAP				IFRS				IFRS								IFRS
		Note 1				Note 1				Note 1				Notes 2 & 3				Note 2 & 4				Ref.
						(unaudited)				(unaudited)				(unaudited)				(unaudited)								(unaudited)
		(in € millions, except per share data)
Operating revenues			869.9				68.7				579.6				(26.7	)			(2.4	)			2.7				1,489.1
Other income from ordinary activities			1.9				—				—				—				—								1.9
Total income from ordinary activities			871.8				68.7				579.6				(26.7	)			(2.4	)							1,491.0
																							4.3.1;
Cost of operations			(670.0	)			(69.7	)			(453.2	)			26.1				(32.0	)			4.3.4				(1,198.8	)
Gross profit			201.8				(1.0	)			126.4				(0.6	)			(34.4	)							292.2
Research and development expenses — net			(31.1	)			—				(16.5	)			5.0				—								(42.6	)
Selling, general and administrative expenses			(91.2	)			(5.8	)			(30.0	)			—				(2.3	)		4.3.1; 4.3.4					(129.4	)
Other revenues (expenses) — net			(4.4	)			—				—				9.9				—								5.5
Operating income			75.1				(6.8	)			79.9				14.2				(36.7	)							125.7
Interest, other financial income and expense, net, exchange gains and losses, net and others			(56.8	)			(11.3	)			12.8				(9.6	)			(93.8	)		4.3.2; 4.3.3					(158.7	)
Variance on derivative of convertible bonds			(11.5	)			—				—				—				—								(11.5	)
Income (loss) of consolidated companies before income taxes			6.8				(18.1	)			92.7				4.7				(130.5	)							(44.5	)
Income taxes			(26.6	)			3.9				(6.1	)			(1.6	)			45.6				4.3.5				15.3
Net income (loss) of consolidated companies			(19.8	)			(14.2	)			86.6				3.1				(84.9	)							(29.3	)
Equity in income of affiliates			13.0				—				—				—				—								13.0
Net income (loss)			(6.8	)			(14.2	)			86.6				3.1				(84.9	)							(16.3	)
Attributable to:
— shareholders			(7.8	)			(14.2	)			86.6				3.1				(84.9	)							(17.3	)
— minority interests			1.0				—				—				—				—								1.0
Weighted average number of outstanding shares (in thousands)			12,095																9,609								21,704
Weighted average number of potential shares (in thousands)			12,095																9,609								21,704
Earnings per share:
— basic			(0.64	)																							(0.80	)
— diluted			(0.64	)																							(0.80	)

50

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														Other pro forma
														adjustments for
														the merger and
		Historical				Historical				Pro forma				the financing								Combined
		CGG 9				Veritas				adjustments				transactions								pro forma
		months				9 months				9 months				9 months								statement of
		ended				ended				ended				ended								income
		September 30,				October 31,				September 30,				September 30,								ended
		2006				2006				2006				2006								September 30,
		IFRS				U.S. GAAP				IFRS				IFRS								2006 IFRS
		Note 1				Note 1				Notes 2 & 3				Note 4				Ref.
		(unaudited)				(unaudited)				(unaudited)				(unaudited)								(unaudited)
		(in € millions, except per share data)
Operating revenues			955.6				519.7				(5.1	)			—								1,470.1
Other income from ordinary activities			1.4				—				—				—								1.4
Total income from ordinary activities			957.0				519.7				(5.1	)			—								1,471.5
																			4.3.1;
Cost of operations			(636.7	)			(390.0	)			9.5				(23.4	)			4.3.4				(1,040.6	)
Gross profit			320.3				129.7				4.4				(23.4	)							430.9
Research and development expenses — net			(27.8	)			(14.2	)			4.3												(37.7	)
																			4.3.1;
Selling, general and administrative expenses			(86.9	)			(35.8	)			8.3				(1.0	)			4.3.4				(115.5	)
Other revenues (expenses) — net			12.0				—				(0.2	)											11.9
Operating income (loss)			217.6				79.7				16.8				(24.4	)							289.6
Interest, other financial income and expense, net, exchange gains and losses, net and others			(27.6	)			4.4				—				(68.9	)		4.3.2; 4.3.3					(92.1	)
Derivative of convertible bonds and related costs			(23.0	)			—				—				—								(23.0	)
Income (loss) of consolidated companies before income taxes			167.0				84.1				16.8				(93.4	)							174.5
Income taxes			(54.9	)			(30.2	)			(5.9	)			32.7				4.3.5				(58.3	)
Net income (loss) of consolidated companies			112.1				53.9				10.9				(60.7	)							116.2
Equity in income of affiliates			8.9				—				—				—								8.9
Net income (loss)			121.0				53.9				10.9				(60.7	)							125.1
Attributable to:
— shareholders			119.8				53.9				10.9				(63.7	)							123.9
— minority interests			1.2				—				—				—								1.2
Weighted average number of outstanding shares (in thousands)			17,318												9,609								26,927
Weighted average number of potential shares (in thousands)			17,675												9,609								27,284
Earnings per share:
— basic			6.92																				4.60
— diluted			6.78																				4.54

51

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														Other pro forma
														adjustments for
		Historical				Historical								the merger and								Combined pro
		CGG				Veritas				Pro forma				the financing								forma
		IFRS at				U.S. GAAP at				adjustments at				transactions at								balance sheet at
		September 30,				October 31,				September 30,				September 30,								September 30,
		2006				2006				2006				2006								2006 IFRS
		Note 1				Note 1				Notes 2 & 3				Note 4				Ref.
		(unaudited)				(unaudited)				(unaudited)				(unaudited)								(unaudited)
		(in € millions)
ASSETS
Cash and cash equivalents			168.7				279.5				0.1				(147.8	)			4.2.5				300.5
Current assets, net			576.4				230.5				(8.5	)			—								798.4
Total current assets			745.1				510.0				(8.4	)			(147.8	)							1,098.9
Goodwill			273.9				—				—				2,110.0				4.2.1				2,383.8
Intangible assets, net			134.5				256.0				6.4				207.7				4.2.1				604.6
																			4.2.1;
Other non-current assets, net			598.2				162.6				(3.0	)			18.3				4.3.5				776.0
Total non-current assets			1,006.6				418.6				3.4				2,335.8								3,764.4
Total assets			1,751.7				928.6				(5.0	)			2,188.0								4,863.4
LIABILITIES AND SHAREHOLDERS’ EQUITY
Bank overdrafts			10.9				—				—				—								10.9
Current portion of financial debt			44.0				122.4				(2.8	)			(103.1	)			4.2.5				60.6
Current liabilities			322.4				186.8				(15.2	)			9.8				4.2.1				503.8
Total current liabilities			377.3				309.2				(18.0	)			(93.3	)							575.3
Financial debt			386.8				—				—				1,243.7				4.2.5				1,630.5
																			4.2.1;
Other non-current liabilities			113.6				27.1				18.0				69.9				4.3.5				228.6
Total non-current liabilities			500.4				27.1				18.0				1,313.6								1,859.1
Total shareholders’ equity			850.5				592.3				(5.0	)			967.7				4.2.2				2,405.5
Minority interests			23.5				—				—				—								23.5
Total shareholders’ equity and minority interests			874.0				592.3				(5.0	)			967.7								2,429.0
Total liabilities and shareholders’ equity			1,751.7				928.6				(5.0	)			2,188.0								4,863.4

52

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																			Other
							Historical												pro forma
							Exploration												adjustments
							Resources												for the								Combined
							and related												merger and								pro forma
			Historical				pro forma				Historical				Pro forma				the financing								income
			CGG				adjustments				Veritas				adjustments				transactions								statement
			12 months				8 months				12 months				12 months				12 months								12 months
			ended				ended				ended				ended				ended								ended
			December 31,				August 31,				January 31,				December 31,				December 31,								December 31,
			2005				2005				2006				2005				2005								2005
			U.S. GAAP				U.S. GAAP				U.S. GAAP				U.S. GAAP				U.S. GAAP								U.S. GAAP
			Note 1				Note 1				Note 1				Notes 2 & 3				Note 4				Ref.
			(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)
			(in € millions, except per share data)
Operating revenues				860.8				63.8				579.6				(29.8	)											1,474.4
Cost of operations				(665.4	)			(68.8	)			(453.2	)			31.8				(30.6	)			4.3.1				(1,186.1	)
Gross profit				195.4				(5.0	)			126.4				2.0				(30.6	)							288.3
Research and development expenses — net				(39.3	)			—				(16.5	)			—				—								(55.8	)
Selling, general and administrative expenses				(92.7	)			(8.4	)			(30.0	)			—				(3.6	)			4.3.1				(134.8	)
Other revenues (expenses) — net				(1.5	)			—								9.6												8.1
Operating income (loss)				61.9				(13.4	)			79.9				11.6				(34.2	)							105.8
Interest, other financial income and expense, net, exchange gains and																								4.3.2	;
	losses, net and others			(31.9	)			(4.6	)			12.8				(9.6	)			(93.8	)			4.3.3				(127.1	)
Variance on derivative of convertible bonds				(11.5	)			—				—				—				—								(11.5	)
Equity in income of affiliates				13.0				—				—				—				—								13.0
Income (loss) of consolidated companies before income taxes and minority interests				31.5				(18.0	)			92.7				2.0				(128.0	)							(19.8	)
Income taxes				(22.2	)			5.2				(6.1	)			(0.7	)			44.8				4.3.5				21.0
Minority interests				(1.0	)			0.2				—				—				—								(0.8	)
Net income (loss)				8.3				(12.6	)			86.6				1.3				(93.2	)							0.4
Weighted average number of outstanding shares (in thousands)				12,095																9,609								21,704
Weighted average number of potential shares (in thousands)				12,357																9,609								21,966
Earnings per share:
— basic				0.69																								0.02
— diluted				0.67																								0.02

53

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															Other
															pro forma
															adjustments
															for the
															merger and								Combined
			Historical				Historical				Pro forma				the financing								pro forma
			CGG				Veritas				adjustments				transactions								statement of
			9 months				9 months				9 months				9 months								income
			ended				ended				ended				ended								ended
			September 30,				October 31,				September 30,				September 30,								September 30,
			2006				2006				2006				2006								2006
			U.S. GAAP				U.S. GAAP				U.S. GAAP				U.S. GAAP								U.S. GAAP
			Note 1				Note 1				Notes 2 & 3				Note 4				Ref.				(unaudited)
			(unaudited)				(unaudited)				(unaudited)				(unaudited)
			(in € millions, except per share data)
Operating revenues				967.7				519.7				(8.1	)											1,479.3
Cost of operations				(636.4	)			(390.0	)			9.2				(22.9	)			4.3.1				(1,040.1	)
Gross profit				331.3				129.7				1.1				(22.9	)							439.2
Research and development expenses — net				(37.7	)			(14.2	)			—				—								(51.9	)
Selling, general and administrative expenses				(87.4	)			(35.8	)			8.3				(2.7	)			4.3.1				(117.7	)
Other revenues (expenses) — net				8.8				—				—				—								8.8
Operating income (loss)				215.0				79.7				9.4				(25.6	)							278.5
Interest, other financial income and expense, net, exchange gains and losses,																				4.3.2	;
	net and others			(64.3	)			4.4								(68.9	)			4.3.3				(128.8	)
Derivative of convertible bonds and related costs				(23.0	)			—				—				—								(23.0	)
Equity in income of affiliates				8.9				—				—				—								8.9
Income (loss) of consolidated companies before income taxes and minority interests				136.6				84.1				9.4				(94.5	)							135.6
Income taxes				(41.4	)			(30.3	)			(3.3	)			33.1				4.3.5				(41.8	)
Minority interests				(1.2	)			—				—				—								(1.2	)
Net income (loss)				94.0				53.9				6.1				(61.4	)							92.6
Weighted average number of outstanding shares (in thousands)				17,318												9,609								26,927
Weighted average number of potential shares (in thousands)				17,675												9,609								27,284
Earnings per share:
— basic				5.43																				3.44
— diluted				5.32																				3.39

54

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														Other pro forma
						Historical								adjustments for								Combined pro
		Historical CGG				Veritas				Pro forma				the merger and								forma balance
		U.S. GAAP at				U.S. GAAP at				adjustments at				the financing								sheet at
		September 30,				October 31,				September 30,				transactions at								September 30,
		2006				2006				2006				September 30, 2006								2006 U.S. GAAP
		Note 1				Note 1				Notes 2 and 3				Note 4				Ref.
		(unaudited)				(unaudited)				(unaudited)				(unaudited)								(unaudited)
		(in € millions)
ASSETS
Cash and cash equivalents			168.7				279.5								(147.8	)			4.2.5				300.4
Current assets, net			581.5				230.5				(1.0	)			20.1				4.2.3				831.1
Total current assets			750.2				510.0				(1.0	)			(127.6	)							1,131.5
Goodwill			286.4				—								1,747.4				4.2.1				2,033.8
Intangible assets, net			99.3				256.0								207.7				4.2.1				563.0
Other non-current assets, net			615.3				162.6								18.2				4.2.1				796.2
Total non-current assets			1,001.0				418.6								1,973.3								3,392.9
Total assets			1,751.2				928.6				(1.0	)			1,845.6								4,524.4
LIABILITIES AND SHAREHOLDERS’ EQUITY
Bank overdrafts			10.9				—				—				—								10.9
Current portion of financial debt			44.0				122.4								(103.1	)			4.2.5				63.4
Current liabilities			352.6				186.8				(9.1	)			10.0				4.2.1				540.2
Total current liabilities			407.5				309.2				(9.1	)			(93.1	)							614.5
Financial debt			392.7				—				—				1,263.8				4.2.3				1,656.5
Other non-current liabilities			115.8				27.1				2.8				65.4				4.3.5				211.2
Total non-current liabilities			508.5				27.1				2.8				1,329.2								1,867.7
Total shareholders’ equity			811.7				592.3				5.3				609.5								2,018.8
Minority interests			23.5				—				—				—								23.5
Total liabilities and shareholders’ equity			1,751.2				928.6				(1.0	)			1,845.6								4,524.4

55

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	Description of transaction

	Basis of presentation

	Historical financial statements and currency translation

56

---

 

		Historical				Historical				Historical				Historical				Historical
		Veritas				Veritas				Veritas				Veritas				Veritas
		12 months				6 months				6 months				12 months				12 months
		ended				ended				ended				ended				ended
		July 31,				January 31,				January 31,				January 31,				January 31,
		2005				2005				2006				2006				2006
		U.S. GAAP				U.S. GAAP				U.S. GAAP				U.S. GAAP				U.S. GAAP
		(in $ millions)				(in $ millions)				(in $ millions)				(in $ millions)				(in € millions)
		(A)				(B)				(C)				(A) - (B) + (C)				(unaudited)
						(unaudited)				(unaudited)				(unaudited)
Operating revenues			634.0				321.8				407.5				719.7				579.6
Cost of operations			(519.0	)			(260.9	)			(304.6	)			(562.7	)			(453.2	)
Gross profit			115.0				60.9				102.9				157.0				126.4
Research and development expenses — net			(18.9	)			(9.1	)			(10.7	)			(20.5	)			(16.5	)
Selling, general and administrative expenses			(31.9	)			(15.0	)			(20.4	)			(37.3	)			(30.0	)
Operating income			64.2				36.8				71.8				99.2				79.9
Interest, other financial income and expense, net, exchange gains and losses, net and others			12.0				(0.1	)			3.8				15.9				12.8
Income of consolidated companies before income taxes and minority interests			76.2				36.7				75.6				115.1				92.7
Income taxes			6.8				(18.4	)			(32.8	)			(7.6	)			(6.1	)
Net income (loss)			83.0				18.3				42.8				107.5				86.6
Weighted average number of outstanding shares (in thousands)			33,843																34,393
Weighted average number of potential shares (in thousands)			35,054																36,442
Earning per share:
— basic			2.45																2.52
— diluted			2.37																2.38

57

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		Historical				Historical				Historical				Historical				Historical
		Veritas				Veritas				Veritas				Veritas				Veritas
		12 months				6 months				3 months				9 months				9 months
		ended				ended				ended				ended				ended
		July 31,				January 31,				October 31,				October 31,				October 31,
		2006				2006				2006				2006				2006
		U.S. GAAP				U.S. GAAP				U.S. GAAP				U.S. GAAP				U.S. GAAP
		(in $ millions)				(in $ millions)				(in $ millions)				(in $ millions)				(in € millions)
		(A)				(B)				(C)				(A) - (B) + (C)				(unaudited)
						(unaudited)								(unaudited)
Operating revenues			822.2				407.5				230.8				645.5				519.7
Cost of operations			(623.2	)			(304.6	)			(165.8	)			(484.4	)			(390.0	)
Gross profit			199.0				102.9				65.0				161.1				129.7
Research and development expenses — net			(22.9	)			(10.7	)			(5.4	)			(17.1	)			(14.2	)
Selling, general and administrative expenses			(43.2	)			(20.4	)			(21.7	)			(44.5	)			(35.8	)
Operating income			132.9				71.8				37.9				99.0				79.7
Interest, other financial income and expense, net, exchange gains and losses, net and others			6.5				3.8				2.8				5.5				4.4
Income (loss) of consolidated companies before income taxes and minority interests			139.4				75.6				40.7				104.5				84.1
Income taxes			(57.2	)			(32.8	)			(13.2	)			(37.6	)			(30.3	)
Net income (loss)			82.2				42.8				27.5				66.9				53.9
Weighted average number of outstanding shares (in thousands)			35,260																35,973
Weighted average number of potential shares (in thousands)			39,623																40,748
Earning per share:
— basic			2.33																1.50
— diluted			2.08																1.32

58

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														Historical
														Exploration
						Purchase				Other				Resources and
		Historical				accounting				adjustments				related
		Exploration				Exploration				Exploration				pro forma
		Resources				Resources				Resources				adjustments
		8 months				8 months				8 months				8 months
		ended				ended				ended				ended
		August 31,				August 31,				August 31,				August 31,
		2005				2005				2005				2005
		U.S. GAAP				U.S. GAAP				U.S. GAAP				U.S. GAAP
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
		(in € millions)
Operating revenues			66.3								(2.5	)(b)			63.8
Cost of operations			(58.7	)			(10.0	)(a)			(0.1	) (b)(c)			(68.8	)
Gross profit			7.6				(10.0	)			(2.6	)			(5.0	)
Selling, general and administrative expenses			(8.4	)											(8.4	)
Operating income			(0.8	)			(10.0	)			(2.6	)			(13.4	)
Interest, other financial income and expense, net, exchange gains and losses, net and others			1.1				—				(5.7	) (d)(f)			(4.6	)
Income (loss) of consolidated companies before income taxes and minority interests			0.3				(10.0	)			(8.3	)			(18.0	)
Income taxes			(1.2	)			2.8	(a)			3.6	(e)			5.2
Minority interests			0.6								(0.4	)			0.2
Net income (loss)			(0.3	)			(7.2	)			(5.1	)			(12.6	)

(a)	Reflects the impact (depreciation adjustment and related income tax adjustment) of the reassessment of the value of Exploration Resources’ assets in accordance with the principles of purchase method accounting under IFRS, which reassessment resulted notably in an increase in the book value of the vessels of €116.8 million as at September 1, 2005.
(b)	Reflects the elimination of material inter-company transactions pursuant to which members of the CGG group sold equipment to Exploration Resources during the period presented but prior to September 1, 2005.
(c)	Conforming Exploration Resources multi-client survey amortization method to CGG’s accounting policies for such amortization.
(d)	Reflects the interest on the $165,000,000 of existing notes issued on April 28, 2005 and the $165,000,000 of existing notes issued on February 3, 2006 in connection with the financing of the acquisition of Exploration Resources as if such notes were issued at par on January 1, 2005 and amortization of related fees.
(e)	Recognition of the impact of deferred tax liabilities to the adjustments set forth in the column “Other Adjustments”.
(f)	Elimination of interest on the bridge credit facility from September 1, 2005 through September 30, 2005, that was put in place and drawn in connection with the acquisition of Exploration Resources.

59

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																		Historical
						Purchase												Exploration
		Historical				accounting												Resources
		Exploration				Exploration				Exploration				Other pro				and related pro
		Resources				Resources				Resources				forma				forma
		9 months				8 months				1 month				adjustments				adjustments
		IFRS ended				IFRS ended				IFRS ended				Exploration				8 months ended
		September 30,				September 30,				September 30,				Resources (a)				August 31, 2005
		2005				2005				2005				IFRS				IFRS
		(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)
		(in € millions)
Operating revenues			78.6								(8.7	)			(1.3	)(b)			68.7
Cost of operations			(67.4	)			(9.4	)(a)			7.0				—	(b)(c)			(69.7	)
Gross profit			11.2				(9.4	)			(1.6	)			(1.2	)			(1.0	)
Selling, general and administrative expenses			(6.3	)							0.5				—				(5.8	)
Operating income			4.9				(9.4	)			(1.2	)			(1.2	)			(6.8	)
Interest, other financial income and expense, net, exchange gains and losses, net and others			(2.1	)							0.4				(9.6	)(d)(f)			(11.3	)
Income (loss) of consolidated companies before income taxes			2.8				(9.4	)(a)			(0.8	)			(10.7	)(e)			(18.1	)
Income taxes			0.4				2.6				(0.8	)			1.6				3.9
Net income (loss)			3.2				(6.8	)			(1.5	)			(9.2	)			(14.2	)
— attributable to shareholders			3.8				(7.5	)			(1.5	)			(9.2	)			(14.2	)
— attributable to minority interests			(0.6	)			0.7				(0.1	)			—				—

(a)	Reflects the impact (depreciation adjustments and related income for adjustment) of the reassessment of the value of Exploration Resources’ assets in accordance with the principles of purchase method accounting under IFRS, which reassessment resulted notably in an increase in the book value of the vessels of €116.8 as at September 1, 2005.

(b)	Reflects the elimination of material inter-company transactions pursuant to which members of the CGG group sold equity.
(c)	Conforming Exploration Resources multi-client survey amortization method to CGG’s accounting policies for such amortization.
(d)	Reflects the interest on the $165,000,000 of existing notes issued on April 28, 2005 and the $165,000,000 of existing notes issued on February 3, 2006 in connection with the financing of the acquisition of Exploration Resources as if such notes were issued at par on January 1, 2005 and amortization of related fees.
(e)	Recognition of the impact of deferred tax liabilities to the adjustments set forth in the column “Other Adjustments”.
(f)	Elimination of interest on the bridge credit facility from September 1, 2005 through September 30, 2005, that was put in place and drawn in connection with the acquisition of Exploration Resources.

60

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																		Pro forma
										Pro forma								adjustments to
										intercompany								income statement
		Pro forma consistency								elimination								12 months ended
		adjustments								and other								December 31, 2005
		under IFRS								adjustments								IFRS
						Ref.				Note 3				Ref.
																		(unaudited)
		(unaudited)								(unaudited)
		(in € millions)
Operating revenues			3.1				2.6				(29.8	)			3.1				(26.7	)
Other income from ordinary activities			—								—								—
Total income from ordinary activities			3.1								(29.8	)							(26.7	)
Cost of operations			7.1			2.1, 2.4, 2.5, 2.6					19.0				3.1				26.1
Gross profit			10.2								(10.8	)			3.1				(0.6	)
Research and development expenses — net			5.0				2.8												5.0
Selling, general and administrative expenses			—								—								—
Other revenues (expenses) — net			9.9				2.2, 2.6				—								9.9
Operating income			25.1								(10.8	)							14.2
Interest, other financial income and expense, net, exchange gains and losses, net and others			(9.6	)			2.2				—								(9.6	)
Income (loss) of consolidated companies before income taxes			15.5								(10.8	)							4.7
Income taxes			(5.4	)			4.3.5				3.8				4.3.5				(1.6	)
Net income (loss)			10.1								(7.0	)							3.1

61

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										Pro forma
										intercompany								Pro forma
										elimination								adjustments to
		Pro forma consistency								and other								balance sheet at
		adjustments								adjustments								September 30, 2006
						Ref.				Note 3				Ref.
																		(unaudited)
		(unaudited)								(unaudited)
		(in € millions)
ASSETS
Cash and cash equivalents			0.1																0.1
Current assets, net			(7.5	)			2.3, 2.4, 2.6				(1.0	)			3.1				(8.5	)
Total current assets			(7.4	)							(1.0	)							(8.4	)
Intangible assets, net			6.4				2.3, 2.8				—								6.4
Other non-current assets, net			(3.0	)			2.3, 2.4, 2.6				—								(3.0	)
Total non-current assets			3.4								—								3.4
TOTAL ASSETS			(4.0	)							(1.0	)							(5.0	)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current portion of financial debt			(2.8	)			2.3				—								(2.8	)
Current liabilities			(6.0	)			2.3, 2.6				(9.2	)			3.1, 3.2				(15.2	)
Total current liabilities			(8.8	)							(9.2	)							(18.0	)
Other non-current liabilities			15.2				2.3, 2.5, 2.8				2.8				3.2				18.0
Total non-current liabilities			15.2								2.8								18.0
Total shareholders’ equity			(10.1	)			2.4				5.4								(5.0	)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY			(4.0	)							(1.0	)							(5.0	)

62

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																		Pro forma
																		adjustments
										Pro forma								to statement
		Pro forma								intercompany								of income
		consistency								elimination								9 months ended
		adjustments								and other								September 30, 2006
		under IFRS								adjustments								IFRS
						Ref.				Note 3				Ref.
																		(unaudited)
		(unaudited)								(unaudited)
		(in € millions)
Operating revenues			3.0				2.6				(8.1	)			3.1				(5.1	)
Other income from ordinary activities			—								—								—
Total income from ordinary activities			3.0								(8.1	)							(5.1	)
Cost of operations			4.8			2.1, 2.4, 2.5, 2.6					4.7				3.1				9.5
Gross profit			7.8								(3.4	)							4.4
Research and development expenses — net			4.3				2.8				—								4.3
Selling, general and administrative expenses			—								8.3				3.2				8.3
Other revenues (expenses) — net			(0.1	)			2.6				—								(0.2	)
Operating income			11.9								4.9								16.8
Income (loss) of consolidated companies before income taxes			11.9								4.8								16.8
Income taxes			(4.2	)			4.3.5				(1.7	)			4.3.5				(5.9	)
Net income (loss)			7.8								3.1								10.9
Attributable to:
— shareholders			7.8								3.1								10.9
— minority interests			—								—								—

63

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																		Pro forma
		Pro forma								Pro forma								adjustments
		consistency								intercompany								to income statement
		adjustments								elimination								12 months ended
		under								and other								December 31, 2005
		U.S. GAAP								adjustments								U.S. GAAP
						Ref.				Note 3				Ref.
		(unaudited)								(unaudited)								(unaudited)
		(in € millions)
Operating revenues											(29.8	)			3.1				(29.8	)
Cost of operations			12.8				2.1				19.0				3.1				31.8
Gross profit			12.8								(10.8	)							2.0
Other revenues (expenses) — net			9.6				2.2				—								9.6
Operating income			22.4								(10.8	)							11.6
Interest, other financial income and expense, net, exchange gains and losses, net and others			(9.6	)			2.2				—								(9.6	)
Income (loss) of consolidated companies before income taxes and minority interests			12.8								(10.8	)							2.0
Income taxes			(4.5	)			4.3.5				3.8				4.3.5				(0.7	)
Net income (loss)			8.3								(7.0	)							1.3

																		Pro forma
																		adjustments
		Pro forma								Pro forma								to statement of
		consistency								intercompany								income
		adjustments								elimination								9 months ended
		under								and other								September 30, 2006
		U.S. GAAP								adjustments								U.S. GAAP
						Ref.				Note 3				Ref.
																		(unaudited)
		(unaudited)								(unaudited)
		(in € millions)
Operating revenues			—								(8.1	)			3.1				(8.1	)
Cost of operations			4.6				2.1				4.7				3.1				9.2
Gross profit			4.6								(3.4	)							1.1
Selling, general and administrative expenses											8.3				3.2				8.3
Operating income			4.6								4.9								9.4
Income (loss) of consolidated companies before income taxes and minority interests			4.6								4.9								9.4
Income taxes			(1.6	)			4.3.5				(1.8	)			4.3.5				(3.3	)
Net income (loss)			3.0								3.1								6.1

64

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										Pro forma
										intercompany								Pro forma
		Pro forma								elimination								adjustments to
		consistency								and other								balance sheet at
		adjustments								adjustments								September 30, 2006
						Ref.				Note 3				Ref.
		(unaudited)								(unaudited)								(unaudited)
		(in € millions)
ASSETS
Current assets, net			—								(1.0	)			3.1				(1.0	)
Total current assets			—								(1.0	)							(1.0	)
Total non-current assets			—								—
TOTAL ASSETS			—								(1.0	)							(1.0	)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities			—								(9.1	)			3.1, 3.2				(9.1	)
Total current liabilities			—								(9.1	)							(9.1	)
Other non-current liabilities			—								2.8				3.2				2.8
Total non-current liabilities			—								2.8								2.8
Total shareholders’ equity			—								5.3				3.2				5.3
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY			—								(1.0	)							(1.0	)

2.1	Adjustment on multi-client surveys amortization of Veritas

	•	Gulf of Mexico surveys are amortized on the basis of 66.6% of revenues. Starting at the time of data delivery, a minimum straight-line depreciation scheme is applied on a three-year period, should total accumulated depreciation from the 66.6% of revenues amortization method below this minimum level;
	•	Rest of the world surveys: same as above except depreciation is 83.3% of revenues and straight-line depreciation is over a five-year period from data delivery; and
	•	Long-term strategic 2D surveys are amortized on the basis of revenues according to the above area split and straight-line depreciation a seven-year period from data delivery.

65

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	2.2     Reclassification of specific items in the statement of income of Veritas

	2.3     Reclassification of specific items in the balance sheet of Veritas (IFRS)

	2.4     Cancellation of deferred charges in Veritas’ financial statements (IFRS)

	2.5     Veritas’ actuarial gain and losses recorded directly in equity (IFRS)

	2.6     Application of proportional method to two Veritas’ subsidiaries (IFRS)

66

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	2.7     Cancellation of deferred revenues in Veritas’ financial statements (IFRS)

	2.8 Capitalization of development costs (IFRS)

	3.1 Intercompany transactions

	3.2 Other pro forma adjustments

67

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NOTE 4 —	Pro forma adjustments on Purchase Price Computation and Purchase Price Allocation

	4.1 Purchase Price Computation and Purchase Price Allocation

	4.1.1 Purchase Price Computation

Number of Veritas common stock outstanding at the merger closing date of January 12, 2007 (in thousands)			36,478
Number of shares of Veritas common stock issued upon the conversion of Veritas’ outstanding Convertible Senior Notes due 2024 (in thousands)(1)			3,872
Number of shares of Veritas common stock reserved for the issuance upon the conversion of Deferred Shares Units			1
Total number of shares of Veritas common stock at the merger closing date of January 12, 2007 (in thousands)			40,351
Ratio to be applied for shares of Veritas common stock to be exchanged for CGG ADSs			50.664	%
Shares of Veritas common stock exchanged for CGG ADSs at the merger closing date of January 12, 2007			20,443
Exchange ratio per Veritas share			2.25 CGG ADSs
Total number of CGG ADSs issued (in thousands)			45,997
Remaining outstanding shares of outstanding Veritas’ Convertible Senior Note due 2024 (ADS) (in thousands)			2,050
Total (in thousands)			48,050

		Under U.S. GAAP								Under IFRS
		$				€				$				€
		(in millions, except share data)
Under U.S. GAAP: Multiplied by CGG’s average ADS price (in U.S. dollars) for the period beginning two days before and ending two days after the September 5, 2006 (the date the merger was announced), and
Under IFRS: Multiplied by CGG’s closing ADS price (in U.S. dollars) at the merger closing date of January 12, 2007		$	32.44							$	40.50
Fair value of CGG ADSs issued(A)			1,559				1,231				1,946				1,537
Total number of shares of Veritas common stock at the merger closing date of January 12, 2007 (in thousands)			40,351
Ratio to be applied for shares of Veritas common stock to be exchanged for cash			49.336	%
Shares of Veritas common stock to be exchanged for cash at July 31, 2006 (in thousands)			19,908
Cash paid per Veritas share			75
Fair value of compensation paid(B)			1,493				1,179				1,493				1,179
Total consideration given in exchange for Veritas shares(A)+(B)			3,052				2,410				3,439				2,716
Cash paid in exchange for Veritas outstanding stock options			45				35				45				35
Estimated transaction costs(2)			31				25				31				25
Conversion option											59				46
Purchase price			3,128				2,470				3,574				2,822

68

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	4.1.2 Purchase Price Allocation

		As at October 31, 2006
		U.S. GAAP								IFRS
		$				€				$				€
		(in millions)
Net book value of net assets acquired at October 31, 2006 (net of merger related costs incurred)			731				577				723				571
Allocation of purchase price:
— Acquired technologies and in-process research and development(1)			39				31				39				31
— Acquired customer relationships(2)			90				71				90				71
— Reassessment of multi-client library(3)			74				58				74				58
— Reassessment of property, plant & equipment(4)			26				20				26				20
— Favorable contracts(5)			60				47				60				47
— Contingent liabilities(6)			(13	)			(10	)			(13	)			(10	)
— Deferred taxes on the above adjustments and other (7)(8)			(91	)			(71	)			(96	)			(76	)
— Goodwill (residual balance not allocated)			2,212				1,747				2,671				2,110
Purchase price			3,128				2,470				3,574				2,822

(1)	Acquired technologies (useful life of 5 years) and in-process research and development

(2)	Acquired customer relationship (useful life of 20 years)

69

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(3)	Reassessment of multi-client library (maximum useful life of 5 years)

(4)	Reassessment of property, plant & equipment

(5)	Favorable contracts (weighted average remaining life of 6 years)

(6)	Contingent liabilities

(7)	Deferred taxes on the above adjustments

(8)	Deferred revenues

	4.2 Pro forma adjustments on the unaudited pro forma combined balance sheet under IFRS and U.S. GAAP

	4.2.1 Allocation of purchase price

70

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		At September 30,
		2006
		$				€
		(in millions)
Identifiable intangible assets			263				208
Identifiable tangible assets			26				20
Identifiable liabilities			13				10
Additional goodwill at September 30, 2006			2,212				1,747
Deferred taxes on the above adjustments			91				71

		At September 30,
		2006
		$				€
		(in millions)
Identifiable intangible assets			263				208
Identifiable tangible assets			26				20
Identifiable liabilities			13				10
Additional goodwill at September 30, 2006			2,671				2,110
Deferred taxes on the above adjustments			96				76

	4.2.2 Adjustments to shareholders’ equity

	•	to remove the historical balance of Veritas for an amount of $750 million (€592 million) at September 30, 2006;
	•	to cancel deferred revenues that do not correspond to a performance obligation for an amount of $5.5 million before tax (€4.3 million) at September 30, 2006;
	•	to record the value at January 12, 2007 of CGG’s ADSs issued in the merger for an amount of $1,946 million (€1,537 million) at September 30, 2006, under IFRS; and
	•	to record the value at September 5, 2006 of CGG’s ADSs issued in the merger for an amount of $1,558.5 million (€1,231 million) at September 30, 2006, under U.S. GAAP.

	4.2.3 Financing of the acquisition

71

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	4.2.4 Share-based payment adjustments

	4.2.5 Net effect of pro forma adjustment on cash

		in $ million				in € million
Cash-out for purchase price as disclosed in 4.1.1
Compensation paid for Veritas shares			(1,493.0	)			(1,179.3	)
Cash paid in exchange for Veritas outstanding stock options			(45.0	)			(35.6	)
Estimated transaction costs			(31.0	)			(24.4	)
Cash-out for reimbursement of Convertible Notes due 2024 as disclosed in 4.1.1(1)			(130.0	)			(102.8	)
Fees paid or engaged by Veritas and severance package as disclosed in 4.1.2(6)			(46.0	)			(36.5	)
Cash-in for financing of the acquisition as disclosed in 4.2.3 composed of $1,000 million term loan facility and $600 million notes offered hereby			1,600.0				1,263.8
Less: issuance costs paid on the term loan facility and the notes offered hereby			(26.0	)			(20.1	)
Net financing			1,574.0				1,243.7
Less: issuance costs paid on the bridge loan facility			(16.0	)			(12.6	)
Total net effect of pro forma adjustments on cash			(187.0	)			(147.7	)

	4.3 Pro forma adjustments on the unaudited pro forma combined statement of income under IFRS and U.S. GAAP

	4.3.1 Amortization of tangible and intangible assets at fair value

72

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	4.3.2 Interests costs and amortization of issuance costs related to the financing of the acquisition

	4.3.3 Interests costs on convertible bonds

	4.3.4 Share-based payment adjustments

	4.3.5 Deferred taxes effect

73

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	•	the Land SBU for land and shallow water seismic acquisition activities;
	•	the Offshore SBU for marine seismic acquisition and multi-client library sales; and
	•	the Processing & Reservoir SBU for seismic data processing, data management and reservoir studies.

	•	the land business line for land and shallow water seismic acquisition and non-exclusive (“multi-client”) library sales;
	•	the offshore business line for marine seismic acquisition, multi-client library sales and related services; and
	•	the processing & reservoir business line for seismic data processing, data management and reservoir studies.

74

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	Geophysical Market Environment

75

---

 

	Change in Scope of Offshore Activities

	•	the technological upgrade of one source vessel, the Laurentian, into a 3D seismic vessel in the second half of 2005; and
	•	the addition to its existing fleet, through the acquisition of Exploration Resources on September 1, 2005, of three owned seismic vessels equipped for 2D studies (Princess, Duke and Venturer), two owned vessels equipped for 3D studies (Search and C-Orion, the latter of which was launched as a 3D vessel with 8 streamers in early 2006), one chartered cable vessel (Geo Challenger) that was converted to a 3D seismic vessel and started seismic operations as a 3D vessel since mid-May 2006 and one chartered 2D vessel (Pacific Titan).

	Acquisitions and Disposals

	•	PT Alico. On February 14, 2005, CGG ended its cooperation agreements with PT Alico, an Indonesian company. On that date, PT Alico, which was fully consolidated in CGG’s accounts until 2004 as a consequence of CGG’s contractual relationship with them, was excluded from CGG’s scope of consolidation. Under CGG’s agreements with PT Alico, CGG indemnified PT Alico against certain specific risks. This liability is limited and was accrued in our financial statements as at December 31, 2004. The liability expired on June 30, 2006, at which date CGG had no further commitment to PT Alico or its shareholders.

76

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	•	Vostok. On July 27, 2005, CGG established a new company in Russia, CGG Vostok, which will undertake seismic services. CGG Vostok has been part of CGG’s consolidated group from the date of its creation.
	•	Exploration Resources. On August 29, 2005, CGG acquired a controlling stake of 60% of Exploration Resources ASA (“Exploration Resources”), a Norwegian provider of marine seismic acquisition services. The total cost to CGG of the acquisition of 100% of the share capital was €303.3 million, including €8.6 million related to acquisition fees. The reassessment of Exploration Resources’ net assets, along with CGG’s evaluation of the seismic business’s economic prospects, led CGG primarily to increase the book value of the vessels (by €115 million at September 1, 2005) and to record corresponding deferred tax liabilities. CGG has included Exploration Resources in its consolidated financial statements from September 1, 2005.
	•	TAQA. On March 27, 2006, CGG signed a memorandum of understanding with Industrialization & Energy Services Company (TAQA), its long term Saudi Partner in Argas (Arabian Geophysical and Surveying Company), which is 51% owned by TAQA and 49% by CGG. Pursuant to this agreement, on June 24, 2006, TAQA acquired 49% of the capital of CGG Ardiseis, a newly formed CGG subsidiary dedicated to land and shallow water seismic data acquisition in the Middle East, and CGG kept a 51% interest.
	•	Cybernetix. On July 10, 2006, Sercel acquired for €4.0 million a 20% interest in Cybernetix, a specialist in innovative solutions in robotics and certain automatic machines, with the aim of strengthening its technical partnership with Cybernetix in offshore oil equipment.
	•	Veritas. On January 12, 2007, CGG acquired Veritas pursuant to the merger agreement. See “The Veritas Merger”.
	•	Vibtech. On September 28, 2006, Sercel acquired all the outstanding shares in Vibration Technologies Limited (“Vibtech”) in a private transaction, for cash consideration of €49.5 million, with the preliminary goodwill recorded in connection with the transaction amounting to €34.4 million. Based in Scotland and founded in 1996, Vibtech has pioneered the use of advanced wireless technologies for seismic recording.

	Backlog

	CGG

77

---

 

	Veritas

	Foreign Exchange Fluctuations

	Operating revenues

	•	Multi-client surveys

78

---

 

	•	Exclusive surveys

	•	Other geophysical services

	•	Equipment sales

	•	Software and hardware sales

79

---

 

	Multi-client surveys

	•	Gulf of Mexico surveys are amortized on the basis of 66.6% of revenues. Starting at time of data delivery, a minimum straight-line depreciation scheme is applied on a three-year period, should total accumulated depreciation from the 66.6% of revenues amortization method be below this minimum level;
	•	Rest of the world surveys: same as above except depreciation is 83.3% of revenues and straight-line depreciation is over a five-year period from data delivery; and
	•	Long term strategic 2D surveys are amortized on the basis of revenues according to the above area split and straight-line depreciation on a seven-year period from data delivery.

	Development costs

	•	the project is clearly defined, and costs are separately identified and reliably measured,
	•	the product or process is technically and commercially feasible,
	•	CGG has sufficient resources to complete development, and
	•	the intangible asset is likely to generate future economic benefits, either because it is useful to CGG or through an existing market for the intangible asset itself or for its products.

80

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	Impairment

	•	significant underperformance relative to expected operating results based upon historical and/or projected data;
	•	significant changes in the manner of CGG’s use of the acquired assets or the strategy for its overall business; and
	•	significant negative industry or economic trends.

	Onerous contracts

	Convertible bonds

81

---

 

	Revenue Recognition

	Multi-Client Data Library

82

---

 

	Deferred Tax Asset

	Software Capitalization and Amortization

	Share Based Compensation

83

---

 

	Pension Plan

84

---

 

	Operating Revenues

	Revenues by Activity

			Nine months ended September 30,
			2006								2005
			(in € millions, except percentages)
Services
	Land SBU			96.9				10	%			88.2				15	%
	Offshore SBU			404.1				42	%			222.3				37	%
	Processing & Reservoir SBU			102.3				11	%			81.1				13	%
Total Services				603.3				63	%			391.6				65	%
Products				352.3				37	%			215.9				35	%
Total				955.6				100	%			607.5				100	%

	Services

85

---

 

	Operating Expenses

86

---

 

	Operating Income (Loss)

	Financial Income and Expenses, Net

87

---

 

	Equity in Income (Losses) of Investees

	Income Taxes

	Operating Revenues

88

---

 

	Revenues by Activity

			Year ended December 31,
			2005								2004
			(in € millions, except percentages)
Services
	Land SBU			119.8				14	%			77.3				11	%
	Offshore SBU			319.5				37	%			205.7				30	%
	Processing and Reservoir SBU			113.0				13	%			105.0				15	%
Total Services				552.3				64	%			388.0				56	%
Products				317.6				36	%			299.4				44	%
Total				869.9				100	%			687.4				100	%

	Services

89

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	Products

	Operating Expenses

	•	€2.9 million expense related to the application of CGG’s hedging policy (a €0.9 million expense in the Services segment, a €3.6 million expense in the Products segment and a €1.6 million elimination on hedging on intra-group sales of equipment); and
	•	€1.0 million net loss on fixed assets sold or written-off.

	•	€7.9 million gain on the sale of PGS shares;
	•	€1.8 million of insurance proceeds related to the seismic vessel the CGG Mistral (in the Services segment);
	•	€2.2 million gain on the sale of a building (in the Services segment); and
	•	€4.5 million income related to the application of CGG’s hedging policy (in the Products segment).

90

---

 

	Operating Income

	Cost of Financial Debt, Net

	Variance on derivative on convertible bonds

	Other Financial Income

	Equity in Income of Affiliates

	Income Taxes

91

---

 

	Net Loss

	Liquidity and Capital Resources

	Operations

	Investing Activities

92

---

 

	Financing Activities

93

---

 

		As at September 30,								As at December 31,
		2006				2005				2005				2004
		(in € millions)
Bank overdrafts			10.9				15.7				9.3				2.8
Current portion of financial debt			44.0				357.5				157.9				73.1
Financial debt			386.8				265.4				242.4				176.5
Less cash and cash equivalents			(168.7	)			(138.1	)			(112.4	)			(130.6	)
Net debt			273.0				500.5				297.2				121.8

	Currency Fluctuations

94

---

 

	Inflation

	Income Taxes

95

---

 

	Revenues

96

---

 

		Three months ended October 31,
										Change
		2006				2005				$				%
		(in $ thousands, except percentages)
NASA			139,294				102,842				36,452				35	%
EAME			54,248				34,769				19,479				56	%
APAC			32,202				26,783				5,419				20	%
VHR			5,087				4,284				803				19	%
Total Revenue			230,831				168,678				62,153				37	%

			Three months ended October 31,
											Change
			2006				2005				$				%
			(in $ thousands, except percentages)
Multi-Client:
	Land			43,747				25,899				17,848				69	%
	Marine			64,549				48,558				15,991				33	%
	Total Multi-Client			108,296				74,457				33,839				45	%
Contract:
	Land			48,817				47,647				1,170				2	%
	Marine			73,718				46,574				27,144				58	%
	Total Contract			122,536				94,221				28,314				30	%
Total Revenue				230,831				168,678				62,153				37	%

	Operating income

97

---

 

	Interest expense

	Interest income

	Involuntary conversion of assets

	Other income (expense), net

	Income taxes

	Revenue

98

---

 

		Year ended July 31,
										Change
		2006				2005				$				%
		(in $ millions, except percentages)
NASA			541.4				388.6				152.8				39	%
EAME			148.7				131.0				17.7				14	%
APAC			112.5				98.2				14.3				15	%
VHR			19.6				16.2				3.4				21	%
Total Revenue			822.2				634.0				188.2				30	%

			Year ended July 31,
											Change
			2006				2005				$				%
			(in $ millions, except percentages)
Multi-client:
	Land			109.8				54.7				55.1				101	%
	Marine			242.3				190.3				52.0				27	%
	Subtotal			352.1				245.0				107.1				44	%
Contract:
	Land			203.1				161.6				41.5				26	%
	Marine			267.0				227.4				39.6				17	%
	Subtotal			470.1				389.0				81.1				21	%
Total Revenue				822.2				634.0				188.2				30	%

	Operating income

	Interest expense and interest income

99

---

 

	Involuntary conversion of assets

	Income taxes

	Revenue

		Year ended July 31,
										Change
		2005				2004				$				%
		(in $ millions, except percentages)
NASA			388.6				370.9				17.7				5	%
EAME			131.0				118.5				12.5				11	%
APAC			98.2				60.1				38.1				63	%
VHR			16.2				15.0				1.2				8	%
Total Revenue			634.0				564.5				69.5				12	%

100

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			Year ended July 31,
											Change
			2005				2004				$				%
			(in $ millions, except percentages)
Multi-client:
	Land			54.7				66.0				(11.3	)			(17	)%
	Marine			190.3				209.1				(18.8	)			(9	)%
	Subtotal			245.0				275.1				(30.1	)			(11	)%
Contract:
	Land			161.6				154.0				7.6				5	%
	Marine			227.4				135.4				92.0				68	%
	Subtotal			389.0				289.4				99.6				34	%
Total Revenue				634.0				564.5				69.5				12	%

	Operating income (loss)

	Interest expense and interest income

101

---

 

	Involuntary conversion of assets

	Income taxes

	Sources and Uses

	Seasonality

102

---

 

	ORBDA

103

---

 

104

---

 

		Nine months
		ended								Year ended
		September 30,								December 31,
		2006				2005				2005				2004
		(in € millions)
ORBDA			359.9				148.9				229.5				172.5
Other financial income (expense) — net			(31.4	)			(36.7	)			(26.0	)			(22.7	)
Income tax paid			(60.6	)			(28.1	)			(31.7	)			(17.0	)
Non-recurring gains (losses)			—				(0.3	)			(0.5	)			3.3
Increase (decrease) in other long-term liabilities			3.3				0.3				6.7				(3.5	)
Income calculated on stock-option			4.0				0.3				0.4				0.5
Less net gain on sale of asset			(6.0	)			0.1				1.6				(11.5	)
Other non-cash items			28.1				36.8				27.5				21.4
(Increase) decrease in trade accounts and notes receivables			(52.2	)			(25.4	)			(24.3	)			(26.8	)
(Increase) decrease in inventories and work in progress			(28.3	)			(17.1	)			(45.2	)			(16.4	)
(Increase) decrease in other current assets			(5.0	)			(5.5	)			(3.1	)			17.4
Increase (decrease) in trade accounts and notes payables			(12.5	)			13.1				38.8				9.0
Increase (decrease) in other current liabilities			8.4				9.9				1.0				(5.5	)
Impact of changes in exchange rate			(12.1	)			13.1				11.2				(0.5	)
Less variation of current assets allowance included above			(1.3	)			(0.1	)			(3.5	)			6.7
Net cash provided by operating activities			194.3				109.3				182.4				126.9

105

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			Three months
			ended
			October 31,								Year ended July 31,
			2006				2005				2006				2005				2004
			(in $ millions)
ORBDA				123.5				81.6				383.7				265.9				278.3
Income tax provision (benefit)				(13.2	)			(9.0	)			(57.2	)			6.8				(3.7	)
Gain on involuntary conversion of assets				—				2.0				2.0				9.9				—
Interest income				5.0				1.9				12.0				5.3				1.6
Interest expense				(2.2	)			(1.5	)			(7.3	)			(4.0	)			(18.9	)
Other (income) expense				(11.7	)			0.1				(0.1	)			0.9				(0.6	)
Loss (gain) on disposition of property and equipment				(0.5	)			0.04				0.3				(0.4	)			(0.3	)
Deferred income taxes				0.5				0.4				3.5				(39.3	)			(9.7	)
Changes in operating assets and liabilities:
	Account receivable			(23.0	)			(5.3	)			(62.3	)			3.1				(34.5	)
	Materials and supplies inventory			(0.6	)			(1.3	)			(1.4	)			(1.2	)			0.8
	Prepayments and other			(13.7	)			0.6				(4.9	)			(3.3	)			(1.8	)
	Accrued income taxes			6.8				2.9				23.0				12.1				2.6
	Accounts payable, deferred revenue, and other accrued liabilities			(27.8	)			(44.5	)			40.6				69.0				33.0
	Other non-current liabilities											4.0				5.1				(1.8	)
	Other			(0.3	)			1.5				0.6				1.4				(2.0	)
Net cash provided by operating activities (as reported by Veritas)				42.7				29.4				336.6				331.3				243.0

		Payments due by period
		Less than												After
		1 Year				1-3 Years				3-5 Years				5 Years				Total
		(in € millions)
Financial Debt(1)			135.7				17.7				10.1				147.3				310.8
Capital Lease Obligations			23.8				32.2				14.5				30.1				100.6
Operating Leases			51.6				43.2				10.3				0.8				105.9
Other Long-term Obligations (interest on existing notes)			11.5				23.0				23.0				47.2				104.7
Total Contractual Obligations			222.6				116.1				57.9				225.4				622.0

(1)	Includes principal due on the existing notes issued on April 28, 2005 and principal and interest due on bank debt.

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		Payments due by period
		Less than												After
		1 Year				1-3 Years				3-5 Years				5 Years				Total
		(in € millions)
Financial Debt(1)			27.4				44.1				35.8				256.2				363.5
Capital Lease Obligations (not discounted)			12.0				17.8				37.8				—				67.6
Operating Leases			45.7				36.1				12.7				2.1				96.6
Other Long-Term Obligations (interest on existing notes)			19.6				39.1				39.1				78.2				176.0
Total Contractual Obligations			104.7				137.1				125.4				336.5				703.7

(1)	Includes principal due on the existing notes issued on each of April 28, 2005 and February 3, 2006 and principal and interest due on bank debt.

		Payments due by period
		Less than												More than
Contractual Obligations		1 Year				1-3 Years				3-5 Years				5 Years				Total
		(in $ millions)
Long-term debt(1)			—				—				—				155.0				155.0
Estimated interest payments(2)			7.1				14.2				14.2				89.9				125.4
Operating leases			49.1				64.9				49.7				59.0				222.8
Capital leases			1.5				0.3				—				—				1.8
Purchase obligations			86.6				—				—				—				86.6
Potential payments under letters of credit			4.6				0.2				—				—				4.8
Other long-term liabilities(3)			0.1				1.4				—				33.0				34.6
Total			148.9				81.0				63.9				337.0				630.9

(1)		The debt of $155 million has been classified as a current liability since October 31, 2005 because the stock price has remained above the level that triggers the convertibility features of the debt.
(2)		The interest rate on Veritas’ debt is LIBOR less 0.75% For purposes of this table, we used Veritas’ current interest rate of 4.58% based on a LIBOR of 5.33%. Each 100 basis point increase in LIBOR will increase our annual interest expense by $1.55 million per year.
(3)		Includes income tax, deferred revenue, pension and retirement obligations for which the timing of payment is uncertain.

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			Payments due by period
			Less than												After
Pro Forma Combined			1 Year				1-3 Years				3-5 Years				5 Years				Total
			(in € millions)
Financial debt				47.9				104.8				74.9				334.4				562.0
Additional notes offered hereby due 2015				17.8				35.5				35.5				297.7				386.6
	Principal(1)															237.0				237.0
	Interest(2)			17.8				35.5				35.5				60.7				149.6
New notes offered hereby due 2017				17.8				35.5				35.5				333.2				422.1
	Principal(1)															237.0				237.0
	Interest(2)			17.8				35.5				35.5				96.3				185.1
Term loan facility				65.3				128.9				126.6				858.9				1,179.8
	Principal			7.9				15.8				15.8				750.4				789.9
	Interest(3)			57.4				113.1				110.8				108.5				389.9
Capital leases				13.0				17.8				37.8				0.0				68.6
Operating leases				88.0				115.0				71.2				89.7				363.9
Total Contractual Obligations				249.7				437.6				381.6				1,914.0				2,983.0

(1)	Assumes $300 million in principal amount of additional notes offered hereby and $300 million of new notes offered hereby.
(2)	Based on an estimated 7.5% interest rate and assuming that the notes offered hereby were issued on September 30, 2006. A change in the interest rate on the notes offered hereby by 50 basis points would have changed the total interest cost by €2.4 million ($3.0 million) per year.
(3)	Based on LIBOR plus a margin of 2% for the term loan facility corresponding to a 7.3% interest rate. A change in LIBOR by 50 basis points would have changed the total interest cost by approximately €4.0 million (approximately $5.0 million per year).

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	•	identifying new areas where subsurface conditions are favorable for the accumulation of oil and gas;
	•	determining the size and structure of previously identified oil and gas fields; and
	•	optimizing development and production of oil and gas reserves (reservoir management).

	Focus on Growth Areas for Geophysical Services

109

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	Develop Technological Synergies for Products and Capitalize on New Generation Equipment

	Develop and Utilize Innovative Technology

	•	land and transition zone seismic data acquisition systems and know-how;
	•	innovative marine or subsea acquisition systems and services;
	•	seismic data processing and reservoir services; and
	•	manufacturing of land, marine and subsea data acquisition equipment.

	Emphasize Client Service

110

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	•	tailoring our data acquisition operations to meet specific client demands;
	•	expanding regional multi-client and dedicated on-site processing centers;
	•	recruiting and training customer-oriented service staff;
	•	organizing client training seminars focused on our products and services;
	•	developing easy access to our multi-client data library through the increasing application of e-business technologies;
	•	developing corporate contracts with our main clients; and
	•	gaining access to new data acquisition markets, such as subsea and newly opening territories.

	Provide Integrated Services

	Exploit Strong Data Libraries

	Develop Reservoir Applications

111

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	•	Economic growth, particularly in more active regions such as Asia (notably China, India and Brazil), is generating increased energy demand and leading to higher energy prices and increased exploration efforts;
	•	The need to replace depleting reserves and maximize the recovery of oil in existing reservoirs should encourage capital expenditures by companies engaged in exploration and production, which we expect will benefit the seismic industry;

112

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	•	The scope of application of geophysical services has considerably increased over the last several years as a result of significant research and development efforts. Geophysical services can now potentially be applied to the entire sequence of exploration, development and production as opposed to exploration only. This is particularly true with technologies such as 4D (time lapse seismic data); and
	•	Finally, the depth and duration of the contraction in the geophysical sector between 1999 and 2004 may have increased awareness among geophysical service providers of the risks related to market overcapacity.

113

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	Revenues by Activity

			Nine months ended
			September 30,																Year ended December 31,
			2006								2005								2005								2004
			(in € millions, except percentages)
Services
	Land SBU			96.9				10	%			88.2				15	%			119.8				14	%			77.3				11	%
	Offshore SBU			404.1				42	%			222.3				37	%			319.5				37	%			205.7				30	%
	Processing & Reservoir SBU			102.3				11	%			81.1				13	%			113.0				13	%			105.0				15	%
Total Services				603.3				63	%			391.6				64	%			552.3				64	%			388.0				56	%
Products				352.3				37	%			215.9				36	%			317.6				36	%			299.4				44	%
Total				955.6				100	%			607.5				100	%			869.9				100	%			687.4				100	%

114

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	Revenues by Region (by location of customers)

		Nine months ended
		September 30,																Year ended December 31,
		2006								2005								2005								2004
		(in € millions, except percentages)
Americas			314.0				33	%			178.7				29	%			291.7				34	%			207.7				30	%
Asia-Pacific/ Middle East			313.2				33	%			217.1				36	%			297.3				34	%			274.5				40	%
Europe and CIS			229.4				24	%			138.6				23	%			190.3				22	%			138.2				20	%
Africa			99.0				10	%			73.1				12	%			90.6				10	%			67.0				10	%
Total			955.6				100	%			607.5				100	%			869.9				100	%			687.4				100	%

	Land Seismic Acquisition

	Description of Activity

115

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	•	the Sercel 408UL seismic data recorders, which feature 24-bit digital recording technology;
	•	Geoland quality control software, which is used to verify that the location of field data points during a survey corresponds to their theoretical position;
	•	the Sercel VE 432 vibrator electronic control system, used to synchronize and verify the emission of acoustical waves by vibrators; and
	•	Geocluster software, used for on-site processing and quality control of acquired data.

	Restructuring

116

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	Description of Activity

117

---

 

	Seabed

	Multi-client Library

118

---

 

	Description of Activity

119

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	IT and Data Management

	Processing Software Development and Sales

	•	Geovista, a set of software products used to produce accurate images of geological structures and showing depth;
	•	Stratavista, advanced software used to determine specific rock properties from stratigraphic inversion of seismic data;
	•	WaveVista, a depth migration service based on wave equations;
	•	VectorVista, designed to provide greater understanding of seismic data acquired with multi-component techniques; and
	•	ChronoVista, a set of software products used to produce accurate images of geological structures over time.

	Description of Activity

	•	clusters of ultra-light acquisition modules allowing total flexibility of configuration;
	•	the option of mixing different communication media (cable, radio, micro-wave, laser, fiber-optic) to form a true network allowing the user to define data routing and hence avoid obstacles in the field; and
	•	an architecture fully supported by a new generation of object-oriented software.

120

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121

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		Jurisdiction of						% of
Subsidiary		organization		Head office				interest
Sercel S.A.		France			Carquefou, France				100.0
CGG Services SA		France			Massy, France				100.0
CGG Americas, Inc.		Texas			Houston, Texas, United States				100.0
CGG Marine Resources Norge A/ S		Norway			Hovik, Norway				100.0
Companía Mexicana de Geofisica		Mexico			Mexico City, Mexico				100.0
CGG do Brasil Participaçoes Ltda.		Brazil			Rio de Janeiro, Brazil				100.0
Exploration Resources ASA		Norway			Oslo, Norway				100.0
Sercel Inc.		Oklahoma			Tulsa, Oklahoma, United States				100.0
CGGVeritas Services Inc.		Delaware			Houston, Texas, United States				100.0

								Owned/
Location		Type of facilities		Size				Leased
Paris, France		Registered offices of CGGVeritas and executive offices for the group			725 m	(2)		Leased
Massy, France		Registered offices of CGG Services SA			9,174 m	(2)		Owned
Massy, France		Data processing center			7,371 m	(2)		Owned
London, England		Data processing center			2,320 m	(2)		Leased
Redhill, England		Administrative offices			2,095 m	(2)		Leased
Houston, Texas, U.S.A.		Offices of CGG Americas, Inc.			6,905 m	(2)		Leased
Houston, Texas, U.S.A.		Offices and manufacturing premises of Sercel			24,154 m	(2)		Owned
Cairo, Egypt		Data processing center			2,653 m	(2)		Leased
Kuala Lumpur, Malaysia		Data processing center and administrative offices			1,152 m	(2)		Leased
Perth, Australia		Data processing center			429 m	(2)		Leased
Calgary, Canada		Administrative offices and data processing center			1,764 m	(2)		Leased
Rio de Janeiro, Brazil		Offices of CGG Do Brazil			326 m	(2)		Leased
Oslo, Norway		Data processing center CGG Norge Offices of CGG			1,431 m	(2)		Leased
		Marine Resources Norge A/S			243 m	(2)		Leased
Bergen, Norway		Offices of Exploration Resources AS and Multiwave AS			992 m	(2)		Leased
Mexico City, Mexico		Registered office of CMG			570 m	(2)		Leased
Caracas, Venezuela		Administrative offices			315 m	(2)		Leased
		Processing activities			1,394 m	(2)		Leased
Carquefou, France		Sercel factory. Activities include research and development relating to, and manufacture of, seismic data recording equipment			23,318 m	(2)		Owned
Saint Gaudens, France		Sercel factory. Activities include research and development relating to, and manufacture of, geophysical cables, mechanical equipment and borehole seismic tools			16,000 m	(2)		Owned

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								Owned/
Location		Type of facilities		Size				Leased
Sydney, Australia		Activities include research and development relating to, and manufacture and marketing of, marine streamers			7,096 m	(2)		Leased
Xu Shui, China		Activities include research and development relating to, and manufacture of geophones			59,247 m	(2)		Leased
Calgary, Canada		Manufacture of geophysical cables			8,357 m	(2)		Owned
Alfreton, England		Manufacture of geophysical cables			5,665 m	(2)		Owned
Singapore		Manufacture of geophysical cables			5,595 m	(2)		Owned

						Year added				Charter								Number of				Vessel length
Vessel Name		Year built				to fleet				expires				2D/3D				streamers				(in meters)
CGG Föhn			1985				1985				2008				3D				8	(1)			84.5
CGG Harmattan			1993				1993				2008				3D				8	(1)			96.5
CGG Alizé			1999				1999				2007				3D				10				100.0
Laurentian			1983				2003				2008				3D				6				84.4
CGG Amadeus			1999				2001				N/A				3D				8				87.0
CGG Symphony			1999				2001				N/A				3D				10				120.7
Search(2)			1982				2005				N/A				3D				6				98.5
C-Orion(2)			1979				2005				N/A				3D				8				81.0
Geo Challenger(2)			1999				2005				2010				3D				12				96.4
Princess(2)			1985				2005				N/A				2D				1-2	(3)			76.2
Duke(2)			1983				2005				N/A				2D				1				66.7
Venturer(2)			1986				2005				N/A				2D				1-4	(3)			89.5
Pacific Titan(2)			1982				2005				2006				2D				1-4	(3)			64.5

(1)	In high-resolution mode.
(2)	Vessel in the Exploration Resources fleet.
(3)	One streamer if long or multistreamer mode for shorter streamers.

123

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124

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		Three months ended
		October 31,								Years ended July 31,
		2006				2005				2006				2005				2004
		(in $ thousands)
Revenue by Contract Type
Contract work			122,536				94,221				470,132				389,046				289,404
Licensing of multi-client data			108,296				74,457				352,056				244,980				275,065
Total			230,831				168,678				822,188				634,026				564,469

		Three
		months
		ended
		October 31,								Year ended July 31,
		2006								2006								2005								2004
		(in $ millions, except percentages)
Revenue by Region
Americas			143.4				62	%			552.4				67	%			397.8				63	%			390.6				70	%
Asia Pacific/Middle East			41.9				18	%			138.2				17	%			124.9				20	%			81.3				14	%
Europe			44.8				20	%			93.6				11	%			71.9				11	%			79.2				14	%
Africa			0.7				—				38.0				5	%			39.4				6	%			13.3				2	%
Total			230.8				100	%			822.2				100	%			634.0				100	%			564.5				100	%

125

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	Land Acquisition

	Marine Acquisition

Year entered

Charter

Vessel

service

Length

Beam

expiration

Pacific Sword

1999

189  feet

40 feet

October 2006(1)

Seisquest

2001

300  feet

60 feet

May 2007(1)

Veritas Viking

1998

305  feet

72 feet

May 2011

Veritas Viking II

1999

305  feet

72 feet

May 2007

Veritas Vantage

2002

305  feet

72 feet

April 2010

Veritas Voyager

2006

220  feet

52 feet

July 2011(1)

Veritas Searcher

1982

217  feet

44 feet

Owned(1)

(1)	See the following discussions related to various changes in the status of the charters and the vessels subsequent to July 31, 2006.

126

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	Data Processing and Interpretation

127

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128

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	Board of Directors

				Initially				Term
Name		Position		appointed				expires
Robert Brunck(1)		Chairman of the Board and Chief Executive Officer			1998				2008
Olivier Appert(2)		Director			2003				2008
Loren Carroll		Director			2007				2013
Rémi Dorval(3)		Director			2005				2010
Jean Dunand(3)		Director			1999				2007
Yves Lesage(3)		Director			1988				2009
Christian Marbach(1)		Director			1995				2007
Thierry Pilenko		Director			2007				2013
Robert Semmens(2)(3)		Director			1999				2011
Daniel Valot(2)		Director			2001				2012
David Work		Director			2007				2013
Terence Young		Director			2007				2013

(1)	Member of Strategic Planning Committee.
(2)	Member of Appointment-Remuneration Committee.
(3)	Member of Audit Committee.

129

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130

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	Executive Officers

131

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				Executive
Name		Current position		officer since
Robert Brunck		Chairman and Chief Executive Officer			1989
Thierry Le Roux		President and Chief Operating Officer			1995
Stephane-Paul Frydman		Chief Financial Officer			2003
Gérard Chambovet		Senior Executive Vice President, Technology, Planning, Control and Communication, QHSE, Career Development and Training, Investor Relations, Communication and Audit			1995
Christophe Pettenati-Auzière		President, Geophysical Services			1997
Luc Benoît-Cattin		President Eastern Hemisphere			2003
Timothy Wells		President Western Hemisphere			2007
Pascal Rouiller		Chief Executive Officer, Sercel Group			1997

132

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133

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		Amount paid to CGG
Name		directors for 2005
		(in €)
Robert Brunck(1)			39,216.55
Olivier Appert			24,249.47
Patrick de la Chevardière(2)			2,534.64
Rémi Dorval			23,235.10
Jean Dunand			35,641.60
Gérard Friès(3)			31,355.82
Yves Lesage			30,879.70
John J. MacWilliams(3)			22,564.61
Christian Marbach			27,777.03
Robert F. Semmens(4)			55,183.85
Andrew Sheiner(5)			1,775.15
Daniel Valot			20,586.46

(1)	Mr. Brunck does not receive any compensation as member of the Supervisory Board of Sercel Holding or as Chairman of the Board of Directors of CGG Americas Inc.
(2)	Resigned from the Board on March 8, 2005.
(3)	Resigned from the board on January 12, 2007.
(4)	Includes €40,183.85 paid by CGG to Mr. Semmens as a director and €15,000 paid by Sercel Holding to Mr. Semmens as a member of the Supervisory Board.
(5)	Resigned from the Board on March 7, 2005.

134

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	•	the proposed acquisition by Sercel of Cybernetix S.A. and Vibtech;
	•	the proposed modification of the terms and conditions of the CGG 7.75% subordinated convertible bonds due 2012 before the modification was proposed to bondholders’ and shareholders’ meetings in April and May 2006, respectively; and
	•	the Board performance evaluation.

	Audit Committee

	Responsibilities

	•	Reviewing and discussing with management and our statutory auditors (i) the consistency and appropriateness of the accounting methods we adopt to prepare our corporate and consolidated financial statements; (ii) the consolidation perimeter and requesting, when necessary, all appropriate explanations; (iii) our draft annual, semi-annual and quarterly financial statements together with the notes to them, and especially off-balance sheet arrangements; and (iv) the quality, comprehensiveness, accuracy and veracity of the financial statements;

135

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	•	Receiving reports from our statutory auditors on their review, including any comments and suggestions they may have made in the scope of their audit; and
	•	Raising any financial or accounting question that the Committee deems important.

	•	Reviewing our annual report on Form 20-F and our “Document de Référence” filed with the French securities market regulator.
	•	In consultation with our statutory auditors, our internal auditors and management, reviewing the structure of our internal control procedures and the way in which they operate, notably those procedures relating to the preparation and treatment of accounting and financial information used to prepare our financial statements, to assess and manage risks, to comply with the principal regulations applicable to us, and to review the comments and observations made by the statutory auditors on our internal control procedures.
	•	With respect to internal audit, reviewing and discuss with management particularly:

	•	its organization and operation,
	•	its activities and the responsibilities proposed in the scope of the internal audit plan approved by the general management and presented to the Audit Committee.

	•	Reviewing and discussing with management and, when appropriate, our statutory auditors the transactions directly or indirectly binding the Group and its executive officers.
	•	With respect to external audit:

	•	Reviewing and discussing with the statutory auditors their annual audit plan,
	•	Meeting, if necessary, with the statutory auditors outside the presence of management,
	•	Ensuring the independence of the statutory auditors by managing the procedure for selection of the auditors. The Audit Committee submits its choice to the Board of Directors, which, pursuant to law, must submit the appointment of auditors to a vote at a shareholders’ meeting,
	•	Discussing the extent and results of the audit work with the statutory auditors and management and reviewing the amount of auditors’ fees regularly with management. The Audit Committee has sole authority to authorize performance of non-audit services by our auditors or members of their network.

	•	Overseeing the anonymous handling of any report concerning a possible internal control problem or any problem of an accounting or financial nature.
	•	Finally, the management of the company must report to the Audit Committee any suspected fraud of a significant amount so that the committee may proceed with any verification that it deems appropriate.

	2006 Activities

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	Appointment-Remuneration Committee

	•	to propose to the Board of Directors:

	— the implementation of stock option and performance share plans and employee shareholding plans;
	— the remuneration of the executive officers (mandataires sociaux); and
	— the appointment of directors, executive officers (mandataires sociaux) or members of Board committees.

	•	to be kept informed of the remuneration of the members of the Executive Committee.

	•	the remuneration of the Chairman and Chief Executive Officer and the Presidents,
	•	the proposal to be subject to the annual general meeting with respect to stock-options and performance shares and the final allocation of such performance shares and stock-options to employees of the Group,
	•	the protection letters of the Chairman and Chief Executive Officer and the Presidents,
	•	the proposal to be made to the extraordinary general meeting for the appointment of the four new directors after completion of the merger with Veritas,
	•	the reorganization of the Group Management Committee to be effective after completion of the merger with Veritas, and
	•	the implementation of the evaluation process of the Board of Directors and the Chief Executive Officer.

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						Options
						exercised				Options
						(ordinary				outstanding				Exercise
		Options				shares) at				at				price per
		initially				December 31,				December 31,				ordinary
Date of board of directors’ resolution		granted(1)				2006				2006(2)				share(1)				Expiration date
January 18, 2000(3)			231,000				181,194				39,625			€	45.83				January 17, 2008
March 14, 2001(4)			256,000				113,911				147,297			€	65.39				March 13, 2009
May 15, 2002(5)			138,100				41,896				97,214			€	39.92				May 14, 2010
May 15, 2003(6)			169,900				15,717				164,711			€	14.53				May 14, 2011
May 11, 2006(7)			202,500				0				201,950			€	131.26				May 10, 2014
Total			997,500				187,649				650,797

(1)	Pursuant to French law and the terms of the stock option plans, the numbers of options granted and the exercise price were adjusted following our share capital increase in December 2005.
(2)	The stock option plans provide for the cancellation of the options if the holder is no longer our employee, director or executive officer.

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(3)	Options under the 2000 plan could not be exercised before January 2003.
(4)	Options under the 2001 plan vest by one-fifth each year from March 2001 and could not be exercised before March 14, 2004.
(5)	Options under the 2002 plan vest by one-fifth each year from May 2002 and could not be exercised before May 16, 2005.
(6)	Options under the 2003 plan vest by one-fourth each year from May 2003 and could not be exercised before May 16, 2006.
(7)	Options under the 2006 plan vest by one-fourth each year from May 2006 and can be exercised at any time. However resulting shares cannot be sold before May 12, 2010.

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		January 25,								December 31,
		2007								2006								2005								2004
						% of								% of								% of								% of
		% of				voting				% of				voting				% of				voting				% of				voting
		shares				rights				shares				rights				shares				rights				shares				rights
Identity of Person or Group
The Beacon Group			—				—				—				—				—				—				15.21				25.51
EBPF-Financière de l’Echiquier			—				—				—				—				—				—				4.58				3.84
Fidelity International Limited			4.71				4.47				10.77				9.97				10.31				9.50				—				—
Institut Français du Pétrole			5.07				9.64				7.73				14.32				8.21				15.13				12.01				12.94
Public			90.22				85.89				81.50				75.71				81.48				75.37				68.20				57.71

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141

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	•	finance a portion of the cash component of the merger consideration;
	•	repay certain existing debt of CGG and Veritas; and
	•	pay the fees and expenses incurred in connection with the foregoing.

	•	finance a portion of the cash component of the merger consideration;
	•	repay certain existing debt of CGG and Veritas; and
	•	pay the fees and expenses incurred in connection with the foregoing.

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	•	maximum ratio of (i) total net debt to (ii) ORBDA; and
	•	minimum ratio of (i) ORBDA less capital expenditures to (ii) total interest costs.

	French Revolving Facility

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	71/2% Senior Notes due 2015

	Veritas Floating Rate Convertible Senior Notes due 2024

	$70 million DnB Credit Facility

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	•	be general senior, unsecured obligations of the Company;
	•	rank equally in right of payment to all existing and future senior, unsecured indebtedness of the Company, except for any liabilities preferred by law;
	•	rank senior in right of payment to all existing and future subordinated indebtedness of the Company;
	•	be guaranteed on a senior unsecured basis by certain Subsidiaries of the Company as described below; and
	•	be effectively subordinated to all existing and future indebtedness of Subsidiaries of the Company that are not Guarantors.

145

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146

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	General

	Guarantors

147

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	Release

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	Merger or Consolidation

	(a)	the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) shall execute a Subsidiary Guarantee and deliver an opinion of counsel in accordance with the terms of the Indenture;
	(b)	immediately after giving effect to such transaction, no Default or Event of Default exists;
	(c)	such Guarantor, or any Person formed by or surviving any such consolidation or merger, would have a Consolidated Net Worth (immediately after giving effect to such transaction) equal to or greater than the Consolidated Net Worth of such Guarantor immediately preceding the transaction; and
	(d)	the Company would be permitted by virtue of the Company’s pro forma Consolidated Interest Coverage Ratio, immediately after giving effect to such transaction, to incur at least €1.00 of additional Indebtedness pursuant to the Consolidated Interest Coverage Ratio test set forth in the covenant described under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Disqualified Stock”.

Year		Percentage
2010			103.75%
2011			102.50%
2012			101.25%
2013 and thereafter			100.00%

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	(a)	if the Notes are listed, in compliance with the requirements of the principal securities exchange on which the Notes are listed; or

	(b)	if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate.

	(a)	(1) any change in or amendment to the laws or treaties (or regulations or rulings promulgated thereunder) of a Relevant Taxing Jurisdiction (as defined under the caption “— Additional Amounts”) or (2) any change in or amendment to any official position regarding the application or interpretation of such laws, treaties, regulations or rulings, which change or amendment is announced or is effective on or after the date of the Indenture; and
	(b)	such obligation cannot be avoided by the Company or any such Guarantor taking reasonable measures available to it.

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	(a)	surrendered by the holder thereof for payment of principal more than 30 days after the later of (1) the date on which such payment first became due and (2) if the full amount payable has not been received by or on behalf of the relevant holder on or prior to such due date, the date on which, the full amount having been so received, notice to that effect shall have been given to the holders by the Trustee, except to the extent that the holder would have been entitled to such Additional Amounts on surrendering such Note for payment on the last day of the applicable 30-day period;
	(b)	if any tax, assessment or other governmental charge is imposed or withheld by reason of the failure to comply by the holder or, if different, the beneficial owner (ayant-droit) of the Note with a request addressed to such holder or beneficial owner to provide information, documents or other evidence concerning the nationality, residence, identity or connection with the Relevant Taxing Jurisdiction of such holder or beneficial owner which is required or imposed by a statute, treaty, regulation or administrative practice of the Relevant Taxing Jurisdiction as a precondition to exemption from all or part of such tax, assessment or governmental charge;

	(c)	held by or on behalf of a holder who is liable for Taxes in respect of such Note by reason of having some connection with the Relevant Taxing Jurisdiction other than the mere purchase, holding or disposition of any Note, or the receipt of payments made by or on behalf of the Company or any Guarantor in respect thereof or any Subsidiary Guarantee, including, without limitation, such holder being or having been a citizen or resident thereof or being or having been present or engaged in a trade or business therein or having had a permanent establishment therein;

	(d)	on account of any estate, inheritance, gift, sale, transfer, personal property or other similar tax, assessment or other governmental charge;
	(e)	except in the case of the winding up of the Company or any Guarantor, any Note surrendered for payment in the Republic of France;
	(f)	any withholding or deduction imposed on a payment to an individual which is required to be made pursuant to any law implementing or complying with, or introduced in order to conform to European Council Directive 2003/48/ EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of November, 26-27, 2000 on the taxation of savings income or any

151

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		agreement between the European Community and any jurisdiction providing for equivalent measures; or
	(g)	as a result of any combination of (a), (b), (c), (d), (e) or (f) or with respect to any payment made by or on behalf of the Company or any Guarantor in respect of any Note or Subsidiary Guarantee to any holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent that a beneficiary or settlor or beneficial owner would not have been entitled to any Additional Amounts had such beneficiary or settlor or beneficial owner been the holder.

	Change of Control

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	(a)	accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer;
	(b)	deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered; and
	(c)	deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers’ Certificate stating the aggregate principal amount of the Notes or portions thereof being purchased by the Company.

	(a)	the sale, lease, transfer, conveyance or other disposition (other than by merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Subsidiaries, taken as a whole;
	(b)	the adoption, by holders of Capital Stock of the Company, of a voluntary plan relating to the liquidation or dissolution of the Company;

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	(c)	the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” (as such term is used in Section 13(d) (3) of the Exchange Act) becomes the “beneficial owner” (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly through one or more intermediaries, of more than 50% of the voting power of the outstanding Voting Stock of the Company; or
	(d)	the first day on which more than a majority of the members of the Board of Directors are not Continuing Directors;

	Asset Sales

	(a)	the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value (as determined in accordance with the definition of such term set out below under the caption “— Certain Definitions”, the results of which determination shall be set forth in an Officers’ Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of; and
	(b)	at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents;

154

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155

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	Restricted Payments

	(a)	purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any of its Restricted Subsidiaries (other than any such Equity Interests owned by the Company or any Wholly Owned Restricted Subsidiary of the Company);
	(b)	make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value, any Indebtedness that is subordinated in right of payment to the Notes or the Subsidiary Guarantees, except a payment of interest or principal at Stated Maturity; or
	(c)	make any Restricted Investment,

	(1)	no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof;
	(2)	the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least €1.00 of additional Indebtedness pursuant to the Consolidated Interest Coverage Ratio test set forth in the first paragraph of the covenant described under the caption “— Incurrence of Indebtedness and Issuance of Disqualified Stock”; and
	(3)	such Restricted Payment, together with (x) the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of the Indenture (excluding Restricted Payments permitted by clauses (b) through (e) and, to the extent deducted in computing Consolidated Net Income, (f) and (g) of the next succeeding paragraph) , and (y) the aggregate amount of all dividends and other payments or distributions paid subsequent to the Issue Date on account of the Company’s or any of its Restricted Subsidiaries’ Equity Interests (including, without limitation, any such payment in connection with any merger or consolidation involving the Company) or to the direct or indirect holders of the Company’s Equity Interests in their capacity as such (other than (i) dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company, (ii) dividends or distributions payable to the Company or any of its Restricted Subsidiaries or (iii) if the Restricted Subsidiary making such dividend is not a Wholly Owned Restricted Subsidiary, dividends to its shareholders on a pro rata basis), is less than the sum (without duplication) of the following:

	(A)	50% of the cumulative Consolidated Net Income of the Company for the period (taken as one accounting period) from January 1, 2005 to the end of the Company’s most recently ended fiscal quarter for which financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit); plus
	(B)	100% of the aggregate of (1) the net cash proceeds and (2) the fair market value of Strategic Assets transferred or conveyed to the Company (as valued at the time of transfer or conveyance to the Company, and as determined in the manner contemplated by the definition of the term “fair market value”), in each case received by the Company since the Issue Date as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issuance or sale of Disqualified Stock or

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		debt securities of the Company that have been converted into, or exchanged or redeemed for, such Equity Interests (other than any such Equity Interests, Disqualified Stock or convertible debt securities sold to a Restricted Subsidiary of the Company and other than Disqualified Stock or convertible debt securities that have been converted into, or exchanged or redeemed for, Disqualified Stock); plus
	(C)	to the extent that any Restricted Investment that was made after the date of the Indenture is sold for cash or otherwise liquidated or repaid for cash, the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any); plus
	(D)	if any Unrestricted Subsidiary is redesignated as a Restricted Subsidiary, the lesser of (1) an amount equal to the fair market value of the Investments previously made by the Company and its Restricted Subsidiaries in such Subsidiary as of the date of redesignation and (2) the amount of such Investments.

	(a)	the payment of any dividend within 60 days after the date of declaration thereof if at said date of declaration such payment would have complied with the provisions of the Indenture;
	(b)	the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or any Guarantor or any Equity Interests of the Company or any of its Restricted Subsidiaries in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, other Equity Interests of the Company (other than any Disqualified Stock), provided that the amount of any such net cash proceeds that are utilized for any such redemption, purchase, retirement, defeasance or other acquisition shall be excluded from clause (3)(B) of the preceding paragraph;
	(c)	the defeasance, redemption, purchase, retirement or other acquisition of subordinated Indebtedness of the Company or any Guarantor with the net cash proceeds from an incurrence of, or in exchange for, Permitted Refinancing Indebtedness;
	(d)	the payment of any dividend or distribution by a Restricted Subsidiary of the Company to the Company or any of its Wholly Owned Restricted Subsidiaries;
	(e)	repurchases of Equity Interests deemed to occur upon exercise of stock options, if such Equity Interests represent a portion of the exercise price of such stock options;
	(f)	so long as no Default has occurred and is continuing, the repurchase or other acquisition for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company for allocation (as a free allocation or otherwise) to directors, officers and employees of the Company and its Restricted Subsidiaries not in excess of €2,500,000 in any 12-month period;
	(g)	so long as no Default has occurred and is continuing, the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any member of the Company’s (or any of its Restricted Subsidiaries’) management pursuant to any management equity subscription agreement or stock option agreement in effect as of the Issue Date; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed €1,000,000 in any 12-month period;
	(h)	loans or advances in the ordinary course of business to Affiliates or Persons with which the Company or a Subsidiary may have contractual arrangements in any jurisdiction reasonably necessary to be made in connection with conducting the business of the Company or a Subsidiary in such jurisdiction in a form that is customary to address foreign investment regulation or practice in such jurisdiction, in an aggregate amount not to exceed €2,000,000 outstanding at any one time;
	(i)	so long as no Default has occurred and is continuing, advances constituting Investments or loans to directors, officers and employees of the Company and its Restricted Subsidiaries in the ordinary

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		course of business for bona fide business purposes not in excess of €1,000,000 at any one time outstanding; and
	(j)	other Restricted Payments not to exceed €15,000,000 in the aggregate.

	Incurrence of Indebtedness and Issuance of Disqualified Stock

	(a)	Indebtedness under Credit Facilities in an aggregate principal amount at any one time outstanding not to exceed the greater of (x) €125,000,000, plus any fees, premiums, expenses (including costs of collection), indemnities and similar amounts payable in connection with such Indebtedness, and less any amounts derived from Asset Sales and applied to the permanent reduction of Indebtedness under Credit Facilities in accordance with the covenant described under the caption “— Put Option of Holders — Asset Sales” and (y) 10% of the Company’s Consolidated Total Assets;
	(b)	Existing Indebtedness;
	(c)	Hedging Obligations;
	(d)	Indebtedness represented by the Existing Notes or the Subsidiary Guarantees with respect thereof (but not the Additional Notes and related guarantees);
	(e)	intercompany Indebtedness between or among the Company and any of its Wholly Owned Restricted Subsidiaries, provided that (1) if the Company or any Guarantor is the obligor on such Indebtedness, then the Indebtedness must be unsecured and expressly subordinated to the prior payment in full in cash of all of the Company’s obligations with respect to the Notes or such Guarantor’s obligations under its Subsidiary Guarantee, as the case may be, and (2) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Wholly Owned Restricted Subsidiary of the Company, or any sale or other transfer of any such Indebtedness to a Person that is neither the Company nor a Wholly Owned Restricted Subsidiary of the Company, shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the

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		Company or such Restricted Subsidiary, as the case may be, as of the date of such issuance, sale or other transfer that is not permitted by this clause (e);
	(f)	Indebtedness in respect of bid, performance or surety bonds issued for the account of the Company or any of its Restricted Subsidiaries in the ordinary course of business, including guarantees or obligations of the Company or any of its Restricted Subsidiaries with respect to letters of credit supporting such bid, performance or surety obligations (in each case other than for an obligation for money borrowed);
	(g)	Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations (or any guarantee thereof or indemnity with respect thereto), in each case, incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or any of its Restricted Subsidiaries, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (g), not to exceed €20,000,000 at any time outstanding;
	(h)	the guarantee by the Company of Indebtedness of any of its Restricted Subsidiaries or by any Restricted Subsidiary of Indebtedness of the Company or another Restricted Subsidiary, in each case, that was permitted to be incurred by another provision of this covenant; provided that if the Indebtedness being guaranteed is subordinated in right of payment to the Notes or a Subsidiary Guarantee then the guarantee shall be subordinated to the same extent as the Indebtedness guaranteed;
	(i)	intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries incurred in the ordinary course of business in connection with cash pooling or other cash management arrangements;
	(j)	Permitted Refinancing Indebtedness incurred in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund Indebtedness incurred pursuant to the first paragraph and clauses (b), (d), (g) and (j) of the second paragraph of this covenant;
	(k)	Indebtedness of Restricted Subsidiaries of the Company (other than Guarantors) in an aggregate principal amount not to exceed 5% of the Company’s Consolidated Total Assets minus the sum of all Indebtedness of Restricted Subsidiaries of the Company (other than Guarantors) then outstanding; and
	(l)	any additional Indebtedness of the Company or any Guarantor in an aggregate principal amount not in excess of €25,000,000 at any one time outstanding and any guarantee thereof.

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	Liens

	Sale-and-Leaseback Transactions

	(a)	the Company or such Restricted Subsidiary could have (1) incurred Indebtedness in an amount equal to the Attributable Indebtedness relating to such sale-and-leaseback transaction pursuant to the Consolidated Interest Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption “— Incurrence of Indebtedness and Issuance of Disqualified Stock” and (2) incurred a Lien to secure such Indebtedness pursuant to the covenant described under the caption “— Liens”;
	(b)	the gross cash proceeds of such sale-and-leaseback transaction are at least equal to the fair market value (as determined in accordance with the definition of such term, the results of which determination shall be set forth in an Officers’ Certificate delivered to the Trustee) of the property that is the subject of such sale-and-leaseback transaction; and
	(c)	the transfer of assets in such sale-and-leaseback transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, the covenant described above under the caption “— Put Option of Holders — Asset Sales”, if applicable.

	Issuances and Sales of Capital Stock of Restricted Subsidiaries

	(a)	the Net Proceeds from such issuance, transfer, conveyance, sale or other disposition are applied in accordance with the covenant described above under the caption “— Put Option of Holders — Asset Sales”; and
	(b)	immediately after giving effect to such transfer, conveyance, sale or other disposition, such Restricted Subsidiary either continues to be a Restricted Subsidiary or, if such Restricted Subsidiary would no longer constitute a Restricted Subsidiary, any remaining Investment in such Restricted Subsidiary would have been permitted to be made under the covenant described above under the caption “— Restricted Payments” if made on the date of such transfer, conveyance, sale or other disposition.

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	Dividend and Other Payment Restrictions Affecting Subsidiaries

	(a)	(1) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries on its Capital Stock or (2) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries;
	(b)	make loans or advances to the Company or any of its Restricted Subsidiaries; or
	(c)	transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries,

	(1)	agreements governing Credit Facilities or Existing Indebtedness, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that such agreements and amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are not materially less favorable to the holders of the Notes, taken as a whole, with respect to such dividend and other payment restrictions, than those contained, in the case of Credit Facilities, in agreements governing Credit Facilities or, in the case of Existing Indebtedness, in agreements governing such Existing Indebtedness, in either case as in effect on the date of the Indenture;
	(2)	the Indenture, the Notes and the Subsidiary Guarantees;
	(3)	any agreement for the sale or other disposition of Equity Interests in a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending the sale or other disposition;
	(4)	any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the Indenture to be incurred;
	(5)	by reason of customary provisions restricting the subletting or assignment of any lease or the transfer of copyrighted or patented materials;
	(6)	purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (c) above on the property so acquired;
	(7)	customary provisions in agreements for the sale of property or assets;
	(8)	customary provisions in agreements that restrict the assignment of such agreements or rights thereunder;
	(9)	provisions with respect to the disposition or distribution of assets or property in any joint venture agreement, assets sale agreement, stock sale agreement or other similar agreement in each case entered into in the ordinary course of business, but in each case only to the extent such encumbrance or restriction relates to the transfer of the property, or encumbers or restricts the assets, subject to such agreement;

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	(10)	restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;
	(11)	Permitted Refinancing Indebtedness, provided that the encumbrances and restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially less favorable to the holders of the Notes, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;
	(12)	any Liens not prohibited by the covenant described above under the caption “— Liens” that limit the right of the debtor to dispose of the assets subject to such Liens; or
	(13)	applicable law.

	Transactions with Affiliates

	(a)	such Affiliate Transaction is in writing and on terms that, when taken as a whole, are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person or, if there is no such comparable transaction, on terms that are fair and reasonable to the Company or such Restricted Subsidiary; and
	(b)	the Company delivers to the Trustee (1) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of €2,000,000, an Officers’ Certificate certifying that such Affiliate Transaction complies with clause (a) above and (2) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of €5,000,000, a resolution of the Board of Directors set forth in an Officers’ Certificate certifying that such Affiliate Transaction complies with clause (a) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors and (3) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of €15,000,000, an opinion as to the fairness to the Company or the relevant Subsidiary of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm that is, in the judgment of the Board of Directors, qualified to render such opinion and is independent with respect to the Company;

	(A)	any employment agreement or other employee compensation plan or arrangement (including stock option plans) entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business of the Company or such Restricted Subsidiary;
	(B)	transactions between or among the Company and its Restricted Subsidiaries (including any Person that becomes a Restricted Subsidiary as a result of any such transaction);
	(C)	loans or advances to officers, directors and employees of the Company or any of its Restricted Subsidiaries made in the ordinary course of business and consistent with past practices of the Company and its Restricted Subsidiaries in an aggregate amount not to exceed €1,000,000 outstanding at any one time;
	(D)	indemnities of officers, directors and employees of the Company or any of its Restricted Subsidiaries permitted by provisions of the organizational documents of the Company or such Restricted Subsidiary or applicable law;

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	(E)	the payment of reasonable and customary regular fees to directors of the Company or any of its Restricted Subsidiaries who are not employees of the Company or any Subsidiary;
	(F)	any agreement or arrangement in effect as of the Issue Date or any amendment thereto or replacement thereof or any transaction contemplated thereby (including pursuant to any amendment or replacement agreement) so long as any such amendment or replacement agreement, taken as a whole, is no more disadvantageous to the holders of the Notes in any material respect than the original agreement as in effect on the Issue Date; and

	(G)	Restricted Payments and Permitted Investments that are permitted by the provisions of the Indenture described above under the caption “— Restricted Payments”.

	Guarantees of Certain Indebtedness by Restricted Subsidiaries

	Conduct of Business

	Anti Layering

	Reports

	(i)	within the time periods specified in the Commission’s rules and regulations, all annual financial and other information with respect to the Company and its Subsidiaries that would be required to be contained in a filing with the Commission on Form 20-F, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and a report thereon by the Company’s certified independent accountants; and
	(ii)	within 60 days after the end of each of the first and third quarters of each fiscal year (and within 75 days after the end of the second quarter of each fiscal year), reports on Form 6-K, or any successor form, attaching (a) unaudited consolidated financial statements for the Company for the period then ended (and the comparable period in the prior year), in each case prepared in accordance with GAAP (as in effect on the date of such report or financial information) including either, to the extent permitted under applicable law and SEC regulations (i) a reconciliation to accounting principles

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		generally accepted in the United States (“U.S. GAAP”) in substantially the form set out in the Form 20-F of the Company for the year ended December 31, 2004 dated on or about April 18, 2005 or (ii) a reconciliation of EBITDA to U.S. GAAP; provided that, in either case, such reconciliation shall be made to U.S. GAAP as in effect on the date of such report or financial information and (b) the information relating to the Company described in Item 5 of Form 20-F (i.e., Operating and Financial Review and Prospects).

	Future Designation of Restricted and Unrestricted Subsidiaries

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	(a)	default for 30 days in the payment when due of interest on the Notes;
	(b)	default in payment when due of the principal of or premium, if any, on the Notes;
	(c)	failure by the Company to comply with the provisions described under the caption “— Put Option of Holders”;
	(d)	failure by the Company for 30 days after it receives written notice from the Trustee or at least 25% in principal amount of the then outstanding Notes to comply with any of its other agreements in the Indenture or the Notes;
	(e)	the declaration or payment of any dividend or the making of any other payment or distribution described in subclause (y) of clause (3) under the caption “— Certain Covenants — Restricted Payments”, which declaration, payment or distribution would not be permitted by the provisions described under the caption “— Certain Covenants — Restricted Payments” if it were treated as a Restricted Payment;

	(f)	the Company consolidates or merges (fusion) with or into (whether or not the Company is the surviving corporation), or sells, assigns, transfers, leases, conveys, demerges (scission) or otherwise disposes of all or substantially all of its properties or assets in one or more related transactions, to another Person unless:

	(1)	the Company is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance, demerger or other disposition shall have been made is a corporation organized or existing under the laws of the United States (or any state thereof or the District of Columbia), the Republic of France or any other member state of the European Union (as constituted on the Issue Date);
	(2)	the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, lease, conveyance, demerger or other disposition shall have been made assumes all the obligations of the Company under the Notes and the Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee;
	(3)	immediately after such transaction no Default or Event of Default exists;

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	(4)	except in the case of a merger of the Company with or into a Wholly Owned Restricted Subsidiary of the Company, the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance, demerger or other disposition shall have been made:

	(A)	will have a Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction; and

	(B)	will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least €1.00 of additional Indebtedness pursuant to the Consolidated Interest Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Disqualified Stock”; and

	(5)	the Company shall deliver to the Trustee an Officers’ Certificate and an opinion of counsel stating that such consolidation, merger or disposition and any supplemental indenture in respect thereto comply with this provision and that all conditions precedent in the Indenture relating to such transaction or transactions have been complied with;

	(g)	default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee exists on the date of the Indenture or is created after the date of the Indenture, which default (1) is caused by a failure to pay principal of or premium or interest on such Indebtedness prior to the expiration of any grace period provided in such Indebtedness, including any extension thereof (a “Payment Default”), or (2) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates in excess of €10,000,000 and provided, further, that if any such default is cured or waived or any such acceleration rescinded, or such Indebtedness is repaid, within a period of 10 days from the continuation of such default beyond the applicable grace period or the occurrence of such acceleration, as the case may be, such Event of Default and any consequential acceleration of the Notes shall be automatically rescinded, so long as such rescission does not conflict with any judgment or decree;
	(h)	failure by the Company or any of its Restricted Subsidiaries to pay final judgments (not covered by insurance) aggregating in excess of €10,000,000, which judgments are not paid, discharged or stayed for a period of 60 days;

	(i)	failure by any Guarantor to perform any covenant set forth in its Subsidiary Guarantee, or the repudiation by any Guarantor of its obligations under its Subsidiary Guarantee or the unenforceability of any Subsidiary Guarantee for any reason other than as provided in the Indenture; and
	(j)	certain events of bankruptcy or insolvency with respect to the Company or any Significant Subsidiary.

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	(a)	the rights of holders of outstanding Notes to receive payments in respect of the principal of and premium, if any, and interest on such Notes when such payments are due from the trust referred to below;
	(b)	the Company’s obligations with respect to the Notes concerning issuing temporary Notes, registration of transfer or exchange of the Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust;
	(c)	the rights, powers, trusts, duties and immunities of the Trustee, and the Company’s and any Guarantor’s obligations in connection with them; and
	(d)	the Legal Defeasance provisions of the Indenture.

	(1)	the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the holders of the Notes, cash in U.S. dollars, non-callable U.S. Government Securities, or a combination thereof, in

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		such amounts as will be sufficient, in the opinion of an internationally recognized firm of independent public accountants, to pay the principal of and premium and interest on the outstanding Notes on the Stated Maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date;
	(2)	in the case of Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service and the French tax authority a ruling or (B) since the date of the Indenture, there has been a change in the applicable income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the holders of the outstanding Notes will not recognize income, gain or loss for U.S. federal or French income tax purposes, respectively, as a result of such Legal Defeasance and will be subject to U.S. federal or French income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

	(3)	in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an opinion of counsel reasonably acceptable to the Trustee confirming that the holders of the outstanding Notes will not recognize income, gain or loss for U.S. federal or French income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal or French income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

	(4)	no Default or Event of Default shall have occurred and be continuing either (A) on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or (B) insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 550th day after the date of deposit;
	(5)	such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the Indenture) to which the Company or any of its Restricted Subsidiaries is a party or by which the Company or any of its Restricted Subsidiaries is bound;
	(6)	the Company must have delivered to the Trustee an opinion of counsel to the effect that, after the 550th day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally;
	(7)	the Company must deliver to the Trustee an Officers’ Certificate stating that the deposit was not made by the Company with the intent of preferring the holders of the Notes over the other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and
	(8)	the Company must deliver to the Trustee an Officers’ Certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

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	(a)	reduce the principal amount of the Notes whose holders must consent to an amendment, supplement or waiver;
	(b)	reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption or purchase of the Notes by the Company;
	(c)	reduce the rate of or change the time for payment of interest on any Note;
	(d)	waive a Default or Event of Default in the payment of principal of or premium or interest on the Notes (except a rescission of acceleration of the Notes by the holders of at least a majority in principal amount of the Notes and a waiver of the payment default that resulted from such acceleration);
	(e)	make any Note payable in money other than that stated in the Notes;

	(f)	make any change in the provisions of the Indenture relating to waivers of past defaults or the rights of holders of the Notes to receive payments of principal of or premium or interest on the Notes;

	(g)	waive a redemption or repurchase payment with respect to any Note;
	(h)	make any change in the ranking of the Notes relative to other Indebtedness of the Company or the Subsidiary Guarantees relative to other Indebtedness of the Guarantors, in either case in a manner adverse to the holders;

	(i)	release any Guarantor from any of its obligations under its Subsidiary Guarantee or the Indenture, except in accordance with the terms of the Indenture;

	(j)	make any change in the provisions described under the caption “— Additional Amounts” in a manner adverse to the holders; or
	(k)	make any change in the preceding amendment, supplement and waiver provisions.

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	(1)	either:

	(a)	all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or
	(b)	all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the giving of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be irrevocably deposited with the Trustee as trust funds in trust solely for the benefit of the holders of the Notes, cash in U.S. dollars, non-callable U.S. Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not previously delivered to the Trustee for cancellation, including principal, premium, if any, and accrued interest to the date of maturity or redemption;

	(2)	no Default or Event of Default shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound;
	(3)	the Company and each Guarantor has paid or caused to be paid all other sums payable by it under the Indenture; and
	(4)	the Company has delivered an Officers’ Certificate and an opinion of counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

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	(a)	the judgment concerned is enforceable in the State of New York;
	(b)	such judgment has been rendered by a court having jurisdiction over the parties both under its own rules of jurisdiction and in accordance with French rules of international conflicts of jurisdiction and the French courts did not have exclusive jurisdiction to hear the matter;
	(c)	the court that rendered such judgment has applied to the merits of the case the laws of the jurisdiction which would have been considered appropriate under French rules of international conflicts of laws;
	(d)	the judgment is not contrary to French international public policy (ordre public international), both pertaining to the merits and to the procedure of the case;
	(e)	the judgment is not tainted with fraud; and
	(f)	the judgment does not conflict with a French judgment or a foreign judgment which has become effective in France and there is no risk of conflict with proceedings pending before the French courts at the time enforcement of the judgment is sought.

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	Exchange of Global Notes for Definitive Notes

	(a)	DTC notifies the Company that it is unwilling or unable to continue as depositary for the Global Notes or has ceased to be a clearing agency registered under the Exchange Act and, in either case, the

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		Company thereupon fails to appoint a successor depositary within 90 days after the date of such notice; or
	(b)	the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Definitive Notes.

	Exchange of Definitive Notes for Global Notes

	Exchange of Definitive Notes for Definitive Notes

	Same-Day Settlement and Payment

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	(a)	1.0% of the principal amount of the Note; and
	(b)	the excess of (1) the present value at such redemption date of (A) the redemption price of the Note at May 15, 2010 (such redemption price being set forth in the table appearing above under the caption “— Optional Redemption”) plus (B) all required interest payments due on the Note during the period from such redemption date through May 15, 2010 (excluding accrued but unpaid interest), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points over (2) the principal amount of the Note, if greater.

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	(a)	the sale, lease, conveyance or other disposition (a “disposition”) of any properties or assets (including, without limitation, by way of a sale-and-leaseback), excluding dispositions in the ordinary course of business (provided that the disposition of all or substantially all of the properties or assets of the Company and its Subsidiaries taken as a whole will be subject to the provisions of the Indenture described above under the caption “— Put Option of Holders — Change of Control” and the provisions described above in clause (f) under the caption “— Events of Default and Remedies” and not to the provisions of the Asset Sales covenant);

	(b)	the issue or sale by the Company or any of its Restricted Subsidiaries of Equity Interests of any of the Company’s Subsidiaries; and

	(c)	any Event of Loss,

	(A)	a disposition of obsolete or excess equipment or other properties or assets;
	(B)	a disposition of properties or assets (including Equity Interests) by the Company to a Wholly Owned Restricted Subsidiary or by a Restricted Subsidiary to the Company or to a Wholly Owned Restricted Subsidiary;
	(C)	a disposition of cash or Cash Equivalents;
	(D)	a disposition of properties or assets (including Equity Interests) that constitutes a Restricted Payment that is permitted by the provisions of the Indenture described above under the caption “— Certain Covenants — Restricted Payments”;
	(E)	any trade or exchange by the Company or any Restricted Subsidiary of equipment or other properties or assets for equipment or other properties or assets owned or held by another Person, provided that the fair market value of the properties or assets traded or exchanged by the Company or such Restricted Subsidiary (together with any cash or Cash Equivalents) is reasonably equivalent to the fair market value of the properties or assets (together with any cash or Cash Equivalents) to be received by the Company or such Restricted Subsidiary;
	(F)	the creation or perfection of a Lien on any properties or assets (or any income or profits therefrom) of the Company or any of its Restricted Subsidiaries that is not prohibited by the covenant described under the caption “— Certain Covenants — Liens”;
	(G)	a sale-and-leaseback of the Company’s office facilities in Massy, France replacing the sale-and-leaseback transaction relating to such facilities that is outstanding on the Issue Date;
	(H)	the surrender or waiver of contract rights or the settlement, release or surrender of contractual, non-contractual or other claims of any kind;
	(I)	the sale or discount, in each case without recourse, of accounts receivable arising in the ordinary course of business, but only in connection with the compromise of collection thereof;
	(J)	the factoring of accounts receivable arising in the ordinary course of business pursuant to arrangements customary in the region; and
	(K)	the grant in the ordinary course of business of any non-exclusive license of patents, trademarks, registrations therefor and other similar intellectual property.

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	(a)	in the case of a corporation, corporate stock;

	(b)	in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, including preferred stock;

	(c)	in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

	(d)	any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

	(a)	securities issued or directly and fully guaranteed or insured by the government of the United States of America, the Republic of France or any other country whose sovereign debt has a rating of at least A3 from Moody’s Investors Service, Inc. and at least A- from Standard & Poor’s Ratings Services or any agency or instrumentality of any such government (provided that the full faith and credit of such government is pledged in support thereof), in each case having maturities of not more than 12 months from the date of acquisition;

	(b)	certificates of deposit, Eurodollar time deposits and French negotiable debt instruments (titres de créances négociables) with maturities of 12 months or less from the date of acquisition, bankers’ acceptances with maturities not exceeding six months and overnight bank deposits, in each case with or issued by any commercial bank organized under the laws of any country that is a member of the Organization for Economic Co-operation and Development having capital and surplus in excess of €500,000,000 and whose long-term debt securities are rated at least A3 by Moody’s Investors Service, Inc. and at least A- by Standard & Poor’s Ratings Services;

	(c)	repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (a) and (b) above entered into with any financial institution meeting the qualifications specified in clause (b) above;

	(d)	commercial paper and French negotiable debt instruments (titres de créances négociables) having a rating of at least P-1 from Moody’s Investors Service, Inc. or at least A-1 from Standard & Poor’s Ratings Services and in each case maturing within 12 months after the date of acquisition;

	(e)	deposits available for withdrawal on demand with any commercial bank not meeting the qualifications specified in clause (b) above, provided that all such deposits are made in the ordinary course of business, do not remain on deposit for more than 30 consecutive days and do not exceed €25,000,000

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		in the aggregate at any one time, with no more than €5,000,000 being deposited in commercial banks within a single country; and

	(f)	money market mutual funds substantially all of the assets of which are of the type described in any of the foregoing clauses (a) to (d).

	(a)	provision for taxes based on income or profits of such Person and its Restricted Subsidiaries;

	(b)	Consolidated Interest Expense of such Person and its Restricted Subsidiaries;

	(c)	depreciation and amortization (including amortization or impairment, if any, of goodwill and of other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) of such Person and its Restricted Subsidiaries;

	(d)	other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries less any non-cash items increasing Consolidated Net Income of such Person and its Restricted Subsidiaries (other than items that will result in cash receipt);

	(e)	any expenses, fees, charges or other costs related to any equity offering (other than of Disqualified Stock) permitted by the indenture (whether or not successful); and

	(f)	without duplication, an amount equal to any extraordinary loss plus any net loss realized by such Person or any of its Restricted Subsidiaries in connection with an Asset Sale,

	(a)	any incurrence, assumption, guarantee, repayment, purchase or redemption by such Person or any of its Restricted Subsidiaries of any Indebtedness (other than revolving credit borrowings) subsequent to the commencement of the period for which the Consolidated Interest Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Consolidated Interest Coverage Ratio is made (the “Calculation Date”);

	(b)	any acquisition that has been made by such Person or any of its Restricted Subsidiaries, or approved and expected to be consummated within 30 days of the Calculation Date, including, in each case, through a merger or consolidation, and including any related financing transactions, during the reference period or subsequent to such reference period and on or prior to the Calculation Date; and

	(c)	any other transaction that may be given pro forma effect in accordance with Article 11 of Regulation S-X under the Securities Act as in effect from time to time;

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	(a)	the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings, and net of all payments made or received (if any) pursuant to Hedging Obligations in respect of interest rates but excluding amortization of debt issuance costs and non-cash charges other than non-cash interest expenses related to convertible bonds); and

	(b)	the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period.

	(a)	the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Wholly Owned Restricted Subsidiary thereof;

	(b)	the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary or its stockholders; and

	(c)	the cumulative effect of a change in accounting principles shall be excluded.

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	(a)	Sercel Inc., Sercel Canada Ltd., Sercel Australia Pty Ltd, CGG Americas, Inc., CGG Canada Services Ltd., CGG Marine Resources Norge A/ S, CGGVeritas Services Inc., Veritas DGC Land Inc., Veritas Geophysical Corporation, Veritas Investments Inc., Viking Maritime Inc., Veritas Geophysical (Mexico) LLC, Veritas DGC Asia Pacific Ltd. and Alitheia Resources Inc.; and

	(b)	any other Subsidiary of the Company that executes a supplemental indenture providing for a Subsidiary Guarantee in accordance with the provisions of Indenture,

	(a)	interest rate swap agreements, interest rate cap agreements and interest rate collar agreements;

	(b)	other agreements or arrangements designed to protect such Person against fluctuations in interest rates; and

	(c)	any foreign currency futures contract, option or similar agreement or arrangement designed to protect such Person against fluctuations in currency exchange rates or commodity prices,

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	(a)	any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (1) any Asset Sale (including, without limitation, dispositions pursuant to sale-and-leaseback transactions) or (2) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and

	(b)	any extraordinary or non-recurring gain (but not loss), together with any related provision for taxes on such extraordinary or non-recurring gain (but not loss).

	(a)	the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, sales commissions, recording fees, title transfer fees, title insurance premiums, appraiser fees, other out-of-pocket expenses and costs incurred in connection with preparing such asset for sale) and any relocation expenses incurred as a result thereof;

	(b)	taxes paid or estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements that will result in a reduction in consolidated tax liability);

	(c)	amounts required to be applied to the repayment of Indebtedness (other than under a revolving credit facility) secured by a Lien on the asset or assets that were the subject of such Asset Sale; and

	(d)	any reserve (including any reserve against any liabilities associated with such Asset Sale and retained by the Company or the relevant Restricted Subsidiary) established in accordance with GAAP or any amount placed in escrow, in either case for adjustment in respect of the sale price of such asset or assets, until such time as such reserve is reversed or such escrow arrangement is terminated, in which case Net Proceeds shall include only the amount of the reserve so reversed or the amount returned to the Company or its Restricted Subsidiaries from such escrow arrangement, as the case may be.

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	(a)	as to which neither the Company nor any of its Restricted Subsidiaries (1) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness) or is otherwise directly or indirectly liable (as a guarantor or otherwise) or (2) constitutes the lender;

	(b)	no default with respect to which (including any rights the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) the holders of Indebtedness of the Company or any of its Restricted Subsidiaries (other than the Notes) to declare a default on such Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and

	(c)	as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries.

	(a)	guaranteeing or securing the Notes or any Guarantee;

	(b)	in favor of the Company or a Guarantor;

	(c)	guaranteeing Indebtedness incurred pursuant to clause (a) of the second paragraph of the covenant described under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Preferred Stock”; or

	(d)	in existence on the date of the Indenture to the extent guaranteeing Existing Indebtedness and Permitted Refinancing Indebtedness in respect thereof incurred in compliance with clause (j) of the second paragraph of the covenant described under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Disqualified Stock”.

	(a)	any Investment in the Company (including, without limitation, any acquisition of the Notes) or in a Wholly Owned Restricted Subsidiary of the Company, other than any Investment described in clause (a) of the definition of “Restricted Payments”;

	(b)	any Investment in Cash Equivalents;

	(c)	any Investment by the Company or any Restricted Subsidiary of the Company in a Person if as a result of such Investment (1) such Person becomes a Restricted Subsidiary of the Company or (2) such Person is merged or consolidated with or into, or transfers or conveys all or substantially all of its properties or assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company;

	(d)	any Investment made as a result of the receipt of non-cash consideration from (1) an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption “— Put Option of Holders — Asset Sales” or (2) a disposition of assets that does not constitute an Asset Sale;

	(e)	Investments in stock, obligations or securities received in settlement of any claim or debts owing to the Company or any Restricted Subsidiary as a result of bankruptcy or insolvency proceedings or received in satisfaction of any judgment or in settlement of any claim in circumstances where the Company does not expect it would receive cash payment in a timely manner, or upon the foreclosure, perfection or enforcement of any Lien in favor of the Company or any Restricted Subsidiary, in each case as to any claim or debts owing to the Company or any Restricted Subsidiary that arose in the ordinary course of business of the Company or any such Restricted Subsidiary, provided that any stocks, obligations or securities received in settlement of any claim or debts that arose in the ordinary course

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		of business (and received other than as a result of bankruptcy or insolvency proceedings or received in satisfaction of any judgment or in settlement of any claim in circumstances where the Company does not expect it would receive cash payment in a timely manner, or upon foreclosure, perfection or enforcement of any Lien) that are, within 180 days of receipt, converted into cash or Cash Equivalents shall be treated as having been cash or Cash Equivalents at the time received;

	(f)	Investments in Argas Ltd. consisting of guarantees of its obligations incurred in the ordinary course of its business, provided that such Investments, when taken together with all other Investments made pursuant to this clause (f) that are at the time outstanding, do not exceed €50,000,000;

	(g)	Investments in Argas Ltd. (other than those described in clause (f) above) and any other Affiliate organized in a foreign jurisdiction that is required by the applicable laws and regulations of such foreign jurisdiction or its governmental agencies, authorities or state-owned businesses to be majority owned by the government of such foreign jurisdiction or individual or corporate citizens of such foreign jurisdiction or another foreign jurisdiction in order for such Affiliate to transact business in such foreign jurisdiction, provided that such Investments, when taken together with all other Investments made pursuant to this clause (g) that are at the time outstanding, do not exceed 20% of Consolidated Tangible Net Worth;
	(h)	Investments in any Person in exchange for, or out of the net cash proceeds of, an issue or sale by the Company of Equity Interests (other than Disqualified Stock); and

	(i)	other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (i) that are at the time outstanding, do not exceed €25,000,000.

	(a)	Liens securing Indebtedness incurred pursuant to clause (a) of the second paragraph of the covenant described under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Disqualified Stock”, and Liens securing any other Indebtedness under Credit Facilities incurred pursuant to the first paragraph of such covenant;

	(b)	Liens in favor of the Company and its Restricted Subsidiaries;

	(c)	Liens on any property or asset of a Person existing at the time such Person is merged into or consolidated with the Company or any Restricted Subsidiary of the Company, provided that such Liens were in existence prior to such merger or consolidation, were not created in contemplation of it and do not extend to any property or asset of the Company or any of its Restricted Subsidiaries other than those of the Person merged into or consolidated with the Company or any of its Restricted Subsidiaries;
	(d)	Liens on any property or asset existing at the time of acquisition thereof by the Company or any Restricted Subsidiary of the Company, provided that such Liens were in existence prior to such acquisition, were not created in contemplation of it and do not extend to any other property or asset of the Company or any of its Restricted Subsidiaries;
	(e)	Liens securing the performance of statutory obligations, surety or appeal bonds, bid or performance bonds, insurance obligations or other obligations of a like nature incurred in the ordinary course of business;

	(f)   Liens securing Hedging Obligations;

	(g)	Liens existing on the date of the Indenture;
	(h)	Liens securing Indebtedness (including Capital Lease Obligations) permitted by clause (g) of the second paragraph of the covenant described under the caption “— Certain Covenants — Incurrence of

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		Indebtedness and Issuance of Disqualified Stock”, provided that such Liens extend only to the property, plant or equipment financed by such Indebtedness;
	(i)	any interest or title of a lessor under an operating lease;
	(j)	Liens arising by reason of deposits necessary to obtain standby letters of credit in the ordinary course of business;
	(k)	Liens on real or personal property or assets of the Company or a Restricted Subsidiary thereof to secure Indebtedness incurred for the purpose of (1) financing all or any part of the purchase price of such property or assets incurred prior to, at the time of, or within 90 days after, the acquisition of such property or assets or (2) financing all or any part of the cost of construction or improvement of any such property or assets, provided that the amount of any such financing shall not exceed the amount expended in the acquisition of, or the construction of, such property or assets and such Liens shall not extend to any other property or assets of the Company or a Restricted Subsidiary (other than any associated accounts, contracts and insurance proceeds);
	(l)	judgment Liens not giving rise to an Event of Default so long as any appropriate legal proceeding which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceeding may be initiated shall not have expired;
	(m)	Liens securing Indebtedness of the Company or any Restricted Subsidiary of the Company that does not exceed €10,000,000 at any one time outstanding;
	(n)	Liens securing Acquired Indebtedness incurred pursuant to the first paragraph of the covenant described under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Disqualified Stock”, provided that such Liens (1) secured such Acquired Indebtedness at the time of and prior to the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company and were not granted in connection with, or in anticipation of, such incurrence, and (2) do not extend to any property or asset of the Company or any of its Restricted Subsidiaries other than the property or asset that secured the Acquired Indebtedness prior to the time that it became Acquired Indebtedness of the Company or a Restricted Subsidiary of the Company; and
	(o)	Liens securing Permitted Refinancing Indebtedness with respect to any Indebtedness secured by Liens referred to in clauses (c), (d), (g), (h), (k) and (n) above and in this clause (o).

	(a)	the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus premium, if any, and accrued interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of expenses incurred in connection therewith);
	(b)	such Permitted Refinancing Indebtedness has a final maturity date no earlier than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;
	(c)	if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness is subordinated in right of payment to the Notes on terms at least as favorable, taken as a whole, to the holders of the Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and

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	(d)	if the Company is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded, then such Permitted Refinancing Indebtedness is solely Indebtedness of the Company,

	(a)	any issuance and sale of Equity Interests (other than Disqualified Stock) of the Company pursuant to an underwritten offering registered under the Securities Act; or
	(b)	any other issuance and sale of Equity Interests (other than Disqualified Stock) of the Company so long as, at the time of consummation of such sale, the Company has a class of common equity securities (including American depositary shares) registered pursuant to Section 12(b) or Section 12(g) under the Exchange Act.

	(a)	Sercel S.A., a French limited liability corporation with its head office in Carquefou, France, and a Restricted Subsidiary of the Company as of the Issue Date; and/or
	(b)	any company (including Sercel Holding S.A.) that holds all of the outstanding Capital Stock of either or both of Sercel S.A. and Sercel Inc. (other than directors’ qualifying shares and Capital Stock held by other statutorily required minority shareholders).

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	(a)	any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof);

	(b)	any partnership (1) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (2) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof); and

	(c)	any other Person whose results for financial reporting purposes are consolidated with those of such Person in accordance with GAAP.

	(a)	has no Indebtedness other than Non-Recourse Debt;

	(b)	is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless such agreement, contract, arrangement or understanding does not violate the terms of the Indenture described under the caption “— Certain Covenants — Transactions with Affiliates”; and

	(c)	is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (1) to subscribe for additional Equity Interests or (2) to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results.

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	(1)	such Indebtedness is permitted under the covenant described under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Disqualified Stock”; calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and
	(2)	no Default or Event of Default would be in existence following such designation.

	(a)	all of the outstanding Capital Stock or other ownership interests of which (other than directors’ qualifying shares and Capital Stock held by other statutorily required minority shareholders) shall at the time be owned directly or indirectly by such Person; or
	(b)	such Restricted Subsidiary is organized in a foreign jurisdiction and is required by the applicable laws and regulations of such foreign jurisdiction or its governmental agencies, authorities or state-owned businesses to be partially owned by the government of such foreign jurisdiction or individual or corporate citizens of such foreign jurisdiction or another foreign jurisdiction in order for such Restricted Subsidiary to transact business in such foreign jurisdiction, provided that such Person, by contract or otherwise, controls the business and management of such Restricted Subsidiary.

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	•	be general senior, unsecured obligations of the Company;
	•	rank equally in right of payment to all existing and future senior, unsecured indebtedness of the Company, except for any liabilities preferred by law;
	•	rank senior in right of payment to all existing and future subordinated indebtedness of the Company;
	•	be guaranteed on a senior, unsecured basis by certain Subsidiaries of the Company as described below; and
	•	be effectively subordinated to all existing and future indebtedness of Subsidiaries of the Company that are not Guarantors.

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	General

	Guarantors

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	Release

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	Merger or Consolidation

	(a)	the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) shall execute a Subsidiary Guarantee and deliver an opinion of counsel in accordance with the terms of the Indenture;
	(b)	immediately after giving effect to such transaction, no Default or Event of Default exists;
	(c)	such Guarantor, or any Person formed by or surviving any such consolidation or merger, would have a Consolidated Net Worth (immediately after giving effect to such transaction) equal to or greater than the Consolidated Net Worth of such Guarantor immediately preceding the transaction; and
	(d)	the Company would be permitted by virtue of the Company’s pro forma Consolidated Interest Coverage Ratio, immediately after giving effect to such transaction, to incur at least €1.00 of additional Indebtedness pursuant to the Consolidated Interest Coverage Ratio test set forth in the covenant described under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Disqualified Stock”.

	Optional Redemption

Year		Percentage
2012				%
2013				%
2014				%
2015 and thereafter			100.00	%

	(a)	if the Notes are listed, in compliance with the requirements of the principal securities exchange on which the Notes are listed; or

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	(b)	if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate.

	(a)	(1) any change in or amendment to the laws or treaties (or regulations or rulings promulgated thereunder) of a Relevant Taxing Jurisdiction (as defined under the caption “— Additional Amounts”) or (2) any change in or amendment to any official position regarding the application or interpretation of such laws, treaties, regulations or rulings, which change or amendment is announced or is effective on or after the date of the Indenture; and
	(b)	such obligation cannot be avoided by the Company or any such Guarantor taking reasonable measures available to it.

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	(a)	surrendered by the holder thereof for payment of principal more than 30 days after the later of (1) the date on which such payment first became due and (2) if the full amount payable has not been received by or on behalf of the relevant holder on or prior to such due date, the date on which, the full amount having been so received, notice to that effect shall have been given to the holders by the Trustee, except to the extent that the holder would have been entitled to such Additional Amounts on surrendering such Note for payment on the last day of the applicable 30-day period;
	(b)	if any tax, assessment or other governmental charge is imposed or withheld by reason of the failure to comply by the holder or, if different, the beneficial owner (ayant-droit) of the Note with a request addressed to such holder or beneficial owner to provide information, documents or other evidence concerning the nationality, residence, identity or connection with the Relevant Taxing Jurisdiction of such holder or beneficial owner which is required or imposed by a statute, treaty, regulation or administrative practice of the Relevant Taxing Jurisdiction as a precondition to exemption from all or part of such tax, assessment or governmental charge;
	(c)	held by or on behalf of a holder who is liable for Taxes in respect of such Note by reason of having some connection with the Relevant Taxing Jurisdiction other than the mere purchase, holding or disposition of any Note, or the receipt of payments made by or on behalf of the Company or any Guarantor in respect thereof or any Subsidiary Guarantee, including, without limitation, such holder being or having been a citizen or resident thereof or being or having been present or engaged in a trade or business therein or having had a permanent establishment therein;
	(d)	on account of any estate, inheritance, gift, sale, transfer, personal property or other similar tax, assessment or other governmental charge;
	(e)	except in the case of the winding up of the Company or any Guarantor, any Note surrendered for payment in the Republic of France;
	(f)	any withholding or deduction imposed on a payment to an individual which is required to be made pursuant to any law implementing or complying with, or introduced in order to conform to European Council Directive 2003/48/ EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of November 26-27, 2000 on the taxation of savings income or any agreement between the European Community and any jurisdiction providing for equivalent measures;
	(g)	as a result of any combination of (a), (b), (c), (d), (e) or (f) or with respect to any payment made by or on behalf of the Company or any Guarantor in respect of any Note or Subsidiary Guarantee to any holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent that a beneficiary or settlor or beneficial owner would not have been entitled to any Additional Amounts had such beneficiary or settlor or beneficial owner been the holder; or
	(h)	if any withholding or deduction imposed or levied on a payment to a Luxembourg resident individual is required to be made pursuant to the Luxembourg law of 23 December 2005.

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	Change of Control

	(a)	accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer;
	(b)	deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered; and

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	(c)	deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers’ Certificate stating the aggregate principal amount of the Notes or portions thereof being purchased by the Company.

	(a)	the sale, lease, transfer, conveyance or other disposition (other than by merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Subsidiaries, taken as a whole;
	(b)	the adoption, by holders of Capital Stock of the Company, of a voluntary plan relating to the liquidation or dissolution of the Company;
	(c)	the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” (as such term is used in Section 13(d) (3) of the Exchange Act) becomes the “beneficial owner” (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly through one or more intermediaries, of more than 50% of the voting power of the outstanding Voting Stock of the Company; or
	(d)	the first day on which more than a majority of the members of the Board of Directors are not Continuing Directors;

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	Asset Sales

	(a)	the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value (as determined in accordance with the definition of such term set out below under the caption “— Certain Definitions”, the results of which determination shall be set forth in an Officers’ Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of; and
	(b)	at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents;

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	Restricted Payments

	(a)	purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any of its Restricted Subsidiaries (other than any such Equity Interests owned by the Company or any Wholly Owned Restricted Subsidiary of the Company);

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	(b)	make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value, any Indebtedness that is subordinated in right of payment to the Notes or the Subsidiary Guarantees, except a payment of interest or principal at Stated Maturity; or
	(c)	make any Restricted Investment,

	(1)	no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof;
	(2)	the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least €1.00 of additional Indebtedness pursuant to the Consolidated Interest Coverage Ratio test set forth in the first paragraph of the covenant described under the caption “— Incurrence of Indebtedness and Issuance of Disqualified Stock”; and

	(3)	such Restricted Payment, together with (x) the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the Reference Date (excluding Restricted Payments permitted by clauses (b) through (e) and, to the extent deducted in computing Consolidated Net Income, (f) and (g) of the next succeeding paragraph), and (y) the aggregate amount of all dividends and other payments or distributions paid subsequent to the Reference Date on account of the Company’s or any of its Restricted Subsidiaries’ Equity Interests (including, without limitation, any such payment in connection with any merger or consolidation involving the Company) or to the direct or indirect holders of the Company’s Equity Interests in their capacity as such (other than (i) dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company, (ii) dividends or distributions payable to the Company or any of its Restricted Subsidiaries or (iii) if the Restricted Subsidiary making such dividend is not a Wholly Owned Restricted Subsidiary, dividends to its shareholders on a pro rata basis), is less than the sum (without duplication) of the following:

	(A)	50% of the cumulative Consolidated Net Income of the Company for the period (taken as one accounting period) from January 1, 2005 to the end of the Company’s most recently ended fiscal quarter for which financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit); plus
	(B)	100% of the aggregate of (1) the net cash proceeds and (2) the fair market value of Strategic Assets transferred or conveyed to the Company (as valued at the time of transfer or conveyance to the Company, and as determined in the manner contemplated by the definition of the term “fair market value”), in each case received by the Company since the Reference Date as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issuance or sale of Disqualified Stock or debt securities of the Company that have been converted into, or exchanged or redeemed for, such Equity Interests (other than any such Equity Interests, Disqualified Stock or convertible debt securities sold to a Restricted Subsidiary of the Company and other than Disqualified Stock or convertible debt securities that have been converted into, or exchanged or redeemed for, Disqualified Stock); plus
	(C)	to the extent that any Restricted Investment that was made after the Reference Date is sold for cash or otherwise liquidated or repaid for cash, the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any); plus
	(D)	if any Unrestricted Subsidiary is redesignated as a Restricted Subsidiary, the lesser of (1) an amount equal to the fair market value of the Investments previously made by the Company and its Restricted Subsidiaries in such Subsidiary as of the date of redesignation and (2) the amount of such Investments.

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	(a)	the payment of any dividend within 60 days after the date of declaration thereof if at said date of declaration such payment would have complied with the provisions of the Indenture;
	(b)	the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or any Guarantor or any Equity Interests of the Company or any of its Restricted Subsidiaries in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, other Equity Interests of the Company (other than any Disqualified Stock), provided that the amount of any such net cash proceeds that are utilized for any such redemption, purchase, retirement, defeasance or other acquisition shall be excluded from clause (3)(B) of the preceding paragraph;
	(c)	the defeasance, redemption, purchase, retirement or other acquisition of subordinated Indebtedness of the Company or any Guarantor with the net cash proceeds from an incurrence of, or in exchange for, Permitted Refinancing Indebtedness;
	(d)	the payment of any dividend or distribution by a Restricted Subsidiary of the Company to the Company or any of its Wholly Owned Restricted Subsidiaries;
	(e)	repurchases of Equity Interests deemed to occur upon exercise of stock options, if such Equity Interests represent a portion of the exercise price of such stock options;
	(f)	so long as no Default has occurred and is continuing, the repurchase or other acquisition for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company for allocation (as a free allocation or otherwise) to directors, officers and employees of the Company and its Restricted Subsidiaries not in excess of €2,500,000 in any 12-month period;
	(g)	so long as no Default has occurred and is continuing, the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any member of the Company’s (or any of its Restricted Subsidiaries’) management pursuant to any management equity subscription agreement or stock option agreement in effect as of the Issue Date; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed €1,000,000 in any 12-month period;
	(h)	loans or advances in the ordinary course of business to Affiliates or Persons with which the Company or a Subsidiary may have contractual arrangements in any jurisdiction reasonably necessary to be made in connection with conducting the business of the Company or a Subsidiary in such jurisdiction in a form that is customary to address foreign investment regulation or practice in such jurisdiction, in an aggregate amount not to exceed €2,000,000 outstanding at any one time;
	(i)	so long as no Default has occurred and is continuing, advances constituting Investments or loans to directors, officers and employees of the Company and its Restricted Subsidiaries in the ordinary course of business for bona fide business purposes not in excess of €1,000,000 at any one time outstanding; and
	(j)	other Restricted Payments not to exceed €15,000,000 in the aggregate.

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	Incurrence of Indebtedness and Issuance of Disqualified Stock

	(a)	Indebtedness under Credit Facilities in an aggregate principal amount at any one time outstanding not to exceed the greater of (x) €125,000,000, plus any fees, premiums, expenses (including costs of collection), indemnities and similar amounts payable in connection with such Indebtedness, and less any amounts derived from Asset Sales and applied to the permanent reduction of Indebtedness under Credit Facilities in accordance with the covenant described under the caption “— Put Option of Holders — Asset Sales” and (y) 10% of the Company’s Consolidated Total Assets;
	(b)	Existing Indebtedness;
	(c)	Hedging Obligations;
	(d)	Indebtedness represented by the New Notes or the Subsidiary Guarantees;
	(e)	intercompany Indebtedness between or among the Company and any of its Wholly Owned Restricted Subsidiaries, provided that (1) if the Company or any Guarantor is the obligor on such Indebtedness, then the Indebtedness must be unsecured and expressly subordinated to the prior payment in full in cash of all of the Company’s obligations with respect to the Notes or such Guarantor’s obligations under its Subsidiary Guarantee, as the case may be, and (2) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Wholly Owned Restricted Subsidiary of the Company, or any sale or other transfer of any such Indebtedness to a Person that is neither the Company nor a Wholly Owned Restricted Subsidiary of the Company, shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, as of the date of such issuance, sale or other transfer that is not permitted by this clause (e);
	(f)	Indebtedness in respect of bid, performance or surety bonds issued for the account of the Company or any of its Restricted Subsidiaries in the ordinary course of business, including guarantees or obligations of the Company or any of its Restricted Subsidiaries with respect to letters of credit supporting such bid, performance or surety obligations (in each case other than for an obligation for money borrowed);
	(g)	Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations (or any guarantee thereof or indemnity with respect thereto), in each case, incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or any of its Restricted Subsidiaries, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (g), not to exceed €20,000,000 at any time outstanding;

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	(h)	the guarantee by the Company of Indebtedness of any of its Restricted Subsidiaries or by any Restricted Subsidiary of Indebtedness of the Company or another Restricted Subsidiary, in each case, that was permitted to be incurred by another provision of this covenant; provided that if the Indebtedness being guaranteed is subordinated in right of payment to the Notes or a Subsidiary Guarantee then the guarantee shall be subordinated to the same extent as the Indebtedness guaranteed;
	(i)	intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries incurred in the ordinary course of business in connection with cash pooling or other cash management arrangements;
	(j)	Permitted Refinancing Indebtedness incurred in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund Indebtedness incurred pursuant to the first paragraph and clauses (b), (d), (g) and (j) of the second paragraph of this covenant;
	(k)	Indebtedness of Restricted Subsidiaries of the Company (other than Guarantors) in an aggregate principal amount not to exceed 5% of the Company’s Consolidated Total Assets minus the sum of all Indebtedness of Restricted Subsidiaries of the Company (other than Guarantors) then outstanding; and
	(l)	any additional Indebtedness of the Company or any Guarantor in an aggregate principal amount not in excess of €25,000,000 at any one time outstanding and any guarantee thereof.

	Liens

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	Sale-and-Leaseback Transactions

	(a)	the Company or such Restricted Subsidiary could have (1) incurred Indebtedness in an amount equal to the Attributable Indebtedness relating to such sale-and-leaseback transaction pursuant to the Consolidated Interest Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption “— Incurrence of Indebtedness and Issuance of Disqualified Stock” and (2) incurred a Lien to secure such Indebtedness pursuant to the covenant described under the caption “— Liens”;
	(b)	the gross cash proceeds of such sale-and-leaseback transaction are at least equal to the fair market value (as determined in accordance with the definition of such term, the results of which determination shall be set forth in an Officers’ Certificate delivered to the Trustee) of the property that is the subject of such sale-and-leaseback transaction; and
	(c)	the transfer of assets in such sale-and-leaseback transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, the covenant described above under the caption “— Put Option of Holders — Asset Sales”, if applicable.

	Issuances and Sales of Capital Stock of Restricted Subsidiaries

	(a)	the Net Proceeds from such issuance, transfer, conveyance, sale or other disposition are applied in accordance with the covenant described above under the caption “— Put Option of Holders — Asset Sales” and
	(b)	immediately after giving effect to such transfer, conveyance, sale or other disposition, such Restricted Subsidiary either continues to be a Restricted Subsidiary or, if such Restricted Subsidiary would no longer constitute a Restricted Subsidiary, any remaining Investment in such Restricted Subsidiary would have been permitted to be made under the covenant described above under the caption “— Restricted Payments” if made on the date of such transfer, conveyance, sale or other disposition.

	Dividend and Other Payment Restrictions Affecting Subsidiaries

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	(a)	(1) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries on its Capital Stock or (2) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries;

	(b)	make loans or advances to the Company or any of its Restricted Subsidiaries; or
	(c)	transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries,

	(1)	agreements governing Credit Facilities or Existing Indebtedness, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that such agreements and amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are not materially less favorable to the holders of the Notes, taken as a whole, with respect to such dividend and other payment restrictions, than those contained, in the case of Credit Facilities, in agreements governing Credit Facilities or, in the case of Existing Indebtedness, in agreements governing such Existing Indebtedness, in either case as in effect on the date of the Indenture;
	(2)	the Indenture, the Notes and the Subsidiary Guarantees;
	(3)	any agreement for the sale or other disposition of Equity Interests in a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending the sale or other disposition;
	(4)	any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the Indenture to be incurred;
	(5)	by reason of customary provisions restricting the subletting or assignment of any lease or the transfer of copyrighted or patented materials;
	(6)	purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (c) above on the property so acquired;
	(7)	customary provisions in agreements for the sale of property or assets;
	(8)	customary provisions in agreements that restrict the assignment of such agreements or rights thereunder;
	(9)	provisions with respect to the disposition or distribution of assets or property in any joint venture agreement, assets sale agreement, stock sale agreement or other similar agreement in each case entered into in the ordinary course of business, but in each case only to the extent such encumbrance or restriction relates to the transfer of the property, or encumbers or restricts the assets, subject to such agreement;
	(10)	restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;
	(11)	Permitted Refinancing Indebtedness, provided that the encumbrances and restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially less favorable to the holders of the Notes, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;

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	(12)	any Liens not prohibited by the covenant described above under the caption “— Liens” that limit the right of the debtor to dispose of the assets subject to such Liens; or
	(13)	applicable law.

	Transactions with Affiliates

	(a)	such Affiliate Transaction is in writing and on terms that, when taken as a whole, are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person or, if there is no such comparable transaction, on terms that are fair and reasonable to the Company or such Restricted Subsidiary; and
	(b)	the Company delivers to the Trustee (1) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of €2,000,000, an Officers’ Certificate certifying that such Affiliate Transaction complies with clause (a) above and (2) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of €5,000,000, a resolution of the Board of Directors set forth in an Officers’ Certificate certifying that such Affiliate Transaction complies with clause (a) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors and (3) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of €15,000,000, an opinion as to the fairness to the Company or the relevant Subsidiary of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm that is, in the judgment of the Board of Directors, qualified to render such opinion and is independent with respect to the Company;

	(A)	any employment agreement or other employee compensation plan or arrangement (including stock option plans) entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business of the Company or such Restricted Subsidiary;
	(B)	transactions between or among the Company and its Restricted Subsidiaries (including any Person that becomes a Restricted Subsidiary as a result of any such transaction);
	(C)	loans or advances to officers, directors and employees of the Company or any of its Restricted Subsidiaries made in the ordinary course of business and consistent with past practices of the Company and its Restricted Subsidiaries in an aggregate amount not to exceed €1,000,000 outstanding at any one time;
	(D)	indemnities of officers, directors and employees of the Company or any of its Restricted Subsidiaries permitted by provisions of the organizational documents of the Company or such Restricted Subsidiary or applicable law;
	(E)	the payment of reasonable and customary regular fees to directors of the Company or any of its Restricted Subsidiaries who are not employees of the Company or any Subsidiary;
	(F)	any agreement or arrangement in effect as of the Issue Date or any amendment thereto or replacement thereof or any transaction contemplated thereby (including pursuant to any amendment or replacement agreement) so long as any such amendment or replacement agreement, taken as a whole, is no more disadvantageous to the holders of the Notes in any material respect than the original agreement as in effect on the Issue Date; and

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	(G)	Restricted Payments and Permitted Investments that are permitted by the provisions of the Indenture described above under the caption “— Restricted Payments.”

	Guarantees of Certain Indebtedness by Restricted Subsidiaries

	Conduct of Business

	Anti Layering

	Reports

	(i)	within the time periods specified in the Commission’s rules and regulations, all annual financial and other information with respect to the Company and its Subsidiaries that would be required to be contained in a filing with the Commission on Form 20-F, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and a report thereon by the Company’s certified independent accountants; and
	(ii)	within 60 days after the end of each of the first and third quarters of each fiscal year (and within 75 days after the end of the second quarter of each fiscal year), reports on Form 6-K, or any successor form, attaching (a) unaudited consolidated financial statements for the Company for the period then ended (and the comparable period in the prior year), in each case prepared in accordance with GAAP (as in effect on the date of such report or financial information) including either, to the extent permitted under applicable law and SEC regulations (i) a reconciliation to accounting principles generally accepted in the United States (“U.S. GAAP”) in substantially the form set out in the Form 20-F of the Company for the year ended December 31, 2005 dated on or about May 9, 2006 or (ii) a reconciliation of EBITDA to U.S. GAAP; provided that, in either case, such reconciliation shall be made to U.S. GAAP as in effect on the date of such report or financial information and (b) the information relating to the Company described in Item 5 of Form 20-F (i.e., Operating and Financial Review and Prospects).

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	Future Designation of Restricted and Unrestricted Subsidiaries

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	(a)	default for 30 days in the payment when due of interest, on the Notes;
	(b)	default in payment when due of the principal of or premium, if any, on the Notes;
	(c)	failure by the Company to comply with the provisions described under the caption “— Put Option of Holders”;
	(d)	failure by the Company for 30 days after it receives written notice from the Trustee or at least 25% in principal amount of the then outstanding Notes to comply with any of its other agreements in the Indenture or the Notes;
	(e)	the declaration or payment of any dividend or the making of any other payment or distribution described in subclause (y) of clause (3) under the caption “— Certain Covenants — Restricted Payments”, which declaration, payment or distribution would not be permitted by the provisions described under the caption “— Certain Covenants — Restricted Payments” if it were treated as a Restricted Payment;
	(f)	the Company consolidates or merges (fusion) with or into (whether or not the Company is the surviving corporation), or sells, assigns, transfers, leases, conveys, demerges (scission) or otherwise disposes of all or substantially all of its properties or assets in one or more related transactions, to another Person unless:

	(1)	the Company is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance, demerger or other disposition shall have been made is a corporation organized or existing under the laws of the United States (or any state thereof or the District of Columbia), the Republic of France or any other member state of the European Union (as constituted on the Issue Date);
	(2)	the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, lease, conveyance, demerger or other disposition shall have been made assumes all the obligations of the Company under the Notes and the Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee;
	(3)	immediately after such transaction no Default or Event of Default exists;
	(4)	except in the case of a merger of the Company with or into a Wholly Owned Restricted Subsidiary of the Company, the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance, demerger or other disposition shall have been made:

	(A)	will have a Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction; and
	(B)	will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least €1.00 of additional Indebtedness pursuant to the Consolidated Interest Coverage Ratio test set forth in the first paragraph of the covenant described

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		above under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Disqualified Stock”; and

	(5)	the Company shall deliver to the Trustee an Officers’ Certificate and an opinion of counsel stating that such consolidation, merger or disposition and any supplemental indenture in respect thereto comply with this provision and that all conditions precedent in the Indenture relating to such transaction or transactions have been complied with;

	(g)	default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee exists on the date of the Indenture or is created after the date of the Indenture, which default (1) is caused by a failure to pay principal of or premium or interest on such Indebtedness prior to the expiration of any grace period provided in such Indebtedness, including any extension thereof (a “Payment Default”), or (2) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates in excess of €10,000,000 and provided, further, that if any such default is cured or waived or any such acceleration rescinded, or such Indebtedness is repaid, within a period of 10 days from the continuation of such default beyond the applicable grace period or the occurrence of such acceleration, as the case may be, such Event of Default and any consequential acceleration of the Notes shall be automatically rescinded, so long as such rescission does not conflict with any judgment or decree;
	(h)	failure by the Company or any of its Restricted Subsidiaries to pay final judgments (not covered by insurance) aggregating in excess of €10,000,000, which judgments are not paid, discharged or stayed for a period of 60 days;
	(i)	failure by any Guarantor to perform any covenant set forth in its Subsidiary Guarantee, or the repudiation by any Guarantor of its obligations under its Subsidiary Guarantee or the unenforceability of any Subsidiary Guarantee for any reason other than as provided in the Indenture; and
	(j)	certain events of bankruptcy or insolvency with respect to the Company or any Significant Subsidiary.

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	(a)	the rights of holders of outstanding Notes to receive payments in respect of the principal of and premium, if any, and interest on such Notes when such payments are due from the trust referred to below;
	(b)	the Company’s obligations with respect to the Notes concerning issuing temporary Notes, registration of transfer or exchange of the Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust;
	(c)	the rights, powers, trusts, duties and immunities of the Trustee, and the Company’s and any Guarantor’s obligations in connection with them; and
	(d)	the Legal Defeasance provisions of the Indenture.

	(1)	the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the holders of the Notes, cash in U.S. dollars, non-callable U.S. Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of an internationally recognized firm of independent public accountants, to pay the principal of and premium and interest on the outstanding Notes on the Stated Maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date;
	(2)	in the case of Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service and the French tax authority a ruling or (B) since the date of the Indenture, there has been a change in the applicable income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the holders of the outstanding Notes will not recognize income, gain or loss for U.S. federal or French income tax

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		purposes, respectively, as a result of such Legal Defeasance and will be subject to U.S. federal or French income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;
	(3)	in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an opinion of counsel reasonably acceptable to the Trustee confirming that the holders of the outstanding Notes will not recognize income, gain or loss for U.S. federal or French income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal or French income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;
	(4)	no Default or Event of Default shall have occurred and be continuing either (A) on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or (B) insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 550th day after the date of deposit;
	(5)	such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the Indenture) to which the Company or any of its Restricted Subsidiaries is a party or by which the Company or any of its Restricted Subsidiaries is bound;
	(6)	the Company must have delivered to the Trustee an opinion of counsel to the effect that, after the 550th day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally;
	(7)	the Company must deliver to the Trustee an Officers’ Certificate stating that the deposit was not made by the Company with the intent of preferring the holders of the Notes over the other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and
	(8)	the Company must deliver to the Trustee an Officers’ Certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

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	(a)	reduce the principal amount of the Notes whose holders must consent to an amendment, supplement or waiver;
	(b)	reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption or purchase of the Notes by the Company;
	(c)	reduce the rate of or change the time for payment of interest on any Note;
	(d)	waive a Default or Event of Default in the payment of principal of or premium or interest on the Notes (except a rescission of acceleration of the Notes by the holders of at least a majority in principal amount of the Notes and a waiver of the payment default that resulted from such acceleration);
	(e)	make any Note payable in money other than that stated in the Notes;
	(f)	make any change in the provisions of the Indenture relating to waivers of past defaults or the rights of holders of the Notes to receive payments of principal of or premium or interest on the Notes;
	(g)	waive a redemption or repurchase payment with respect to any Note;
	(h)	make any change in the ranking of the Notes relative to other Indebtedness of the Company or the Subsidiary Guarantees relative to other Indebtedness of the Guarantors, in either case in a manner adverse to the holders;
	(i)	release any Guarantor from any of its obligations under its Subsidiary Guarantee or the Indenture, except in accordance with the terms of the Indenture;
	(j)	make any change in the provisions described under the caption “— Additional Amounts” in a manner adverse to the holders; or
	(k)	make any change in the preceding amendment, supplement and waiver provisions.

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	(1)	either:

	(a)	all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or
	(b)	all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the giving of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be irrevocably deposited with the Trustee as trust funds in trust solely for the benefit of the holders of the Notes, cash in U.S. dollars, non-callable U.S. Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not previously delivered to the Trustee for cancellation, including principal, premium, if any, and accrued interest to the date of maturity or redemption;

	(2)	no Default or Event of Default shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound;
	(3)	the Company and each Guarantor has paid or caused to be paid all other sums payable by it under the Indenture; and
	(4)	the Company has delivered an Officers’ Certificate and an opinion of counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

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	(a)	the judgment concerned is enforceable in the State of New York;
	(b)	such judgment has been rendered by a court having jurisdiction over the parties both under its own rules of jurisdiction and in accordance with French rules of international conflicts of jurisdiction and the French courts did not have exclusive jurisdiction to hear the matter;
	(c)	the court that rendered such judgment has applied to the merits of the case the laws of the jurisdiction which would have been considered appropriate under French rules of international conflicts of laws;
	(d)	the judgment is not contrary to French international public policy (ordre public international), both pertaining to the merits and to the procedure of the case;
	(e)	the judgment is not tainted with fraud; and
	(f)	the judgment does not conflict with a French judgment or a foreign judgment which has become effective in France and there is no risk of conflict with proceedings pending before the French courts at the time enforcement of the judgment is sought.

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	Exchange of Global Notes for Definitive Notes

	(a)	DTC notifies the Company that it is unwilling or unable to continue as depositary for the Global Notes or has ceased to be a clearing agency registered under the Exchange Act and, in either case, the

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		Company thereupon fails to appoint a successor depositary within 90 days after the date of such notice;
	(b)	the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Definitive Notes; or
	(c)	there has occurred and is continuing an Event of Default with respect to the Notes.

	Exchange of Definitive Notes for Global Notes

	Exchange of Definitive Notes for Definitive Notes

	Same-Day Settlement and Payment

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	(a)	1.0% of the principal amount of the Note; and
	(b)	the excess of (1) the present value at such redemption date of (A) the redemption price of the Note at May 15, 2012 (such redemption price being set forth in the table appearing above under the caption “— Optional Redemption”) plus (B) all required interest payments due on the Note during the period from such redemption date through May 15, 2012 (excluding accrued but unpaid interest), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points over (2) the principal amount of the Note, if greater.

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	(a)	the sale, lease, conveyance or other disposition (a “disposition”) of any properties or assets (including, without limitation, by way of a sale-and-leaseback), excluding dispositions in the ordinary course of business (provided that the disposition of all or substantially all of the properties or assets of the Company and its Subsidiaries taken as a whole will be subject to the provisions of the Indenture described above under the caption “— Put Option of Holders — Change of Control” and the provisions described above in clause (f) under the caption “— Events of Default and Remedies” and not to the provisions of the Asset Sales covenant);
	(b)	the issue or sale by the Company or any of its Restricted Subsidiaries of Equity Interests of any of the Company’s Subsidiaries; and
	(c)	any Event of Loss,

	(A)	a disposition of obsolete or excess equipment or other properties or assets;
	(B)	a disposition of properties or assets (including Equity Interests) by the Company to a Wholly Owned Restricted Subsidiary or by a Restricted Subsidiary to the Company or to a Wholly Owned Restricted Subsidiary;
	(C)	a disposition of cash or Cash Equivalents;
	(D)	a disposition of properties or assets (including Equity Interests) that constitutes a Restricted Payment that is permitted by the provisions of the Indenture described above under the caption “— Certain Covenants — Restricted Payments”;
	(E)	any trade or exchange by the Company or any Restricted Subsidiary of equipment or other properties or assets for equipment or other properties or assets owned or held by another Person, provided that the fair market value of the properties or assets traded or exchanged by the Company or such Restricted Subsidiary (together with any cash or Cash Equivalents) is reasonably equivalent to the fair market value of the properties or assets (together with any cash or Cash Equivalents) to be received by the Company or such Restricted Subsidiary;
	(F)	the creation or perfection of a Lien on any properties or assets (or any income or profits therefrom) of the Company or any of its Restricted Subsidiaries that is not prohibited by the covenant described under the caption “— Certain Covenants — Liens”;
	(G)	a sale-and-leaseback of the Company’s office facilities in Massy, France replacing the sale-and-leaseback transaction relating to such facilities that is outstanding on the Issue Date;
	(H)	the surrender or waiver of contract rights or the settlement, release or surrender of contractual, non-contractual or other claims of any kind;
	(I)	the sale or discount, in each case without recourse, of accounts receivable arising in the ordinary course of business, but only in connection with the compromise of collection thereof;
	(J)	the factoring of accounts receivable arising in the ordinary course of business pursuant to arrangements customary in the region; and
	(K)	the grant in the ordinary course of business of any non-exclusive license of patents, trademarks, registrations therefor and other similar intellectual property.

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	(a)	in the case of a corporation, corporate stock;
	(b)	in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, including preferred stock;
	(c)	in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

	(d)	any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

	(a)	securities issued or directly and fully guaranteed or insured by the government of the United States of America, the Republic of France or any other country whose sovereign debt has a rating of at least A3 from Moody’s Investors Service, Inc. and at least A- from Standard & Poor’s Ratings Services or any agency or instrumentality of any such government (provided that the full faith and credit of such government is pledged in support thereof), in each case having maturities of not more than 12 months from the date of acquisition;
	(b)	certificates of deposit, Eurodollar time deposits and French negotiable debt instruments (titres de créances négociables) with maturities of 12 months or less from the date of acquisition, bankers’ acceptances with maturities not exceeding six months and overnight bank deposits, in each case with or issued by any commercial bank organized under the laws of any country that is a member of the Organization for Economic Co-operation and Development having capital and surplus in excess of €500,000,000 and whose long-term debt securities are rated at least A3 by Moody’s Investors Service, Inc. and at least A- by Standard & Poor’s Ratings Services;
	(c)	repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (a) and (b) above entered into with any financial institution meeting the qualifications specified in clause (b) above;
	(d)	commercial paper and French negotiable debt instruments (titres de créances négociables) having a rating of at least P-1 from Moody’s Investors Service, Inc. or at least A-1 from Standard & Poor’s Ratings Services and in each case maturing within 12 months after the date of acquisition;
	(e)	deposits available for withdrawal on demand with any commercial bank not meeting the qualifications specified in clause (b) above, provided that all such deposits are made in the ordinary course of business, do not remain on deposit for more than 30 consecutive days and do not exceed €25,000,000

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		in the aggregate at any one time, with no more than €5,000,000 being deposited in commercial banks within a single country; and
	(f)	money market mutual funds substantially all of the assets of which are of the type described in any of the foregoing clauses (a) to (d).

	(a)	provision for taxes based on income or profits of such Person and its Restricted Subsidiaries;
	(b)	Consolidated Interest Expense of such Person and its Restricted Subsidiaries;
	(c)	depreciation and amortization (including amortization or impairment, if any, of goodwill and of other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) of such Person and its Restricted Subsidiaries;
	(d)	other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries less any non-cash items increasing Consolidated Net Income of such Person and its Restricted Subsidiaries (other than items that will result in cash receipt);
	(e)	any expenses, fees, charges or other costs related to any equity offering (other than of Disqualified Stock) permitted by the indenture (whether or not successful); and

	(f)	without duplication, an amount equal to any extraordinary loss plus any net loss realized by such Person or any of its Restricted Subsidiaries in connection with an Asset Sale, in each case, on a consolidated basis and determined in accordance with GAAP.

	(a)	any incurrence, assumption, guarantee, repayment, purchase or redemption by such Person or any of its Restricted Subsidiaries of any Indebtedness (other than revolving credit borrowings) subsequent to the commencement of the period for which the Consolidated Interest Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Consolidated Interest Coverage Ratio is made (the “Calculation Date”);
	(b)	any acquisition that has been made by such Person or any of its Restricted Subsidiaries, or approved and expected to be consummated within 30 days of the Calculation Date, including, in each case, through a merger or consolidation, and including any related financing transactions, during the reference period or subsequent to such reference period and on or prior to the Calculation Date; and
	(c)	any other transaction that may be given pro forma effect in accordance with Article 11 of Regulation S-X under the Securities Act as in effect from time to time;

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	(a)	the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings, and net of all payments made or received (if any) pursuant to Hedging Obligations in respect of interest rates but excluding amortization of debt issuance costs and non-cash charges other than non-cash interest expenses related to convertible bonds); and
	(b)	the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period.

	(a)	the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Wholly Owned Restricted Subsidiary thereof;
	(b)	the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary or its stockholders; and
	(c)	the cumulative effect of a change in accounting principles shall be excluded.

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	(1)	Sercel Inc., Sercel Canada Ltd., Sercel Australia Pty Ltd, CGG Americas, Inc., CGG Canada Services Ltd., CGG Marine Resources Norge A/ S, CGGVeritas Services Inc., Veritas DGC Land Inc., Veritas Geophysical Corporation, Veritas Investments Inc., Viking Maritime Inc., Veritas Geophysical (Mexico) LLC, Veritas DGC Asia Pacific Ltd. and Alitheia Resources Inc.; and

224

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	(2)	any other Subsidiary of the Company that executes a supplemental indenture providing for a Subsidiary Guarantee in accordance with the provisions of Indenture,

	(a)	interest rate swap agreements, interest rate cap agreements and interest rate collar agreements;
	(b)	other agreements or arrangements designed to protect such Person against fluctuations in interest rates; and
	(c)	any foreign currency futures contract, option or similar agreement or arrangement designed to protect such Person against fluctuations in currency exchange rates or commodity prices,

225

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	(a)	any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (1) any Asset Sale (including, without limitation, dispositions pursuant to sale-and-leaseback transactions) or (2) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and
	(b)	any extraordinary or non-recurring gain (but not loss), together with any related provision for taxes on such extraordinary or non-recurring gain (but not loss).

	(a)	the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, sales commissions, recording fees, title transfer fees, title insurance premiums, appraiser fees, other out-of-pocket expenses and costs incurred in connection with preparing such asset for sale) and any relocation expenses incurred as a result thereof;
	(b)	taxes paid or estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements that will result in a reduction in consolidated tax liability);
	(c)	amounts required to be applied to the repayment of Indebtedness (other than under a revolving credit facility) secured by a Lien on the asset or assets that were the subject of such Asset Sale; and
	(d)	any reserve (including any reserve against any liabilities associated with such Asset Sale and retained by the Company or the relevant Restricted Subsidiary) established in accordance with GAAP or any amount placed in escrow, in either case for adjustment in respect of the sale price of such asset or assets, until such time as such reserve is reversed or such escrow arrangement is terminated, in which case Net Proceeds shall include only the amount of the reserve so reversed or the amount returned to the Company or its Restricted Subsidiaries from such escrow arrangement, as the case may be.

	(a)	as to which neither the Company nor any of its Restricted Subsidiaries (1) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness) or is otherwise directly or indirectly liable (as a guarantor or otherwise) or (2) constitutes the lender;
	(b)	no default with respect to which (including any rights the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) the holders of Indebtedness of the Company or any of its Restricted Subsidiaries (other than the Notes) to declare a default on such Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and

226

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	(c)	as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries.

	(1)	guaranteeing or securing the Notes or any Guarantee;
	(2)	in favor of the Company or a Guarantor;
	(3)	guaranteeing Indebtedness incurred pursuant to clause (a) of the second paragraph of the covenant described under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Preferred Stock”; or
	(4)	in existence on the date of the Indenture to the extent guaranteeing Existing Indebtedness and Permitted Refinancing Indebtedness in respect thereof incurred in compliance with clause (j) of the second paragraph of the covenant described under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Disqualified Stock”.

	(a)	any Investment in the Company (including, without limitation, any acquisition of the Notes) or in a Wholly Owned Restricted Subsidiary of the Company, other than any Investment described in clause (a) of the definition of “Restricted Payments”;
	(b)	any Investment in Cash Equivalents;
	(c)	any Investment by the Company or any Restricted Subsidiary of the Company in a Person if as a result of such Investment (1) such Person becomes a Restricted Subsidiary of the Company or (2) such Person is merged or consolidated with or into, or transfers or conveys all or substantially all of its properties or assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company;
	(d)	any Investment made as a result of the receipt of non-cash consideration from (1) an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption “— Put Option of Holders — Asset Sales” or (2) a disposition of assets that does not constitute an Asset Sale;
	(e)	Investments in stock, obligations or securities received in settlement of any claim or debts owing to the Company or any Restricted Subsidiary as a result of bankruptcy or insolvency proceedings or received in satisfaction of any judgment or in settlement of any claim in circumstances where the Company does not expect it would receive cash payment in a timely manner, or upon the foreclosure, perfection or enforcement of any Lien in favor of the Company or any Restricted Subsidiary, in each case as to any claim or debts owing to the Company or any Restricted Subsidiary that arose in the ordinary course of business of the Company or any such Restricted Subsidiary, provided that any stocks, obligations or securities received in settlement of any claim or debts that arose in the ordinary course of business (and received other than as a result of bankruptcy or insolvency proceedings or received in satisfaction of any judgment or in settlement of any claim in circumstances where the Company does not expect it would receive cash payment in a timely manner, or upon foreclosure, perfection or enforcement of any Lien) that are, within 180 days of receipt, converted into cash or Cash Equivalents shall be treated as having been cash or Cash Equivalents at the time received;
	(f)	Investments in Argas Ltd. consisting of guarantees of its obligations incurred in the ordinary course of its business, provided that such Investments, when taken together with all other Investments made pursuant to this clause (f) that are at the time outstanding, do not exceed €50,000,000;

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	(g)	Investments in Argas Ltd. (other than those described in clause (f) above) and any other Affiliate organized in a foreign jurisdiction that is required by the applicable laws and regulations of such foreign jurisdiction or its governmental agencies, authorities or state-owned businesses to be majority owned by the government of such foreign jurisdiction or individual or corporate citizens of such foreign jurisdiction or another foreign jurisdiction in order for such Affiliate to transact business in such foreign jurisdiction, provided that such Investments, when taken together with all other Investments made pursuant to this clause (g) that are at the time outstanding, do not exceed 20% of Consolidated Tangible Net Worth;
	(h)	Investments in any Person in exchange for, or out of the net cash proceeds of, an issue or sale by the Company of Equity Interests (other than Disqualified Stock); and
	(i)	other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (i) that are at the time outstanding, do not exceed €25,000,000.

	(a)	Liens securing Indebtedness incurred pursuant to clause (a) of the second paragraph of the covenant described under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Disqualified Stock”, and Liens securing any other Indebtedness under Credit Facilities incurred pursuant to the first paragraph of such covenant;
	(b)	Liens in favor of the Company and its Restricted Subsidiaries;
	(c)	Liens on any property or asset of a Person existing at the time such Person is merged into or consolidated with the Company or any Restricted Subsidiary of the Company, provided that such Liens were in existence prior to such merger or consolidation, were not created in contemplation of it and do not extend to any property or asset of the Company or any of its Restricted Subsidiaries other than those of the Person merged into or consolidated with the Company or any of its Restricted Subsidiaries;
	(d)	Liens on any property or asset existing at the time of acquisition thereof by the Company or any Restricted Subsidiary of the Company, provided that such Liens were in existence prior to such acquisition, were not created in contemplation of it and do not extend to any other property or asset of the Company or any of its Restricted Subsidiaries;

	(e)	Liens securing the performance of statutory obligations, surety or appeal bonds, bid or performance bonds, insurance obligations or other obligations of a like nature incurred in the ordinary course of business;

	(f)	Liens securing Hedging Obligations;
	(g)	Liens existing on the date of the Indenture;
	(h)	Liens securing Indebtedness (including Capital Lease Obligations) permitted by clause (g) of the second paragraph of the covenant described under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Disqualified Stock”, provided that such Liens extend only to the property, plant or equipment financed by such Indebtedness;
	(i)	any interest or title of a lessor under an operating lease;
	(j)	Liens arising by reason of deposits necessary to obtain standby letters of credit in the ordinary course of business;
	(k)	Liens on real or personal property or assets of the Company or a Restricted Subsidiary thereof to secure Indebtedness incurred for the purpose of (1) financing all or any part of the purchase price of such property or assets incurred prior to, at the time of, or within 90 days after, the acquisition of such property or assets or (2) financing all or any part of the cost of construction or improvement of any

228

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		such property or assets, provided that the amount of any such financing shall not exceed the amount expended in the acquisition of, or the construction of, such property or assets and such Liens shall not extend to any other property or assets of the Company or a Restricted Subsidiary (other than any associated accounts, contracts and insurance proceeds);
	(l)	judgment Liens not giving rise to an Event of Default so long as any appropriate legal proceeding which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceeding may be initiated shall not have expired;
	(m)	Liens securing Indebtedness of the Company or any Restricted Subsidiary of the Company that does not exceed €10,000,000 at any one time outstanding;
	(n)	Liens securing Acquired Indebtedness incurred pursuant to the first paragraph of the covenant described under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Disqualified Stock”, provided that such Liens (1) secured such Acquired Indebtedness at the time of and prior to the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company and were not granted in connection with, or in anticipation of, such incurrence, and (2) do not extend to any property or asset of the Company or any of its Restricted Subsidiaries other than the property or asset that secured the Acquired Indebtedness prior to the time that it became Acquired Indebtedness of the Company or a Restricted Subsidiary of the Company; and
	(o)	Liens securing Permitted Refinancing Indebtedness with respect to any Indebtedness secured by Liens referred to in clauses (c), (d), (g), (h), (k) and (n) above and in this clause (o).

	(a)	the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus premium, if any, and accrued interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of expenses incurred in connection therewith);
	(b)	such Permitted Refinancing Indebtedness has a final maturity date no earlier than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;
	(c)	if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness is subordinated in right of payment to the Notes on terms at least as favorable, taken as a whole, to the holders of the Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and
	(d)	if the Company is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded, then such Permitted Refinancing Indebtedness is solely Indebtedness of the Company,

229

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	(a)	any issuance and sale of Equity Interests (other than Disqualified Stock) of the Company pursuant to an underwritten offering registered under the Securities Act; or
	(b)	any other issuance and sale of Equity Interests (other than Disqualified Stock) of the Company so long as, at the time of consummation of such sale, the Company has a class of common equity securities (including American depositary shares) registered pursuant to Section 12(b) or Section 12(g) under the Exchange Act.

	(a)	Sercel S.A., a French limited liability corporation with its head office in Carquefou, France, and a Restricted Subsidiary of the Company as of the Issue Date; and/or
	(b)	any company (including Sercel Holding S.A.) that holds all of the outstanding Capital Stock of either or both of Sercel S.A. and Sercel Inc. (other than directors’ qualifying shares and Capital Stock held by other statutorily required minority shareholders).

	(a)	any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof);
	(b)	any partnership (1) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (2) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof); and
	(c)	any other Person whose results for financial reporting purposes are consolidated with those of such Person in accordance with GAAP.

230

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	(a)	has no Indebtedness other than Non-Recourse Debt;
	(b)	is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless such agreement, contract, arrangement or understanding does not violate the terms of the Indenture described under the caption “— Certain Covenants  — Transactions with Affiliates”; and
	(c)	is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (1) to subscribe for additional Equity Interests or (2) to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results.

	(1)	such Indebtedness is permitted under the covenant described under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Disqualified Stock”; calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and
	(2)	no Default or Event of Default would be in existence following such designation.

231

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	(a)	all of the outstanding Capital Stock or other ownership interests of which (other than directors’ qualifying shares and Capital Stock held by other statutorily required minority shareholders) shall at the time be owned directly or indirectly by such Person; or
	(b)	such Restricted Subsidiary is organized in a foreign jurisdiction and is required by the applicable laws and regulations of such foreign jurisdiction or its governmental agencies, authorities or state-owned businesses to be partially owned by the government of such foreign jurisdiction or individual or corporate citizens of such foreign jurisdiction or another foreign jurisdiction in order for such Restricted Subsidiary to transact business in such foreign jurisdiction, provided that such Person, by contract or otherwise, controls the business and management of such Restricted Subsidiary.

232

---

 

233

---

 

234

---

 

235

---

 

236

---

 

237

---

 

	Withholding Tax

	Luxembourg non-residents individuals

	Luxembourg residents individuals

238

---

 

		Principal				Principal
		Amount of				Amount of
Underwriter		Additional Notes				New Notes
Credit Suisse Securities (Europe) Limited		$				$
BNP Paribas Securities Corp.
Natexis Bleichroeder Inc.
SG Americas Securities, LLC
Calyon Securities (USA), Inc.
Total

	•	it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection

239

---

 

		with the issue or sale of any notes in circumstances in which section 21(1) of the FSMA does not apply to CGG or the guarantors; and
	•	it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the notes in, from or otherwise involving the United Kingdom.

240

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	•	Over-allotment involves sales in excess of the offering size, which creates a short position for the underwriters.
	•	Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.
	•	Covering transactions involve purchases of the notes in the open market after the distribution has been completed in order to cover short positions.
	•	Penalty bids permit the underwriters to reclaim a selling concession from a broker/ dealer when the notes originally sold by such broker/ dealer are purchased in a stabilizing or covering transaction to cover short positions.

	•	to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;
	•	to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;
	•	to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the underwriters for any such offer; or
	•	in any other circumstances which do not require the publication by CGGVeritas of a prospectus pursuant to Article 3 of the Prospectus Directive.

241

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	France

	Germany

	Italy

242

---

 

	United Kingdom

	Denmark

	Norway

	Finland

	Sweden

	The Netherlands

243

---

 

	Belgium

	(a)	investors required to invest a minimum of €250,000 (per investor and per transaction); or

	(b)	institutional investors as defined in Article 3, 27, of the Belgian Royal Decree of July 7, 1999 on the public character of financial transactions, acting for their own account.

	Austria

	Switzerland

	Ireland

244

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	Spain

	Portugal

	Greece

	Canada

	•	such purchaser is entitled under applicable provincial securities laws to purchase such Notes without the benefit of a prospectus qualified under such securities laws;
	•	where required by law, that such purchaser is purchasing as principal and not as agent; and

245

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	•	such purchaser has reviewed the text in the preceding paragraph.

	Hong Kong

	Singapore

246

---

 

	Malaysia

247

---

 

248

---

 

249

---

 

	Initial Guarantors

250

---

 

	Documents Available

251

---

 

		Page
Unaudited Interim Consolidated IFRS Financial Statements of CGG
Unaudited Interim Consolidated Balance Sheets as at September 30, 2006 and December 31, 2005			F-3
Unaudited Interim Consolidated Statements of Operations for the nine months and the three months ended September 30, 2006 and 2005			F-4
Unaudited Interim Consolidated Statements of Cash Flows for the nine months ended September 30, 2006 and 2005			F-5
Unaudited Interim Consolidated Statements of Changes in Shareholders’ Equity during the nine months ended September 30, 2006 and 2005			F-6
Notes to Unaudited Interim Consolidated Financial Statements			F-8
Annual Consolidated IFRS Financial Statements of CGG
Reports of Independent Registered Public Accounting Firms			F-19
Consolidated Balance Sheets as at December 31, 2005 and 2004			F-20
Consolidated Statements of Operations for the years ended December 31, 2005 and 2004			F-21
Consolidated Statements of Cash Flows for the years ended December 31, 2005 and 2004			F-22
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2005 and 2004			F-23
Notes to Consolidated Financial Statements			F-25
Annual Financial Statements of Exploration Resources ASA
Report of Independent Registered Public Accounting Firm			F-87
Combined Balance Sheet as at December 31, 2004			F-88
Combined Statement of Operations for the year ended December 31, 2004			F-89
Combined Statement of Cash Flows for the year ended December 31, 2004			F-90
Combined Statement of Owners’ Net Investment for the year ended December 31, 2004			F-91
Notes to the Combined Financial Statements			F-92
Annual Financial Statements of Argas
Report of Independent Registered Public Accounting Firm			F-113
Balance Sheet as at December 31, 2005, 2004 and 2003			F-114
Income Statement for the years ended December 31, 2005, 2004 and 2003			F-115
Statement of Cash Flows for the years ended December 31, 2005, 2004 and 2003			F-116
Statement of Changes in Partners’ Equity for the year ended December 31, 2005, 2004 and 2003			F-117
Notes to the Financial Statements			F-118
Unaudited Interim Consolidated U.S. GAAP Financial Statements of Veritas
Unaudited Interim Consolidated Statements of Operations for the three months ended October 31, 2006 and 2005			F-127
Unaudited Interim Consolidated Balance Sheets as at October 31, 2006 and July 31, 2006			F-128
Unaudited Interim Consolidated Statements of Cash Flows Information for the three months ended October 31, 2006 and 2005			F-129
Notes to Unaudited Interim Consolidated Financial Statements			F-130
Annual Consolidated U.S. GAAP Financial Statements of Veritas
Report of Independent Registered Public Accounting Firm			F-146
Consolidated Statements of Operations for the years ended July 31, 2006, 2005 and 2004			F-147
Consolidated Balance Sheets as at July 31, 2006 and 2005			F-148
Consolidated Statements of Cash Flows for the years ended July 31, 2006, 2005 and 2004			F-149
Consolidated Statement of Changes in Stockholders’ Equity for the years ended July 31, 2006, 2005 and 2004			F-151
Notes to Consolidated Financial Statements			F-152

F-1

---

 

F-2

---

 

		September 30,				December 31,
		2006				2005
		(unaudited)				(audited)
		(in millions of euros)
ASSETS
Cash and cash equivalents			168.7				112.4
Trade accounts and notes receivable, net			331.4				297.5
Inventories and work-in-progress, net			171.9				139.5
Income tax assets			19.6				10.1
Other current assets, net			53.5				41.5
Assets held for sale			—				3.5
Total current assets			745.1				604.5
Deferred tax assets			47.5				31.6
Investments and other financial assets, net			18.9				15.3
Investments in companies under equity method			46.8				44.4
Property, plant and equipment, net			485.0				480.1
Goodwill and intangible assets, net			408.4				389.2
Total non-current assets			1,006.6				960.6
TOTAL ASSETS			1,751.7				1,565.1
LIABILITIES AND SHAREHOLDERS’ EQUITY
Bank overdrafts			10.9				9.3
Current portion of financial debt			44.0				157.9
Trade accounts and notes payable			137.1				178.5
Accrued payroll costs			66.9				57.8
Income taxes payable			35.1				29.3
Advance billings to customers			37.9				19.5
Provisions — current portion			16.2				17.7
Other current liabilities			29.2				35.2
Total current liabilities			377.3				505.2
Deferred tax liabilities			70.9				56.9
Provisions — non-current portion			19.8				18.4
Financial debt			386.8				242.4
Derivative on convertible bonds			—				11.3
Other non-current liabilities			22.9				20.7
Total non-current liabilities			500.4				349.7
Common stock, 34,762,762 shares authorized 17,507,110 shares with a €2 nominal value issued and outstanding at September 30, 2006; 17,081,680 at December 31, 2005			35.0				34.2
Additional paid-in capital			390.7				372.3
Retained earnings			317.3				291.0
Treasury shares			2.6				(1.1	)
Net income (loss) for the period — Attributable to the Group			119.8				(7.8	)
Income and expense recognized directly in equity			3.6				(1.4	)
Cumulative translation adjustment			(18.5	)			11.3
Total shareholders’ equity			850.5				698.5
Minority interests			23.5				11.7
Total shareholders’ equity and minority interests			874.0				710.2
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY			1,751.7				1,565.1

F-3

---

 

						Nine Months Ended								Three Months Ended
						September 30,								September 30,
		Notes				2006				2005				2006				2005
										restated(1)								restated(1)
		(unaudited)
		(in millions of euros, except per share data)
Operating revenues							955.6				607.5				321.1				220.5
Other income from ordinary activities							1.4				1.2				0.5				0.4
Total income from ordinary activities							957.0				608.7				321.6				220.9
Cost of operations							(636.7	)			(473.2	)			(216.3	)			(175.0	)
Gross profit							320.3				135.5				105.3				45.9
Research and development expenses — net							(27.8	)			(23.6	)			(9.4	)			(8.8	)
Selling, general and administrative expenses							(86.9	)			(64.2	)			(26.6	)			(22.3	)
Other revenues (expenses) — net							12.0				(2.7	)			2.2				(1.9	)
Operating income							217.6				45.0				71.5				12.9
Expenses related to financial debt							(24.0	)			(29.4	)			(7.9	)			(8.2	)
Income provided by cash and cash equivalents							4.8				2.7				1.8				1.1
Cost of financial debt, net							(19.2	)			(26.7	)			(6.1	)			(7.1	)
Derivative and other expenses on convertible bonds							(23.0	)			(38.0	)			—				(23.3	)
Other financial income (loss)							(8.4	)			1.3				(1.8	)			0.6
Income (loss) from consolidated companies before income taxes							167.0				(18.4	)			63.6				(16.9	)
Income taxes							(54.9	)			(18.5	)			(21.9	)			(3.7	)
Net income (loss) from consolidated companies							112.1				(36.9	)			41.7				(20.6	)
Equity in income (losses) of affiliates							8.9				9.6				3.1				2.9
Net income (loss)							121.0				(27.3	)			44.8				(17.7	)
Attributable to:
Shareholders							119.8				(27.9	)			44.5				(18.3	)
Minority interest							1.2				0.6				0.3				0.6
Weighted average number of shares outstanding							17,318,957				11,765,118				17,496,278				11,698,623
Dilutive potential shares from stock options							356,659				285,979				364,187				285,979
Dilutive potential shares from convertible bonds							—				1,400,000				—				1,400,000
Dilutive weighted average number of shares outstanding							17,675,616				13,451,097				17,860,465				13,384,602
Net income (loss) per share
Basic							6.92				(2.37	)			2.55				(1.57	)
Diluted(2)							6.78				(2.37	)			2.49				(1.57	)

(1)	Restatement of IFRS financial statements in accordance with the standards used to prepare the IFRS financial statements contained in our annual report on Form 20-F for the year ended December 31, 2005 filed with the SEC on May 9, 2006.
(2)	Stock options and convertible bonds had an anti-dilutive effect for the three months and the nine months periods ended September 30, 2005; as a consequence, potential shares linked to those instruments are not taken into account in the adjusted dilutive weighted average number of shares, nor in the calculation of diluted loss per share.

F-4

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		Nine Months Ended
		September 30,
		2006				2005
						restated(1)
		(unaudited)
		(in millions of euros)
OPERATING
Net income (loss)			121.0				(27.3	)
Depreciation and amortization			76.0				51.0
Multi-client surveys amortization			60.7				48.3
Variance on provisions			3.3				0.3
Expense & income calculated on stock-option			4.0				0.3
Net gain on disposal of fixed assets			(6.0	)			0.1
Equity in income of affiliates			(8.9	)			(9.6	)
Dividends received from affiliates			4.3				4.2
Other non-cash items			28.1				36.8
Net cash including net cost of financial debt and income taxes			282.5				104.1
Less net cost of financial debt			19.2				26.7
Less income taxes expenses			54.9				18.5
Net cash excluding net cost of financial debt and income taxes			356.6				149.3
Income taxes paid			(60.6	)			(28.1	)
Net cash before changes in working capital			296.0				121.2
INVESTING
— change in trade accounts and notes receivable			(52.2	)			(25.4	)
— change in inventories and work in progress			(28.3	)			(17.1	)
— change in other current assets			(5.0	)			(5.5	)
— change in trade accounts and notes payable			(12.5	)			13.1
— change in other current liabilities			8.4				9.9
Impact of changes in exchange rate			(12.1	)			13.1
Net cash provided by operating activities			194.3				109.3
Total purchases of tangible & intangible assets (included variation of fixed assets suppliers)			(131.3	)			(67.7	)
Investments in multi-client surveys			(38.9	)			(19.2	)
Proceeds from disposals tangible & intangible			5.7				1.6
Total net proceeds from financial assets			16.6				—
Acquisition in investments, net of cash and cash equivalents acquired			(47.7	)			(262.2	)
Variation in loans granted			(0.2	)			0.2
Variation in subsidies for Capital Expenditures			0.3				0.5
Variation in other non-current financial assets			(6.7	)			(0.4	)
Net cash from investing activities			(202.2	)			(347.2	)
FINANCING
Repayment of long-term debt			(129.7	)			(178.1	)
Total issuance of long-term debt			215.9				442.6
Reimbursement on leasing			(17.6	)			(9.0	)
Change in short-term loans			1.9				2.0
Financial interest paid			(12.5	)			(32.2	)
Net proceeds from capital increase:
— from shareholders			8.0				7.6
— from minority interest of integrated companies			—				—
Dividends paid and share capital reimbursements
— to shareholders			—				—
— to minority interest of integrated companies			(0.4	)			(0.2	)
Buying & sales from treasury shares			3.7				0.1
Net cash provided by financing activities			69.3				232.8
Effects of exchange rate changes on cash			(5.1	)			12.6
Net increase (decrease) in cash and cash equivalents			56.3				7.5
Cash and cash equivalents at beginning of year			112.4				130.6
Cash and cash equivalents at end of period			168.7				138.1

(1)	Restatement of IFRS financial statements in accordance with the standards used to prepare the IFRS financial statements contained in our annual report on Form 20-F for the year ended December 31, 2005 filed with the SEC on May 9, 2006.

F-5

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																						Income and																Total
																						expense																shareholders’
		Number of								Additional												recognized				Cumulative				Total								equity and
		shares				Share				paid-in				Retained				Treasury				directly in				translation				shareholders’				Minority				minority
		issued				capital				capital				earnings				shares				equity				adjustment				equity				interests				interest
		(unaudited)
		(in millions of euros)
Balance at January 01, 2005			11,682,218				23.4				173.4				208.1				1.8				3.7				(17.2	)			393.3				9.1				402.3
Capital increase			147,432				0.3				7.6																				7.9								7.9
Net income															(27.9	)															(27.9	)			0.6				(27.3	)
Cost of share-based payment															0.3																0.3								0.3
Transactions with treasury shares																			0.1												0.1								0.1
Financial instruments: variance and transfer to income statement(1)																							(6.4	)							(6.4	)							(6.4	)
Foreign currency translation: variance and transfer to income statement(2)																											23.6				23.6				1.3				24.9
Income and expense recognized directly in equity(1) + (2)															—				0.1				(6.4	)			23.6				17.2				1.3				18.5
Others(a)											(54.2	)			53.6								0.6												—				—
Balance at September 30, 2005 restated(b)			11,829,650				23.7				126.8				234.1				2.0				(2.1	)			6.4				390.9				11.0				401.9

(a)		Deduction from issuance premium for allocation to the carry forward
(b)		Restatement of IFRS financial statements in accordance with the standards used to prepare the IFRS financial statements contained in our annual report on Form 20-F for the year ended December 31, 2005 filed with the SEC on May 9, 2006.

																						Income and																Total
																						expense																shareholders’
		Number of								Additional												recognized				Cumulative				Total								equity and
		shares				Share				paid-in				Retained				Treasury				directly in				translation				shareholders’				Minority				minority
		issued				capital				capital				earnings				shares				equity				adjustment				equity				interests				interest
		(amounts in millions of euros)
Balance at January 01, 2006			17,081,680				34.2				372.3				283.2				(1.1	)			(1.4	)			11.3				698.5				11.7				710.2
Capital increase			128,852				0.3				7.8																				8.1								8.1
Conversion of convertible bonds			274,914				0.5				10.6				31.1																42.2								42.2
Net income															119.8																119.8				1.2				121.0
Cost of share-based payments															4.0																4.0				(0.3	)			3.7
Transactions with treasury shares																			3.7												3.7								3.7
Actuarial gains/losses on pension plans(1)															(1.0	)															(1.0	)							(1.0	)
Financial instruments: variance and transfer to income statement(2)																							5.0								5.0								5.0
Foreign currency translation: variance and transfer to income statement(3)																											(29.8	)			(29.8	)			(0.6	)			(30.4	)
Income and expense recognized directly in equity(1) + (2) + (3)															(1.0	)							5.0				(29.8	)			(25.8	)			(0.6	)			(26.4	)
Others(a)																																			11.5				11.5
Balance at September 30, 2006			17,507,110				35.0				390.7				437.1				2.6				3.6				(18.5	)			850.5				23.5				874.0

(a)		Sale of 49% of CGG Ardiseis to minority shareholders.

F-6

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						September, 30
		September, 30
		2006				2005
						restated(1)
		(in millions of euros)
Net income			119.8				(27.9	)
— Actuarial gains and losses on pension plans			(1.0	)			—
— Variance in fair value of hedging instruments			5.0				(6.4	)
— Variance in fair value of available-for-sale financial assets			—				—
— Variance in foreign currency translation adjustment			(29.8	)			23.6
Incomes and expenses recognized directly in equity for the period			94.0				(10.7	)

(1)		Restatement of IFRS financial statements in accordance with the standards used to prepare the IFRS financial statements contained in our annual report on Form 20-F for the year ended December 31, 2005 filed with the SEC on May 9, 2006.

F-7

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	IFRS 6 — Exploration for and evaluation of mineral resources
	Amendment to IAS 19 — Employee benefits — Actuarial gains and losses, Group Plans and Disclosures
	Amendment to IAS 21 — Net investment in a foreign operation
	Amendment to IAS 39 — Financial Instruments: Recognition and Measurement — The Fair Value Option
	Amendment to IAS 39 — Cash-flow Hedge Accounting of Forecast Intragroup Transactions
	Amendment to IAS 39 and to IFRS 4 — Financial Guarantees Contracts
	Amendment to IFRS 1 and to IFRS 6 — First time adoption of IFRS 6
	IFRIC 4 — Determining whether an arrangement contains a lease
	IFRIC 5 — Rights to interests arising from decommissioning, restoration and environmental rehabilitation funds
	IFRIC 6 — Liabilities arising from Participating in a Specific Market — Waste electrical and Electronic equipment
	These Standards and Interpretations had no significant impact on our consolidated financial statements.

	IFRS 7 — Financial instruments — Disclosures
	Amendment to IAS 1 — Presentation of financial statements: Capital disclosures

F-8

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	IFRIC 7 — Applying the restatement approach under IAS 29 Financial reporting in hyperinflationary economies
	IFRIC 8 — Scope of IFRS 2
	IFRIC 9 — Reassessment of embedded derivatives
	IFRIC 10 — Interim Financial Reporting and Impairment

	•	Geophysical services, which consist of (i) land seismic data acquisition, (ii) marine seismic data acquisition, (iii) other geophysical data acquisition, including activities not exclusively linked to oilfield services, and (iv) data processing, and data management;
	•	Products, which consist of the manufacture and sale of equipment involved in seismic data acquisition, such as recording and transmission equipment and vibrators for use in land seismic acquisition.

		Nine Months Ended September 30, 2006																	Nine Months Ended September 30, 2005
										Eliminations																	Eliminations
										and				Consolidated													and				Consolidated
		Services				Products				Adjustments				Total					Services				Products				Adjustments				Total
		(in millions of euros)
Revenues from unaffiliated customers			603.3				352.3				—				955.6					391.6				215.9				—				607.5
Inter-segment revenues			0.6				69.2				(69.8	)			—					0.5				40.1				(40.6	)			—
Operating revenues			603.9				421.5				(69.8	)			955.6					392.1				256.0				(40.6	)			607.5
Other income from ordinary activities			1.4				—				—				1.4					1.2				—				—				1.2
Total income from ordinary activities			605.3				421.5				(69.8	)			957.0					393.3				256.0				(40.6	)			608.7
Operating income (loss)			129.7				113.5				(25.6	)(a)			217.6					14.0				49.3				(18.3	)(a)			45.0
Equity income (loss) of investees			9.0				(0.1	)			—				8.9					9.8				(0.2	)			—				9.6
Capital expenditures(b)			162.8				22.5				(16.3	)			169.0					100.0				14.0				(12.4	)			101.6
Depreciation and amortization(c)			130.9				12.7				(6.9	)			136.7					90.0				12.9				(3.6	)			99.3
Investments in companies under equity method			1.0				—				—				1.0					—				—				—				—
Identifiable assets			1,154.5				476.7				(103.7	)			1,527.5					1,072.1				358.2				(82.8	)			1,347.5
Unallocated and corporate assets															224.2																	183.6
Total assets															1,751.7																	1,531.1

F-9

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(a)		Includes general corporate expenses of €19.2 million for the nine months ended September 30, 2006 and of €8.9 million for the nine months ended September 30, 2005
(b)		Includes (i) investments in multi-client surveys of €38.9 million for the nine months ended September 30, 2006 and €19.2 million for the nine months ended September 30, 2005, (ii) equipment acquired under capital leases of €0.2 million for nine months ended September 30, 2006 and €13.6 million for the nine months ended September 30, 2005, (iii) capitalized development costs in the Services segment for €7.0 million for the nine months ended September 30, 2006 and €3.1 million for the nine months ended September 30, 2005, and (iv) capitalized development costs in the Products segment for €2.9 million for the nine months ended September 30, 2006 and €2.4 million for the nine months ended September 30, 2005
(c)		Includes multi-client amortization of €60.7 million for the nine months ended September 30, 2006 and €48.3 million for nine months ended September 30, 2005.

		Three Months Ended September 30, 2006																	Three Months Ended September 30, 2005
										Eliminations																	Eliminations
										and				Consolidated													and				Consolidated
		Services				Products				Adjustments				Total					Services				Products				Adjustments				Total
		(in millions of euros)
Revenues from unaffiliated customers			201.0				120.1				—				321.1					143.2				77.3				—				220.5
Inter-segment revenues			—				14.2				(14.2	)			—					0.2				19.8				(20.0	)			—
Operating revenues			201.0				134.3				(14.2	)			321.1					143.4				97.1				(20.0	)			220.5
Other income from ordinary activities			0.5				—				—				0.5					0.4				—				—				0.4
Total income from ordinary activities			201.5				134.3				(14.2	)			321.6					143.8				97.1				(20.0	)			220.9
Operating income (loss)			40.0				38.6				(7.1	)(a)			71.5					2.4				19.2				(8.7	)(a)			12.9
Equity income (loss) of investees			3.1				—				—				3.1					2.9				—				—				2.9
Capital expenditures(b)			38.8				14.0				(4.1	)			48.7					38.1				5.5				(7.3	)			36.3
Depreciation and amortization(c)			48.1				4.7				(2.8	)			50.0					32.9				4.4				(1.3	)			36.0
Investments in companies under equity method			—				—				—				—					—				—				—				—

(a)		Includes general corporate expenses of €6.4 million for the three months ended September 30, 2006 and of €2.5 million for the three months ended September 30, 2005.
(b)		Includes (i) investments in multi-client surveys of €12.4 million for the three months ended September 30, 2006 and €4.2 million for the three months ended September 30, 2005, (ii) no equipment acquired under capital leases for the three months ended September 30, 2006 and €0.4 million for the three months ended September 30, 2005, (iii) and development costs capitalized in the Services segment of €3.6 million for the three months ended September 30, 2006 and €0.9 million for the three months ended September 30, 2005, and (iv) development costs capitalized in the Products segment of €1.0 million for the three months ended September 30, 2006 and €0.6 million for the three months ended September 30, 2005.
(c)		Includes multi-client amortization of €22.1 million for the three months ended September 30, 2006 and of €17.0 million for the three months ended September 30, 2005.

F-10

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	Analysis of operating revenues by location of customers

		Nine Months Ended September 30,																Three Months Ended September 30,
		2006								2005								2006								2005
		(in millions of euros, except percentages)
France			14.4				1.5	%			5.4				0.9	%			10.1				3.1	%			1.3				0.6	%
Rest of Europe			215.0				22.5	%			133.2				21.9	%			88.0				27.4	%			67.2				30.5	%
Asia-Pacific/ Middle East			313.2				32.8	%			217.1				35.7	%			90.5				28.2	%			69.3				31.4	%
Africa			99.0				10.4	%			73.1				12.0	%			39.2				12.2	%			26.0				11.8	%
Americas			314.0				32.8	%			178.7				29.4	%			93.3				29.1	%			56.7				25.7	%
Consolidated Total			955.6				100	%			607.5				100	%			321.1				100	%			220.5				100	%

	Analysis of operating revenues by location of origin

		Nine Months Ended September 30,																Three Months Ended September 30,
		2006								2005								2006								2005
		(in millions of euros, except percentages)
France			211.3				22.1	%			137.6				22.6	%			74.4				23.2	%			30.3				13.7	%
Rest of Europe			81.6				8.5	%			90.8				14.9	%			39.3				12.3	%			49.4				22.4	%
Asia-Pacific/ Middle East			216.2				22.6	%			145.4				23.9	%			60.5				18.8	%			39.3				17.9	%
Africa			79.1				8.3	%			36.9				6.1	%			32.3				10.0	%			14.4				6.5	%
Americas			367.4				38.5	%			196.8				32.4	%			114.6				35.7	%			87.1				39.5	%
Consolidated Total			955.6				100	%			607.5				100	%			321.1				100	%			220.5				100	%

F-11

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	•	the project is clearly defined, and costs are separately identified and reliably measured,
	•	the product or process is technically and commercially feasible and,
	•	the Group has sufficient resources to complete development.

F-12

---

 

	•	changes in the cumulative translation adjustment related to consolidated foreign subsidiaries,
	•	changes in the fair value of derivative instruments designed as cash flow hedges meeting the criteria established by SFAS 133; and
	•	changes in the amount of the additional minimum pension liability due to actuarial losses.

F-13

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		September 30,				September 30,
		2006				2005
		(unaudited)				restated
						(unaudited)
		(in millions of euros,
		except per share data)
Net income (loss) attributable to shareholders as reported in Consolidated Statements of operations			119.8				(27.9	)
Deferred tax (FAS 109)			(1.6	)			1.8
Loss on extinguishment of debt (APB 26)			—				(2.8	)
Stock options			(0.5	)			0.1
Actuarial gain/(loss) on pension plan			(1.0	)			—
Cancellation of IFRS long-term contracts adjustment			—				(2.2	)
Cancellation of IFRS currency translation adjustment			—				3.6
Cancellation of IFRS tangible assets adjustment			0.2				0.2
Cancellation of IFRS capitalization of development costs (before tax)			(7.7	)			(4.0	)
Deferred tax on cancellation of IFRS capitalization of development costs (2)			7.7				—
Derivative instruments (FAS 133)			(22.9	)			15.9
Net income according to U.S. GAAP			94.0				(15.3	)
Weighted average number of shares outstanding			17,318,957				11,765,118
Dilutive potential shares from stock-options			356,659				285,979
Dilutive potential shares from convertible bonds			—				1,400,000
Adjusted weighted average shares and assumed option exercises			17,675,616				13,451,097
Net income (loss) per share
Basic for shareholder			5.43				(1.30	)
Diluted for shareholder			5.32				(1.30	)

(1)	Restatement of IFRS financial statements in accordance with the standards used to prepare the IFRS financial statements contained in our annual report on Form 20-F for the year ended December 31, 2005 filed with the SEC on May 9, 2006.
(2)	Tax effect is linked to the first-time recognition of all the deferred tax liability position on capitalized development costs under IFRS of French tax Group, which is cancelled under U.S. GAAP.

		September 30,				December 31,
		2006				2005
		(unaudited)
		(in millions of euros)
Shareholders’ equity as reported in the Consolidated Balance Sheets			850.5				698.5
Goodwill amortization (FAS 142) (a)			12.5				13.4
Deferred tax (FAS 109) (a)			(10.2	)			(8.3	)
Stock options			(7.0	)			(2.5	)
Cancellation of IFRS tangible assets adjustment			(6.7	)			(6.9	)
Cancellation of IFRS capitalization of development costs (a)			(13.4	)			(13.6	)
Derivative instruments			(14.0	)			8.9
Shareholders’ equity according to U.S. GAAP			811.7				689.5

(a)	Net of currency translation adjustment effect and of deferred tax

F-14

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			September 30,
			(unaudited)
			2006				2005
							restated (1)
			(amounts in millions of euros
			except per share data)
Operating revenues				967.7				601.6
Cost of operations				(636.4	)			(469.2	)
Gross profit				331.3				132.4
Research and development expenses — net				(37.7	)			(29.1	)
Selling, general and administrative expenses				(87.4	)			(64.1	)
Other revenues (expenses) — net				8.8				(1.0	)
Operating income				215.0				38.2
Cost of financial debt, net				(19.2	)			(29.5	)
Derivative and other expenses on convertible bonds				(23.0	)			(38.0	)
Other financial income (loss)				(45.1	)			21.4
Equity in income of affiliates				8.9				9.6
Income of consolidated companies before income taxes and minority interests				136.6				1.7
Income taxes				(41.4	)			(16.4	)
Minority interests				(1.2	)			(0.6	)
Net income				94.0				(15.3	)
Dilutive weighted average number of shares outstanding				17,318,957				11,765,118
Dilutive potential shares from stock-options				356,659				285,979
Dilutive potential shares from convertible bonds				—				1,400,000
Adjusted weighted average shares and assumed option exercises when dilutive				17,675,616				13,451,097
Net income per share
	Basic for shareholder			5.43				(1.30	)
	Diluted for shareholder			5.32				(1.30	)

(1)	Restatement of IFRS financial statements in accordance with the standards used to prepare the IFRS financial statements contained in our annual report on Form 20-F for the year ended December 31, 2005 filed with the SEC on May 9, 2006.

F-15

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		September 30,				December 31,
		2006				2005
		(amounts in millions of euros)
ASSETS
Current assets			750.2				608.5
Long-term assets			1,001.0				965.4
Total Assets			1,751.2				1,573.8
LIABILITIES
Current liabilities			407.5				509.9
Long term liabilities			508.5				362.7
Minority interests			23.5				11.7
Shareholders equity			811.7				689.5
Total Liabilities			1,751.2				1,573.8

		September 30,
		2006				2005
		(in millions of euros)
Net income (loss) under US GAAP			94.0				(15.3	)
Other comprehensive income (loss)
— Changes in the cumulative translation adjustment			(30.8	)			18.2
— Changes in the fair value of available-for-sale securities							—
— Changes in the fair value of derivative instruments			5.0				(5.9	)
Comprehensive income (loss) under U.S. GAAP			68.2				(3.0	)

		September 30,
		2006				2005
		(in millions of euros)
— Cumulative Translation adjustment			(72.7	)			(47.0	)
— Fair value of available-for-sale securities							—
— Fair value of derivative instruments			3.6				(3.2	)
Accumulated Other Comprehensive loss under U.S. GAAP			(69.1	)			(50.2	)

F-16

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																						Sercel
						Subsidiary								Consolidating								Subsidiary
IFRS		CGG				Group				Others				adjustments				Consolidated				Group
		(in € millions)
2006
Total assets			952.9				610.8				1,359.7				(1,171.7	)			1,751.7				208.7
Operating revenues			210.8				423.5				791.2				(469.9	)			955.6				229.2
Operating income (loss)			9.4				126.4				135.8				(54.0	)			217.6				33.6
Net income (loss)			47.5				77.0				126.6				(131.3	)			119.8				22.3
2005
Total assets			895.5				542.9				955.3				(863.3	)			1,530.4				190.3
Operating revenues			155.9				193.4				474.9				(216.8	)			607.4				93.8
Operating income (loss)			(24.1	)			26.3				64.6				(21.8	)			45.0				0.7
Net income (loss)			(5.8	)			14.8				72.4				(108.7	)			(27.3	)			(0.5	)

F-17

---

 

F-18

---

 

BARBIER FRINAULT & AUTRES ERNST & YOUNG 41, rue Ybry 92576 Neuilly-sur-Seine cedex		MAZARS & GUERARD MAZARS Le Vinci – 4, allée de l’Arche 92075 La Defense cedex

BARBIER FRINAULT & AUTRES ERNST & YOUNG /s/ Pascal MACIOCE   Pascal MACIOCE		MAZARS & GUERARD /s/ Philippe CASTAGNAC   Philippe CASTAGNAC

F-19

---

 

						December 31,
		Notes				2005				2004
						(amounts in
						millions of euros)
ASSETS
Cash and cash equivalents			12				112.4				130.6
Trade accounts and notes receivable, net			3				297.5				196.8
Inventories and work-in-progress, net			4				139.5				86.8
Income tax assets							10.1				4.2
Other current assets, net			5				41.5				48.7
Assets held for sale							3.5
Total current assets							604.5				467.1
Deferred tax assets			23				31.6				31.5
Investments and other financial assets, net			7				15.3				12.5
Investments in companies under equity method			8				44.4				30.8
Property, plant and equipment, net			9				480.1				204.1
Goodwill and intangible assets, net			10				389.2				225.2
Total non-current assets							960.6				504.1
TOTAL ASSETS							1,565.1				971.2
LIABILITIES AND SHAREHOLDERS’ EQUITY
Bank overdrafts			12				9.3				2.8
Current portion of financial debt			12				157.9				73.1
Trade accounts and notes payables							178.5				98.3
Accrued payroll costs							57.8				47.6
Income taxes payable							29.3				24.0
Advance billings to customers							19.5				13.2
Provisions — current portion			15				17.7				14.2
Other current liabilities			11				35.2				22.8
Total current liabilities							505.2				296.0
Deferred tax liabilities			23				56.9				26.7
Provisions — non-current portion			15				18.4				16.0
Financial debt			12				242.4				176.5
Derivative on convertible bonds			12				11.3				33.9
Other non-current liabilities			16				20.7				19.8
Total non-current liabilities							349.7				272.9
Common stock: 28,938,836 shares authorized and 17,081,680 shares with a €2 nominal value issued and outstanding at December 31, 2005; 11,682,218 at December 31, 2004			14				34.2				23.4
Additional paid-in capital							372.3				173.4
Retained earnings							291.0				214.5
Treasury shares							(1.1	)			1.8
Net loss for the period — Attributable to the Group							(7.8	)			(6.4	)
Income and expense recognized directly in equity							(1.4	)			3.7
Cumulative translation adjustment							11.3				(17.2	)
Total shareholders’ equity							698.5				393.2
Minority interests							11.7				9.1
Total shareholders’ equity and minority interests							710.2				402.3
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY							1,565.1				971.2

F-20

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							December 31,
			Notes				2005				2004
							(in millions of euros,
							except per share data)
Operating revenues				18				869.9				687.4
Other income from ordinary activities				18				1.9				0.4
Total income from ordinary activities								871.8				687.8
Cost of operations								(670.0	)			(554.0	)
Gross profit				18				201.8				133.8
Research and development expenses — net				19				(31.1	)			(28.8	)
Selling, general and administrative expenses								(91.2	)			(78.6	)
Other revenues (expenses) — net				20				(4.4	)			19.3
Operating income				18				75.1				45.7
Expenses related to financial debt								(45.8	)			(30.0	)
Income provided by cash and cash equivalents								3.5				2.2
Cost of financial debt, net				21				(42.3	)			(27.8	)
Variance on derivative on convertible bonds								(11.5	)			(23.5	)
Other financial income (loss)				22				(14.5	)			0.8
Income (loss) of consolidated companies before income taxes								6.8				(4.8	)
Income taxes				23				(26.6	)			(10.9	)
Net loss from consolidated companies								(19.8	)			(15.7	)
Equity in income of affiliates								13.0				10.3
Net loss								(6.8	)			(5.4	)
Attributable to:
Shareholders								(7.8	)			(6.4	)
Minority interests								1.0				1.0
Weighted average number of shares outstanding								12,095,925				11,681,406
Dilutive potential shares from stock-options(1)								270,789				108,631
Dilutive potential shares from convertible bonds(1)								252,500				233,333
Dilutive weighted average number of shares outstanding adjusted when dilutive								12,095,925				11,681,406
Net loss per share
	— Basic							(0.64	)			(0.55	)
	— Diluted(1)							(0.64	)			(0.55	)

(1)	Stock-options and convertible bonds have an anti-dilutive effect at December 31, 2005 and at December 31, 2004; as a consequence, potential shares linked to those instruments are not taken into account in the adjusted dilutive weighted average number of shares, nor in the calculation of diluted loss per share.

F-21

---

 

						Year
		Notes				2005				2004
						(amounts in
						millions of euros)
OPERATING
Net loss							(6.8	)			(5.4	)
Depreciation and amortization							76.3				65.5
Multi-client surveys amortization			10				69.6				66.5
Variance on provisions							6.7				(3.5	)
Cancellation of expense & income calculated on stock-option							0.4				0.5
Cancellation of net gain (loss) on disposal of fixed assets							1.6				(11.5	)
Equity in income of affiliates,							(13.0	)			(10.3	)
Dividends received from affiliates							4.5				4.8
Other non-cash items			27				27.5				21.4
Net cash including net cost of financial debt and income taxes							166.8				128.0
Less net cost of financial debt							42.3				27.8
Less income taxes expenses							26.6				10.9
Net cash excluding net cost of financial debt and income taxes							235.7				166.7
Income taxes paid			27				(31.7	)			(17.0	)
Net cash before changes in working capital							204.0				149.7
— change in trade accounts and notes receivables							(24.3	)			(26.8	)
— change in inventories and work-in-progress							(45.2	)			(16.4	)
— change in other current assets							(3.1	)			17.4
— change in trade accounts and notes payable							38.8				9.0
— change in other current liabilities							1.0				(5.5	)
Impact of changes in exchange rate on financial items							11.2				(0.5	)
Net cash provided by operating activities							182.4				126.9
INVESTING
Total capital expenditures (including variation of fixed assets suppliers, excluding multi-client surveys)			9 et 10				(117.1	)			(44.4	)
Investments in multi-client surveys			10				(32.0	)			(51.1	)
Proceeds from disposals tangible & intangible							3.6				6.9
Total net proceeds from financial assets							0.9				17.2
Acquisition of investments, net of cash & cash equivalents acquired			2				(265.8	)			(27.9	)
Variation in loans granted							0.8				0.1
Variation in subsidies for capital expenditures							(1.3	)			(0.4	)
Variation in other non-current financial assets							(0.2	)			(1.2	)
Net cash from investing activities							(411.1	)			(100.8	)
FINANCING
Repayement of long-term debt							(391.7	)			(16.5	)
Total issuance of long-term debt							461.1				73.7
Reimbursement on leasing							(13.5	)			(11.9	)
Change in short-term loans							(4.1	)			(0.6	)
Financial expenses paid			27				(62.6	)			(29.1	)
Net proceeds from capital increase:
— from shareholders							207.3				—
— from minority interest of integrated companies							—				—
Dividends paid and share capital reimbursements:
— to shareholders							—				—
— to minority interest of integrated companies							(0.2	)			—
Acquisition/disposal of from treasury shares							(2.9	)			2.0
Net cash provided by financing activities							193.4				17.6
Effect of exchange rates on cash							17.1				(9.5	)
Net increase (decrease) in cash and cash equivalents							(18.2	)			34.2
Cash and cash equivalents at beginning of year							130.6				96.4
Cash and cash equivalents at end of period			12				112.4				130.6

F-22

---

 

																						Income and																Total
																						expense																shareholders’
		Number of								Additional												recognized				Cumulative				Total								equity and
		shares				Share				paid-in				Retained				Treasury				directly in				translation				shareholders’				Minority				minority
		issued				capital				capital				earnings				shares				equity				adjustment				equity				interest				interest
		(amounts in millions of euros)
Balance at January 1, 2004			11,680,718				23.4				292.7				94.7				(0.8	)			9.2				—				419.2				8.8				428.0
Capital increase			1,500				—				—
Net income															(6.4	)															(6.4	)			1.0				(5.4	)
Cost of share-based payment															0.5																0.5								0.5
Operations on treasury shares																			2.6												2.6								2.6
Financial instruments: variance and transfer to income statement(1)																							(1.2	)							(1.2	)							(1.2	)
Financial assets: variance and transfer to income statement(2)																							(4.3	)							(4.3	)							(4.3	)
Foreign currency translation: variance and transfer to income statement (3)																											(17.2	)			(17.2	)			(0.7	)			(17.9	)
Income and expense recognized directly in equity(1)+(2)+(3)																							(5.5	)			(17.2	)			(22.7	)			(0.7	)			(23.4	)
Others(a)											(119.3	)			119.3																—								—
Balance at December 31, 2004			11,682,218				23.4				173.4				208.1				1.8				3.7				(17.2	)			393.2				9.1				402.3
Capital increase			4,251,962				8.5				199.1																				207.6								207.6
Conversion of convertible bonds			1,147,500				2.3				54.0				28.9																85.2								85.2
Net income															(7.8	)															(7.8	)			1.0				(6.8	)
Cost of share-based payment															0.4																0.4				(0.2	)			0.2
Operations on treasury shares																			(2.9	)											(2.9	)							(2.9	)
Financial instruments: variance and transfer to income statement(1)																							(5.7	)							(5.7	)							(5.7	)
Foreign currency translation: variance and transfer to income statement (2)																											28.5				28.5				1.8				30.3
Income and expense recognized directly in equity(1)+(2)																							(5.7	)			28.5				22.8				1.8				24.6
Others(a)											(54.2	)			53.6								0.6								—								—
Balance at December 31, 2005			17,081,680				34.2				372.3				283.2				(1.1	) (b)			(1.4	)			11.3				698.5				11.7				710.2

(a)	Transfer of additional paid-in-capital to retained earnings.
(b)	Includes 42,500 treasury shares acquired in the frame of a liquidity contract.

F-23

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		December 31,
		2005				2004
		(amounts
		in millions
		of euros)
Net income			(7.8	)			(6.4	)
— Variance in fair value of available-for-sale investments			—				(4.3	)
— Variance in fair value of hedging instruments			(5.7	)			(1.2	)
— Variance in foreign currency translation adjustment			28.5				(17.2	)
Incomes and expenses recognized directly in equity for the period			15.0				(29.1	)

F-24

---

 

	—	Business combinations (IFRS 3): the Group has opted not to restate business combinations that occurred before January 1, 2004,
	—	Measurement of certain items of property, plant and equipment at fair value (IAS 16): the Group has opted not to reassess property, plant and equipment and intangible assets at fair value. Property, plant and equipment are maintained at historical cost,
	—	Actuarial gains and losses on pension and other post-employment benefit plans (IAS 19): cumulative unrecognized actuarial gains and losses on pension and other post-employment benefits plans at January 1, 2004 have been recognized in shareholders’ equity in the opening balance sheet,
	—	Cumulative translation adjustments: the accumulated total of translation adjustments at January 1, 2004 has been reversed against consolidated reserves,
	—	Only stock option plans issued after November 7, 2002 and not fully vested as of January 1, 2005 are accounted for in accordance with IFRS2.

	—	Financial instruments: the Group elect the option to apply standards IAS 32 and 39 from January 1, 2004;

F-25

---

 

•	Multi-client surveys

F-26

---

 

•	Exclusive surveys

•	Other geophysical services

•	Equipment sales

F-27

---

 

•	Software and hardware sales

•	Property, plant and equipment

— equipments and tools:			3 to 10 years
— vehicles:			3 to 5 years
— seismic vessels:			12 to 30 years
— buildings for industrial use:			20 years
— buildings for administrative and commercial use:			20 to 40 years

F-28

---

 

•	Lease agreements

•	Goodwill

•	Multi-client surveys

	—	Gulf of Mexico surveys are amortized on the basis of 66.6% of revenues. Starting at time of data delivery, a minimum straight-line depreciation scheme is applied on a three-year period, should total accumulated depreciation from the 66.6% of revenues amortization method be below this minimum level;
	—	Rest of the world surveys: same as above except depreciation is 83.3% of revenues and straight-line depreciation is over a five-year period from data delivery; and
	—	Long term strategic 2D surveys are amortized on the basis of revenues according to the above area split and straight-line depreciation on a seven-year period from data delivery.

F-29

---

 

•	Development costs

	—	the project is clearly defined, and costs are separately identified and reliably measured,
	—	the product or process is technically and commercially feasible,
	—	we have sufficient resources to complete development, and
	—	the intangible asset is likely to generate future economic benefits, either because it is useful to us or through an existing market for the intangible asset itself or for its products.

•	Impairment

	—	significant underperformance relative to expected operating results based upon historical and/or projected data,
	—	significant changes in the manner of our use of the acquired assets or the strategy for our overall business, and
	—	significant negative industry or economic trends.

F-30

---

 

•	Assets held for sale

•	Investments in non-consolidated entities

•	Loans and non-current receivables

•	Impairment

F-31

---

 

•	Onerous contracts

•	Pension, post-employment benefits and other post-employment benefits

•	Defined contribution plans

•	Defined benefit plans

	—	As at the date of issuance, at the fair value of the consideration received, less issuance fees and/or issuance premium;
	—	subsequently, at amortized cost, corresponding to the amount at which is assessed the financial debt at its initial accounting, less repayments in nominal and increased or decreased of the accumulated amortization of all differences between this original amount and the amount at maturity; differences between initial amount and the amount at maturity are amortized according to the method of effective interest rate.

•	Convertible bonds

F-32

---

 

•	Operating activities

•	Investing activities

•	Financing activities

•	Cash and cash equivalents

F-33

---

 

F-34

---

 

			(in million of euros)
Total acquisition of Exploration Resources shares				294.7
Acquisition fees				8.6
Total acquisition price				303.3
	Cash and cash equivalents acquired			37.5
	Fair value of fixed assets acquired			195.1
	Deferred tax liabilities net assumed			(32.9	)
	Other assets and liabilities acquired			(73.5	)
Preliminary fair value of net assets acquired				126.2
Preliminary goodwill				177.1

F-35

---

 

		December 31
		2005				2004
		(in millions
		of euros)
Trade accounts and notes receivable gross — current portion			240.0				159.4
Less: allowance for doubtful accounts			(6.2	)			(4.4	)
Trade accounts and notes receivables net — current portion			233.8				155.0
Trade accounts and notes receivable gross — long term portion			12.0				13.1
Less: allowance for doubtful accounts			—				—
Trade accounts and notes receivables net — long term portion			12.0				13.1
Recoverable costs and accrued profit on billed			51.7				28.7
Total accounts and notes receivables			297.5				196.8

F-36

---

 

		December 31, 2005												December 31, 2004
						Valuation												Valuation
		Cost				Allowance				Net				Cost				Allowance				Net
		(in millions of euros)
Geophysical services
— Consumables and spares parts			23.1				(1.1	)			22.0				18.6				(1.0	)			17.6
— Work in progress			7.6				—				7.6				5.4				—				5.4
Geophysical products
— Raw materials and spare parts			45.4				(6.9	)			38.5				27.4				(6.1	)			21.3
— Work in progress			51.0				(5.7	)			45.3				34.9				(4.6	)			30.3
— Finished goods			30.1				(4.0	)			26.1				16.0				(3.8	)			12.2
Inventories and work in progress			157.2				(17.7	)			139.5				102.3				(15.5	)			86.8

		December 31,				December 31,
Variation of the period		2005				2004
		(in millions of euros)
Balance at beginning of period			86.8				62.4
Variations			46.6				9.5
Movements in valuation allowance			(1.3	)			6.9
Change in consolidation scope			1.1				7.5
Change in exchange rates			4.3				(1.5	)
Others			2.0				2.0
Balance at end of period			139.5				86.8

		December 31,
		2005				2004
		(in millions
		of euros)
Social and tax assets			16.0				5.5
Fair value of financial instruments			—				8.9
Other miscellaneous receivables			11.6				18.9
Supplier prepayments			3.7				8.2
Assets of retirement indemnity plans			1.8				—
Prepaid expenses(a)			8.4				7.2
Other current assets			41.5				48.7

(a)	includes principally prepaid rent, vessels charters.

F-37

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		December 31, 2005
						Additions/
		Balance at				Deductions								Balance
		beginning				charged in								at end
		of year				income				Others(a)				of period
		(in millions of euros)
Trade accounts and notes receivables			4.4				2.3				(0.5	)			6.2
Inventories and work-in-progress			15.4				1.3				1.0				17.7
Tax assets			—				—				0.3				0.3
Other current assets			0.7				0.7				—				1.4
Loans receivables and other investments			2.0				(0.7	)			—				1.3
Total assets valuation allowance			22.5				3.6				0.8				26.9

(a)	includes the effects of exchange rates changes and changes in the scope of consolidation.

		December 31, 2004
						Additions/
		Balance at				Deductions								Balance
		beginning				charged								at end
		of year				in income				Others(a)				of period
		(in millions of euros)
Trade accounts and notes receivables			3.9				(0.1	)			0.6				4.4
Inventories and work-in-progress			22.7				(6.9	)			(0.4	)			15.4
Other current assets			0.6				0.1				—				0.7
Loans receivables and other investments			2.0				0.2				(0.2	)			2.0
Total assets valuation allowance			29.2				(6.7	)			(0.0	)			22.5

(a)	includes the effects of exchange rates changes and changes in the scope of consolidation.

		December 31,
		2005				2004
		(in millions
		of euros)
Other financial investments:
Unconsolidated investments			3.7				2.8
Loans and advances(a)			7.3				6.3
Other			4.3				3.4
Total			15.3				12.5

(a)	includes loans and advances to companies accounted for under the equity method at December 31, 2005 for €6.6 million, and at December 31, 2004 for €5.8 million.

F-38

---

 

		December 31,
		2005				2004
		(in millions
		of euros)
Tronic’s Microsystems SA			3.5				2.6
Other investments in unconsolidated companies			0.2				0.2
Total investments in unconsolidated companies			3.7				2.8

		December 31,
		2005				2004
		(in millions
		of euros)
Balance at beginning of period			30.8				27.0
Equity in income			13.0				10.3
Dividends received during the period, reduction in share capital			(4.5	)			(4.8	)
Changes in exchange rates			4.6				(1.7	)
Balance at end of period			43.9				30.8

		December 31,
		2005				2004
		(in millions
		of euros)
Argas			36.5				23.7
Geomar			5.5				5.6
JV Xian Peic/ Sercel Limited			2.4				2.2
VS Fusion LLC			(0.5	)			(0.7	)
Investments in companies under the equity method			43.9				30.8

F-39

---

 

		December 31,
		2005				2004
		(in millions
		of euros)
Argas			32.2				19.4
Geomar			(0.2	)			—
JV Xian Peic/ Sercel Limited			0.8				0.6
VS Fusion LLC			(0.5	)			(0.7	)
Total			32.3				19.3

		2005				2004
		(in millions
		of euros)
Current assets			57.5				41.9
Fixed assets			33.5				23.7
Current liabilities			3.5				5.7
Non current liabilities			8.7				2.6
Gross revenue			76.3				70.0
Operating profit			19.6				21.6
Income from continuing operations before extraordinary items and cumulative effect of change in accounting principle			20.4				21.3
Net income			20.4				21.3

		December 31, 2005												December 31, 2004
						Accumulated												Accumulated
		Gross				depreciation				Net				Gross				depreciation				Net
		(amounts in millions of euros)
Land			4.7				(0.2	)			4.5				4.4				(0.2	)			4.2
Buildings			60.3				(29.6	)			30.7				53.1				(25.4	)			27.7
Machinery & equipment			457.0				(295.9	)			161.1				339.7				(259.3	)			80.4
Vehicles & vessels			373.1				(104.3	)			268.8				159.2				(79.0	)			80.2
Other tangible assets			35.8				(25.9	)			9.9				33.1				(23.6	)			9.5
Assets under constructions			5.1				—				5.1				2.1				—				2.1
Total Property, plant and equipment			936.0				(455.9	)			480.1				591.6				(387.5	)			204.1

F-40

---

 

		December 31, 2005												December 31, 2004
						Accumulated												Accumulated
		Gross				depreciation				Net				Gross				depreciation				Net
		(amounts in millions of euros)
Land and buildings under capital leases			5.9				(0.2	)			5.7				5.9				(0.1	)			5.8
Geophysical equipment and vessels under capital leases			101.7				(25.5	)			76.2				30.7				(22.1	)			8.6
Other tangible assets under capital leases			0.5				(0.5	)			—				0.2				(0.1	)			0.1
Total Property, plant and equipment under capital lease			108.1				(26.2	)			81.9				36.9				(22.4	)			14.5

		December 31,
Variation of the period		2005				2004
		(in millions
		of euros)
Balance at beginning of period			204.1				215.8
Acquisitions			107.7				41.1
Acquisitions through capital lease			17.4				8.7
Depreciation			(67.9	)			(58.0	)
Disposals			(6.0	)			(1.9	)
Changes in exchange rates			35.2				(8.9	)
Change in consolidation scope			195.1				8.8
Other			(5.5	)			(1.5	)
Balance at end of period			480.1				204.1

F-41

---

 

		December 31, 2005
		(in millions of euros)
Acquisitions of tangible assets (excluding capital lease) — see above			107.7
Development costs capitalized — see note 19			8.1
Additions in other tangible assets (excluding non-exclusive surveys) — see note 10			2.3
Variance of fixed assets suppliers			(1.0	)
Total purchases of tangible and intangible assets according to cash-flow statement			117.1
Acquisitions through capital lease — see above			17.4
Increase in multi-clients surveys — see note 10			32.0
Less variance of fixed assets			1.0
Capital expenditures according to note 18			167.5

		December 31, 2005												December 31, 2004
						Accumulated												Accumulated
		Gross				depreciation				Net				Gross				depreciation				Net
		(amounts in millions of euros)
Goodwill of consolidated subsidiaries			252.9				—				252.9				62.5				—				62.5
Multi-clients surveys			568.4				(474.8	)			93.6				510.8				(386.3	)			124.5
Development costs capitalized			29.2				(3.9	)			25.3				19.9				(1.6	)			18.3
Software			25.9				(19.5	)			6.4				24.8				(17.4	)			7.4
Other intangible assets			19.6				(8.6	)			11.0				17.7				(5.2	)			12.5
Total Goodwill and Intangible assets			896.0				(506.8	)			389.2				635.7				(410.5	)			225.2

F-42

---

 

		December 31,
Variation of the period		2005				2004
		(in millions
		of euros)
Balance at beginning of period			225.2				217.3
Additions in goodwill			177.1				0.2
Increase in multi-clients surveys			32.0				51.1
Development costs capitalized			8.2				4.6
Others acquisitions			2.3				1.7
Depreciation on multi-client surveys			(69.6	)			(66.5	)
Other depreciation			(8.4	)			(7.8	)
Disposals			—				(0.9	)
Changes in exchange rates			22.4				(8.4	)
Change in consolidation scope			—				33.1
Other			0.1				0.8
Balance at end of period			389.2				225.2

	—	the Product segment level: test of the net book value of the goodwill
	—	the Offshore SBU: test of the historical multi-client library net book value and of the tangible assets net book value, which results notably from the 2001 Aker purchase accounting, from the assets acquired in 2005 Exploration Resources purchase accounting and of the goodwill, corresponding mainly to the goodwill booked from Exploration Resources purchase accounting in 2005
	—	the Processing SBU: test of the goodwill, corresponding mainly to the goodwill booked from Exploration Resources purchase accounting in 2005
	—	the Land SBU level: test of the net book value of assets.

	•	forecasted cash-flows estimated in 5-years business plans deemed on the basis of the average medium term exchange rate €1 equals U.S.$1.25; and
	•	discount ratios corresponding to the respective sector weighted average cost of capital (WACC):

	—	8.83% for the Product segment (corresponding to a pre-tax rate of 13.62%);
	—	8.29% for the multi-client library (corresponding to a pre-tax rate of 12.09%);
	—	8.44% for the whole Offshore SBU (corresponding to a pre-tax rate of 19.82%); and
	—	8.67% for the Processing SBU (corresponding to a pre-tax rate of 14.45%).

F-43

---

 

		December 31,
		2005				2004
		(in millions
		of euros)
Deferred income			10.6				3.9
Value added tax and other taxes payable			12.9				7.7
Fair value of financial instruments			4.7				—
Other liabilities			7.0				11.2
Other current liabilities			35.2				22.8

		December 31, 2005												December 31, 2004
						Non-												Non-
		Current				current				Total				Current				current				Total
		(in millions of euros)
Outstanding bonds			—				146.3				146.3				55.1				154.9				210.0
Bank loans			135.9				28.8				164.7				5.3				6.6				11.9
Capital lease obligations			20.1				67.3				87.4				9.8				15.0				24.8
Sub-total			156.0				242.4				398.4				70.2				176.5				246.7
Accrued interest			1.9												2.9
Total			157.9												73.1

		December 31,
		2005				2004
		(in millions
		of euros)
Euro			11.8				18.7
U.S. dollar			385.6				226.0
Other currencies			1.0				2.0
Total			398.4				246.7

F-44

---

 

		December 31,
		2005				2004
		(in millions of
		euros)
Variable rates (effective rate December 31, 2005: 7.60%, 2004: 2.76%)			156.6				15.4
Fixed rates (effective rate December 31, 2005: 7.06%, 2004: 11.07%)			241.8				231.3
Total			398.4				246.7

F-45

---

 

F-46

---

 

F-47

---

 

	(a)	the ratio of net debt over equity should not exceed 2.50;
	(b)	the ratio of net debt over Adjusted EBITDA (ORBDA) should not exceed (i) 2.00 on the 12 months periods ending December 31, 2003, June 30, 2004 and December 31, 2004, (ii) 1.75 on the 12 months periods ending June 30, 2005, (iii) 2.50 on the 12 months period preceding December 31, 2005 and (iv) 2.00 on the following 12 months periods; and
	(c)	the ratio of net debt (in USD at closing rate) over cash-flow from operations on a rolling 12 months period calculated at average rate of the period should not exceed (i) 4.00 on the 12 months periods ending December 31, 2003 and June 30, 2004, (ii) 3.75 on the 12 months periods ending December 31, 2004, (iii) 3.50 on the 12 months period ending June 30, 2005, (iv) 3.00 on the following 12 months periods.

F-48

---

 

			December 31,
			2005				2004
Forward sales of U.S. dollars against euros
Notional amount (in millions of US$)				183.6				127.0
	— of which forward sales qualifying as cash-flow hedges			183.6				108.4
	— of which forward sales not qualifying as cash-flow hedges			—				18.6
Weighted average maturity				91 days				96 days
Weighted average forward U.S.$/ Euro exchange rate				1.2048				1.2453
Forward sales of U.S. dollars against British pounds
Notional amount (in millions of US$)				6.5				—
	— of which forward sales qualifying as cash-flow hedges			6.5				—
	— of which forward sales not qualifying as cash-flow hedges			—				—
Weighted average maturity				90 days				—
Weighted average forward U.S.$/£ exchange rate				1.8871				—

		December 31,				December 31,
		2005				2004
		(in millions of euros)
Carrying value of forward exchange contracts			(4.7	)			8.9
Fair value of forward exchange contracts			(4.7	)			8.9
Gains recognized in profit and loss			—				4.5
Losses recognized in profit and loss			(2.9	)			—
Gains recognized directly in equity			—				3.7
Losses recognized directly in equity			(5.6	)			—

			December 31, 2005								December 31, 2004
			Carrying				Fair				Carrying				Fair
			amount				value				amount				value
			(in millions of euros)
Cash and cash equivalents				112.4				112.4				130.6				130.6
Bank overdraft facilities				9.3				9.3				2.8				2.8
Bank loans, vendor equipment
financing and shareholder loans:
	— Variable rate			156.6				156.6				15.4				15.4
	— Fixed rate			241.8				244.0				231.7				254.8
Forward currency exchange contracts				(4.1	)			(4.1	)			8.7				8.7

F-49

---

 

	—	152.834 fully paid shares related to stock options exercised for which the company received net proceeds of €8.2 million;
	—	1.147.500 fully paid ordinary shares issued on the conversion of 11,475 convertibles bonds out of the convertible bonds issued on November 4, 2004 with maturity date 2012 and;
	—	4.099.128 fully paid ordinary shares issued on the capital increase completed between November 21, 2005 and December 2, 2005 at a share price of €51 for which the company received gross proceeds of €209.1 million. The fees and costs related to this transaction amounted to €9.4 million.

F-50

---

 

		Adjustment of				Exercise price				Adjusted
Date of stock options		number of options				before adjustment (€)				exercise price (€)
January 18, 2000			9.387				49.90				45.83
March 14, 2001			21.376				71.20				65.39
May 15, 2002			11.466				43.47				39.92
May 15, 2003			15.583				15.82				14.53
Total			57.812

Options

Date of Board of

outstanding at

Exercise price

Remaining

Directors’ Resolution

Options granted

Dec. 31. 2005

per share (€)

Expiration date

duration

January 18. 2000

231.000

124.736

45.83

January 17, 2008

24.5 months

March 14. 2001

256.000

251.463

65.39

March 13, 2009

38.5 months

May 15. 2002

138.100

135.400

39.92

May 14, 2010

52.5 months

May 15. 2003

169.900

180.235

14.53

May 14, 2011

64.5 months

Total

795.000

691.834

		December 31,
		2005								2004
						Weighted								Weighted
						average								average
		Number of				exercise				Number of				exercise
		options				price				options				price
		(weighted average exercise price in euro)
Outstanding-beginning of year			809.050				48.95	€			815.673				48.86	€
Granted			—				—				—				—
Adjustments followings the capital increase			57.812				43.45	€			—				—
Exercised			(152.834	)			53.86	€			(1.500	)			15.82	€
Forfeited			(22.194	)			55.61	€			(5.123	)			44.39	€
Outstanding-end of year			691.834				43.63	€			809.050				48.95	€
Exercisable-end of year			376.199				58.90	€			56.662				61.03	€

F-51

---

 

		Balance at																				Balance at
		31 December,								Deductions				Deductions								31 December,
		2004				Additions				(used)				(non used)				Others(a)				2005
		(in millions of euros)
Provisions for contacts losses			4.7				2.8				(3.8	)			—				0.4				4.1
Provisions for restructuring costs			1.0				0.3				(0.5	)			—				—				0.8
Provisions for litigations			5.4				5.0				(1.8	)			—				(0.3	)			8.3
Provisions for exchange losses			—				—				—				—				—				—
Others provisions			3.1				3.8				(2.1	)			(0.2	)			(0.1	)			4.5
Total short-term provisions			14.2				11.9				(8.2	)			(0.2	)			—				17.7
Customers Guarantee provisions			3.4				3.8				(2.3	)			—				0.1				5.0
Retirement indemnity provisions			11.0				1.3				(0.6	)			—				0.1				11.8
Others provisions			1.6				0.4				(1.1	)			—				0.2				1.1
Negative value of investments in companies under the equity method			—				—				—				—				0.5				0.5
Total long-term provisions			16.0				5.5				(4.0	)			—				0.9				18.4
Total provisions			30.2				17.4				(12.2	)			(0.2	)			0.9				36.1

(a)	includes the effects of exchange rates changes and acquisitions and divestitures

	•	historical staff turnover and standard mortality schedule;
	•	age of retirement between 60 and 65 years old; and
	•	actuarial rate and average rate of increase in future compensation.

F-52

---

 

			December 31,
			2005				2004
			(in millions
			of euros)
Accumulated benefit obligation (unvested)				11.4				8.7
Projected benefit obligation				14.5				13.2
Effect of changes in discount rates				—				—
				15.0				13.2
Service cost				1.6				0.6
Interest expense				0.7				0.5
Amortization of loss arising from change in discount rate				(0.2	)			(0.3	)
Net expense of the year				2.1				0.8
Benefit payments				(0.4	)			(0.2	)
Consolidation scope entries & currency translation				0.1				0.3
Net changes				1.8				0.9
Fair value of plan assets				5.0				2.2
Contributions paid				2.6				0.4
Expected return on plan assets				0.2				0.1
Consolidation scope entries & currency translation				—				—
Net changes				2.8				0.5
Net liability at end of the year				11.8				11.0
Net asset at end of the year				1.8				—
Key assumptions used in estimating the Group’s retirement
	obligations are:
	Discount rate			4.25	%			4.00	%
	Average rate of increase in future compensation			3.00	%			3.00	%
	Average expected return on assets			4.00	%			5.50	%

		December 31,
		2005				2004
		(in millions
		of euros)
Research and development subsidies			5.5				6.8
Profit sharing scheme			15.2				13.0
Other non-current liabilities			20.7				19.8

F-53

---

 

		Payments due by period
		Less than												After
		1 year				1-3 years				4-5 years				5 years				Total
		(in million of euros)
Long-term debt (Note 12)			135.7				17.7				10.1				147.3				310.8
Capital Lease Obligations			23.8				32.2				14.5				30.1				100.6
Operating Leases			51.6				43.2				10.3				0.8				105.9
Other Long-term Obligations (bond interest)			11.5				23.0				23.0				47.2				104.7
Total Contractual Obligations			222.6				116.1				57.9				225.4				622.0

		Less than								After
		1 year				1-5 years				5 years				Total
		(in millions of euros)
Capital Lease Obligations			23.8				46.7				30.1				100.6
Discounting			(3.7	)			(9.4	)			(0.1	)			(13.2	)
Capital lease debt (see note 12)			20.1				37.3				30.0				87.4

F-54

---

 

		2005				2004
		(in millions
		of euros)
Guarantees issued in favor of clients			82.4				83.0
Guarantees issued in favor of banks			26.3				13.7
Notes receivable discounted			—				—
Other guarantees(a)			14.2				13.3
Total			122.9				110.0

(a)	Other guarantees relate primarily to guarantees issued by the Company on behalf of subsidiaries and affiliated companies in favor of customs or other governmental administrations.

		Due date
		Less than												After
		1 year				1-3 years				4-5 years				5 years				Total
		(in millions of euros)
Guarantees issued in favor of clients			69.0				4.5				8.9				—				82.4
Guarantees issued in favor of banks			20.0				4.5				1.8				—				26.3
Other guarantees			14.2				—				—				—				14.2
Total			103.2				9.0				10.7				—				122.9

F-55

---

 

	•	Geophysical services, which consist of (i) land seismic acquisition, (ii) marine seismic acquisition, (iii) other geophysical acquisition, including activities not exclusively linked to oilfield services, and (iv) data processing, and data management;
	•	Geophysical products, which consist of the manufacture and sale of equipment involved in seismic data acquisition, such as recording and transmission equipment and vibrators for use in land seismic acquisition. and software development and sales.

F-56

---

 

		Geophysical				Geophysical				Eliminations and				Consolidated
2005		services				products				Adjustments				Total
		(in millions of euros)
Revenues from unaffiliated customers			552.3				317.6				—				869.9
Inter-segment revenues			0.6				61.2				(61.8	)			—
Operating revenues			552.9				378.8				(61.8	)			869.9
Other income from ordinary activities			1.9				—				—				1.9
Total income from ordinary activities			554.8				378.8				(61.8	)			871.8
Operating income (loss)			25.2				79.8				(29.9	)(a)			75.1
Equity income (loss) of investees			12.9				0.1				—				13.0
Capital expenditures(b)			165.5				21.6				(19.6	)			167.5
Depreciation and amortization(c)			132.9				18.2				(5.2	)			145.9
Corporate assets amortization			—				—				—				—
Investments in companies under equity method			—				—				—				—
Identifiable assets			1,105.4				412.7				(113.4	)			1,404.7
Unallocated and corporate assets															160.4
Total assets															1,565.1
of which equity method companies			42.0				2.4								44.4
Identifiable liabilities			575.5				179.8				(59.5	)			695.8
Unallocated and corporate liabilities															159.1
Total liabilities															854.9

(a)	Includes general corporate expenses of €15.8 million.
(b)	Includes (i) investments in multi-clients surveys of €31.9 million, (ii) equipment acquired under capital lease of €17.4 million, (iii) capitalized development costs in the Services segment of €3.5 million, and (iv) capitalized development costs in the Products segment of €4.6 million.
(c)	Includes multi-clients surveys amortization of €69.6 million.

F-57

---

 

		Geophysical				Geophysical				Eliminations and				Consolidated
2004		services				products				Adjustments				Total
		(in millions of euros)
Revenues from unaffiliated customers			388.0				299.4				—				687.4
Inter-segment revenues			1.3				14.2				(15.5	)			—
Operating revenues			389.3				313.6				(15.5	)			687.4
Other income from ordinary activities			0.4				—				—				0.4
Total income from ordinary activities			389.7				313.6				(15.5	)			687.8
Operating income (loss)			(19.8	)			64.5				1.0	(a)			45.7
Equity income (loss) of investees			10.0				0.3				—				10.3
Capital expenditures(b)			94.0				14.2				(0.9	)			107.3
Depreciation and amortization(c)			121.8				15.5				(5.0	)			132.3
Corporate assets amortization			—				—				—				—
Investments in companies under equity method															—
Identifiable assets			540.8				311.9				(44.9	)			807.8
Unallocated and corporate assets															163.4
Total assets															971.2
of which equity method companies			28.6				2.2								30.8
Identifiable liabilities			230.7				129.6				(38.4	)			321.9
Unallocated and corporate liabilities															247.0
Total liabilities															568.9

(a)	Includes general corporate expenses of €13.0 million.
(b)	Includes (i) investments in multi-clients surveys of €51.1 million, (ii) equipment acquired under capital lease of €8.7 million, (iii) capitalized development costs in the Services segment of €1.9 million, and (iv) capitalized development costs in the Products segment of €2.7 million.
(c)	Includes multi-clients surveys amortization of €66.5 million.

		2005								2004
		(in millions of euros)
France			7.8				1%				14.1				2%
Rest of Europe			182.5				21%				124.1				18%
Asia-Pacific/Middle East			297.3				34%				274.5				40%
Africa			90.6				10%				67.0				10%
Americas			291.7				34%				207.7				30%
Consolidated total			869.9				100%				687.4				100%

F-58

---

 

		2005								2004
		(in millions of euros)
France			227.4				26%				244.5				36%
Rest of Europe			133.2				15%				64.8				9%
Asia-Pacific/Middle East			185.1				21%				131.7				19%
Africa			50.2				6%				50.7				7%
Americas			274.0				32%				195.7				29%
Consolidated total			869.9				100%				687.4				100%

		2005								2004
		(in millions of euros)
Sales of goods			296.6				34 %				281.3				41%
Services rendered			468.6				54%				339.9				49%
Royalties (after-sales)			97.4				11%				60.9				9%
Leases			7.3				1%				5.3				1%
Consolidated total			869.9				100%				687.4				100%

		December 31,
		2005				2004
		(in millions
		of euros)
Research and development costs — gross, incurred			(43.5	)			(35.5	)
Development costs capitalized			8.2				4.6
Research and development expensed			(35.3	)			(30.9	)
Government grants recognized in income			4.2				2.1
Research and development costs — net			(31.1	)			(28.8	)

	•	for the geophysical services segment, projects concerning data processing services; and
	•	for the products segment, projects concerning seismic data recording equipment.

F-59

---

 

		December 31,
		2005				2004
		(in millions
		of euros)
Assets depreciation			—				0.3
Restructuring costs			(0.2	)			(11.0	)
Variation of reserves for restructuring			0.1				11.1
Other non-recurring revenues			—				3.5
Other non-recurring expenses			(0.4	)			(0.6	)
Non-recurring revenues (expenses) — net			(0.5	)			3.3
Exchange gains (losses) on hedging contracts			(2.9	)			4.5
Gains (losses) on sales of assets			(1.0	)			11.5
Other revenues (expenses) — net			(4.4	)			19.3

F-60

---

 

		December 31,
		2005				2004
		(in millions
		of euros)
Current interest expenses related to financial debt			(22.2	)			(25.7	)
Financial cost on early redemption of bonds			(9.4	)			(4.3	)
Interest expenses and financial expenses related to the Bridge loan put in place for the acquisition of Exploration Resources			(14.2	)			—
Income provided by cash and cash equivalents			3.5				2.2
Cost of financial debt, net			(42.3	)			(27.8	)

		December 31,
		2005				2004
		(in millions
		of euros)
Exchange gains and losses, net			(1.8	)			3.9
Other financial income			1.6				0.5
Premium paid for the nearly conversion of the convertible bonds			(8.9	)			—
Write-off of issuance costs on convertible bonds recognized as
expense at the time of the early conversion			(3.7	)			—
Other financial expenses			(1.7	)			(3.6	)
Other financial income (loss)			(14.5	)			0.8

F-61

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		December 31,
		2005				2004
		(in millions
		of euros)
France
• current income taxes			(0.4	)			(0.3	)
• deferred taxes and other(b)							0.1
			(0.4	)			(0.2	)
Foreign countries
• current income taxes(a)			(30.9	)			(21.9	)
• deferred taxes and other(b)			4.7				11.2
			(26.2	)			(10.7	)
Total income tax expense			(26.6	)			(10.9	)

(a)	includes withholding taxes
(b)	includes principally deferred income and expense taxes

F-62

---

 

Net income attributable to shareholders			(7.8	)
Income tax expense			(26.6	)
Income before tax			18.8
Differences on taxable basis:
Equity in income (loss) of affiliates			(13.0	)
Net loss of the French tax group(a)			74.8
Theoretical taxable base excluding French tax group			80.6
Income tax rate enacted in France			34.93%
Theoretical tax			(28.2	)
Differences on income taxes:
Income tax on Argas’s income paid by CGG(b)			(1.9	)
Deferred tax income on carry-forward losses at CMG			2.4
Differences on income tax rate			1.1
Income tax			(26.6	)

(a)	the theoretical deferred tax income related to the loss of the French tax group in 2005, estimated to €26,1 million, was not booked in the Group income statement in 2005.
(b)	CGG, as shareholder of Argas, is directly required to pay income tax for Argas in Saudi Arabia for its share in Argas.

						Foreign
		France				countries
		(in millions of euros)
2006			98.0	(a)			—
2007			—				—
2008			—				—
2009			—				—
2010			—				3.3
2011 and thereafter			—				37.9
Available indefinitely			107.1				70.9
Total			205.1				112.1

(a)	Capital losses

F-63

---

 

		December 31,
		2005				2004
		(in millions
		of euros)
Deferred tax assets — temporary differences			17.0				23.8
Deferred tax assets — tax losses carried forward(a)			14.6				7.7
Total Deferred tax assets			31.6				31.5
Total Deferred tax liabilities			56.9				26.7
Total deferred tax. net			(25.3	)			4.8

(a)	relating to loss carry forwards in United Kingdom, Mexico, Norway and United States.

F-64

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			Year ended
			December 31,
			2005				2004
Personnel employed under French contracts
	Geophysical services			821				797
	Products			654				622
Personnel employed under local contracts				2.477				2.250
Total				3.952				3.669
Including field staff of:				579				475

F-65

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		December 31,
		2005				2004
		(in euros)
Short-term employee benefit excluding tax on salary(1)			3,026,474				2,939,051
Long-term employee benefit — pension(2)			26,331				19,576
Long-term employee benefit — supplemental pension(3)			2,050,972				—
Share-based payments(4)			170,676				240,724

(1)	Includes gross remunerations and attendance fees paid during the year but excludes attendance fees paid to the President of the Board of Directors, respectively €37,873 in 2005 and €39,886 in 2004.
(2)	Cost of services rendered
(3)	Corresponding to a supplemental pension implemented by the end of 2004 and transferred to an insurance company; the amount above mentioned is the contribution paid in 2005 to this company.
(4)	Expense in the income statement related to the stock-options plan. No stock-options was attributed in 2005 to directors.

F-66

---

 

		Year ended
		December 31,
		2005				2004
		(in millions
		of euros)
Financial expenses paid			62.6				29.1
Income taxes paid			31.7				17.0

		Year ended
		December 31,
		2005				2004
		(in millions
		of euros)
Equipment acquired under capital leases			17.4				8.7

F-67

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NOTE 29 —	LIST OF PRINCIPAL CONSOLIDATED SUBSIDIARIES AND COMPANIES ACCOUNTED FOR USING THE EQUITY METHOD AS OF DECEMBER 31, 2005

						% of
Siren Number(a)		Consolidated companies		Head Office		interest
403 256 944		CGG Marine SAS		Massy, France			100.0
351 834 288		Geocal SARL		Massy, France			100.0
966 228 363		Geoco SAS		Paris, France			100.0
378 040 497		Sercel SA		Carquefou, France			100.0
410 072 110		CGG Explo SARL		Massy, France			100.0
866 800 154		Sercel Holding SA		Carquefou, France			100.0
		CGG Americas. Inc.		Houston, United States			100.0
		CGG do Brasil Participaçoes Ltda		Rio do Janeiro, Brazil			100.0
		CGG Canada Services Ltd.		Calgary, Canada			100.0
		CGG International SA		Geneva, Switzerland			100.0
		CGG (Nigeria) Ltd.		Lagos, Nigeria			100.0
		CGG Marine Resources Norge A/S		Hovik, Norway,			100.0
		CGG Offshore UK Ltd.		United Kingdom			100.0
		CGG India Private Ltd.		New Delhi, India			40.0
		Exploration Resources ASA		Bergen, Norway			100.0
		Exploration Investment Resources AS		Bergen, Norway			100.0
		Exploration Investment Resources II AS		Bergen, Norway			100.0
		Exploration Vessel Resources AS		Bergen, Norway			100.0
		Exploration Vessel Resources II AS		Bergen, Norway			100.0
		Multiwave Geophysical Company ASA and its subsidiaries		Bergen, Norway			100.0
		Companía Mexicana de Geofisica		Mexico City, Mexico,			100.0
		Companhia de Geologia e Geofisica Portuguesa		Lisbon, Portugal			100.0
		Exgeo CA		Caracas, Venezuela			100.0
		Geoexplo		Almaty, Kazakhstan			100.0
		Geophysics Overseas Corporation Ltd.		Nassau, Bahamas			100.0
		CGG Australia Services Pty Ltd.		Sydney, Australia			100.0
		CGG Asia Pacific(b)		Kuala Lumpur, Malaisia			33.2
		Petroleum Exploration Computer Consultants Ltd.		Forest Row, United Kingdom			100.0
		CGG Vostok		Moscow, Russia			100.0
		PT CGG Indonesia		Jakarta, Indonesia			100.0
		Sercel Australia		Sydney, Australia			100.0
		Hebei Sercel JunFeng(c)		Hebei, China			51.0
		Sercel Inc.		Tulsa, United States			100.0
		Sercel Singapore Pte Ltd.		Singapore, Singapore			100.0
		Sercel England Ltd.		Somercotes, United Kingdom			100.0
		Sercel Canada Ltd.		Calgary, Canada			100.0

(a)	Siren number is an individual identification number for company registration purposes under French law.
(b)	the consolidation of CGG Asia Pacific, in which CGG owns 33.2% of the ordinary shares and 30% of the total shares is compliant with IFRS.
(c)	Sercel JunFeng is fully consolidated since, according to the management agreement, the Group has operating control of the company.

F-68

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						% of
Siren number(a)		Accounted for using the equity method		Head Office		interest
413 926 320		Geomar SAS		Paris. France			49.0
		Argas Ltd.		Al-Khobar. Saudi Arabia			49.0
		JV Xian Peic/ Sercel Limited		Xian. China			40.0
		VS Fusion		Houston. United States			49.0

		Shareholders’ equity
																		Income and																Total
																		expense																shareholders’
		Balance at								Movements				Movements				recognized				Cumulative				Balance at								equity and
		January 1,				Net				in stock-				in treasury				directly in				translation				December 31,				Minority				minority
		2004				income				options				shares				equity				adjustment				2004				interest				interest
		(in million of euros)
Total under French accounting principles			396.6				11.1								0.6								(12.6	)			395.7				9.1				404.8
(a) Tangible assets (IAS 16)			7.2				(0.1	)																			7.1								7.1
(b) Employee benefits (IAS 19)			0.7				(0.4	)															(0.1	)			0.2								0.2
(c) Currency translation (IAS 21)			—				4.0																(4.0	)			—								—
(d) Treasury shares (IAS 32)			(0.8	)			(1.4	)							2.0												(0.2	)							(0.2	)
(e) Goodwill amortization (IAS 36)			—				6.2																(0.4	)			5.8								5.8
(f) Development costs (IAS 38)			3.2				4.4																(0.1	)			7.5								7.5
(g) Financial instruments (IAS 39)			12.8				(2.0	)											(5.5	)							5.3								5.3
(h) Financial debt (IAS 39)			0.3				(0.4	)																			(0.1	)							(0.1	)
(h) Convertible bonds derivative (IAS 39)			—				(23.5	)																			(23.5	)							(23.5	)
(i) Stock-options (IFRS 2)			—				(0.5	)			0.5																—								—
(j) Revenue recognition (IAS 11)			—				(2.4	)																			(2.4	)							(2.4	)
Impact of IFRS restatements before deferred tax and minority interests			420.0				(5.0	)			0.5				2.6				(5.5	)			(17.2	)			395.4				9.1				404.5
Impact of deferred tax			(0.8	)			(1.4	)																			(2.2	)							(2.2	)
Total under IFRS			419.2				(6.4	)			0.5				2.6				(5.5	)			(17.2	)			393.2				9.1				402.3

F-69

---

 

		French
		Accounting
ASSETS		Principles				Ref.				Reclassifications				Ref.				Restatements				IFRS
		(in millions of euros)
Cash and cash equivalents			96.4																				96.4
Trade accounts and notes receivable			165.5				(k)				4.6												170.1
Inventories and work-in-progress			64.0								(1.6	)											62.4
Income tax assets			—				(l)				3.6												3.6
Other current assets			57.9				(h)(l)				(12.2	)			(g)				7.7				53.4
Total current assets			383.8								(5.6	)							7.7				385.9
Deferred tax assets			—				(l)				20.0												20.0
Investments and other financial assets			41.5				(k)(l)(m)				(2.5	)			(g)				4.3				43.3
Investments in companies under equity method			33.0				(m)				(6.1	)											26.9
Property, plant and equipment, net			216.0				(n)				(7.3	)			(a)				7.2				215.9
Goodwill and intangible assets, net			205.1				(n)				8.9				(f)				3.2				217.2
Total non-current assets			495.6								13.0								14.7				523.3
TOTAL ASSETS			879.4								7.4								22.4				909.2
LIABILITIES
Bank overdrafts			3.2								—												3.2
Current portion of financial debt			24.6								—												24.6
Trade accounts and notes payable			78.6								0.2												78.8
Accrued payroll costs			47.7								(0.4	)			(b)				0.2				47.5
Income tax payable			18.3								(1.4	)											16.9
Advance billings to customers			16.9								—												16.9
Provisions — current portion			—				(o)				20.1												20.1
Other current liabilities			44.8				(o)				(23.5	)											21.3
Total current liabilities			234.1								(5.0	)							0.2				229.3
Deferred tax liabilities			—				(l)				18.0								0.8				18.8
Provisions — non-current portion			—				(o)				13.6				(b)				(0.9	)			12.7
Financial debt			207.8				(h)				(5.4	)			(h)				(0.3	)			202.1
Other non-current liabilities			32.1				(l)(o)				(13.8	)											18.3
Total non-current liabilities			239.9								12.4								(0.4	)			251.9
Common stock			23.4								—												23.4
Additional paid-in-capital			292.7								—												292.7
Retained earnings			132.1				(c)				(51.6	)							14.2				94.7
Treasury shares			—								—				(d)				(0.8	)			(0.8	)
Income and expenses recognized directly in equity			—								—				(g)				9.2				9.2
Cumulative translation adjustment			(51.6	)			(c)				51.6												—
Total shareholders’ equity			396.6								—								22.6				419.2
Minority interests			8.8								—								—				8.8
Total shareholders’ equity and minority interests			405.4								—								22.6				428.0
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY			879.4								7.4								22.4				909.2

F-70

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			French
			Accounting
			Principles				Ref.				Reclassifications				Ref.				Restatements				IFRS
			(in million of euros)
Operating revenues				692.7																(5.3	)			687.4
Other revenues of ordinary activities								(q)				0.4								—				0.4
Total revenues of ordinary activities				692.7								0.4								(5.3	)			687.8
Cost of operations				(556.0	)											(b)(f)				2.0				(554.0	)
Gross profit				136.7								0.4								(3.3	)			133.8
Research and development expenses, net				(33.5	)											(f)				4.7				(28.8	)
Selling, general and administrative expenses, net				(79.5	)			(h)				1.5				(a)(i)				(0.6	)			(78.6	)
Other revenues (expenses), net				12.0				(h)				4.3				(d)(g)				3.0				19.3
Operating income				35.7								6.2								3.8				45.7
Expenses related to financial debt								(h)				(29.6	)			(h)				(0.4	)			(30.0	)
Income provided by cash and cash equivalents								(h)				2.2												2.2
Cost of net financial debt								(h)				(27.4	)			(h)				(0.4	)			(27.8	)
Variance on derivative on convertible bonds																(h)				(23.5	)			(23.5	)
Other financial incomes (expenses), net								(p)				3.2				(c)(g)				(2.4	)			0.8
Financial incomes (expenses), net				(22.4	)			(q)				22.4												—
Exchange gains (losses), net				4.4				(p)				(4.4	)											—
Income before income taxes				17.7								—								(22.5	)			(4.8	)
Income taxes				(9.7	)															(1.2	)			(10.9	)
Income (loss) from consolidated companies				8.0								—				(e)(f)(j)				(23.7	)			(15.7	)
Equity in income of affiliates				10.3																				10.3
Goodwill amortization				(6.2	)											(e)				6.2				—
Net income				12.1								—								(17.5	)			(5.4	)
Attributable to:
	— Shareholders			11.1								—								(17.5	)			(6.4	)
	— Minority interests			1.0								—								—				1.0

F-71

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		French
		Accounting
ASSETS		Principles				Ref.				Reclassifications				Ref.				Restatements				IFRS
		(in millions of euros)
Cash and cash equivalents			130.8												(d)				(0.2	)			130.6
Trade accounts and notes receivable			191.7				(k)				13.1				(j)				(8.0	)			196.8
Inventories and work-in-progress			81.4								—				(j)				5.4				86.8
Income tax assets			—				(l)				4.0				(j)				0.2				4.2
Other current assets			58.3				(l)(h)				(14.9	)			(g)				5.3				48.7
Total current assets			462.2								2.2								2.7				467.1
Deferred tax assets			—				(l)				31.5												31.5
Investments and other financial assets			31.9				(k)(l)(m)				(19.4	)											12.5
Investments in companies under equity method			36.6				(m)				(5.8	)											30.8
Property, plant and equipment, net			204.5				(n)				(7.5	)			(a)				7.1				204.1
Goodwill and intangible assets, net			204.4				(n)				7.5				(e)(f)				13.3				225.2
Total non-current assets			477.4								6.3								20.4				504.1
TOTAL ASSETS			939.6								8.5								23.1				971.2
LIABILITIES
Bank overdrafts			2.8								—												2.8
Current portion of financial debt			73.1								—												73.1
Trade accounts and notes payable			97.8								0.5												98.3
Accrued payroll costs			47.8								(0.2	)											47.6
Income tax payable			24.9								(0.9	)											24.0
Advance billings to customers			13.2								—												13.2
Provisions — current portion			—				(o)				14.2												14.2
Other current liabilities			41.0				(o)				(18.2	)											22.8
Total current liabilities			300.6								(4.6	)											296.0
Deferred tax liabilities			—				(l)				24.5								2.2				26.7
Provisions — non-current portion			—				(o)				16.2				(b)				(0.2	)			16.0
Financial debt			194.1				(h)				(7.3	)			(h)				(10.3	)			176.5
Derivative on convertible bonds															(h)				33.9				33.9
Other non-current liabilities			40.1				(l)(o)				(20.3	)											19.8
Total non-current liabilities			234.2								13.1								25.6				272.9
Common stock			23.4								—												23.4
Additional paid-in-capital			173.4								—												173.4
Retained earnings			252.0				(c)				(52.2	)							14.7				214.5
Treasury shares			—								0.6				(d)				1.2				1.8
Net income — attributable to shareholders			11.1								—								(17.5	)			(6.4	)
Income and expenses recognized directly in equity			—								—				(g)				3.7				3.7
Cumulative translation adjustment			(64.2	)			(c)				51.6				(c)				(4.6	)			(17.2	)
Total shareholders’ equity			395.7								—								(2.5	)			393.2
Minority interests			9.1								—								—				9.1
Total shareholders’ equity and minority interests			404.8								—								(2.5	)			402.3
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY			939.6								8.5								23.1				971.2

F-72

---

 

F-73

---

 

F-74

---

 

F-75

---

 

		French
		gaaps				Reclassification(a)				Reclassification(b)				Reclassification(c)				Others				IFRS
		(amounts in millions of euros)
Net cash provided by operating activities			91.9				29.1				(2.2	)			7.9				0.2				126.9
Net cash from investing activities			(100.1	)															(0.7	)			(100.8	)
Net cash provided by financing activities			44.2				(29.1	)			2.0								0.5				17.6
Effect of exchange rates on cash			(1.6	)											(7.9	)							(9.5	)
Net increase (decrease) in cash and cash equivalents			34.4								(0.2	)											34.2
Cash and cash equivalents at beginning of year			96.4																				96.4
Cash and cash equivalents at end of year			130.8								(0.2	)											130.6

(a)	Financial expenses paid
(b)	Treasury shares
(c)	Foreign exchange effect on cash and cash equivalents in USD

A —	SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE GROUP AND U.S. GAAP

F-76

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	•	the project is clearly defined, and costs are separately identified and reliably measured,
	•	the product or process is technically and commercially feasible,
	•	the Group has sufficient resources to complete development.

F-77

---

 

	•	changes in the cumulative translation adjustment related to consolidated foreign subsidiaries,
	•	changes in the fair value of derivative instruments designed as cash flow hedges meeting the criteria established by SFAS 133; and
	•	changes in the amount of the additional minimum pension liability due to actuarial losses.

F-78

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B —	RECONCILIATION OF NET INCOME AND SHAREHOLDERS’ EQUITY TO U.S. GAAP

		December 31,
		2005				2004
						(restated)
		(in millions
		of euros)
Net loss) as reported in Consolidated Statements of operations			(7.8	)			(6.4	)
Deferred tax (FAS 109)			2.7				(3.4	)
Loss on extinguishment of debt (APB 26)			(2.8	)			2.8
Stock options			(1.5	)			0.3
Cancellation of IFRS long-term contracts adjustment			(2.4	)			2.4
Cancellation of IFRS tangible assets adjustment			0.2				0.1
Cancellation of IFRS currency translation adjustment			3.6				(4.0	)
Cancellation of IFRS capitalization of development costs			(6.1	)			(4.2	)
Available for sale security (FAS 115)			—				1.3
Derivative instruments (FAS 133)			22.4				(9.1	)
Net income (loss) under U.S. GAAP			8.3				(20.2	)

(a)	Restatements are presented net of tax..

		December 31,
		2005				2004
						(restated)
		(in millions
		of euros)
Shareholders’ equity as reported in the Consolidated Balance Sheets			698.5				393.2
Goodwill amortization (FAS 142)			13.4	(b)			12.6	(b)
Deferred tax (FAS 109)			(8.3	) (b)			(9.6	)(b)
Loss on extinguishment of debt (APB 26)			—				2.8
Stock options			(2.5	)			(0.6	)
Cancellation of IFRS long-term contracts adjustment			—				2.4
Cancellation of IFRS tangible assets adjustment			(6.9	)			(7.1	)
Cancellation of IFRS capitalization of development costs			(13.6	)			(6.5	)
Derivative instruments (FAS 133)			8.9				(15.0	)
Shareholders’ equity under U.S. GAAP			689.5				372.2

(a)	All adjustments disclosed above are net of tax effects, if applicable.
(b)	This amount is net of currency translation adjustment effect.

F-79

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			December 31,
			2005				2004
			(amounts in millions of euros
			except per share data)
Operating revenues				860.8				709.5
Cost of operations				(665.4	)			(559.5	)
Gross profit				195.4				150.0
Research and development expenses — net				(39.3	)			(33.5	)
Selling, general and administrative expenses				(92.7	)			(79.7	)
Other revenues (expenses) — net				(1.5	)			18.2
Operating income (loss)				61.9				55.0
Cost of financial debt, net				(46.6	)			(22.4	)
Variance on derivative on convertible bonds				(11.5	)			(23.5	)
Other financial income (loss)				14.7				(23.6	)
Equity in income (losses) of affiliates				13.0				10.3
Income (loss) of consolidated companies before income taxes and minority interests				31.5				(4.2	)
Income taxes				(22.2	)			(15.0	)
Minority interests				(1.0	)			(1.0	)
Net income (loss)				8.3				(20.2	)
Dilutive weighted average number of shares outstanding				12,095,925				11,681,406
Dilutive potential shares from stock-options(1)				261,855				83,211
Dilutive potential shares from convertible bonds(2)				252,500				233,333
Adjusted weighted average shares and assumed option exercises when dilutive				12,357,779				11,681,406
Net income (loss) per share
	Basic for shareholder			0.69				(1.73	)
	Diluted for shareholder			0.67				(1.73	)

(1)	anti-dilutive for year ended at December 31, 2004.
(2)	anti-dilutive for years ended at December 31, 2004 and December 31, 2005.

F-80

---

 

		December 31,
		2005				2004
		(amounts in
		millions of euros)
ASSETS
Current assets			608.5				480.2
Long-term assets			965.4				495.6
Total Assets			1,573.8				975.8
LIABILITIES
Current liabilities			509.9				325.8
Long term liabilities			362.7				268.6
Minority interests			11.7				9.1
Shareholders equity			689.5				372.2
Total Liabilities			1,573.8				975.8

		December 31,
		2005				2004
		(in million
		of euros)
Net income (loss) under US GAAP			8.3				(20.2	)
Other comprehensive income (loss)
— Changes in the cumulative translation adjustment			23.3				(13.6	)
— Changes in the fair value of available-for-sale securities			—				(7.8	)
— Changes in the fair value of derivative instruments			(4.1	)			(2.8	)
Comprehensive income (loss) under U.S. GAAP			27.5				(43.1	)

(a)	All adjustments disclosed above are net of tax effects, if applicable.

		December 31,
		2005				2004
		(in million
		of euros)
— Cumulative Translation adjustment			(41.9	)			(65.2	)
— Fair value of derivative instruments			(1.4	)			2.7
Accumulated Other Comprehensive loss under U.S. GAAP			(43.3	)			(62.5	)

(a)	All adjustments disclosed above are net of tax effects, if applicable.

F-81

---

 

			December 31, 2004
			(in millions of
			euros except for
			income (loss) per
			share information)
Net loss, as reported			€	(20.2	)
Add: total stock-based employee compensation expense included in reported net income, net of related tax effect				0.2
Deduct: total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects				(3.8	)
Pro forma U.S. GAAP net loss				(23.8	)
Earnings per share:
	Basic for common stock holder — as reported			(1.73	)
	Basic for common stock holder — pro forma			(2.03	)
	Diluted for common stock holder — as reported			(1.73	)
	Diluted for common stock holder — pro forma			(2.03	)

F-82

---

 

		Year ended December 31, 2005
		Balance at																				Balance at
		beginning of								Deductions				Deductions								end of
		year				Additions				(used)				(unused)				Other(a)				year
		(in millions of euros)
Termination benefits			0.4				0.2				—				—				—				0.6
Other associated costs			0.5				0.1				—				(0.4	)			—				0.2
Total			0.9				0.3				—				(0.4	)			—				0.8

(a)	Includes the effects of exchange rate changes

		Year ended December 31, 2004
		Balance at																				Balance at
		beginning of								Deductions				Deductions								end of
		year				Additions				(used)				(unused)				Other(a)				year
		(in millions of euros)
Termination benefits			10.8				—				(10.4	)							—				0.4
Contract termination costs			0.6				—				(0.4	)			(0.2	)			—				0.0
Other associated costs			0.7				—				(0.2	)			—				—				0.5
Total			12.1				—				(11.0	)			—				—				0.9

(a)	Includes the effects of exchange rate changes

		Total								Cumulative
		amount				Amount incurred				amount incurred
		expected				as of Dec. 31, 2005				as of Dec. 31, 2005
		(in millions of euros)
Termination benefits			10.8				—				10.4
Contract termination costs			0.4				—				0.4
Other associated costs			1.6				—				1.1
Total			12.8				—				11.8

F-83

---

 

F-84

---

 

																						Sercel
						Subsidiary								Consolidating								Subsidiary
IFRS		CGG				Group				Others				adjustments				Consolidated				Group
		(in € millions)
2005
Total assets			799.8				600.3				1,082.5				(917.5	)			1,565.1				205.9
Operating revenues			221.3				307.5				668.9				(327.8	)			869.9				146.5
Operating income (loss)			(26.4	)			60.7				76.6				(35.8	)			75.1				10.9
Net income (loss)			(29.5	)			37.0				108.3				(122.6	)			(6.8	)			6.3
2004
Total assets			623.6				341.7				718.3				(712.4	)			971.2				150.8
Operating revenues			190.7				227.8				589.6				(320.7	)			687.4				104.8
Operating income (loss)			(45.2	)			36.2				64.5				(9.8	)			45.7				6.8
Net income (loss)			(38.2	)			31.7				78.7				(77.6	)			(5.4	)			14.2

F-85

---

 

F-86

---

 

F-87

---

 

						December 31,
		Notes				2004
						(in millions of NOK)
ASSETS
Cash and cash equivalents							14.4
Restricted cash							2.1
Trade accounts and notes receivable			3				92.0
Inventories			4				5.9
Other current assets			5				84.5
Total current assets							198.9
Investment in associated companies			6				—
Property, plant and equipment, net			7				200.6
Intangible assets, net			8				9.5
Total assets							409.0
LIABILITIES AND OWNERS’ NET INVESTMENT
Bank overdrafts							38.2
Current portion of long-term debt			10				54.6
Trade accounts and notes payable							73.0
Income taxes payable							—
Other current liabilities			9				39.1
Total current liabilities							204.9
Long-term debt — less current portion			10				83.8
Other long-term liabilities			11				39.1
Total long-term liabilities							122.9
Minority interest							4.4
Owner’s net investment			12				76.8
Total liabilities and owner’s net investment							409.0

F-88

---

 

						Year ended
		Notes				December 31, 2004
						(amounts in millions
						of NOK)
Operating revenues			15				497.3
Cost of operations							(504.2	)
Gross profit							(6.9	)
Selling, general & administrative expenses							(15.6	)
Other revenues — net			16				20.0
Operating income			15				(2.5	)
Interest and other financial income & expense — net			17				10.5
Exchange gain (loss) — net							(3.4	)
Equity in income of affiliates							5.9
Income before income taxes and Minority interest							10.5
Income taxes			18				(5.3	)
Minority interest							11.3
Net income							16.5

F-89

---

 

			December 31, 2004
			(in millions of NOK)
Cash flows from operating activities:
Net income				16.5
Adjustments to reconcile Net income to Net cash provided by operating activities:
Depreciation and amortization				75.2
Net gain on sale of assets				(20.0	)
Deferred income taxes				5.3
Minority interest				(11.4	)
Equity in income of investees, net of dividends				5.2
Non-cash items				2.0
Increase/decrease in operating assets and liabilities:
	Increase in trade accounts and notes receivable			8.1
	Increase in inventories			(4.2	)
	Decrease in other current assets			4.1
	Increase in trade accounts and notes payable			0.3
	Decrease in other current liabilities			(9.4	)
Net cash provided by operating activities				71.7
Cash flows from investing activities:
Purchases of property, plant and equipment				(96.3	)
Investments in multi-client surveys				(6.3	)
Investments in equity-method companies				(1.8	)
Proceeds from sale of assets				61.2
Cash paid for acquired businesses, net of cash acquired				(4.9	)
Net cash used in investing activities				(48.1	)
Cash flows from financing activities:
Repayment of long-term debt				(21.0	)
Issuance of long-term debt				33.4
Repayment of capital lease obligations				(28.0	)
Increase in bank overdrafts				7.8
Increase in restricted cash				(0.3	)
Dividends paid				(7.8	)
Net cash provided by financing activities				(15.9	)
Effects of exchange rate changes on cash				6.7
Net increase in cash and cash equivalents				14.4
Cash and cash equivalents at beginning of year				0
Cash and cash equivalents at end of year				14.4

F-90

---

 

			Owner’s												Accumulated				Total
			initial				Comprehensive				Retained				Comprehensive				Owner’s
			investment				income				earnings				income				Investment
			(in millions NOK)
As of December 31, 2003				135.2								(75.5	)			—				59.7
Net income								16.5				16.5				—				16.5
Dividends												(7.8	)			—				(7.8	)
Other comprehensive income								—				—				—				—
Foreign currency translation								8.4				—				8.4				8.4
Comprehensive income								24.9				—				—				—
	As of December 31, 2004			135.2								(66.8	)			8.4				76.8

F-91

---

 

	•	In 2000, Rieber Shipping became a 49.5 per cent shareholder in Multiwave, a seismic company focusing on seabed seismic operations with high-tech project-based assignments.
	•	In 2001, Rieber Shipping started to invest in towed streamer equipment on its seismic vessels. Polar Duke and Polar Princess were upgraded with state of the art equipment.
	•	In 2002, the seismic vessel Polar Search was upgraded with a new generation of seismic streamer technology and fully rigged with all new seismic equipment. The vessel commenced a charter to TGS Nopec in the US Gulf of Mexico, and its seismic operation was handled by Multiwave.
	•	In 2003, Rieber Shipping entered into time charter party agreements with Fugro Geoteam for two of its seismic vessels Polar Princess and Polar Duke. Under the terms of the agreements were that Fugro Geoteam would be responsible for the exclusive marketing of the vessels and that profits earned or losses incurred on their utilization, would be split between the two parties. Towards the end of the year, Rieber Shipping acquired the seismic vessel Polar Venturer, which was chartered to Fugro under a similar arrangement.
	•	In 2004 the charter party agreement with Fugro were transferred from Rieber to the Exploration Resources Group and extended for a period of 3 years starting from 1 January 2005, being a fixed contract for 2005, subject to that the aggregate result for the vessels is showing a profit. For the years 2006 and 2007 both parties can terminate the agreements providing 100 days written notice.
	•	In 2004, the Group increased its holding in Multiwave to 52.7 per cent. Furthermore, in December the Boards of Rieber Shipping and the Group signed the Demerger Plan for the proposed Demerger of Rieber Shipping, after having considered Rieber Shipping’s changing business portfolio, where marine seismic gradually had become a larger and more important part. Moreover, the Boards considered the fact that the risk profile of the marine seismic business was different from the remaining business portfolio, due to shorter contract duration and more volatile earnings. It was thus expected that the seismic business would be better positioned relative to future development opportunities as a separate entity, rather than as part of a joint shipping and offshore company. It was also expected that the seismic business could be developed as an attractive investment object on Oslo Børs. On January 6, 2005 shareholders of the two companies approved the Demerger Plan for the Demerger. Polar Seismikk ASA was incorporated 17 August 2004 for the purpose of participating in the Demerger. On February 3, 2005 its name was changed to Exploration Resources ASA.

F-92

---

 

F-93

---

 

				% of
Entities		Head Office		interest
Exploration Resources ASA		Bergen, Norway			100.0
Exploration Vessel Resources AS		Bergen, Norway			100.0
Exploration Vessel Resources II AS		Bergen, Norway			100.0
Exploration Investment Resources II AS		Bergen, Norway			100.0
Multiwave Geophysical Company AS		Bergen, Norway			52.8
Multiwave Geophysical Company ApS		Denmark			52.8
Multiwave Exploration Ltd.		London, UK			51.7
Multiwave Geophysical Company Asia Pacific Pte. Ltd		Singapore			52.8

F-94

---

 

	•	Multi-client surveys

	•	Exclusive surveys

F-95

---

 

F-96

---

 

•  equipment			3 to 5  years
•  seismic vessels			25 years

	•	Defined contribution plans

	•	Defined benefit plans

F-97

---

 

	•	the “Towed seismic” segment performs seismic services for a specific customer;
	•	the “Multi-client segment” sells seismic surveys to be licensed to customers on a non-exclusive basis; and,
	•	the “4C/4D/ OBS segment” performs seabed seismic operations with high-tech project-based assignments.

F-98

---

 

		December 31,
		2004
		(in millions
		of Nok)
Trade accounts and notes receivable			101.2
Less: allowance for doubtful accounts			(9.2	)
Trade accounts and notes receivable net			92.0

		December 31,
		2004
		Cost
		(in millions
		of Nok)
Bunkers oil			4.7
Supplies			1.2
Inventories			5.9

		December 31,
		2004
		(in millions
		of Nok)
Prepaid tax			3.1
Prepaid expenses			4.0
Derivative on sales contract			7.7
Other receivable — Rieber Shipping(a)			60.0
Other(b)			9.7
Other current assets			84.5

(a)		Other receivables include receivables from Rieber Shipping and cash held by Rieber Shipping companies for NOK 37.4 million and NOK 22.6 million respectively, which at the year-end had not been paid to the Group as part of the demerger process. These amounts were paid in full to the Group in February 2005.
(b)		includes mainly short-term deposits and advances to suppliers.

F-99

---

 

Roll-forward		2004
		(in millions
		of Nok)
Balance at beginning of year			10.9
Investments made during the year			1.7
Equity in income			5.8
Dividends received during the year, reduction in share capital			(0.7	)
Changes in exchange rates			0.1
Impact of change in consolidation method on Multiwave			(17.8	)
Balance at end of year			—

		December 31,
		2004
		(in millions
		of Nok)
Current assets			72.8
Fixed assets			59.6
Current liabilities			84.7
Non current liabilities			35.9
Gross revenues			290.4
Operating profit			(7.5	)
Income before income taxes and minority interest			(8.6	)
Net income			(7.2	)

		December 31,
		2004
		(in millions
		of Nok)
Machinery and equipment			64.8
Less: accumulated depreciation			(12.4	)
Machinery and equipment — net			52.4
Vessels			409.7
Less: accumulated depreciation			(261.5	)
Vessels — net			148.2
Total property, plant and equipment — net			200.6

F-100

---

 

Roll-forward		2004
		(in millions
		of Nok)
Balance at beginning of year			186.4
Additions			62.9
Additions through capital lease			33.4
Depreciation			(66.1	)
Disposals			(41.2	)
Changes in exchange rates			5.8
Impact of change in consolidation method on Multiwave			19.4
Balance at end of year			200.6

		December 31, 2004
		Cost				Acc. Dep.				Net
		(in millions of Nok)
Geophysical equipment			64.8				(12.4	)			52.4
Vessels			104.1				(60.4	)			43.7
Total			168.9				(72.8	)			96.1

		December 31, 2004
		(in millions of Nok)
Multi-client surveys			73.2
Less: accumulated amortization			(63.7	)
Multi-client surveys — net			9.5
Total Intangible assets — net			9.5

Roll-forward		Year 2004
		(in millions of Nok)
Balance at beginning of period			12.2
Additions			6.3
Depreciation and amortization			(9.0	)
Balance at end of period			9.5

F-101

---

 

		December 31, 2004
		(in millions of Nok)
Debt to Rieber Shipping			21.1
Value added tax and other taxes payable			4.9
Unrealized exchange losses on forward contracts			1.9
Other liabilities			11.2
Other current liabilities			39.1

		December 31, 2004
		Current				Long-term				Total
		(in millions of Nok)
Bank loans			25.1				37.0				62.1
Capital lease obligations			29.3				46.8				76.1
Sub-total			54.4				83.8				138.2
Accrued interest			0.2				—				0.2
Total			54.6				83.8				138.4

			December 31, 2004
			(in millions of Nok)
U.S. dollar				138.4
	Total			138.4

		December 31, 2004
		(in millions of Nok)
Variable rates bank loans (effective rate December 31, 2004: LIBOR + 0.9%			62.3
Variable rate on lease Polar Search: (effective rate December 31, 2004: LIBOR + 1.25%)			40.7
Variable rate on leases in MGC: (effective rate December 31, 2004: 3.455% — 4.310%)			35.4
Fixed rates			—
Total			138.4

F-102

---

 

	•	the guarantor’s working capital on a consolidated basis should not be less than the higher of the sum of one years ordinary installments and NOK 25 million.
	•	the guarantor’s reported (book) equity on consolidated basis should not fall below 30% of the book value of the total assets in the group.

			December 31, 2004
			(in millions of Nok)
Retirement indemnity provisions				0.4
	Deferred income tax			38.7
Other long-term liabilities				39.1

	•	historical staff turnover and standard mortality schedule;
	•	age of retirement: 60 years old; and
	•	actuarial rate: 5.00% and average rate of increase in future compensation: 3.50%.

F-103

---

 

			December 31, 2004
			(in millions of Nok)
Accumulated benefit obligation (unvested)
Projected benefit obligation				2.4
Fair value of plan assets				2.0
Unrecognized loss arising from change in assumed discount rate				0.0
Accrued provision				0.4
Service cost				0.9
Interest expense				0.1
Amortization of transition amount				0.1
Expected return on plan assets				(0.1	)
Net pension cost (net of administration charge)				1.0
Administration charge				0.1
Benefit payments				0.0
Curtailment				0.0
Contribution to plan net of administration charge				(0.7	)
Net changes				0.3
Key assumptions used in estimating the Group’s retirement obligations are:
	Discount rate			5.00	%
	Average rate of increase in future compensation			3.50	%

F-104

---

 

		December 31, 2004
Notional amount (in millions of U.S.$)			2.1
— of which forward sales qualifying as cash-flow hedges			—
— of which forward sales not qualifying as cash-flow hedges			2.1
Weighted average maturity			106 days
Weighted average forward NOK/U.S.$ exchange rate			6.4043
Unrealized exchange gains (in millions of NOK)			0.8

			December 31, 2004
			Carrying				Fair
			Amount				Value
			(in millions of Nok)
Cash and cash equivalents				14.4				14.4
Restricted cash				2.1				2.1
Bank overdraft facilities				(38.2	)			(38.2	)
Bank loans, vendor equipment financing and shareholder loans:
	•  Variable rate			(138.4	)			(138.4	)
	•  Fixed rate			—				—
Foreign currency exchange contracts				0.8				0.8
Interest rate swaps				(2.2	)			(2.2	)
Commodity swap Brent Blend				(0.5	)			(0.5	)

F-105

---

 

		Payments due by period
		Less than												After
		1 year				1-3 years				4-5 years				5 years				Total
		(in million of Nok)
Long-term debt			25.3				37.0				—				—				62.3
Capital Lease Obligations			29.3				32.9				13.9				—				76.1
Operating Leases			88.3				17.1				—				—				105.4
Total Contractual Obligations			142.9				87.0				13.9								243.8

		2004
		(in millions of Nok)
Guarantees issued in favor of clients(a)			0.9
Guarantees issued in favor of banks			—
Other guarantees(b)			1.5
Total			2.4

(a)		Guarantees issued in favor of clients relate primarily to performance bonds, direct guarantees given for bids at the bidder level.
(b)		Other guarantees relate primarily to guarantees given to third parties for payment of rents.

		Due date
		Less than												After
		1 year				1-3 years				4-5 years				5 years				Total
		(in million of Nok)
Guarantees issued in favor of clients			0.9				—				—				—				0.9
Guarantees issued in favor of banks			—				—				—				—				—
Other guarantees			1.5				—				—				—				1.5
Total			2.4				—				—				—				2.4

F-106

---

 

	•	Towed seismic, which consist of marine seismic acquisition;
	•	Multi-client, which consist of acquiring and selling seismic library;
	•	4C/4D/OBS, which consist of seabed marine seismic acquisition.

		2004
		(in millions of Nok)
Towed seismic			378.8
Multi-client			15.8
4C/4D/OBS			102.7
Operating revenues			497.3
Towed seismic			2.2
Multi-client			6.8
4C/4D/OBS			(11.5	)
Operating income (loss)			(2.5	)
Towed seismic			52.7
Multi-client			9.0
4C/4D/OBS			13.5
Depreciation and amortization			75.2
Towed seismic			49.1
Multi-client			6.3
4C/4D/OBS			40.0
Unallocated			0.9
Capital expenditures			96.3
Towed seismic			290.9
Multi-client			9.5
4C/4D/OBS			107.7
Unallocated			0.9
Total Assets			409.0

F-107

---

 

		2004
		(in millions
		of Nok)
Europe			410.5				83	%
Asia-Pacific/Middle East			60.8				12	%
Africa			—				0	%
Americas			26.0				5	%
Combined total			497.3				100	%

		2004
		(in millions of Nok)
Europe			497.3				100	%
Asia-Pacific/Middle East			—				—	%
Africa			—				—	%
Americas			—				—	%
Combined total			497.3				100	%

		Year 2004
		(in millions of Nok)
Other revenues (expenses)			—
Non-recurring revenues (expenses) — net			—
Gains (losses) on sale of assets			20.0
Other revenues (expenses) — net			20.0

		Year 2004
		(in millions of Nok)
Financial income on derivatives			16.0
Financial expense			(7.4	)
Financial income			1.9
Financial expense — net			10.5

F-108

---

 

		Year 2004
		(in millions of Nok)
Current income taxes			(0.9	)
Deferred taxes and other			(4.4	)
Total income tax expense			(5.3	)

		December 31, 2004
		(in millions of Nok)
Deferred tax assets — temporary differences			—
Deferred tax assets — tax losses carried forward			0.5
Total Deferred tax assets			—
Total Deferred tax liabilities			(39.2	)
Total deferred tax, net			(38.7	)

		December 31, 2004
		(in millions of Nok)
Personnel employed under Norwegian contracts 4C/4D/ OBC			67
Towed seismic			—
Total			67

F-109

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		December 31, 2004
		(in millions of Nok)
Interest			5.2
Income taxes			0.3

F-110

---

 

F-111

---

 

F-112

---

 

F-113

---

 

						As at 31 December 2005
		Note				2005				2004				2003
						SR				SR				SR
ASSETS EMPLOYED
PROPERTY AND EQUIPMENT			3				148,187,403				121,111,759				174,344,719
CURRENT ASSETS
Inventories			4				11,181,732				7,961,714				4,890,999
Accounts receivable and prepayments			5				127,578,318				101,800,723				85,954,484
Bank balances and cash							115,622,483				104,151,363				85,090,860
							254,382,533				213,913,800				175,936,343
CURRENT LIABILITIES
Accounts payable and accruals			6				22,433,138				12,078,475				29,952,747
Current portion of term loans			7				—				—				30,900,000
Zakat and income tax payable			8				15,908,684				17,166,077				12,390,391
							38,341,822				29,244,552				73,243,138
NET CURRENT ASSETS							216,040,711				184,669,248				102,693,205
							364,228,114				305,781,007				277,037,924
FUNDS EMPLOYED
PARTNERS’ EQUITY
Capital			9				36,000,000				36,000,000				36,000,000
Statutory reserve			10				18,000,000				18,000,000				18,000,000
General reserve			11				4,646,910				4,646,910				4,646,910
Capital reserve			12				13,999,304				13,392,139				6,961,297
Reserve for employees’ training			13				3,000,000				3,000,000				3,000,000
Retained earnings							272,939,576				217,433,007				162,775,989
							348,585,790				292,472,056				231,384,196
NON CURRENT LIABILITIES
Term loans			7				—				—				34,866,667
Employees’ terminal benefits							15,642,324				13,308,951				10,787,061
							15,642,324				13,308,951				45,653,728
							364,228,114				305,781,007				277,037,924

F-114

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						Year ended 31 December 2005
		Note				2005				2004				2003
						SR				SR				SR
Contracts revenue							359,398,833				324,889,670				306,295,873
Operating costs							(262,462,397	)			(227,316,493	)			(223,800,880	)
GROSS PROFIT							96.936,436				97,573,177				82,494,993
General and administration expenses			14				(5,253,509	)			(4,870,222	)			(5,038,543	)
INCOME FROM MAIN OPERATIONS							91,682,927				92,702,955				77,456,450
Other income			15				4,439,959				7,778,330				812,163
Other expenses			16				—				(40,740	)			(1,150,521	)
Financial charges							(9,152	)			(1,352,685	)			(3,633,632	)
NET INCOME FOR THE YEAR							96,113,734				99,087,860				73,484,460

F-115

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			Year ended 31 December 2005
			2005				2004				2003
			SR				SR				SR
OPERATING ACTIVITIES
Net income for the year				96,113,734				99,087,860				73,484,460
Adjustments for:
	Depreciation			76,023,171				62,855,322				64,333,171
	(Profit)/loss on sale of property and equipment			(607,165	)			(6,430,842	)			858,820
				171,529,740				155,512,340				138,676,451
Changes in operating assets and liabilities:
	Inventories			(3,220,018	)			(3,070,715	)			1,418,358
	Receivables			(25,777,595	)			(15,846,239	)			31,543,715
	Payables			26,270,446				18,880,156				10,241,576
Cash from operations				168,802,573				155,475,542				181,880,100
Employees’ terminal benefits, net				2,333,373				2,521,890				2,350,914
Zakat and income tax paid				(17,173,176	)			(12,598,742	)			(11,424,355	)
Net cash from operating activities				153,962,770				145,398,690				172,806,659
INVESTING ACTIVITIES
Purchase of property and equipment				(103,265,814	)			(10,789,409	)			(13,436,425	)
Proceeds from sale of property and equipment				774,164				7,597,889				6,365,240
Net cash used in investing activities				(102,491,650	)			(3,191,520	)			(7,071,185	)
FINANCING ACTIVITIES
Term loans, net				—				(65,766,667	)			(111,650,000	)
Dividends paid				(40,000,000	)			(57,380,000	)			(18,620,000	)
Net cash used in financing activities				(40,000,000	)			(123,146,667	)			(130,270,000	)
INCREASE IN BANK BALANCES AND CASH				11,471,120				19,060,503				35,465,474
Bank balances and cash at the beginning of the year				104,151,363				85,090,860				49,625,386
BANK BALANCES AND CASH AT THE END OF THE YEAR				115,622,483				104,151,363				85,090,860

F-116

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		Year ended 31 December 2005
																		Reserve for
						Statutory				General				Capital				employees’				Retained
		Capital				reserve				reserve				reserve				training				earnings				Total
		SR				SR				SR				SR				SR				SR				SR
Balance at 31 December 2002			36,000,000				18,000,000				4,646,910				7,820,117				3,000,000				126,432,709				195,899,736
Net income for the year			—				—				—				—				—				73,484,460				73,484,460
Provision for zakat and income tax (note 8)			—				—				—				—				—				(12.390,391	)			(12,390,391	)
Zakat and income tax reimburseable by the partners			—				—				—				—				—				12,390,391				12,390,391
Transfer from capital reserve (note 12)			—				—				—				(858,820	)			—				858,820				—
Transfer to retained earnings			—				—				—				—				(2,134,170	)			2.134,170				—
Transfer to reserve for employees’ training (note 13)			—				—				—				—				2,134,170				(2,134,170	)			—
Dividends relating to 2002			—				—				—				—				—				(38,000,000	)			(38,000,000	)
Balance at 31 December 2003			36,000,000				18,000,000				4,646,910				6,961,297				3,000,000				162,775,989				231,384,196
Net income for the year			—				—				—				—				—				99,087,860				99,087,860
Provision for zakat and income tax (note 8)			—				—				—				—				—				(17,374,428	)			(17,374,428	)
Zakat and income tax reimburseable by the partners			—				—				—				—				—				17,374,428				17,374,428
Transfer to capital reserve (note 12)			—				—				—				6,430,842				—				(6,430,842	)			—
Transfer to retained earnings			—				—				—				—				(2,077,836	)			2,077,836				—
Transfer to reserve for employees’ training (note 13)			—				—				—				—				2,077,836				(2,077,836	)			—
Dividends relating to 2003			—				—				—				—				—				(38,000,000	)			(38,000,000	)
Balance at 31 December 2004			36,000,000				18,000,000				4,646,910				13,392,139				3,000,000				217,433,007				292,472,056
Net income for the year			—				—				—				—				—				96,113,734				96,113,734
Provision for zakat and income tax (note 8)			—				—				—				—				—				(15,915,783	)			(15,915,783	)
Zakat and income tax reimburseable by the partners			—				—				—				—				—				15,915,783				15,915,783
Transfer to capital reserve (note 12)			—				—				—				607,165				—				(607,165	)			—
Transfer to retained earnings			—				—				—				—				(1,730,387	)			1,730,387				—
Transfer to reserve for employees’ training (note 13)			—				—				—				—				1,730,387				(1,730,387	)			—
Dividends relating to 2004			—				—				—				—				—				(40,000,000	)			(40,000,000	)
Balance at 31 December 2005			36,000,000				18,000,000				4,646,910				13,999,304				3,000,000				272,939,576				348,585,790

F-117

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F-118

---

 

Camp and Geophysical equipment		3 to 5 years (2004: 51/3 years)
Vehicles		4 to 5 years (2004: 4 to 51/3 years)
Others		4 to 5 years (2004: 51/3 years)

							Camp and
			Freehold				Geophysical												Total				Total				Total
			land				equipment				Vehicles				Others				2005				2004				2003
			SR				SR				SR				SR				SR				SR				SR
Cost:
	At the beginning of the year			1,382,000				366,802,316				58,922,918				4,215,639				431,322,873				457,716,818				521,502,125
	Additions			9,512,745				76,520,246				17,077,632				155,191				103,265,814				10,789,409				13,436,425
	Disposals			—				(14,816,565	)			(1,064,266	)			(60,620	)			(15,941,451	)			(37,183,354	)			(77,221,732	)
	At the end of the year			10,894,745				428,505,997				74,936,284				4,310,210				518,647,236				431,322,873				457,716,818
Accumulated depreciation:
	At the beginning of the year			—				256,770,716				50,125,766				3,314,632				310,211,114				283,372,099				289,036,600
	Charge for the year			—				70,992,252				4,691,143				339,776				76,023,171				62,855,322				64,333,171
	Disposals			—				(14,649,584	)			(1,064,251	)			(60,617	)			(15,774,452	)			(36,016,307	)			(69,997,672	)
	At the end of the year			—				313,113,384				53,752,658				3,593,791				370,459,833				310,211,114				283,372,009
Net book amounts:
	At 31 December 2005			10,894,745				115,392,613				21,183,626				716,419				148,187,403
	At 31 December 2004			1,382,000				110,031,600				8,797,152				901,007								121,111,759
	At 31 December 2003			1,382,000				163,572,447				8,508,014				882,258												174,344,719

		2005				2004				2003
		SR				SR				SR
Equipment spares and others			8,535,353				6,697,432				4,813,651
Goods in transit			2,646,379				1,264,282				77,348
			11,181,732				7,961,714				4,890,999

F-119

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		2005				2004				2003
		SR				SR				SR
Trade accounts receivable			57,120,568				48,034,478				24,033,667
Retentions receivable			41,892,370				35,159,374				51,263,358
Amounts due from partners (note 17)			14,996,318				16,856,091				7,617,984
Unbilled receivables			7,596,342				—				—
Advances to suppliers			1,661,670				208,164				723,577
Other receivables			1,843,450				307,976				996,515
Prepaid expenses			2,467,600				1,234,640				1,319,383
			127,578,318				101,800,723				85,954,484

		2005				2004				2003
		SR				SR				SR
Trade accounts payable			10,943,801				6,718,682				6,583,563
Amount due to a partner			—				—				17,051,226
Amounts due to affiliates (note 17)			1,268,815				293,909				826,766
Accrued expenses			8,083,410				3,967,197				4,209,785
Other payables			2,137,112				1,098,687				1,281,407
			22,433,138				12,078,475				29,952,747

F-120

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		2005				2004				2003
		SR				SR				SR
Bank loans			—				—				65,766,667
Less: Non current portion			—				—				34,866,667
Current portion			—				—				30,900,000

		2005				2004				2003
		SR				SR				SR
Provision for the year			2,652,142				2,271,559				1,289,884
Prior years			567				207,308				143
Charge for the year			2,652,709				2,478,867				1,290,027

		2005				2004				2003
		SR				SR				SR
Equity			127,230,749				98,625,940				99,908,866
Opening provisions and other adjustments			8,317,565				5,501,401				4,302,435
Book value of long term assets			(98,450,756	)			(65,182,687	)			(91,370,769	)
			37,097,558				38,944,654				12,840,532
Zakatable income for the year			68,988,128				51,917,716				38,754,818
Zakat base			106,085,686				90,862,370				51,595,350

		2005				2004				2003
		SR				SR				SR
Provision for the year			13,256,542				14,894,518				11,100,507
Prior year			6,532				1,043				1,646
Charge for the year			13,263,074				14,895,561				11,102,153

F-121

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		2005				2004				2003
		SR				SR				SR
At the beginning of the year			17,166,077				12,390,391				11,422,566
Provided during the year			15,915,783				17,374,428				12,392,180
Payments during the year			(17,173,176	)			(12,598,742	)			(11,424,355	)
At the end of the year			15,908,684				17,166,077				12,390,391

F-122

---

 

		2005				2004				2003
		SR				SR				SR
At the beginning of the year			3,000,000				3,000,000				3,000,000
Transfer to retained earnings			(1,730,387	)			(2,077,836	)			(2,134,170	)
Transfer from retained earnings			1,730,387				2,077,836				2,134,170
At the end of the year			3,000,000				3,000,000				3,000,000

		2005				2004				2003
		SR				SR				SR
Rent			1,082,246				1,178,503				1,271,583
Printing and stationery			1,014,003				872,659				886,376
Postage, fax and telephone			570,271				587,883				642,201
Other			2,586,989				2,231,177				2,238,383
			5,253,509				4,870,222				5,038,543

		2005				2004				2003
		SR				SR				SR
Profit on sale of plant and equipment			607,165				6,430,842				—
Income from bank deposits			3,748,749				1,347,488				812,163
Other			84,045				—				—
			4,439,959				7,778,330				812,163

		2005				2004				2003
		SR				SR				SR
Loss on sale of plant and equipment			—				—				858,820
Exchange loss			—				40,740				291,701
			—				40,740				1,150,521

F-123

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20	SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

a.	Following is a reconciliation of net income to US GAAP:

			2005				2004				2003
			SR				SR				SR
Net income under Saudi accounting standards				96,113,734				99,087,860				73,484,460
US GAAP adjustments:
	Provision for zakat and income tax (note 8(c))			(15,915,783	)			(17,374,428	)			(12,390,391	)
	Net over payment of zakat and income tax (refer below)			904,631				—				—
	Deferred tax adjustment for the year			3,787,829				43,367				84,968
Net income under US GAAP				84,890,411				81,756,799				61,179,037
Difference in net income between Saudi Standards and US GAAP				11,223,323				17,331,061				12,305,423
Difference in partners’ equity between Saudi Accounting Standards and US GAAP (due to cumulative effect of current and prior years’ adjustments)				13,680,456				20,735,296				15,794,626

F-124

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b.	Following is a reconciliation of partners’ equity for differences with US GAAP:

		2005				2004				2003
		SR				SR				SR
Partners’ equity under Saudi accounting standards			348,585,790				292,472,056				231,384,196
Cumulative effect of current and prior year adjustments (note 20(a))			(13,680,456	)			(20,735,296	)			(15,794,626	)
Partners’ equity under US GAAP			334,905,334				271,736,760				215,589,570

c.	Dividends paid

d.	Fair values

F-125

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F-126

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			Three Months Ended
			October 31,
			2006				2005
			(In thousands, except per
			share amounts)
Revenue			$	230,831			$	168,678
Cost of services				165,792				136,666
Research and development				5,404				4,902
Merger and related costs				10,259				—
General and administrative				11,432				8,855
Operating income				37,944				18,255
Interest expense				2,188				1,476
Interest income				(4,983	)			(1,901	)
Gain on involuntary conversion of assets				—				(2,000	)
Other (income) expense, net				29				(126	)
Income before provision for income taxes				40,710				20,806
Provision for income tax expense				13,182				9,019
Net income			$	27,528			$	11,787
Net income per share:
Basic:
	Weighted average common shares			35,973				34,689
	Net income per common share		$	.77			$	.34
Diluted:
	Weighted average common shares			40,748				36,838
	Net income per common share		$	.68			$	.32
Comprehensive income:
Net income			$	27,528			$	11,787
Other comprehensive income (net of tax, $0 in all periods, except as specified):
	Minimum pension liability adjustment (net of tax provision of $155)			363				—
	Foreign currency translation adjustments			862				4,905
Total other comprehensive income				1,225				4,905
Comprehensive income			$	28,753			$	16,692

F-127

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				October 31,				July 31,
				2006				2006
				(Dollars in thousands,
				except par value)
				(Unaudited)
ASSETS
Current assets:
	Cash and cash equivalents			$	353,819			$	401,955
	Restricted cash investments				303				302
	Accounts receivable (net of allowance for doubtful accounts: $1,915 in October and $1,895 in July)				238,430				215,244
	Materials and supplies inventory				7,451				6,366
	Prepayments and other				37,386				18,917
	Deferred tax asset				8,225				8,225
	Current assets held for sale				—				5,148
		Total current assets			645,614				656,157
Property and equipment					546,225				359,683
Less accumulated depreciation					404,342				249,079
		Property and equipment, net			141,883				110,604
Multi-client data library					324,069				296,603
Deferred tax asset, net					41,392				41,511
Other assets					22,656				22,699
Noncurrent assets held for sale					—				30,456
		Total		$	1,175,614			$	1,158,030
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Notes payable			$	155,000			$	155,000
	Accounts payable, trade				95,545				107,863
	Accrued and deferred income taxes				35,131				29,224
	Deferred revenue				47,581				29,280
	Other accrued liabilities				58,256				70,313
	Current liabilities held for sale				—				21,245
		Total current liabilities			391,513				412,925
Non-current liabilities:
	Other non-current liabilities				34,268				34,561
		Total non-current liabilities			34,268				34,561
Stockholders’ equity:
	Common stock, $.01 par value; issued: 37,376,318 and 37,220,959 shares, respectively				374				372
	Additional paid-in capital				503,455				492,387
	Accumulated earnings				255,904				228,376
	Accumulated other comprehensive income:
		Cumulative foreign currency translation adjustment			22,645				21,783
		Minimum pension liability			(9,004	)			(9,367	)
	Treasury stock, at cost; 1,357,643 and 1,349,592 shares, respectively				(23,541	)			(23,007	)
		Total stockholders’ equity			749,833				710,544
		Total		$	1,175,614			$	1,158,030

F-128

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				Three Months Ended
				October 31,
				2006				2005
				(In thousands)
Cash flows from operating activities:
Net income				$	27,528			$	11,787
Non-cash items included in net income:
	Depreciation and amortization, net (other than multi-client)				14,619				9,045
	Amortization of multi-client data library				57,925				52,840
	Share based compensation				1,323				1,447
	Deferred income taxes				467				364
	(Gain) / loss on disposition of property				(478	)			43
	Change in operating assets and liabilities:
		Accounts receivable			(23,023	)			(5,336	)
		Materials and supplies inventory			(645	)			(1,298	)
		Prepayments and other			(13,749	)			574
		Accrued income tax			6,817				2,933
		Accounts payable, deferred revenue and other accrued liabilities			(27,808	)			(44,504	)
		Other			(300	)			1,502
		Net cash provided by operating activities			42,676				29,397
Cash flows from investing activities:
	Investment in multi-client data library, net cash				(80,901	)			(61,622	)
	Purchase of property and equipment				(19,221	)			(11,451	)
	Proceeds from involuntary conversion of assets				—				13,600
	Proceeds from sales of property and equipment				1,078				38
		Net cash used by investing activities			(99,044	)			(59,435	)
Cash flows from financing activities:
	Proceeds from the sale of common stock				2,734				6,560
	Excess tax benefit from stock based compensation				5,588				732
	Principal payments on capital lease obligations				(444	)			(370	)
		Net cash provided by financing activities			7,878				6,922
Currency gain on foreign cash					354				1,694
Decrease in cash and cash equivalents					(48,136	)			(21,422	)
Beginning cash and cash equivalents balance					401,955				249,393
Ending cash and cash equivalents balance				$	353,819			$	227,971
Schedule of non-cash transactions:
	Capitalization of depreciation and amortization resulting in an increase in multi-client data library			$	3,612			$	5,609

F-129

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F-130

---

 

F-131

---

 

	•	All of our outstanding stock options would fully vest and restrictions on most outstanding restricted shares would vest.
	•	CGG will assume our convertible debt, which would continue to be fully convertible, and the holders of the debt would have the option of exercising their put right to CGG.
	•	Any outstanding borrowings and letters of credit under the credit facility would be due immediately upon closing of the transaction.
	•	A significant amount of severance compensation may be paid to executives of the company, including the named executive officers.
	•	Other material effects of the merger will be more fully discussed in the proxy statement/prospectus on Form F-4 which CGG has filed with the SEC and in the proxy statement/prospectus relating to the proposed transaction, which will be sent to each Veritas stockholder in connection with the meeting of Veritas stockholders that we intend to call to vote to adopt the merger agreement.

F-132

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				Three Months Ended
				October 31,
				2006				2005
				(In thousands, except
				per share amounts)
Net income				$	27,528			$	11,787
Basic:
	Weighted average common shares (including exchangeable shares)				35,973				34,689
	Net income per share			$	.77			$	.34
Diluted:
	Weighted average common shares (including exchangeable shares)				35,973				34,689
	Shares issuable from assumed conversion of notes				4,298				1,638
	Shares issuable from assumed exercise of options				389				469
	Shares issuable from the assumed vesting of restricted stock				88				42
		Total			40,748				36,838
	Net income per share			$	.68			$	.32

		Three Months Ended October 31,
		2006				2005
Number of options			—				385,271
Exercise price range			—			$	33.94 - $55.13
Expiring through			—				March 2012

F-133

---

 

				For the three months
				ending October 31,
				2006				2005
				(amounts in
				thousands)
Income tax provision computed at the U.S. statutory rate				$	14,249			$	7,282
Increase (decrease) in taxes resulting from:
	Non-U.S. activities				(993	)			1,153
	Foreign tax refund				(5,047	)			—
	Non-deductible merger and related costs				3,590				—
	Other				1,383				584
		Total		$	13,182			$	9,019

	1.	the closing sale price of our common stock is over 120% of the conversion price, which is currently $24.03 (with 120% being $28.84) for 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the fiscal quarter preceding the quarter in which the conversion occurs;
	2.	if we called the notes for redemption and the redemption has not occurred;
	3.	the occurrence of a five consecutive trading day period in which the trading price of the notes was less than 95% of the closing sale price of our common stock on such day multiplied by the conversion ratio; or
	4.	the occurrence of specified corporate transactions.

F-134

---

 

F-135

---

 

			Three Months
			Ended October 31,
			2006				2005
			(In thousands)
Service cost (benefits earned during the period)			$	398			$	331
Interest cost on projected benefit obligation				630				480
Expected return on plan assets				(391	)			(324	)
Amortization of transition obligation				2				2
Amortization of prior service cost				(38	)			(36	)
Amortization of net (gain)/loss				327				261
	Net periodic benefit costs		$	928			$	714

F-136

---

 

				As of July 31, 2006
				Land				Searcher
				acquisition				vessel				Total
				(amounts in thousands)
Materials and inventory				$	440			$	—			$	440
Prepayments and other					4,708				—				4,708
	Current assets				5,148				—				5,148
Geophysical vessel					—				8,331				8,331
Geophysical equipment					144,096				2,206				146,302
Leasehold improvements and other					23,863				—				23,863
	Total				167,959				10,537				178,496
Accumulated depreciation					(138,003	)			(10,037	)			(148,040	)
	Property and equipment, net				29,956				500				30,456
		Total assets		$	35,104				500			$	35,604
Deferred revenue				$	21,245				—			$	21,245
		Total current liabilities		$	21,245				—			$	21,245

		For the Three Months Ended October 31, 2006
		NASA				EAME				APAC				VHR				Corporate				Total
		(In thousands)
Revenue		$	139,294			$	54,248			$	32,202			$	5,087			$	—			$	230,831
Depreciation and amortization, net (other than multi-client)			9,450				2,291				1,575				1,025				278				14,619
Amortization of multi-client library			37,082				20,749				94				—				—				57,925
Operating income (loss)			41,634				10,571				6,825				663				(21,749	)			37,944
Assets			556,877				197,009				92,453				11,457				317,818				1,175,614

		For the Three Months Ended October 31, 2005
		NASA				EAME				APAC				VHR				Corporate				Total
		(In thousands)
Revenue		$	102,842			$	34,769			$	26,783			$	4,284			$	—			$	168,678
Depreciation and amortization, net (other than multi-client)			4,839				1,208				1,819				961				218				9,045
Amortization of multi-client library			36,745				16,095				—				—				—				52,840
Operating income (loss)			19,035				3,528				5,804				(662	)			(9,450	)			18,255
Assets			491,099				140,136				54,077				14,637				254,517				954,466

F-137

---

 

		Three Months Ended				Three Months Ended
		October 31, 2006				October 31, 2005
		(In millions of dollars)
Compensation costs recorded for all plans		$	1.3			$	1.5
Tax benefit recognized in income statement for share-based compensation arrangements			0.4				0.4

F-138

---

 

		2006				2005
Expected volatility			Not applicable				50.8%
Expected dividends			Not applicable				0%
Expected term (in years)			Not applicable				4.0
Risk free rate			Not applicable				4.0%

For the Three Months Ended October 31, 2006

Weighted

Weighted

Weighted

Average

Aggregate

Average

Average

Contractual

Intrinsic

Number of

Exercise

Grant Date

Life

Value

Shares

Price

Fair Value

In Years

(000’s)

Beginning balance

1,178,473

$

19.70

Options granted

—

Options exercised

106,956

17.82

Options forfeited

—

Total outstanding

1,071,517

19.77

2.6

$

55,977

Options exercisable and vested

818,384

19.35

2.4

$

43,100

F-139

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			Number of
			Shares
Nonvested at July 31, 2006				124,969
	Granted			70,113
	Less: Vested			34,782
	Less: Forfeited			1,250
Nonvested at October 31, 2006				159,050

		Assumptions used in valuation model
		Risk free								Expected				Expected
For the quarter ended		rate				Volatility				life				dividends
October 31, 2005			3.5	%			47	%			90 days				—
October 31, 2006			4.9	%			44	%			90 days				—

F-140

---

 

		Parent
		Company				Subsidiary				Combined								Consolidated
		Guarantor				Guarantors				Non-Guarantors				Eliminations				Totals
		(dollars in thousands)
Revenue		$	—			$	112,516			$	119,926			$	(1,611	)		$	230,831
Cost of services			—				76,881				95,736				(1,421	)			171,196
General and administrative			894				20,455				342				—				21,691
Operating income			(894	)			15,180				23,848				(190	)			37,944
Interest (income) expense			(6,808	)			5,213				(1,200	)			—				(2,795	)
Gain on involuntary conversion of assets			—				—				—				—				—
Equity in (earnings) losses of subsidiaries			(23,529	)			(13,752	)			—				37,281				—
Other (income) expense, net			—				142				(166	)			53				29
Income before provision (benefit) for income taxes			29,443				23,577				25,214				(37,524	)			40,710
Provision (benefit) for income taxes			1,915				3,181				8,086				—				13,182
Net income		$	27,528			$	20,396			$	17,128			$	(37,524	)		$	27,528

		Parent
		Company				Subsidiary				Combined								Consolidated
		Guarantor				Guarantors				Non-Guarantors				Eliminations				Totals
		(dollars in thousands)
Revenue		$	—			$	82,918			$	86,931			$	(1,171	)		$	168,678
Cost of services			—				68,336				74,403				(1,171	)			141,568
General and administrative			493				7,876				486				—				8,855
Operating income			(493	)			6,706				12,042				—				18,255
Interest (income) expense			1,474				(1,533	)			(366	)			—				(425	)
Gain on involuntary conversion of assets			—				(2,000	)			—				—				(2,000	)
Equity in (earnings) losses of subsidiaries			(12,901	)			(4,699	)			—				17,600				—
Other (income) expense, net			—				(558	)			315				117				(126	)
Income before provision (benefit) for income taxes			10,934				15,496				12,093				(17,717	)			20,806
Provision (benefit) for income taxes			(853	)			4,680				5,192				—				9,019
Net income		$	11,787			$	10,816			$	6,901			$	(17,717	)		$	11,787

F-141

---

 

				Parent
				Company				Subsidiary				Combined								Consolidated
				Guarantor				Guarantors				Non-Guarantors				Eliminations				Totals
				(dollars in thousands)
ASSETS
Current assets:
	Cash and cash equivalents			$	2,981			$	228,931			$	121,907			$	—			$	353,819
	Restricted cash investments				—				—				303				—				303
	Accounts receivable				16,581				126,265				95,584				—				238,430
	Materials and supplies inventory				—				6,313				1,138				—				7,451
	Prepayments and other				1,228				21,550				14,608				—				37,386
	Deferred tax asset				6,802				82				1,341				—				8,225
		Total current assets			27,592				383,141				234,881				—				645,614
Property and equipment					—				358,829				187,396				—				546,225
Less accumulated depreciation					—				(255,863	)			(148,479	)			—				404,342
		Property and equipment, net			—				102,966				38,917				—				141,883
Multi-client data library					—				129,883				194,186				—				324,069
Intercompany receivable					617,935				—				—				(617,935	)			—
Investment in subsidiaries					227,385				149,394				76,962				(453,741	)			—
Other assets					35,552				15,939				12,557				—				64,048
		Total		$	908,464			$	781,323			$	557,503			$	(1,071,676	)		$	1,175,614
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Notes payable			$	155,000			$	—			$	—			$	—			$	155,000
	Accounts payable, trade				—				40,909				54,636				—				95,545
	Accrued and deferred income taxes				(2,200	)			4,488				32,843				—				35,131
	Deferred revenue				—				26,773				20,808				—				47,581
	Other accrued liabilities				1,825				31,834				24,597				—				58,256
		Total current liabilities			154,625				104,004				132,884				—				391,513
Non-current liabilities:
	Intercompany payable				—				470,483				147,452				(617,935	)			—
	Other non-current liabilities				4,006				8,100				22,162				—				34,268
		Total non-current liabilities			4,006				478,583				169,614				(617,935	)			34,268
Stockholders’ equity:
Common stock					374				3,132				26,937				(30,069	)			374
Other stockholders’ equity					749,459				195,604				228,068				(423,672	)			749,459
		Total stockholders’ equity			749,833				198,736				255,005				(453,741	)			749,833
		Total		$	908,464			$	781,323			$	557,503			$	(1,071,676	)		$	1,175,614

F-142

---

 

				Parent
				Company				Subsidiary				Combined								Consolidated
				Guarantor				Guarantors				Non-Guarantors				Eliminations				Totals
				(dollars in thousands)
ASSETS
Current assets:
	Cash and cash equivalents			$	5,418			$	295,634			$	100,903			$	—			$	401,955
	Restricted cash investments				—				—				302				—				302
	Accounts receivable				9,873				97,292				108,079				—				215,244
	Materials and supplies inventory				—				4,899				1,467				—				6,366
	Prepayments and other				1,445				14,342				3,130				—				18,917
	Deferred tax asset				14,616				1,819				(8,210	)			—				8,225
	Current assets held for sale				—				1,791				3,357				—				5,148
		Total current assets			31,352				415,777				209,028				—				656,157
Property and equipment					—				290,866				68,817				—				359,683
Less accumulated depreciation					—				(201,357	)			(47,722	)			—				249,079
		Property and equipment, net			—				89,509				21,095				—				110,604
Multi-client library					—				129,876				166,727				—				296,603
Intercompany receivable					616,026				—				—				(616,026	)			—
Investment in subsidiaries					190,083				149,394				76,443				(415,920	)			—
Other assets					34,433				14,762				15,015				—				64,210
Noncurrent assets held for sale					—				8,598				21,858				—				30,456
		Total		$	871,894			$	807,916			$	510,166			$	(1,031,946	)		$	1,158,030
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Notes payable			$	155,000			$	—			$	—			$	—			$	155,000
	Accounts payable, trade				—				54,508				53,355				—				107,863
	Accrued and deferred income taxes				1,245				3,177				24,802				—				29,224
	Deferred revenue				—				4,616				24,664				—				29,280
	Other accrued liabilities				1,554				41,711				27,048				—				70,313
	Current liabilities held for sale				—				20,124				1,121				—				21,245
		Total current liabilities			157,799				124,136				130,990				—				412,925
Non-current liabilities:
	Intercompany payable				—				497,913				118,113				(616,026	)			—
	Other non-current liabilities				3,551				9,386				21,624				—				34,561
		Total non-current liabilities			3,551				507,299				139,737				(616,026	)			34,561
Stockholders’ equity:
Common stock					372				3,132				26,936				(30,068	)			372
Other stockholders’ equity					710,172				173,349				212,503				(385,852	)			710,172
		Total stockholders’ equity			710,544				176,481				239,439				(415,920	)			710,544
		Total		$	871,894			$	807,916			$	510,166			$	(1,031,946	)		$	1,158,030

F-143

---

 

			Parent Company				Subsidiary				Combined								Consolidated
			Guarantor				Guarantors				Non-Guarantors				Eliminations				Totals
			(dollars in thousands)
Cash flows from (used in):
Operating activities			$	(10,759	)		$	(46,059	)		$	99,494			$	—			$	42,676
Investing activities				—				(20,644	)			(78,400	)			—				(99,044	)
Financing activities				8,322				—				(444	)			—				7,878
	Subtotal			(2,437	)			(66,703	)			20,650				—				(48,490	)
Currency gain on foreign cash				—				—				354				—				354
Increase (decrease) in cash				(2,437	)			(66,703	)			21,004				—				(48,136	)
Beginning cash balance				5,418				295,634				100,903				—				401,955
Ending cash balance			$	2,981			$	228,931			$	121,907			$	—			$	353,819

			Parent Company				Subsidiary				Combined								Consolidated
			Guarantor				Guarantors				Non-Guarantors				Eliminations				Totals
			(dollars in thousands)
Cash flows from (used in):
Operating activities			$	48,168			$	(54,999	)		$	36,228			$	—			$	29,397
Investing activities				—				(5,479	)			(53,956	)			—				(59,435	)
Financing activities				7,293				—				(371	)			—				6,922
	Subtotal			55,461				(60,478	)			(18,099	)			—				(23,116	)
Currency gain on foreign cash				—				—				1,694				—				1,694
Increase (decrease) in cash				55,461				(60,478	)			(16,405	)			—				(21,422	)
Beginning cash balance				2,977				177,824				68,592				—				249,393
Ending cash balance			$	58,438			$	117,346			$	52,187			$	—			$	227,971

F-144

---

 

F-145

---

 

F-146

---

 

			For the Years Ended July 31,
			2006				2005				2004
			(In thousands, except per share
			amounts)
Revenue			$	822,188			$	634,026			$	564,469
Cost of services				623,159				519,008				495,709
Research and development				22,910				18,882				15,536
General and administrative				43,240				31,895				25,454
Operating income				132,879				64,241				27,770
Interest expense				7,319				3,996				18,851
Interest income				(11,989	)			(5,262	)			(1,602	)
Gain on involuntary conversion of assets				(2,000	)			(9,861	)			—
Other (income) expense, net				123				(875	)			1,585
Income before provision (benefit) for income taxes				139,426				76,243				8,936
Provision (benefit) for income taxes				57,195				(6,758	)			3,715
Net income			$	82,231			$	83,001			$	5,221
Net income per share:
Basic:
	Weighted average common shares			35,260				33,843				33,572
	Income per common share		$	2.33			$	2.45			$	.16
Diluted:
	Weighted average common shares			39,623				35,054				34,260
	Income per common share		$	2.08			$	2.37			$	.15
Comprehensive income
Net income			$	82,231			$	83,001			$	5,221
Other comprehensive income (loss) (net of tax, $0 in all periods except as specified):
	Foreign currency translation adjustments			7,538				6,914				3,835
	Unrealized gain (loss) on investments-available for sale			—				(159	)			(588	)
	Reclassification of unrealized gain on investments recognized in income			(197	)			—				—
	Unrealized gain on hedge transactions			—				—				145
	Minimum pension liability adjustment (net of tax benefit of $409, $3,074 and $0 in 2006, 2005 and 2004, respectively)			(956	)			(7,171	)			338
Total other comprehensive income (loss)				6,385				(416	)			3,730
Comprehensive income			$	88,616			$	82,585			$	8,951

F-147

---

 

				July 31,
				2006				2005
				(Dollars in thousands,
				except par value)
ASSETS
Current assets:
	Cash and cash equivalents			$	401,955			$	249,393
	Restricted cash investments				302				237
	Accounts receivable (net of allowance for doubtful accounts: $1,895 in 2006 and $1,322 in 2005)				215,244				165,989
	Materials and supplies inventory				6,366				5,381
	Prepayments and other				18,917				18,900
	Deferred tax asset				8,225				12,486
	Current assets held for sale				5,148				—
		Total current assets			656,157				452,386
Property and equipment:
	Land				2,855				7,005
	Geophysical equipment				200,297				329,436
	Data processing equipment				79,590				75,337
	Geophysical vessel				—				8,331
	Leasehold improvements and other				76,941				74,981
		Total			359,683				495,090
	Less accumulated depreciation				249,079				367,173
		Property and equipment, net			110,604				127,917
Multi-client data library					296,603				316,793
Deferred tax asset, net					41,511				45,963
Other assets					22,699				23,539
Noncurrent assets held for sale					30,456				—
		Total		$	1,158,030			$	966,598
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Notes payable			$	155,000			$	—
	Accounts payable, trade				107,863				75,810
	Accrued and deferred income taxes				29,224				9,402
	Deferred revenue				29,280				42,043
	Other accrued liabilities				70,313				65,193
	Current liabilities held for sale				21,245				—
		Total current liabilities			412,925				192,448
Non-current liabilities:
	Long-term debt				—				155,000
	Other non-current liabilities				34,561				36,602
		Total non-current liabilities			34,561				191,602
Commitments and Contingent Liabilities (Note 6)
Stockholders’ equity:
Common stock, $.01 par value; authorized: 78,500,000 shares; issued: 37,220,959 shares in 2006 and 35,580,032 shares in 2005 (excluding Exchangeable Shares of 156,428 in 2005)					372				355
Additional paid-in capital					492,387				452,299
Accumulated earnings					228,376				146,145
Accumulated other comprehensive income:
	Cumulative foreign currency translation adjustment				21,783				14,245
	Unrealized gain on investments-available for sale				—				197
	Minimum pension liability				(9,367	)			(8,410	)
Unearned compensation					—				(595	)
Treasury stock, at cost; 1,349,592 shares in 2006 and 1,320,106 shares in 2005					(23,007	)			(21,688	)
		Total stockholders’ equity			710,544				582,548
		Total		$	1,158,030			$	966,598

F-148

---

 

					For the Years Ended July 31,
					2006				2005				2004
					(Dollars in thousands)
Cash flows from operating activities:
	Net income				$	82,231			$	83,001			$	5,221
	Non-cash items included in net income:
		Depreciation and amortization, net (other than multi-client)				43,920				41,583				40,300
		Amortization of multi-client library				200,975				159,725				209,840
		Share based compensation				5,957				350				385
		Loss (gain) on disposition of property and equipment				302				(445	)			(310	)
		Equity in loss of joint venture				—				—				958
		Deferred income taxes				3,545				(39,280	)			(9,678	)
	Changes in operating assets and liabilities:
		Accounts receivable				(62,288	)			3,128				(34,452	)
		Materials and supplies inventory				(1,422	)			(1,177	)			819
		Prepayments and other				(4,884	)			(3,270	)			(1,836	)
		Accrued income taxes				23,037				12,136				2,649
		Accounts payable, deferred revenue and other accrued liabilities				40,602				69,003				32,951
		Other non-current liabilities				4,010				5,098				(1,844	)
		Other				630				1,443				(1,969	)
			Net cash provided by operating activities			336,615				331,295				243,034
Cash flows used by investing activities:
		Investment in multi-client library, net cash				(165,634	)			(148,373	)			(126,250	)
		Purchase of property and equipment				(67,903	)			(62,375	)			(30,543	)
		Sale of (RC)2				—				—				2,000
		Proceeds from involuntary conversion of assets				15,600				2,817				—
		Proceeds from sales of property and equipment				1,158				1,342				2,307
		Decrease (increase) in restricted cash investments				(63	)			(126	)			94
			Net cash used by investing activities			(216,842	)			(206,715	)			(152,392	)
Cash flows from financing activities:
		Borrowings of long-term debt				—				—				155,000
		Payments of long-term debt				—				—				(194,225	)
		Proceeds from the sale of common stock				27,744				7,652				12,543
		Purchase of treasury stock				—				—				(20,000	)
		Excess tax benefit from share based compensation				4,277				—				—
		Principal payments on capital lease obligations				(2,023	)			—				—
			Net cash provided by (used by) financing activities			29,998				7,652				(46,682	)
	Currency gain on foreign cash					2,791				862				242
	Increase in cash and cash equivalents					152,562				133,094				44,202
	Beginning cash and cash equivalents balance					249,393				116,299				72,097
	Ending cash and cash equivalents balance				$	401,955			$	249,393			$	116,299

F-149

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					For the Years Ended July 31,
					2006				2005				2004
					(Dollars in thousands)
Schedule of significant non-cash transactions:
	Capitalization of depreciation and amortization resulting in an increase in multi-client data library					13,275				11,365				18,648
	Capital lease obligations incurred for the purchase of equipment					3,742				—				—
	Common stock issued for purchase of Fairweather Geophysical LLC					—				—				500
Supplemental disclosures of cash flow information:
	Cash paid for:
		Interest:
			Convertible notes		$	5,301			$	2,286			$	160
			Term notes			—				—				11,830
			Other			276				163				114
		Income taxes, net				34,840				21,809				3,216

F-150

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		Common Stock																				Accumulated
										Treasury Stock												Earnings from
										At Cost								Additional				August 1, 1991								Accumulated
						Par												Paid-In-				with respect to				Unearned				Comprehensive
		Shares				Value				Shares				Cost				Capital				Digicon Inc.				Compensation				Income (Loss)
		(In thousands, except share amounts)
Balance, July 31, 2003			32,156,781			$	322				(84,143	)		$	(1,508	)		$	428,402			$	57,923			$	(340	)		$	2,718
Common stock issued for exchangeable stock			1,257,490				12				—				—				(12	)			—				—				—
Common stock issued to employees			56,353				—				—				—				468				—				(649	)			—
Common stock issued for cash			1,289,098				13				—				—				12,530				—				—				—
Stock returned to treasury			—				—				(10,895	)			(120	)			—				—				—				—
Treasury stock buy back			—				—				(1,222,494	)			(20,000	)			—				—				—				—
Tax benefit for share based compensation			—				—				—				—				95				—				—				—
Common stock exchanged for purchase of Fairweather			61,576				1				—				—				499				—				—				—
Cumulative foreign currency translation adjustment			—				—				—				—				—				—				—				3,835
Amortization of unearned compensation			—				—				—				—				—				—				385				—
Unrealized gain on investments — available for sale			—				—				—				—				—				—				—				(588	)
Unrealized loss on foreign currency hedge			—				—				—				—				—				—				—				(632	)
Unrealized gain on interest rate swap			—				—				—				—				—				—				—				777
Unrealized minimum pension liability			—				—				—				—				—				—				—				338
Net income			—				—				—				—				—				5,221				—				—
Balance, July 31, 2004			34,821,298			$	348				(1,317,532	)		$	(21,628	)		$	441,982			$	63,144			$	(604	)		$	6,448
Common stock issued for exchangeable stock			25,484				—				—				—				(280	)			—				—				—
Common stock issued to employees			733,250				7				—				—				8,326				—				(341	)			—
Stock returned to treasury			—				—				(2,574	)			(60	)			—				—				—				—
Tax benefit for share based compensation			—				—				—				—				2,271				—				—				—
Cumulative foreign currency translation adjustment			—				—				—				—				—				—				—				6,914
Amortization of unearned compensation			—				—				—				—				—				—				350				—
Unrealized gain on investments — available for sale			—				—				—				—				—				—				—				(159	)
Unrealized minimum pension liability			—				—				—				—				—				—				—				(7,171	)
Net income			—				—				—				—				—				83,001				—				—
Balance, July 31, 2005			35,580,032			$	355				(1,320,106	)		$	(21,688	)		$	452,299			$	146,145			$	(595	)		$	6,032
Common stock issued for exchangeable stock			156,428				2				—				—				1,048				—				—				—
Common stock issued to employees			1,484,499				15				—				—				28,072				—				—				—
Reclassification of unearned compensation			—				—				—				—				(595	)			—				595				—
Stock returned to treasury			—				—				(29,486	)			(1,319	)			—				—				—				—
Tax benefit for share based compensation			—				—				—				—				6,870				—				—				—
Cumulative foreign currency translation adjustment			—				—				—				—				—				—				—				7,538
Share based compensation expense			—				—				—				—				4,693				—				—				—
Reclassification of unrealized gain on investments			—				—				—				—				—				—				—				(197	)
Unrealized minimum pension liability			—				—				—				—				—				—				—				(956	)
Net income			—				—				—				—				—				82,231				—				—
Balance, July 31, 2006			37,220,959			$	372				(1,349,592	)		$	(23,007	)		$	492,387			$	228,376			$	—			$	12,417

F-151

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F-152

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		Estimated
		Useful Life
		In Years
Geophysical equipment			3-5
Data processing equipment			3
Leasehold improvements and other			3-15

F-153

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F-154

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				Year Ended
				July 31,
				2005				2004
Net income as reported				$	83,001			$	5,221
Add: Compensation expense, net of related tax effects					228				250
Less: Total share based compensation expense determined under fair value based method for all awards, net of related tax effects					(2,541	)			(4,859	)
Pro forma net income				$	80,688			$	612
Earnings per share:
	Basic:
		As reported		$	2.45			$	.16
		Pro-forma			2.38				.02
	Diluted:
		As reported		$	2.37			$	.15
		Pro-forma			2.30				.02

F-155

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		Year Ended
		July 31,
		2005				2004
Risk-free interest rate			3.7%				3.7%
Expected volatility			46.8%				64.9%
Expected life in years			4.0				4.0

F-156

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F-157

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		July 31, 2006												July 31, 2005
		Gross Carrying				Accumulated								Gross Carrying				Accumulated
		Amount				Amortization				Net				Amount				Amortization				Net
		(In thousands)
Software		$	16,861			$	13,200			$	3,661			$	16,396			$	9,610			$	6,786
Debt Issuance Costs			6,759				2,876				3,883				5,821				1,597				4,224

	1.	the closing sale price of our common stock is over 120% of the conversion price, which is currently $24.03 (with 120% being $28.84) for 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the fiscal quarter preceding the quarter in which the conversion occurs;
	2.	if we called the notes for redemption and the redemption has not occurred;
	3.	the occurrence of a five consecutive trading day period in which the trading price of the notes was less than 95% of the closing sale price of our common stock on such day multiplied by the conversion ratio; or
	4.	the occurrence of specified corporate transactions.

F-158

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F-159

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			July 31,
			2006				2005
			(In thousands)
Accrued payroll and benefits			$	42,565			$	35,679
Accrued taxes other than income taxes				5,071				5,985
Accrued insurance				5,676				9,105
Accrued dry dock				6,043				3,181
Current capital lease obligation				1,455				—
Other				9,503				11,243
	Total		$	70,313			$	65,193

			For the Years Ended July 31,
			2006				2005				2004
			(In thousands)
U.S.			$	55,028			$	46,224			$	4,192
Non-U.S.				84,398				30,019				4,744
	Total		$	139,426			$	76,243			$	8,936

			For the Years Ended July 31,
			2006				2005				2004
			(In thousands)
Current — U.S.			$	27,805			$	23,444			$	(3,293	)
Deferred — U.S.				(538	)			(38,380	)			—
Current — Non-U.S.				25,845				9,078				6,052
Deferred — Non-U.S.				4,083				(900	)			956
	Total		$	57,195			$	(6,758	)		$	3,715

				For the Years Ended July 31,
				2006				2005				2004
				(In thousands)
Income tax provision (benefit) computed at the U.S. statutory rate				$	48,799			$	26,685			$	3,128
Increase (decrease) in taxes resulting from:
	Non-U.S. activities				7,173				3,029				8,662
	Adjustments to tax contingencies and resolution of certain tax matters				1,011				776				(5,173	)
	Deduction of worthless stock of a subsidiary				—				—				(3,446	)
	Tax credits				(330	)			(3,369	)			(1,671	)
	Valuation allowances on deferred income tax assets				—				(34,417	)			1,408
	Non-deductibles				372				892				521
	Software amortization				—				—				411
	Other				170				(354	)			(125	)
		Total		$	57,195			$	(6,758	)		$	3,715

F-160

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				July 31,
				2006				2005
				(In thousands)
Deferred income tax assets:
	Net operating loss carryforwards			$	13,423			$	24,156
	Multi-client data library				22,150				13,801
	Property and equipment				7,073				8,711
	Tax credit carryforwards				8,175				540
	Accrued liabilities				8,012				5,424
	Pension liabilities				4,345				3,106
	Capitalized costs				2,452				2,703
	Equity based compensation				1,696				—
	Deferred revenue				2,561				6,255
	Other				1,430				2,093
	Valuation allowances				(19,255	)			(17,772	)
		Deferred income tax assets — net			52,062				49,017
Deferred income tax liabilities:
	Partnerships				(8,936	)			(5,157	)
	Deferred charges				(2,691	)			(441	)
	Deferred mobilization				(1,069	)			(1,278	)
	Other				(360	)			—
		Deferred income tax liabilities			(13,056	)			(6,876	)
Net deferred income tax assets (liabilities)				$	39,006			$	42,141

F-161

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			Non-U.S.
			Net
			Operating
Fiscal Year			Losses
2007			$	853
2008				1,019
2009				2,394
2010				411
2011				989
2012				906
2013				929
2014				378
2015				1,631
2016				1,392
Indefinite				33,995
	Total		$	44,897

F-162

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		Minimum
Fiscal Year		Rentals
		(In thousands)
2007		$	49,099
2008			34,349
2009			30,595
2010			27,468
2011			22,212
2012 and thereafter			59,032
Total		$	222,755

				Minimum
				Rentals
				(In thousands)
2007				$	1,502
2008					265
	Total minimum lease payments			$	1,767
Less: imputed interest costs					(48	)
	Present value of net
		minimum lease payments		$	1,719

F-163

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F-164

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			Year Ended
			July 31, 2006
			(In millions of dollars,
			except per share data)
Compensation costs recorded for all plans			$	6.0
Tax benefit recognized in income statement for share based compensation arrangements				1.7
Impact of adopting SFAS 123R to:
	Net income			4.3
	Basic earnings per share			0.12
	Diluted earnings per share			0.11

		Year Ended
		July 31, 2006
Expected volatility			50.8%
Expected dividends			0%
Expected term (in years)			4.0
Risk free rate			4.0%

F-165

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			For the Year Ended July 31, 2006
															Weighted
							Weighted				Weighted				Average				Aggregate
							Average				Average				Contractual				Intrinsic
			Number of				Exercise				Grant Date				Life In				Value
			Shares				Price				Fair Value				Years				(000’s)
Beginning balance				2,422,790			$	17.52
	Options granted			209,750				31.94			$	13.29				4.2
	Options exercised			(1,414,462	)			17.69
	Options forfeited			(39,605	)			23.27
Total outstanding				1,178,473				19.70								2.8			$	44,280
Options exercisable and vested				873,348				18.55								2.6			$	33,817

F-166

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			Number of
			Shares
Nonvested at July 31, 2005				54,134
Activity for the quarter ended October 31, 2005:
	Granted			97,500
	Less: Vested			7,167
	Less: Forfeited			1,888
Nonvested at October 31, 2005				142,579
Activity for the quarter ended January 31, 2006:
	Granted			3,100
	Less: Vested			14,540
	Less: Forfeited			—
Nonvested at January 31, 2006				131,139
Activity for the quarter ended April 30, 2006:
	Granted			2,000
	Less: Vested			3,033
	Less: Forfeited			4,388
Nonvested at April 30, 2006				125,718
Activity for the quarter ended July 31, 2006:
	Granted			750
	Less: Vested			1,499
	Less: Forfeited			—
Nonvested at July 31, 2006				124,969

		Year Ended
		July 31,
		2006				2005				2004
Fair value of shares vested		$	1,026			$	583			$	155

F-167

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														Assumptions used in valuation model
		Shares				Quarter when				Grant date				Risk free								Expected				Expected
For the quarter ended		granted				to be issued				fair value				rate				Volatility				life				dividends
October 31, 2005			23,144				Second FY06			$	7.52				3.5%				47%				90 days				—
January 31, 2006			21,878				Third FY06			$	7.50				3.9%				40%				90 days				—
April 30, 2006			19,543				Fourth FY06			$	10.67				4.7%				39%				90 days				—
July 31, 2006			17,807				First FY07			$	12.07				4.9%				44%				90 days				—

		July 31,
		2006				2005
		(In thousands)
Benefit obligation at beginning of year		$	36,447			$	19,882
Service cost			1,154				754
Interest cost			1,905				1,235
Contributions by plan participants			418				431
Actuarial loss			5,915				16,295
Benefits paid			(52	)			(186	)
Foreign currency exchange rate changes			2,518				(1,964	)
Benefit obligation at end of year		$	48,305			$	36,447
Fair value of plan assets at beginning of year		$	18,001			$	14,088
Actual gain on plan assets			2,236				3,616
Employer contributions			994				972
Plan participants’ contributions			418				431
Benefits paid			(45	)			(46	)
Foreign currency exchange rate changes and other			1,202				(1,060	)
Fair value of plan assets at end of year		$	22,806			$	18,001

		July 31,
		2006				2005
		(In thousands)
Projected benefit obligation in excess of plan assets		$	25,499			$	18,446
Unrecognized prior service costs			(1,322	)			(1,386	)
Unrecognized actuarial loss			(9,017	)			(5,003	)
Net pension liability		$	15,160			$	12,057

F-168

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		July 31,
		2006				2005
		(In thousands)
Accrued benefit obligation		$	16,482			$	13,443
Intangible asset			(1,322	)			(1,386	)
Net pension liability		$	15,160			$	12,057
Net amount recognized			(2,310	)			(572	)
Minimum pension liability in accumulated comprehensive income		$	12,850			$	11,485

		For the Years Ended July 31,
		2006				2005				2004
		(In thousands)
Service costs (benefits earned during the period)		$	1,154			$	754			$	542
Interest cost on projected benefit obligation			1,905				1,235				1,061
Expected return on plan assets			(1,296	)			(968	)			(787	)
Net amortization and deferral			899				164				194
Net periodic pension costs		$	2,662			$	1,185			$	1,010

		For the Years Ended
		July 31,
		2006				2005				2004
Discount rate			5.0%				5.0%				6.0%
Rates of increase in compensation levels			5.0%				4.3%				4.0%
Expected long-term rate of return on assets			6.5%				6.8%				6.5%

Asset Category
		For the Years
		Ended July
		31,
		2006				2005
Equity securities and property			74.1	%			98.0	%
Cash and bonds			25.9	%			2.0	%
Total			100.0	%			100.0	%

F-169

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Year		Amount
		(In thousands)
2007		$	61
2008			85
2009			94
2010			107
2011			138
Years 2012 to 2015			2,433

F-170

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			For the Years Ended July 31,
			2006				2005				2004
			(In thousands)
Net foreign currency exchange loss (gain)			$	1,341			$	(110	)		$	1,248
Loss from unconsolidated subsidiary1				—				—				958
Other				(1,218	)			(765	)			(621	)
	Total		$	123			$	(875	)		$	1,585

				For the Years Ended July 31,
				2006				2005				2004
				(In thousands)
Net income				$	82,231			$	83,001			$	5,221
Basic:
	Weighted average common shares (including exchangeable shares)				35,260				33,843				33,572
	Income per share			$	2.33			$	2.45			$	.16
Diluted:
	Weighted average common shares (including exchangeable shares)				35,260				33,843				33,572
	Shares issuable from assumed conversion of notes				3,744				—				—
	Shares issuable from assumed exercise of options				463				1,166				660
	Shares issuable due to performance shares agreement				82				—				—
	Shares issuable from assumed vesting of restricted stock				74				45				28
		Total			39,623				35,054				34,260
	Income per share			$	2.08			$	2.37			$	.15

		For the Years Ended July 31,
		2006				2005				2004
Number of options			13,705				681,650				1,079,591
Exercise price range			$43.56 — $55.13				$26.00 — $55.13				$14.56 — $55.13
Expiring through			May 2008				March 2012				March 2012

F-171

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			As of July 31, 2006
			Land				Searcher
			acquisition				vessel				Total
			(amounts in thousands)
Materials and inventory			$	440			$	—			$	440
Prepayments and other				4,708				—				4,708
	Current assets			5,148				—				5,148
Geophysical vessel				—				8,331				8,331
Geophysical equipment				144,096				2,206				146,302
Leasehold improvements and other				23,863				—				23,863
	Total			167,959				10,537				178,496
Accumulated depreciation				(138,003	)			(10,037	)			(148,040	)
Property and equipment, net				29,956				500				30,456
	Total assets		$	35,104				500			$	35,604
Deferred revenue			$	21,245				—			$	21,245
	Total current liabilities		$	21,245				—			$	21,245

F-172

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		For the Year Ended July 31, 2006
		NASA				EAME				APAC				VHR				Corporate				Total
		(In thousands)
Revenue		$	541,396			$	148,739			$	112,466			$	19,587			$	—			$	822,188
Depreciation and amortization, net (other than multi-client)			28,778				5,518				4,637				4,004				983				43,920
Amortization of multi-client library			164,940				36,035				—				—				—				200,975
Operating income (loss)			137,194				23,533				18,142				(2,782	)			(43,208	)			132,879
Net income (loss) before income tax			141,417				24,298				18,604				(3,106	)			(41,787	)			139,426
Total assets			485,989				191,077				86,810				12,436				381,718				1,158,030

		For the Year Ended July 31, 2005
		NASA				EAME				APAC				VHR				Corporate				Total
		(In thousands)
Revenue		$	388,632			$	130,989			$	98,171			$	16,234			$	—			$	634,026
Depreciation and amortization, net (other than multi-client)			27,033				4,898				4,519				3,764				1,369				41,583
Amortization of multi-client library			112,019				43,420				4,286				—				—				159,725
Operating income (loss)			73,429				18,176				9,118				(4,811	)			(31,671	)			64,241
Net income (loss) before income tax			83,660				19,161				9,677				(4,853	)			(31,402	)			76,243
Total assets			501,995				119,632				51,915				14,680				278,376				966,598

		For the Year Ended July 31, 2004
		NASA				EAME				APAC				VHR				Corporate				Total
		(In thousands)
Revenue		$	370,916			$	118,448			$	60,125			$	14,980			$	—			$	564,469
Depreciation and amortization, net (other than multi-client)			29,095				2,583				4,438				3,762				422				40,300
Amortization of multi-client library			148,218				56,818				4,804				—				—				209,840
Operating income (loss)			57,510				6,026				1,851				(3,183	)			(34,434	)			27,770
Net income (loss) before income tax			58,772				5,918				142				(3,298	)			(52,598	)			8,936
Total assets			479,140				116,158				38,014				15,845				127,089				776,246

				For the Years Ended July 31,
				2006				2005				2004
				(In thousands)
Geographic areas:
	United States			$	343,299			$	287,993			$	245,144
	Canada				141,667				92,639				88,283
	Latin America				67,401				17,178				57,210
	Europe				93,589				71,852				79,182
	Middle East/ Africa				60,771				62,515				32,513
	Asia Pacific				115,461				101,849				62,137
		Total		$	822,188			$	634,026			$	564,469

F-173

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				For the Years Ended July 31,
				2006				2005				2004
				(In thousands)
Geographic areas:
	United States			$	81,773			$	93,194			$	83,181
	Canada				2,962				14,808				17,317
	Latin America				1,183				1,176				1,958
	Europe				7,772				8,212				8,213
	Middle East/ Africa				2,515				2,406				3,491
	Asia Pacific				14,399				8,121				7,503
		Total		$	110,604			$	127,917			$	121,663

		For the Year Ended July 31, 2006
		1st Quarter				2nd Quarter				3rd Quarter				4th Quarter
		(In thousands, except per share amounts)
Revenue		$	168,678			$	238,860			$	236,219			$	178,431
Net income			11,787				31,082				32,876				6,487
Net income per common share — basic			.34				.89				.92				.18
Net income per common share — diluted			.32				.81				.84				.16

		For the Year Ended July 31, 2005
		1st Quarter				2nd Quarter				3rd Quarter				4th Quarter
		(In thousands, except per share amounts)
Revenue		$	129,581			$	192,228			$	175,510			$	136,707
Net income			978				17,368				18,407				46,248
Net income per common share — basic			.03				.51				.54				1.36
Net income per common share — diluted			.03				.51				.52				1.31

F-174

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	•	All of our outstanding stock options would fully vest and restrictions on most outstanding restricted shares would vest.
	•	CGG will assume our convertible debt, which would continue to be fully convertible, and the holders of the debt would have the option of exercising their put right to CGG.
	•	Any outstanding borrowings and letters of credit under the credit facility would be due immediately upon closing of the transaction.
	•	A significant amount of severance compensation may be paid to executives of the company, including the named executive officers.
	•	Other material effects of the merger will be more fully discussed in the proxy statement/prospectus on Form F-4 which CGG plans to file with the SEC and in the proxy statement/prospectus relating to the proposed transaction, which will be sent to each Veritas stockholder in connection with the meeting of Veritas stockholders that we intend to call to vote to adopt the merger agreement.

F-175

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		Parent
		Company				Subsidiary				Combined								Consolidated
		Guarantor				Guarantors				Non-Guarantors				Eliminations				Totals
		(dollars in thousands)
Revenue		$	—			$	384,078			$	447,846			$	(9,736	)		$	822,188
Cost of services			—				280,788				374,428				(9,147	)			646,069
General and administrative			2,809				37,755				2,676				—				43,240
Operating income			(2,809	)			65,535				70,742				(589	)			132,879
Interest (income) expense			(23,360	)			21,931				(3,241	)			—				(4,670	)
Gain on involuntary conversion of assets			—				(2,000	)			—				—				(2,000	)
Equity in (earnings) losses of subsidiaries			(71,601	)			(21,504	)			—				93,105				—
Other (income) expense, net			—				35				(217	)			305				123
Income before provision (benefit) for income taxes			92,152				67,073				74,200				(93,999	)			139,426
Provision (benefit) for income taxes			9,921				17,621				29,653				—				57,195
Net income		$	82,231			$	49,452			$	44,547			$	(93,999	)		$	82,231

		Parent
		Company				Subsidiary				Combined								Consolidated
		Guarantor				Guarantors				Non-Guarantors				Eliminations				Totals
		(dollars in thousands)
Revenue		$	—			$	338,261			$	300,630			$	(4,865	)		$	634,026
Cost of services			—				262,116				280,275				(4,501	)			537,890
General and administrative			1,890				28,411				1,594				—				31,895
Operating income			(1,890	)			47,734				18,761				(364	)			64,241
Interest (income) expense			(26,458	)			26,235				(1,043	)			—				(1,266	)
Gain on involuntary conversion of assets			—				(9,861	)			—				—				(9,861	)
Equity in (earnings) losses of subsidiaries			(51,820	)			(2,219	)			—				54,039				—
Other (income) expense, net			—				96				(1,186	)			215				(875	)
Income before provision (benefit) for income taxes			76,388				33,483				20,990				(54,618	)			76,243
Provision (benefit) for income taxes			(6,613	)			(8,230	)			8,085				—				(6,758	)
Net income		$	83,001			$	41,713			$	12,905			$	(54,618	)		$	83,001

F-176

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		Parent
		Company				Subsidiary				Combined								Consolidated
		Guarantor				Guarantors				Non-Guarantors				Eliminations				Totals
		(dollars in thousands)
Revenue		$	—			$	294,776			$	274,565			$	(4,872	)		$	564,469
Cost of services			—				240,896				272,995				(2,646	)			511,245
General and administrative			1,864				24,190				—				(600	)			25,454
Operating income			(1,864	)			29,690				1,570				(1,626	)			27,770
Interest (income) expense			(4,118	)			20,283				1,084				—				17,249
Gain on involuntary conversion of assets			—				—				—				—				—
Equity in (earnings) losses of subsidiaries			(2,253	)			34,151				—				(31,898	)			—
Other (income) expense, net			—				(638	)			2,003				220				1,585
Income before provision (benefit) for income taxes			4,507				(24,106	)			(1,517	)			30,052				8,936
Provision (benefit) for income taxes			(714	)			(2,778	)			7,207				—				3,715
Net income		$	5,221			$	(21,328	)		$	(8,724	)		$	30,052			$	5,221

F-177

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				Parent
				Company				Subsidiary				Combined								Consolidated
				Guarantor				Guarantors				Non-Guarantors				Eliminations				Totals
				(dollars in thousands)
ASSETS
Current assets:
	Cash and cash equivalents			$	5,418			$	295,634			$	100,903			$	—			$	401,955
	Restricted cash investments				—				—				302				—				302
	Accounts receivable				9,873				97,292				108,079				—				215,244
	Materials and supplies inventory				—				4,899				1,467				—				6,366
	Prepayments and other				1,445				14,342				3,130				—				18,917
	Deferred tax asset				14,616				1,819				(8,210	)			—				8,225
	Current assets held for sale				—				1,791				3,357				—				5,148
		Total current assets			31,352				415,777				209,028				—				656,157
Property and equipment					—				290,866				68,817				—				359,683
Less accumulated depreciation					—				(201,357	)			(47,722	)			—				249,079
		Property and equipment, net			—				89,509				21,095				—				110,604
Multi-client data library					—				129,876				166,727				—				296,603
Intercompany receivable					616,026				—				—				(616,026	)			—
Investment in subsidiaries					190,083				149,394				76,443				(415,920	)			—
Other assets					34,433				14,762				15,015				—				64,210
Noncurrent assets held for sale					—				8,598				21,858				—				30,456
		Total		$	871,894			$	807,916			$	510,166			$	(1,031,946	)		$	1,158,030
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Notes payable			$	155,000			$	—			$	—			$	—			$	155,000
	Accounts payable, trade				—				54,508				53,355				—				107,863
	Accrued and deferred income taxes				1,245				3,177				24,802				—				29,224
	Deferred revenue				—				4,616				24,664				—				29,280
	Other accrued liabilities				1,554				41,711				27,048				—				70,313
	Current liabilities held for sale				—				20,124				1,121				—				21,245
		Total current liabilities			157,799				124,136				130,990				—				412,925
Non-current liabilities:
	Intercompany payable				—				497,913				118,113				(616,026	)			—
	Other non-current liabilities				3,551				9,386				21,624				—				34,561
		Total non-current liabilities			3,551				507,299				139,737				(616,026	)			34,561
Stockholders’ equity:
Common stock					372				3,132				26,936				(30,068	)			372
Other stockholders’ equity					710,172				173,349				212,503				(385,852	)			710,172
		Total stockholders’ equity			710,544				176,481				239,439				(415,920	)			710,544
		Total		$	871,894			$	807,916			$	510,166			$	(1,031,946	)		$	1,158,030

F-178

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				Parent
				Company				Subsidiary				Combined								Consolidated
				Guarantor				Guarantors				Non-Guarantors				Eliminations				Totals
				(dollars in thousands)
ASSETS
Current assets:
	Cash and cash equivalents			$	2,977			$	177,824			$	68,592			$	—			$	249,393
	Restricted cash investments				—				—				237				—				237
	Accounts receivable				224				91,675				74,090				—				165,989
	Materials and supplies inventory				—				3,359				2,022				—				5,381
	Prepayments and other				1,175				13,482				4,243				—				18,900
	Deferred tax asset				9,627				12,819				(9,960	)			—				12,486
		Total current assets			14,003				299,159				139,224				—				452,386
Property and equipment					—				346,354				148,736				—				495,090
Less accumulated depreciation					—				(246,191	)			(120,982	)			—				367,173
		Property and equipment, net			—				100,163				27,754				—				127,917
Multi-client data library					—				141,206				175,587				—				316,793
Intercompany receivable					559,618				—				—				(559,618	)			—
Investment in subsidiaries					138,816				157,114				87,311				(383,241	)			—
Other assets					43,221				10,199				16,082				—				69,502
		Total		$	755,658			$	707,841			$	445,958			$	(942,859	)		$	966,598
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable, trade			$	61			$	37,569			$	38,180			$	—			$	75,810
	Accrued and deferred income taxes				9,402				—				—				—				9,402
	Deferred revenue				—				24,020				18,023				—				42,043
	Other accrued liabilities				521				44,765				19,907				—				65,193
		Total current liabilities			9,984				106,354				76,110				—				192,448
Non-current liabilities:
	Long-term debt				155,000				—				—				—				155,000
	Intercompany payable				—				458,121				101,497				(559,618	)			—
	Other non-current liabilities				8,126				10,342				18,134				—				36,602
		Total non-current liabilities			163,126				468,463				119,631				(559,618	)			191,602
Stockholders’ equity:
Common stock					355				3,132				26,985				(30,117	)			355
Other stockholders’ equity					582,193				129,892				223,232				(353,124	)			582,193
		Total stockholders’ equity			582,548				133,024				250,217				(383,241	)			582,548
		Total		$	755,658			$	707,841			$	445,958			$	(942,859	)		$	966,598

F-179

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			Parent
			Company				Subsidiary				Combined								Consolidated
			Guarantor				Guarantors				Non-Guarantors				Eliminations				Totals
			(dollars in thousands)
Cash flows from (used in):
Operating activities			$	(29,580	)		$	174,295			$	191,900			$	—			$	336,615
Investing activities				—				(56,485	)			(160,357	)			—				(216,842	)
Financing activities				32,021				—				(2,023	)			—				29,998
	Subtotal			2,441				117,810				29,520				—				149,771
Currency gain on foreign cash				—				—				2,791				—				2,791
Increase (decrease) in cash				2,441				117,810				32,311				—				152,562
Beginning cash balance				2,977				177,824				68,592				—				249,393
Ending cash balance			$	5,418			$	295,634			$	100,903			$	—			$	401,955

			Parent
			Company				Subsidiary				Combined								Consolidated
			Guarantor				Guarantors				Non-Guarantors				Eliminations				Totals
			(dollars in thousands)
Cash flows from (used in):
Operating activities			$	(8,133	)		$	171,513			$	167,915			$	—			$	331,295
Investing activities				—				(77,492	)			(129,223	)			—				(206,715	)
Financing activities				7,652				—				—				—				7,652
	Subtotal			(481	)			94,021				38,692				—				132,232
Currency gain on foreign cash				—				—				862				—				862
Increase (decrease) in cash				(481	)			94,021				39,554				—				133,094
Beginning cash balance				3,458				83,803				29,038				—				116,299
Ending cash balance			$	2,977			$	177,824			$	68,592			$	—			$	249,393

			Parent
			Company				Subsidiary				Combined								Consolidated
			Guarantor				Guarantors				Non-Guarantors				Eliminations				Totals
			(dollars in thousands)
Cash flows from (used in):
Operating activities			$	45,737			$	91,248			$	106,049			$	—			$	243,034
Investing activities				—				(59,257	)			(93,135	)			—				(152,392	)
Financing activities				(46,682	)			—				—				—				(46,682	)
	Subtotal			(945	)			31,991				12,914				—				43,960
Currency gain on foreign cash				—				—				242				—				242
Increase (decrease) in cash				(945	)			31,991				13,156				—				44,202
Beginning cash balance				4,403				51,812				15,882				—				72,097
Ending cash balance			$	3,458			$	83,803			$	29,038			$	—			$	116,299

F-180

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F-181

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ITEM 8.	Indemnification of Directors and Officers

II-1

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II-2

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	Corporations Act of Australia

	•	a liability owed to the company or a related body corporate;
	•	a liability for a pecuniary penalty order or compensation order under sections 1317G, 1317H or 1317HA of the Corporations Act; or
	•	a liability that is owed to someone other than the company or a related body corporate that did not arise out of conduct in good faith.

II-3

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	•	in defending or resisting proceedings in which the person is found to have a liability for which they could not be indemnified under section 199A(2); or
	•	in defending or resisting criminal proceedings in which the person is found guilty; or
	•	in defending or resisting proceedings brought by the Australian Securities and Investments Commission (ASIC) or a liquidator for a court order if the grounds for making the order are found by the court to have been established (but this does not apply to costs incurred in responding to actions taken by ASIC or a liquidator as part of an investigation before commencing proceedings for the court order); or
	•	in connection with proceedings for relief to the person under the Corporations Act in which the court denies the relief.

	•	conduct involving a willful breach of any duty in relation to the company; or
	•	a contravention of the officer’s duties under the Corporations Act not to improperly use their position or make improper use of information obtained as an officer.

	•	a director or secretary;
	•	a person who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the company;
	•	a person who has the capacity to significantly affect the company’s financial standing; and
	•	a person in accordance with whose instructions or wishes the directors of the company are accustomed to act.

	(i)	in defending or resisting civil proceedings in which the person is found to have a liability for which they could not be indemnified under paragraph (a); or
	(ii)	is defending or resisting criminal proceedings in which the person is found guilty;
	(iii)	in defending or resisting proceedings brought by ASIC or a liquidator for a court order if the grounds for making the order are found by the court to be established;
	(iv)	in connection with proceedings for relief to the person under the Corporations Act in which the Court denies relief.

	Paragraph (iii) does not apply to costs incurred in responding to actions brought by ASIC or a liquidator as part of an investigation before commencing proceedings for the court order.

II-4

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II-5

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II-6

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II-7

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ITEM 9.	Exhibits and Financial Schedules

Exhibit No				Exhibit
1.1*				Form of Underwriting Agreement among the Registrants, Credit Suisse Securities (Europe) Limited and the other parties thereto.
3.1**				English translation of the Articles of Association (statuts) of Compagnie Générale de Géophysique-Veritas
3.2				Articles of Incorporation of CGG Americas Inc., dated May 15, 1998.(1)
3.3				Articles of Amendment to the Articles of Incorporation of CGG Americas, Inc., dated December 1, 1999.(1)
3.4				Articles of Amendment by the Sole Shareholder to the Articles of Incorporation of CGG Americas Inc., dated December 22, 2001.(1)
3.5				Articles of Amendment by the Sole Shareholder to the Articles of Incorporation of CGG Americas Inc., dated December 15, 2004.(1)
3.6				Revised bylaws of Georex, Inc. (CGG Americas Inc.)(1)
3.7				Articles of Amalgamation of CGG Canada Services Ltd.(1)
3.8				CGG Canada Services Ltd. Resolution of the Sole Shareholder.(1)
3.9				By-law No. 1 of CGG Canada Services Ltd.(1)
3.10				Articles of Association of CGG Marine Resources Norge A/S.(1)
3.11				Amended Certificate of Incorporation of Opseis, Inc. (Sercel, Inc.), dated February 24, 1993.(1)
3.12				Certificate of Amendment of Certificate of Incorporation of Opseis, Inc. (Sercel, Inc.), dated December 23, 1996.(1)
3.13				Bylaws of Opseis, Inc. (Sercel, Inc.)(1)
3.14				Constitution of Sercel Australia Pty Ltd.(1)
3.15				Articles of Incorporation of Sercel Canada Ltd.(1)
3.16				By-Law No. 1 of Sercel Canada Ltd.(1)
3.17**				Certificate of Incorporation of Volnay Acquisition Co. II (CGGVeritas Services Inc.), dated September 5, 2006.
3.18**				Certificate of Amendment of Certificate of Incorporation of Volnay Acquisition Co. II (CGGVeritas Services Inc.), dated January 12, 2007.
3.19**				Bylaws of Volnay Acquisition Co. II (CGGVeritas Services Inc.).
3.20**				Certificate of Incorporation of Veritas DGC Land Inc., dated March 20, 1997.
3.21**				Certificate of Merger of Veritas DGC Land with and into Veritas DGC Land Inc., dated July 30, 1997.
3.22**				Certificate of Merger of Airjac Drilling Inc. with and into Veritas DGC Land Inc., dated July 24, 1998.
3.23**				Restated Certificate of Incorporation (with Amendments) of Veritas DGC Land Inc., dated July 18, 2000.
3.24**				Certificate of Merger of Neptune Holdco LLC into Veritas DGC Land Inc., dated March 8, 2004.
3.25**				Bylaws of Veritas DGC Land Inc.
3.26**				Certificate of Ownership and Merger of Seismic Company of America, Inc. with and into Digicon Geophysical Corp. (Veritas Geophysical Corporation), dated July 30, 1997.
3.27**				Restated Certificate of Incorporation (with Amendments) of Digicon Geophysical Corp. (Veritas Geophysical Corporation), dated February 6, 2001.
3.28**				Bylaws of Veritas Geophysical Corporation.

II-8

---

 

Exhibit No				Exhibit
3.29**				Certificate of Incorporation of Veritas Geophysical Inc. (Veritas Investments Inc.), dated February 23, 1998.
3.30**				Restated Certificate of Incorporation (with Amendments) of Veritas Geophysical Inc. (Veritas Investments Inc.), dated February 6, 2001.
3.31**				Bylaws of Veritas Investments Inc.
3.32**				Certificate of Incorporation of Viking Maritime Inc., dated March 29, 2001.
3.33**				Bylaws of Viking Maritime Inc.
3.34**				Certificate of Formation of Veritas Geophysical (Mexico) LLC, dated February 20, 2001.
3.35**				Operating Agreement of Veritas Geophysical (Mexico) LLC.
3.36**				Certificate of Incorporation of Digicon Exploration, Ltd. (Veritas DGC Asia Pacific Ltd.), dated November 30, 1967.
3.37**				Certificate of Amendment of Certificate of Incorporation of Digicon Exploration Ltd. (Veritas DGC Asia Pacific Ltd.), dated December 3, 1997.
3.38**				Bylaws of Veritas DGC Asia Pacific Ltd.
3.39**				Certificate of Incorporation of Alitheia Resources Inc., dated June 29, 2004.
3.40**				Bylaws of Alitheia Resources Inc.
4.1				Indenture dated as of April 28, 2005 among certain of the Registrants and The Bank of New York (formerly JP Morgan Chase Bank, National Association), as Trustee, which includes the form of the 71/2% Senior Notes due 2015 as an exhibit thereto.(1)
4.2**				Form of Supplemental Indenture to be entered into among the Registrants and The Bank of New York, as Trustee.
4.3**				Form of Indenture to be entered into among the Registrants and The Bank of New York, as Trustee, which includes the form of Senior Notes due 2017 as an exhibit thereto.
5.1**				Opinion of Linklaters, special U.S. counsel to the Registrants, as to the legality of the notes and the guarantees.
12.1**				Statement re Computation of Ratios.
23.1**				Consent of Linklaters, special U.S. counsel to the Registrants (included in Exhibit 5.1).
23.2**				Consent of Barbier Frinault & Autres Ernst & Young Audit and Mazars & Guérard.
23.3**				Consent of Ernst & Young AS.
23.4**				Consent of Ernst & Young.
23.5**				Consent of PricewaterhouseCoopers LLP.
25.1				Statement of Eligibility of Trustee.(1)
25.2**				Statement of Eligibility of Trustee.

	*	The Registrants will file as an exhibit to a current report on Form 6-K (i) any underwriting agreement relating to securities offered hereby, (ii) the instruments setting forth the terms of any debt securities and guarantees of debt securities or preferred stock, (iii) any required opinion of counsel to the Registrants as to certain tax matters relative to securities offered hereby, or (iv) any additional required opinion of counsel with respect to the legality of the securities offered hereby.

	**	Filed herewith

(1)	Incorporated by reference to the Registrants’ Registration Statement on Forms F-4 and S-4 (SEC File No. 333-126556), dated July 13, 2005, as amended.

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ITEM 22.	Undertakings

	(1)	To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

	•	To include any prospectus required by Section 10(a)(3) of the Securities Act;
	•	To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;
	•	To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement:

provided, however, that the paragraphs above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the Registrants pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.

	(2)	That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
	(3)	To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
	(4)	To file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A of Form 20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act need not be furnished, provided that the Registrants include in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. Notwithstanding the foregoing, a post-effective amendment need not be filed to include financial statements and information required by Section 10(a)(3) of the Securities Act of 1933 if such financial statements and information are contained in periodic reports filed with or furnished to the Commission by the Registrants pursuant to Section 13 or Section l5(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this registration statement.
	(5)	That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:

	A.	Each prospectus filed by the Registrants pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and

	B.	Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to

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		be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof, provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.

	(6)	That, for the purpose of determining liability of the Registrants under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned Registrants undertake that in a primary offering of securities of the undersigned Registrants pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrants will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

	(i)	Any preliminary prospectus or prospectus of the undersigned Registrants relating to the offering required to be filed pursuant to Rule 424;
	(ii)	Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrants or used or referred to by the undersigned Registrants;
	(iii)	The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrants or its securities provided by or on behalf of the undersigned registrant; and
	(iv)	Any other communication that is an offer in the offering made by the undersigned Registrants to the purchaser.

	(7)	That, for purposes of determining any liability under the Securities Act, each filing of the Registrant’s annual report pursuant to section 13(a) or section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
	(8)	To file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the TIA in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the TIA.
	(9)	Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrants, the Registrants have been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrants will, unless, in the opinion of their counsel, the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

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	Compagnie Generale De Geophysique-Veritas

	By:	/s/ Robert Brunck

	Robert Brunck
	Chairman of the Board and
	Chief Executive Officer

Signatures				Title		Date
By:		/s/ Robert Brunck   Robert Brunck		Chairman of the Board and Chief Executive Officer (Principal executive officer)		January 29, 2007
By:		/s/ Stephane-Paul Frydman   Stephane-Paul Frydman		Chief Financial Officer (Principal financial and accounting officer)		January 29, 2007

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Signatures				Title		Date
By:		/s/ Olivier Appert   Olivier Appert		Director		January 29, 2007
By:		/s/ Loren Caroll   Loren Caroll		Director		January 29, 2007
By:		/s/ Rémi Dorval   Rémi Dorval		Director		January 29, 2007
By:		/s/ Jean Dunand   Jean Dunand		Director		January 29, 2007
By:		/s/ Yves Lesage   Yves Lesage		Director		January 29, 2007
By:		/s/ Thierry Pilenko   Thierry Pilenko		Director		January 29, 2007
By:		/s/ Robert Semmens   Robert Semmens		Director		January 29, 2007
By:		/s/ Daniel Valot   Daniel Valot		Director		January 29, 2007
By:		/s/ David Work   David Work		Director		January 29, 2007
By:		/s/ Terence Young   Terence Young		Director		January 29, 2007

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Signatures				Title		Date
By:		/s/ Jonathan Miller   Jonathan Miller		Duly Authorized Representative of Compagnie Générale de Géophysique-Veritas in the United States		January 29, 2007

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	CGG Canada Services Ltd.

	By:	/s/ Jonathan Miller

	Jonathan Miller
	President

Signatures				Title		Date
By:		/s/ Jonathan Miller   Jonathan Miller		President (Principal executive officer), Director and Duly Authorized Representative of CGG Canada Services Ltd. in the United States		January 29, 2007
By:		/s/ Jonathan Miller   Kay Pratt		Treasurer (Principal financial and accounting officer)		January 29, 2007
By:		/s/ Leslie Patrick   Leslie Patrick		Director		January 29, 2007

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	CGG Marine Resources Norge A/ S.

	By:	/s/ Christophe Pettenati-Auzière

	Christophe Pettenati-Auzière
	Chairman of the Board

Signatures				Title		Date
By:		/s/ Christophe Pettenati-Auzière   Christophe Pettenati-Auzière		Chairman of the Board		January 29, 2007
By:		/s/ Luc Benoit-Cattin   Luc Benoit-Cattin		Managing Director (Principal executive officer) and Director		January 29, 2007
By:		/s/ Geir F. Landsend   Geir F. Landsend		General Manager (Principal financial and accounting officer)		January 29, 2007

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Signatures				Title		Date
By:		/s/ Torgier Nilsen   Torgier Nilsen		Director		January 29, 2007
By:		/s/ Jonathan Miller   Jonathan Miller		Duly Authorized Representative of CGG Marine Resources Norge A/ S in the United States		January 29, 2007

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	Sercel Canada Ltd.

	By:	/s/ Pascal Rouiller

	Pascal Rouiller
	President

Signatures				Title		Date
By:		/s/ Pascal Rouiller   Pascal Rouiller		President (Principal executive officer) and Director		January 29, 2007
By:		/s/ Kenneth O. Fitts   Kenneth O. Fitts		Chief Financial Officer (Principal financial officer) and Director		January 29, 2007
By:		/s/ Jason Boulay   Jason Boulay		Controller (Principal accounting officer)		January 29, 2007

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Signatures				Title		Date
By:		/s/ Jean-Maurice Dalongeville   Jean-Maurice Dalongeville		Director		January 29, 2007
By:		/s/ George Wood   George Wood		Director and Duly Authorized Representative of Sercel Canada Ltd. in the United States		January 29, 2007

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	Sercel Australia Pty Ltd.

	By:	/s/ Pascal Rouiller

	Pascal Rouiller
	Director

Signatures				Title		Date
By:		/s/ Peter Goodwin   Peter Goodwin		Managing Director (Principal executive and financial officer) and Director		January 29, 2007
By:		/s/ Peter Goodwin   Louise McGoldrick		Accounting Manager (Principal accounting officer)		January 29, 2007
By:		/s/ Pascal Rouiller   Pascal Rouiller		Director		January 29, 2007

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Signatures				Title		Date
By:		/s/ Gérard Dufoulon   Gérard Dufoulon		Director		January 29, 2007
By:		/s/ George Wood   George Wood		Duly Authorized Representative of Sercel Australia Pty Ltd. in the United States		January 29, 2007