Exhibit 10.3(b)
(SOCIETE GENERALE LOGO) [w76318w7631802.gif]

        SOCIÉTÉ GÉNÉRALE
17 COURS VALMY
92987 PARIS-LA DEFENSE,
FRANCE

     
DATE:
  November 10, 2009
 
   
TO:
  TeleCommunication Systems, Inc.
ATTENTION:
  Bruce A. White
TELEPHONE:
  (410) 263-7616
FACSIMILE:
  (410) 263-7617
 
   
FROM:
  Société Générale
FACSIMILE:
  (212) 278-5624
 
   
SUBJECT:
  Equity Derivatives Warrant Confirmation
 
   
REFERENCE NUMBER(S):
  [               ]

The purpose of this facsimile agreement (this “Confirmation”) is to confirm the
terms and conditions of the transaction entered into between Société Générale
(“Société Générale”) and TeleCommunication Systems, Inc. (“Counterparty”) on the
Trade Date specified below (the “Transaction”). This Confirmation constitutes a
“Confirmation” as referred to in the ISDA Master Agreement specified below. This
Confirmation constitutes the entire agreement and understanding of the parties
with respect to the subject matter and terms of the Transaction and supersedes
all prior or contemporaneous written and oral communications with respect
thereto.
The definitions contained in the 2002 ISDA Equity Derivatives Definitions (the
“Equity Definitions”), as published by the International Swaps and Derivatives
Association, Inc., are incorporated into this Confirmation. In the event of any
inconsistency between the Equity Definitions and the terms of this Confirmation,
the terms of this Confirmation shall govern. For the purposes of the Equity
Definitions, each reference herein to a Warrant shall be deemed to be a
reference to a Call or an Option, as context requires.
This Confirmation evidences a complete and binding agreement between Société
Générale and Counterparty as to the terms of the Transaction to which this
Confirmation relates. This Confirmation shall supplement, form a part of, and be
subject to an agreement (the “Agreement”) in the form of the ISDA 2002 Master
Agreement as if Société Générale and Counterparty had executed an agreement in
such form (without any Schedule but with the “Cross-Default” provisions of
Section 5(a)(vi) applicable to Counterparty with a “Threshold Amount” of
$5,000,000 and with such other elections set forth in this Confirmation). For
the avoidance of doubt, the Transaction shall be the only transaction under the
Agreement.
The Transaction is a Warrant Transaction, which shall be considered a Share
Option Transaction for purposes of the Equity Definitions, and shall have the
following terms:

 

--------------------------------------------------------------------------------

 

     
General:
   
 
   
Trade Date:
  November 10, 2009.
 
   
Effective Date:
  November 16, 2009.
 
   
Components:
  The Transaction will be divided into individual Components, each with the
terms set forth in this Confirmation, and, in particular, with the Number of
Warrants and Expiration Date set forth in this Confirmation. The payments and
deliveries to be made upon settlement of the Transaction will be determined
separately for each Component as if each Component were a separate Transaction
under the Agreement.
 
   
Warrant Style:
  European.
 
   
Warrant Type:
  Call.
 
   
Seller:
  Counterparty.
 
   
Buyer:
  Société Générale.
 
   
Shares:
  Class A common stock, par value USD 0.01 per share, of Counterparty.
 
   
Number of Warrants:
  For each Component, as provided in Annex C to this Confirmation.
 
   
Strike Price:
  As provided in Annex B to this Confirmation.
 
   
Premium:
  As provided in Annex B to this Confirmation.
 
   
Premium Payment Date:
  The Effective Date.
 
   
Exchange:
  The NASDAQ Global Market.
 
   
Related Exchanges:
  All Exchanges.
 
   
Calculation Agent:
  Société Générale.
 
   
Procedure for Exercise:
   
 
   
In respect of any Component:
   
 
   
Expiration Date:
  As provided in Annex C to this Confirmation (or, if such date is not a
Scheduled Trading Day, the next following Scheduled Trading Day that is not
already an Expiration Date for another Component); provided that if that date is
a Disrupted Day, the Expiration Date for such Component shall be the first
succeeding Scheduled Trading Day that is not a Disrupted Day and is not or is
not deemed to be an Expiration Date in respect of any other Component of the
Transaction

2

--------------------------------------------------------------------------------

 

     
 
  hereunder; and provided further that if the Expiration Date has not occurred
pursuant to the preceding proviso as of the Final Disruption Date, the Final
Disruption Date shall be the Expiration Date (irrespective of whether such date
is an Expiration Date in respect of any other Component for the Transaction)
and, notwithstanding anything to the contrary in this Confirmation or the Equity
Definitions, the Relevant Price for the Expiration Date shall be the prevailing
market value per Share determined by the Calculation Agent in a commercially
reasonable manner. Notwithstanding the foregoing and anything to the contrary in
the Equity Definitions, if a Market Disruption Event occurs on any Expiration
Date, the Calculation Agent may determine that such Expiration Date is a
Disrupted Day only in part, in which case the Calculation Agent shall make
adjustments to the number of Warrants for the relevant Component for which such
day shall be the Expiration Date and shall designate the Scheduled Trading Day
determined in the manner described in the immediately preceding sentence as the
Expiration Date for the remaining Warrants for such Component. Section 6.6 of
the Equity Definitions shall not apply to any Valuation Date occurring on an
Expiration Date. “Final Disruption Date” has the meaning provided in Annex B to
this Confirmation.
 
   
Automatic Exercise:
  Applicable. Each Warrant not previously exercised will be deemed to be
automatically exercised on the Expiration Time on the relevant Expiration Date.
 
   
Market Disruption Event:
  Section 6.3(a) of the Equity Definitions is hereby amended by deleting the
words “during the one hour period that ends at the relevant Valuation Time,
Latest Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as
the case may be,” in clause (ii) thereof, and by replacing the words “or
(iii) an Early Closure.” with “(iii) an Early Closure or (iv) a Regulatory
Disruption, in each case that the Calculation Agent determines is material.”
 
   
 
  Section 6.3(d) of the Equity Definitions is hereby amended by deleting the
remainder of the provision following the term “Scheduled Closing Time” in the
fourth line thereof.
 
   
Regulatory Disruption:
  Any event that Société Générale, in its commercially reasonable discretion
upon the advice of outside counsel, determines makes it appropriate with regard
to any legal, regulatory or self-regulatory requirements or related policies and
procedures (whether or not such requirements, policies or procedures are imposed
by law or have been voluntarily adopted by Société Générale, and including
without limitation Rule 10b-18, Rule 10b-5, Regulation 13D-G and Regulation 14E
under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”),
and Regulation M and/or analyzing Société Générale as if Société Générale were
the Issuer or an affiliated purchaser of the Issuer), for Société Générale to
refrain from or decrease any market activity in connection with the Transaction.
Société Générale shall notify Counterparty as soon as reasonably

3

--------------------------------------------------------------------------------

 

     
 
  practicable that a Regulatory Disruption has occurred and the Expiration Dates
affected by it.
 
   
Settlement Terms:
   
 
   
In respect of any Component:
   
 
   
Net Share Settlement:
  On each Settlement Date, Counterparty shall deliver to Société Générale a
number of Shares equal to the Net Share Amount for such Settlement Date to the
account specified by Société Générale, and cash in lieu of any fractional shares
valued at the Relevant Price for the Valuation Date corresponding to such
Settlement Date. If, in the good faith reasonable judgment of Société Générale,
the Shares deliverable hereunder would not be immediately freely transferable by
Société Générale under Rule 144 (“Rule 144”) under the U.S. Securities Act of
1933, as amended (the “Securities Act”) or any successor provision, then Société
Générale may elect to either (x) accept delivery of such Shares notwithstanding
the fact that such Shares are not immediately freely transferable by Société
Générale under Rule 144 or any successor provision or (y) require that such
delivery take place pursuant to the provisions set forth opposite the caption
“Registration/Private Placement Procedures” below.
 
   
Net Share Amount:
  For any Exercise Date, a number of Shares, as calculated by the Calculation
Agent, equal to (x) the product of (i) the number of Warrants being exercised or
deemed exercised on such Exercise Date, and (ii) the excess, if any, of the
Relevant Price for the Valuation Date occurring on such Exercise Date over the
Strike Price (such product, the “Net Share Settlement Amount”), divided by
(y) such Relevant Price.
 
   
Relevant Price:
  On any Valuation Date, the volume weighted average price per Share for the
regular trading session of the Exchange as displayed under the heading
“Bloomberg VWAP” on Bloomberg Page TSYS <equity> AQR on such Valuation Date in
respect of the period from 9:30 am to 4:00 p.m. (New York City time) on such
Valuation Date (or if such volume weighted average price is not available, the
Calculation Agent’s reasonable, good faith estimate of such price on such
Valuation Date).
 
   
Settlement Currency:
  USD.
 
   
Other Applicable Provisions:
  The provisions of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 (except that the
Representation and Agreement contained in Section 9.11 of the Equity Definitions
shall be modified by excluding any representations therein relating to
restrictions, obligations, limitations or requirements under applicable
securities laws as a result of the fact that Counterparty is the Issuer of the
Shares) and 9.12 of the Equity Definitions will be applicable, except that all
references in such provisions to “Physical Settlement” and “Physically-settled”
shall be read as references to

4

--------------------------------------------------------------------------------

 

     
 
  “Net Share Settlement” and “Net Share Settled”. “Net Share Settled” in
relation to any Warrant means that Net Share Settlement is applicable to such
Warrant.
 
   
Dividends:
   
 
   
In respect of any Component:
   
 
   
Dividend Adjustments:
  Counterparty agrees to notify Société Générale promptly of the announcement of
an ex-dividend date for any cash dividend by Counterparty. If an ex-dividend
date for any cash dividend occurs at any time from, but excluding, the Trade
Date to, and including, the Expiration Date, then in lieu of any adjustments as
provided under “Method of Adjustment” below, the Calculation Agent shall make
such adjustments to the Strike Price and/or the Number of Warrants as it deems
appropriate to preserve for the parties the intended economic benefits of the
Transaction.
 
   
Adjustments:
   
 
   
In respect of any Component:
   
 
   
Method of Adjustment:
  Calculation Agent Adjustment; provided, however, that the Equity Definitions
shall be amended by replacing the words “diluting or concentrative” in
Sections 11.2(a), 11.2(c) (in two instances) and 11.2(e)(vii) with the word
“material” and by adding the words “or the Transaction” after the words
“theoretical value of the relevant Shares” in Sections 11.2(a), 11.2(c) and
11.2(e)(vii); provided further that adjustments may be made to account for
changes in expected volatility, expected dividends, expected correlation,
expected stock loan rate and expected liquidity relative to the relevant Share.
 
   
Extraordinary Events:
   
 
   
New Shares:
  In the definition of New Shares in Section 12.1(i) of the Equity Definitions,
the text in clause (i) thereof shall be deleted in its entirety and replaced
with “publicly quoted, traded or listed on any of the New York Stock Exchange,
The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective
successors)”.
 
   
Modified Calculation Agent Adjustment:
  If, in respect of any Merger Event to which Modified Calculation Agent
Adjustment applies, the adjustments to be made in accordance with
Section 12.2(e)(i) of the Equity Definitions would result in Counterparty being
different from the issuer of the Shares, then with respect to such Merger Event,
as a condition precedent to the adjustments contemplated in Section 12.2(e)(i)
of the Equity Definitions, Counterparty and the issuer of the Shares shall,
prior to the Merger Date, have entered into such documentation containing
representations, warranties and agreements relating to securities law and other
issues as requested by Société Générale that Société Générale has determined, in
its reasonable discretion, to be reasonably

5

--------------------------------------------------------------------------------

 

     
 
  necessary or appropriate to allow Société Générale to continue as a party to
the Transaction, as adjusted under Section 12.2(e)(i) of the Equity Definitions,
and to preserve its hedging or hedge unwind activities in connection with the
Transaction in a manner compliant with applicable legal, regulatory or
self-regulatory requirements, or with related policies and procedures applicable
to Société Générale, and if such conditions are not met or if the Calculation
Agent determines that no adjustment that it could make under Section 12.2(e)(i)
of the Equity Definitions will produce a commercially reasonable result, then
the consequences set forth in Section 12.2(e)(ii) of the Equity Definitions
shall apply.
 
   
 
  For greater certainty, the definition of “Modified Calculation Agent
Adjustment” in Sections 12.2 and 12.3 of the Equity Definitions shall be amended
by adding the following italicized language to the stipulated parenthetical
provision: “(including adjustments to account for changes in expected
volatility, expected dividends, expected correlation, expected stock loan rate
or expected liquidity relevant to the Shares or to the Transaction) from the
Announcement Date to the Merger Date (Section 12.2) or Tender Offer Date
(Section 12.3)”.
 
   
Announcement Event:
  If an Announcement Event occurs, the Calculation Agent will determine the
economic effect of the Announcement Event on the theoretical value of each
Component of the Transaction (including without limitation any change in
expected volatility, expected dividends, expected correlation, expected stock
loan rate or expected liquidity relevant to the Shares or to the Transaction)
from the potential Announcement Date to the Expiration Date for such Component
and, if such economic effect is material, the Calculation Agent will adjust the
terms of the Transaction to reflect such economic effect. “Announcement Event”
shall mean the occurrence of a potential Announcement Date of a Merger Event or
Tender Offer, if the Merger Date or Tender Offer Date does not, or is not
anticipated to, occur on or prior to the Expiration Date for, or any earlier
termination of, the relevant Component.
 
   
Consequences of Merger Events:
   
 
   
(a) Share-for-Share:
  Modified Calculation Agent Adjustment.
 
   
(b) Share-for-Other:
  Cancellation and Payment (Calculation Agent Determination).
 
   
(c) Share-for-Combined:
  Component Adjustment.
 
   
Tender Offer:
  Applicable; provided that Section 12.1(d) of the Equity Definitions is hereby
amended by adding “, or of the outstanding Shares,” before “of the Issuer” in
the fourth line thereof. Sections 12.1(e) and 12.1(1)(ii) of the Equity
Definitions are hereby amended by adding “or Shares, as applicable,” after
“voting shares”.
 
   
Consequences of Tender Offers:
   
 
   
(a) Share-for-Share:
  Modified Calculation Agent Adjustment.

6

--------------------------------------------------------------------------------

 

     
(b) Share-for-Other:
  Modified Calculation Agent Adjustment.
 
   
(c) Share-for-Combined:
  Modified Calculation Agent Adjustment.
 
   
Nationalization, Insolvency and Delisting:
  Cancellation and Payment (Calculation Agent Determination); provided that in
addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it
shall also constitute a Delisting if the Exchange is located in the United
States and the Shares are not immediately re-listed, re-traded or re-quoted on
any of the New York Stock Exchange, The NASDAQ Global Select Market or The
NASDAQ Global Market (or their respective successors); if the Shares are
immediately re-listed, re-traded or re-quoted on any such exchange or quotation
system, such exchange or quotation system shall be deemed to be the Exchange.
For the avoidance of doubt, the occurrence of any event that is a Merger Event
and would otherwise have been a Delisting will have the consequence specified
for the relevant Merger Event.
 
   
Additional Disruption Events:
   
 
   
Change in Law:
  Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is
hereby amended (i) by the replacement of the word “Shares” with “Hedge
Positions” in clause (X) thereof; (ii) by adding the phrase “or announcement”
immediately after the phrase “due to the promulgation” in the third line thereof
and adding the phrase “formal or informal” before the word “interpretation” in
the same line; and (iii) immediately following the word “Transaction” in clause
(X) thereof, adding the phrase “in the manner contemplated by the Hedging Party
on the Trade Date, unless the illegality is due to an act or omission of the
party seeking to elect termination of the Transaction”.
 
   
Failure to Deliver:
  Inapplicable
 
   
Insolvency Filing:
  Applicable
 
   
Loss of Stock Borrow:
  Applicable
 
   
     Maximum Stock Loan Rate:
  200 basis points per annum
 
   
Increased Cost of Stock Borrow:
  Applicable
 
   
     Initial Stock Loan Rate:
  25 basis points per annum
 
   
Increased Cost of Hedging:
  Applicable
 
   
Hedging Disruption:
  Applicable
 
   
Hedging Party:
  Société Générale for all applicable Additional Disruption Events
 
   
Determining Party:
  Société Générale for all applicable Additional Disruption Events

7

--------------------------------------------------------------------------------

 

     
Acknowledgements:
   
 
   
Non-Reliance:
  Applicable
 
   
Agreements and Acknowledgements Regarding Hedging Activities:
  Applicable
 
   
Additional Acknowledgements:
  Applicable

Mutual Representations: Each of Société Générale and Counterparty represents and
warrants to, and agrees with, the other party that:

  (i)   Tax Disclosure. Notwithstanding anything to the contrary herein, in the
Equity Definitions or in the Agreement, and notwithstanding any express or
implied claims of exclusivity or proprietary rights, the parties (and each of
their employees, representatives or other agents) are authorized to disclose to
any and all persons, beginning immediately upon commencement of their
discussions and without limitation of any kind, the tax treatment and tax
structure of the Transaction, and all materials of any kind (including opinions
or other tax analyses) that are provided by either party to the other relating
to such tax treatment and tax structure.     (ii)   Commodity Exchange Act. It
is an “eligible contract participant” within the meaning of Section 1a(12) of
the U.S. Commodity Exchange Act, as amended (the “CEA”). The Transaction has
been subject to individual negotiation by the parties. The Transaction has not
been executed or traded on a “trading facility” as defined in Section 1a(33) of
the CEA. It has entered into the Transaction with the expectation and intent
that the Transaction shall be performed to its termination date.     (iii)  
Securities Act. It is a “qualified institutional buyer” as defined in Rule 144A
under the Securities Act, or an “accredited investor” as defined under the
Securities Act.     (iv)   Investment Company Act. It is a “qualified purchaser”
as defined under the U.S. Investment Company Act of 1940, as amended (the
“Investment Company Act”).     (v)   ERISA. The assets used in the Transaction
(1) are not assets of any “plan” (as such term is defined in Section 4975 of the
U.S. Internal Revenue Code (the “Code”)) subject to Section 4975 of the Code or
any “employee benefit plan” (as such term is defined in Section 3(3) of the U.S.
Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) subject
to Title I of ERISA, and (2) do not constitute “plan assets” within the meaning
of Department of Labor Regulation 2510.3-101, 29 CFR Section 2510-3-101.

Counterparty Representations: In addition to the representations and warranties
in the Agreement and those contained elsewhere herein, Counterparty represents,
warrants, acknowledges and covenants that:

  (i)   Counterparty shall immediately provide written notice to Société
Générale upon obtaining knowledge of the occurrence of any event that would
constitute an Event of Default, a Potential Event of Default, a Potential
Adjustment Event, a Merger Event or any other Extraordinary Event; provided,
however, that should Counterparty be in possession of material non-public
information regarding Counterparty, Counterparty shall not communicate such
information to Société Générale in connection with this Transaction.

8

--------------------------------------------------------------------------------

 

  (ii)   (A) Counterparty is acting for its own account, and it has made its own
independent decisions to enter into the Transaction and as to whether the
Transaction is appropriate or proper for it based upon its own judgment and upon
advice from such advisers as it has deemed necessary, (B) Counterparty is not
relying on any communication (written or oral) of Société Générale or any of its
affiliates as investment advice or as a recommendation to enter into the
Transaction (it being understood that information and explanations related to
the terms and conditions of the Transaction shall not be considered investment
advice or a recommendation to enter into the Transaction) and (C) no
communication (written or oral) received from Société Générale or any of its
affiliates shall be deemed to be an assurance or guarantee as to the expected
results of the Transaction.     (iii)   Counterparty is not entering into the
Transaction for the purpose of (i) creating actual or apparent trading activity
in the Shares (or any security convertible into or exchangeable for the Shares)
or (ii) raising or depressing or otherwise manipulating the price of the Shares
(or any security convertible into or exchangeable for the Shares), in either
case in violation of the Exchange Act.     (iv)   Counterparty’s filings under
the Securities Act, the Exchange Act, and other applicable securities laws that
are required to be filed have been filed and, as of the respective dates thereof
and as of the date of this representation, there is no misstatement of material
fact contained therein or omission of a material fact required to be stated
therein or necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.     (v)   Counterparty
has not violated, and shall not directly or indirectly violate, any applicable
law (including, without limitation, the Securities Act and the Exchange Act) in
connection with the Transaction.     (vi)   The representations and warranties
of Counterparty set forth in Section 3 of the Agreement and Section 2 of the
Purchase Agreement (the “Purchase Agreement”) dated as of the Trade Date between
Counterparty and Oppenheimer & Co. and Raymond James are true and correct and
are hereby deemed to be repeated to Société Générale as if set forth herein.    
(vii)   The Shares issuable upon exercise of all Warrants (the “Warrant Shares”)
have been duly authorized and, when delivered pursuant to the terms of such
Transaction, shall be validly issued, fully-paid and non-assessable, and such
issuance of the Warrant Shares shall not be subject to any preemptive or similar
rights and shall, upon such issuance, be accepted for listing or quotation on
the Exchange.     (viii)   Counterparty is not as of the Trade Date and as of
the date on which Counterparty delivers any Termination Delivery Units, and
shall not be after giving effect to the transactions contemplated hereby,
“insolvent” (as such term is defined in Section 101(32) of the U.S. Bankruptcy
Code (Title 11 of the United States Code) (the “Bankruptcy Code”)).     (ix)  
Counterparty is not, and after giving effect to the transactions contemplated
hereby will not be, an “investment company” as such term is defined in the
Investment Company Act.     (x)   Without limiting the generality of
Section 13.1 of the Equity Definitions, Counterparty acknowledges that Société
Générale is not making any representations or warranties with respect to the
treatment of the Transaction under FASB Statements 128, 133, 149 or 150 (or
under any successor statement), EITF Issue No. 00-19, 01-6, 03-6 or 07-5 (or any
successor issue statements), under FASB’s Liabilities & Equity Project, or under
any other accounting guidance.     (xi)   Counterparty understands, agrees and
acknowledges that no obligations of Société Générale to it hereunder, if any,
shall be entitled to the benefit of deposit insurance and that such obligations
shall not be guaranteed by any affiliate of Société Générale or any governmental
agency.

9

--------------------------------------------------------------------------------

 

  (xii)   Counterparty shall deliver to Société Générale an opinion of counsel,
dated as of the Trade Date and reasonably acceptable to Société Générale in form
and substance, with respect to the matters set forth in Section 3(a) of the
Agreement and such other matters as Société Générale may reasonably request.    
(xiii)   On each anniversary of the Trade Date, Counterparty shall deliver to
Société Générale an officer’s certificate, signed by an authorized officer,
stating the number of Available Shares (as defined in the provision titled
“Limitation On Delivery of Shares” below).

Miscellaneous:
Effectiveness. If, on or prior to the Effective Date, Société Générale
reasonably determines that it is advisable to cancel the Transaction because of
concerns that Société Générale’s related hedging activities could be viewed as
not complying with applicable securities laws, rules or regulations, the
Transaction shall be cancelled and shall not become effective, and neither party
shall have any obligation to the other party in respect of the Transaction.
Netting and Set-Off. The parties hereto agree that the Transaction shall not be
subject to netting or set off with any other transaction.
Qualified Financial Contracts. It is the intention of the parties that, in
respect of Counterparty, (a) the Transaction shall constitute a “qualified
financial contract” within the meaning of 12 U.S.C. Section 1821(e)(8)(D)(i) and
(b) a Non-defaulting Party’s rights under Sections 5 and 6 of the Agreement
constitute rights of the kind referred to in 12 U.S.C. Section 1821(e)(8)(A).
Method of Delivery. Whenever delivery of funds or other assets is required
hereunder by or to Counterparty, such delivery will be effected through Agent.
In addition, all notices, demands and communications of any kind relating to the
Transaction between Société Générale and Counterparty may be transmitted
exclusively through Agent.
Status of Claims in Bankruptcy. Société Générale acknowledges and agrees that
this Confirmation is not intended to convey to Société Générale rights with
respect to the Transaction that are senior to the claims of common stockholders
in any U.S. bankruptcy proceedings of Counterparty; provided that nothing herein
shall limit or shall be deemed to limit Société Générale’s right to pursue
remedies in the event of a breach by Counterparty of its obligations and
agreements with respect to the Transaction; provided, further, that nothing
herein shall limit or shall be deemed to limit Société Générale’s rights in
respect of any transactions other than the Transaction.
No Collateral. Notwithstanding any provision of this Confirmation, the
Agreement, Equity Definitions, or any other agreement between the parties to the
contrary, the obligations of Counterparty under the Transaction are not secured
by any collateral.
Securities Contract; Swap Agreement. The parties hereto agree and acknowledge
that Société Générale is a “financial institution,” “swap participant” and
“financial participant” within the meaning of Sections 101(22), 101(53C) and
101(22A) of the Bankruptcy Code. The parties hereto further agree and
acknowledge (A) that this Confirmation is (i) a “securities contract,” as such
term is defined in Section 741(7) of the Bankruptcy Code, with respect to which
each payment and delivery hereunder or in connection herewith is a “termination
value,” “payment amount” or “other transfer obligation” within the meaning of
Section 362 of the Bankruptcy Code and a “settlement payment” or a “transfer”
within the meaning of Section 546 of the Bankruptcy Code, and (ii) a “swap
agreement,” as such term is defined in Section 101(53B) of the Bankruptcy Code,
with respect to which each payment and delivery hereunder or in connection
herewith is a “termination value,” a “payment amount” or

10

--------------------------------------------------------------------------------

 

“other transfer obligation” within the meaning of Section 362 of the Bankruptcy
Code and a “transfer” within the meaning of Section 546 of the Bankruptcy Code,
and (B) that Société Générale is entitled to the protections afforded by, among
other sections, Section 362(b)(6), 362(b)(17), 362(b)(27), 362(o), 546(e),
546(g), 546(j), 548(d)(2), 555, 560 and 561 of the Bankruptcy Code.
Alternative Calculations and Counterparty Payment on Early Termination and on
Certain Extraordinary Events. If Counterparty owes Société Générale any amount
in connection with the Transaction pursuant to Sections 12.2, 12.3, 12.6, 12.7
or 12.9 of the Equity Definitions (except in the case of an Extraordinary Event
in which the consideration or proceeds to be paid to holders of Shares as a
result of such event consists solely of cash) or pursuant to Section 6(d)(ii) of
the Agreement (except in the case of an Event of Default in which Counterparty
is the Defaulting Party or a Termination Event in which Counterparty is the
Affected Party, other than (x) an Event of Default of the type described in
Section 5(a)(iii), (v), (vi) or (vii) of the Agreement or (y) a Termination
Event of the type described in Section 5(b)(i), (ii), (iii), (iv), (v) or
(vi) of the Agreement that in the case of either (x) or (y) resulted from an
event or events outside Counterparty’s control) (a “Counterparty Payment
Obligation”), Counterparty shall have the right, in its sole discretion, to
satisfy any such Counterparty Payment Obligation by delivery of Termination
Delivery Units (as defined below) by giving irrevocable telephonic notice to
Société Générale, confirmed in writing within one Scheduled Trading Day, between
the hours of 9:00 a.m. and 4:00 p.m. New York time on the Early Termination Date
or other date the transaction is terminated, as applicable (“Notice of
Counterparty Termination Delivery”). Within a commercially reasonable period of
time following receipt of a Notice of Counterparty Termination Delivery,
Counterparty shall deliver to Société Générale a number of Termination Delivery
Units having a cash value equal to the amount of such Counterparty Payment
Obligation (such number of Termination Delivery Units to be delivered to be
determined by the Calculation Agent as the number of whole Termination Delivery
Units that could be sold over a commercially reasonable period of time to
generate proceeds equal to the cash equivalent of such payment obligation). In
addition, if, in the good faith reasonable judgment of Société Générale, for any
reason, the Termination Delivery Units deliverable pursuant to this paragraph
would not be immediately freely transferable by Société Générale under Rule 144
or any successor provision, then Société Générale may elect either to (x) accept
delivery of such Termination Delivery Units notwithstanding any restriction on
transfer or (y) require that such delivery take place pursuant to the provisions
set forth opposite the caption “Registration/Private Placement Procedures”
below. If the provisions set forth in this paragraph are applicable, the
provisions of Sections 9.8, 9.9, 9.10, 9.11 (modified as described above) and
9.12 of the Equity Definitions shall be applicable, except that all references
to “Shares” shall be read as references to “Termination Delivery Units”.
“Termination Delivery Unit” means (a) in the case of a Termination Event, an
Event of Default or an Extraordinary Event (other than an Insolvency,
Nationalization, Merger Event or Tender Offer), one Share or (b) in the case of
an Insolvency, Nationalization, Merger Event or Tender Offer, a unit consisting
of the number or amount of each type of property received by a holder of one
Share (without consideration of any requirement to pay cash or other
consideration in lieu of fractional amounts of any securities) in such
Insolvency, Nationalization, Merger Event or Tender Offer. If a Termination
Delivery Unit consists of property other than cash or New Shares and
Counterparty provides irrevocable written notice to the Calculation Agent on or
prior to the Closing Date that it elects to deliver cash, New Shares or a
combination thereof (in such proportion as Counterparty designates) in lieu of
such other property, the Calculation Agent shall replace such property with
cash, New Shares or a combination thereof as components of a Termination
Delivery Unit in such amounts, as determined by the Calculation Agent in its
discretion by commercially reasonable means, as shall have a value equal to the
value of the property so replaced. If such Insolvency, Nationalization, Merger
Event or Tender Offer involves a choice of consideration to be received by
holders, such holder shall be deemed to have elected to receive the maximum
possible amount of cash.
Registration/Private Placement Procedures. If, in the reasonable opinion of
Société Générale, following any delivery of Shares or Termination Delivery Units
to Société Générale hereunder, such Shares or Termination Delivery Units would
be in the hands of Société Générale subject to any applicable restrictions with
respect to any registration or qualification requirement or prospectus delivery
requirement for such Shares or Termination Delivery Units pursuant to any
applicable federal or state securities law (including, without limitation, any
such requirement arising under Section 5 of the Securities Act as a result of
such Shares or Termination Delivery Units being “restricted securities”, as such
term is defined in Rule 144) (such Shares or Termination Delivery Units,

11

--------------------------------------------------------------------------------

 

“Restricted Shares”), then delivery of such Restricted Shares shall be effected
pursuant to either clause (i) or (ii) of Annex A hereto at the election of
Counterparty, unless waived by Société Générale. Notwithstanding the foregoing,
solely in respect of any Warrants exercised or deemed exercised on any Exercise
Date, Counterparty shall elect, prior to the first Settlement Date for the first
Exercise Date, a Private Placement Settlement (as defined in Annex A hereto) or
Registration Settlement (as defined in Annex A hereto) for all deliveries of
Restricted Shares for all such Exercise Dates which election shall be applicable
to all Settlement Dates for such Warrants and the procedures in clause (i) or
clause (ii) of Annex A hereto shall apply for all such delivered Restricted
Shares on an aggregate basis commencing after the final Settlement Date for such
Warrants. The Calculation Agent shall make reasonable adjustments to settlement
terms and provisions under this Confirmation to reflect a single Private
Placement Settlement or Registration Settlement for such aggregate Restricted
Shares delivered hereunder. If the Private Placement Settlement or the
Registration Settlement shall not be effected as set forth in clauses (i) or
(ii) of Annex A, as applicable, then failure to effect such Private Placement
Settlement or such Registration Settlement shall constitute an Event of Default
with respect to which Counterparty shall be the Defaulting Party.
Share Deliveries. Counterparty acknowledges and agrees that, to the extent that
Société Générale is not then an affiliate, as such term is used in Rule 144, of
Counterparty and has not been such an affiliate of Counterparty for 90 days (it
being understood that Société Générale shall not be considered such an affiliate
of Counterparty solely by reason of its right to receive Shares pursuant to a
Transaction hereunder), any Shares or Termination Delivery Units delivered
hereunder at any time after one year from the Premium Payment Date shall be
eligible for resale under Rule 144 or any successor provision, and Counterparty
agrees to promptly remove, or cause the transfer agent for such Shares or
Termination Delivery Units to remove, any legends referring to any restrictions
on resale under the Securities Act from the certificates representing such
Shares or Termination Delivery Units. Counterparty further agrees that with
respect to any Shares or Termination Delivery Units delivered hereunder at any
time after 6 months from the Premium Payment Date but prior to 1 year from the
Premium Payment Date, to the extent that Counterparty then satisfies the current
information requirement of Rule 144, Counterparty shall promptly remove, or
cause the transfer agent for such Shares or Termination Delivery Units to
remove, any legends referring to any such restrictions or requirements from the
certificates representing such Share or Termination Delivery Units upon delivery
by Société Générale to Counterparty or such transfer agent of any customary
seller’s and broker’s representation letters in connection with resales of such
Shares or Termination Delivery Units pursuant to Rule 144, without any further
requirement for the delivery of any certificate, consent, agreement, opinion of
counsel, notice or any other document, any transfer tax stamps or payment of any
other amount or any other action by Société Générale. Counterparty further
agrees and acknowledges that Société Générale shall run a holding period under
Rule 144 with respect to the Warrants and/or any Shares or Termination Delivery
Units delivered hereunder notwithstanding the existence of any other transaction
or transactions between Counterparty and Société Générale relating to the
Shares. Counterparty further agrees that Shares or Termination Delivery Units
delivered hereunder prior to the date that is 6 months from the Premium Payment
Date may be freely transferred by Société Générale to its affiliates, and
Counterparty shall effect such transfer without any further action by Société
Générale. Notwithstanding anything to the contrary herein, Counterparty agrees
that any delivery of Shares or Termination Delivery Units shall be effected by
book-entry transfer through the facilities of the Clearance System if, at the
time of such delivery, the certificates representing such Shares or Termination
Delivery Units would not contain any restrictive legend as described above.
Notwithstanding anything to the contrary herein, to the extent the provisions of
Rule 144 or any successor rule are amended, or the applicable interpretation
thereof by the Securities and Exchange Commission or any court changes after the
Trade Date, the agreements of Counterparty herein shall be deemed modified to
the extent necessary, in the opinion of outside counsel of Counterparty, to
comply with Rule 144, including Rule 144(b) or any successor provision, as in
effect at the time of delivery of the relevant Shares or Termination Delivery
Units.
No Material Non-Public Information. On each day during the period beginning on
the Trade Date and ending on the day on which Société Générale has informed
Counterparty in writing that Société Générale has completed all purchases or
sales of Shares or other transactions to hedge initially its exposure with
respect to the Transaction, Counterparty represents and warrants to Société
Générale that it is not aware of any material nonpublic information concerning
itself or the Shares.
Limit on Beneficial Ownership. Notwithstanding any other provisions hereof,
Société Générale may not

12

--------------------------------------------------------------------------------

 

exercise any Warrant hereunder, Automatic Exercise shall not apply with respect
thereto, and no delivery hereunder (including pursuant to provisions opposite
the headings “Alternative Calculations and Counterparty Payments on Early
Termination and on Certain Extraordinary Events,” “Registration/Private
Placement Procedures,” “Limitation on Delivery of Shares” or Annex A) shall be
made, to the extent (but only to the extent) that the receipt of any Shares upon
such exercise or delivery would result in the Equity Percentage (as defined
below) exceeding 9% or an Ownership Trigger (as defined below) being met. Any
purported delivery hereunder shall be void and have no effect to the extent (but
only to the extent) that such delivery would result in the Equity Percentage
exceeding 9% or an Ownership Trigger being met. If any delivery owed to Société
Générale or exercise hereunder is not made, in whole or in part, as a result of
this provision, Counterparty’s obligation to make such delivery and Société
Générale’s right to exercise a Warrant shall not be extinguished and
Counterparty shall make such delivery as promptly as practicable after, but in
no event later than one Clearance System Business Day after, Société Générale
gives notice to Counterparty that such exercise or delivery would not result in
the Equity Percentage exceeding 9% or an Ownership Trigger being met.
Repurchase Notices. Counterparty shall, on any day on which Counterparty effects
any repurchase of Shares, provide Société Générale with a written notice of such
repurchase (a “Repurchase Notice”) on such day if, following such repurchase,
the Warrant Equity Percentage (as defined below) is (a) equal to or greater than
4.5% and (b) greater by 0.5% or more than the Warrant Equity Percentage set
forth in the immediately preceding Repurchase Notice (or, in the case of the
first such Repurchase Notice, greater by 0.5% or more than the Warrant Equity
Percentage as of the date hereof). The “Warrant Equity Percentage” as of any day
is the fraction, expressed as a percentage, of (1) the numerator of which is the
Number of Warrants, and (2) the denominator of which is the number of Shares
outstanding on such day. Counterparty agrees to indemnify and hold harmless
Société Générale and its affiliates and their respective officers, directors,
employees, affiliates, advisors, agents and controlling person (each, an
“Indemnified Person”) from and against any and all losses (including losses
relating to Société Générale’s hedging activities as a consequence of becoming,
or of the risk of becoming, an “insider” as defined under Section 16 of the
Exchange Act, including without limitation, any forbearance from hedging
activities or cessation of hedging activities and any losses in connection
therewith with respect to this Transaction), claims, damages, judgments,
liabilities and expense (including reasonable attorney’s fees), joint or
several, which an Indemnified Person actually may become subject to, as a result
of Counterparty’s failure to provide Société Générale with a Repurchase Notice
on the day and in the manner specified herein, and to reimburse, upon written
request, each of such Indemnified Persons for any reasonable legal or other
expenses incurred in connection with investigating, preparing for, providing
testimony or other evidence in connection with or defending any of the
foregoing. If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
the Indemnified Person, such Indemnified Person shall promptly notify
Counterparty in writing, and Counterparty, upon request of the Indemnified
Person, shall retain counsel reasonably satisfactory to the Indemnified Person
to represent the Indemnified Person and any others Counterparty may designate in
such proceeding and shall pay the fees and expenses of such counsel related to
such proceeding. Counterparty shall be relieved from liability to the extent
that the Indemnified Person fails promptly to notify Counterparty of any action
commenced against it in respect of which indemnity may be sought hereunder;
provided that failure to notify Counterparty (x) shall not relieve Counterparty
from any liability hereunder to the extent it is not materially prejudiced as a
result thereof and (y) shall not, in any event, relieve Counterparty from any
liability that it may have otherwise than on account of this indemnity
agreement. Counterparty shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, Counterparty agrees to indemnify
any Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Counterparty shall not, without the prior written
consent of the Indemnified Person, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement includes an unconditional release of
such Indemnified Person from all liability on claims that are the subject matter
of such proceeding on terms reasonably satisfactory to such Indemnified Person.
If the indemnification provided for in this paragraph is unavailable to an
Indemnified Person or insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then Counterparty, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities. The remedies provided for in this paragraph are not exclusive and
shall not limit any rights or remedies that may otherwise be available to any
Indemnified Person at law or in equity. The indemnity and

13

--------------------------------------------------------------------------------

 

contribution agreements contained in this paragraph shall remain operative and
in full force and effect regardless of the termination of the Transaction.
Limitation On Delivery of Shares. Notwithstanding anything herein or in the
Agreement to the contrary, in no event shall Counterparty be required to deliver
Shares in connection with the Transaction in excess of 6,088,133 Shares (the
“Maximum Delivery Amount”). Counterparty represents and warrants (which shall be
deemed to be repeated on each day that the Transaction is outstanding) that the
Maximum Delivery Amount is equal to or less than the number of authorized but
unissued Shares of Counterparty that are not reserved for future issuance in
connection with transactions in the Shares (other than the Transaction) on the
date of the determination of the Maximum Delivery Amount (such Shares, the
“Available Shares”). In the event Counterparty shall not have delivered the full
number of Shares otherwise deliverable as a result of this paragraph (the
resulting deficit, the “Deficit Shares”), Counterparty shall be continually
obligated to deliver, from time to time until the full number of Deficit Shares
have been delivered pursuant to this paragraph, Shares when, and to the extent,
that (i) Shares are repurchased, acquired or otherwise received by Counterparty
or any of its subsidiaries after the Trade Date (whether or not in exchange for
cash, fair value or any other consideration), (ii) authorized and unissued
Shares reserved for issuance in respect of other transactions prior to such date
which prior to the relevant date become no longer so reserved and
(iii) Counterparty additionally authorizes any unissued Shares that are not
reserved for other transactions. Counterparty shall immediately notify Société
Générale of the occurrence of any of the foregoing events (including the number
of Shares subject to clause (i), (ii) or (iii) and the corresponding number of
Shares to be delivered) and promptly deliver such Shares thereafter.
Notwithstanding the provisions of Section 5(a)(ii) of the Agreement, in the
event of a failure by Counterparty to comply with the agreement set forth in
this provision, there shall be no grace period for remedy of such failure.
Additional Termination Event. The occurrence of any of the following shall
constitute an Additional Termination Event with respect to which
(1) Counterparty shall be the sole Affected Party and (2) the Transaction shall
be the sole Affected Transaction; provided that with respect to any Additional
Termination Event, Société Générale may choose to treat part of the Transaction
as the sole Affected Transaction, and, upon termination of the Affected
Transaction, a Transaction with terms identical to those set forth herein except
with a Number of Warrants equal to the unaffected number of Warrants shall be
treated for all purposes as the Transaction, which shall remain in full force
and effect:
(i) Société Générale reasonably determines, upon advice of counsel, that it is
advisable to terminate a portion of the Transaction so that Société Générale’s
related hedging activities will comply with applicable securities laws, rules or
regulations;
(ii) The Shares are not approved for listing on the New York Stock Exchange, The
NASDAQ Global Select Market or The NASDAQ Global Market (or any of their
respective successors);
(iii) any “person” or “group” (as such terms are used for purposes of Sections
13(d) and 14(d) of the Exchange Act or any successor provisions, including any
group acting for the purpose of acquiring, holding, voting or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act or any
successor provision) is or becomes the “beneficial owner” (as that term is used
in Rule 13d-3 under the Exchange Act as in effect on the Effective Date, except
that the number of shares of Counterparty’s voting stock will be deemed to
include, in addition to all outstanding shares of Counterparty’s voting stock
and shares of voting stock not outstanding that are subject to options,
warrants, rights to purchase or conversion privileges exercisable within 60 days
of the date of determination (“unissued shares”) deemed to be held by the
“person” or “group” or other person with respect to which the determination is
being made, all unissued shares deemed to be held by all other persons),
directly or indirectly, of shares representing 50% or more of the total voting
power of all outstanding classes of Counterparty’s capital stock or other
interests normally entitled (without regard to the occurrence of any
contingency) to vote in the election of the board of directors, managers or
trustees (“voting stock”) or has the power, directly or indirectly, to elect a
majority of the members of Counterparty’s board of directors, unless the
exception provided in clause (iv)(2) below applies;
(iv) Counterparty consolidates with, enters into a binding share exchange with,
or merges with or into, another person, or Counterparty sells, assigns, conveys,
transfers, leases or otherwise disposes of all or

14

--------------------------------------------------------------------------------

 

substantially all of its assets, or any person consolidates with, or merges with
or into, Counterparty, in any such event, other than any transaction:
(1) pursuant to which the persons that “beneficially owned,” directly or
indirectly, the shares of Counterparty’s voting stock immediately prior to such
transaction “beneficially own,” directly or indirectly, shares of Counterparty’s
voting stock representing at least a majority of the total voting power of all
outstanding classes of voting stock of the surviving or transferee person and
such holders’ proportional voting power immediately after such transaction
vis-à-vis each other with respect to the securities they receive in such
transaction shall be in substantially the same proportions as their respective
voting power vis-à-vis each other immediately prior to such transaction;
(2) in which at least 90% of the consideration paid for the Shares (other than
cash payments for fractional shares or pursuant to dissenters’ appraisal rights)
consists of shares of common stock traded on the New York Stock Exchange, The
NASDAQ Global Market or The NASDAQ Global Select Market (or any of their
respective successors), or which will be so traded immediately following such
transaction; or
(3) which is effected solely to change Counterparty’s jurisdiction of
incorporation and results in a reclassification, conversion or exchange of
outstanding Shares solely into shares of common stock of the surviving person;
(v) (a) individuals who on the Effective Date constituted Counterparty’s board
of directors and (b) any new directors whose election to Counterparty’s board of
directors or whose nomination for election by Counterparty’s stockholders was
approved by at least a majority of the directors at the time of such election or
nomination still in office either who were directors on the Effective Date or
whose election or nomination for election was previously so approved, cease for
any reason to constitute a majority of Counterparty’s board of directors; or
(vi) the holders of Counterparty’s capital stock approve any plan or proposal
for liquidation or dissolution of Counterparty.
Transfer or Assignment. Notwithstanding any provision of the Agreement to the
contrary, Société Générale may, subject to applicable law, freely transfer and
assign all of its rights and obligations under the Transaction without the
consent of Counterparty. If, as determined in Société Générale’s sole
discretion, (a) at any time (1) the Equity Percentage exceeds 8.0% (2) Société
Générale, Société Générale Group (as defined below) or any person whose
ownership position would be aggregated with that of Société Générale or Société
Générale Group (Société Générale, Société Générale Group or any such person, a
“Société Générale Person”) under Sections 3-701 to 3-709 of the Maryland Control
Share Acquisition Act or other federal, state or local laws, regulations or
regulatory orders applicable to ownership of Shares (“Applicable Laws”), owns,
beneficially owns, constructively owns, controls, holds the power to vote or
otherwise meets a relevant definition of ownership, or could be reasonably
viewed as meeting any of the foregoing, in excess of a number of Shares equal to
(x) the number of Shares that would give rise to reporting, registration, filing
or notification obligations or other requirements (including obtaining prior
approval by a state or federal regulator) of a Société Générale Person under
Applicable Laws and with respect to which such requirements have not been met or
the relevant approval has not been received (this clause (2)(x), the “Ownership
Trigger”) minus (y) 1% of the number of Shares outstanding on the date of
determination, or (3) the number of “control shares” (as such term is used in
Section 3-701(d) of the Maryland Control Share Acquisition Act) owned by a
Société Générale Person divided by the number of Counterparty’s outstanding
Shares exceeds 8.0%, (each of such conditions described in clause (1), (2) or
(3), an “Excess Ownership Position”), and (b) Société Générale is unable, after
commercially reasonable efforts, to effect a transfer or assignment on pricing
and terms and within a time period reasonably acceptable to it of all or a
portion of this Transaction pursuant to the preceding paragraph such that an
Excess Ownership Position no longer exists, Société Générale may designate any
Scheduled Trading Day as an Early Termination Date with respect to a portion
(the “Terminated Portion”) of this Transaction, such that an Excess Ownership
Position no longer exists following such partial termination. In the event that
Société Générale so designates an Early Termination Date with respect to a
portion of this Transaction, a payment shall be made pursuant to Section 6 of
the Agreement as if (i) an Early

15

--------------------------------------------------------------------------------

 

Termination Date had been designated in respect of a Transaction having terms
identical to this Transaction and a Number of Warrants equal to the Terminated
Portion (allocated among the Components thereof in the discretion of Société
Générale), (ii) Counterparty shall be the sole Affected Party with respect to
such partial termination and (iii) such Transaction shall be the only Terminated
Transaction (and, for the avoidance of doubt, the provisions set forth under the
caption “Alternative Calculations and Counterparty Payment on Early Termination
and on Certain Extraordinary Events” shall apply to any amount that is payable
by Counterparty to Société Générale pursuant to this sentence). The “Equity
Percentage” as of any day is the fraction, expressed as a percentage, (A) the
numerator of which is the number of Shares that Société Générale and any of its
affiliates subject to aggregation with Société Générale for purposes of the
“beneficial ownership” test under Section 13 of the Exchange Act and all persons
who may form a “group” (within the meaning of Rule 13d-5(b)(1) under the
Exchange Act) with Société Générale (collectively, “Société Générale Group”)
“beneficially own” (within the meaning of Section 13 of the Exchange Act)
without duplication on such day and (B) the denominator of which is the number
of Shares outstanding on such day.
Notwithstanding any other provision in this Confirmation to the contrary
requiring or allowing Société Générale to purchase, sell, receive or deliver any
shares or other securities to or from Counterparty, Société Générale, acting in
good faith and in a commercially reasonable manner, may designate any of its
affiliates to purchase, sell, receive or deliver such shares or other securities
and otherwise to perform Société Générale’s obligations in respect of the
Transaction and any such designee may assume such obligations. Société Générale
shall be discharged of its obligations to Counterparty to the extent of any such
performance.
Amendments to Equity Definitions. (a) Section 12.9(b)(iv) of the Equity
Definitions is hereby amended by: (i) deleting (1) subsection (A) in its
entirety, (2) the phrase “or (B)” following subsection (A) and (3) the phrase
“in each case” in subsection (B); (ii) replacing “will lend” with “lends” in
subsection (B); and (iii) deleting the phrase “neither the Non-Hedging Party nor
the Lending Party lends Shares in the amount of the Hedging Shares or” in the
penultimate sentence; and (b) Section 12.9(b)(v) of the Equity Definitions is
hereby amended by: (i) adding the word “or” immediately before subsection “(B)”
and deleting the comma at the end of subsection (A); (ii) (1) deleting
subsection (C) in its entirety, (2) deleting the word “or” immediately preceding
subsection (C) and (3) deleting the penultimate sentence in its entirety and
replacing it with the sentence “The Hedging Party will determine the
Cancellation Amount payable by one party to the other”; and (iii) deleting
subsection (X) in its entirety and the words “or (Y)” immediately following
subsection (X).
Severability; Illegality. If compliance by either party with any provision of
the Transaction would be unenforceable or illegal, (a) the parties shall
negotiate in good faith to resolve such unenforceability or illegality in a
manner that preserves the economic benefits of the transactions contemplated
hereby and (b) the other provisions of the Transaction shall not be invalidated,
but shall remain in full force and effect.
Waiver of Jury Trial. EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING RELATING TO THE TRANSACTION. EACH PARTY (I) CERTIFIES THAT
NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF SUCH A
SUIT, ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(II) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO
THE TRANSACTION, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS PROVIDED HEREIN.
Payment by Société Générale. In the event that (i) an Early Termination Date
occurs or is designated with respect to the Transaction as a result of a
Termination Event or an Event of Default (other than an Event of Default arising
under Section 5(a)(ii) or 5(a)(iv) of the Agreement) and, as a result, Société
Générale owes to Company pursuant to Section 6(d)(ii) of the Agreement an amount
calculated under Section 6(e) of the Agreement, or (ii) Société Générale owes to
Company, pursuant to Section 12.7 or Section 12.9 of the Equity Definitions
(including, for the avoidance of doubt, any amount payable in connection with an
Extraordinary Event), an amount calculated under Section 12.8 of the Equity
Definitions, such amount shall be deemed to be zero.

16

--------------------------------------------------------------------------------

 

Governing law: The law of the State of New York.
Terms relating to the Agent. Société Générale is not registered as a broker or
dealer under the Securities Exchange Act of 1934, as amended. SG Americas
Securities, LLC has acted solely as agent for Société Générale and the
counterparty to the extent required by law in connection with this Transaction
and has no obligations, by way of issuance, endorsement, guarantee or otherwise,
with respect to the performance of either party under this Transaction. The
parties agree to proceed solely against each other, and not against SG Americas
Securities, LLC as agent, in seeking enforcement of their rights and obligations
with respect to this Transaction, including their rights and obligations with
respect to payment of funds and delivery of securities.
Broker. SG Americas Securities, LLC may have been paid a fee by Société Générale
in connection with this Transaction. Further details will be furnished upon
written request.
Time of Dealing. The time of the Transaction will be furnished by SG Americas
Securities, LLC upon written request.
Contact information. For purposes of the Agreement (unless otherwise specified
in the Agreement), the addresses for notice to the parties shall be:
(a) Counterparty
TeleCommunication Systems, Inc
275 West Street, Annapolis, Maryland 21401
Annapolis, Maryland 21401
Attention:  Bruce A. White
Facsimile: (410) 263-7617
(b) Société Générale
Société Générale
1221 Avenue of the Americas
New York, NY 10020
Attention: Sanjay Garg
Telephone: (212) 278-5187
Facsimile: (212) 278-5624
Email:          sanjay.garg@sgcib.com
with a copy to:
Société Générale
1221 Avenue of the Americas
New York, NY 10020
Attention: Steve Milankov
Telephone: (212) 278-6985
Facsimile: (212) 278-7365
Email:     steve.milankov@sgcib.com

17

--------------------------------------------------------------------------------

 

This Confirmation may be executed in several counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the
same instrument.
Counterparty hereby agrees to check this Confirmation and to confirm that the
foregoing correctly sets forth the terms of the Transaction by signing in the
space provided below and returning to Société Générale a facsimile of the
fully-executed Confirmation to Société Générale at (212) 278-5624. Originals
shall be provided for your execution upon your request.
We are very pleased to have executed the Transaction with you and we look
forward to completing other transactions with you in the near future.

          Very truly yours,

SOCIÉTÉ GÉNÉRALE
      By:   /s/ Sanjay Garg       Name:   Sanjay Garg       Title:   Managing
Director      

Counterparty hereby agrees to, accepts and confirms the terms of the foregoing
as of the Trade Date.

          TELECOMMUNICATION SYSTEMS, INC.
      By:   /s/ Thomas M. Brandt, Jr.       Name:   Thomas M. Brandt, Jr.      
Title:   Senior Vice President and Chief Financial Officer    

 

--------------------------------------------------------------------------------

 

ANNEX A
Registration Settlement and Private Placement Settlement

(i)   If Counterparty elects to settle the Transaction pursuant to this clause
(i) (a “Private Placement Settlement”), then delivery of Restricted Shares by
Counterparty shall be effected in private placement procedures (customary for
equity securities of the size of such private placement) with respect to such
Restricted Shares reasonably acceptable to Société Générale; provided that
Counterparty may not elect a Private Placement Settlement if, on the date of its
election, it has taken, or caused to be taken, any action that would make
unavailable either the exemption pursuant to Section 4(2) of the Securities Act
for the sale by Counterparty to Société Générale (or any affiliate designated by
Société Générale) of the Restricted Shares or the exemption pursuant to
Section 4(1) or Section 4(3) of the Securities Act for resales of the Restricted
Shares by Société Générale (or any such affiliate of Société Générale). The
Private Placement Settlement of such Restricted Shares shall include customary
representations, covenants, blue sky and other governmental filings and/or
registrations, indemnities to Société Générale, due diligence rights (for
Société Générale or any buyer of the Restricted Shares designated by Société
Générale), opinions and certificates, and such other documentation as is
customary for private placement agreements, all reasonably acceptable to Société
Générale. In the event of a Private Placement Settlement, the Net Share
Settlement Amount or the Counterparty Payment Obligation, respectively, shall be
deemed to be the Net Share Settlement Amount or the Counterparty Payment
Obligation, respectively, plus an additional amount (determined from time to
time by the Calculation Agent in its commercially reasonable judgment)
attributable to interest that would be earned on such Net Share Settlement
Amount or the Counterparty Payment Obligation, respectively, (increased on a
daily basis to reflect the accrual of such interest and reduced from time to
time by the amount of net proceeds received by Société Générale as provided
herein) at a rate equal to the open Federal Funds Rate plus 100 basis points per
annum for the period from, and including, such Settlement Date or the date on
which the Counterparty Payment Obligation is due, respectively, to, but
excluding, the related date on which all the Restricted Shares have been sold
and calculated on an Actual/360 basis.   (ii)   If Counterparty elects to settle
the Transaction pursuant to this clause (ii) (a “Registration Settlement”), then
Counterparty shall promptly (but in any event no later than the beginning of the
Resale Period) file and use its reasonable best efforts to make effective under
the Securities Act a registration statement or supplement or amend an
outstanding registration statement in form and substance reasonably satisfactory
to Société Générale, to cover the resale of such Restricted Shares (and any
Make-whole Shares) in accordance with customary resale registration procedures,
including covenants, conditions, representations, underwriting discounts (if
applicable), commissions (if applicable), indemnities, due diligence rights,
opinions and certificates, and such other documentation as is customary for
equity resale underwriting agreements, all reasonably acceptable to Société
Générale. If Société Générale, in its sole reasonable discretion, is not
satisfied with such procedures and documentation, Private Placement Settlement
shall apply. If Société Générale is satisfied with such procedures and
documentation, it shall sell the Restricted Shares (and any Make-whole Shares)
pursuant to such registration statement during a period (the “Resale Period”)
commencing on the Exchange Business Day following delivery of such Restricted
Shares (and any Make-whole Shares) and ending on the earliest of (i) the
Exchange Business Day on which Société Générale completes the sale of all
Restricted Shares or, in the case of settlement of Termination Delivery Units, a
sufficient number of Restricted Shares so that the realized net proceeds of such
sales exceed the Counterparty Payment Obligation, (ii) the date upon which all
Restricted Shares (and any Make-whole Shares) have been sold or transferred
pursuant to Rule 144 (or similar provisions then in force) and (iii) the date
upon which all Restricted Shares (and any Make-whole Shares) may be sold or
transferred by a non-affiliate pursuant to Rule 144 (or any similar provision
then in force) without any further restriction whatsoever.   (iii)   If
(ii) above is applicable and the Net Share Settlement Amount or the Counterparty
Payment Obligation, as applicable, exceeds the realized net proceeds from such
resale, or if (i) above is applicable and the Freely Tradeable Value (as defined
below) of the Shares owed pursuant to the Net Share Settlement Amount, or the
Counterparty Payment Obligation (in each case as adjusted pursuant to
(i) above), as applicable, exceeds the realized net proceeds

A-1

--------------------------------------------------------------------------------

 

    from such resale, Counterparty shall transfer to Société Générale by the
open of the regular trading session on the Exchange on the Exchange Business Day
immediately following the last day of the Resale Period the amount of such
excess (the “Additional Amount”), at its option, either in cash or in a number
of Restricted Shares (“Make-whole Shares”, provided that the aggregate number of
Restricted Shares and Make-whole Shares delivered shall not exceed the Maximum
Delivery Amount) that, based on the Relevant Price on the last day of the Resale
Period (as if such day was the “Valuation Date” for purposes of computing such
Relevant Price), has a value equal to the Additional Amount. If Counterparty
elects to pay the Additional Amount in Make-whole Shares, Counterparty shall
elect whether the requirements and provisions for either Private Placement
Settlement or Registration Settlement shall apply to such payment. This
provision shall be applied successively until the Additional Amount is equal to
zero, subject to “Limitation on Delivery of Shares”. “Freely Tradeable Value”
means the value of the number of Shares delivered to Société Générale which such
Shares would have if they were freely tradeable (without prospectus delivery)
upon receipt by Société Générale, as determined by the Calculation Agent by
reference to the Relevant Price for freely tradeable Shares as of the Valuation
Date, or other date of valuation used to determine the delivery obligation with
respect to such Shares, or by other commercially reasonable means.

A-2

--------------------------------------------------------------------------------

 

ANNEX B
The Strike Price, Premium and Final Disruption Date for the Transaction are set
forth below.

     
Strike Price:
  USD12.736
Premium:
  USD3,944,115
Final Disruption Date:
  July 7, 2015.

B-1

--------------------------------------------------------------------------------

 

ANNEX C
For each Component of the Transaction, the Number of Warrants and Expiration
Date is set forth below.

                  Component Number   Number of Warrants   Expiration Date
1.
    33,823     Fri, 02/13/15
2.
    33,823     Tue, 02/17/15
3.
    33,823     Wed, 02/18/15
4.
    33,823     Thu, 02/19/15
5.
    33,823     Fri, 02/20/15
6.
    33,823     Mon, 02/23/15
7.
    33,823     Tue, 02/24/15
8.
    33,823     Wed, 02/25/15
9.
    33,823     Thu, 02/26/15
10.
    33,823     Fri, 02/27/15
11.
    33,823     Mon, 03/02/15
12.
    33,823     Tue, 03/03/15
13.
    33,823     Wed, 03/04/15
14.
    33,823     Thu, 03/05/15
15.
    33,823     Fri, 03/06/15
16.
    33,823     Mon, 03/09/15
17.
    33,823     Tue, 03/10/15
18.
    33,823     Wed, 03/11/15
19.
    33,823     Thu, 03/12/15
20.
    33,823     Fri, 03/13/15
21.
    33,823     Mon, 03/16/15
22.
    33,823     Tue, 03/17/15
23.
    33,823     Wed, 03/18/15
24.
    33,823     Thu, 03/19/15
25.
    33,823     Fri, 03/20/15
26.
    33,823     Mon, 03/23/15
27.
    33,823     Tue, 03/24/15
28.
    33,823     Wed, 03/25/15
29.
    33,823     Thu, 03/26/15
30.
    33,823     Fri, 03/27/15
31.
    33,823     Mon, 03/30/15
32.
    33,823     Tue, 03/31/15
33.
    33,823     Wed, 04/01/15
34.
    33,823     Thu, 04/02/15
35.
    33,823     Mon, 04/06/15
36.
    33,823     Tue, 04/07/15
37.
    33,823     Wed, 04/08/15
38.
    33,823     Thu, 04/09/15
39.
    33,823     Fri, 04/10/15

C-1

--------------------------------------------------------------------------------

 

                  Component Number   Number of Warrants   Expiration Date
40.
    33,823     Mon, 04/13/15
41.
    33,823     Tue, 04/14/15
42.
    33,823     Wed, 04/15/15
43.
    33,823     Thu, 04/16/15
44.
    33,823     Fri, 04/17/15
45.
    33,823     Mon, 04/20/15
46.
    33,823     Tue, 04/21/15
47.
    33,823     Wed, 04/22/15
48.
    33,823     Thu, 04/23/15
49.
    33,823     Fri, 04/24/15
50.
    33,823     Mon, 04/27/15
51.
    33,823     Tue, 04/28/15
52.
    33,823     Wed, 04/29/15
53.
    33,823     Thu, 04/30/15
54.
    33,823     Fri, 05/01/15
55.
    33,823     Mon, 05/04/15
56.
    33,823     Tue, 05/05/15
57.
    33,823     Wed, 05/06/15
58.
    33,823     Thu, 05/07/15
59.
    33,823     Fri, 05/08/15
60.
    33,823     Mon, 05/11/15
61.
    33,823     Tue, 05/12/15
62.
    33,823     Wed, 05/13/15
63.
    33,823     Thu, 05/14/15
64.
    33,823     Fri, 05/15/15
65.
    33,823     Mon, 05/18/15
66.
    33,823     Tue, 05/19/15
67.
    33,823     Wed, 05/20/15
68.
    33,823     Thu, 05/21/15
69.
    33,823     Fri, 05/22/15
70.
    33,823     Tue, 05/26/15
71.
    33,823     Wed, 05/27/15
72.
    33,823     Thu, 05/28/15
73.
    33,823     Fri, 05/29/15
74.
    33,823     Mon, 06/01/15
75.
    33,823     Tue, 06/02/15
76.
    33,823     Wed, 06/03/15
77.
    33,823     Thu, 06/04/15
78.
    33,823     Fri, 06/05/15
79.
    33,823     Mon, 06/08/15
80.
    33,823     Tue, 06/09/15
81.
    33,823     Wed, 06/10/15
82.
    33,823     Thu, 06/11/15
83.
    33,823     Fri, 06/12/15
84.
    33,823     Mon, 06/15/15
85.
    33,823     Tue, 06/16/15

A-2

--------------------------------------------------------------------------------

 

                  Component Number   Number of Warrants   Expiration Date
86.
    33,823     Wed, 06/17/15
87.
    33,823     Thu, 06/18/15
88.
    33,823     Fri, 06/19/15
89.
    33,823     Mon, 06/22/15
90.
    33,819     Tue, 06/23/15

A-2