EXCHANGE AGREEMENT

       (the “Undersigned”), for itself and on behalf of the beneficial owners
listed on Exhibit A hereto (“Accounts”) for whom the Undersigned holds
contractual and investment authority (each Account, as well as the Undersigned
if it is exchanging Existing Notes (as defined below) hereunder, a “Holder”),
enters into this Exchange Agreement (the “Agreement”) with TeleCommunication
Systems, Inc. (the “Company”) on May      , 2013 whereby the Holders will
exchange (the “Exchange”) the Company’s 4.50% Convertible Senior Notes due 2014
(the “Existing Notes”) for the Company’s new      % Convertible Senior Notes due
2018 (the “New Notes”) that will be issued pursuant to the provisions of an
Indenture to be dated as of      , 2013 (the “Indenture”) between the Company
and The Bank of New York Mellon Trust Company, N.A., as Trustee (the “Trustee”).

On and subject to the terms hereof, the parties hereto agree as follows:

Article I: Exchange of the Existing Notes for New Notes

Subject to the terms set forth in this Agreement, at the Closing (as defined
herein), the Undersigned hereby agrees to cause the Holders to exchange and
deliver to the Company the following Existing Notes, and in exchange therefor
the Company hereby agrees to issue to the Holders the principal amount of New
Notes described below and to pay in cash the following accrued but unpaid
interest on such Existing Notes:

      Principal Amount of Existing Notes to be Exchanged: $   (the “Exchanged

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Principal Amount of New Notes to be Issued in the Exchange:

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Cash Payment of Accrued but Unpaid Interest on Exchanged Notes:  
Notes”).
$(the “Holders’
New Notes”).
$(the “Cash
Payment”).

Subject to the following provisions of this paragraph, the closing of the
Exchange (the “Closing”) shall occur on a date (the “Closing Date”) no later
than four business days after the date of this Agreement. At the Closing,
(a) each Holder shall deliver or cause to be delivered to the Company all right,
title and interest in and to its Exchanged Notes (and no other consideration)
free and clear of any mortgage, lien, pledge, charge, security interest,
encumbrance, title retention agreement, option, equity or other adverse claim
thereto (collectively, “Liens”), together with any documents of conveyance or
transfer that the Company may deem necessary or desirable to transfer to and
confirm in the Company all right, title and interest in and to the Exchanged
Notes free and clear of any Liens, and (b) the Company shall deliver to each
Holder the principal amount of Holders’ New Notes and the portion of the Cash
Payment specified on Exhibit A hereto (or, if there are no Accounts, the Company
shall deliver to the Undersigned, as the sole Holder, the Holders’ New Notes and
the Cash Payment specified above); provided, however, that the parties
acknowledge that the Company may delay the Closing and the delivery of the
Holders’ New Notes to the Holder due to procedures and mechanics within the
system of the Depository Trust Company or the NASDAQ Global Market (including
the procedures and mechanics regarding the listing of the Conversion Shares (as
defined below) on the NASDAQ Global Market), or events beyond the Company’s
control and that such delay will not be a default under this Agreement so long
as (i) the Company is using its best efforts to effect the issuance of one or
more global notes representing the New Notes, (ii) such delay is no longer than
five business days, and (iii) interest shall accrue on such New Notes from the
Closing Date. Simultaneously with or after the Closing, the Company may issue
New Notes to one or more other holders of outstanding Existing Notes or to other
investors, subject to the terms of the Indenture.

Article II: Covenants, Representations and Warranties of the Holders

Each Holder (and, where specified below, the Undersigned) hereby covenants
(solely as to itself), as follows, and makes the following representations and
warranties (solely as to itself), each of which is and shall be true and correct
on the date hereof and at the Closing, to the Company, Lazard Frères & Co. LLC
and Lazard Capital Markets LLC, and all such covenants, representations and
warranties shall survive the Closing.

Section 2.1 Power and Authorization. The Holder is duly organized, validly
existing and in good standing, and has the power, authority and capacity to
execute and deliver this Agreement, to perform its obligations hereunder, and to
consummate the Exchange contemplated hereby. If the Undersigned is executing
this Agreement on behalf of Accounts, (a) the Undersigned has all requisite
discretionary and contractual authority to enter into this Agreement on behalf
of, and bind, each Account, and (b) Exhibit A hereto is a true, correct and
complete list of (i) the name of each Account, (ii) the principal amount of such
Account’s Exchanged Notes, (iii) the principal amount of Holders’ New Notes to
be issued to such Account in respect of its Exchanged Notes, and (iv) the
portion of the Cash Payment to be made to such Account in respect of the accrued
interest on its Exchanged Notes.

Section 2.2 Valid and Enforceable Agreement; No Violations. This Agreement has
been duly executed and delivered by the Undersigned and the Holder and
constitutes a legal, valid and binding obligation of the Undersigned and the
Holder, enforceable against the Undersigned and the Holder in accordance with
its terms, except that such enforcement may be subject to (a) bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or other similar
laws affecting or relating to enforcement of creditors’ rights generally, and
(b) general principles of equity, whether such enforceability is considered in a
proceeding at law or in equity (the “Enforceability Exceptions”). This Agreement
and consummation of the Exchange will not violate, conflict with or result in a
breach of or default under (i) the Undersigned’s or the Holder’s organizational
documents, (ii) any agreement or instrument to which the Undersigned or the
Holder is a party or by which the Undersigned or the Holder or any of their
respective assets are bound, or (iii) any laws, regulations or governmental or
judicial decrees, injunctions or orders applicable to the Undersigned or the
Holder.

Section 2.3 Title to the Exchanged Notes. The Holder is the sole legal and
beneficial owner of the Exchanged Notes set forth opposite its name on Exhibit A
hereto (or, if there are no Accounts, the Undersigned is the sole legal and
beneficial owner of all of the Exchanged Notes). The Holder has good, valid and
marketable title to its Exchanged Notes, free and clear of any Liens (other than
pledges or security interests that the Holder may have created in favor of a
prime broker under and in accordance with its prime brokerage agreement with
such broker). The Holder has not, in whole or in part, except as described in
the preceding sentence, (a) assigned, transferred, hypothecated, pledged,
exchanged or otherwise disposed of any of its Exchanged Notes or its rights in
its Exchanged Notes, or (b) given any person or entity any transfer order, power
of attorney or other authority of any nature whatsoever with respect to its
Exchanged Notes. Upon the Holder’s delivery of its Exchanged Notes to the
Company pursuant to the Exchange, such Exchanged Notes shall be free and clear
of all Liens created by the Holder.

Section 2.4 Accredited Investor or Qualified Institutional Buyer. The Holder is
either (i) an “accredited investor” within the meaning of Rule 501 of
Regulation D (“Regulation D”) promulgated under the Securities Act of 1933, as
amended (the “Securities Act”) or (ii) a “qualified institutional buyer” within
the meaning of Rule 144A promulgated under the Securities Act.

Section 2.5 No Affiliate Status. The Holder is not, and has not been during the
consecutive three month period preceding the date hereof, a director, officer or
“affiliate” within the meaning of Rule 144 promulgated under the Securities Act
(an “Affiliate”) of the Company. To its knowledge, the Holder did not acquire
any of the Exchanged Notes, directly or indirectly, from an Affiliate of the
Company.

Section 2.6 No Trading or Disclosure. Each of the Undersigned and the Holder has
not, directly or indirectly, and no person acting on behalf of or pursuant to
any understanding with it has, disclosed to a third party any of the Anticipated
Disclosure (as defined in Section 2.7 below) or engaged in any transactions in
the securities of the Company (including, without limitation, any Short Sales
(as defined below) involving any of the Company’s securities) since the time
that the Undersigned was first contacted by either the Company, Lazard Frères &
Co. LLC or Lazard Capital Markets LLC or any other person regarding the
Exchange, this Agreement or an investment in the New Notes or the Company. Each
of the Undersigned and the Holder covenants that neither it nor any person
acting on its behalf or pursuant to any understanding with it will disclose to a
third party any of the Anticipated Disclosure or engage, directly or indirectly,
in any transactions in the securities of the Company (including Short Sales)
prior to the time all of the Anticipated Disclosure is publicly disclosed.
“Short Sales” include, without limitation, all “short sales” as defined in
Rule 200 of Regulation SHO promulgated under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), and all types of direct and indirect
stock pledges, forward sale contracts, options, puts, calls, short sales, swaps,
derivatives and similar arrangements (including on a total return basis), and
sales and other transactions through non-U.S. broker-dealers or foreign
regulated brokers. Solely for purposes of this Section 2.6, subject to the
Undersigned’s and the Holder’s compliance with their respective obligations
under the U.S. federal securities laws and the Undersigned’s and the Holder’s
respective internal policies, (a) “Undersigned” and “Holder” shall not be deemed
to include any employees, subsidiaries or affiliates of the Undersigned or the
Holder that are effectively walled off by appropriate “Chinese Wall” information
barriers approved by the Undersigned’s or the Holder’s respective legal or
compliance department (and thus have not been privy to any information
concerning the Exchange), and (b) the foregoing representations and covenants of
this Section 2.6 shall not apply to any transaction by or on behalf of an
Account that was effected without the advice or participation of, or such
Account’s receipt of information regarding any of the Anticipated Disclosure
provided by, the Undersigned.

Section 2.7 Adequate Information; No Reliance. The Holder acknowledges and
agrees that (a) the Holder has been furnished with all materials it considers
relevant to making an investment decision to enter into the Exchange and has had
the opportunity to review (i) the Company’s filings and submissions with the
Securities and Exchange Commission (the “SEC”), including, without limitation,
all information filed or furnished pursuant to the Exchange Act, (ii) a draft
press release or form of Current Report on Form 8-K disclosing, among other
things, certain financial information concerning the Company’s first quarter
ended March 31, 2013, the substance of which will be publicly issued or filed
with the SEC in accordance with Section 3.6 below and (iii) a draft press
release or form of Current Report on Form 8-K disclosing all material terms of
the Exchange and certain other matters concerning the Company, the substance of
which will be publicly issued or filed with the SEC in accordance with
Section 3.6 below (the disclosures described in preceding clause (ii) and this
clause  (iii) being referred to collectively herein as the “Anticipated
Disclosure”), (b) the Holder has had a full opportunity to ask questions of the
Company concerning the Company, its business, operations, financial performance,
financial condition and prospects, and the terms and conditions of the Exchange,
(c) the Holder has had the opportunity to consult with its accounting, tax,
financial and legal advisors to be able to evaluate the risks involved in the
Exchange and to make an informed investment decision with respect to such
Exchange and (d) the Holder is not relying, and has not relied, upon any
statement, advice (whether accounting, tax, financial, legal or other),
representation or warranty made by the Company or any of its affiliates or
representatives including, without limitation, Lazard Frères & Co. LLC and
Lazard Capital Markets LLC, except for (A) the publicly available filings and
submissions made by the Company with the SEC under the Exchange Act, (B) the
Anticipated Disclosure, and (C) the representations and warranties made by the
Company in this Agreement.

Section 2.8 No Public Market. The Holder understands that no public market
exists for the New Notes, and that there is no assurance that a public market
will ever develop for the New Notes.

Article III: Covenants, Representations and Warranties of the Company

The Company hereby covenants as follows, and makes the following representations
and warranties, each of which is and shall be true and correct on the date
hereof and at the Closing, to the Holders, Lazard Frères & Co. LLC and Lazard
Capital Markets LLC, and all such covenants, representations and warranties
shall survive the Closing.

Section 3.1 Power and Authorization. The Company is duly incorporated, validly
existing and in good standing under the laws of its state of incorporation, and
has the power, authority and capacity to execute and deliver this Agreement and
the Indenture, to perform its obligations hereunder and thereunder, and to
consummate the Exchange contemplated hereby.

Section 3.2 Valid and Enforceable Agreements; No Violations. This Agreement has
been duly executed and delivered by the Company and constitutes a legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that such enforcement may be subject to the
Enforceability Exceptions. At the Closing, the Indenture, substantially in the
form of Exhibit B hereto, will have been duly executed and delivered by the
Company and will govern the terms of the New Notes, and the Indenture will
constitute a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except that such enforcement
may be subject to the Enforceability Exceptions. This Agreement, the Indenture
and consummation of the Exchange will not violate, conflict with or result in a
breach of or default under (i) the charter, bylaws or other organizational
documents of the Company, (ii) any agreement or instrument to which the Company
is a party or by which the Company or any of its assets are bound, or (iii) any
laws, regulations or governmental or judicial decrees, injunctions or orders
applicable to the Company.

Section 3.3 Validity of the Holders’ New Notes. The Holders’ New Notes have been
duly authorized by the Company and, when executed and authenticated in
accordance with the provisions of the Indenture and delivered to the Holder
pursuant to the Exchange against delivery of the Exchanged Notes in accordance
with the terms of this Agreement, the Holders’ New Notes will be valid and
binding obligations of the Company, enforceable in accordance with their terms,
except that such enforcement may be subject to the Enforceability Exceptions,
and the Holders’ New Notes will not be subject to any preemptive, participation,
rights of first refusal or other similar rights. Assuming the accuracy of each
Holder’s representations and warranties hereunder, the Holders’ New Notes
(a) will be issued in the Exchange exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) of the Securities Act and Rule 506
of Regulation D, (b) will, at the Closing, be free of any restrictions on resale
by such Holder pursuant to Rule 144 promulgated under the Securities Act, and
(c) will be issued in compliance with all applicable state and federal laws
concerning the issuance of the Holders’ New Notes.

Section 3.4 Validity of Underlying Class A Common Stock. The Holders’ New Notes
will at the Closing be convertible into shares of Class A Common Stock, par
value $0.01 per share, of the Company (the “Conversion Shares”) in accordance
with the terms of the Indenture. The Conversion Shares have been duly authorized
and reserved by the Company for issuance upon conversion of the Holders’ New
Notes and, when issued upon conversion of the Holders’ New Notes in accordance
with the terms of the Holders’ New Notes and the Indenture, will be validly
issued, fully paid and non-assessable, and the issuance of the Conversion Shares
will not be subject to any preemptive, participation, rights of first refusal or
other similar rights.

Section 3.5 Listing Approval. At the Closing, the Conversion Shares shall be
listed on the NASDAQ Global Market.

Section 3.6 Disclosure. On or before the first business day following the date
of this Agreement, the Company shall issue one or more publicly available press
releases or file with the SEC one or more Current Reports on Form 8-K disclosing
all Anticipated Disclosure (to the extent not previously publicly disclosed).

Article IV: Miscellaneous

Section 4.1 Entire Agreement. This Agreement and any documents and agreements
executed in connection with the Exchange embody the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof
and supersede all prior and contemporaneous oral or written agreements,
representations, warranties, contracts, correspondence, conversations, memoranda
and understandings between or among the parties or any of their agents,
representatives or affiliates relative to such subject matter, including,
without limitation, any term sheets, emails or draft documents.

Section 4.2 Construction. References in the singular shall include the plural,
and vice versa, unless the context otherwise requires. References in the
masculine shall include the feminine and neuter, and vice versa, unless the
context otherwise requires. Headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meanings of the
provisions hereof. Neither party, nor its respective counsel, shall be deemed
the drafter of this Agreement for purposes of construing the provisions of this
Agreement, and all language in all parts of this Agreement shall be construed in
accordance with its fair meaning, and not strictly for or against either party.

Section 4.3 Governing Law. This Agreement shall in all respects be construed in
accordance with and governed by the substantive laws of the State of New York,
without reference to its choice of law rules.

Section 4.4 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument. Any counterpart or other signature
hereon delivered by facsimile shall be deemed for all purposes as constituting
good and valid execution and delivery of this Agreement by such party.

[Signature Page Follows]

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed as of the date first above written.

     
“UNDERSIGNED”:
  “COMPANY”:
(in its capacities described in the first
paragraph hereof)
  TELECOMMUNICATION SYSTEMS, INC.

 
 

By:
  By:
Name:
  Name:
Title:
  Title:

1

EXHIBIT A
Exchanging Beneficial Owners

              Name of           Portion of

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Beneficial Owner  
Principal Amount of
Exchanged Notes
  Principal Amount of
Holders’ New Notes   —
Cash Payment    
 
       

2

EXHIBIT B
Form of Indenture

3