Document:

exv10w2

 

Exhibit 10.2

CONFIDENTIALITY AND NON-COMPETITION AGREEMENT

     THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT (the “Agreement”) is made and
entered into as of the 29th day of February, 2008, by and between Pioneer Drilling Company, a Texas
corporation having its principal place of business at 1250 N.E. Loop 410, Suite 1000, San Antonio,
Texas 78209 (the “Parent”), Pioneer Production Services, Inc., a Delaware corporation and
wholly owned subsidiary of Parent having its principal place of business at 1250 N.E. Loop 410,
Suite 1000, San Antonio, Texas 78209 (the “Employer”), and Joe Eustace, residing at 1305 US
281 South, Pleasanton, Texas 78064 (the “Employee”).

RECITALS

     WHEREAS, the Parent, WEDGE Group Incorporated (“WEDGE Group”), WEDGE Energy Holdings,
L.L.C., WEDGE Oil and Gas Services, L.L.C., Timothy Daley, John Patterson and Patrick Grissom are
party to that certain Securities Purchase Agreement, dated as of January ___, 2008 (the
“Purchase Agreement”), pursuant to which the Parent will acquire all of the existing and
outstanding limited liability company interests of WEDGE Fishing and Rental Services, L.L.C. and
WEDGE Well Services, L.L.C. and all of the issued and outstanding capital stock of WEDGE Wireline
Services, Inc., all upon the terms and subject to the conditions set forth in the Purchase
Agreement; and

     WHEREAS, the Employee is employed by the Employer as President — Pioneer Energy Services, a
division of Pioneer Drilling Company; and

     WHEREAS, simultaneously with and following the execution of this Agreement, the Parent and the
Employer have agreed to provide, and will provide, the Employee with access to certain confidential
information that relates to the business of the Parent and the Employer to include confidential
information to which the Employee did not have access prior to execution of this Agreement; and

     WHEREAS, the Parent and the Employer desire that any such information not be disclosed to
other parties or otherwise used for unauthorized purposes; and

     WHEREAS, the execution and delivery of this Agreement by the Employee is a condition to the
obligations of the Parent to consummate the transactions contemplated by the Purchase Agreement;
and

     WHEREAS, upon the consummation of the transactions contemplated the Purchase Agreement on the
date hereof, the Employee will receive a transaction bonus from WEDGE Group or certain of its
affiliates; and

     WHEREAS, the execution and delivery of this Agreement by the Employee is a condition to the
Employee’s participation in the Key Employee Severance Plan of the Parent (the “Severance
Plan”); and

     WHEREAS, the execution and delivery of this Agreement by the Employee is a condition to the
Employee’s participation in the 2003 Incentive Plan of the Parent (the “Option Plan”) and
the grant by the Parent to the Employee of options to purchase shares of the Common Stock of the
Parent (the “Common Stock”) pursuant to the Option Plan;

     NOW, THEREFORE, in consideration of the above premises and the following mutual covenants and
conditions, the parties hereby agree as follows:

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	1.	 	Restrictive Covenants.

	 	(a)	 	Certain Definitions.

	 	(i)	 	“Affiliate” means, with respect to any particular
Person or entity, any Person controlling, controlled by or under common control
with such Person or entity.
	 
	 	(ii)	 	“Confidential Information” means any trade secrets,
know-how, technical data or proprietary information of the Parent or the
Employer, including, without limitation, information relating to products,
services, processes, designs, formulas, developmental or experimental work,
improvements, discoveries, plans for research or products, databases, computer
programs, software source documents, development tools, other original works of
authorship, hardware configuration, marketing and sales plans, business plans,
budgets and financial information, prices and costs, customer lists, supplier
lists, contact and key person lists, information regarding the skills and
compensation of employees and contractors of the Parent or the Employer and
other business information. The term “Confidential Information”
includes all of the foregoing information, rights and materials, whether
tangible or intangible, whether in written, oral, chemical, magnetic,
photographic, optical or other form, in all stages of research and development,
and whether now existing, or developed or created at any time during the
Employee’s employment by the Employer. “Confidential Information” does
not include any information that is or becomes generally available to the
public other than as a result, directly or indirectly, of a breach by the
Employee of this Agreement.
	 
	 	(iii)	 	“Covenant Term” means the period beginning on the date
of this Agreement and ending on the three-year anniversary of the date of this
Agreement.
	 
	 	(iv)	 	“Directly or Indirectly” means either directly as an
individual or indirectly through any other Person, including as an officer,
director, employee, employer, consultant, advisor, referring source, financing
source, stockholder, investor or partner of or in any other Person (other than
the ownership of publicly-traded securities that constitute less than 1% of the
outstanding securities in such class).
	 
	 	(v)	 	“Person” means any individual, corporation, limited
liability company, partnership, joint venture, trust or other enterprise or
entity.
	 
	 	(vi)	 	“Restricted Business” means each of the following: (A)
the business of providing wireline services, fishing and rental tool services
and well services, (B) each other business conducted by the Employer on, or
within six (6) months prior to, the date of this Agreement and (C) the business
of providing products or services substantially similar to or related to any of
the foregoing.
	 
	 	(vii)	 	“Restricted Territory” means the United States of
America.

	 	(b)	 	Confidentiality.

	 	(i)	 	Access to Confidential Information. The Employee
acknowledges that he has occupied a position of trust and confidence with the
Employer prior to the date hereof and has become familiar with the Confidential
Information of the

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	 	 	 	Employer. During the Employee’s employment by the Employer, the Employer
promises and agrees to provide the Employee with continued access to such
Confidential Information and additional Confidential Information of the
Parent and the Employer. The Employee agrees that the performance of his
duties to the Employer requires that he become familiar with all such
Confidential Information, and Employee agrees to become familiar with such
Confidential Information. The Employee acknowledges that all such
Confidential Information is the property of the Parent and the Employer,
respectively, and that any use or public disclosure of the Confidential
Information by the Employee (other than in the good faith performance of his
duties to the Employer) would have an adverse effect on the business of the
Parent and the Employer. The Employee acknowledges that he has agreed to
the covenants set forth in this Section 1(b), as well as in
Section 1(c), Section 1(d) and Section 1(e), as a
condition to the Parent’s acquisition of the Employer and its goodwill, and
the employment of the Employee by the Employer.
	 
	 	(ii)	 	Treatment of Confidential Information. At all times
during the Employee’s employment by the Employer and at all times thereafter,
the Employee will (A) not use, disclose or otherwise permit any Person access
to any Confidential Information (except, while employed by the Employer, in the
good faith performance of the Employee’s duties and responsibilities to the
Employer), (B) not sell, license or otherwise exploit any products or services
that embody in whole or in part any Confidential Information and (C) take all
reasonable precautions to prevent disclosure of any Confidential Information to
unauthorized Persons.
	 
	 	(iii)	 	Non-Use of Proprietary Information of Others. At all
times during the Employee’s employment by the Employer, the Employee will not
improperly use or disclose any confidential or proprietary information or trade
secrets of any former or concurrent employer or other Person, and will not
bring onto the premises of the Parent or the Employer any unpublished document
or any property belonging to any such employer or Person without such
employer’s or Person’s written consent.
	 
	 	(iv)	 	Treatment of Third Party Proprietary Information. The
Employer and the Parent have and in the future will receive from third parties
their confidential or proprietary information subject to a duty to maintain the
confidentiality of and to use such information only for certain limited
purposes. At all times during the Employee’s employment by the Employer, the
Employee will hold all such third party confidential or proprietary information
in the strictest confidence and not disclose it to any Person or use it, except
as necessary in the course of the Employee’s work on behalf of the Employer and
in accordance with the Employer’s or the Parent’s agreement with such third
party.
	 
	 	(v)	 	Compelled Disclosure. Notwithstanding the provisions
of Section 1(b)(i), if the Employee is requested to disclose any
Confidential Information to any governmental, regulatory or other such
authority with proper jurisdiction, the Employee must promptly notify the
Parent and the Employer to permit the Parent and the Employer to seek a
protective order or to take other appropriate action. The Employee must also
exercise his reasonable best efforts (subject to the advice of legal counsel)
to cooperate in the Parent and the Employer’s efforts to

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	 	 	 	obtain a protective order or other reasonable assurance that confidential
treatment will be accorded to the Confidential Information. If, in the
absence of a protective order, the Employee is, in the opinion of legal
counsel, compelled as a matter of law to disclose the Confidential
Information, the Employee may disclose to the party compelling disclosure
such part, and only such part, of the Confidential Information that is
required by law or legal process to be disclosed.

(c) Non-Solicitation. In consideration of the Employer’s promise to provide the
Employee access to Confidential Information (and continue access previously given), the
Employee covenants and agrees that at all times during the Covenant Term, the Employee will
not (other than within the scope of his employment with the Employer), Directly or
Indirectly, (i) solicit, encourage, recruit or induce, or attempt to solicit, encourage,
recruit or induce, or take any other action that is intended, directly or indirectly, to
result in any employee of the Parent, the Employer or any of their respective Affiliates to
terminate his or her employment, (ii) interfere in any manner with the contractual or
employment relationship between the Employer, the Parent or any of their respective
Affiliates, on the one hand, and any other employees or independent contractors of the
Employer, the Parent or any of their respective Affiliates, on the other hand, or (iii) hire
or attempt to hire any former employee of the Employer, the Parent or any of their
respective Affiliates, whose termination from employment has been effective for one year or
less.

(d) Non-Interference with Business Relationships. In consideration of the
Employer’s promise to provide the Employee access to Confidential Information (and continue
access previously given), the Employee covenants and agrees that at all times during the
Covenant Term, the Employee will not (other than within the scope of his employment with the
Employer), Directly or Indirectly, (i) call on, solicit or attempt to call on or solicit any
customer, customer prospect, supplier or account of the Parent, the Employer or any of their
respective Affiliates in respect of Restricted Business, (ii) influence or attempt to
influence any customer, customer prospect, supplier or account of the Parent, the Employer
or any of their respective Affiliates to stop doing business with the Parent, the Employer
and their respective Affiliates or (iii) influence or attempt to influence any customer,
customer prospect, supplier or account of the Parent, the Employer or any of their
respective Affiliates to do business with a competing Person.

(e) Non-Competition. In consideration of the Employer’s promise to provide the
Employee access to Confidential Information (and continue access previously given), the
Employee covenants and agrees that at all times during the Covenant Term, the Employee will
not (other than within the scope of his employment with the Employer), Directly or
Indirectly, (i) engage in any Restricted Business within the Restricted Territory or (ii)
give advice or lend credit, money or reputation to any Person engaged in or establishing any
Restricted Business in the Restricted Territory. The Employee waives any and all right to
contest the Parent’s and the Employer’s right and ability to enforce the agreements and
covenants of the Employee contained in this Section 1(e) where his employment by the
Employer has been terminated by the Employer.

(f) Protection of Acquired Goodwill. The agreements and covenants in this
Section 1 have been separately bargained for by the Parent (on behalf of itself and
the Employer) to protect the Employer and its business and goodwill, which is being acquired
by the Parent under the Purchase Agreement, and to ensure that the Parent will have the full
benefit of the value thereof. The Employee acknowledges that the nature of the business
conducted by the Parent and the Employer is highly competitive, that one of the most
valuable assets of the Employer is its goodwill in the marketplace and among its clients and
customers, which the Employee helped to develop and maintain in the course of the Employee’s
service to the Employer, and that the Parent, in entering into the transactions contemplated
by the Purchase Agreement, has relied on

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the fact that it is acquiring the goodwill of the Employer and therefore the willingness of
the Employee to restrict his ability to compete with the Employer per the terms of this
Agreement.

(g) Reasonable Scope of Covenants. The Employee acknowledges and agrees that the
agreements and covenants set forth in this Section 1 are (i) necessary to protect
the legitimate business interests of the Parent and the Employer, including the protection
of confidential information and intellectual property, (ii) reasonable as to time,
geographic area and scope of activity and do not impose a greater restraint on the
activities of the Employee than is reasonably necessary to protect such legitimate business
interests of the Parent and the Employer and (iii) reasonable in light of the consideration
and other value provided to the Employee by the Employer. The Employee hereby waives any
and all right to contest the validity of the agreements and covenants in this Section
1 on the ground of the breadth of their geographic or business coverage or the length of
their term. If, notwithstanding the foregoing, any of the above agreements and covenants in
this Section 1 (or any items or elements thereof) are held to be unreasonable,
invalid, or otherwise unenforceable, in whole or in part, the Employee, the Parent and the
Employer each agree that any court or authority so finding will have the authority to
reform, redraft, blue pencil or otherwise modify any and all portions ruled to be
unreasonable, invalid or unenforceable, whether as to time, scope, geography or otherwise,
so that the covenant or covenants, as so reformed, will be applicable and enforceable to the
fullest extent allowed by law.

(h) Independent Covenants. Each of the agreements and covenants of the Employee
contained in Section 1(b), Section 1(c), Section 1(d) and
Section 1(e) will be construed as independent of any other provision of this
Agreement or of any other agreement or arrangement between the Parent or the Employer, on
the one hand, and the Employee, on the other hand, and the existence of any claim or cause
of action by the Employee against the Parent or the Employer (or any of their respective
Affiliates) will not constitute a defense to the enforcement by the Parent or the Employer
of such covenants. The Employee understands that the agreements and covenants of the
Employee contained in Section 1(b), Section 1(c), Section 1(d) and
Section 1(e) are essential elements of the transactions contemplated by the Purchase
Agreement and, but for such covenants, the Parent would not have agreed to enter into the
Purchase Agreement or to consummate the transactions contemplated thereby. The Employee
further understands and agrees that the promise by the Company to provide Confidential
Information herein is in return for the promises and agreements by the Employee under
Section 1(b), Section 1(c), Section 1(d) and Section 1(e).

(i) Equitable Remedies. In the event of a breach or a threatened breach by the
Employee of any of the provisions of this Section 1, the Employee acknowledges that
the Parent and/or the Employer will suffer irreparable damage or injury not fully
compensable by money damages, or the exact amount of which may be impossible to obtain, and,
therefore, will not have an adequate remedy available at law. Accordingly, the Parent and
the Employer will be entitled to obtain such injunctive relief or other equitable remedy,
without the necessity of posting bond therefor, from any court of competent jurisdiction as
may be necessary or appropriate to prevent or curtail any such breach, threatened or actual.
The foregoing will be in addition to any other rights the Parent and the Employer may have
at law or in equity, including without limitation the right to sue for damages. The
Employee agrees that if, during any calendar month during the Covenant Term, the Employee is
not in compliance with any of the covenants in this Section 1, the Parent and the
Employer will be entitled to, among other remedies, specific enforcement of the Employee’s
compliance with all such covenants for an additional number of calendar months following the
end of the Covenant Term as equals the number of calendar months during which such
noncompliance occurred.

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	2.	 	Repurchase Option.

(a) Grant of Repurchase Option. The Parent will have the right, but not the
obligation, to repurchase all of the shares of Common Stock issued to the Employee pursuant
to the exercise of options or the grant of restricted stock under the Option Plan (the
“Subject Shares”) upon any breach by the Employee of any of the Employee’s covenants
and obligations pursuant to Section 1 (the “Triggering Breach”) on the terms
and subject to the conditions set forth in this Section 2 (the “Repurchase
Option”). The Repurchase Option is in addition to any rights or remedies that the
Parent may have, or choose to exercise, with respect to any Triggering Breach.

(b) Exercise of Repurchase Option. In order to exercise the Repurchase Option with
respect to a particular Triggering Breach, the Parent must give written notice to the
Employee no later than sixty (60) days after the date on which the Chief Executive Officer
or the Secretary of the Parent has actual knowledge of all of the circumstances constituting
such Triggering Breach. If the Parent fails to give notice within such sixty (60) day
period, the Repurchase Option with respect to such Triggering Breach will terminate unless
the Parent and the Employee have agreed to extend such period for exercise. The failure of
the Parent to exercise its Repurchase Option with respect to any particular Triggering
Breach will not prejudice its right to exercise its Repurchase Option with respect to any
subsequent Triggering Breach. The Repurchase Option may be exercised, in the Parent’s sole
discretion, for all or any portion of the Subject Shares subject to the Repurchase Option.

(c) Consummation of Repurchase Option. The purchase price for the Subject Shares
being repurchased by the Parent pursuant to the Repurchase Option will be the Employee’s
original cost for such Subject Shares (the “Repurchase Price”). On the first
business day after the expiration of fifteen (15) days from the date of the written notice
to the Employee of the Parent’s exercise of the Repurchase Option, (i) the Parent will pay
the Repurchase Price to the Employee and (ii) the Employee will deliver the Subject Shares,
with such evidence of conveyance as the Parent may reasonably request, to the Parent.

(d) Assignment of Repurchase Option. The Parent may assign the Repurchase Option at
any time, whether or not such option is then exercisable, to one or more Persons as may be
selected by the Parent.

(e) Substituted Property. Upon the occurrence of a change in the character or
amount of the Common Stock, any and all new, substituted or additional securities or other
property to which the Employee is entitled by reason of the Employee’s ownership of Subject
Shares will be automatically subject to the Repurchase Option and included in the term
“Subject Shares” for all purposes of the Repurchase Option. Similar provision will
be made for any like changes occurring with respect to any such new, substituted or
additional securities or other property. The aggregate Repurchase Price will remain the
same after any such changes.

	3.	 	Right of Restitution.

(a) Grant of Right. Upon the occurrence of any Triggering Breach, the Parent will
have the right (the “Right of Restitution”) to require the Employee to pay to the
Parent an amount of cash (the “Restitution Amount”) equal to the sum of (i) the
dollar amount of all cash payments made by the Parent to the Employee pursuant to the
Severance Plan, (ii) the dollar cost to the Parent of all non-cash benefits made available
by the Parent to the Employee pursuant to the Severance Plan and (iii) the Realized Profit
(as defined in Section 3(e)) in respect of all Subject Shares previously transferred
by the Employee (which Subject Shares, upon such Triggering Breach,

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would have become subject to the Repurchase Option in accordance with Section 2 but
for such transfer). The Right of Restitution is in addition to any rights or remedies that
the Parent may have, or choose to exercise, with respect to any Triggering Breach.

(b) Exercise of Right. In order to exercise the Right of Restitution, the Parent
must give written notice to the Employee no later than sixty (60) days after the date on
which the Chief Executive Officer or the Secretary of the Parent has actual knowledge of all
of the circumstances constituting the Triggering Breach. If the Parent fails to give notice
within such sixty (60) day period, the Right of Restitution will terminate unless the Parent
and the Employee have agreed to extend such period for exercise.

(c) Terms of Payment. The Employee must pay the Restitution Amount to the Parent no
later than the first business day after the expiration of fifteen (15) days from the date of
the written notice to the Employee of the Parent’s exercise of the Right of Restitution
following the occurrence of the Triggering Breach. At the Parent’s option, the Parent may
set-off against the Restitution Amount any sum owed to the Employee by the Parent, including
the amount of any Repurchase Price payable to the Employee.

(d) Substituted Property. Upon the occurrence of any change in the character or
amount of the Common Stock, any and all new, substituted or additional securities or other
property to which the Employee is entitled by reason of the Employee’s ownership of Subject
Shares will be automatically included in the term “Subject Shares,” and the value
thereof included in the calculation of the Realized Profit, for all purposes of the Right of
Restitution. Similar provision will be made for any like changes occurring with respect to
any such new, substituted or additional securities or other property.

(e) Realized Profit. The “Realized Profit” shall be (i) with respect to any
bona fide transfer of Subject Shares to a third party in an arms’ length transaction, the
amount of any gain realized, or payment received, by the Employee as a result of the
transfer and (ii) with respect to any other transfer of Subject Shares, the Fair Market
Value (as defined below) of such shares on the effective date of such transfer, in each case
with simple interest accruing on such amount from the date of transfer to the date on which
the Restitution Amount is paid to the Parent at a rate of eight percent (8.00%) per annum.
“Fair Market Value” means, as of any date, the value of a Subject Share as
determined in good faith by the Board of Directors of the Parent, except that if the Common
Stock is listed on a national securities exchange or quotation system on such date, the Fair
Market Value of a Subject Share will be the closing price of a share of Common Stock (or the
mean of the closing bid and asked prices of a share of Common Stock if the Common Stock is
so quoted instead) as quoted on the national securities exchange or quotation system
constituting the primary market for the Common Stock, as reported by Bloomberg Financial
Markets or such other source as the Parent deems reliable. If the relevant date of
valuation does not fall on a day on which the Common Stock has traded on such securities
exchange or quotation system, the date on which the Fair Market Value will be established
will be the last day on which the Common Stock was so traded prior to the relevant date, or
such other appropriate day as may be determined by the Board of Directors of the Parent, in
its discretion.

	4.	 	Return of Employer Property. Immediately following the termination of the Employee’s
employment by the Employer (regardless of the reason for termination, if any, and regardless
of whether such employment is terminated by the Employee or the Employer), the Employee must
deliver to the Employer (and will not knowingly keep in his possession or deliver to any other
Person) any and all property of the Parent or the Employer (e.g., laptop computers, records,
data,

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	 	 	notes, reports, proposals, lists, correspondence or specifications) or reproductions of any
such property, regardless of the media or format in which such property is retained.
	 
	5.	 	Disclaimer of Employment Contract. The Employee agrees and acknowledges that this
Agreement is not an employment contract for a term and that the Employee has the right to
resign from the Employer, and the Employer has the right to terminate its employment of the
Employee at will, at any time, for any or no reason, with or without cause, consistent with
applicable law. The Employee agrees and acknowledges that the termination of the Employee’s
employment by the Employer (regardless of the reason for termination, if any, and regardless
of whether terminated by the Employee or the Employer) will not result in the termination of
this Agreement or the Employee’s obligations hereunder.
	 
	6.	 	Notices. Any and all notices in connection with this Agreement will be deemed
adequately given only if in writing and (a) personally delivered, (b) sent by first class,
registered or certified mail, postage prepaid, return receipt requested, or by recognized,
receipted overnight courier or (c) sent by facsimile transmission or electronic mail, provided
that a physical copy is also sent with postage prepaid thereon via regular mail on that date
to the party for whom such notice is intended. A written notice will be deemed to have been
given to the recipient party on the earlier of (i) the date it is actually received by the
recipient; (ii) the date delivery is refused at the address required by this Agreement; (iii)
with respect to notices sent by mail or overnight courier, the date that the Postal Service or
overnight courier, as the case may be, indicates that such notice was undeliverable at the
address required by this Agreement; or (iv) immediately upon the non-automated confirmation of
receipt by the recipient if sent by facsimile transmission or electronic mail. Any and all
notices referred to in this Agreement, or that any party desires to give to any other party,
must be addressed to the recipient parties at the addresses set forth in the preamble to this
Agreement or to such other addresses, facsimile numbers or electronic mail addresses as such
recipient party may have specified by notice given to the other party pursuant to this
Section 6.
	 
	7.	 	Assignment. The Employee may not delegate any of his duties or obligations under
this Agreement. The rights and obligations of the Parent and the Employer under this
Agreement will inure to the benefit of and will be binding upon their respective successors
and assigns. This Agreement may not be interpreted to confer any rights or remedies upon any
Person other than the parties and their respective successors and permitted assigns.
	 
	8.	 	Entire Agreement. This Agreement sets forth the entire and final agreement and
understanding of the parties and contains all of the agreements made between the parties with
respect to the subject matter hereof. This Agreement supersedes any and all prior written
agreements and any and all prior or contemporaneous oral agreements between the parties
hereto, with respect to the subject matter hereof.
	 
	9.	 	Amendments and Waivers. No amendment or waiver of any provision of this Agreement
will be valid unless it is in writing and signed by the Parent, the Employer and the Employee.
No waiver by any party to this Agreement of any default or breach of covenant hereunder,
whether intentional or not, may be deemed to extend to any other prior, contemporaneous or
subsequent default or breach of covenant hereunder or affect in any way any rights arising by
virtue of any other prior, contemporaneous or subsequent such occurrence.
	 
	10.	 	Severability. If any provision of this Agreement, as applied to any party or to any
circumstance, is held invalid, illegal, void or unenforceable by any court of competent
jurisdiction, (a) such provision, as applied to such party or such circumstance, is hereby
deemed modified to give effect to the original written intent of the parties to the greatest
extent consistent with being valid

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	 	 	and enforceable under applicable law, (b) the application of such provision to any other
party or to any other circumstance will not be affected or impaired thereby and (c) the
validity, legality and enforceability of the remaining provisions of this Agreement will
remain in full force and effect. It is hereby stipulated and declared to be the intention
of the parties that they would have executed the remaining provisions of this Agreement
without including any of such that may be hereafter declared to be (in whole or in part)
invalid, illegal, void or unenforceable.
	 
	11.	 	Headings. The section headings contained in this Agreement are inserted for
convenience only and are not to be a construction of the provisions hereof.
	 
	12.	 	Recitals. The recitals to this Agreement are incorporated herein as an integral part
hereof and will be considered as substantive and not prefatory language.
	 
	13.	 	Further Assurances. Each of the parties agrees to execute and deliver all such
further documents, instruments and agreements and take such other and further action as may be
necessary or appropriate to carry out the purposes and intents of this Agreement.
	 
	14.	 	Governing Law. This Agreement will be governed by, and construed in accordance with,
the domestic laws of the State of Texas, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Texas or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the State of
Texas.
	 
	15.	 	Remedies Cumulative. The remedies provided for in this Agreement are cumulative and
not exclusive of any other remedies provided at law. If any party to this Agreement brings
any action, at law or in equity, to enforce or interpret the terms of this Agreement, the
substantially prevailing party will be entitled to recover from the other party to this
Agreement reasonable attorneys’ fees and other out-of-pocket expenses associated with such
action, in addition to any other relief to which such may be entitled.
	 
	16.	 	WAIVER OF JURY TRIAL.

(a) WAIVER. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE
EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT THAT SUCH PARTY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT.

(b) CERTIFICATION. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (ii) SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH
WAIVER, (iii) SUCH PARTY MAKES SUCH WAIVER VOLUNTARILY AND (iv) SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN
THIS SECTION 16.

	17.	 	Construction. The parties jointly participated in the negotiation and drafting of
this Agreement. In the event of an ambiguity or question of intent or interpretation arises,
this Agreement must be construed as if drafted jointly by the parties and no presumptions or
burdens of proof may arise favoring any party by virtue of the authorship of any of the
provisions of this Agreement. The

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	 	 	parties intend that each provision and covenant contained in this Agreement have independent
significance.
	 
	18.	 	Counterparts. This Agreement may be executed in two or more counterparts (including
by exchange of signature pages transmitted by facsimile or other electronic means), each of
which will be deemed an original but all of which, when together, will constitute one and the
same instrument.

10

 

     IN WITNESS WHEREOF, this Confidentiality and Non-Competition Agreement has been executed by
the parties hereto as of the date first written above. By their signature below, each Party
warrants and affirms that they have read and understand the terms of this Agreement, and enter into
it knowingly and voluntarily, with ample time to consider its import.

PARENT:

	 	 	 	 	 
	PIONEER DRILLING COMPANY, a Texas corporation

 	 	 
	By:  	              /s/ Joyce M. Schuldt
 	 	 
	 	Name:  	Joyce M. Schuldt 	 	 
	 	Title:  	EVP, CFO, Secretary 	 	 
	 

EMPLOYER:

	 	 	 	 	 
	PIONEER PRODUCTION SERVICES, INC., a Delaware corporation

 	 	 
	By:  	        /s/ Joyce M. Schuldt
 	 	 
	 	Name:  	Joyce M. Schuldt 	 	 
	 	Title:  	EVP, CFO, Secretary 	 	 
	 

EMPLOYEE:

/s/ Joseph B. Eustace                    

Printed Name: Joseph B. Eustace                    

{Signature Page to Confidentiality and Non-Competition Agreement}exv10w47

 

Exhibit 10.47

Incentive Stock Option Grant Agreement

Under The

TeleCommunication Systems, Inc. 

Fifth Amended and Restated 1997 Stock Incentive Plan

     1. Terminology. All capitalized words that are not defined in this Agreement have the
meanings ascribed to them in the Plan. For purposes of this Agreement, the terms below have the
following meanings:

          (a) “Cause” has the meaning ascribed to such term or words of similar import in the Employee’s
written employment or service contract with the Company and, in the absence of such agreement or
definition, means: (i) the willful commission by the Employee of a criminal or other act that
causes or is likely to cause substantial economic damage to the Company or substantial injury to
the business reputation of the Company; (ii) the commission by the Employee of an act of fraud in
the performance of such Employee’s duties on behalf of the Company; or (iii) the continuing willful
failure of the Employee to perform the duties of such Employee to the Company (other than such
failure resulting from the Employee’s incapacity due to physical or mental illness), all as
determined by the Administrator, which determination will be conclusive. For purposes of this
Agreement, no act, or failure to act, on the Employee’s part shall be considered “willful” unless
done or omitted to be done by the Employee not in good faith with the reasonable belief that the
Employee’s action or omission was in the best interest of the Company.

          (b) “Change in Control” means: (i) an acquisition (other than from the Company) in a
transaction, or a series of related transactions, by any person, entity or “group,” within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange
Act”), (excluding for this purpose, (A) the Company or its subsidiaries, (B) any employee benefit
plan of the Company or its subsidiaries which acquires beneficial ownership of voting securities of
the Company, (C) an underwriter temporarily holding securities pursuant to an offering of such
securities, or (D) any corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of the then outstanding voting
securities of the Company entitled to vote generally in the election of directors) of beneficial
ownership, within the meaning of Rule 13d-3 promulgated under the Exchange Act, of 50% or more of
either the then outstanding shares of common stock or the combined voting power of the Company’s
then outstanding voting securities entitled to vote generally in the election of directors (the
"Company Voting Stock”); (ii) the effective time of any merger, share exchange, consolidation or
other reorganization or business combination of the Company if immediately after such transaction
persons who hold a majority of the outstanding voting securities entitled to vote generally in the
election of directors of the surviving entity (or the entity owning 100% of such surviving entity)
are not persons who held the Company Voting Stock immediately prior to such transaction; (iii) the
closing of a sale or conveyance of all or substantially all of the assets of the Company; (iv)
individuals who were the Board’s nominees for election as directors immediately prior to a meeting
of the stockholders of the Company involving an actual or threatened election contest relating to
the election of the directors of the Company, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the

 - 1 -

 

 

Exchange Act, cease to constitute a majority of the Board following the election; or (v) the
dissolution or liquidation of the Company; provided, however, that the term “Change
in Control” does not include a public offering of capital stock of the Company that is effected
pursuant to a registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the Securities Act of 1933.

          (c) “Company” includes TeleCommunication Systems, Inc. and its Affiliates, except where the
context otherwise requires.

          (d) “Option Shares” mean the shares of Common Stock underlying the Options.

          (e) “Total and Permanent Disability” means the inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last for a continuous period
of not less than twelve months. The Administrator may require such proof of Total and Permanent
Disability as the Administrator in its sole discretion deems appropriate and the Administrator’s
good faith determination as to whether the Employee is totally and permanently disabled will be
final and binding on all parties concerned.

     2. Vesting. The Options vest in accordance with the vesting schedule identified in
the Stock Option Certificate which is attached hereto and constitutes a part of the Agreement (the
"Vesting Schedule”), so long as the Employee is in the continuous employ of, or in a service
relationship with, the Company from the Grant Date through the applicable date upon which vesting
is scheduled to occur. No vesting will accrue to any Options after the Employee ceases to be in
either an employment or other service relationship with the Company.

     3. Exercise of Options.

          (a) Right to Exercise. The Employee may exercise the Options to the extent vested at
any time on or before the Expiration Date or the earlier termination of the Options, unless
otherwise provided in this Agreement. Section 4 below describes certain limitations on exercise of
the Options that apply in the event of the Employee’s death, Total and Permanent Disability,
discharge by the Company without Cause or other termination of employment or other service
relationship with the Company. The Options may be exercised only in multiples of whole shares and
may not be exercised at any one time as to fewer than one hundred shares (or such lesser number of
shares as to which the Options are then exercisable). No fractional shares will be issued under
the Options.

          (b) Exercise Procedure. In order to exercise the Options, the following items must be
delivered to the Administrator before the expiration or termination of the Options: (i) an exercise
notice, in such form as the Administrator may require from time to time, specifying the number of
Option Shares to be purchased, and (ii) full payment of the Exercise Price for such Option Shares
or properly executed, irrevocable instructions, in such form as the Administrator may require from
time to time, to effectuate a broker-assisted cashless exercise, each in accordance with Section
3(c) of this Agreement. An exercise will not be effective until all of the foregoing items are
received by the Administrator.

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          (c) Method of Payment. Payment of the Exercise Price may be made by delivery of cash,
certified or cashier’s check, money order or other cash equivalent acceptable to the Administrator
in its discretion, a broker-assisted cashless exercise in accordance with Regulation T of the Board
of Governors of the Federal Reserve System through a brokerage firm approved by the Administrator,
or a combination of the foregoing. In addition, payment of the Exercise Price may be made by any
of the following methods, or a combination thereof, as determined by the Administrator in its
discretion at the time of exercise:

          (i) by tender (via actual delivery or attestation) to the Company of other shares of
Common Stock of the Company which have a Fair Market Value on the date of tender equal to
the Exercise Price, provided that such shares have been owned by the
Employee for a period of at least six months free of any substantial risk of forfeiture or
were purchased on the open market without assistance, direct or indirect, from the Company;

          (ii) by delivery of the Employee’s full recourse promissory note payable to the Company
in a form approved by the Administrator; or

          (iii) by any other method approved by the Administrator.

          (d) Issuance of Shares upon Exercise. Upon exercise of the Options in accordance with
the terms of this Agreement, the Company will issue to the Employee, the brokerage firm specified
in the Employee’s delivery instructions pursuant to a broker-assisted cashless exercise, or such
other person exercising the Options, as the case may be, the number of shares of Common Stock so
paid for, in the form of fully paid and nonassessable stock. The Company will deliver stock
certificates for the Option Shares as soon as practicable after exercise, which certificates will,
unless such Option Shares are registered or an exemption from registration is available under
applicable federal and state law, bear a legend restricting transferability of such shares.

     4. Termination of Employment or Service.

          (a) Exercise Period Following Cessation of Employment or Other Service Relationship, In
General. If the Employee ceases to be employed by, or in a service relationship with, the
Company for any reason other than death, Total and Permanent Disability, or discharge by the
Company without Cause, the Options terminate in their entirety, regardless of whether the options
are vested, immediately upon the Employee’s termination of employment or other service
relationship.

          (b) Termination by the Company Without Cause. In the event the Employee’s employment
or other service relationship is terminated by the Company without Cause, (i) the unvested Options,
after giving effect to the provisions of Section 2 of this Agreement, terminate immediately upon
such cessation, and (ii) the vested Options remain exercisable during the 90-day period following
such cessation, but in no event after the Expiration Date. Unless sooner terminated, the vested
Options terminate upon the expiration of such 90-day period.

          (c) Disability of Employee. Notwithstanding the provisions of Section 4(a) above, if
the Employee ceases to be employed by, or in a service relationship with, the Company as a result
of the Employee’s Total and Permanent Disability, (i) the unvested

- 3 -

 

Options, after giving effect to the provisions of Section 2 of this Agreement, terminate
immediately upon such cessation, and (ii) the vested Options remain exercisable during the
six-month period following such cessation, but in no event after the Expiration Date. Unless
sooner terminated, the vested Options terminate upon the expiration of such six-month period.

          (d) Death of Employee. If the Employee dies prior to the expiration or other
termination of the Options, (i) the unvested Options, after giving effect to the provisions of
Section 2 of this Agreement, terminate immediately upon the Employee’s death, and (ii) the vested
Options remain exercisable during the six-month period following the Employee’s death, but in no
event after the Expiration Date, by the Employee’s executor, personal representative, or the
person(s) to whom the Options are transferred by will or the laws of descent and distribution.
Unless sooner terminated, the vested Options terminate upon the expiration of such six-month
period.

          (e) Misconduct. Notwithstanding anything to the contrary in this Agreement, the
Options terminate in their entirety, regardless of whether the Options are vested, immediately upon
the Employee’s discharge of employment or other service relationship for Cause or upon the
Employee’s commission of any of the following acts during any period following the cessation of
employment or other service relationship during which the Options otherwise would be exercisable:
(i) fraud on or misappropriation of any funds or property of the Company, or (ii) breach by the
Employee of any provision of any employment, non-disclosure, non-competition, non-solicitation,
assignment of inventions, or other similar agreement executed by the Employee for the benefit of
the Company, as determined by the Administrator, which determination will be conclusive.

          (f) Change in Status. If the Employee’s relationship with the Company ceases to be a
“common law employee” relationship but the Employee continues to provide bona fide services to the
Company following such cessation in a different capacity, including without limitation as a
director, consultant or independent contractor, then a termination of employment or other service
relationship shall not be deemed to have occurred for purposes of this Section 4 upon such change
in relationship. Notwithstanding the foregoing, the Options shall not be treated as incentive
stock options within the meaning of Code section 422 with respect to any exercise that occurs more
than 90 days after such cessation of the common law employee relationship (except as otherwise
permitted under Code section 421 or 422).

     5. Nontransferability of Options. These Options are nontransferable otherwise than by
will or the laws of descent and distribution and during the lifetime of the Employee, the Options
may be exercised only by the Employee or, during the period the Employee is under a legal
disability, by the Employee’s guardian or legal representative. Except as provided above, the
Options may not be assigned, transferred, pledged, hypothecated or disposed of in any way (whether
by operation of law or otherwise) and shall not be subject to execution, attachment or similar
process.

     6. Qualified Nature of the Options. The Options are intended to qualify as incentive
stock options within the meaning of Code section 422 (“Incentive Stock Options”), to the fullest
extent permitted by Code section 422, and this Agreement shall be so construed. Pursuant to Code
section 422(d) the aggregate fair market value (determined as of the Grant Date) of shares of
Common Stock with respect to which all Incentive Stock Options first become exercisable by the
Employee in any calendar year under the Plan or any other plan of the

- 4 -

 

Company (and its parent and subsidiary corporations, within the meaning of Code section 424(e)
and (f), as may exist from time to time) may not exceed $100,000 or such other amount as may be
permitted from time to time under Code section 422. To the extent that such aggregate fair market
value exceeds $100,000 or other applicable amount in any calendar year, such stock options will be
treated as nonstatutory stock options with respect to the amount of aggregate fair market value
thereof that exceeds the Code section 422(d) limit. For this purpose, the Incentive Stock Options
will be taken into account in the order in which they were granted. In such case, the Company may
designate the shares of Common Stock that are to be treated as stock acquired pursuant to the
exercise of Incentive Stock Options and the shares of Common Stock that are to be treated as stock
acquired pursuant to nonstatutory stock options by issuing separate certificates for such shares
and identifying the certificates as such in the stock transfer records of the Company.

     Notwithstanding anything herein to the contrary, if the Employee owns, directly or indirectly
through attribution, stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of any of its subsidiaries (within the meaning of Code section
424(f)) on the Grant Date, then the Exercise Price is the greater of (a) the Exercise Price stated
on the Stock Option Certificate which is attached hereto and constitutes a part of this Agreement
or (b) 110% of the Fair Market Value of the Common Stock on the Grant Date, and the Expiration Date
is the last business day prior to the fifth anniversary of the Grant Date.

     Code section 422 provides additional limitations respecting the treatment of these Options as
Incentive Stock Options.

     7. Notice of Disqualifying Disposition. If the Employee makes a disposition (as that
term is defined in Code section 424(c)) of any Option Shares acquired pursuant to these Options
within two years of the Grant Date or within one year after the Option Shares are transferred to
the Employee, the Employee agrees to notify the Administrator of such disposition in writing within
30 days of the disposition.

     8. Withholding of Taxes. At the time the Options are exercised, in whole or in part,
or at any time thereafter as requested by the Company, the Employee hereby authorizes withholding
from payroll or any other payment of any kind due the Employee and otherwise agrees to make
adequate provision for foreign, federal, state and local taxes required by law to be withheld, if
any, which arise in connection with the Options (including upon a disqualifying disposition within
the meaning of Code section 421(b)). The Company may require the Employee to make a cash payment
to cover any withholding tax obligation as a condition of exercise of the Options or issuance of
share certificates representing Option Shares.

     The Administrator may, in its sole discretion, permit the Employee to satisfy, in whole or in
part, any withholding tax obligation which may arise in connection with the Options either by
electing to have the Company withhold from the shares to be issued upon exercise that number of
shares, or by electing to deliver to the Company already-owned shares, in either case having a Fair
Market Value equal to the amount necessary to satisfy the statutory minimum withholding amount due.

- 5 -

 

     9. Adjustments for Corporate Transactions and Other Events.

          (a) Stock Dividend, Stock Split and Reverse Stock Split. Upon a stock dividend of, or
stock split or reverse stock split affecting, the Common Stock, the number of shares covered by and
the exercise price and other terms of the Options, shall, without further action of the Board, be
adjusted to reflect such event unless the Board determines, at the time it approves such stock
dividend, stock split or reverse stock split, that no such adjustment shall be made. The
Administrator may make adjustments, in its discretion, to address the treatment of fractional
shares and fractional cents that arise with respect to the Options as a result of the stock
dividend, stock split or reverse stock split.

          (b) Non-Change in Control Transactions. Except with respect to the transactions set
forth in Section 9(a), in the event of any change affecting the Common Stock, the Company or its
capitalization, by reason of a spin-off, split-up, dividend, recapitalization, merger,
consolidation or share exchange, other than any such change that is part of a transaction resulting
in a Change in Control, the Administrator, in its discretion and without the consent of the
Employee, shall make any adjustments in the Options, including but not limited to reducing the
number, kind and price of securities subject to the Options.

          (c) Change in Control Transactions. In the event of any transaction resulting in a
Change in Control, the Options will terminate upon the effective time of any such Change in Control
unless provision is made in connection with the transaction in the sole discretion of the parties
thereto for the continuation or assumption of the Options, or the substitution of the Options with
new options of the surviving or successor entity or a parent thereof. In the event of such
termination, the Employee will be permitted, for a period of at least 10 days prior to the
effective time of the Change in Control, to exercise all of the Options that are then exercisable
or will become exercisable upon or prior to the effective time of the Change in Control; provided,
however, that any such exercise of any Options that become exercisable as a result of the Change in
Control shall be deemed to occur immediately prior to the effective time of such Change in Control.

          (d) Pooling of Interests Transaction. Notwithstanding anything in the Plan or this
Agreement to the contrary, in connection with any business combination authorized by the Board, the
Administrator, in its sole discretion and without the consent of the Employee, may make any
modifications to the Options, including but not limited to cancellation, forfeiture, surrender or
other termination of the Options, in whole or in part, regardless of their vested status, but
solely to the extent necessary to facilitate the compliance of such transaction with requirements
for treatment as a pooling of interests transaction for accounting purposes under generally
accepted accounting principles.

          (e) Adjustments for Unusual Events. The Administrator is authorized to make, in its
discretion and without the consent of the Employee, adjustments in the terms and conditions of, and
the criteria included in, the Options in recognition of unusual or nonrecurring events affecting
the Company, or the financial statements of the Company or any Affiliate, or of changes in
applicable laws, regulations, or accounting principles, whenever the Administrator determines that
such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Options or the Plan.

- 6 -

 

          (f) Binding Nature of Adjustments. Adjustments under this Section 9 will be made by
the Administrator, whose determination as to what adjustments, if any, will be made and the extent
thereof will be final, binding and conclusive. No fractional shares will be issued pursuant to the
Options on account of any such adjustments. The terms and conditions of this Agreement shall apply
with equal force to any additional and/or substitute securities received by the Employee pursuant
to this Section 9 in exchange for, or by virtue of the Employee’s ownership of, the Options or the
Option Shares, except as otherwise determined by the Administrator.

     10. Confidential Information. In consideration of the Options granted to the Employee
pursuant to this Agreement, the Employee agrees and covenants that, except as specifically
authorized by the Company, the Employee will keep confidential any trade secrets or confidential or
proprietary information of the Company which are now or which hereafter may become known to the
Employee as a result of the Employee’s employment by or other service relationship with the
Company, and shall not at any time, directly or indirectly, disclose any such information to any
person, firm, Company or other entity, or use the same in any way other than in connection with the
business of the Company, at all times during and after the Employee’s employment or other service
relationship. The provisions of this Section 10 shall not narrow or otherwise limit the
obligations and responsibilities of the Employee set forth in any agreement of similar import
entered into between the Employee and the Company.

     11. Non-Guarantee of Employment or Service Relationship. Nothing in the Plan or this
Agreement shall alter the at-will or other employment status or other service relationship of the
Employee, nor be construed as a contract of employment or service relationship between the Company
and the Employee, or as a contractual right of Employee to continue in the employ of, or in a
service relationship with, the Company for any period of time, or as a limitation of the right of
the Company to discharge the Employee at any time with or without cause or notice and whether or
not such discharge results in the failure of any Options to vest or any other adverse effect on the
Employee’s interests under the Plan.

     12. No Rights as a Stockholder. The Employee shall not have any of the rights of a
stockholder with respect to the Option Shares until such shares have been issued to him or her upon
the due exercise of the Options. No adjustment shall be made for dividends or distributions or
other rights for which the record date is prior to the date such shares are issued.

     13. The Company’s Rights. The existence of the Options shall not affect in any way
the right or power of the Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company’s capital structure or its
business, or any merger or consolidation of the Company, or any issue of bonds, debentures,
preferred or other stocks with preference ahead of or convertible into, or otherwise affecting the
Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale
or transfer of all or any part of the Company’s assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.

     14. Employee. Whenever the word “Employee” is used in any provision of this Agreement
under circumstances where the provision should logically be construed, as determined by the
Administrator, to apply to the estate, personal representative, or beneficiary to whom the Options
may be transferred by will or by the laws of descent and distribution, the word “Employee” shall be
deemed to include such person.

- 7 -

 

     15. Notices. All notices and other communications made or given pursuant to this
Agreement shall be in writing and shall be sufficiently made or given if hand delivered or mailed
by certified mail, addressed to the Employee at the address contained in the records of the
Company, or addressed to the Administrator, care of the Company for the attention of its Corporate
Secretary at its principal office or, if the receiving party consents in advance, transmitted and
received via telecopy or via such other electronic transmission mechanism as may be available to
the parties.

     16. Entire Agreement. This Agreement contains the entire agreement between the
parties with respect to the Options granted hereunder. Any oral or written agreements,
representations, warranties, written inducements, or other communications made prior to the
execution of this Agreement with respect to the Options granted hereunder shall be void and
ineffective for all purposes.

     17. Amendment. This Agreement may be amended from time to time by the Administrator
in its discretion; provided, however, that this Agreement may not be modified in a
manner that would have a materially adverse effect on the Options or Option Shares as determined in
the discretion of the Administrator, except as provided in the Plan or in a written document signed
by each of the parties hereto.

     18. Conformity with Plan. This Agreement is intended to conform in all respects with,
and is subject to all applicable provisions of, the Plan. Inconsistencies between this Agreement
and the Plan shall be resolved in accordance with the terms of the Plan. In the event of any
ambiguity in this Agreement or any matters as to which this Agreement is silent, the Plan shall
govern. A copy of the Plan is available upon request to the Administrator.

     19. Governing Law. The validity, construction and effect of this Agreement, and of any
determinations or decisions made by the Administrator relating to this Agreement, and the rights of
any and all persons having or claiming to have any interest under this Agreement, shall be
determined exclusively in accordance with the laws of the State of Maryland, without regard to its
provisions concerning the applicability of laws of other jurisdictions. Any suit with respect
hereto will be brought in the federal or state courts in the districts which include the city and
state in which the principal offices of the Company are located, and the Employee hereby agrees and
submits to the personal jurisdiction and venue thereof.

     20. Headings. The headings in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.

Enclosure: Prospectus of the TeleCommunication Systems, Inc. Fifth Amended and Restated 1997
Stock Incentive Plan

- 8 -

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