Document:

exv4w9

 

Exhibit 4.9

REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this “Agreement”) is made and entered into as of March 13,
2006, by and among TeleCommunication Systems, Inc., a Maryland corporation (the “Company”), and the
investors signatory hereto (each an “Investor” and collectively, the “Investors”).

BACKGROUND

     This Agreement is made pursuant to the Note Purchase Agreement, dated as of March 13, 2006,
among the Company and the Investors (the “Purchase Agreement”). In connection with the Purchase
Agreement, the Company has agreed, upon the terms and subject to the conditions of the Purchase
Agreement, (i) to issue and sell on the date hereof to each Investor Secured Notes of the Company,
due March 13, 2009 (the “Notes”) and (ii) to issue and sell on the date hereof to the Investors
warrants (the “Warrants”) to purchase an aggregate of 1,750,002 shares of Common Stock (the
“Warrant Shares”).

AGREEMENT

     The Company and the Investors hereby agree as follows:

     Section 1. Definitions. Capitalized terms used and not otherwise defined herein that
are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase
Agreement. As used in this Agreement, the following terms shall have the respective meanings set
forth in this Section 1:

     “Advice” shall have the meaning set forth in Section 6(d).

     “Effective Date” means the date that the Registration Statement filed pursuant to Section 2(a)
is first declared effective by the Commission.

     “Effectiveness Date” means the earlier of (i) the 135th day following the date of
this Agreement with respect to the Warrant Shares or (ii) the tenth Business Day following the date
that the Company is notified, orally or in writing, by the Commission, that the Registration
Statement is not being reviewed or is not subject to further review or comment by the Commission
staff.

     “Event” shall have the meaning set forth in Section 2(b).

     “Event Date” shall have the meaning set forth in Section 2(b).

     “Filing Date” means the 45th day following the date of this Agreement with respect
to the Warrant Shares.

     “Holder” or “Holders” means the holder or holders, as the case may be, from time to time of
Registrable Securities.

     “Indemnified Party” shall have the meaning set forth in Section 5(c).

 

 

     “Indemnifying Party” shall have the meaning set forth in Section 5(c).

     “Losses” shall have the meaning set forth in Section 5(a).

     “Notes” shall have the meaning set forth in the Background section.

     “Prospectus” means (i) the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the Registration Statement,
and all other amendments and supplements to the Prospectus, including post-effective amendments,
and all material incorporated by reference or deemed to be incorporated by reference in such
Prospectus and (ii) any “free writing prospectus” as defined in Rule 163 under the Securities Act.

     “Registrable Securities” means (i) the Warrant Shares, and (ii) any other securities into
which the Warrant Shares may be reclassified after the date hereof; provided however, that any
Registrable Securities will cease to be Registrable Securities at such time as they have been sold
under a Registration Statement or pursuant to Rule 144, or otherwise or such time as they are
eligible to be sold pursuant to Rule 144(k) promulgated under the Securities Act.

     “Registration Period” means the period commencing on any applicable Effectiveness Date and
ending on the earliest of (i) the third anniversary of such Effectiveness Date, (ii) the date on
which the Holders are able to resell all of their respective Registrable Securities without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act, or (iii) the date on
which all of the Registrable Securities have been sold by the Investors under a Registration
Statement or pursuant to Rule 144.

     “Registration Statement” means the registration statement required to be filed in accordance
with Section 2(a), including the Prospectus, amendments and supplements to such registration
statements or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and
all material incorporated by reference or deemed to be incorporated by reference in such
registration statements.

     “Required Holders” means (i) the Holders who, together with their respective Affiliates, hold
a majority of the Registrable Securities at the time of determination, (ii) SRB Management, L.P. as
long as (A) it and its Affiliates, (B) WS Capital Management, L.P. and its Affiliates and (C) WS
Ventures Management, L.P. and its Affiliates collectively hold or have the right to acquire at
least 50% of the Registrable Securities initially issuable to them under the Purchase Agreement,
and (iii) Bonanza Master Fund Ltd. as long as it, together with its Affiliates, holds or has the
right to acquire at least 50% of the Registrable Securities initially issuable to them under the
Purchase Agreement.

     “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

 

 

     “Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

     “Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

     “Selling Shareholder Questionnaire” shall have the meaning set forth in Section 3(j).

     “Warrants” shall have the meaning set forth in the Background section.

     Section 2. Registration.

          (a) On or prior to the Filing Date for the Warrant Shares, the Company shall use its
commercially reasonable efforts to prepare and file with the Commission a Registration Statement
covering the resale of all Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if the Company is not
then eligible to register for resale of the Registrable Securities on Form S-3, in which case such
registration shall be another appropriate form in accordance herewith) and shall contain (unless
otherwise directed by the Holders and except if otherwise required pursuant to comments received
from the Commission upon a review of such Registration Statement or pursuant to judicial and SEC
interpretations) substantially the “Plan of Distribution” attached hereto as Annex A. The
Company shall use its commercially reasonable efforts to cause the Registration Statement to be
declared effective under the Securities Act as soon as reasonably possible but, in any event, no
later than the applicable Effectiveness Date, and shall use its commercially reasonable efforts to
keep the Registration Statement effective under the Securities Act during the balance of the
applicable Registration Period.

          (b) Subject to the last sentence of this Section 2(b), if: (i) a Registration Statement under
subsection (a) above is not filed on or prior to its Filing Date, or (ii) a Registration Statement
under subsection (a) above is not declared effective by the Commission on or prior to its required
Effectiveness Date, or (iii) after its Effective Date, without regard for the reason thereunder or
efforts therefor, such Registration Statement under subsection (a) above ceases for any reason to
be effective and available to the Holders as to all Registrable Securities to which it is required
to cover at any time prior to the expiration of the Registration Period for more than an aggregate
of thirty (30) Trading Days during any 12-month period (which need not be consecutive) (any such
failure or breach being referred to as an “Event,” and for purposes of clauses (i) or (ii) the date
on which such Event occurs, or for purposes of clause (iii) the date which such thirty (30) Trading
Day-period is exceeded, being referred to as “Event Date”), then, in addition to any other rights
available to the Holders under this Agreement or under applicable law, on the earlier of the last
day of each 30-day period after each such Event Date (if the applicable Event shall not have been
cured by such date) or on the fifth Trading Day after the applicable Event has been cured, the
Company shall pay to each Holder an amount in cash, as liquidated damages and not as a penalty,
equal to their pro rata portion of $50,000 (i.e., the Holders in the aggregate shall be entitled to
receive a penalty totaling $50,000 for each 30-day period); provided that such penalty shall not
exceed $600,000 in the aggregate. The liquidated

 

 

damages pursuant to the preceding sentence shall apply and be payable on a pro rata basis for
any portion of a 30-day period prior to the cure of an Event and shall cease to accrue (unless
earlier ceased) upon expiration of the Registration Period. Notwithstanding anything to the
contrary in this Section 2(b), the Company shall not be required to make any payments under this
Section 2(b) in the event that the subject Event or Event Date, or the failure to cure such Event
or Event Date, is due to the Company’s postponement (and the Company is hereby permitted to
postpone) for a maximum of forty-five (45) days after the initial effectiveness of a Registration
Statement, by the Company’s furnishing to the Holders a certificate signed by the Chief Executive
Officer of the Company stating the Company (1) is in the process of filing a registration statement
or proxy statement with respect to an acquisition or disposition and as a result thereof, the
registration required by this Agreement could be materially detrimental to the Company, provided,
however, that the Company may use this right to postpone such filing or effectiveness only once
during any twelve (12) month period, or (2) has announced that a Change of Control (as defined in
the Notes) has occurred or that the Company has entered into a definitive agreement to effect a
Change of Control.

          (c) Each Holder agrees to furnish to the Company a completed Questionnaire in the form
attached to this Agreement as Annex B (a “Selling Shareholder Questionnaire”) not less than
five (5) Trading Days prior to the date on which a Registration Statement under this Agreement is
to be filed or (if earlier) by the end of the fourth Trading Day following the date on which such
Holder receives draft materials in accordance with this Section. The Company shall not be required
to include the Registrable Securities of a Holder in a Registration Statement and shall not be
required to pay any liquidated or other damages under Section 2(b) hereof to such Holder who fails
to furnish to the Company a fully completed Selling Shareholder Questionnaire as required by this
Section or other information reasonably requested by the Company for compliance with applicable
registration and disclosure requirements.

     Section 3. Registration Procedures.

     In connection with the Company’s registration obligations hereunder, the Company shall:

          (a) Not less than three (3) Trading Days prior to the filing of a Registration Statement or
any related Prospectus or any amendment or supplement thereto, the Company shall furnish to the
Holders copies of all such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the review of such
Holders (and changes (if any) to correct appropriate information about the Holder).

          (b) (i) Prepare and file with the Commission such amendments, including post-effective
amendments, to each Registration Statement and the Prospectus used in connection therewith as may
be necessary to keep such Registration Statement continuously effective as to the applicable
Registrable Securities for the applicable Registration Period; (ii) cause the related Prospectus to
be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended
to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any comments
received from the Commission with respect to each Registration Statement or any amendment thereto;
and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange
Act with respect to the Registration

 

 

Statements and the disposition of all Registrable Securities covered by each Registration
Statement.

          (c) Subject to the requirements of applicable law, including, but not limited to, Regulation
FD, notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to
clauses (ii) through (v) hereof, be accompanied by an instruction to suspend sales made under the
Prospectus until the requisite changes have been made in the Prospectus) as promptly as reasonably
possible (i) with respect to each Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to a Registration Statement or Prospectus or
for additional information; (iii) of the issuance by the Commission of any stop order suspending
the effectiveness of a Registration Statement covering any or all of the Registrable Securities or
the initiation of any Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption from qualification of
any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of
any Proceeding for such purpose; and (v) of the occurrence of any event or passage of time that
makes the financial statements included in a Registration Statement ineligible for inclusion
therein or any statement made in such Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to such Registration Statement, Prospectus or other documents so that,
in the case of such Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.

          (d) Use its commercially reasonable efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii)
any suspension of the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.

          (e) Furnish to each Holder, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and schedules, and, to the
extent requested by such Holder, all documents incorporated or deemed to be incorporated herein by
reference and all exhibits (including those previously furnished) promptly after the filing of such
documents with the Commission.

          (f) Comply with Rule 172, promptly advise each Holder at any time the Company has not
satisfied the requirements of Rule 172 and promptly deliver to each Holder, without charge, as many
copies of each Prospectus or Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Holder may reasonably request in connection with resales by the Holder
of Registrable Securities. Subject to the terms of this Agreement, the Company hereby consents to
the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders
in connection with the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto.

 

 

          (g) Prior to any public offering of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the selling Holders in connection with
the registration or qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws of all
jurisdictions within the United States as any Holder reasonably requests in writing, to keep each
such registration or qualification (or exemption therefrom) effective during the Registration
Period and to do any and all other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by each Registration
Statement; provided, that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified, subject the Company to any material tax in any
such jurisdiction where it is not then so subject or file a general consent to service of process
in any such jurisdiction.

          (h) If requested by the Holders, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to be delivered to a
transferee pursuant to the Registration Statements, which certificates shall be free, to the extent
permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable
Securities to be in such denominations and registered in such names as any such Holders may
request.

          (i) Subject to the requirements of applicable law, including, but not limited to, Regulation
FD, upon the occurrence of any event contemplated by Sections 3(c)(ii) through (v), as promptly as
reasonably possible under the circumstances, and in the case of Section 3(c)(v) taking into account
the Company’s good faith assessment of any adverse consequences to the Company and its stockholders
of the premature disclosure of such event, prepare a supplement or amendment, including a
post-effective amendment, to the affected Registration Statements or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file
any other required document so that, as thereafter delivered or published, as applicable, neither a
Registration Statement nor such Prospectus will contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading and that the
event that resulted in the suspension of such Prospectus is otherwise cured. If the Company
notifies the Holders in accordance with Sections 3(c)(ii) through (v) to suspend sales made under
the Prospectus until the requisite changes have been made to the then-existing Prospectus, then the
Holders shall suspend such sales and/or any use of such Prospectus. The Company will use its
commercially reasonable efforts to ensure that sales under the Prospectus and/or the use of the
Prospectus may be resumed as promptly as is practicable.

          (j) Discontinued Disposition. Each Holder agrees by its acquisition of such
Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any
event of the kind described in Section 3(c), such Holder will forthwith discontinue disposition of
such Registrable Securities under the Registration Statement until such Holder is advised in
writing (the “Advice”) by the Company that sales may be resumed and/or the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by reference in such

 

 

Prospectus or Registration Statement. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph.

     Section 4. Registration Expenses. All fees and expenses of the Company incident to the
performance of or compliance with this Agreement by the Company shall be borne by the Company,
whether or not any Registrable Securities are sold pursuant to a Registration Statement, including
without limitation all registration, listing, and qualifications fees, printers and accounting
fees, and fees and disbursements of counsel for the Company.

     Section 5. Indemnification.

          (a) Indemnification by the Company. The Company shall, notwithstanding any termination
of this Agreement, indemnify and hold harmless each Holder, the officers, directors, agents,
investment advisors, partners, members and employees of each of them, each Person who controls any
such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such controlling Person, to the
fullest extent permitted by applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses
(collectively, “Losses”) arising out of or relating to any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, any Prospectus or any form of prospectus or
in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made) not misleading,
except to the extent, but only to the extent, that (1) such untrue statements or omissions are
based solely upon information regarding such Holder furnished in writing to the Company by such
Holder expressly for use therein, or to the extent that such information relates to such Holder or
such Holder’s proposed method of distribution of Registrable Securities and was reviewed and
approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus
or such form of Prospectus or in any amendment or supplement thereto (it being understood that the
Holder has approved Annex A hereto for this purpose) or (2) in the case of an occurrence of
an event of the type specified in Section 3(c)(ii) through (v), sales by such Holder under an
outdated or defective Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(d) and provided that a corrected prospectus would have avoided such
Losses. The Company shall notify the Holders promptly of the institution, threat or assertion of
any Proceeding of which the Company is aware arising from or in connection with the transactions
contemplated by this Agreement.

          (b) Indemnification by Holders. Each Holder shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person
who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of
the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses to the extent arising
out of or relating to: (i) such Holder’s failure to comply with the prospectus delivery
requirements of the Securities Act after being advised by the Company that it has not satisfied the
conditions of Rule 172 and that such Holder is, as a consequence, required to deliver

 

 

a prospectus in connection with any disposition of Registrable Securities and has provided the
Holder with a current prospectus to be used in connection with any such dispositions or (ii) any
untrue statement of a material fact contained in any Registration Statement, any Prospectus, or any
form of prospectus, or in any amendment or supplement thereto, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading to the extent, but only to the extent that, (1) such untrue
statements or omissions are based upon information regarding such Holder furnished in writing to
the Company by such Holder expressly for use therein, or to the extent that such information
relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities
and was reviewed and approved in writing by such Holder expressly for use in the Registration
Statement (it being understood that the Holder has approved Annex A hereto for this
purpose), such Prospectus or such form of Prospectus or in any amendment or supplement thereto or
(2) in the case of an occurrence of an event of the type specified in Section 3(c)(ii) through (v),
sales by such Holder under an outdated or defective Prospectus after the Company has notified such
Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such
Holder of the Advice contemplated in Section 6(d) and provided that a corrected prospectus would
have avoided such Losses. In no event shall the liability of any selling Holder hereunder be
greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale
of the Registrable Securities giving rise to such indemnification obligation.

          (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such
Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying
Party”) in writing, and the Indemnifying Party shall have the right to participate in, and, to the
extent the Indemnifying Party so desires, assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses
incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to
give such notice shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except to the extent that the Indemnifying Party is prejudiced by such
failure, including impairment in its ability to defend such action.

     An Indemnified Party shall have the right to employ separate counsel in any such Proceeding
and to participate in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding
(including any impleaded parties) include both such Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall reasonably believe based upon the advice of counsel that a
conflict of interest is likely to exist if the same counsel were to represent such Indemnified
Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof
and such counsel shall be at the expense of the Indemnifying Party; provided, however, that in the
event one or more Investors is a party to such Proceeding, the Company shall only be required to
pay the expenses of one law firm serving as counsel to such Investors, unless and to

 

 

the extent that such Investors have been advised by counsel that a conflict of interest is
likely to exist if the same counsel were to represent such Investor on a particular issue). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without
its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims that are the subject
matter of such Proceeding. The Indemnified Party shall cooperate fully with the Indemnifying Party
in connection with any negotiation or defense of any such Proceeding by the Indemnifying Party and
shall furnish to the Indemnifying Party all information reasonably available to the Indemnified
Party that relates to such Proceeding.

     Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified
Party subject to indemnification under Section 5(a) (including reasonable fees and expenses to the
extent incurred in connection with investigating or preparing to defend such Proceeding in a manner
not inconsistent with these Sections) shall be paid to the Indemnified Party, as incurred, within
ten (10) Trading Days of written notice thereof to the Indemnifying Party (provided, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and
expenses to the extent it is finally judicially determined that such Indemnified Party is not
entitled to indemnification hereunder).

          (d) Contribution. In the event that indemnification under Section 5(a) or 5(b) is
unavailable to or insufficient to hold harmless an Indemnified Party for any Losses (by reason of
unenforceability due to public policy or otherwise), then each Indemnifying Party shall contribute
to the amount paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent such action,
statement or omission. The amount paid or payable by a party as a result of any Losses shall be
deemed to include, subject to the limitations set forth in Section 5(c), any reasonable attorneys’
or other reasonable fees or expenses incurred by such party in connection with any Proceeding to
the extent such party would have been indemnified for such fees or expenses if the indemnification
provided for in this Section was available to such party in accordance with its terms.

     The parties hereto agree that it would not be just and equitable if contribution pursuant to
this Section 5(d) were determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the proceeds actually
received by such Holder from the sale of the Registrable Securities subject to the Proceeding
exceeds the amount of any damages that such Holder has otherwise been required to pay by

 

 

reason of such untrue or alleged untrue statement or omission or alleged omission or other
event under 5(a) or 5(b), as the case may be, to which such contribution applies.

     The indemnity and contribution agreements contained in this Section are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties.

     Section 6. Miscellaneous.

          (a) Remedies. In the event of a breach by the Company or by a Holder, of any of their
obligations under this Agreement, each Holder or the Company, as the case may be, in addition to
being entitled to exercise all rights granted by law and under this Agreement, including recovery
of damages, will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby
further agree that, in the event of any action for specific performance in respect of such breach,
it shall waive the defense that a remedy at law would be adequate.

          (b) No Piggyback on Registrations. Neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may include securities of the
Company in the Registration Statement other than the Registrable Securities in accordance with the
terms of the Notes, and the Company shall not after the date hereof enter into any agreement
providing any such right to any of its security holders.

          (c) Compliance. Each Holder covenants and agrees that (i) it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to the Registration Statement; and (ii) it has no present plan,
intention or understanding and has made no arrangement to sell the Registrable Securities at any
predetermined time or for any predetermined price (other than such Holder’s right to sell the
Registrable Securities pursuant to a Registration Statement filed pursuant hereto).

          (d) Piggy-Back Registrations. If at any time during the Effectiveness Period there is
not an effective Registration Statement covering all of the Registrable Securities then required
hereunder to be registered at such time and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own account or the account
of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee benefit plans, then
the Company shall send to each Holder written notice of such determination and, if within 15 days
after receipt of such notice, any such Holder shall so request in writing, the Company shall
include in such registration statement all or any part of such Registrable Securities (not already
covered by an effective Registration Statement) such holder requests to be registered, subject to
customary underwriter cutbacks applicable to holders of registration rights and subject to
restrictions in prior registration agreements.

 

 

          (e) Amendments and Waivers. No provision of this Agreement may be waived or amended
and waivers or consents to departures from the provisions hereof may not be given except in a
written instrument signed by the Company and the all of the Purchasers, except that in the event
that any Purchaser no longer holds any portion of the Notes purchased pursuant to the Purchase
Agreement, then the written instrument shall be signed by the Company and the Required Holders. No
waiver of any default with respect to any provision, condition or requirement of this Agreement
shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise of any such right.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of one or more Holders and that does not
directly or indirectly affect the rights of other Holders may be given by Holders to which such
waiver or consent relates; provided, however, that the provisions of this sentence may not be
amended, modified, or supplemented except in accordance with the provisions of the immediately
preceding sentence.

          (f) Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement.

          (g) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties and shall inure to the
benefit of each Holder. The Company may not assign its rights or obligations hereunder without the
prior written consent of each Holder of then-outstanding Registrable Securities. Each Holder may
assign their respective rights hereunder in the manner and to the Persons as permitted under the
Purchase Agreement.

          (h) Execution and Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original and, all of which
taken together shall constitute one and the same Agreement. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof.

          (i) Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the principles of conflicts of
law thereof. Each party agrees that all Proceedings to resolve any dispute concerning the
interpretations, enforcement and defense of the transactions contemplated by this Agreement
(whether brought against a party hereto or its respective Affiliates, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New York, Borough of
Manhattan (the “New York Courts”) although depositions may be taken in other places. Each party
hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any Proceeding, any claim that it is not personally subject to the jurisdiction of any New York
Court, or that such Proceeding has been commenced in an

 

 

improper or inconvenient forum. Each party hereto hereby irrevocably waives personal service
of process and consents to process being served in any such Proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of delivery) to such party at
the address in effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each
party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any Proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence a Proceeding to enforce any
provisions of this Agreement, then the prevailing party in such Proceeding shall be reimbursed by
the other party for its attorney’s fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.

          (j) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive
of any remedies provided by law.

          (k) Severability. If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions without including
any of such that may be hereafter declared invalid, illegal, void or unenforceable.

          (l) Headings. The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.

          (m) Independent Nature of Holders’ Obligations and Rights. The obligations of each
Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and
no Holder shall be responsible in any way for the performance of the obligations of any other
Holder hereunder. The decision of each Holder to acquire Registrable Securities pursuant to the
Transaction Documents has been made independently of any other Holder. Nothing contained herein or
in any other agreement or document delivered at any closing, and no action taken by any Holder
pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an
association, a joint venture or any other kind of entity, or create a presumption that the Holders
are in any way acting in concert with respect to such obligations or the transactions contemplated
by this Agreement. Each Holder acknowledges that no other Holder has acted as agent for such Holder
in connection with making its investment hereunder and that no Holder will be acting as agent of
such Holder in connection with monitoring its investment in the Securities or enforcing its rights
under the Transaction Documents. Each Holder shall be entitled to protect and enforce its rights,
including without limitation the rights arising out of this Agreement, and it shall not be
necessary (but may be permissible) for any other Holder to be joined as an additional party in any
Proceeding for such purpose.

 

 

(Signatures begin on the next page.)

 

 

     IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the
date first written above.

	 	 	 	 	 
	 

	 	TELECOMMUNICATION SYSTEMS, INC.
	 	 
	 
	 	 	 	 
	 

	 	   /s/ Thomas M. Brandt, Jr.	 	 
	 

	 	 	 	 
	 

	 	   Name: Thomas M. Brandt, Jr.	 	 
	 

	 	   Title: Senior Vice President and Chief Financial Officer	 	 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES OF INVESTORS TO FOLLOW]

 

 

     IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly
executed by their respective authorized signatories as of the date first written above.

	 	 	 	 	 	 	 
	 

	 	INVESTOR	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Bonanza Master Fund, Ltd.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Brian Ladin	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Brian Ladin	 	 
	 

	 	 	 	Title: Partner	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Notice and Residence:	 	 
	 
	 

	 	 	 	Bonanza Capital	 	 
	 

	 	 	 	300 Crescent Court	 	 
	 

	 	 	 	Suite 250	 	 
	 

	 	 	 	Dallas, TX 75201	 	 
	 

	 	 	 	Tel:	 	 
	 

	 	 	 	Fax:	 	 
	 

	 	 	 	E-mail:	 	 

 

 

     IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly
executed by their respective authorized signatories as of the date first written above.

	 	 	 	 	 	 	 	 	 
	 	 	INVESTOR	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	HHMI Investments, L.P.	 	 
	 	 	 	 	By: WS Capital Management, L.P.,	 	 
	 	 	 	 	     Investment Manager	 	 
	 	 	 	 	     By: WS Capital, L.L.C., General Partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	/s/ Reid S. Walker	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name: Reid S. Walker	 	 
	 

	 	 	 	 	 	Title: Member	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Address for Notice and Residence:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	300 Crescent Court	 	 
	 

	 	 	 	 	 	Suite 1111	 	 
	 

	 	 	 	 	 	Dallas, TX 75201	 	 
	 

	 	 	 	 	 	Tel:	 	 
	 

	 	 	 	 	 	Fax:	 	 
	 

	 	 	 	 	 	E-mail:	 	 

 

 

     IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly
executed by their respective authorized signatories as of the date first written above.

	 	 	 	 	 	 	 	 	 
	 	 	INVESTOR	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Walker Smith International Fund, Ltd.	 	 
	 	 	 	 	By: WS Capital Management, L.P.,	 	 
	 	 	 	 	     Attorney-in-fact	 	 
	 	 	 	 	     By: WS Capital, L.L.C., General Partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	/s/ Reid S. Walker	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name: Reid S. Walker	 	 
	 

	 	 	 	 	 	Title: Member	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Address for Notice and Residence:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	300 Crescent Court	 	 
	 

	 	 	 	 	 	Suite 1111	 	 
	 

	 	 	 	 	 	Dallas, TX 75201	 	 
	 

	 	 	 	 	 	Tel:	 	 
	 

	 	 	 	 	 	Fax:	 	 
	 

	 	 	 	 	 	E-mail:	 	 

 

 

     IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly
executed by their respective authorized signatories as of the date first written above.

	 	 	 	 	 	 	 	 	 
	 	 	INVESTOR	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Walker Smith Capital, L.P.	 	 
	 	 	 	 	By: WS Capital Management, L.P., General Partner	 	 
	 	 	 	 	     By: WS Capital, L.L.C., General Partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	/s/ Reid S. Walker	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name: Reid S. Walker	 	 
	 

	 	 	 	 	 	Title: Member	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Address for Notice and Residence:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	300 Crescent Court	 	 
	 

	 	 	 	 	 	Suite 1111	 	 
	 

	 	 	 	 	 	Dallas, TX 75201	 	 
	 

	 	 	 	 	 	Tel:	 	 
	 

	 	 	 	 	 	Fax:	 	 
	 

	 	 	 	 	 	E-mail:	 	 

 

 

     IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly
executed by their respective authorized signatories as of the date first written above.

	 	 	 	 	 	 	 	 	 
	 	 	INVESTOR	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Walker Smith Capital (Q.P.), L.P.	 	 
	 	 	 	 	By: WS Capital Management, L.P., General Partner	 	 
	 	 	 	 	     By: WS Capital, L.L.C., General Partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	/s/ Reid S. Walker	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name: Reid S. Walker	 	 
	 

	 	 	 	 	 	Title: Member	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Address for Notice and Residence:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	300 Crescent Court	 	 
	 

	 	 	 	 	 	Suite 1111	 	 
	 

	 	 	 	 	 	Dallas, TX 75201	 	 
	 

	 	 	 	 	 	Tel:	 	 
	 

	 	 	 	 	 	Fax:	 	 
	 

	 	 	 	 	 	E-mail:	 	 

 

 

     IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly
executed by their respective authorized signatories as of the date first written above.

	 	 	 	 	 	 	 	 	 
	 	 	INVESTOR	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	SRB Greenway Capital, L.P.	 	 
	 	 	 	 	By: SRB Management, L.P., General Partner	 	 
	 	 	 	 	     By: BC Advisors, L.L.C., General Partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	/s/ Steven R. Becker	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name: Steven R. Becker	 	 
	 

	 	 	 	 	 	Title: Member	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Address for Notice and Residence:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	300 Crescent Court	 	 
	 

	 	 	 	 	 	Suite 1111	 	 
	 

	 	 	 	 	 	Dallas, TX 75201	 	 
	 

	 	 	 	 	 	Tel:	 	 
	 

	 	 	 	 	 	Fax:	 	 
	 

	 	 	 	 	 	E-mail:	 	 

 

 

     IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly
executed by their respective authorized signatories as of the date first written above.

	 	 	 	 	 	 	 	 	 
	 	 	INVESTOR	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	SRB Greenway Capital QP, L.P.	 	 
	 	 	 	 	By: SRB Management, L.P., General Partner	 	 
	 	 	 	 	     By: BC Advisors, L.L.C., General Partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	/s/ Steven R. Becker	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name: Steven R. Becker	 	 
	 

	 	 	 	 	 	Title: Member	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Address for Notice and Residence:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	300 Crescent Court	 	 
	 

	 	 	 	 	 	Suite 1111	 	 
	 

	 	 	 	 	 	Dallas, TX 75201	 	 
	 

	 	 	 	 	 	Tel:	 	 
	 

	 	 	 	 	 	Fax:	 	 
	 

	 	 	 	 	 	E-mail:	 	 

 

 

     IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly
executed by their respective authorized signatories as of the date first written above.

	 	 	 	 	 	 	 	 	 
	 	 	INVESTOR	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	SRB Greenway Offshore Operating Fund, L.P.	 	 
	 	 	 	 	By: SRB Management, L.P., General Partner	 	 
	 	 	 	 	     By: BC Advisors, L.L.C., General Partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	/s/ Steven R. Becker	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name: Steven R. Becker	 	 
	 

	 	 	 	 	 	Title: Member	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Address for Notice and Residence:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	300 Crescent Court	 	 
	 

	 	 	 	 	 	Suite 1111	 	 
	 

	 	 	 	 	 	Dallas, TX 75201	 	 
	 

	 	 	 	 	 	Tel:	 	 
	 

	 	 	 	 	 	Fax:	 	 
	 

	 	 	 	 	 	E-mail:	 	 

 

 

Annex A

Plan of Distribution

     The Selling Stockholders and any of their pledgees, donees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares of Class A Common
Stock registered hereunder on any stock exchange, market or trading facility on which the shares
are traded or in private transactions. These sales may be at fixed or negotiated prices. The
Selling Stockholders may use any one or more of the following methods when selling shares:

	 	•	 	ordinary brokerage transactions and transactions in which the broker-dealer
solicits investors;
	 
	 	•	 	block trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to facilitate the
transaction;
	 
	 	•	 	purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;
	 
	 	•	 	an exchange distribution in accordance with the rules of the applicable
exchange;
	 
	 	•	 	privately negotiated transactions;
	 
	 	•	 	to cover short sales made after the date that this Registration Statement is
declared effective by the Securities and Exchange Commission;
	 
	 	•	 	through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
	 
	 	•	 	broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
	 
	 	•	 	a combination of any such methods of sale; and
	 
	 	•	 	any other method permitted pursuant to applicable law.

     The Selling Stockholders may also sell shares under Rule 144 under the Securities Act, if
available, rather than under this prospectus.

     The selling stockholders may, from time to time, pledge or grant a security interest in some
or all of the shares of common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the shares of common stock,
from time to time, under this prospectus, or under an amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest as selling
stockholders under this prospectus. The selling stockholders also may transfer the shares

 

 

of common stock in other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of this prospectus.

     In connection with the sale of our common stock or interests therein, the selling stockholders
may enter into hedging transactions with broker-dealers or other financial institutions, which may
in turn engage in short sales of the common stock in the course of hedging the positions they
assume. The selling stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common stock to broker-dealers
that in turn may sell these securities. The selling stockholders may also enter into option or
other transactions with broker-dealers or other financial institutions or the creation of one or
more derivative securities which require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect
such transaction).

     Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from the Selling
Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated. The Selling Stockholders do not expect these commissions
and discounts to exceed what is customary in the types of transactions involved.

     Upon the Company being notified in writing by a Selling Stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of Common Stock through a block
trade, special offering, exchange distribution or secondary distribution or a purchase by a broker
or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b)
under the Securities Act, disclosing (i) the name of each such Selling Stockholder and of the
participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such
the shares of Common Stock were sold, (iv) the commissions paid or discounts or concessions allowed
to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not conduct any
investigation to verify the information set out or incorporated by reference in this prospectus,
and (vi) other facts material to the transaction.

     The Selling Stockholders also may transfer the shares of Common Stock in other circumstances,
in which case the transferees, pledgees or other successors in interest may be the selling
beneficial owners for purposes of this prospectus.

     The Selling Stockholders and any broker-dealers or agents that are involved in selling the
shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act. Discounts, concessions, commissions and similar selling
expenses, if any, that can be attributed to the sale of securities will be paid by the Selling
Stockholder and/or the purchaser. Each Selling Stockholder has represented and warranted to the
Company that it does not have any agreement or understanding, directly or indirectly, with any
person to distribute the Common Stock.

 

 

     The Company has advised each Selling Stockholder that it may not use shares registered on this
Registration Statement to cover short sales of Common Stock made prior to the date on which this
Registration Statement shall have been declared effective by the Commission. If a Selling
Stockholder uses this prospectus for any sale of the Common Stock, it will be subject to the
prospectus delivery requirements of the Securities Act.

     The Company is required to pay the Company’s fees and expenses incident to the registration of
the shares. The Company has agreed to indemnify the Selling Stockholders against certain losses,
claims, damages and liabilities, including liabilities under the Securities Act.

     The Selling Stockholders will be responsible to comply with the applicable provisions of the
Securities Act and Exchange Act, and the rules and regulations thereunder promulgated, including,
without limitation, Regulation M, as applicable to such Selling Stockholders in connection with
resales of their respective shares under this Registration Statement.

 

 

Annex B

Selling Shareholder Questionnaire

     The undersigned beneficial owner of Class A common stock, par value $0.01 per share (the
“Class A Common Stock”), of TeleCommunication Systems, Inc., a Maryland corporation (the
“Company”), (the “Registrable Securities”) understands that the Company has filed
or intends to file with the Securities and Exchange Commission (the “Commission”) a
registration statement on Form S-3 (the “Registration Statement”) for the registration and
resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of
the Registrable Securities, in accordance with the terms of the Registration Rights Agreement,
dated as of March 13, 2006 (the “Registration Rights Agreement”), among the Company and the
Investors named therein. A copy of the Registration Rights Agreement is available from the Company
upon request at the address set forth below. All capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Registration Rights Agreement.

     Certain legal consequences arise from being named as a selling shareholder in the Registration
Statement and the related prospectus. Accordingly, holders and beneficial owners of Registrable
Securities are advised to consult their own securities law counsel regarding the consequences of
being named or not being named as a selling shareholder in the Registration Statement and the
related prospectus.

NOTICE

     The undersigned beneficial owner (the “Selling Shareholder”) of Registrable Securities
hereby elects to include the Registrable Securities owned by it and listed below in Item 3 (unless
otherwise specified under such Item 3) in the Registration Statement.

     The undersigned hereby provides the following information to the Company and represents and
warrants that such information is accurate:

QUESTIONNAIRE

	1.	 	Name.

	 	(a)	 	Full Legal Name of Selling Shareholder
	 
	 	 	 	

	 
	 	(b)	 	Full Legal Name of Registered Holder (if not the same as (a) above)
through which Registrable Securities Listed in Item 3 below are held:
	 
	 	 	 	

	 
	 	(c)	 	Full Legal Name of Natural Control Person (which means a natural
person who directly or indirectly alone or with others has power to
vote or dispose of the securities covered by the questionnaire):

 

 

	 	 	 	

	2.	 	Address for Notices to Selling Shareholder:

	 	 	 	 	 	 	 
	Company

	 	 	 	Telephone:	 	 
	 

	 	 
	 	 	 	 
	Street 1

	 	 	 	Fax:	 	 
	 

	 	 
	 	 	 	 
	Street 2

	 	 	 	E-mail:	 	 
	 

	 	 
	 	 	 	 
	Suite / Apt #

	 	 	 	 	 	 
	City, State ZIP

	 	 	 	Contact Person:	 	 
	 

	 	 
	 	 	 	 

	3.	 	Beneficial Ownership of Registrable Securities:

	 	(a)	 	Type and Number of Registrable Securities beneficially owned:
	 
	 	 	 	

	 
	 	 	 	

	 
	 	 	 	

	 
	 	 	 	

	4.	 	Broker-Dealer Status:

	 	(a)	 	Are you a broker-dealer?

Yes       o      No      o

	 	(b)	 	If “yes” to Section 4(a), did you receive your Registrable Securities
as compensation for investment banking services to the Company.

Yes       o      No      o

Note: If no, the Commission’s staff has indicated that you should be
identified as an underwriter in the Registration Statement.

	 	(c)	 	Are you an affiliate of a broker-dealer?

Yes       o      No      o

	 	(d)	 	If you are an affiliate of a broker-dealer, do you certify that you
bought the Registrable Securities in the ordinary course of business,
and at the time of the purchase of the Registrable Securities to be
resold, you had no agreements or understandings, directly or
indirectly, with any person to distribute the Registrable Securities?

Yes       o      No      o

Note: If no, the Commission’s staff has indicated that you should be
identified as an underwriter in the Registration Statement.

 

 

	5.	 	Beneficial Ownership of Other Securities of the Company Owned by the Selling Shareholder.

        Except as set forth below in this Item 5, the undersigned is not the beneficial or registered
owner of any securities of the Company other than the Registrable Securities listed above in Item
3.

	 	(a)	 	Type and Amount of Other Securities beneficially owned by the Selling Shareholder:
	 
	 	 	 	

	 
	 	 	 	

	 
	 	 	 	

	6.	 	Relationships with the Company:

        Except as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity securities of the
undersigned) has held any position or office or has had any other material relationship with the
Company (or its predecessors or affiliates) during the past three years.

State any exceptions here:

        By signing below, the undersigned consents to the disclosure of the information contained
herein in its answers to Items 1 through 6 and the inclusion of such information in the
Registration Statement and the related prospectus and any amendments or supplements thereto. The
undersigned understands that such information will be relied upon by the Company in connection with
the preparation or amendment of the Registration Statement and the related prospectus.

 

 

     IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Questionnaire to
be executed and delivered either in person or by its duly authorized agent.

	 	 	 	 	 
	Dated: 	Beneficial Owner:

 	 
	 	By:  	
 	 
	 	 	 	 
	 	 	Name: 	  	 
	 	 	Title: 	 	 
	 

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

DLA PIPER RUDNICK GRAY CARY US LLP

6225 SMITH AVENUE

BALTIMORE, MARYLAND 21209

ATTN: MICHAEL J. STEIN, ESQ.

TELEPHONE NO.: (410) 580-4835

FACSIMILE NO.: (410) 580-3835exv4w10

 

Exhibit 4.10

INTELLECTUAL PROPERTY SECURITY AGREEMENT

     INTELLECTUAL PROPERTY SECURITY AGREEMENT, dated as of March 13, 2006 (this
“Agreement”), among Telecommunication Systems, Inc., a Maryland corporation (the
“Company” or the “Debtor”) and Bonanza Master Fund, Ltd. as agent (the “Agent”) for
the holders of the Company’s Secured Notes due March 13, 2009 in the original aggregate principal
amount of $10,000,000 (together with any additional such Notes issued as interest on the existing
Notes, the “Notes”), signatory hereto, their endorsees, transferees and assigns
(collectively referred to as, the “Secured Parties”).

W I T N E S S E T H:

     WHEREAS, pursuant to the Notes, the Secured Parties have severally agreed to extend the loans
to the Company evidenced by the Notes; and

     WHEREAS, in order to induce the Secured Parties to extend the loans evidenced by the Notes,
Debtor has agreed to execute and deliver to the Agent this Agreement and to grant the Agent for the
benefit of the Secured Parties, a first priority perfected security interest in the Collateral (as
defined herein) to secure the prompt payment, performance and discharge in full of all of the
Company’s obligations under the Notes.

     NOW, THEREFORE, in consideration of the agreements herein contained and for other good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties
hereto hereby agree as follows:

     1. Certain Definitions. As used in this Agreement, the following terms shall have the meanings
set forth in this Section 1. Capitalized terms used but not otherwise defined in this Agreement
that are defined in Article 9 of the UCC shall have the respective meanings given such terms in
Article 9 of the UCC.

     (a) “Collateral” means Debtor’s Intellectual Property existing on the date of
this Agreement, wherever situated, and all Proceeds of any sale or other disposition
thereof outside of the ordinary course of business, including, without limitation, all
proceeds from insurance covering the same and of any tort claims in connection therewith.

     (b) “Intellectual Property” means the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising under United
States, multinational or foreign laws or otherwise, including, without limitation, (i) all
copyrights arising under the laws of the United States, any other country or any political
subdivision thereof, whether registered or unregistered and whether published or
unpublished, all registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings and applications in
the United States Copyright Office, (ii) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions thereof, and all
applications for

- 1 -

 

letters patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof, (iii) all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade dress,
service marks, logos, domain names and other source or business identifiers, and all
goodwill associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection therewith, whether
in the United States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political subdivision thereof,
or otherwise, and all common law rights related thereto, (iv) all trade secrets arising
under the laws of the United States, any other country or any political subdivision
thereof, (v) all rights to obtain any reissues, renewals or extensions of the foregoing,
(vi) all licenses for any of the foregoing, but only to the extent that the inclusion
thereof in this Agreement does not and will not cause a default under the terms of any
agreements in respect of the such license (except that all rights to payment in respect of
such licenses shall be included in the definition of Intellectual Property), and (vii) all
causes of action for infringement of the foregoing.

     (c) “Majority in Interest” means (i) the Secured Parties who, together with
their respective Affiliates, hold a majority of the Notes outstanding at the time of
determination, (ii) SRB Management, L.P. as long as (A) it and its Affiliates, (B) WS
Capital Management, L.P. and its Affiliates and (C) WS Ventures Management, L.P. and its
Affiliates collectively hold at least $2,000,000 in aggregate principal amount of the Notes
outstanding at the time of determination, and (iii) Bonanza Master Fund Ltd. as long as it,
together with its Affiliates, holds at least $3,000,000 in aggregate principal amount of
the Notes outstanding at the time of determination.

     (d) “Note Purchase Agreement” means the Note Purchase Agreement dated as of
the date hereof by and among Debtor and the Secured Parties signatory thereto.

     (e) “Obligations” means (i) principal of, and interest on the Notes and the
loans extended pursuant thereto; (ii) any and all other fees, indemnities, costs,
obligations and liabilities of the Debtor from time to time under or in connection with
this Agreement, the Notes and the Note Purchase Agreement; and (iii) all amounts (including
but not limited to post-petition interest) in respect of the foregoing that would be
payable but for the fact that the obligations to pay such amounts are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar proceeding
involving any Debtor.

     (f) “Organizational Documents” means with respect to Debtor, the documents by
which such Debtor was organized (such as a certificate of incorporation, certificate of
limited partnership or articles of organization, and including, without limitation, any
certificates of designation for preferred stock or other forms of preferred equity) and
which relate to the internal governance of

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such Debtor (such as bylaws, a partnership agreement or an operating, limited
liability or members agreement).

     (g) “Release Collateral” shall mean all of the following:

          (i) all letters patent of the United States or any other country or political
subdivision thereof, and all applications for letters patent of the United States or any
other country, that are listed on Schedule E-1 attached hereto;

          (ii) all re-issues, continuations, divisions, continuations-in-part, renewals or
extensions of the patents and applications referred to in preceding clause (i);

          (iii) the inventions disclosed or claimed in preceding clauses (i) and (ii), including
the right to make, use, practice and/or sell (or license or otherwise transfer or dispose
of) the inventions disclosed or claimed in preceding clauses (i) and (ii);

          (iv) the right to make and prosecute applications for the patents and applications
referred to in preceding clauses (i), (ii) and (iii); and

          (v) Proceeds of any property described in the preceding clauses of this definition of
Release Collateral.

     (h) “Silicon Valley Bank” means Silicon Valley Bank, and
its successors and assigns.

     (i) “Subordination Agreement” means the Subordination Agreement, dated of even
date herewith, among Silicon Valley Bank and the Secured Parties.

     (j) “UCC” means the Uniform Commercial Code of the State of Maryland and or
any other applicable law of any state or states which has jurisdiction with respect to all,
or any portion of, the Collateral or this Agreement, from time to time. It is the intent
of the parties that defined terms in the UCC should be construed in their broadest sense so
that the term “Collateral” will be construed in its broadest sense. Accordingly if there
are, from time to time, changes to defined terms in the UCC that broaden the definitions,
they are incorporated herein and if existing definitions in the UCC are broader than the
amended definitions, the existing ones shall be controlling.

     2. Grant of Perfected First Priority Security Interest. As an inducement for the Secured
Parties to extend the loans as evidenced by the Notes and to secure the complete and timely
payment, performance and discharge in full, as the case may be, of all of the Obligations, Debtor
hereby unconditionally and irrevocably pledges, grants and hypothecates to the Agent for the
benefit of the Secured Parties a continuing and

- 3 -

 

perfected security interest in and to, a lien upon all of their respective right, title and
interest of whatsoever kind and nature in and to, the Collateral (the “Security Interest”).
Secured Parties acknowledge that the Collateral may be subject to certain rights of Silicon
Valley Bank pursuant to certain loan documents from the Debtor in favor of Silicon Valley Bank.

     3. Intentionally Omitted.

     4. Representations, Warranties, Covenants and Agreements of the Debtor. Debtor represents and
warrants to, and covenants and agrees with, the Secured Parties as follows:

     (a) Debtor has the requisite corporate power and authority to enter into this
Agreement and otherwise to carry out its obligations hereunder. The execution, delivery and
performance by Debtor of this Agreement and the filings contemplated therein have been duly
authorized by all necessary action on the part of Debtor and no further action is required
by Debtor. This Agreement has been duly executed by Debtor. This Agreement constitutes
the legal, valid and binding obligation of Debtor, enforceable against Debtor in accordance
with its terms except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization and similar laws of general application relating to or affecting
the rights and remedies of creditors and by general principles of equity.

     (b) The Debtor has no place of business or offices where its books of account and
records are kept (other than temporarily at the offices of its attorneys or accountants) or
places where Collateral is stored or located, except as set forth on Schedule A
attached hereto.

     (c) Except as set forth on Schedule B attached hereto, the Debtor is the sole
owner of the Collateral (except for non-exclusive licenses granted by Debtor in the
ordinary course of business), free and clear of any liens, security interests,
encumbrances, rights or claims, and is fully authorized to grant the Security Interest.
There is not on file in any governmental or regulatory authority, agency or recording
office an effective financing statement, security agreement, license or transfer or any
notice of any of the foregoing (other than those that will be filed in favor of the Secured
Parties pursuant to this Agreement) covering or affecting any of the Collateral. So long
as this Agreement shall be in effect, the Debtor shall not execute and shall not knowingly
permit to be on file in any such office or agency any such financing statement or other
document or instrument (except to the extent filed or recorded in favor of the Secured
Parties pursuant to the terms of this Agreement). In the event that there is on file on
the date hereof in any governmental or regulatory authority, agency or recording office an
effective financing statement, security agreement, license or other notice of any of the
foregoing (other than those that will be filed in favor of the Secured Parties pursuant to
this Agreement) covering or affecting the Collateral, Debtor shall be permitted a period of
thirty (30) days after becoming aware thereof in which to

- 4 -

 

have such financing statement, security agreement, license or transfer or notice
terminated and released of record.

     (d) No written claim has been received that any Collateral or Debtor’s use of any
Collateral violates the rights of any third party. There has been no adverse decision to
Debtor’s claim of ownership rights in or exclusive rights to use the Collateral in any
jurisdiction or to Debtor’s right to keep and maintain such Collateral in full force and
effect, and there is no proceeding involving said rights pending or, to the best knowledge
of Debtor, threatened before any court, judicial body, administrative or regulatory agency,
arbitrator or other governmental authority.

     (e) This Agreement creates in favor of the Agent for the benefit of the Secured
Parties a valid security interest in the Collateral, securing the payment and performance
of the Obligations. Upon making the filings described in the immediately following
paragraph, all security interests created hereunder in any Collateral which may be
perfected by filing Uniform Commercial Code financing statements shall have been duly
perfected. Except for the filing of the Uniform Commercial Code financing statements
referred to in the immediately following paragraph, no action is necessary to create or
perfect the security interests created hereunder. Without limiting the generality of the
foregoing, except for the filing of said financing statements, no consent of any third
parties and no authorization, approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required for (i) the execution, delivery
and performance of this Agreement, (ii) the creation or perfection of the Security
Interests created hereunder in the Collateral or (iii) the enforcement of the rights of the
Secured Parties hereunder, other than as set forth in the Subordination Agreement.

     (f) Debtor hereby authorizes the Agent on behalf of the Secured Parties to file one or
more financing statements under the UCC, with respect to the Security Interest with the
proper filing and recording agencies in any jurisdiction deemed proper by them.

     (g) The execution, delivery and performance of this Agreement by the Debtor does not
(i) violate any of the provisions of any Organizational Documents of the Debtor or any
judgment, decree, order or award of any court, governmental body or arbitrator or any
applicable law, rule or regulation applicable to Debtor or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing Debtor’s debt or otherwise) or other
understanding to which Debtor is a party or by which any property or asset of Debtor is
bound or affected. No consent (including, without limitation, from stockholders or
creditors of Debtor)

- 5 -

 

which has not been obtained is required for Debtor to enter into and perform its
obligations hereunder.

     (h) Debtor shall at all times maintain the liens and Security Interest provided for
hereunder as valid and perfected first priority liens and security interests in the
Collateral in favor of the Agent until this Agreement and the Security Interest hereunder
shall be terminated pursuant to Section 11 hereof. Debtor hereby agrees to defend the same
against the claims of any and all persons and entities. At the request of the Agent,
Debtor will pay the cost of filing UCC financing statements in appropriate form in all
public offices wherever filing is, or is deemed by the Agent to be, necessary or desirable
to effect the rights and obligations provided for herein. Without limiting the generality
of the foregoing, Debtor shall pay all fees, taxes and other amounts necessary to maintain
the Collateral and the Security Interest hereunder, and Debtor shall obtain and furnish to
the Agent from time to time, upon demand, such releases and/or subordinations of claims and
liens which may be required to maintain the priority of the Security Interest hereunder;
provided, however, that nothing in this clause (h) shall obligate the Debtor to take any
action with respect to the Subordination Agreement.

     (i) Debtor will not transfer, pledge, hypothecate, encumber, license, sell or
otherwise dispose of any of the Collateral (other than Release Collateral and licenses
granted by a Debtor in its ordinary course of business) without the prior written consent
of the Agent, which consent shall not be unreasonably withheld, conditioned or delayed, it
being acknowledged that the legitimate interests of the Agent and the Debtor may differ
with respect to the desirability of any given proposed disposition.

     (j) Debtor shall, within thirty (30) days of obtaining knowledge thereof, advise the
Secured Parties promptly, in sufficient detail, of any substantial change in the
Collateral, and of the occurrence of any event which would have a material adverse effect
on the value of the Collateral (other than the Release Collateral) or on the Secured
Parties’ security interest therein.

     (k) Upon the Agent’s written request, Debtor shall execute and deliver to Agent such
instruments and documents, in form and substance reasonably satisfactory to Debtor (and for
so long as Debtor is indebted to Silicon Valley Bank, Silicon Valley Bank), as may be
necessary for Agent to confirm the creation or perfection of, or to give public notice of,
the Security Interest granted under this Agreement; provided that unless an Event of
Default has occurred and is continuing (i) Debtor shall not be required to execute or
deliver to Agent any instrument or other document to be recorded with any public office
other than the appropriate public office for filing financing statements under the UCC and
(ii) the Agent shall not make any filing in any office other than the appropriate public
office for filing financing statements under the UCC.

- 6 -

 

     (l) Intentionally Omitted.

     (m) Debtor shall promptly notify the Agent in sufficient detail upon becoming aware of
any attachment, garnishment, execution or other legal process levied against any Collateral
and of any other information received by Debtor that may materially affect the value of the
Collateral, the Security Interest or the rights and remedies of the Agent hereunder.

     (n) Intentionally Omitted.

     (o) Debtor will not change its name, type of organization, jurisdiction of
organization, organizational identification number (if it has one), legal or corporate
structure, or identity, or add any new fictitious name unless it provides at least 10 days
prior written notice to the Agent of such change and, at the time of such written
notification, Debtor provides any financing statements necessary to perfect and continue
perfected the perfected security interest granted and evidenced by this Agreement.

     (p) Debtor was organized and remains organized solely under the laws of the state set
forth next to Debtor’s name in the first paragraph of this Agreement. Schedule C
attached hereto sets forth Debtor’s organizational identification number or, if Debtor does
not have one, states that one does not exist.

     (q) (i) The actual name of Debtor is the name set forth in the preamble above; (ii)
Debtor does not have any trade names except as set forth on Schedule D attached
hereto; (iii) Debtor has not used any name other than that stated in the preamble hereto or
as set forth on Schedule D for the preceding five years; and (iv) no entity has
merged into Debtor or been acquired by Debtor within the past five years except as set
forth on Schedule D.

     (r) If Debtor shall at any time hold or acquire a commercial tort claim in respect of
any Collateral, Debtor shall promptly notify the Secured Parties in a writing signed by
Debtor of the particulars thereof and grant to the Secured Parties in such writing a
security interest therein and in the proceeds thereof, all upon the terms of this
Agreement, with such writing to be in form and substance satisfactory to the Secured
Parties.

     (s) Without limiting the generality of the other obligations of the Debtor hereunder,
Debtor shall, upon the written request of the Agent upon the occurrence and during the
continuance of any Event of Default, promptly (i) cause to be registered at the United
States Copyright Office all of its material copyrights and (ii) cause the Security Interest
with respect to all Intellectual Property registered at the United States Copyright Office
or United States Patent and Trademark Office to be duly recorded at the applicable office,
(provided, that

- 7 -

 

no such recordation shall be required prior to the occurrence of an Event of Default).

     (t) Schedule E attached hereto lists all of the patents, patent applications,
trademarks, trademark applications, registered copyrights, and domain names owned by the
Debtor as of the date hereof. Schedule E lists all material licenses in favor of
Debtor for the use of any patents, trademarks, copyrights and domain names as of the date
hereof. All material patents and trademarks of the Debtor have been duly recorded at the
United States Patent and Trademark Office.

     5. RELEASE COLLATERAL.

     (a) Notwithstanding anything to the contrary set forth in this Agreement or in any other
Transaction Document, the Agent, and, if requested by the Debtor, each Secured Party shall release
and terminate any and all liens and security interests that the Agent or any Secured Party has or
may have in the Release Collateral within ten (10) days after Debtor’s written request for such
release and termination in preparation for Debtor’s sale, license or other disposition of all or
any portion of the Release Collateral to any Person from time to time, and in connection therewith,
and within ten (10) days after Debtor’s written request for any such release and termination, the
Agent, and if so requested by the Debtor, each Secured Party shall:

     (i) execute and deliver to Debtor a written instrument prepared by Debtor in form and
substance satisfactory to Debtor to confirm that Secured Party’s liens and security
interests in the Release Collateral will be fully released and terminated upon such
disposition and that all of Agent’s and each Secured Party’s right, title and interest in
such Release Collateral has been so assigned back to Debtor;

     (ii) execute such Uniform Commercial Code financing statement amendments prepared by
Debtor as may be necessary in the appropriate public filing office(s) to release the
Release Collateral from any filed financing statement on which Agent or any Secured Party
is a secured party and which describes collateral that includes, or in Debtor’s judgment
may include, the Release Collateral; and

     (iii) execute for filing with the United States Patent and Trademark Office such
written instruments and documents prepared by Debtor as may be necessary or appropriate in
Debtor’s judgment to fully release and terminate of record Agent’s or each Secured Party’s
lien and security interest in the Release Collateral and to assign all of Agent’s or each
Secured Party’s right, title and interest in such Release Collateral back to Debtor.

- 8 -

 

     (b) Debtor shall not be required to pay Agent or any Secured Party any fee or other amount for
or in connection with any release or termination requested by Debtor under this Section 5 (or for
performance of Agent’s or any Secured Party’s obligations under this Section 5) and Debtor shall
not be required to make any payment or prepayment of any obligations (under the Notes or otherwise)
upon, or with any Proceeds of, any sale, license or other disposition of any Release Collateral.

     (c) If the Agent or any Secured Party shall fail to comply with the requirements of this
Section 5, Debtor is hereby authorized to prepare, execute (as necessary) and file in the
appropriate Uniform Commercial Code financing statement records and with the United States Patent
and Trademark Office such financing statement amendments and other instruments and documents as may
be necessary to release and terminate all of Agent’s and each Secured Party’s right, title and
interest in the Release Collateral of record and in fact and to re-assign the Release Collateral
back to Debtor. Agent and each Secured Party hereby grants Debtor Agent’s and such Secured Party’s
power of attorney and authorization to execute, deliver and file such instruments and documents in
Agent’s or such Secured Party’s name for the purposes described in this Section 5, which power is
coupled with an interest and is irrevocable.

     (d) Each Secured Party hereby irrevocably agrees that the Agent’s release and termination of
any lien or security interest in the Release Collateral as provided in this Section 5 shall
constitute a full and complete release and termination of any and all right, title and interest
(including any lien or security interest) that such Secured Party may have or claim in the Release
Collateral and that any actions taken by Agent under this Section 5 shall be binding on each
Secured Party.

     (e) The Secured Parties hereby irrevocably authorize and direct the Agent to perform the
Agent’s obligations under this Section 5 without any requirement of notice to, or consent or
authorization from, any Secured Party.

     6. Defaults. The following events shall be “Events of Default”:

     (a) The occurrence of an Event of Default (as defined in the Notes) under the Notes;

     (b) Any material representation or warranty of any Debtor in this Agreement or the
Note Purchase Agreement shall prove to have been incorrect in any material respect when
made;

     (c) The failure by Debtor to observe or perform any of its obligations hereunder for
thirty (30) days after delivery to Debtor of notice of such failure by or on behalf of a
Secured Party unless such default is capable of cure but cannot be cured within such time
frame and Debtor is using best efforts to cure same in a timely fashion; or

- 9 -

 

     (d) If any provision of this Agreement shall at any time for any reason be declared
to be null and void, or the validity or enforceability thereof shall be contested by
Debtor, or a proceeding shall be commenced by Debtor, or by any governmental authority
having jurisdiction over Debtor, seeking to establish the invalidity or unenforceability
thereof, or Debtor shall deny that Debtor has any liability or obligation purported to be
created under this Agreement.

     7. Duty To Hold In Trust. Upon and during the occurrence of any Event of Default, Debtor
shall, upon receipt of any Proceeds of any sale or other disposition of Collateral other than the
Release Collateral, Debtor shall hold the same in trust for the Secured Parties and shall forthwith
endorse and transfer any such sums or instruments evidencing such sums, or both, to the Agent for
the benefit of the Secured Parties, pro-rata in proportion to their initial purchases of Notes for
application to the satisfaction of the Obligations (and if any Notes are not outstanding, pro-rata
in proportion to the initial purchases of the remaining Notes).

     8. Rights and Remedies Upon Default.

     (a) Upon the occurrence and during the continuance of any Event of Default, the Agent
shall have the right to exercise all of the remedies conferred hereunder, and the Agent
shall have all the rights and remedies of a secured party under the UCC. Without
limitation, the Agent shall have the following rights and powers:

     (i) The Agent shall have the right to take possession of the Collateral and,
for that purpose, enter, with the aid and assistance of any person, any premises
where the Collateral, or any part thereof, is or may be placed and remove the same,
and Debtor shall assemble the Collateral and make it available to the Agent at
places which the Agent shall reasonably select, whether at Debtor’s premises or
elsewhere, and make available to the Agent, without rent, all of Debtor’s premises
and facilities for the purpose of the Agent taking possession of, removing or
putting the Collateral in saleable or disposable form.

     (ii) Upon notice to the Debtor by Agent, all rights of Debtor to receive
payments or other sums from the sale of Collateral (but not any revenue, income or
other sums which arise in the ordinary course of business from the use of
Collateral) shall, at the option of Agent, be delivered to Agent. Without limiting
the generality of the foregoing, Agent shall have the right (but not the
obligation) to exercise all rights with respect to the Collateral as if it were the
sole and absolute owner thereof.

     (iii) The Agent shall have the right to assign, sell, lease or otherwise
dispose of and deliver all or any part of the Collateral, at public or private sale
or otherwise, either with or without special conditions or

- 10 -

 

stipulations, for cash or on credit or for future delivery, in such parcel or
parcels and at such time or times and at such place or places, and upon such terms
and conditions as shall be commercially reasonable, all without (except as shall be
required by applicable statute) advertisement or demand upon or notice to Debtor or
right of redemption of Debtor. Upon each such sale, lease, assignment or other
transfer of Collateral, the Agent may, unless prohibited by applicable law,
purchase all or any part of the Collateral being sold, free from and discharged of
all trusts, claims, right of redemption and equities of Debtor, which are hereby
waived and released.

     (iv) Intentionally Omitted.

     (v) The Agent may (but is not obligated to) transfer any or all Intellectual
Property registered in the name of Debtor at the United States Patent and Trademark
Office and/or Copyright Office into the name of the Agent or any designee or any
purchaser of any Collateral.

     (b) The Agent may comply with any applicable law in connection with a disposition of
Collateral and such compliance will not be considered adversely to affect the commercial
reasonableness of any sale of the Collateral. The Agent may sell the Collateral without
giving any warranties and may specifically disclaim such warranties. If the Agent sells
any of the Collateral on credit, the Debtor will only be credited with payments actually
made by the purchaser. In addition, Debtor waives any and all rights that it may have to a
judicial hearing in advance of the enforcement of any of the Agent’s rights and remedies
hereunder, including, without limitation, its right following an Event of Default to take
immediate possession of the Collateral and to exercise its rights and remedies with respect
thereto.

     (c) For the purpose of enabling the Agent to further exercise rights and remedies
under this Section 8 or elsewhere provided by agreement or applicable law, upon the
occurrence and during the continuance of any Event of Default, Debtor hereby grants to the
Agent, for the benefit of the Agent and the Secured Parties, an irrevocable, nonexclusive
license (exercisable without payment of royalty or other compensation to Debtor) to use,
license or sublicense any Intellectual Property, and wherever the same may be located, and
including in such license access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the compilation or
printout thereof.

     9. Applications of Proceeds. The proceeds of any such sale, lease or other disposition of the
Collateral hereunder shall be applied first, to the expenses of retaking, holding, storing,
processing and preparing for sale, selling, and the like (including, without limitation, any taxes,
fees and other costs incurred in connection therewith) of the Collateral, to the reasonable
attorneys’ fees and expenses incurred by the Agent or the Secured Parties in enforcing their rights
hereunder and in connection with collecting,

- 11 -

 

storing and disposing of the Collateral, and then to satisfaction of the Obligations pro rata among
the Secured Parties (based on then-outstanding principal amounts of Notes at the time of any such
determination), and to the payment of any other amounts required by applicable law, after which the
Agent on behalf of the Secured Parties shall pay to the Debtor any surplus proceeds. If, upon the
sale, license or other disposition of the Collateral, the proceeds thereof are insufficient to pay
all amounts to which the Secured Parties are legally entitled, the Debtor will be liable for the
deficiency, together with interest thereon, at the rate of 14% per annum or the lesser amount
permitted by applicable law (the “Default Rate”), and the reasonable fees of any attorneys employed
by the Secured Parties to collect such deficiency. To the extent permitted by applicable law,
Debtor waives all claims, damages and demands against the Agent and the Secured Parties arising out
of the repossession, removal, retention or sale of the Collateral, unless due solely to the gross
negligence or willful misconduct of the Secured Parties as determined by a final judgment (not
subject to further appeal) of a court of competent jurisdiction.

     10. Intentionally Omitted.

     11. Costs and Expenses. Debtor agrees to pay all reasonable out-of-pocket fees, costs and
expenses incurred in connection with any filing required hereunder, including without limitation,
any financing statements pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto, or upon and during the continuance of an Event of Default,
any expenses of any searches reasonably required by the Secured Parties. The Debtor will also,
upon demand, pay to the Secured Parties the amount of any and all reasonable expenses, including
the reasonable fees and expenses of its counsel and of any experts and agents, which the Secured
Parties may incur upon the occurrence and during the continuance of an Event of Default in
connection with (i) the enforcement of this Agreement, (ii) the custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Collateral, or (iii) the exercise
or enforcement of any of the rights of the Secured Parties under the Notes. Until so paid, any fees
payable hereunder shall be added to the principal amount of the Notes and shall bear interest at
the Default Rate.

     12. Responsibility for Collateral. The Debtor assumes all liabilities and responsibility in
connection with all Collateral, and the Obligations shall in no way be affected or diminished by
reason of the loss, destruction, damage or theft of any of the Collateral or its unavailability for
any reason. Without limiting the generality of the foregoing, (a) neither the Agent nor any
Secured Party (i) has any duty (either before or after an Event of Default) to collect any amounts
in respect of the Collateral or to preserve any rights relating to the Collateral, or (ii) has any
obligation to clean-up or otherwise prepare the Collateral for sale, and (b) Debtor shall remain
obligated and liable under each contract or agreement included in the Collateral to be observed or
performed by Debtor thereunder. Neither the Agent nor any Secured Party shall have any obligation
or liability under any such contract or agreement by reason of or arising out of this Agreement or
the receipt by the Agent or any Secured Party of any payment relating to any of the Collateral, nor
shall the Agent or any Secured Party be obligated in any manner to perform any of the obligations
of Debtor under or pursuant to any such

- 12 -

 

contract or agreement, to make inquiry as to the nature or sufficiency of any payment received by
the Agent or any Secured Party in respect of the Collateral or as to the sufficiency of any
performance by any party under any such contract or agreement, to present or file any claim, to
take any action to enforce any performance or to collect the payment of any amounts which may have
been assigned to the Agent or to which the Agent or any Secured Party may be entitled at any time
or times.

     13. Security Interest Absolute. All rights of the Agent and the Secured Parties and all
obligations of the Debtor hereunder, shall be absolute and unconditional, irrespective of: (a) any
lack of validity or enforceability of this Agreement, the Notes, the Obligations or any agreement
entered into in connection with the foregoing, or any portion hereof or thereof; (b) any change in
the time, manner or place of payment or performance of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure from the Notes or
any other agreement entered into in connection with the foregoing; (c) any exchange, release or
nonperfection of any of the Collateral, or any release or amendment or waiver of or consent to
departure from any other collateral for, or any guaranty, or any other security, for all or any of
the Obligations; (d) any action by the Agent or the Secured Parties to obtain, adjust, settle and
cancel in its sole discretion any insurance claims or matters made or arising in connection with
the Collateral; or (e) any other circumstance which might otherwise constitute any legal or
equitable defense available to Debtor, or a discharge of all or any part of the Security Interest
granted hereby. Until the Obligations shall have been paid and performed in full, the rights of
the Agent and the Secured Parties shall continue even if the Obligations are barred for any reason,
including, without limitation, the running of the statute of limitations or bankruptcy. Debtor
expressly waives presentment, protest, notice of protest, demand, notice of nonpayment and demand
for performance. In the event that at any time any transfer of any Collateral or any payment
received by the Agent or the Secured Parties hereunder shall be deemed by final order of a court of
competent jurisdiction to have been a voidable preference or fraudulent conveyance under the
bankruptcy or insolvency laws of the United States, or shall be deemed to be otherwise due to any
party other than the Agent or the Secured Parties, then, in any such event, Debtor’s obligations
hereunder shall survive cancellation of this Agreement, and shall not be discharged or satisfied by
any prior payment thereof and/or cancellation of this Agreement, but shall remain a valid and
binding obligation enforceable in accordance with the terms and provisions hereof. Debtor waives
all right to require the Agent or the Secured Parties to proceed against any other person or entity
or to apply any Collateral which the Agent or the Secured Parties may hold at any time, or to
marshal assets, or to pursue any other remedy. Debtor waives any defense arising by reason of the
application of the statute of limitations to any obligation secured hereby.

     14. Term of Agreement. This Agreement and the Security Interest shall terminate on the date
on which all payments of principal, accrued and unpaid interest and any other amounts due under the
Notes have been indefeasibly paid in full; provided, however, that all indemnities of the Debtor
contained in this Agreement (including, without limitation, Annex A hereto) shall survive and
remain operative and in full force and effect regardless of the termination of this Agreement.
Upon payment in full of all of

- 13 -

 

the outstanding principal amount of the Notes, together with all accrued and unpaid interest, and
any other amounts due under the Notes, the Agent shall prepare and file such Uniform Commercial
Code financing statement amendments, and shall prepare, execute and file such other documents or
instruments, as may be necessary to terminate of record and in fact any security interest in or
lien on the Collateral under this Agreement. Each Secured Party irrevocably agrees that the
Agent’s termination and release of any lien or security interest in the Collateral as provided in
this Section 14 shall constitute a full and complete termination and release or any and all right,
title and interest (including any lien or security interest) that such Secured Party may have or
claim in the Collateral and that any actions taken by Agent under this Section 14 shall be binding
on each Secured Party. The Secured Parties hereby irrevocably authorize and direct the Agent to
perform the Agent’s obligations under this Section 14 without any requirement or notice to, or
consent or authorization from, any Secured Party.

     15. Power of Attorney; Further Assurances.

     (a) Debtor authorizes the Agent, and does hereby make, constitute and appoint the
Agent and its officers, agents, successors or assigns with full power of substitution, as
such Debtor’s true and lawful attorney-in-fact, with power, in the name of the Agent, the
various Secured Parties or Debtor, to, after the occurrence and during the continuance of
an Event of Default, (i) endorse any note, checks, drafts, money orders or other
instruments of payment (including payments payable under or in respect of any policy of
insurance) in respect of the Collateral that may come into possession of the Agent or any
of the Secured Parties; (ii) to sign and endorse any financing statement pursuant to the
UCC or any invoice, drafts against debtors, assignments, verifications and notices in
connection with accounts, and other documents relating to the Collateral; (iii) to pay or
discharge taxes, liens, security interests or other encumbrances at any time levied or
placed on or threatened against the Collateral; (iv) to demand, collect, receipt for,
compromise, settle and sue for monies due in respect of the Collateral; (v) to transfer any
Intellectual Property or provide licenses respecting any Intellectual Property; and (vi)
generally, at the option of the Agent, and at the expense of the Debtor, at any time, or
from time to time, to execute and deliver any and all documents and instruments and to do
all acts and things which the Agent deems reasonably necessary to protect, preserve and
realize upon the Collateral and the Security Interest granted therein in order to effect
the intent of this Agreement and the Notes all as fully and effectually as the Debtor might
or could do; and Debtor hereby ratifies all that said attorney shall lawfully do or cause
to be done by virtue hereof. This power of attorney is coupled with an interest and shall
be irrevocable for the term of this Agreement and thereafter as long as any of the
Obligations shall be outstanding. The designation set forth herein shall be deemed to
amend and supersede any inconsistent provision in the Organizational Documents or other
documents or agreements to which Debtor is subject or to which Debtor is a party other than
those in favor of Silicon Valley Bank. Without limiting the generality of the foregoing,
upon and during the continuance of an Event of Default, the Agent is specifically
authorized to execute and file any applications

- 14 -

 

for or instruments of transfer and assignment of any patents, trademarks, copyrights
or other Intellectual Property with the United States Patent and Trademark Office and the
United States Copyright Office.

     (b) On a continuing basis, Debtor will file with the proper filing office in any
jurisdiction, including, without limitation, the jurisdictions indicated on Schedule
C attached hereto, all such instruments, and take all such action as may reasonably be
deemed necessary or advisable, or as reasonably requested by the Agent, to perfect the
Security Interest granted hereunder. Notwithstanding anything to the contrary set forth in
this Agreement or otherwise, (1) Debtor shall not be required to maintain or make any
filings to maintain any Collateral that Debtor deems to be not material to Debtor’s
business, and (2) Debtor shall not be required to make any filing other than the filing of
one or more financing statements under the UCC to perfect the Security Interest unless an
Event of Default has occurred and is continuing.

     (c) Upon the occurrence and during the continuance of any Event of Default, Debtor
hereby irrevocably appoints the Secured Parties as Debtor’s attorney-in-fact, with full
authority in the place and instead of Debtor and in the name of Debtor, in the Agent’s
discretion, to take any action and to execute any instrument which the Secured Parties may
deem necessary or advisable to accomplish the purposes of this Agreement, including the
filing, in its sole discretion, of one or more financing or continuation statements and
amendments thereto, relative to any of the Collateral without the signature of Debtor where
permitted by law, and ratifies all such actions taken by the Agent. This power of attorney
is coupled with an interest and shall be irrevocable for the term of this Agreement and
thereafter as long as any of the Obligations shall be outstanding.

     16. Notices. Any notice required or permitted by or in connection with this Agreement shall be
in writing and shall be made by facsimile, or by hand delivery, or by overnight delivery service,
or by certified mail, return receipt requested, postage prepaid, addressed to Agent or Debtor at
the appropriate address set forth below or to such other address as may be hereafter specified by
written notice given by Agent or Debtor. Notice shall be considered given as of the earlier of the
date of actual receipt, or the date of the facsimile transmission without error, or the date of
hand delivery, or one (1) business day after delivery to a nationally recognized overnight delivery
service, or three (3) business days after the date of mailing, independent of the date of actual
delivery or whether delivery is ever in fact made, as the case may be, provided the giver of notice
can establish that notice was given as provided herein.

	 	 	 	 	 
	 

	 	If to Agent:
	 	Bonanza Master Fund, Ltd.
	 

	 	 	 	300 Crescent Court, Suite 250
	 

	 	 	 	Dallas, Texas 75201

Attn: Bernay Box
	 

	 	 	 	Facsimile No.: 214-303-3950

- 15 -

 

	 	 	 	 	 
	 

	 	If to Debtor:
	 	Telecommunications Systems, Inc.
	 

	 	 	 	275 West Street
	 

	 	 	 	Annapolis, Maryland 21401
	 

	 	 	 	Attn: Chief Financial Officer
	 

	 	 	 	Facsimile No.: 410-263-7617

     17. Other Security. To the extent that the Obligations are now or hereafter secured by
property other than the Collateral or by the guarantee, endorsement or property of any other
person, firm, corporation or other entity, then the Agent or the Secured Parties shall have the
right, in their sole discretion, to pursue, relinquish, subordinate, modify or take any other
action with respect thereto, without in any way modifying or affecting any of the Agent’s or the
Secured Parties’ rights and remedies hereunder.

     18. Appointment of Agent. The Secured Parties hereby appoint Bonanza Master Fund, Ltd. to act
as their agent (“Bonanza” or “Agent”) for purposes of exercising any and all rights and
remedies of the Secured Parties hereunder. Such appointment shall continue until revoked in writing
by a Majority in Interest, at which time a Majority in Interest shall appoint a new Agent;
provided, that Bonanza may not be removed as Agent unless Bonanza shall then hold less than
$2,000,000 principal amount of Notes; provided further that such removal may occur only if each of
the other Secured Parties shall then hold not less than $2,000,000 principal amount of Notes. The
Agent shall have the rights, responsibilities and immunities set forth in Annex A hereto.

     19. Miscellaneous.

     (a) No course of dealing between the Debtor and the Secured Parties, nor any failure
to exercise, nor any delay in exercising, on the part of the Secured Parties, any right,
power or privilege hereunder or under the Notes shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder or
thereunder preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.

     (b) All of the rights and remedies of the Secured Parties with respect to the
Collateral, whether established hereby or by the Notes or by any other agreements,
instruments or documents or by law shall be cumulative and may be exercised singly or
concurrently.

     (c) This Agreement constitutes the entire agreement of the parties with respect to the
subject matter hereof and is intended to supersede all prior negotiations, understandings
and agreements with respect thereto. Except as specifically set forth in this Agreement, no
provision of this Agreement may be modified or amended except by a written agreement
specifically referring to this Agreement and signed by a Majority in Interest and Debtor.

- 16 -

 

     (d) In the event any provision of this Agreement is held to be invalid, prohibited or
unenforceable in any jurisdiction for any reason, unless such provision is narrowed by
judicial construction, this Agreement shall, as to such jurisdiction, be construed as if
such invalid, prohibited or unenforceable provision had been more narrowly drawn so as not
to be invalid, prohibited or unenforceable. If, notwithstanding the foregoing, any
provision of this Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to the extent
of such invalidity, prohibition or unenforceability without invalidating the remaining
portion of such provision or the other provisions of this Agreement and without affecting
the validity or enforceability of such provision or the other provisions of this Agreement
in any other jurisdiction.

     (e) No waiver of any breach or default or any right under this Agreement shall be
considered valid unless in writing and signed by a Majority in Interest and the Debtor, and
no such waiver shall be deemed a waiver of any subsequent breach or default or right,
whether of the same or similar nature or otherwise.

     (f) This Agreement shall be binding upon and inure to the benefit of each party
hereto and its successors and assigns.

     (g) Intentionally Omitted.

     (h) All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Debtor agrees that all proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by this Agreement
and the Notes (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, partners, members, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New York,
Borough of Manhattan. Debtor hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any proceeding, any claim that it is not personally subject to the jurisdiction
of any such court, that such proceeding is improper. Each party hereto hereby irrevocably
waives personal service of process and consents to process being served in any such
proceeding by mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices to it under
this Agreement and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in any way
any

- 17 -

 

right to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If any party shall commence a proceeding to enforce any
provisions of this Agreement, then the prevailing party in such proceeding shall be
reimbursed by the other party for its reasonable attorney’s fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such proceeding.

     (i) This Agreement may be executed in any number of counterparts, each of which when
so executed shall be deemed to be an original and, all of which taken together shall
constitute one and the same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding obligation of the party
executing (or on whose behalf such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof.

     (j) Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured
Parties and their respective partners, members, shareholders, officers, directors,
employees and agents (collectively, “Indemnitees”) from and against any and all
losses, claims, liabilities, damages, penalties, suits, costs and expenses, of any kind or
nature, (including fees relating to the cost of investigating and defending any of the
foregoing) imposed on, incurred by or asserted against such Indemnitee in any way related
to or arising from or alleged to arise from this Agreement or the Collateral, except any
such losses, claims, liabilities, damages, penalties, suits, costs and expenses which
result from the gross negligence or willful misconduct of the Indemnitee as determined by a
final, nonappealable decision of a court of competent jurisdiction. This indemnification
provision is in addition to, and not in limitation of, any other indemnification provision
in the Notes, the Purchase Agreement (as such term is defined in the Notes) or any other
agreement, instrument or other document executed or delivered in connection herewith or
therewith.

[SIGNATURE PAGES FOLLOW]

- 18 -

 

     IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed
on the day and year first above written.

	 	 	 	 	 	 	 
	TeleCommunication Systems, Inc.	 	 
	 
	 	 	 	 	 	 
	By:	 	/s/ Thomas M. Brandt, Jr.	 	 
	 	 	 	 	 
	 	 	Name: Thomas M. Brandt, Jr.	 	 
	 	 	Title: Senior Vice President and Chief Financial Officer
	 

	 	 	 		 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Bonanza Master Fund, Ltd., as Agent	 	 
	 
	 	 	 	 	 	 
	By:	 	/s/ Brian Ladin	 	 
	 	 	 	 	 
	 	 	Name: Brian Ladin	 	 
	 	 	Title: Partner	 	 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

- 19 -

 

[SIGNATURE PAGE OF SECURED PARTIES TO TSYS SA]

	 	 	 
	 

	 	Name of Investing Entity: Bonanza Master Fund, Ltd.

Signature of Authorized Signatory of Investing entity: /s/ Brian Ladin                    
	 

	 	Name of Authorized Signatory: Brian Ladin                    
	 

	 	Title of Authorized Signatory: Partner                    

- 20 -

 

[SIGNATURE PAGE OF SECURED PARTIES TO TSYS SA]

	 	 	 	 	 	 	 
	 	 	 	 	HHMI Investments, L.P.
	 	 	By:	 	  WS Capital Management, L.P.,
	 	 	 	 	Investment Manager
	 	 	 	 	By: WS Capital, L.L.C., General Partner
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Reid S. Walker
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Name: Reid S. Walker
	 

	 	 	 	 	 	
	 

	 	 	 	 	 	Title: Member

- 21 -

 

[SIGNATURE PAGE OF SECURED PARTIES TO TSYS SA]

	 	 	 	 	 	 	 
	 	 	 	 	Walker Smith International Fund, Ltd.
	 

	 	By:
	 	  WS
	 	Capital Management, L.P.,
	 	 	 	 	Attorney-in-fact
	 	 	 	 	By: WS Capital, L.L.C., General Partner
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Reid S. Walker
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Name: Reid S. Walker
	 

	 	 	 	 	 	
	 

	 	 	 	 	 	Title: Member

- 22 -

 

[SIGNATURE PAGE OF SECURED PARTIES TO TSYS SA]

	 	 	 	 	 	 	 
	 	 	 	 	Walker Smith Capital, L.P.
	 	 	By:	 	     WS Capital Management, L.P., General Partner
	 	 	 	 	By: WS Capital, L.L.C., General Partner
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Reid S. Walker
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Name: Reid S.  Walker
	 

	 	 	 	 	 	Title: Member

- 23 -

 

[SIGNATURE PAGE OF SECURED PARTIES TO TSYS SA]

	 	 	 	 	 	 	 
	 	 	 	 	Walker Smith Capital (Q.P.), L.P.
	 	 	By:	 	  WS Capital Management, L.P., General Partner
	 	 	 	 	By: WS Capital, L.L.C., General Partner
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Reid S. Walker
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Name: Reid S. Walker
	 

	 	 	 	 	 	Title: Member

- 24 -

 

[SIGNATURE PAGE OF SECURED PARTIES TO TSYS SA]

	 	 	 	 	 	 	 
	 	 	 	 	SRB Greenway Capital, L.P.
	 	 	By:	 	  SRB Management, L.P., General Partner
	 	 	 	 	By: BC Advisors, L.L.C., General
	 	 	 	 	          Partner
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Steven R. Becker
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Name: Steven R. Becker
	 

	 	 	 	 	 	Title: Member

- 25 -

 

[SIGNATURE PAGE OF SECURED PARTIES TO TSYS SA]

	 	 	 	 	 	 	 
	 	 	 	 	SRB Greenway Capital QP, L.P.
	 	 	By:	 	  SRB Management, L.P., General Partner
	 	 	 	 	By: BC Advisors,
L.L.C., General Partner
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Steven R. Becker
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Name: Steven R. Becker
	 

	 	 	 	 	 	Title: Member

-26-

 

[SIGNATURE PAGE OF SECURED PARTIES TO TSYS SA]

	 	 	 	 	 	 	 
	 	 	 	 	SRB Greenway Offshore Operating
	 	 	 	 	Fund, L.P.
	 	 	By:	 	  SRB Management, L.P., General Partner
	 	 	 	 	By: BC Advisors, L.L.C., General Partner
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Steven R. Becker
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Name: Steven R. Becker
	 

	 	 	 	 	 	Title: Member

- 27 -

 

ANNEX A

to

SECURITY

AGREEMENT

THE AGENT

          1. Appointment. The Secured Parties (all capitalized terms used herein and not otherwise
defined shall have the respective meanings provided in the Security Agreement to which this Annex A
is attached (the “Agreement”)), by their acceptance of the benefits of the Agreement,
hereby designate Bonanza Capital Partners, Ltd. (“Bonanza” or “Agent”) as the Agent
to act as specified herein and in the Agreement. Each Secured Party shall be deemed irrevocably to
authorize the Agent to take such action on its behalf under the provisions of the Agreement and any
other Transaction Document (as such term is defined in the Notes) and to exercise such powers and
to perform such duties hereunder and thereunder as are specifically delegated to or required of the
Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto.
The Agent may perform any of its duties hereunder by or through its agents or employees.

          2. Nature of Duties. The Agent shall have no duties or responsibilities except those
expressly set forth in the Agreement. Neither the Agent nor any of its partners, members,
shareholders, officers, directors, employees or agents shall be liable for any action taken or
omitted by it as such under the Agreement or hereunder or in connection herewith or therewith, be
responsible for the consequence of any oversight or error of judgment or answerable for any loss,
unless caused solely by its or their gross negligence or willful misconduct as determined by a
final judgment (not subject to further appeal) of a court of competent jurisdiction. The duties of
the Agent shall be mechanical and administrative in nature; the Agent shall not have by reason of
the Agreement or any other Transaction Document a fiduciary relationship in respect of any Debtor
or any Secured Party; and nothing in the Agreement or any other Transaction Document, expressed or
implied, is intended to or shall be so construed as to impose upon the Agent any obligations in
respect of the Agreement or any other Transaction Document except as expressly set forth herein and
therein.

          3. Lack of Reliance on the Agent. Independently and without reliance upon the Agent, each
Secured Party, to the extent it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of the Company and its
subsidiaries in connection with such Secured Party’s investment in the Debtor, the creation and
continuance of the Obligations, the transactions contemplated by the Transaction Documents, and the
taking or not taking of any action in connection therewith, and (ii) its own appraisal of the
creditworthiness of the Company and its subsidiaries, and of the value of the Collateral from time
to time,

- 28 -

 

and the Agent shall have no duty or responsibility, either initially or on a continuing basis, to
provide any Secured Party with any credit, market or other information with respect thereto,
whether coming into its possession before any Obligations are incurred or at any time or times
thereafter. The Agent shall not be responsible to the Debtor or any Secured Party for any
recitals, statements, information, representations or warranties herein or in any document,
certificate or other writing delivered in connection herewith, or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of the
Agreement or any other Transaction Document, or for the financial condition of the Debtor or the
value of any of the Collateral, or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of the Agreement or any
other Transaction Document, or the financial condition of the Debtor, or the value of any of the
Collateral, or the existence or possible existence of any default or Event of Default under the
Agreement, the Notes or any of the other Transaction Documents.

          4. Certain Rights of the Agent. The Agent shall have the right to take any action with
respect to the Collateral, on behalf of all of the Secured Parties. To the extent practical, the
Agent shall request instructions from the Secured Parties with respect to any material act or
action (including failure to act) in connection with the Agreement or any other Transaction
Document, and shall be entitled to act or refrain from acting in accordance with the instructions
of Secured Parties holding a majority in principal amount of Notes (based on then-outstanding
principal amounts of Notes at the time of any such determination); if such instructions are not
provided despite the Agent’s request therefor, the Agent shall be entitled to refrain from such act
or taking such action, and if such action is taken, shall be entitled to appropriate
indemnification from the Secured Parties in respect of actions to be taken by the Agent; and the
Agent shall not incur liability to any person or entity by reason of so refraining. Without
limiting the foregoing, (a) no Secured Party shall have any right of action whatsoever against the
Agent as a result of the Agent acting or refraining from acting hereunder in accordance with the
terms of the Agreement or any other Transaction Document, and the Debtor shall have no right to
question or challenge the authority of, or the instructions given to, the Agent pursuant to the
foregoing and (b) the Agent shall not be required to take any action which the Agent believes (i)
could reasonably be expected to expose it to personal liability or (ii) is contrary to this
Agreement, the Transaction Documents or applicable law.

          5. Reliance. The Agent shall be entitled to rely, and shall be fully protected in relying,
upon any writing, resolution, notice, statement, certificate, telex, teletype or telecopier
message, cablegram, radiogram, order or other document or telephone message signed, sent or made by
the proper person or entity, and, with respect to all legal matters pertaining to the Agreement and
the other Transaction Documents and its duties thereunder, upon advice of counsel selected by it
and upon all other matters pertaining to this Agreement and the other Transaction Documents and its
duties thereunder, upon advice of other experts selected by it.

- 29 -

 

          6. Indemnification. To the extent that the Agent is not reimbursed and indemnified by the
Debtor, the Secured Parties will jointly and severally reimburse and indemnify the Agent, in
proportion to their initially purchased respective principal amounts of Notes, from and against any
and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in performing its duties hereunder or under the Agreement or any other
Transaction Document, or in any way relating to or arising out of the Agreement or any other
Transaction Document except for those determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction to have resulted solely from the Agent’s own gross
negligence or willful misconduct. Prior to taking any action hereunder as Agent, the Agent may
require each Secured Party to deposit with it sufficient sums as it determines in good faith is
necessary to protect the Agent for costs and expenses associated with taking such action.

          7. Resignation by the Agent.

     (a) The Agent may resign from the performance of all its functions and duties under
the Agreement and the other Transaction Documents at any time by giving 30 days’ prior
written notice (as provided in the Agreement) to the Debtor and the Secured Parties. Such
resignation shall take effect upon the appointment of a successor Agent pursuant to clauses
(b) and (c) below.

     (b) Upon any such notice of resignation, the Secured Parties, acting by a Majority in
Interest, shall appoint a successor Agent hereunder.

     (c) If a successor Agent shall not have been so appointed within said 30-day period,
the Agent shall then appoint a successor Agent who shall serve as Agent until such time, if
any, as the Secured Parties appoint a successor Agent as provided above. If a successor
Agent has not been appointed within such 30-day period, the Agent may petition any court of
competent jurisdiction or may interplead the Debtor and the Secured Parties in a proceeding
for the appointment of a successor Agent, and all fees, including, but not limited to,
extraordinary fees associated with the filing of interpleader and expenses associated
therewith, shall be payable by the Debtor on demand.

          8. Rights with respect to Collateral. Each Secured Party agrees with all other Secured
Parties and the Agent (i) that it shall not, and shall not attempt to, exercise any rights with
respect to its security interest in the Collateral, whether pursuant to any other agreement or
otherwise (other than pursuant to this Agreement), or take or institute any action against the
Agent or any of the other Secured Parties in respect of the Collateral or its rights hereunder
(other than any such action arising from the breach of this Agreement) and (ii) that such Secured
Party has no other rights with respect to the Collateral other than as set forth in this Agreement
and the other Transaction Documents.

- 30 -

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