8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

August 30, 2004

Date of Report
(Date of earliest event reported)

TeleCommunication Systems, Inc.
(Exact name of registrant as specified in its charter)

Maryland	0-30821	52-1526369
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

275 West Street, Annapolis, Maryland 21401
(Address of principal executive offices)                     (Zip code)

Registrant’s telephone number, including area code: (410) 263-7616

N/A
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[     ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[     ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[     ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[     ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 3 — Securities and Trading Markets

Item 3.02. Unregistered Sales of Equity Securities

     On August 30, 2004, the registrant entered into definitive agreements to issue and sell to two institutional investors 2,500,000 shares of its Class A common stock, par value $0.01 per share (the “Common Stock”) for aggregate consideration of $10.0 million, subject to customary conditions to closing.

     Also on August 30, 2004, the registrant and the holder of a subordinated convertible debenture issued by the registrant with a face amount of $15 million (issued in January 2004 in connection with the registrant’s acquisition of its Enterprise Division assets from Aether Systems, Inc.) (the “Debenture”) entered into definitive agreements pursuant to which: (1) the holder of the Debenture will become obligated to convert the entire $15 million principal amount into shares of Common Stock by the end of 2004 and (2) all of the material restrictive covenants contained in the Debenture will be nullified in exchange for $1 million and an additional 200,000 shares of Common Stock. The registrant and the holder of the Debenture agreed that, in lieu of the issuance of an additional 200,000 shares of Common Stock, the conversion price set forth in the Debenture would be decreased from $5.3753 to $5.01581.

     Closing for the transactions described above took place on August 31, 2004.

     The shares of Common Stock described above were issued pursuant to the exemption provided under Section 4(2) of the Securities Act of 1933, as amended.

     Attached hereto as exhibits are copies of the transaction documents as well as copies of the press releases related to the execution of the transaction documents and the closing of the transactions described above.

Section 9 — Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits

(a)	Financial statements of business acquired
	None
(b)	Pro forma financial information
	None
(c)	Exhibits

Exhibit No.	Description
10.1	Securities Purchase Agreement dated as of August 30, 2004 by and among the registrant and the investors party thereto (the “Securities Purchase Agreement”)
10.2	Registration Rights Agreement dated as of August 30, 2004 by and among the registrant and the investors party thereto.
10.3	Waiver Agreement dated as of August 30, 2004 by and among the registrant and the investors party thereto.
10.4	Side Letter to the Securities Purchase Agreement
99.1	Press release (Execution)
99.2	Press release (Closing)

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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

Date: September 1, 2004

EXHIBIT INDEX

Exhibit No.	Description
10.1	Securities Purchase Agreement dated as of August 30, 2004 by and among the registrant and the investors party thereto (the “Securities Purchase Agreement”)
10.2	Registration Rights Agreement dated as of August 30, 2004 by and among the registrant and the investors party thereto.
10.3	Waiver Agreement dated as of August 30, 2004 by and among the registrant and the investors party thereto.
10.4	Side Letter to the Securities Purchase Agreement
99.1	Press release (Execution)
99.2	Press release (Closing)

EX-10.1

Exhibit 10.1

EXECUTION VERSION

SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (this “Agreement”) is dated as of August 30, 2004, among TeleCommunication Systems, Inc., a Maryland corporation (the “Company”), and the investors identified on the signature pages hereto (each, an “Investor” and collectively, the “Investors”).

     WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act (as defined below) and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Investor, and each Investor, severally and not jointly, desires to purchase from the Company certain securities of the Company, as more fully described in this Agreement; and

     WHEREAS, subject to the terms and conditions set forth in this Agreement, the Investor so identified on its signature page hereto (the “Designated Investor”) desires to make certain amendments to the terms and conditions of that certain Subordinated Convertible Debenture issued by the Company to it on January 13, 2004 (the “Debenture”).

     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Investors agree as follows:

ARTICLE I.
DEFINITIONS

     1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms shall have the meanings indicated in this Section 1.1:

          “Action” means any action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation pending or threatened in writing against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency, regulatory authority (federal, state, county, local or foreign), stock market, stock exchange or trading facility.

          “Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144.

          “Business Day” means any day except Saturday, Sunday and any day which is a federal legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

          “Closing” means the closing of the purchase and sale of the Securities pursuant to Article II.

          “Closing Date” means the Business Day immediately following the date on which all of the conditions set forth in Sections 6.1 and 6.2 hereof are satisfied, or such other date as the parties may agree in writing.

          “Commission” means the Securities and Exchange Commission.

          “Common Stock” means the Class A common stock of the Company, par value $0.01 per share, and any securities into which such common stock may hereafter be reclassified.

          “Common Stock Equivalents” means any securities of the Company or any Subsidiary which entitle the holder thereof to acquire Common Stock at any time, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock or other securities that entitle the holder to receive, directly or indirectly, Common Stock.

          “Company Counsel” means Piper Rudnick LLP.

          “Company Deliverables” has the meaning set forth in Section 2.2(a).

          “Disclosure Materials” has the meaning set forth in Section 3.1(h).

          “Effective Date” means the date that the Registration Statement required by Sections 2(a) or 2(b) of the Registration Rights Agreement is first declared effective by the Commission.

          “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          “GAAP” means U.S. generally accepted accounting principles applied on a consistent basis during the periods involved.

          “Investment Amount” means, with respect to each Investor, the Investment Amount indicated on such Investor’s signature page to this Agreement.

          “Investor Deliverables” has the meaning set forth in Section 2.2(b).

          “Investor Party” has the meaning set forth in Section 4.7.

          “Lien” means any lien, charge, encumbrance, security interest, right of first refusal or other restrictions of any kind; other than restrictions on transfer of securities arising under federal or state securities laws and regulations.

          “Material Adverse Effect” means any of (i) a material and adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material and adverse effect on the results of operations, assets, prospects, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) an adverse impairment

to the Company’s ability to perform on a timely basis its obligations under any Transaction Document.

          “New York Courts” means the state and federal courts sitting in the City of New York, Borough of Manhattan.

          “Per Share Purchase Price” equals $4.00.

          “Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

          “Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale by the Investors of the Shares.

          “Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date of this Agreement, among the Company and the Investors, in the form of Exhibit B hereto

          “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.

          “SEC Reports” has the meaning set forth in Section 3.1(h).

          “Securities” means the Shares.

          “Securities Act” means the Securities Act of 1933, as amended.

          “Shares” means the shares of Common Stock issued or issuable to the Investors pursuant to this Agreement.

          “Short Sales” include, without limitation, all “short sales” as defined in Rule 3b-3 of the Exchange Act (or any successor thereto) and include, without limitation, all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, short sales, swaps and similar arrangements (including on a total return basis), and sales and other transactions through non-US broker dealers or foreign regulated brokers.

          “Subsidiary” means any subsidiary of the Company listed on Schedule 3.1(a) hereto.

          “Trading Day” means (i) a day on which the Common Stock is traded on a Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any Trading Market, a day on which the Common Stock is

quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

          “Trading Market” means whichever of the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market or The Nasdaq SmallCap Market on which the Common Stock is listed or quoted for trading on the date in question.

          “Transaction Documents” means this Agreement, the Registration Rights Agreement and the Waiver Agreement dated as of the date hereof by and between the Company and certain of the Investors.

          “Waiver Agreement” means the Waiver Agreement, dated as of the date of this Agreement, among the Company and certain of the Investors, in the form of Exhibit C hereto.

ARTICLE II.
PURCHASE AND SALE

     2.1 Closing. Subject to the terms and conditions set forth in this Agreement, at the Closing the Company shall issue and sell to each Investor, and each Investor shall, severally and not jointly, purchase from the Company, the Shares representing such Investor’s Investment Amount. The Closing shall take place at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, NY 10022 on the Closing Date or at such other location or time as the parties may agree.

     2.2 Closing Deliveries. (a) At the Closing, the Company shall deliver or cause to be delivered the following (the “Company Deliverables”):

               (i) to each Investor other than the Designated Investor a facsimile copy of a certificate evidencing a number of Shares equal to such Investor’s Investment Amount divided by the Per Share Purchase Price, registered in the name of such Investor (provided that originals of the same are delivered pursuant to the terms of Section 4);

               (ii) to the Designated Investor, as consideration for the covenants, agreements and amendments set forth in Article V hereof, (A) a facsimile copy of a certificate evidencing a number of Shares equal to the sum of (x) such Investor’s Investment Amount divided by the Per Share Purchase Price and (y) 200,000 shares of Common Stock, registered in the name of such Investor (provided that originals of the same are delivered pursuant to the terms of Section 4.12) and (B) $1,000,000 by wire transfer of immediately available funds (the “Designated Investor Cash Consideration”) to the account or accounts specified by the Designated Investor in writing (provided that, at the Designated Investor’s option, the Designated Investor may chose to offset the Designated Investor Cash Consideration against the dollar amount deliverable by such Investor pursuant to clause (b)(i) of this Section);

               (iii) the legal opinion of Company Counsel, in substantially the form attached hereto as Exhibit B, addressed to the Investors;

               (iv) the Registration Rights Agreement, duly executed by the Company; and

               (v) the Waiver Agreement, duly executed by the Company; and

          (b) At the Closing, each Investor shall deliver or cause to be delivered to the Company the following (the “Investor Deliverables”):

               (i) its Investment Amount, in United States dollars and in immediately available funds, by wire transfer to the account or accounts designated in writing by the Company for such purpose (provided that, at the Designated Investor’s option, the Designated Investor may chose to apply the Designated Investor Cash Consideration against its Investment Amount; and provided, further that, the Designated Investor may apply the interest payment described in Section 5.2(a) against its Investment Amount in accordance with that section);

               (ii) the Registration Rights Agreement, duly executed by such Investor; and

               (iii) the Waiver Agreement, duly executed by such Investor.

ARTICLE III.
REPRESENTATIONS AND WARRANTIES

     3.1 Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to each Investor:

          (a) Subsidiaries. The Company has no direct or indirect subsidiaries other than the Subsidiaries. Except as disclosed in Schedule 3.1(a), the Company owns, directly or indirectly, all of the capital stock of each Subsidiary free and clear of any and all Liens, and all the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights under the Company’s Amended and Restated Articles of Incorporation (the “Charter”), the Maryland General Corporation Law (the “MGCL”) or any contract to which the Company is a party. Neither the Company nor any Subsidiary is party to any joint venture, nor has any ownership interest in any other entity other than as disclosed on Schedule 3.1(a) and in the SEC Reports.

          (b) Organization and Qualification. The Company and each Subsidiary are duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and its Subsidiaries is duly qualified to conduct its respective business and is in good standing as a foreign corporation or other entity in each jurisdiction in

which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, has not had or could not reasonably be expected to result in a Material Adverse Effect, either individually or in the aggregate.

          (c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company in connection therewith. Each Transaction Document has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies, (ii) laws relating to the availability of specific performance, injunctive relief or other equitable principles of general application or (iii) with respect to the indemnification provisions of the Registration Rights Agreement, public policy.

          (d) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, 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 a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as has not had or could not reasonably be expected to result in a Material Adverse Effect, either individually or in the aggregate.

          (e) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority, regulatory authority, stock market, stock exchange or trading facility or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) the filing with the Commission of one or more Registration Statements in accordance with the terms and conditions of the Registration Rights Agreement, (ii) filings required by state securities laws, (iii) the filing of a Notice of Sale of Securities on Form D with

the Commission under Regulation D of the Securities Act (iv) the filings required in accordance with Section 4.5, (iv) the filing of a Notification of Listing of Additional Shares with The Nasdaq Stock Market and (v) those that have been made or obtained prior to the date of this Agreement.

          (f) Issuance of the Securities. The Securities have been duly authorized and, when issued and paid for in accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens.

          (g) Capitalization. As of the date hereof, the authorized capital stock of the Company consists of (x) 225,000,000 shares of Common Stock, of which 24,735,590 are issued and outstanding, 75,000,000 shares of Class B Common Stock, of which 8,756,101 are issued and outstanding, 16,296,757 shares of Common Stock are reserved for issuance pursuant to the Company’s stock option and purchase plans and 19,154 shares of Common Stock are reserved for issuance pursuant to securities (other than the Debentures and the Warrants to Purchase Common Stock of the Company issued on January 13, 2004 pursuant to the 2003 Securities Purchase Agreement (collectively, the “Warrants”)) exercisable or exchangeable for, or convertible into, shares of Common Stock, and (y) no shares of preferred stock. All of such outstanding shares have been, or upon issuance will be, validly issued and are fully paid and nonassessable. Except as set forth on
Schedule 3.1(g), no securities of the Company are entitled to preemptive or similar rights, and no Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents under the Charter, the MGCL or any contract to which the Company is a party except for the participation rights granted to the investors party to that certain Securities Purchase Agreement dated as of December 18, 2003 (the “2003 Securities Purchase Agreement”). Except as specified in the SEC Reports or on Schedule 3.1(g), there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. The issue and sale of the Securities will not, immediately or with the passage of time, obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Investors) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under such securities other than pursuant to the terms of (A) that certain Subordinated Convertible Debenture issued on January 13, 2004 to The Riverview Group LLC and (B) the Warrants.

          (h) SEC Reports; Financial Statements. The Company has filed all reports required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof (or such shorter period as the Company was required by law to file such reports) (the foregoing materials being collectively referred to herein as the “SEC Reports” and, together with the Schedules to this Agreement, the “Disclosure Materials”) on a timely basis or has timely filed a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with

the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except to the extent that such SEC Reports may have been subsequently amended or supplemented to correct such misstatement or omission. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with GAAP applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

          (i) Press Releases. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made and when made, not misleading.

          (j) Material Changes. Since the date of the latest audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003, except as specifically disclosed in the SEC Reports or subsequent press releases, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables, accrued expenses and other liabilities incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting or the identity of its auditors, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans. The Company does not have pending before the Commission any request for confidential treatment of information.

          (k) Litigation. There is no Action which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) except as specifically disclosed in the SEC Reports, has had or could, if there were an unfavorable decision to the Company, reasonably be expected to result in a Material Adverse Effect, either individually or in the aggregate. Neither the Company nor any Subsidiary, nor any director or officer thereof (in his or her capacity as such), is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty, except as specifically disclosed in the SEC Reports. There has not been, and to the knowledge of the Company there is not pending any investigation by the

Commission involving the Company or any current or former director or officer of the Company (in his or her capacity as such). The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

          (l) Labor Relations. No material labor dispute exists or, to the knowledge of the Company is imminent with respect to any of the employees of the Company.

          (m) Compliance. Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental or regulatory authority, stock market, stock exchange or trading facility, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except as have not, individually or in the aggregate, had or could not reasonably be expected to result in a Material Adverse Effect. The Company is in compliance with all effective requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations thereunder, that are applicable to it, except where such noncompliance has not had or could not reasonably be expected to result in a Material Adverse Effect.

          (n) Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits has not had or could not reasonably be expected to result in a Material Adverse Effect, either individually or in the aggregate, and neither the Company nor any Subsidiary has received any notice of any Action relating to the revocation or modification of any such permits.

          (o) Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them that is material to their respective businesses and good and marketable title in all personal property owned by them that is material to their respective businesses, in each case free and clear of all Liens, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company and the Subsidiaries are in compliance, except as has not had or could not reasonably be expected to result in a Material Adverse Effect, either individually or in the aggregate.

          (p) Patents and Trademarks. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks,

trade names, copyrights, licenses and other similar rights that are necessary or material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have has, individually or in the aggregate, had or could reasonably be expected to result in a Material Adverse Effect (collectively, the “Intellectual Property Rights”). Neither the Company nor any Subsidiary has received a written notice that the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person, except where such infringement has not had or could not reasonably be expected to have a Material Adverse Effect. Except as set forth in the SEC Reports, to the knowledge of the Company all such Intellectual Property Rights are enforceable and, to the knowledge of the Company there is no existing infringement by another Person of any of the Intellectual Property Rights.

          (q) Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged. The Company has no reason to believe that it will not be able to renew its and the Subsidiaries’ existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business on terms consistent with market for the Company’s and such Subsidiaries’ respective lines of business.

          (r) Transactions With Affiliates and Employees. Except as set forth in the SEC Reports, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case that would be required to be disclosed now or in the future in the SEC Reports pursuant to the requirements of Item 404 of Regulation S-K promulgated under the Securities Act.

          (s) Internal Accounting Controls. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company, including its Subsidiaries, is made known to the certifying officers by others within those entities, particularly during the period in which the Company’s Form 10-K or 10-Q, as the case may be, is being prepared. The Company’s certifying officers have evaluated the effectiveness of the Company’s controls and procedures in accordance with

Item 307 of Regulation S-K under the Exchange Act for the Company’s most recently ended fiscal quarter or fiscal year-end (such date, the “Evaluation Date”). The Company presented in its most recently filed Form 10-K or Form 10-Q the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no significant changes in the Company’s internal controls (as such term is described in Item 308(c) of Regulation S-K under the Exchange Act) or, to the Company’s knowledge, in other factors that could significantly affect the Company’s internal controls.

          (t) Certain Fees. Except as described in Schedule 3.1(t), no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. The Investors shall have no obligation with respect to any fees or with respect to any claims (other than such fees or commissions owed by an Investor pursuant to written agreements executed by such Investor which fees or commissions shall be the sole responsibility of such Investor) made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement.

          (u) Investment Company. The Company is not, and is not an Affiliate of, and immediately following the Closing will not have become, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

          (v) Certain Registration Matters. Assuming the accuracy of the Investors’ representations and warranties set forth in Section 3.2(b)-(e), no registration under the Securities Act is required for the offer and sale of the Shares by the Company to the Investors under the Transaction Documents. The Company is eligible to register the resale of its Common Stock by the Investors on Form S-3 promulgated under the Securities Act. Except as specified in Schedule 3.1(v), the Company has not granted or agreed to grant to any Person any rights (including “piggy-back” registration rights) to have any securities of the Company registered with the Commission or any other governmental authority that have not been satisfied.

          (w) Listing and Maintenance Requirements. Except as specified in the SEC Reports, the Company has not, in the two years preceding the date hereof, received notice from any Trading Market to the effect that the Company is not in compliance with the listing or maintenance requirements thereof, and the Company has no reason to believe that it will not continue to be in compliance with such requirements in the immediately foreseeable future. The Company is in compliance with the listing and maintenance requirements for continued listing or quotation of the Common Stock on the Trading Market on which the Common Stock is currently listed or quoted. The issuance and sale of the Securities under the Transaction Documents does not contravene the rules and regulations of the Trading Market on which the Common Stock is currently listed or quoted, and no approval of the shareholders of the Company thereunder is required for the Company to issue and deliver to the Investors the Securities contemplated by Transaction Documents.

          (x) Application of Takeover Protections. The Company has taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Charter or the laws of its state of incorporation that is or could become applicable to the Investors as a result of the Investors and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation the Company’s issuance of the Securities and the Investors’ ownership of the Securities.

          (y) No Additional Agreements. The Company does not have any agreement or understanding with any Investor with respect to the transactions contemplated by the Transaction Documents other than as specified in the Transaction Documents.

          (z) Disclosure. The Company confirms that neither it nor any Person acting on its behalf has provided any Investor or its agents or counsel with any information that the Company believes constitutes material, non-public information except insofar as the existence and terms of the proposed transactions hereunder may constitute such information. The Company understands and confirms that the Investors will rely on the foregoing representations and the covenants set forth elsewhere in this Agreement in effecting transactions in the Common Stock. The Company’s representations and warranties set forth in this Agreement are true and correct and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

          (aa) Solvency. Based on the financial condition of the Company as of the Closing Date (and assuming that the Closing shall have occurred), (i) the Company’s fair saleable value of its assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature; (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business for the current fiscal year as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, and projected capital requirements and capital availability thereof; and (iii) the current cash flow of the Company, together with the proceeds the Company would receive at the Closing, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its debt when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt).

The Investors acknowledge that the Company does not make and has not made any representations, warranties or agreements with respect to the transactions contemplated hereby other than those specifically set forth in the Transaction Documents.

     3.2 Representations and Warranties of the Investors. Each Investor hereby, for itself and for no other Investor, represents and warrants to the Company as follows (except in the case

of Section 3.2(k) which contains only the representations and warranties of the Designated Investor):

          (a) Organization; Authority. Such Investor is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the applicable Transaction Documents and otherwise to carry out its obligations thereunder. The execution, delivery and performance by such Investor of the transactions contemplated by this Agreement has been duly authorized by all necessary corporate or, if such Investor is not a corporation, such partnership, limited liability company or other applicable like action, on the part of such Investor. Each of the Transaction Documents has been duly executed by such Investor, and when delivered by such Investor in accordance with terms hereof, will constitute the valid and legally binding obligation of such Investor, enforceable against it in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies, (ii) laws relating to the availability of specific performance, injunctive relief or other equitable principles of general application or (iii) with respect to the indemnification provisions of the Registration Rights Agreement, public policy.

          (b) Investment Intent. Such Investor is acquiring the Securities as principal for its own account for investment purposes only and not with a view to or for distributing such Securities or any part thereof in violation of applicable federal and state securities laws; provided, however that such representation is made without prejudice, to such Investor’s right at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state securities laws. Nothing contained herein shall be deemed a representation or warranty by such Investor to hold the Securities for any period of time. Such Investor is acquiring the Securities hereunder in the ordinary course of its business. Such Investor does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities.

          (c) Investor Status. At the time such Investor was offered the Securities, it was, and at the date hereof it is an “accredited investor” as defined in Rule 501(a) under the Securities Act. Such Investor is not a registered broker-dealer under Section 15 of the Exchange Act.

          (d) Reliance on Exemptions. Such Investor understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of U.S. federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Investor’s compliance with, the representations, warranties, agreements, acknowledgements and understandings of the Investor set forth in this Section 3.2 in order to determine the availability of such exemption and the eligibility of the Investor to acquire the Securities.

          (e) General Solicitation. Such Investor is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities

published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

          (f) Access to Information. Such Investor acknowledges that it has reviewed the Disclosure Materials and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Securities; (ii) access to information about the Company and the Subsidiaries and their respective financial condition, results of operations, business, properties and management sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Neither such inquiries nor any other investigation conducted by or on behalf of such Investor or its representatives or counsel shall modify, amend or affect such Investor’s right to rely on the truth, accuracy and completeness of the Disclosure Materials and the Company’s representations and warranties contained in the Transaction Documents.

          (g) Limited Ownership. The purchase by such Investor of the Securities issuable to it at Closing will not result in beneficial ownership by such Investor in excess of 19.999% of either (i) the voting power of the Company or (ii) the total number shares of Common Stock outstanding.

          (h) Certain Trading Activities. Such Investor has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Investor, engaged in any transactions in the securities of the Company (including, without limitations, any Short Sales involving the Company’s securities) since the time that such Investor was in possession of material, nonpublic information regarding the transaction contemplated hereby.

          (i) Independent Investment Decision. Such Investor has independently evaluated the merits of its decision to purchase Securities pursuant to the Transaction Documents, such decision has been independently made by such Investor and such Investor confirms that it has only relied on the advice of its own Investor’s business and/or legal counsel and not on the advice of any other Investor’s business and/or legal counsel in making such decision. Such Investor has not relied on the business or legal advice of Roth Capital Partners, LLC or any of its agents, counsel or Affiliates in making its investment decision hereunder, and each Investor confirms that none of such Persons has made any representations or warranties to it in connection with the transactions contemplated by the Transaction Documents.

          (j) Residency. Each Investor is a resident of that jurisdiction specified below its address on its signature page hereto.

          (k) Ownership of the Debenture. The Designated Investor is the sole and exclusive holder of the Debenture and no other Person has any interest therein, and the Designated Investor holds good and marketable title to the Debenture, free and clear of any material liens, defects, restrictions and encumbrances. There are no existing contracts or agreements with, or rights in, any third party to acquire the Debenture or any interest therein.

The Company acknowledges and agrees that no Investor has made or makes any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 3.2.

ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES

     4.1 (a) The Company and the Investors, severally and not jointly, agree that the Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of the Securities other than pursuant to an effective registration statement, to the Company, to an Affiliate of an Investor or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of an Investor hereunder and under the Registration Rights Agreement.

     (b) Certificates evidencing the Securities will contain the following legend, until such time as they are not required under Section 4.1(c):

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

     The Company acknowledges and agrees that an Investor may from time to time pledge, and/or grant a security interest in some or all of the Securities pursuant to a bona fide margin agreement in connection with a bona fide margin account and, if required under the terms of such agreement or account, such Investor may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval or consent of the Company and no legal opinion of legal counsel to the pledgee, secured party or pledgor shall be required in connection with the pledge, but such legal opinion may be required in connection with a subsequent transfer following default by the Investor transferee of the

pledge. No notice shall be required of such pledge. At the appropriate Investor’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities including the preparation and filing of any required prospectus supplement under Rule 424(b)(3) of the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of selling stockholders thereunder.

          (c) Certificates evidencing the Shares shall not contain any legend (including the legend set forth in Section 4.1(b)): (i) following a sale or transfer of such Shares pursuant to an effective registration statement (including the Registration Statement), or (ii) following a sale or transfer of such Shares pursuant to Rule 144 (assuming the transferor is not, and does not become, an Affiliate of the Company), or (iii) while such Shares are eligible for sale under Rule 144(k). The Company may not make any notation on its records or give instructions to any transfer agent of the Company that enlarge the restrictions on transfer set forth in this Section.

     4.2 Furnishing of Information. As long as any Investor owns the Securities, from the date hereof and ending on the second (2nd) anniversary of the Closing Date, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. As long as any Investor owns Securities, if the Company is not required to file reports pursuant to such laws, it will prepare and furnish to the Investors and make publicly available in accordance with Rule 144(c) such information as is required for the Investors to sell the Shares under Rule 144. The Company further covenants that it will take such further action as any holder of Securities may reasonably request, all to the extent required from time to time to enable such Person to sell the Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144.

     4.3 Integration. The Company shall not, and shall use its commercially reasonable efforts to ensure that no Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities pursuant to the Transaction Documents in a manner that would require the registration under the Securities Act of the sale of the Securities to the Investors, or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market in a manner that would require stockholder approval of the sale of the securities to the Investors.

     4.4 Subsequent Registrations. Other than pursuant to the Registration Statement, prior to the Effective Date, the Company may not file any registration statement (other than on Form S-8) with the Commission with respect to any securities of the Company.

     4.5 Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York time) on the Trading Day following the execution of this Agreement the Company shall issue a press release (in a form previously approved by the Investors) announcing the execution of this Agreement, and by 9:00 a.m. (New York time) on the Trading Day following the Closing Date, the Company shall issue a press release (in a form previously approved by the Investors) announcing the Closing. On the Trading Day following the execution of this Agreement, the Company will file

a Current Report on Form 8-K announcing the execution of this Agreement and disclosing the material terms of the Transaction Documents, and on the Trading Day following the Closing Date the Company will file a Current Report on Form 8-K announcing the Closing and attach as exhibits thereto the Transaction Documents). In addition, the Company will make such other filings and notices in the manner and time required by the Commission and the Trading Market on which the Common Stock is listed. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Investor, or include the name of any Investor in any filing with the Commission (other than the Registration Statement and any exhibits to filings made in respect of this transaction in accordance with periodic filing requirements under the Exchange Act) or any regulatory agency or Trading Market, without the prior written consent of such Investor, except to the extent such disclosure is required by law or Trading Market regulations.

     4.6 Limitation on Issuance of Future Priced Securities. During the six months following the Closing Date, the Company shall not issue any “Future Priced Securities” as such term is described by NASD IM-4350-1.

     4.7 Indemnification of Investors.

          (a) In addition to the indemnity provided in the Registration Rights Agreement, the Company will indemnify and hold the Investors and their directors, officers, shareholders, partners, employees and agents (each, an “Investor Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation (collectively, “Losses”) that any such Investor Party may suffer or incur as a result of or relating to any misrepresentation, breach or inaccuracy of any representation, warranty, covenant or agreement made by the Company in any Transaction Document.

          (b) If any Action shall be brought or asserted against any Investor Party entitled to indemnity hereunder, such Investor Party shall promptly notify the Company in writing, and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Investor Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Investor Party to give such notice shall not relieve the Company of its obligations or liabilities hereunder, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Company.

          (c) Each Investor Party shall have the right to employ separate counsel in any such Action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Investor Party or Parties unless: (1) the Company has agreed in writing to pay such fees and expenses; (2) the Company shall have failed promptly to assume the defense of such Action and to employ counsel reasonably satisfactory to such Investor Party in any such Action; or (3) the named parties to any such Action (including any impleaded parties) include both such Investor Party and the Company, and such Investor Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to

represent such Investor Party and the Company (in which case, if such Investor Party notifies the Company in writing that it elects to employ separate counsel at the expense of the Company, the Company shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Company; provided, however, that in the event one or more Investors is a party to such Action, the Company shall only be required to pay the expenses of one law firm serving as counsel to said 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 Investors on a particular issue). The Company shall not be liable for any settlement of any such Action effected without its written consent, which consent shall not be unreasonably withheld. The Company shall not, without the prior written consent of the Investor Party, effect any settlement of any pending Action in respect of which any Investor Party is a party, unless such settlement includes an unconditional release of such Investor Party from all liability on claims that are the subject matter of such Action.

          (d) All fees and expenses of the Investor Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Action in a manner not inconsistent with this Section) shall be paid to the Investor Party, as incurred, within thirty (30) Trading Days of written notice thereof to the Company (regardless of whether it is ultimately determined that an Investor Party is not entitled to indemnification hereunder; provided, that the Company may require such Investor Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Investor Party is not entitled to indemnification hereunder).

     4.8 Non-Public Information. The Company covenants and agrees that neither it nor any other Person acting on its behalf will provide any Investor or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Investor shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands and confirms that each Investor shall be relying on the foregoing covenants in effecting transactions in securities of the Company.

     4.9 Listing of Securities. The Company agrees, (i) if the Company applies to have the Common Stock traded on any other Trading Market, it will include in such application the Shares, and will take such other action as is necessary or desirable to cause the Shares to be listed on such other Trading Market as promptly as possible, and (ii) it will take all action reasonably necessary to continue the listing and trading of its Common Stock on a Trading Market and will comply in all material respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading Market.

     4.10 Sales by Investors. Each Investor covenants to sell any Securities sold by it in compliance with applicable prospectus delivery requirements, if any, or otherwise in compliance with the requirements for an exemption from registration under the Securities Act and the rules and regulations promulgated thereunder. No Investor will make any sale, transfer or other disposition of the Securities in violation of federal or state securities laws.

     4.11 Trading Activities. Each Investor covenants that neither it nor any Person acting on its behalf or pursuant to any understanding with it will engage in any transactions in the

securities of the Company (including Short Sales involving the Company’s securities) prior to the time that the transactions contemplated by this Agreement are publicly disclosed by the Company following the Closing. Such Investor covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company such Investor will maintain the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of the transactions contemplated hereby).

     4.12 Delivery of Share Certificates. As soon as practicable after the Closing, but in no event more than five (5) business days after the Closing, the Company agrees to cause manually executed originals of a certificate evidencing a number of Shares being issued to the Investor hereunder, registered in the name of such Investor to be delivered to such Investor at the address specified herein for delivery of notices.

     4.13 Stand-Still. Except as specifically authorized by the Board of Directors of the Company, during the three-year period commencing on the date of this Agreement, neither the Investors nor any of their Affiliates will directly or indirectly do any of the following:

     (a) make, or in any way participate directly or indirectly, any “solicitation” of “proxies” (as such terms are defined or used in Regulation 14A under the Exchange Act) or become a “participant” in any “election contest” (as such terms are defined or used in Rule 14a-11 under the Exchange Act) with respect to the Company, or initiate, propose or otherwise solicit stockholders of the Company for the approval of one or more stockholder proposals with respect to the Company or induce or attempt to include any other Person to initiate any stockholder proposal;

     (b) otherwise act alone or in concert with others, to seek to control the management, Board of Directors, policies or affairs of the Company, or solicit, propose, seek to effect or negotiate with any other Person with respect to any form of business combination, recapitalization or similar transaction with respect to the Company or any Affiliate thereof, solicit, make or propose or encourage or negotiate with any other Person with respect to, or announce an intent to make, any tender offer or exchange offer for any securities of the Company entitled to vote, or securities convertible into or exercisable or exchangeable for such securities, or disclose an intent, purpose, plan or proposal with respect to the Company or any Voting Securities inconsistent with the provisions of this Section 4.13, including an intent, purpose, plan or proposal that is conditioned on or would require the Company to waive the benefit of or amend any provision of this Section 4.13, or assist, participate in, facilitate, encourage or solicit any effort or attempt by any Person to do any of the foregoing; or

     (c) encourage or render advice to or make any recommendation or proposal to any Person, or participate, aid and abet or otherwise induce any Person, to engage in any of the actions prohibited by this Section 4.13.

ARTICLE V.
COVENANTS OF THE DESIGNATED INVESTOR AND
AMENDMENTS TO THE TERMS OF THE DEBENTURE

     5.1 Agreements of the Designated Investor. Notwithstanding anything to the contrary contained in the Debenture, the Designated Investor covenants and agrees that on or before December 31, 2004, it will convert, pursuant to the terms of Section 3(b) of the Debenture, all Principal (as such term is defined in the Debenture) and accrued and unpaid Late Charges (as such term is defined in the Debenture) with respect to such Principal into shares of Common Stock pursuant to the terms of the Debenture.

     5.2 Amendments. Notwithstanding anything to the contrary contained in the Debenture, the Company and the Designated Investor hereby agree that:

          (a) Interest (as such term is defined in the Debenture) on the Debenture shall cease to accrue as of the Closing Date, and any accrued but unpaid Interest as of the Closing Date (the “Accrued Interest”) will be payable on or before December 31, 2004, at the Company’s option, pursuant to the terms of the Debenture (any such date of payment to be considered an “Interest Date” for the purposes of the Debenture); provided that the Designated Investor, upon written request to the Company (which request may be approved or rejected in the Company’s sole discretion), may off-set the amount of such Accrued Interest against its Investment Amount in full satisfaction of such its obligation to pay such Accrued Interest pursuant to the terms of the Debenture;

          (b) on and after the Closing Date, the provisions of Sections 5, 7(a), 8(d), 11 (to the extent implicated by Section 5), 12, 14, 17 and 18(a) of the Debenture shall be void and of no further force and effect; and

          (c) on the earlier of (X) the date on which the Designated Investor has complied with all of the obligations set forth above in Section 5.1 and (Y) December 31, 2004, the provisions of Section 6 of the Debenture shall be void and of no further force and effect

ARTICLE VI.
CONDITIONS PRECEDENT TO CLOSING

     6.1 Conditions Precedent to the Obligations of the Investors to Purchase Securities. The obligation of each Investor to acquire Securities at the Closing is subject to the satisfaction or waiver by such Investor, at or before the Closing, of each of the following conditions:

          (a) Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct in all material respects as of the date when made and as of the Closing as though made on and as of such date, (except that representations and warranties that are qualified by materiality shall be true and correct in all respects) as of the date when made and as of the Closing as though made on and as of such date;

          (b) Performance. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing (except that covenants, agreements and conditions that are qualified by materiality shall have been performed, satisfied and complied with in all respects);

          (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents;

          (d) Adverse Changes. Since the date of execution of this Agreement, no event or series of events shall have occurred that has had or could reasonably be expected to result in a Material Adverse Effect;

          (e) No Suspensions of Trading in Common Stock; Listing. Trading in the Common Stock shall not have been suspended by the Commission or any Trading Market (except for any suspensions of trading of not more than one Trading Day solely to permit dissemination of material information regarding the Company) at any time since the date of execution of this Agreement, and the Common Stock shall have been at all times since such date listed for trading on a Trading Market; and

          (f) Company Deliverables. The Company shall have delivered the Company Deliverables in accordance with Section 2.2(a).

     6.2 Conditions Precedent to the Obligations of the Company to sell Securities. The obligation of the Company to sell Securities at the Closing is subject to the satisfaction or waiver by the Company, at or before the Closing, of each of the following conditions:

          (a) Representations and Warranties. The representations and warranties of each Investor contained herein shall be true and correct in all material respects (except that representations and warranties that are qualified by materiality shall be true and correct in all respects) as of the date when made and as of the Closing Date as though made on and as of such date;

          (b) Performance. Each Investor shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by such Investor at or prior to the Closing (except that covenants, agreements and conditions that are qualified by materiality shall have been performed, satisfied and complied with in all respects);

          (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents; and

          (d) Investors Deliverables. Each Investor shall have delivered its Investors Deliverables in accordance with Section 2.2(b).

ARTICLE VII.
MISCELLANEOUS

     7.1 Fees and Expenses. At the Closing, the Company shall pay to Schulte Roth & Zabel LLP, counsel to the Investors, $30,000, and to Bryan Cave LLP, counsel for the placement agent, $25,000 as partial reimbursement for its legal fees in connection with the preparation of the Transaction Documents (it being understood that Bryan Cave LLP has only rendered legal advice to the placement agent, and not to the Company or any Investor in connection with the transactions contemplated hereby, and that each of the Company and each Investor has relied for such matters on the advice of its own respective counsel). Except as specified in the immediately preceding sentence, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of the Transaction Documents. The Company shall pay all stamp and other taxes and duties levied in connection with the sale of the Shares.

     7.2 Entire Agreement. The Transaction Documents, together with the Exhibits and Schedules thereto, contain the entire understanding of the parties with respect to the subject matter specifically set forth herein and supersede all prior agreements, understandings, discussions and representations, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

     7.3 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile (provided the sender receives a machine-generated confirmation of successful transmission) at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows:

If to the Company:	TeleCommunication Systems, Inc. 275 West Street Annapolis, Maryland 21401 Facsimile No.: 410-280-1048 Attention: Chief Financial Officer
With a copy to:	Piper Rudnick LLP 6225 Smith Avenue Baltimore, Maryland 21209 Facsimile No.: (410) 580-3763 Attention: Wilbert H. Sirota, Esq.

If to an Investor:	To the address set forth under such Investor’s name on the signature pages hereof;
With a copy to:	Schulte Roth & Zabel LLP 919 Third Avenue New York, New York 10022 Facsimile No.: (212) 593-5955 Attention: Eleazer N. Klein, Esq.

or such other address as may be designated in writing hereafter, in the same manner, by such Person.

     7.4 Amendments; Waivers; No Additional Consideration. No provision of this Agreement may be waived or amended except in a written instrument signed by the Company and the Investors holding a majority of the Shares. 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. No consideration shall be offered or paid to any Investor to amend or consent to a waiver or modification of any provision of any Transaction Document unless the same consideration is also offered to all Investors who then hold Shares.

     7.5 Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. This Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement or any of the Transaction Documents.

     7.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investors. Any Investor may assign any or all of its rights under this Agreement to any Person to whom such Investor assigns or transfers any Securities, provided such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions hereof that apply to the “Investors.”

     7.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.7 (as to each Investor Party).

     7.8 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 Actions concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective Affiliates, employees or agents) shall be commenced exclusively in the New York Courts. 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 (including with respect to the enforcement of the any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Action, any claim that it is not personally subject to the jurisdiction of any such New York Court, or that such Action 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 Action 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 legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence a Action to enforce any provisions of a Transaction Document, then the prevailing party in such Action shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Action.

     7.9 Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Shares. The agreements and covenants contained herein shall survive the Closing in accordance with their respective terms.

     7.10 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.

     7.11 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

     7.12 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents,

whenever any Investor exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Investor may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.

     7.13 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities. If a replacement certificate or instrument evidencing any Securities is requested due to a mutilation thereof, the Company may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.

     7.14 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Investors and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

     7.15 Payment Set Aside. To the extent that the Company makes a payment or payments to any Investor pursuant to any Transaction Document or an Investor enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

     7.16 Independent Nature of Investors’ Obligations and Rights. The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Document. The decision of each Investor to purchase Securities pursuant to the Transaction Documents has been made by such Investor independently of any other Investor. Nothing contained herein or in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Investor

acknowledges that no other Investor has acted as agent for such Investor in connection with making its investment hereunder and that no Investor will be acting as agent of such Investor in connection with monitoring its investment in the Securities or enforcing its rights under the Transaction Documents. Each Investor shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose. The Company acknowledges that each of the Investors has been provided with the same Transaction Documents for the purpose of closing a transaction with multiple Investors and not because it was required or requested to do so by any Investor.

     7.17 Limitation of Liability. Notwithstanding anything herein to the contrary, the Company acknowledges and agrees that the liability of an Investor arising directly or indirectly, under any Transaction Document of any and every nature whatsoever shall be satisfied solely out of the assets of such Investor, and that no trustee, officer, other investment vehicle or any other Affiliate of such Investor or any investor, shareholder or holder of shares of beneficial interest of such a Investor shall be personally liable for any liabilities of such Investor.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]

     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

TELECOMMUNICATION SYSTEMS, INC.
By:	/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 FOR INVESTORS FOLLOW]

     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

NAME OF INVESTOR
Riverview Group, LLC
AUTHORIZED SIGNATORY
By:	/s/ David Nolan
	Name: David Nolan
	Title: Vice Chairman

Investment Amount: $	8,000,000
Tax ID No.:	113485705
ADDRESS FOR NOTICE
c/o:
Street:	666 Fifth Avenue
City/State/Zip:	New York, NY 10103
Attention:	Dan Cardella
Tel:	(212) 841-4100
Fax:	(212) 977-1667
DELIVERY INSTRUCTIONS (if different from above)
c/o:
Street:
City/State/Zip:
Attention:
Tel:

     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

NAME OF INVESTOR
033 Growth Partners I, LP
AUTHORIZED SIGNATORY
By:	/s/ Lawrence C. Longo, Jr.
	Name: Lawrence C. Longo, Jr.
	Title:   Chief Operating Officer for             033 Asset Management, LLC,             its Investment Manager

Investment Amount: $	987,696
Tax ID No.:	04-3510149
ADDRESS FOR NOTICE
c/o:	Lawrence C. Longo, Jr.
Street:	033 Asset Management LLC 125 High Street, Suite 1405
City/State/Zip:	Boston, MA 02110
Attention:
Tel:	617-371-2015
Fax:	617-371-2002
DELIVERY INSTRUCTIONS (if different from above)
c/o:	Morgan Stanley
Street:	1225 Avenue of the Americas 28th Floor
City/State/Zip:	New York, NY 10020
Attention:	Michael Cardaci
Tel:	212-762-5184

     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

NAME OF INVESTOR
033 Growth Partners II, LP
AUTHORIZED SIGNATORY
By:	/s/ Lawrence C. Longo, Jr.
	Name: Lawrence C. Longo, Jr.
	Title:   Chief Operating Officer for             033 Asset Management, LLC,             its Investment Manager

Investment Amount: $	304,744
Tax ID No.:	04-3510150
ADDRESS FOR NOTICE
c/o:	Lawrence C. Longo, Jr.
Street:	033 Asset Management LLC 125 High Street, Suite 1405
City/State/Zip:	Boston, MA 02110
Attention:
Tel:	617-371-2015
Fax:	617-371-2002
DELIVERY INSTRUCTIONS (if different from above)
c/o:	Morgan Stanley
Street:	1225 Avenue of the Americas 28th Floor
City/State/Zip:	New York, NY 10020
Attention:	Michael Cardaci
Tel:	212-762-5184

     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

NAME OF INVESTOR
Oyster Pond Partners, LP
AUTHORIZED SIGNATORY
By:	/s/ Lawrence C. Longo, Jr.
	Name: Lawrence C. Longo, Jr.
	Title:   Chief Operating Officer for             033 Asset Management, LLC,             its Investment Manager

Investment Amount: $	220,492
Tax ID No.:	04-3510154
ADDRESS FOR NOTICE
c/o:	Lawrence C. Longo, Jr.
Street:	033 Asset Management LLC 125 High Street, Suite 1405
City/State/Zip:	Boston, MA 02110
Attention:
Tel:	617-371-2015
Fax:	617-371-2002
DELIVERY INSTRUCTIONS (if different from above)
c/o:	Morgan Stanley
Street:	1225 Avenue of the Americas 28th Floor
City/State/Zip:	New York, NY 10020
Attention:	Michael Cardaci
Tel:	212-762-5184

     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

NAME OF INVESTOR
033 Growth International Fund, Ltd.
AUTHORIZED SIGNATORY
By:	/s/ Lawrence C. Longo, Jr.
	Name: Lawrence C. Longo, Jr.
	Title:   Chief Operating Officer for             033 Asset Management, LLC,             its Investment Manager

Investment Amount: $	487,068
Tax ID No.:	N/A
ADDRESS FOR NOTICE
c/o:	Lawrence C. Longo, Jr.
Street:	033 Asset Management LLC 125 High Street, Suite 1405
City/State/Zip:	Boston, MA 02110
Attention:
Tel:	617-371-2015
Fax:	617-371-2002
DELIVERY INSTRUCTIONS (if different from above)
c/o:	Morgan Stanley
Street:	1225 Avenue of the Americas 28th Floor
City/State/Zip:	New York, NY 10020
Attention:	Michael Cardaci
Tel:	212-762-5184

EX-10.2

Exhibit 10.2

EXECUTION VERSION

REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this “Agreement”) is made and entered into as of August 30, 2004, by and among TeleCommunication Systems, Inc., a Maryland corporation (the “Company”), and the investors signatory hereto (each a “Investor” and collectively, the “Investors”).

     This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date hereof among the Company and the Investors (the “Purchase Agreement”).

     The Company and the Investors hereby agree as follows:

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

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

          “Effectiveness Date” means (a) with respect to the initial Registration Statement required to be filed under Section 2(a), the earlier of: (a)(i) the [60th] day following the Closing Date; provided, that, if the Commission reviews and has written comments to the filed Registration Statement that would require the filing of a pre-effective amendment thereto with the Commission, then the Effectiveness Date under this clause (a)(i) shall be the [100th] day following the Closing Date, and (ii) the fifth Trading Day following the date on which the Company is notified by the Commission that the initial Registration Statement will not be reviewed or is no longer subject to further review and comments, and (b) with respect to any additional Registration Statements that may be required pursuant to Section 2(b), the earlier of (i) the [60th] day following (x) if such Registration Statement is required because the Commission shall have notified the Company in writing that certain Registrable Securities were not eligible for inclusion on a previously filed Registration Statement, the date or time on which the Commission shall indicate as being the first date or time that such Registrable Securities may then be included in a Registration Statement, or (y) if such Registration Statement is required for a reason other than as described in (x) above, the date on which the Company first knows, or reasonably should have known, that such additional Registration Statement(s) is required; provided, that, if the Commission reviews and has written comments to such additional filed Registration Statement that would require the filing of a pre-effective amendment thereto with the Commission, then the Effectiveness Date under this clause (b)(i) shall be the [100th] day following the date that the Company first knows, or reasonably should have known, that such additional Registration Statement is required under such Section and (ii) the fifth Trading Day following the date on which the Company is notified by the Commission that such additional

Registration Statement will not be reviewed or is no longer subject to further review and comments.

          “Effectiveness Period” has the meaning set forth in Section 2(a).

          “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          “Filing Date” means (a) with respect to the initial Registration Statement required to be filed under Section 2(a), the 30th day following the Closing Date, and (b) with respect to any additional Registration Statements that may be required pursuant to Section 2(b), the 30th day following (x) if such Registration Statement is required because the Commission shall have notified the Company in writing that certain Registrable Securities were not eligible for inclusion on a previously filed Registration Statement, the date or time on which the Commission shall indicate as being the first date or time that such Registrable Securities may then be included in a Registration Statement, or (y) if such Registration Statement is required for a reason other than as described in (x) above, the date on which the Company first knows, or reasonably should have known, that such additional Registration Statement(s) is required.

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

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

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

          “New York Courts” means the state and federal courts sitting in the City of New York, Borough of Manhattan.

          “Prospectus” means 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 a 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.

          “Registrable Securities” means (i) the Shares and (ii) any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event, or any conversion price adjustment with respect to any of the securities referenced in (i) above.

          “Registration Statement” means the initial registration statement required to be filed in accordance with Section 2(a) and any additional registration statement(s) required to be filed under Section 2(b), including (in each case) 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 therein.

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          “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.

     2. Registration.

          (a) On or prior to each Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all Registrable Securities not already covered by an existing and effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415, on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form for such purpose). Such Registration Statement shall contain (except if otherwise required pursuant to written comments received from the Commission upon a review of such Registration Statement) a “Plan of Distribution” section in form and substance substantially the same as the “Plan of Distribution” section included in the Company’s Registration Statement on Form S-3 (No. 333-112759) (the “Plan of Distribution Section”). The Company shall cause such Registration Statement to be declared effective under the Securities Act as soon as possible but, in any event, no later than its Effectiveness Date, and shall use its reasonable best efforts to keep the Registration Statement continuously effective under the Securities Act until the date which is the earlier of (i) the later to occur of (A) two years after its Effective Date, and (B) such time as all of the Registrable Securities covered by such Registration Statement may be sold by the Holders pursuant to Rule 144(k) as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the affected Holders and (ii) such time as all of the Registrable Securities covered by such Registration Statement have been publicly sold by the Holders (the “Effectiveness Period”).

          (b) If for any reason the Commission does not permit all of the Registrable Securities to be included in the Registration Statement filed pursuant to Section 2(a), or for any other reason any outstanding Registrable Securities are not then covered by an effective Registration Statement, then the Company shall prepare and file by the Filing Date for such Registration Statement, an additional Registration Statement covering the resale of all Registrable Securities not already covered by an existing and effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415, on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form for such purpose). Each such Registration Statement shall contain (except if otherwise required pursuant to written comments received from the Commission upon a review of such Registration Statement) a “Plan of Distribution” section in form and substance substantially the same as the Plan of Distribution

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Section. The Company shall cause each such Registration Statement to be declared effective under the Securities Act as soon as possible but, in any event, by its Effectiveness Date, and shall use its reasonable best efforts to keep such Registration Statement continuously effective under the Securities Act during the entire Effectiveness Period.

          (c) If: (i) a Registration Statement is not filed on or prior to its Filing Date (provided, however that if (A) the Company files a Registration Statement without affording the Holders the opportunity to review and comment on the same as required by Section 3(a) hereof or (B) the Investors reasonably object to the form of the presentation of the information relating to the selling stockholders or under the heading “Plan of Distribution” in the Registration Statement, then, in either case, the Company shall not be deemed to have satisfied this clause (i)), or (ii) a Registration Statement 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 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 its Effectiveness Period for more than an aggregate of 20 Trading Days (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 20 Trading Day-period is exceeded, being referred to as “Event Date”), then in addition to any other rights the Holders may have hereunder or under applicable law: (x) on each such Event Date the Company shall pay to each Holder an amount in cash, as liquidated damages and not as a penalty, equal to 2.0% of the aggregate Investment Amount paid by such Holder for Shares pursuant to the Purchase Agreement; and (y) on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as liquidated damages and not as a penalty, equal to 2.0% of the aggregate Investment Amount paid by such Holder for Shares pursuant to the Purchase Agreement (provided that, in the event that an Event is cured other than on a monthly anniversary of the Event Date, the liquidated damages provided hereunder shall accrue through the cure date on a pro rata basis for that portion of the month prior to the cure date). If the Company fails to pay any amounts pursuant to this Section in full within seven days after the date payable, the Company will pay interest thereon at a rate of 8% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such amounts are due until such amounts, plus all such interest thereon, are paid in full.

          (d) Each Holder agrees to furnish to the Company a completed Questionnaire in the form attached to this Agreement as Annex A (a “Selling Holder Questionnaire”). 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(c) to any Holder who fails to furnish to the Company a fully completed Selling Holder Questionnaire at least two Trading Days prior to the Filing Date (subject to the requirements set forth in Section 3(a)).

     3. Registration Procedures.

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

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          (a) Not less than four 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 each Holder copies of the “Selling Stockholders” section of such document, the “Plan of Distribution” and any risk factor contained in such document that specifically addresses the transactions contemplated by the Transaction Documents or the Selling Stockholders, as proposed to be filed which documents will be subject to the review of such Holder. The Company shall not file a Registration Statement, any Prospectus or any amendments or supplements thereto in which the “Selling Stockholder” section thereof differs from the disclosure received from a Holder in its Selling Holder Questionnaire (as amended or supplemented).

          (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 its Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (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, as promptly as reasonably possible provide the Holders true and complete copies of all correspondence from and to the Commission relating to such Registration Statement that would not result in the disclosure to the Holders of material and non-public information concerning the Company; 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) Notify the Holders as promptly as reasonably possible (and, in the case of (i)(A) below, not less than three Trading Days prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed; (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement (the Company shall provide true and complete copies thereof and all written responses thereto to each of the Holders that pertain to the Holders as a Selling Stockholder or to the Plan of Distribution, but not information which the Company believes would constitute material and non-public information); and (C) 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 Actions 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 Action for such purpose; and (v) of the occurrence of any event or passage of time that makes the

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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 reasonable best efforts (which shall not require the filing of any court action) 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 and all exhibits to the extent requested by such Person (including those previously furnished) promptly after the filing of such documents with the Commission.

          (f) 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 Persons may reasonably request. 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, except after delivery of any notice described in Section 3(c)(ii)-(v) and subject to Section 6(d).

          (g) Prior to any public offering of Registrable Securities, use its reasonable best 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, to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the Registration Statements; provided, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or subject the Company to any material tax in any such jurisdiction where it is not then so subject.

          (h) 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) Upon the occurrence of any event contemplated by Section 3(c)(v), as promptly as reasonably possible, prepare a supplement or amendment, including a post-effective

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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, no Registration Statement nor any 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.

     4. Registration Expenses. All fees and expenses 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. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, and (B) in compliance with applicable state securities or Blue Sky laws), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is reasonably requested by the holders of a majority of the Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. The Company shall also reimburse the Holders for the fees and disbursements to legal counsel in connection with registration, filing or qualification pursuant to Sections 2 and 3 of this Agreement which amount shall be limited to $5,000 for each Registration Statement.

     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, as incurred, 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

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such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly 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 Holders have approved the form and substance of the Plan of Distribution Section for this purpose) or (2) in the case of an occurrence of an event of the type specified in Section 3(c)(ii)-(v), the use by such Holder of 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 any Advice contemplated by Section 6(d) or an amended or supplemented Prospectus, but only if and to the extent that following the receipt of the Advice or the amended or supplemented Prospectus the misstatement or omission giving rise to such Loss would have been corrected. The Company shall notify the Holders promptly of the institution, threat or assertion of any Action of which the Company is aware in connection with the transactions contemplated by this Agreement.

          (b) Indemnification by Holders. Each Holder shall, severally and not jointly (in proportion to the respective number of shares included by each such Holder, if Registrable Securities are included in the securities as to which such registration, qualification or compliance is being effected, notwithstanding any termination of this Agreement) 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 any and all Losses, as incurred, arising solely out of or based solely upon: (x) such Holder’s failure to comply with the prospectus delivery requirements of the Securities Act or (y) 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 solely out of or based solely upon any omission of a material fact required to be stated therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) 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 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 expressly approved in writing by such Holder expressly for use in the Registration Statement (it being understood that the Holder has approved the form and substance of the Plan of Distribution Section 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)-(v), the use by such Holder of 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 an Advice or an amended or supplemented Prospectus, but only if and to the extent that following the receipt of the Advice or the amended or supplemented Prospectus the misstatement or omission giving rise to such Loss would have been corrected. 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. Each Holder shall notify the Company promptly of the institution, threat or assertion of any Action of which the Holder is aware in connection with the transactions contemplated by this Agreement.

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          (c) Conduct of Indemnification Actions. If any Action 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 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 (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party.

          An Indemnified Party shall have the right to employ separate counsel in any such Action 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 Action and to employ counsel reasonably satisfactory to such Indemnified Party in any such Action; or (3) the named parties to any such Action (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by 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 Action, the Company shall only be required to pay the expenses of one law firm serving as counsel to said 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 Investors on a particular issue). The Indemnifying Party shall not be liable for any settlement of any such Action 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 Action 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 Action.

          All fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Action in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; 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. If a claim for indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the

9

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 Action 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 Action 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.

          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.

     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 agrees 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. Except as and to the extent specified in Schedule 3.1(v) to the Purchase Agreement, 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 a Registration Statement other than the Registrable Securities, and the Company shall not during the Effectiveness Period enter into any agreement providing any such right to any of its security holders.

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          (c) Compliance. Each Holder covenants and agrees that 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.

          (d) 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’s receipt of the copies of the supplemented Prospectus and/or amended Registration Statement or until it is advised in writing (the “Advice”) by the Company that 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.

          (e) Piggy-Back Registrations. If at any time during the Effectiveness Period there is not an effective Registration Statement covering all of the Registrable Securities 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 fifteen 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 such holder requests to be registered, subject to customary underwriter cutbacks applicable to all holders of registration rights.

          (f) Amendments and Waivers. The provisions of this Agreement, including the provisions of this Section 6(f), may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of no less than a majority in interest of the then outstanding Registrable Securities. 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 certain Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of at least a majority of the Registrable Securities to which such waiver or consent relates. 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.

          (g) Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile (provided the sender receives a machine-generated confirmation of

11

successful transmission) at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows:

If to the Company:	TeleCommunication Systems, Inc. 275 West Street, Suite 400 Annapolis, MD 21401 Attn: Thomas M. Brandt, Jr. Telephone: (410) 263-7616 Fax: (410) 280-1048
With a copy to:	Piper Rudnick LLP 6225 Smith Avenue Baltimore, MD 21209-3600 Attn: Wilbert H. Sirota, Esq. Telephone: (410) 580-3000 Fax: (410) 580-3763
If to a Investor:	To the address set forth under such Investor’s name on the signature pages hereto.

If to any other Person who is then the registered Holder:

To the address of such Holder as it appears in the stock transfer books of the Company

or such other address as may be designated in writing hereafter, in the same manner, by such Person.

          (h) 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. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement.

          (i) 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.

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          (j) 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 Actions 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) will be commenced in the New York Courts. 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 Action, any claim that it is not personally subject to the jurisdiction of any New York Court, or that such Action 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 Action 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 Action arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence a Action to enforce any provisions of this Agreement, then the prevailing party in such Action 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 Action.

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

          (l) 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.

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

          (n) Independent Nature of Investors’ Obligations and Rights. The obligations of each Investor under this Agreement are several and not joint with the obligations of each other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under this Agreement. Nothing contained herein or in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to

13

such obligations or the transactions contemplated by this Agreement or any other Transaction Document. Each Investor acknowledges that no other Investor will be acting as agent of such Investor in enforcing its rights under this Agreement. Each Investor shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Investor to be joined as an additional party in any Action for such purpose. The Company acknowledges that each of the Investors has been provided with the same Registration Rights Agreement for the purpose of closing a transaction with multiple Investors and not because it was required or requested to do so by any Investor.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES TO FOLLOW]

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

TELECOMMUNICATION SYSTEMS, INC.
By:	/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 executed this Registration Rights Agreement as of the date first written above.

NAME OF INVESTING ENTITY

Riverview Group, LLC

AUTHORIZED SIGNATORY

By: /s/ David Nolan
Name: David Nolan
Title: Vice Chairman

ADDRESS FOR NOTICE

c/o:

Street: 666 Fifth Avenue

City/State/Zip: New York, NY 10103

Attention: Dan Cardella

Tel: (212) 841-4100

Fax: (212) 977-1667

Email: dcardella@mlp.com

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

NAME OF INVESTING ENTITY

033 Growth Partners I, LP

AUTHORIZED SIGNATORY

By: /s/ Lawrence C. Longo, Jr.
Name: Lawrence C. Longo, Jr.
Title: Chief Operating Officer for 033 Asset Management, LLC,
its Investment Manager

ADDRESS FOR NOTICE

c/o: Lawrence C. Longo, Jr.
033 Asset Management, LLC

Street: 125 High Street, Suite 1405

City/State/Zip: Boston MA 02110

Attention:

Tel: 617-371-2015

Fax: 617-371-2002

Email:

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

NAME OF INVESTING ENTITY

033 Growth Partners II, LP

AUTHORIZED SIGNATORY

By: /s/ Lawrence C. Longo, Jr.
Name: Lawrence C. Longo, Jr.
Title: Chief Operating Officer for 033 Asset Management, LLC,
its Investment Manager

ADDRESS FOR NOTICE

c/o: Lawrence C. Longo, Jr.
033 Asset Management, LLC

Street: 125 High Street, Suite 1405

City/State/Zip: Boston MA 02110

Attention:

Tel: 617-371-2015

Fax: 617-371-2002

Email:

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

NAME OF INVESTING ENTITY

Oyster Pond Partners, LP

AUTHORIZED SIGNATORY

By: /s/ Lawrence C. Longo, Jr.
Name: Lawrence C. Longo, Jr.
Title: Chief Operating Officer for 033 Asset Management, LLC,
its Investment Manager

ADDRESS FOR NOTICE

c/o: Lawrence C. Longo, Jr.
033 Asset Management, LLC

Street: 125 High Street, Suite 1405

City/State/Zip: Boston MA 02110

Attention:

Tel: 617-371-2015

Fax: 617-371-2002

Email:

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

NAME OF INVESTING ENTITY

033 Growth International Fund, Ltd.

AUTHORIZED SIGNATORY

By: /s/ Lawrence C. Longo, Jr.
Name: Lawrence C. Longo, Jr.
Title: Chief Operating Officer for 033 Asset Management, LLC,
its Investment Manager

ADDRESS FOR NOTICE

c/o: Lawrence C. Longo, Jr.
033 Asset Management, LLC

Street: 125 High Street, Suite 1405

City/State/Zip: Boston MA 02110

Attention:

Tel: 617-371-2015

Fax: 617-371-2002

Email:

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Annex A

TELECOMMUNICATION SYSTEMS, INC.

Selling Securityholder Questionnaire

The undersigned beneficial owner of common stock (the “Common Stock”), of TeleCommunication Systems, Inc. (the “Company”) understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “Commission”) a Registration Statement for the registration and resale of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement, dated as of August [   ], 2004 (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 used and 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 securityholder 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 securityholder in the Registration Statement and the related prospectus.

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 Securityholder
(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 you indirectly alone or with others has power to vote or dispose of the securities covered by the questionnaire):

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2.	Address for Notices to Selling Securityholder:
	Telephone:
	Fax:
	Contact Person:
3.	Beneficial Ownership of Registrable Securities:

(a) Type and Principal Amount of Registrable Securities beneficially owned:

4. Broker-Dealer Status:

(a) Are you a broker-dealer?

Yes  o               No  o

Note:	If yes, the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.
(b)	Are you an affiliate of a broker-dealer?

Yes  o               No  o

(c) 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 Securityholder.

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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 Securityholder:

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:

The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof and prior to the Effective Date for the Registration Statement.

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. 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 Notice and 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:

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Piper Rudnick LLP
6225 Smith Avenue
Baltimore, MD 21209-3600
Attn: Wilbert H. Sirota, Esq.
Telephone: (410) 580-3000
Fax: (410) 580-3763

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EX-10.3

Exhibit 10.3

EXECUTION VERSION

WAIVER AGREEMENT

     This WAIVER AGREEMENT (this “Waiver”) is made and entered into as of August 30, 2004 by and among TeleCommunication Systems, Inc., a Maryland corporation (the “Company”), and each of the investors listed on the signature pages hereto (the “Investors”).

RECITALS

     WHEREAS, the Company and the Investors are parties to that certain Securities Purchase Agreement dated as of December 18, 2003 (the “2003 Purchase Agreement”) pursuant to which the Investors have been granted certain rights of participation with respect to issuances of the Company’s capital stock;

     WHEREAS, the Company and each of the Investors are parties to certain Warrants to Purchase Common Stock of the Company each dated January 13, 2004 (each, a “Warrant Agreement”, and collectively, the “Warrant Agreements”) pursuant to which each of the Investors has been granted certain anti-dilution rights upon certain issuances of the Company’s capital stock;

     WHEREAS, the Company and certain of the Investors are or will be parties to that certain Securities Purchase Agreement dated on or about August 30, 2004 (the “2004 Purchase Agreement”) pursuant to which the Company will issue and sell (the “Offering”) up to 3,000,000 shares of its Class A common stock, par value $0.01 per share (the “Common Stock”);

     WHEREAS, pursuant to the 2004 Purchase Agreement, the Company and Riverview Group LLC have agreed, among other things, to amend certain terms of the subordinated convertible debenture issued to it on January 13, 2004 (the “Debenture”) and that Riverview Group LLC will convert such Debenture, in its entirety, into Common Stock on or before December 31, 2004 in exchange for $1 million and the issuance and sale to it of 200,000 shares of Common Stock by the Company (the “Conversion and Amendment”, and together with the Offering, the “Transactions”); and

     WHEREAS, the Company desires that the Investors waive, and the Investors desire to so waive, certain rights under the 2003 Purchase Agreement and the Warrant Agreements.

     NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE I
 
WAIVERS

     1.1 2003 Purchase Agreement. Each of the Investors hereby agrees (a) to waive its rights under Sections 4(h) (Additional Debentures; Variable Securities; Additional Registration Statement) and 4(k) (Right of Participation) of the 2003 Purchase Agreement with respect to the

1

EXECUTION VERSION

Transactions, and (b) that, as of the date hereof, such Sections 4(h) and 4(k) of the 2003 Purchase Agreement are void and of no further force or effect.

     1.2 Warrants. Each of the Investors hereby agrees to waive its rights under Section 2(a) (Adjustment of Exercise Price and Number of Warrant Shares — Adjustment upon Issuance of Common Stock) of its Warrant Agreement both (a) with respect to the Transactions and (b) with respect to any event which would trigger the Investors’ rights thereunder through December 31, 2004.

     1.3 No Other Waivers. Other than as provided in Section 1.1 and 1.2 hereof, this Waiver shall not constitute a consent or waiver to or modification of any provision, term or condition of the 2003 Purchase Agreement or any Warrant Agreement. All terms, provisions, covenants, representations, warranties, agreements and conditions contained in the 2003 Purchase Agreement and each of the Warrant Agreements shall otherwise remain in full force and effect in accordance with their terms.

ARTICLE II
 
ADDITIONAL AGREEMENTS

     2.1 Counterparts.

          This Waiver may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

     2.2 Construction.

          The parties have participated jointly in the negotiation and drafting of this Waiver. In the event an ambiguity or question of intent or interpretation arises, this Waiver shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of authorship of any provision of this Waiver.

     2.3 Governing Law.

          This Waiver shall be governed by and construed under and the rights of the parties determined in accordance with the laws of the State of New York (without reference to the choice of law provisions of such state) except with respect to matters of law concerning the internal corporate affairs of any corporate entity which is a party to or the subject of this Waiver, and as to those matters the law of the jurisdiction under which the respective entity derives its powers shall govern.

2

EXECUTION VERSION

     IN WITNESS WHEREOF, each Investor and the Company have caused their respective signature page to this Waiver to be duly executed as of the date first written above.

COMPANY: TELECOMMUNICATION SYSTEMS, INC.			INVESTORS: RIVERVIEW GROUP LLC
By:	/s/ Thomas M. Brandt		By:	/s/ David Nolan
	Name:	Thomas M. Brandt, Jr.		Name:	David Nolan
	Title:	Senior Vice President and		Title:	Vice Chairman
		Chief Financial Officer
			033 GROWTH PARTNERS I, L.P.
			By:	/s/ Lawrence C. Longo
				Name:	Lawrence C. Longo
				Title:	Chief Operating Officer for 033 Asset Management, LLC, its Investment Manager
			033 GROWTH PARTNERS II, L.P.
			By:	/s/ Lawrence C. Longo
				Name:	Lawrence C. Longo
				Title:	Chief Operating Officer for 033 Asset Management, LLC, its Investment Manager
			033 GROWTH INTERNATIONAL FUND, LTD.
			By:	/s/ Lawrence C. Longo
				Name:	Lawrence C. Longo
				Title:	Chief Operating Officer for 033 Asset Management, LLC, its Investment Manager
			OYSTER POND PARTNERS, L.P.
			By:	/s/ Lawrence C. Longo
				Name:	Lawrence C. Longo
				Title:	Chief Operating Officer for 033 Asset Management, LLC, its Investment Manager

3

EX-10.4

EXHIBIT 10.4

TeleCommunication Systems, Inc.
275 West Street
Annapolis, Maryland 21401

September 1, 2004

Riverview Group, LLC
666 Fifth Avenue, 8th Floor
New York, New York 10103

     Reference is made to (a) that certain Securities Purchase Agreement, dated as of August 30, 2004 (the “Securities Purchase Agreement”), by and among TeleCommunication Systems, Inc. (the “Company”), Riverview Group, LLC, as an investor (“Riverview”), and the other investors party thereto and (b) that certain Subordinated Convertible Debenture issued by the Company to Riverview on January 13, 2004 in the principal amount of $15,000,000 (the “Debenture”). Any capitalized term used herein and not defined herein shall have the meaning assigned to it in the Securities Purchase Agreement, unless specified otherwise.

     Notwithstanding anything to the contrary in the Transaction Documents, the Company and Riverview hereby agree that, in lieu of issuing the Shares described in Section 2.2(a)(ii)(A)(y) of the Securities Purchase Agreement as provided therein:

     (a) Section 5.2 of the Securities Purchase Agreement shall be amended and restated in its entirety as follows:

     “5.2 Amendments. Notwithstanding anything to the contrary contained in the Debenture, the Company and the Designated Investor hereby agree that:

     (a) Interest (as such term is defined in the Debenture) on the Debenture shall cease to accrue as of the Closing Date, and any accrued but unpaid Interest as of the Closing Date (the “Accrued Interest”) shall be offset by the Designated Investor against its Investment Amount in full satisfaction of such obligation to pay such Accrued Interest pursuant to the terms of the Debenture;

     (b) on and after the Closing Date, the provisions of Sections 5, 7(a), 8(d), 11 (to the extent implicated by Section 5), 12, 14, 17 and 18(a) of the Debenture shall be void and of no further force and effect;

     (c) on the earlier of (X) the date on which the Designated Investor has complied with all of the obligations set forth above in Section 5.1 and (Y) December 31, 2004, the provisions of Section 6 of the Debenture shall be void and of no further force and effect; and

     (d) The Conversion Price (as that term is used in the Debenture) shall mean $5.01581.”

     (b) Section 4.5 of the Securities Purchase Agreement shall be amended and restated in its entirety as follows:

     “4.5 Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York time) on the Trading Day following the execution of this Agreement the Company shall issue a press release (in a form previously approved by the Investors) announcing the execution of this Agreement, and by 9:00 a.m. (New York time) on September 2, 2004, the Company shall issue a press release (in a form previously approved by the Investors) announcing the Closing and file a Current Report on Form 8-K announcing the execution of this Agreement and the Closing and attaching as exhibits thereto the Transaction Documents. In addition, the Company will make such other filings and notices in the manner and time required by the Commission and the Trading Market on which the Common Stock is listed. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Investor, or include the name of any Investor in any filing with the Commission (other than the Registration Statement and any exhibits to filings made in respect of this transaction in accordance with periodic filing requirements under the Exchange Act) or any regulatory agency or Trading Market, without the prior written consent of such Investor, except to the extent such disclosure is required by law or Trading Market regulations.”

     Except as specifically modified by this letter, all other terms and conditions of the Transaction Documents and the Debenture shall remain in full force and effect. This letter may be executed in counterparts and will be effective as of the date first written above.

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

ACKNOWLEDGED AND AGREED

RIVERVIEW GROUP, LLC

By:	/s/ Terry Feeney
	Name:   Terry Feeney
	Title:     Chief Operating Officer

Dated: September 1, 2004

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE
Company Contacts:
Tom Brandt
Senior Vice President & CFO
TeleCommunication Systems, Inc.
410-280-1001
brandtt@telecomsys.com  
 
Scott Liolios
Investor Relations
Liolios Group, Inc.
949-574-3860
scott@liolios.com

TCS TO ADD $17 MILLION TO BOOK EQUITY
THROUGH A COMBINATION OF DEBT CONVERSION
AND $10 MILLION TO BE RAISED IN EQUITY FINANCING

Balance Sheet Will Be Significantly Strengthened

ANNAPOLIS, MD — August 31, 2004 — TeleCommunication Systems, Inc. (Nasdaq: TSYS), a global leader in wireless data technology, today announced it has executed definitive agreements which will significantly enhance its debt-to-equity ratio. Closing under the agreements is expected to occur this week, subject to customary closing conditions.

In January, the Company issued a subordinated convertible debenture with a principal amount of $15 million in connection with acquiring Enterprise Division assets from Aether Systems. The Company and the holder of this subordinated debenture have entered into definitive agreements pursuant to which: (1) the noteholder will become obligated to convert the entire $15 million principal amount of its debenture into shares of the Company’s Class A Common Stock by December 31, 2004 and (2) all of the material restrictive covenants contained in the debenture will be nullified in exchange for the payment of $1 million and the issuance of an additional 200,000 shares of Class A Common Stock of the Company. In addition, the Company has entered into an agreement with current institutional investors in the Company to issue and sell 2.5 million shares of Class A Common Stock of the Company.

“While this summer’s technology ‘bear market’ has been an unfriendly environment for large capital markets transactions, we were pleased when presented with the opportunity to significantly reduce our leverage and strengthen our balance sheet on fair terms,” said Maurice B. Tosé, Chairman and CEO. “We are seeing many opportunities to round out our wireless data product and service offerings, and our now-stronger balance sheet positions us to aggressively and efficiently add to our core competencies. Such opportunities enhance our continuing organic growth in revenue and EBITDA.”

The effect of the financing transactions is summarized in the table below. The information under the heading “Adjusted” is non-GAAP balance sheet information which is revised to illustrate the effect of the financing transactions described above as if the financing transactions had occurred and the subordinated debenture had been fully converted into shares of Class A Common Stock as of

June 30, 2004. Management believes the “Adjusted” information presented below is useful in order to compare the financial condition of the Company before and after the conversion of subordinated debt to equity and the receipt of proceeds from the sale of Class A Common Stock.

	June 30, 2004
($ millions)	Actual		Adjusted
Cash and cash equivalents	$	15.8	$	24.5	(a)
Other current assets		46.9		46.9
Total current assets		62.7		71.4
Noncurrent assets		39.1		38.4	(b)
Total Assets	$	101.8	$	109.8
Total current liabilities	$	37.8	$	37.8
Debt:
Total debt		26.3		17.3
Less: current portion		11.8		11.8
Noncurrent long-term debt		14.5		5.5	(c)
Total Liabilities		52.3		43.3
Stockholders’ Equity		49.5		66.5
Total Liabilities and Equity	$	101.8	$	109.8
Shares Outstanding (millions)		33.4		38.9	(d)
Working Capital	$	24.9	$	33.6
Current Ratio		1.7		1.9
Debt/Equity Ratio		0.53		0.26

(a)	Includes $8.7 million in net proceeds from the financing transactions.
(b)	Reflects decrease of $0.7 million in unamortized deferred financing fees.
(c)	Reflects decrease of $15.0 million face value in convertible subordinated debentures, net of $6.0 million unamortized deferred debt discount or $9.0 million.
(d)	Includes an additional 2,500,000 shares of Class A Common Stock issued in the financing transactions, 2,990,542 shares of Class A Common Stock issuable in connection with the debt conversion.

In accordance with GAAP, the Company will record non-recurring, non-cash charges, which were not anticipated in past management earnings guidance, totaling approximately $8.5 million in the aggregate, to third and fourth quarter net income (the timing between the quarters will depend on the timing of conversion of the note) in order to write off unamortized deferred debt discount and financing fees associated with the debt which is being converted. There will be no effect on EBITDA or Adjusted Operating Income, Excluding Non-Cash Charges.

ABOUT TELECOMMUNICATION SYSTEMS, INC.

TeleCommunication Systems, Inc. (TCS) (NASDAQ:TSYS) is a leading provider of mission critical wireless data solutions to carrier, enterprise and government customers. TCS’ wireless data offerings include location-based Enhanced 9-1-1 services, and messaging and location service infrastructure for wireless operators, real-time market data and alerts to financial institutions, mobile asset management and mobile office solutions for enterprises, and encrypted satellite communications to government customers. For more information visit www.telecomsys.com.

This announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. These statements are based upon TCS’ current expectations and assumptions that are subject to a number of risks and uncertainties that would cause actual results to differ materially from those anticipated. The words, ``believe,’’ ``expect,’’ ``intend,’’ ``anticipate,’’ and variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. Statements in this announcement that are forward-looking include, but are not limited to, the statement by Mr. Tosé concerning our continuing organic growth in revenue and EBITDA.

The actual results realized by the Company could differ materially from the statements made herein, depending in particular upon the risks and uncertainties described in the Company’s filings with the Securities and Exchange Commission (SEC). These include without limitation risks and uncertainties relating to the Company’s financial results and the ability of the Company to (i) sustain profitability, (ii) continue to rely on its customers and other third parties to provide additional products and services that create a demand for its products and services, (iii) conduct its business in foreign countries, (iv) adapt and integrate new technologies into its products, (v) expand its sales and business offerings in the wireless data industry, (vi) develop software without any errors or defects, (vii) have sufficient capital resources to fund the company’s operations, (viii) protect its intellectual property rights, (ix) implement its sales and marketing strategy, and (x) successfully integrate the assets and personnel of acquired entities, such as the Enterprise net assets acquired from Aether Systems, Inc. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update or revise the information in this press release, whether as a result of new information, future events or circumstances, or otherwise.

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EX-99.2

Exhibit 99.2

Company Contacts:
Tom Brandt	Scott Liolios
Senior Vice President & CFO	Investor Relations
TeleCommunication Systems, Inc.	Liolios Group, Inc.
410-280-1001	949-574-3860
brandtt@telecomsys.com	scott@liolios.com

TCS CLOSES ON $10 MILLION IN EQUITY FINANCING

ANNAPOLIS, MD — September 1, 2004 — TeleCommunication Systems, Inc. (Nasdaq: TSYS), a global leader in wireless data technology, announced it closed yesterday on the equity financing arrangement announced earlier in the day.

ABOUT TELECOMMUNICATION SYSTEMS, INC.

TeleCommunication Systems, Inc. (TCS) (NASDAQ:TSYS) is a leading provider of mission critical wireless data solutions to carrier, enterprise and government customers. TCS’ wireless data offerings include location-based Enhanced 9-1-1 services, and messaging and location service infrastructure for wireless operators, real-time market data and alerts to financial institutions, mobile asset management and mobile office solutions for enterprises, and encrypted satellite communications to government customers. For more information visit www.telecomsys.com.

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