10-KT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[ ] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

          For the fiscal year ended June 30, 2010

or

[ X  ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
    For the transition period from 11/1/09 to 6/30/10.

Commission file number:   001-31265

AVATECH SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	84-1035353
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

10715 Red Run Blvd, Suite 101, Owings Mills, Maryland	21117
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (410) 581-8080

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common stock, par value $.01 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes       No  X   

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes       No  X   

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  X   No      

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes       No      

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K   X  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	Accelerated Filer
Non-Accelerated Filer	Smaller Reporting Company  X
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.
Yes        No   X   

The aggregate market value of the voting and non-voting equity stock held by non-affiliates of the registrant as of November 11, 2010 was approximately $33,719,230.

The number of shares of common stock outstanding as of November 11, 2010 was 51,875,739

DOCUMENTS INCORPORATED BY REFERENCE

Certain non-financial information responsive to items of this Transition Report is incorporated herein by reference to either:

• The Registrant’s Form 10-K for the fiscal year ended June 30, 2010 filed on September 28, 2010 (the “FY10 Form 10-K”)

• The Registrant’s definitive proxy statement filed on October 7, 2010 (the “Proxy Statement”)

• The Registrant’s Form 8-K filed on August 17, 2010 (as amended, the “Form 8-K”)

TABLE OF CONTENTS

PART I		4
ITEM 1.	Business	4
ITEM 2.	Properties	7
ITEM 3.	Legal Proceedings	7
ITEM 4.	(Removed and Reserved)	7
PART II		8
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	8
ITEM 6.	Selected Financial Data	8
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
ITEM 8.	Financial Statements and Supplementary Data	22
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	22
ITEM 9(A).	Controls and Procedures	22
ITEM 9B.	Other Information	22
PART III		23
ITEM 10.	Directors, Executive Officers and Corporate Governance	23
ITEM 11.	Executive Compensation	23
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	23
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	23
ITEM 14.	Principal Accounting Fees and Services	24
PART IV		24
ITEM 15.	Exhibits and Financial Statement Schedules	24
EXHIBIT INDEX		25
SIGNATURES		29
EX-10.24
EX-10.25
EX-10.26
EX-10.27
EX-10.28
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1

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EXPLANATORY NOTE

On August 17, 2010 (the “Closing Date”), Avatech Solutions, Inc., a Delaware corporation (“Avatech” or the “Registrant”), acquired all of the issued and outstanding capital securities of Rand Worldwide, Inc., a Delaware corporation (“Rand Worldwide”), in a reverse merger transaction (the “Acquisition”). The Acquisition was consummated pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), dated as of the Closing Date, by and among Avatech, ASRW Acquisition Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Avatech (“Merger Sub”), Rand Worldwide, and RWWI Holdings LLC (“RWWI”), a Delaware limited liability company and the sole stockholder of Rand Worldwide. At the effective time of the Acquisition (the “Closing”), Merger Sub was merged with and into Rand Worldwide, with Rand Worldwide as the surviving entity. As a result of the Acquisition, Rand Worldwide became a wholly-owned subsidiary of Avatech. The Acquisition is intended to qualify as a tax-free reorganization within the meaning of Section 368 of Internal Revenue Code of 1986, as amended. The Acquisition is being accounted for as a reverse acquisition because the number of shares issued to the former shareholders of Rand Worldwide, Inc. represents more than 50% of the number of shares of Avatech Common Stock outstanding immediately after the Acquisition. For accounting and Securities and Exchange Commission (“SEC”) reporting purposes, Rand Worldwide is deemed to be the continuing reporting entity, and the assets and liabilities and the historical operations that will be reflected in the consolidated financial statements will be those of Rand Worldwide. At the time of the Closing, the board of directors of Rand Worldwide changed its fiscal year end from October 31^st to June 30^th to match Avatech’s fiscal year end. Because Rand Worldwide is considered the accounting acquirer and the predecessor entity for SEC reporting purposes in the Acquisition, this change in fiscal year end is deemed to be a change in Avatech’s fiscal year end and this Transition Report on Form 10-K covering the transition period of November 1, 2009 (the day after the end of Rand Worldwide’s previous fiscal year) to June 30, 2010 (the end of our new fiscal year) is being filed as required by applicable SEC rules.

Certain non-financial information responsive to items of this Transition Report is incorporated herein by reference to either:

• The Registrant’s Form 10-K for the fiscal year ended June 30, 2010 filed on September 28, 2010 (the “FY10 Form 10-K”)

• The Registrant’s definitive proxy statement filed on October 7, 2010 (the “Proxy Statement”)

• The Registrant’s Form 8-K filed on August 17, 2010 (as amended, the “Form 8-K”)

This Transition Report on Form 10-K for the period ended June 30, 2010 may contain forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Readers of this report should be aware of the speculative nature of “forward-looking statements.” Statements that are not historical in nature, including those that include the words “anticipate”, “estimate”, “should”, “expect”, “believe”, “intend” and similar expressions are based on current expectations, estimates and projections about, among other things, the industry and the markets in which Avatech operates, and they are not guarantees of future performance. Whether actual results will conform to expectations and predictions is subject to known and unknown risks and uncertainties, including risks and uncertainties discussed in this report; general economic, market, or business conditions; cost of capital, demand for products and services; changes in Avatech’s competitive position or competitive actions by other companies; the speed, cost, and effectiveness of the proposed integration of the operations of Rand Worldwide and Avatech; the actions, product introductions and business practices of the software vendors for which Rand Worldwide and Avatech resell product; the ability to manage growth and continue to generate revenue from software maintenance contract renewals by our customers; changes in laws or regulations or policies of federal and state regulators and agencies; and other circumstances beyond our control. Consequently, all of the forward-looking statements made in this document are qualified by these cautionary statements, and there can be no assurance that the actual results anticipated will be realized, or if substantially realized, will have the expected consequences on the Avatech business or operations. Except as required by applicable laws, Avatech does not intend to publish updates or revisions of forward-looking statements it makes to reflect new information, future events or otherwise.

When used throughout this annual report, the terms “the Registrant,” and “Avatech” refer to Avatech Solutions, Inc. and, unless the context clearly indicates otherwise, its consolidated subsidiaries. In order to discuss and provide information related to the business of Rand Worldwide prior to the Acquisition, we will refer to that business as

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“Rand Worldwide” or the “Company” which includes such business and, unless the context clearly indicates otherwise, its consolidated subsidiaries. Except as set forth in this Explanatory Note or as explicitly stated herein, the information herein speaks as of June 30, 2010 and has not been updated to reflect subsequent events or changed circumstances.

PART I

ITEM 1. BUSINESS

The disclosure contained in Part I, Item 1 of the FY2010 10-K relating to the business of the Registrant during the transition period is incorporated herein by reference.

The business of Rand Worldwide during the transition period is described below.

Background

Rand Worldwide was formed in August 2007 for the purpose of allowing certain US limited partnerships associated with a domestic private investment firm to acquire, in November 2007, all of the outstanding shares of Rand A Technology Corporation which had been a publicly traded Canadian corporation. Rand Worldwide, through its subsidiary companies, carried on the business of Rand A Technology Corporation.

As required by applicable SEC rules, Rand Worldwide, as the accounting acquirer in the Acquisition, is required to file this Transition Report on Form 10-K for the period from November 1, 2009 (the day after the end of Rand Worldwide’s previous fiscal year) to June 30, 2010 (the end of our new fiscal year) (the “Transition Report”). As required by such SEC rules, this Report will discuss the operations of Rand Worldwide on a standalone basis for such period and the consolidated financial statements included herein are the consolidated financial statements of Rand Worldwide and its subsidiaries alone. Information regarding the financial results, business and operations of Avatech Solutions and the combined business have been provided in other filings made by Avatech Solutions, Inc. and can be found on its website (www.avatech.com) or on the SEC website (www.sec.gov).

General

Rand Worldwide is one of the world’s leading professional services and technology companies for the engineering community, targeting organizations in the building, infrastructure, and manufacturing industries. The Company advances the way organizations design, develop, and manage building, infrastructure, and manufacturing projects. Fortune 500 and Engineering News Record’s Top 100 companies, along with many small and medium businesses work with Rand Worldwide to gain a competitive advantage through technology consulting, implementation, training, and support services. One of the world’s largest integrators of Autodesk software, the Company provides software solutions that accelerate innovation while improving quality and profitability. The Company is globally diversified with offices in the United States, Canada, Australia, Malaysia and Singapore. Rand Worldwide has over 20 years of industry experience and expertise, an extensive list of training and implementation services and long standing relationships with design technology leader Autodesk, Inc. The Company’s clients include corporations, government agencies, and educational institutions.

Rand Worldwide differentiates itself from traditional product resellers through a wide range of value-added services, consisting primarily of training, technical support, and professional services. It also provides software customization, data migration, computer-aided design standards consulting, process workflow analysis, and implementation assistance for complex design environments. Its strategic focus is to provide clients a competitive advantage with technology solutions that address broad, enterprise-wide initiatives.

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Business Units

There have historically been two distinct business units, or divisions, within Rand Worldwide: (i) the IMAGINiT Technologies division (“IMAGINiT”); and (ii) the Rand Professional Services (“RPS”) division. IMAGINiT is the largest North American value-added reseller of pre-packaged software product offerings developed by Autodesk, Inc. (“Autodesk”). IMAGINiT also provides services related to these Autodesk offerings primarily to businesses in the manufacturing, building and infrastructure industries. Major product offerings include AutoCAD, Autodesk Inventor and Autodesk Revit.

RPS has been focused on the re-sale of other software products and the provision of services related to those products. Vendor relationships of RPS include Dassault Systèmes S.A. (“Dassault”), with respect to services provided related to their product lifecycle management (“PLM”) product offerings, and Autonomy PLC (“Autonomy”), with respect to its email archiving software products sold under the name “Zantaz EAS.” In addition, RPS develops and publishes educational courseware related to the Autodesk products and other similar PLM products under the brand name “ASCENT.”

See Note 20, “Segment Information,” in the Notes to Consolidated Financial Statements for more information about our divisions.

Services

In addition to reselling software from Autodesk and other companies, Rand Worldwide provides services to enable effective design, development and project management of client initiatives. Professional services include project-focused software implementations, software customization, data migration, computer aided design standards consulting, supplemental design staffing, drawing digitization, and symbol library development. The Company employs over 60 industry specialists who provide professional services to its customers.

Rand Worldwide offers training courses in numerous subjects related to various software solutions offered at 35 training facilities and through mobile labs sent to customer sites or other off-site facilities. Training is led by 27 technical experts that have formal training or proven industry experience in the topics they teach. Rand Worldwide also provides training services that are highly tailored to meet the needs of a particular customer, including company-specific operational topics, customized product usage, and other general technology or process training. Rand Worldwide provides end-user telephone support services through its staffed hotline service and customized service offerings. A staff of full-time technology consultants assists customers with questions about product features, functions, usability issues, and configurations. The hotline offers services through multiple access levels including prepaid services, actual elapsed time, and annual support contracts. Customers can communicate with the hotline through a variety of channels including email, an internet portal, telephone, and facsimile.

Markets and Competition

IMAGINiT Technologies:   In the IMAGINiT Technologies business, we focus primarily on providing enterprise solutions to small- and medium-sized businesses with less than one billion dollars of annual revenue, predominantly in the architecture, engineering, and construction (“AEC”) market and the mechanical design and manufacturing (“MDM”) market. The AEC market is comprised of design services focused on the construction of large physical assets such as buildings, roads, factories, utility companies, and commercial infrastructure projects. The MDM market is primarily focused on the design, tooling, assembly, and testing of instruments, electronic devices, machines, mechanical devices, and power-driven equipment.

While several local and regional competitors exist in the various geographic territories where Rand Worldwide conducts business, we believe that we have a competitive advantage in terms of geographic reach, comprehensive training and support, and the provision of other products and services, and that we are one of the largest commercial Autodesk resellers in the North America. Prior to the Acquisition, Avatech was the largest US competitor of this business unit and other regional resellers are competitive in our various regions. Sales territories are established and maintained through authorization directly from Autodesk and many of our competitors are smaller, regionally-based Autodesk resellers with established reputations in their specific territory.

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RPS: In the RPS business, we focus on providing services to a variety of customers that range in size and scope depending on our offerings. In the email archiving business, we sell the Zantaz EAS line of products from Autonomy, and related implementation services, to many large businesses and government organizations. We face competition from the direct sales channels of other email archiving product lines, such as Mimosa. In this business, because we do not sell any Dassault software directly, we face competition from resellers that are authorized to offer both the products of Dassault and related services.

Arrangements with Principal Suppliers

Our revenue is primarily derived from the resale of software products produced by other vendors and services related to those software products. These sales are made pursuant to channel sales agreements whereby Rand Worldwide is granted the authority to purchase and resell the vendor products and provide the associated services. Under these agreements, Rand Worldwide both resells software directly to its customers and acts as a sales agent for various vendors and receives commissions for its sales efforts.

On February 1, 2010, certain subsidiaries of Rand Worldwide entered into certain renewable Authorized Channel Partner Agreements with Autodesk. The renewable agreements dated February 1, 2010, have a term of three years but provide targets for a one-year period. Under these agreements Autodesk appointed IMAGINiT as a non-exclusive partner to market, distribute, and support Autodesk software products and identifies targets for the upcoming year. The territories for such authorizations include the authorization to sell various Autodesk products in parts of the United States and Australia and in all of Canada, Malaysia and Singapore. The Company must achieve yearly minimum purchase requirements from the sale of Autodesk’s various software products in order to be eligible to purchase such products directly from Autodesk. For the eight-month transition period ended June 30, 2010 and the Company’s most recent fiscal year ended October 31, 2009, the Company’s revenue from the sale of Autodesk software and subscriptions was approximately $21.7 million and $33.2 million, respectively.

Customers

Rand Worldwide markets its products to private companies, public corporations, government agencies and educational institutions throughout the United States, Canada, Australia, Malaysia and Singapore.

Intellectual Property

Rand Worldwide regards its technology and other proprietary rights as essential to its business. As such, it relies on copyright, trade secret, confidentiality procedures, contract provisions, and trademark law to protect its technology and intellectual property. Rand Worldwide has confidentiality agreements with its consultants and corporate partners and controls access to, and distribution of, its products, documentation, and other proprietary information.

Rand Worldwide and its subsidiaries own several federally registered trademarks, and has other trademark applications pending, but has no patents or patent applications pending. This Transition Report contains trademarks and trade names of Rand Worldwide and its affiliates as well as those of other companies. All trademarks and trade names appearing in this report are the property of their respective holders.

Employees

At June 30, 2010, Rand Worldwide had approximately 249 employees located in 40 offices throughout the United States, Canada, Australia, Malaysia and Singapore of which 245 were full-time employees. None of its employees are represented by collective bargaining agreements and it has never experienced a work stoppage. Rand Worldwide believes that its employee relations are good.

Available Information

Avatech maintains an Internet site at www.avatech.com on which it makes available, free of charge, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to the foregoing as soon as reasonably practicable after these reports are electronically filed with, or furnished to, the SEC.

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In addition, stockholders may access these reports and documents on the SEC’s web site at www.sec.gov. Avatech’s executive offices are located at 10715 Red Run Blvd, Suite 101, Owings Mills, Maryland 21117 and its telephone number is (410) 581-8080.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

The disclosure contained in Part I, Item 2 of the FY2010 Form 10-K relating to the properties of the Registrant during the transition period is incorporated herein by reference.

Rand Worldwide leases approximately 150,000 square feet of office and technical training space in 40 locations in the United States and internationally through our foreign subsidiaries. Rand Worldwide does not own any real property.

All facilities are in good condition and we believe that our existing facilities and offices are adequate to meet our requirements for the foreseeable future. See Note 12, “Commitments and Contingencies,” in the Notes to Consolidated Financial Statements for more information about our lease commitments.

ITEM 3. LEGAL PROCEEDINGS

From time to time, Rand Worldwide is involved in legal matters or named as a defendant in legal actions arising from normal operations, or is presented with claims for damages arising out of the conduct of its business. Management believes that no pending matter, alone or together with other pending matters, is likely to have a material adverse effect on Rand Worldwide or the Company’s future financial condition or results of operations.

ITEM 4. (REMOVED AND RESERVED.)

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The disclosure responsive to this item contained in Part II, Item 5 of the FY2010 10-K relating to the Registrant during the transition period is incorporated herein by reference.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The disclosure contained in Part II, Item 7 of the FY2010 Form 10-K, to the extent relating to the financial condition and results of operations of the Registrant during the transition period and the corresponding period of the prior fiscal year, is incorporated herein by reference.

THE FOLLOWING DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF RAND WORLDWIDE SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT.

Material Subsequent Event

          On August 17, 2010, Rand Worldwide Inc. (“Rand Worldwide” or “the Company”) was acquired by Avatech Solutions, Inc. (“Avatech”) in a reverse merger transaction that resulted in Rand Worldwide becoming a wholly-owned subsidiary of Avatech (the “Merger”). In connection with the Merger, Rand Worldwide’s stockholders received shares of Avatech common stock representing approximately 66.1% of the outstanding shares of Avatech common stock and Avatech’s stockholders retained approximately 33.9% of the outstanding shares of Avatech common stock. When calculated based on the number of shares of Avatech’s common stock outstanding on a fully diluted basis on August 17, 2010, the common stock issued to Rand Worldwide is equal to approximately 59.3% of the total common equivalent shares as of the date of the Merger. Because the shares of Avatech common stock issued to Rand Worldwide’s stockholders in the merger exceeded 50% of the outstanding shares of Avatech common stock outstanding immediately after the merger, Rand Worldwide is deemed, for accounting and SEC reporting purposes, to be the continuing reporting entity, and the assets and liabilities and the historical operations that will be reflected in the resulting consolidated financial statements going forward will be those of Rand Worldwide.

          In connection with the Merger, Rand Worldwide changed its fiscal year end from October 31 to June 30, and SEC rules require a Transition Report on Form 10-K to be filed for Rand Worldwide’s transition period of November 1, 2009 to June 30, 2010. This Item 7 discusses the financial condition and results of operations of Rand Worldwide for the resulting eight-month period ended June 30, 2010 as well as the year ended October 31, 2009. References to “2008” and “2009” refer to the fiscal years ended October 31, 2008 and 2009, respectively, unless otherwise indicated.

Overview

          Rand Worldwide is a leading provider of design automation solutions to various manufacturing and engineering industries. The Company specializes in technical support, training, and consulting aimed at improving design and documentation efficiencies and the seamless integration of workflow processes. These technology solutions enable its customers to enhance productivity, profitability, and competitive position. Rand Worldwide is one of the largest Autodesk software integrators worldwide.

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          The Company is organized into two divisions: the IMAGINiT Technologies division (“IMAGINiT”) and the Rand Professional Services division (“RPS”). IMAGINiT is the largest licensed value-added reseller of Autodesk, Inc. (“Autodesk”) products in North America, providing Autodesk solutions and value-added services to customers in the manufacturing, infrastructure, building, and media and entertainment industries. RPS is a reseller of product lifecycle management (“PLM”) products and a provider of services related to solutions sold by Dassault Systèmes S.A. (“Dassault”), Autonomy PLC (“Autonomy”) and other software vendors. RPS also sells its own proprietary software products and related services, enhancing its total client solution offerings.

          Rand Worldwide was formed in August 2007 and was later capitalized on October 31, 2007 and November 1, 2007 with an aggregate investment of $44.5 million by certain limited partnerships of a domestic private investment firm (collectively the “Stockholder”) in exchange for preferred stock with a purchase price of $31.0 million, less cost of issuance of $187,000, and term notes with a $13.5 million principal amount. Immediately thereafter, the Company acquired all of the outstanding shares of Rand A Technology Corporation, a publicly traded Canadian corporation, for $44.5 million.

          Immediately prior to the Merger on August 17, 2010, the holders of the common stock, redeemable preferred stock and term notes of Rand Worldwide exchanged their respective securities for membership interests in RWWI Holdings LLC (“RWWI”), formerly a subsidiary of Rand Worldwide. Simultaneously, Rand Worldwide merged with a subsidiary of RWWI, with Rand Worldwide being the surviving entity. As a result of this exchange of Rand Worldwide securities for RWWI membership interests: (i) RWWI became the sole stockholder of Rand Worldwide and (ii) all of the associated financial obligations relating to the then outstanding redeemable preferred stock and term notes of Rand Worldwide were settled in full and such securities no longer remain outstanding. Following this exchange, all of RWWI’s ownership in Rand Worldwide was exchanged for shares of Avatech common stock, completing the Merger.

Discontinued Operations

     Since November 1, 2007, the Company has undertaken significant actions to restructure its business, including the sale or closure of several subsidiaries of the business that were routinely producing losses. Accordingly, the results of these subsidiaries from these periods, including any gain or loss recognized upon their disposal, are considered discontinued operations and are presented separately from the results of the Company’s continuing operations. Unless otherwise indicated, the discussion and amounts provided in Item 7 solely relate to the Company’s continuing operations.

Critical Accounting Policies

          The consolidated financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. Critical accounting policies and estimates that impact the consolidated financial statements include those that relate to software revenue recognition, estimates of bad debts, income taxes and recoverability of our intangible assets, including goodwill. All of these critical accounting policies are discussed with and reviewed by the Company’s Audit Committee on a periodic basis. Presented below is a description of the accounting policies that we believe are most critical to an understanding of our consolidated financial statements.

          Revenue Recognition- We generate revenue from three principal sources: (i) license fees for packaged software products; (ii) service fees from installation, training and consulting engagements, telephone support contracts, and maintenance and support contracts; and (iii) commission fees from the resale of Autodesk software support agreements and from the referral of customers to Autodesk.

          For revenue derived from license fees for packaged software products, we follow Accounting Standards Codification (“ASC”) 985-605 Software-Revenue Recognition and ASC 605-10 Revenue Recognition. We recognize revenue from the sale of software licenses and training materials upon shipment of the products, provided that evidence of the arrangement exists, the arrangement fee is fixed or determinable, and collection of the related receivable is probable and free of contingencies.

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          Revenue from installation, training and consulting services is recognized upon completion of the requested service, which typically occurs within ninety days of receipt of an order. Revenue from telephone support contracts and maintenance and support contracts is recognized ratably over the contract period, which is typically twelve months. Maintenance and support services typically include only telephone and Internet-based support, but in limited circumstances include software updates, when and if available, provided by the vendor of the software. Installation and consulting services provided by the Company are not considered essential to the functionality of any software products sold as those services do not alter the functionality or capabilities of the software product and could be performed by customers themselves or other vendors.

          Fees earned from the resale of Autodesk’s software support agreements are reported as commission revenue and presented net of their related costs, with no amount reported as a cost of revenue. For these transactions, we consider Autodesk to be the primary obligor in the arrangement as Autodesk has the responsibility of providing the end-customer all the deliverables under the contract, including software upgrades and various support services. As a result, we assume an agency relationship in these transactions, and recognize the net fee associated with serving as an agent in sales. Commission revenue also includes referral fees paid by Autodesk for certain types of customer transactions, determined based on specified percentages of the amount billed by Autodesk to the referred customer. These referral fees are recorded as revenue in the period earned, based on reporting by Autodesk.

          Our arrangements with our customers typically involve the sale of one or more products and services at the same time. We consider these to be multiple elements of a single arrangement. We apply the residual method to recognize revenues from such arrangements with one or more elements that are to be delivered at a future date, provided that evidence of the fair value of all undelivered elements exists. Under the residual method, the fair value of the undelivered elements, such as installation and software support services, is deferred at date of product shipment and the remaining portion of the total arrangement fee is recognized as revenue. We determine vendor-specific objective evidence (“VSOE”) of the fair value of undelivered services based on the prices that are charged when the same element is sold separately to customers. If the fair value of each undelivered element in a multiple-element arrangement cannot be determined based on VSOE, all revenue under the arrangement is deferred until those undelivered elements are later delivered or until such time as the only remaining undelivered element is software support, at which time total revenue is recognized ratably over the remaining software support period.

          We assess whether the total fee payable to the Company for the order is fixed or determinable and free of contingencies at the time of delivery. We consider the payment terms of the transaction, including whether the terms are extended, and our collection experience in similar transactions that did not require concessions, among other factors. If the total consideration payable is not fixed or determinable, revenue is recognized only as payments become due from the customer, provided that all other revenue recognition criteria are met.

          If an arrangement includes customer acceptance criteria, we defer all revenue from the arrangement until acceptance is received or the acceptance period has lapsed, unless those acceptance criteria only require that the product perform in accordance with the software vendor’s standard published product specifications. If a customer’s obligation to pay us is contingent upon a future event, such as installation or acceptance, we defer all revenue from the arrangement until that event has occurred.

          Our arrangements with customers do not contain any rights of product return, other than those related to standard warranty provisions that permit replacement of defective goods. To date, we have no reserve recorded for product returns because such returns have been insignificant.

          Revenue recognized in a reporting period could be adversely affected if future changes in conditions related to a transaction cause management to determine the revenue recognition criteria are not met or that VSOE for a certain element of a transaction cannot be determined. In the past, it has not been necessary to adjust reported revenues due to such changes, and we continue to evaluate current conditions that may affect the nature and timing of our revenue recognition.

          Allowance for Doubtful Accounts- We maintain an allowance for doubtful accounts for estimated losses which may result from the inability of customers to pay for purchased products and services or for disputes that affect the ability to fully collect accounts receivable. We estimate this allowance by reviewing the status of past-due accounts and consideration of general historical bad debt expense. Accounts are considered past due based on the payment terms as stated on the

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invoice. Actual experience has not varied significantly from estimates; however, if the financial condition of the Company’s customers were to deteriorate, resulting in their inability to pay for products or services, there may be a need to record additional allowances in future periods. To mitigate this risk, we perform ongoing credit evaluations of our customers.

          Income Taxes-The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. Variations in the actual outcome of these future tax consequences could materially impact our financial position, results of operations, or cash flows.

          In addition to taxes paid to the U.S. federal government and U.S. state taxes, we pay taxes in foreign jurisdictions including Canada, Australia, Malaysia and Singapore. Our effective tax rate may be materially impacted by the amount of income taxes associated with these foreign earnings, which are taxed at rates different from that of the U.S. federal statutory tax rate, as well as the timing and extent of the realization of deferred tax assets, changes in tax law and potential acquisitions. Further, our tax rates may fluctuate within a fiscal year, including from quarter to quarter, due to items arising from discrete events, including settlement of tax audits and assessments, acquisitions of other companies, and changes in generally accepted accounting principles (“GAAP”) or other events.

          At June 30, 2010, the Company had federal net operating loss carryforwards totaling approximately $27.8 million, which expire between the date of this Transition Report and 2029. We established a full valuation allowance against our net deferred tax assets, which includes these loss carryforwards, as we believe that it is more likely than not that the tax assets will not be realized prior to their expiration.

          Recoverability of goodwill and purchased intangible assets- We account for goodwill and other intangibles under ASC 350 (previously Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets). ASC 350 prescribes a two-phase process for impairment testing of goodwill. The first phase screens for impairment; while the second phase, if necessary, measures the impairment. Management considers the Company to be two reporting units and we perform the required impairment analysis of goodwill annually or on an interim basis if circumstances dictate. Any reduction of the reporting unit’s fair value below its carrying value could require us to write down the value of goodwill or purchased intangibles and record an expense for an impairment loss. Our analysis of the recoverability of our goodwill and intangible assets as of June 30, 2010 determined that there was no evidence of impairment.

Results of Operations

          The following describes the components of each line item of our consolidated statement of operations.

          Product Sales- Product sales represents fees derived from the resale of packaged design software products.

          Service Revenue- Service revenue represents fees derived from various services offered by the Company, including: training; consulting services; maintenance and support services; and telephone support services.

          Commission Revenue- Commission revenue represents fees derived from the resale of Autodesk’s software support agreements, net of their related costs, and referral fees paid by Autodesk for certain types of customer transactions.

          Cost of Product Sales- Cost of product sales consists of the cost of products purchased from software suppliers or hardware manufacturers as well as the associated shipping and handling costs.

          Cost of Service Revenue- Cost of service revenue includes the direct costs associated with the implementation of software and hardware solutions as well as training, support services, and professional services. These costs consist primarily of compensation, travel, literature, and the costs of third-party contractors engaged by the Company. The cost of service revenue does not include an allocation of overhead costs. In addition, cost of

11

service revenue includes amortization expense related to intellectual property recorded in connection with our acquisitions.

          Selling, General and Administrative Expenses- Selling, general and administrative expenses consist primarily of compensation and other expenses associated with the Company’s sales force, management, finance, human resources, and information systems. Advertising and public relations expenses and expenses for facilities, such as rent and utilities, are also included in selling, general and administrative expenses.

          Depreciation and Amortization– Depreciation and amortization expenses represent the period costs associated with our investment in property and equipment, consisting principally of computer equipment, software, furniture and fixtures, leasehold improvements and acquired intangible assets. Our acquired intangible assets include customer relationships, trademarks and trade names recorded in connection with our acquisitions.

          Restructuring Charges – We enacted a series of actions to right-size our operations, to relocate our corporate headquarters and to reduce overall expenses. As a result of these activities, we incurred severance expenses related to employee terminations as well as charges related to facility closures, all of which has been recorded as restructuring charges in our consolidated statement of operations.

          Impairment of Acquired Intangible Assets – In 2008, we experienced a significant decline in demand for our products and services. We concluded that the decline was not likely to recover in the short term and was an indication that the carrying value of its long-lived intangible assets may not be recoverable. We performed an assessment of the value of our acquired intangible assets, concluding that an impairment existed. Accordingly, a charge of $11.9 million was recorded.

          Impairment of Goodwill – In 2008, as a result of our annual goodwill impairment tests and in light of the then-current market conditions, an impairment charge of $9.2 million was recorded.

          Other Expenses (Income) – Components of other expenses and income include interest expense and recognized foreign exchange gains and losses. Our interest expense includes interest charged on the balances of our term notes, interest charged on our revolving line of credit and interest charges on capital lease agreements. Interest income has not been material and, when earned, has been netted against interest expense. As a result of the recapitalization of Rand Worldwide and the Merger, the Company’s term notes are no longer outstanding and the related interest will cease to accrue.

          Income Tax Expense (Benefit)- We are subject to income tax in numerous jurisdictions worldwide with varying statutory rates, and the use of estimates is required in determining our provision for income taxes. We have established a valuation allowance against net deferred tax assets, consisting principally of net operating losses and temporary differences in certain jurisdictions, including the United States.

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Selected Revenue Information for the Eight Months ended June 30, 2010 and 2009 (unaudited)

     The following table sets forth the percentages of total revenue represented by selected items reflected in our audited Consolidated Statements of Operations included elsewhere in this report. The period-to-period comparisons of financial results are not necessarily indicative of future results.

	Eight Months Ended
(Amounts in thousands, except percentages)	June 30,
	2010			2009
				(unaudited)
Revenue
Product sales		51.6	%		52.4	%
Service revenue		30.7	%		33.6	%
Commission revenue		17.7	%		14.0	%
Total revenue		100.0	%		100.0	%
Cost of revenue
Product sales		34.2	%		32.4	%
Service revenue		23.2	%		28.7	%
Total cost of revenue		57.4	%		61.2	%
Gross profit		42.6	%		38.8	%
Operating expenses
Selling, general and administrative		47.5	%		41.2	%
Depreciation and amortization		2.2	%		3.0	%
Restructuring charges		2.0	%		2.6	%
Impairment of acquired intangible assets		0.0	%		0.0	%
Impairment of goodwill		0.0	%		0.0	%
Total operating expenses		51.7	%		46.7	%
Loss from operations		(9.2	%)		(7.9	%)
Other expenses (income)
Interest expense		3.9	%		2.8	%
Currency exchange losses (gains)		0.2	%		0.0	%
Other expense (income)		(4.9	%)		0.1	%
Loss from continuing operations before income taxes		(8.3	%)		(10.7	%)
Income tax expense (benefit)		0.0	%		0.0	%
Loss from continuing operations		(8.3	%)		(10.7	%)

13

Eight Months ended June 30, 2010 compared to Eight Months ended June 30, 2009 (unaudited)

Revenue

	Eight Months Ended
(Amounts in thousands, except percentages)	June 30,
	2010		2009		% Change
			(unaudited)
Revenue
Product sales	$	16,869	$	19,584		(13.9%)
Service revenue		10,055		12,551		(19.9%)
Commission revenue		5,786		5,250		10.2%
Total revenue		32,710		37,385		(12.5%)

          Revenue: Total revenue of the eight month period ended June 30, 2010 decreased by $4.7 million (or 12.5%) as compared to the prior fiscal period. The markets served by the Company’s offerings continued to be impacted by the economic recession, which decreased both product and service revenue when compared to the same period of the previous year. In addition, in conjunction with its restructuring activities, the Company exited certain aspects of its RPS consulting business, which reduced service revenue in the eight months ended June 30, 2010. The Company experienced an increase in commission revenue, a result of resale of Autodesk maintenance and support contracts, which we believe was a result of various programs launched by Autodesk to entice the users of their software to update their previously purchased software.

Cost of Revenue

	Eight Months Ended
(Amounts in thousands, except percentages)	June 30,
	2010		2009		% Change
			(unaudited)
Cost of revenue
Product sales		11,199		12,130		(7.7%)
Service revenue		7,592		10,746		(29.4%)
Total cost of revenue		18,791		22,876		(17.9%)
Gross profit		13,919		14,509		(4.1%)

          Cost of Revenue: Total cost of revenue during the eight month period ended June 30, 2010 decreased by $4.1 million or 17.9% as compared to the prior fiscal period. Cost of product sales decreased by $931,000 (or 7.7%), a result of the aforementioned decrease in product revenue, partially offset by increased sales rebates received from Autodesk. Cost of service revenue decreased by $3.1 million or 29.4%, primarily due to reductions in the technical workforce pursuant to our restructuring activities.

          Gross Profit: Our gross margin percentage, which is calculated by dividing gross profit by total revenue, for the eight months ended June 30, 2010, was 42.6%, compared to 38.8% in the prior fiscal period. The improved gross margin was primarily a result of the reduction of costs resulting from our restructuring activities, which improved the gross margin on services revenue from 14.4% to 24.5%. In addition, our commission revenues represented a higher proportion of total revenues resulting in a favorable revenue mix and a higher gross margin.

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Operating Expenses

	Eight Months Ended
(Amounts in thousands, except percentages)	June 30,
	2010		2009		% Change
			(unaudited)
Operating expenses
Selling, general and administrative		15,529		15,401		0.8%
Depreciation and amortization		733		1,105		(33.7%)
Restructuring charges		665		957		(30.5%)
Impairment of acquired intangible assets		-		-		0.0%
Impairment of goodwill		-		-		0.0%
Total operating expenses		16,927		17,463		(3.1%)

          Selling, General and Administrative Expenses: Selling, general and administrative expenses during the eight month period ended June 30, 2010 increased $128,000 (or 0.8%) when compared to the same period of the previous year. In the eight months ended June 30, 2010, we incurred a $350,000 charge in relation to the settlement of an outstanding legal matter, the impact of which was partially offset by reduced compensation expense, a result of savings realized from reductions in workforce pursuant to our restructuring.

          Depreciation and Amortization: Depreciation and amortization during the eight month period ended June 30, 2010 decreased $372,000 (or 33.7%) when compared to the same period of the previous year. The decrease was a result of reduced amortization charges related to our acquired customer relationships. Our amortization methodology for that intangible asset results in progressively lower charges over its useful life.

          Restructuring Charge: We implemented a series of restructuring activities to right-size our operations, relocate our corporate headquarters from Canada to the United States and to reduce our overall expenses. As a result of these actions, we incurred significant severance-related expenses in both fiscal periods. These expenses, along with a lesser amount of charges related to facility closures, have been classified as restructuring activities in the Company’s statement of operations.

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Other Expenses (Income)

(Amounts in thousands)	Eight Months Ended June 30,
	2010		2009		% change
			(unaudited)
Other expenses (income)
Interest expense	$	1,260	$	1,033		22.0%
Currency exchange gains		51		6		750.0%
Other expense (income)		(1,600)		22		(7372.7%)
Total other expense (income)	$	(289)	$	1,061		(127.2%)

          Other Expenses (Income): Other expenses (income) includes interest expense arising from the Company’s borrowings and recognized currency gains and losses and other expense (income). Interest expense during the eight month period ended June 30, 2010 increased compared to the prior year period as a result of an increase in the interest rate on amounts outstanding under the Company’s term loan agreements. The Company’s term loan agreements included a clause that retroactively increased the interest rate of the loan from 10% to 12% if the loan remained unpaid as of September 30, 2009. As the Company had approximately $11.2 million of principal outstanding under these term loans as of that date, the clause became effective, contributing to a significant increase in interest expense between the fiscal periods. As a result of the Merger with Avatech, the term loans and our obligations to repay the principal and related interest are no longer outstanding. Interest expense related to the Company’s revolving line of credit, which is still outstanding subsequent to the Merger, was $173,000 and $0, in the eight months ended June 30, 2010 and 2009, respectively.

          In the eight months ended June 30, 2010, the Company sold its 30% ownership interest in Rand North America (“RNA”) for $1.6 million. RNA, a joint venture between the Company and Dassault Systemes S. A. was established in 2004 and had no carrying value. The proceeds from the sale were recorded as “other income” and there were no associated disposal costs.

Income Tax Expense

(Amounts in thousands)	Eight Months Ended June 30,
	2010		2009		% change
			(unaudited)
Income tax expense (benefit)	$	35	$	20		75.0%

          Income Tax Expense: The Company recorded tax expense of approximately $20,000 during the eight months ended June 30, 2009, primarily related to state income taxes, representing an effective tax rate of less than 1%. In the eight months ended June 30, 2010, we recorded an expense of approximately $35,000, primarily related to state income taxes, representing an effective tax rate of approximately 1%.

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Selected Revenue Information for Years Ended October 31, 2009 and 2008

          The following table sets forth the percentages of total revenue represented by selected items reflected in our audited Consolidated Statements of Operations included elsewhere in this report. The year-to-year comparisons of financial results are not necessarily indicative of future results.

	Year ended
	October 31,
	2009		2008
Revenue
Product sales		47.9%		56.1%
Service revenue		30.5%		27.4%
Commission revenue		21.6%		16.5%
Total revenue		100.0%		100.0%
Cost of revenue
Product sales		32.3%		38.7%
Service revenue		25.9%		25.1%
Total cost of revenue		58.2%		63.8%
Gross profit		41.8%		36.2%
Operating expenses
Selling, general and administrative		43.1%		36.5%
Depreciation and amortization		2.5%		7.8%
Restructuring charges		3.3%		1.5%
Impairment of acquired intangible assets		0.0%		15.0%
Impairment of goodwill		0.0%		11.7%
Total operating expenses		48.9%		72.5%
Loss from operations		(7.1%)		(36.3%)
Other expenses (income)
Interest expense		3.8%		1.8%
Currency exchange losses (gains)		(0.1%)		(0.3%)
Other expense (income)		0.0%		0.1%
Loss from continuing operations before income taxes		(10.8%)		(37.9%)
Income tax expense (benefit)		(0.7%)		0.1%
Loss from continuing operations		(10.2%)		(38.0%)

17

Year Ended October 31, 2009 Compared to Year Ended October 31, 2008

Revenue

	Year ended
(Amounts in thousands, except percentages)	October 31,
	2009		2008		% Change
Revenue
Product sales	$	25,522	$	44,385		(42.5%)
Service revenue		16,236		21,700		(25.2%)
Commission revenue		11,505		13,083		(12.1%)
Total revenue		53,263		79,168		(32.7%)

          Revenue: During 2008 and 2009, the Company experienced a significant decline in all sources of revenue as a result of the economic recessions impacting both the United States and Canada. Our product and service offerings are primarily marketed to customers in the manufacturing and engineering industries. As a result of the recession, the buying behavior of customers in these industries was significantly curtailed relative to periods prior to 2008. These factors contributed to a $25.9 million (or 32.7%) decrease in total revenue in 2009 compared to 2008, which included an $18.9 million decrease in product revenue, a $5.5 million decrease in service revenue and a $1.6 million decrease in commission revenue.

Cost of Revenue

	Year ended
(Amounts in thousands, except percentages)	October 31,
	2009		2008		% Change
Cost of revenue
Product sales		17,199		30,653		(43.9%)
Service revenue		13,802		19,832		(30.4%)
Total cost of revenue		31,001		50,485		(38.6%)

          Cost of Revenue: Total cost of revenue decreased by $19.5 million (or 38.6%) for the year ended October 31, 2009 as compared to the prior fiscal year. Cost of product sales decreased by $13.5 million (or 43.9%), a result of the aforementioned decrease in product revenue. Cost of service revenue decreased by $6.0 million (or 30.4%), primarily due to our reductions in the technical workforce that occurred during the period pursuant to our restructuring activities.

          Gross Profit: Our gross margin percentage for fiscal 2009 was 41.8%, compared to 36.2% in 2008. The improved gross margin was primarily a result of the effect of the reduction of costs resulting from our restructuring activities, which improved the gross margin on services revenue from 8.6% in 2008 to 15.0% in 2009. In addition, our commission revenues represented a higher proportion of total revenues resulting in a favorable revenue mix and a higher gross margin.

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Operating Expenses

(Amounts in thousands)	Year ended October 31,
	2009		2008		% change
Operating expenses
Selling, General and Administrative	$	22,942	$	28,915		(20.7%)
Depreciation and Amortization		1,333		6,205		(78.5%)
Restructuring Charge		1,740		1,166		49.2%
Impairment of Acquired Intangible Assets		-		11,914		(100.0%)
Impairment of Goodwill		-		9,235		(100.0%)
Total Operating Expenses	$	26,015	$	57,435		(54.7%)

          Selling, General and Administrative Expenses: Selling, general and administrative expenses decreased $6.0 million (or 20.7%) when compared to the previous year. The decrease was due to reduced compensation expense, a result of savings realized from reductions in workforce pursuant to our restructuring activities as well as a result of reduced sales-related variable compensation. In 2009, we migrated most of the Company’s corporate headquarters and administrative functions from Canada to the United States, which, for a period of time, resulted in duplicative staff and costs. We estimate that these duplicative items resulted in $1.3 million of expenses in 2009.

           Depreciation and Amortization: Depreciation and amortization decreased $4.9 million (or 78.5%) when compared to the previous year. Our periodic amortization charge decreased a result of the reduction in carrying value of our acquired intangible assets resulting from the 2008 impairment charge.

          Restructuring Charges: We implemented a series of restructuring activities to right-size our operations, relocate our corporate headquarters from Canada to the United States and to reduce our overall expenses. As a result of these actions, our headcount was reduced by approximately 150 employees and we incurred significant severance-related expenses. These expenses, along with a lesser amount of charges related to facility closures, have been classified as restructuring activities in the Company’s statement of operations.

Other Expenses (Income)

(Amounts in thousands)	Year ended October 31,
	2009		2008		% change
Other expenses (income)
Interest expense	$	2,049	$	1,409		45.4%
Currency exchange gains		(40)		(227)		(82.4%)
Other expense		-		40		(100.0%)
Total other expense (income)	$	2,009	$	1,222		64.4%

          Other Expenses (Income): Other expense (income) includes interest expense arising from the Company’s borrowings and recognized foreign exchange gains and losses. The increase in other expense (income) is a result of an increase in the interest rate on amounts outstanding under the Company’s term loan agreements. The Company’s term loan agreement included a clause that retroactively increased the interest rate of the loan from 10% to 12% if the loan remained unpaid as of September 30, 2009. As the Company had approximately $11.1 million of principal outstanding under these term loans, the clause became effective, contributing to a significant increase in interest expense in 2009. As a result of the Merger with Avatech, the term loans and our obligations to repay the principal and related interest are no longer outstanding. Interest expense related to the Company’s revolving line of credit, which is still outstanding subsequent to the Merger, was $47,000 and $0, in fiscal 2009 and 2008, respectively.

19

Income Tax Expense (Benefit)

(Amounts in thousands)	Year ended October 31,
	2009			2008		% change
Income tax expense (benefit)	$	(348	)	$	95		(466.3	%)

          Income Tax Expense (Benefit): The Company recorded tax expense of $95,000 during 2008, primarily related to state income taxes, representing an effective tax rate of less than 1%. In 2009, we recorded a benefit of $348,000, primarily a result of the utilization of net operating losses to offset the gain related to the sale of our investment in Sigmetrix, representing an effective tax rate of (6%).

Liquidity and Capital Resources

          Historically, the Company has financed its operations and met its capital expenditure requirements through cash flows provided by borrowings under short-term and long-term debt arrangements, and proceeds received from the divestitures of certain businesses and the sale of an investment in a minority-owned entity.

          The Company was formed in August 2007 and was later capitalized on October 31, 2007 and November 1, 2007 with an aggregate investment of $44.5 million by the Stockholder in exchange for redeemable preferred stock with a purchase price of $31.0 million and term notes with a $13.5 million principal amount. Immediately thereafter, the Company acquired all of the outstanding shares of Rand A Technology Corporation, a publicly traded Canadian corporation, for $44.5 million. That business combination created a new basis of accounting for Rand A Technology, which has been reflected as of November 1, 2007 in the Company’s consolidated financial statements.

          Since then, the Company has made a number of modifications to its term notes. In 2008 and 2009, additional borrowings of $5.6 million were made by the Company from the Stockholder to finance its operations and its various restructuring activities. In August 2009, the Company repaid $4.7 million of term note principal and accrued interest to the Stockholder. As of June 30, 2010, the carrying value of these term notes was $12.6 million inclusive of both principal and interest; however, as described below, these term notes are no longer outstanding as a result of the Merger.

          In August 2010, the holders of the Company’s common stock, redeemable preferred stock and term notes converted and exchanged their respective securities for membership interests in RWWI, which at the time was a subsidiary of the Company. At the time of this conversion and exchange, the carrying value of the redeemable preferred stock was $38.1 million, representing its then-current redemption amount, and the carrying value of the term notes was $12.8 million, inclusive of both principal and interest. RWWI therefore became the sole stockholder of the Company. Immediately thereafter, all of RWWI’s ownership in the Company was exchanged for shares of Avatech common stock, and the Company was merged into a subsidiary of Avatech, completing the Merger transaction. As a result of all such transactions: the Company’s common stock, redeemable preferred stock and term notes and all the related financial obligations thereunder are no longer outstanding; the operations of the Company continue as a subsidiary of Avatech; and RWWI is a controlling shareholder of Avatech but not part of the ongoing Avatech consolidated reporting entity.

          The Company maintains a $12.5 million revolving credit facility, which includes a $500,000 sublimit for the issuance of standby or trade letters of credit, with PNC Bank (the “Credit Facility”). The Credit Facility is provided pursuant to a Revolving Credit and Security Agreement dated as of August 14, 2009 and amended on January 22, 2010, July 23, 2010 and August 17, 2010 (as amended, the “Credit Agreement”). A portion of the Credit Facility is guaranteed by the Stockholder (the “Stockholder Guaranties”). The Stockholder Guaranties provide for a guaranty of $2.5 million of the Credit Facility, which represents the amount of the “Permitted Overadvance” as defined by the Credit Agreement. Beginning on February 1, 2011, and on the first day of each May, August, November and February thereafter, the Permitted Overadvance and the collective amount of the Credit Facility guaranteed by the Stockholder is reduced by approximately $357,000, until the amount reaches $0. As of June 30, 2010, the Company had $3.3 million outstanding under the Credit Facility, which is used to finance day-to-day operations.

20

          The Credit Facility has a term of three years, and matures on August 13, 2012. Amounts borrowed under the Credit Facility bear interest at a rate equal to, at the Company’s option, either (i) the “Eurodollar Rate”, which is calculated by reference to the London Interbank Offered Rate (“LIBOR”) plus an applicable margin ranging from 3.00% to 3.75% or (ii) the bank’s “Alternate Base Rate”, which is determine by reference to the base commercial lending rate of the bank as publicly announced to be in effect from time to time, the federal funds open rate, or the daily LIBOR plus an applicable margin ranging from 2.25% to 3.00%. The applicable margin is determined based on the ratio of (a) Earnings before interest, tax, depreciation, and amortization (“EBITDA”), minus unfunded capital expenditures made during such period, minus distributions (including tax distributions made during such period) and dividends, minus cash taxes paid during such period to (b) all cash payments in respect of indebtedness (other than repayments of advances under the Credit Facility (the “Fixed Charge Coverage Ratio”). The ratio described above is measured at each fiscal quarter end, and is calculated based on the financial results of certain of the Company’s subsidiaries for the nine month period ending October 31, 2010, and for each fiscal quarter thereafter, on a rolling four quarter basis. All amounts outstanding under the revolving loan will be due and payable upon the earlier of August 13, 2012 or the acceleration of the loan upon an event of default, as described below.

          The Credit Agreement contains customary representations, warranties and covenants, including covenants by the Company limiting additional debt, liens, guaranties, mergers and consolidations, substantial asset sales, investments and loans, sale and leasebacks and other fundamental changes. In addition, the Credit Agreement contains financial covenants by certain subsidiaries of the Company that impose a minimum Fixed Charge Coverage Ratio.

          The Credit Agreement provides for events of default customary for credit facilities of this type, including but not limited to non-payment, misrepresentation, breach of covenants and bankruptcy. Upon an event of default, the interest rate on all outstanding obligations will be increased and the bank may accelerate payment of all outstanding loans and may terminate the lenders’ commitments. Upon the occurrence of an event of default relating to insolvency, bankruptcy or receivership, the lender commitments will be automatically terminated and the amounts outstanding under the Credit Facility will become payable immediately.

          Avatech also has a credit facility with the same bank, and the Credit Agreement also contains a covenant requiring that both companies’ facilities be amended, restated and consolidated into one agreement or such other agreements reasonably acceptable to the bank by December 15, 2010.

          The Company’s operating assets and liabilities consist primarily of accounts receivable, accounts payable, and inventory. Changes in these balances are affected principally by the timing of sales and investments in inventory based on expected customer demand. The Company attempts to minimize its inventory levels through arrangements with suppliers to ship products with an average delivery period of two days and centralized inventory management. The Company purchases approximately 95% of its product from one principal supplier which provides it with credit to finance those purchases.

          In the eight months ended June 30, 2010, operating activities of the Company’s continuing operations consumed $37,000 of cash, compared to $6.8 million for the twelve months ended October 31, 2009, the reduction was primarily a result of operating spending savings realized as a result of our various restructuring activities. Collections of trade accounts receivable and receivables due from related parties generated $3.5 million of cash, which was offset by an $842,000 decrease in deferred revenue and a $348,000 reduction in income taxes payable. In the eight months ended June 30, 2010, investing activities generated $698,000 of cash, a result of the sale of our ownership interest in Rand North America, a joint-venture between the Company and Dassault. Financing activities in the eight months ended June 30, 2010 consumed $741,000 of cash, representing the net activity under the Company’s line of credit which is used to fund day-to-day operations.

          The Company entered into a Value Added Reseller Agreement with Autodesk effective February 1, 2010 for an initial term of twelve months that will automatically renew on an annual basis for two additional twelve month periods. The agreement designates the Company as an authorized reseller of Autodesk software and prescribes the authorized sales territories, authorized products and services, rebate and incentive program details and marketing support.

Off Balance Sheet Transactions

The Company is not party to any off-balance sheet transactions as defined in Item 303 of the SEC’s Regulation S-K.

21

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item may be found immediately after the signatures to this report and is incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

          None.

ITEM 9(A). CONTROLS AND PROCEDURES

The disclosure contained in Part II, Item 9(A) of the FY2010 Form 10-K is incorporated herein by reference.

Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation of Rand Worldwide’s disclosure controls and procedures as of June 30, 2010, that Rand Worldwide’s disclosure controls and procedures were effective as of June 30, 2010. It should be noted that Rand Worldwide did not have a class of securities registered under the Securities Exchange Act of 1934 during the transition period, so its controls did not address any requirement to file reports under that Act but focused primarily on financial reporting requirements.

Management’s Annual Report on Internal Control over Financial Reporting

Management of Rand Worldwide is responsible for establishing and maintaining adequate internal control over financial reporting for Rand Worldwide. Because Rand Worldwide did not have a class of securities registered under the Securities Exchange Act of 1934 as of June 30, 2010 and was, therefore, not subject to Rule 13a-15 under that Act, its internal control over financial reporting was not established with a view to evaluation under a control framework complying in all respects with Rule 13a-15(c). The Registrant’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of Rand Worldwide’s internal control over financial reporting as of June 30, 2010. This evaluation focused on the principal risks for misstatement of the financial statements and assessed the adequacy of the controls in place to address those risks, including reviewing the available evidence of the operation of such controls. Based on its evaluation, management concluded that Rand Worldwide’s internal control over financial reporting was effective as of June 30, 2010.

Changes in Internal Control Over Financial Reporting

During the transition period, there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

          None.

22

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The Disclosure contained in the Proxy Statement relating to directors, executive officers and corporate governance of the Registrant is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The disclosure contained in the Proxy Statement relating to executive compensation of the Registrant is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The disclosure contained in the Proxy Statement relating to security ownership of the Registrant and the other matters is incorporated herein by reference.

We note that on October 12, 2010, the group of stockholders identified in the Beneficial Ownership table of the Proxy Statement as “Group per Schedule 13D/A filing as filed on April 27, 2010” filed an amendment to Schedule 13D indicating that it no longer is acting as a “group” within the meaning of Regulation 13d, as amended, and that the members of such group have agreed not to take any further actions as such a “group”, in whole or in part, in the future.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The disclosure contained in the Proxy Statement and the Form 8-K relating to transactions and relationships with related persons of the Registrant is incorporated herein by reference.

For information regarding related party transactions and relationships occurring or existing prior to the Acquisition, please refer to the disclosure included in Note 10 to the Notes to Consolidated Financial Statements included in this Transition Report, which is incorporated into this Item 13 by reference.

23

ITEM 14. Principal Accountant Fees and Services

The disclosure contained under the heading Accounting Fees and Services of the Proxy Statement relating to accounting fees and services of the Registrant is incorporated herein by reference.

	11/1/09 - 6/30/10		11/1/08 - 10/31/09		11/1/07 - 10/31/08
Audit Fees	$	245,000	$	281,000	$	286,000
Audit-Related Fees		188,000		12,000		12,000
Tax Fees		18,000		127,000		136,000
All Other Fees		2,000		2,000		2,000
Total Fees	$	453,000	$	422,000	$	436,000

Audit Fees: Total fees for professional services rendered by PricewaterhouseCoopers LLP in connection with the audits of Rand Worldwide’s consolidated financial statements included in our Annual Reports on Form 10-K and Form 8-K/A for the period ended June 30, 2010 and years ended October 31, 2009 and 2008 were $245,000, $281,000 and $286,000, respectively.

Audit-Related Fees: Total fees for assurance and related services reasonably related to the performance of the audit or review of the Company’s financial statements for the period ended June 30, 2010 and years ended October 31, 2009 and 2008 were $188,000, $12,000 and $12,000, respectively. All of the services described in this paragraph were pre-approved by the Audit Committee.

Tax Fees: Total fees for professional services rendered by PricewaterhouseCoopers LLP in connection with tax compliance and advisory services for the period ended June 30, 2010 and years ended October 31, 2009 and 2008 were $18,000, $127,000 and $136,000, respectively. These fees include professional services provided in connection with compliance services. All of the services described in this paragraph were pre-approved by the Audit Committee.

All Other Fees: All other fees include charges related to accounting software licenses.

Approval of Independent Auditor Services and Fees

     The Audit Committee reviews all fees charged by our independent registered public accounting firm, and actively monitors the relationship between audit and non-audit services provided. The Audit Committee must pre-approve all audit and non-audit services provided by our independent registered public accounting firm and fees charged.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) The following documents are filed as part of this Transition Report:

(1)	Financial Statements: The consolidated balance sheets of Rand Worldwide and its Subsidiaries as of June 30, 2010; October 31, 2009 and October 31, 2008 and the related consolidated statements of operations, redeemable preferred stock, stockholders’ deficit and cash flows for the transition period and the years ended October 31, 2008 and 2009 are filed herewith.
(2)	Financial Statement Schedules: Financial Statement Schedules have been omitted because the information required to be set forth therein is shown in the Notes to the Consolidated Financial Statements.
(3)	Exhibits: The exhibits filed or furnished with this transition report are listed in the Exhibit Index that immediately follows the Notes to the Consolidated Financial Statements presented elsewhere in this report, which list is incorporated herein by reference.

24

EXHIBIT INDEX

Exhibit	Description
3.1(i)	Restated Certificate of Incorporation of Spatial Technology, Inc. (incorporated by reference to Exhibit 3(i).1 to the Registration Statement on Form SB-2 filed by Spatial Technology, Inc. on November 21, 2000, File No. 333-50426)
3.1(ii)	Certificate of Amendment to the Restated Certificate of Incorporation of Spatial Technology, Inc., changing Spatial Technology, Inc.’s name to PlanetCad, Inc. (incorporated by reference to Exhibit 3(i).2 to the Registration Statement on Form SB-2 filed by PlanetCad, Inc. on November 21, 2000, File No. 333-50426)
3.1(iii)	Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 4.2 of the Registration Statement on Form 8-A filed by PlanetCad, Inc. on March 11, 2002, File No. 001-31265)
3.1(iv)	Certificate of Designation, Preferences and Rights of Series B Convertible Preferred Stock (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed by PlanetCad, Inc. on May 28, 2002)
3.1(v)	Certificate of Amendment of Restated Certificate of Incorporation of PlanetCad, Inc. (incorporated by reference to Annex G of the Pre-Effective Amendment No. 2 on Form S-4/A filed by PlanetCad, Inc. on September 13, 2002, File No. 333-89386)
3.1(vi)	Certificate of Amendment of Certificate of Incorporation, changing PlanetCad, Inc.’s name to Avatech Solutions, Inc. (incorporated by reference to Exhibit 3.1(vi) of the Annual Report on Form 10-k filed by Avatech Solutions, Inc. on September 28, 2010)
3.1(vii)	Certificate of Designations – Series C Convertible Preferred Stock (incorporated by reference to Exhibit 3.6A of the Pre-Effective Amendment No. 1 on Form S-1/A filed by Avatech Solutions, Inc. on April 11, 2003, File No. 333-104035)
3.1(viii)	Certificate of Amendment to Certificate of Designations – Series C Convertible Preferred Stock (incorporated by reference to Exhibit 3.8 of the Quarterly Report on Form 10-Q filed by Avatech Solutions, Inc. on February 13, 2004)
3.1(ix)	Certificate of Designations of Series D Convertible Preferred Stock (incorporated by reference to Exhibit 3.9 of the Quarterly Report on Form 10-Q filed by Avatech Solutions, Inc. on February 13, 2004)
3.1(x)	Certificate of Elimination of Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.10 of the Quarterly Report on Form 10-Q filed by Avatech Solutions, Inc. on February 13, 2004
3.1(xi)	Certificate of Amendment to Certificate of Designation of Series D Convertible Preferred Stock (incorporated by reference to Exhibit 3.12 of the Quarterly Report on Form 10-Q filed by Avatech Solutions, Inc. on February 13, 2004)
3.1(xii)	Certificate of Elimination of Series C Convertible Preferred Stock (incorporated by reference to Exhibit 3.11 of the Quarterly Report on Form 10-Q filed by Avatech Solutions, Inc. on February 13, 2004)
3.1(xiii)	Certificate of Amendment to the Restated Certificate of Incorporation of Avatech Solutions, Inc. (incorporated by reference to Exhibit 3.13 of the Pre-Effective Amendment No. 1 on Form S-1/A filed by Avatech Solutions, Inc. on July 19, 2004, File No. 333-114230)

25

3.1(xiv)	Certificate of Designations of Series E Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on May 9, 2005)
3.1(xv)	Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and Restrictions Thereof of Series F 10% Cumulative Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on June 19, 2006)
3.2	Bylaws (incorporated by reference to Exhibit 3(ii).1 to the Registration Statement on Form SB-2 filed by Spatial Technology, Inc. on November 21, 2000, File No. 333-50426)
4.1	Form of Amended and Restated Warrant (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on August 17, 2010)
9.1	Stockholders’ Agreement by and among Avatech Solutions, Inc., RWWI Holdings LLC and certain holders of common stock dated as of August 17, 2010 (incorporated by reference to Exhibit 9.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on August 17, 2010)
10.1	Lease between Merritt-DM1, LLC and Avatech Solutions, Inc. effective June 1, 2004 (incorporated by reference to Exhibit 10.7 to the Pre-Effective Amendment No. 1 on Form S-1/A filed by Avatech Solutions, Inc. on July 19, 2004, File No. 333-114230)
10.2	Form of Preferred Stock Purchase Agreement for Series D Convertible Preferred Stock (incorporated by reference to Exhibit 10.13 of the Quarterly Report on Form 10-Q filed by Avatech Solutions, Inc. on February 13, 2004)
10.3	Form of Preferred Stock Purchase Agreement for Series E Convertible Preferred Stock (incorporated by reference to Exhibit 10.3 of the Annual Report on Form 10-K filed by Avatech Solutions, Inc. on September 28, 2010)
10.4*	Avatech Solutions, Inc. 2002 Stock Option Plan (incorporated by reference to Annex F of the Registration Statement on Form S-4 filed by Avatech Solutions, Inc. on May 30, 2002, File No. 333-89386)
10.5*	Form of First Amendment to Stock Option (incorporated by reference to Exhibit 10.4 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on August 17, 2010)
10.6*	Avatech Solutions, Inc. Restricted Stock Award Plan, as amended (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-8 filed by Avatech Solutions, Inc. on February 10, 2006, File No. 333-131721)
10.7*	Form of Restricted Stock Award (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on January 12, 2009)
10.8*	Avatech Solutions, Inc. Employee Stock Purchase Plan, as amended (incorporated by reference to Exhibit 4 of the Registration Statement on Form S-8 filed by Avatech Solutions, Inc. on December 4, 2007 File No. 333-147823)
10.9*	Employment Agreement between Avatech Solutions, Inc. and George Davis dated 28, 2010 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on June 29, 2010)
10.10*	Employment Agreement between Marc L. Dulude and Rand Worldwide, Inc. dated August 17, 2010 (incorporated by reference to Exhibit 10.5 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on August 17, 2010)

26

10.11*	Amended and Restated Employment Agreement between Avatech Solutions, Inc. and Lawrence Rychlak dated August 17, 2010 (incorporated by reference to Exhibit 10.6 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on August 17, 2010)
10.12*	Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on August 17, 2010)
10.13	Revolving Loan Promissory Note issued by Avatech Solutions Subsidiary, Inc. and Avatech Solutions Subsidiary, Inc. to Mercantile Safe-Deposit & Trust Co. dated January 27, 2006 (incorporated by reference to Exhibit 10.50 of the Registration Statement on Form S-1 filed by Avatech Solutions, Inc. on February 10, 2006, File No 333-131720)
10.14	Loan and Security Agreement among Avatech Solutions Subsidiary, Inc., Avatech Solutions Subsidiary, Inc. and Mercantile Safe-Deposit & Trust Co., dated January 27, 2006 (incorporated by reference to Exhibit 10.51 of the Registration Statement on Form S-1 filed by Avatech Solutions, Inc. on February 10, 2006, File No 333-131720)
10.15	Modification Agreement among Avatech Solutions, Inc., Avatech Solutions Subsidiary, Inc. and Mercantile Safe-Deposit & Trust Co. dated May 30, 2006 (incorporated by reference to Exhibit 10.57 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on June 8, 2006)
10.16	Second Modification Agreement among Avatech Solutions, Inc., Avatech Solutions Subsidiary, Inc and Mercantile Bank & Trust Co., dated December 31, 2006 (incorporated by reference to Exhibit 10.16 of the Quarterly Report on Form 10-Q filed by Avatech Solutions, Inc. on November 14, 2007)
10.17	Third Modification Agreement among Avatech Solutions, Inc., Avatech Solutions Subsidiary, Inc and PNC Bank, National Association, dated December 31, 2008 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on January 30, 2009)
10.18	Fourth Modification Agreement among Avatech Solutions, Inc., Avatech Solutions Subsidiary, Inc and PNC Bank, National Association, dated December 23, 2009 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on December 30, 2009)
10.19	Fifth Modification Agreement among Avatech Solutions, Inc., Avatech Solutions Subsidiary, Inc and PNC Bank, National Association, dated August 17, 2010 (incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on August 17, 2010)
10.20	Autodesk Authorized Value Added Reseller Agreement between Avatech Solutions Subsidiary, Inc. and Autodesk, Inc, dated February 1, 2010 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on May 17, 2010)
10.21	Registration Rights Agreement between Avatech Solutions, Inc. and RWWI Holdings LLC, dated August 17, 2010 (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K of Avatech Solutions, Inc. filed on August 17, 2010)
10.22	Omnibus Waiver and Termination Agreement among Avatech Solutions, Inc., Pacific Asset Partners and Sigma Opportunity Fund, LLC, dated August 17, 2010 (incorporated by reference to Exhibit 10.22 of the Annual Report on Form 10-K of Avatech Solutions, Inc. filed on September 28, 2010)
10.23	Omnibus Waiver and Termination Agreement among Avatech Solutions, Inc., Sigma Opportunity Fund, LLC, Garnett Y. Clark, Jr., Robert Post and George Davis, dated August 17, 2010

27

	(incorporated by reference to Exhibit 10.22 of the Annual Report on Form 10-K of Avatech Solutions, Inc. filed on September 28, 2010)
10.24	Autodesk Authorized Value Added Reseller Agreement between Rand Imaginit Technologies, Inc. and Autodesk, Inc, dated February 1, 2010 (filed herewith)
10.25	Revolving Credit and Security Agreement among PNC Bank, National Association and Rand Worldwide US Holdings, Inc., Rand A Technology Corporation, Rand Technologies of Michigan, Inc. and Rand IMAGINiT Technologies, Inc., dated August 14, 2009 (filed herewith)
10.26	First Amendment to Revolving Credit and Security Agreement by and among PNC Bank, National Association and Rand Worldwide US Holdings, Inc., Rand A Technology Corporation, Rand Technologies of Michigan, Inc. and Rand IMAGINiT Technologies, Inc., dated January 22, 2010 (filed herewith)
10.27	Second Amendment to Revolving Credit and Security Agreement by and among PNC Bank, National Association and Rand Worldwide US Holdings, Inc., Rand A Technology Corporation, Rand Technologies of Michigan, Inc. and Rand IMAGINiT Technologies, Inc., dated July 23, 2010 (filed herewith)
10.28	Third Amendment to Revolving Credit and Security Agreement by and among PNC Bank, National Association and Rand Worldwide US Holdings, Inc., Rand A Technology Corporation, Rand Technologies of Michigan, Inc. and Rand IMAGINiT Technologies, Inc., dated July 23, 2010 (filed herewith)
13.1	Those portions of the Annual Report on Form 10-K of Avatech Solutions, Inc. for the fiscal year ended June 30, 2010 filed on September 28, 2010 that are incorporated by reference into Part I, Items 1 and 2 and Part II, Items 5, 7 and 9(A) of this Transition Report, respectively.
21.1	Subsidiaries of Avatech Solutions, Inc. (filed herewith)
23.1	Consent of PricewaterhouseCoopers, LLP (filed herewith)
31.1	Rule 15d-14(a) Certifications by Chief Executive Officer (filed herewith)
31.2	Rule 15d-14(a) Certifications by Chief Financial Officer (filed herewith)
32.1	Section 1350 Certifications (furnished herewith)

* Identifies a management contract or compensatory plan or arrangement in which an executive officer of Avatech or Rand Worldwide participates.

28

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

	AVATECH SOLUTIONS, INC.
Date: November 15, 2010	By:	/s/  Marc L. Dulude
		Marc L. Dulude
		Chief Executive Officer        (Principal Executive Officer)

          Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

By:	/s/ Richard A. Charpie	By:	/s/ George M. Davis
	Richard A. Charpie Director		George M. Davis Director
	November 15, 2010		November 15, 2010
By:	/s/ Marc L. Dulude	By:	/s/ Eugene J. Fischer
	Marc L. Dulude Director and Chief Executive Officer		Eugene J. Fischer Director
	November 15, 2010		November 15, 2010
By:	/s/ Suzanne E. MacCormack	By:	/s/ Lawrence Rychlak
	Suzanne E. MacCormack Director		Lawrence Rychlak President and Chief Financial Officer
	November 15, 2010		(Principal Financial and Accounting Officer)
			November 15, 2010
By:	/s/ Charles D. Yie
	Charles D. Yie Director
	November 15, 2010

29

INDEX TO RAND WORLDWIDE INC. AND SUBSIDIARIES FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm		F-1
Consolidated Balance Sheets as of October 31, 2008 and 2009 and June 30, 2010		F-2
Consolidated Statements of Operations for the years ended October 31, 2008 and 2009 and the eight months ended June 30, 2010		F-3
Consolidated Statements of Redeemable Preferred Stock and Shareholders’ Deficit for the years ended October 31, 2008 and 2009 and eight months ended June 30, 2010		F-4
Consolidated Statements of Cash Flows for the years ended October 31, 2008 and 2009 and the eight months ended June 30, 2010		F-5
Notes to Consolidated Financial Statements		F-6

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Rand Worldwide, Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, redeemable preferred stock and shareholders’ deficit, and cash flows present fairly, in all material respects, the financial position of Rand Worldwide, Inc. and its subsidiaries at June 30, 2010, October 31, 2009 and 2008 and the results of their operations and their cash flows for the eight months ended June 30, 2010 and the years ended October 31, 2009 and 2008 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/S/ PricewaterhouseCoopers LLP

Boston, Massachusetts

November 15, 2010

F-1

Rand Worldwide, Inc.

Consolidated Balance Sheets

							As of
(Amounts in thousands, except share data)	As of October 31,						June 30,
	2008			2009			2010
Assets
Current assets
Cash and cash equivalents	$	4,736		$	1,168		$	1,198
Accounts receivable, net of allowance for doubtful accounts of $363, $215 and $390, at October 31, 2008, 2009 and June 30, 2010, respectively		12,141			10,358			8,203
Accounts receivable from related parties (Note 10)		1,209			627			-
Other receivables		249			318			433
Inventory		658			106			152
Prepaid expenses and other current assets		1,295			1,129			1,030
Total current assets		20,288			13,706			11,016
Property and equipment, net (Note 6)		1,727			1,364			1,823
Acquired intangible assets (Note 4)		3,200			2,207			1,638
Goodwill (Note 5)		7,023			7,201			7,232
Other long-term assets		136			441			406
Total assets	$	32,374		$	24,919		$	22,115
Liabilities, Redeemable Preferred Stock and Shareholders’ Deficit
Current liabilities
Revolving line of credit (Note 11)	$	-		$	4,026		$	3,325
Accounts payable		6,578			5,828			6,307
Accrued liabilities (Note 7)		5,392			3,416			3,684
Income taxes payable (Note 9)		588			381			34
Customer advance payments		175			63			103
Deferred revenue		4,696			3,391			2,479
Due to related parties, current portion (Note 10)		7,046			3,540			6,576
Capital lease obligations, current portion		45			50			55
Total current liabilities		24,520			20,695			22,563
Due to related parties, net of debt discount of $215, $162 and $126, at October 31, 2008, 2009 and June 30, 2010, respectively (Note 10)		8,815			8,066			6,061
Capital lease obligations		70			74			35
Other long-term liabilities		233			160			114
Total liabilities		33,638			28,995			28,773
Commitments and contingencies (Note 12)
Series A redeemable preferred stock, $0.001 par value;
31,858,922 shares authorized; 31,000,000 shares issued and outstanding; liquidation preference of $33,480, $36,158 and $38,086, at October 31, 2008, 2009 and June 30, 2010, respectively		33,480			36,158			38,086
Shareholders’ deficit
Common stock, $0.001 par value; 11,010,000 shares authorized; 9,500,000 shares issued and outstanding at October 31, 2008, 2009 and June 30, 2010, respectively		10			10			10
Accumulated deficit		(34,880	)		(40,879	)		(45,528	)
Accumulated other comprehensive income		126			635			774
Total shareholders’ deficit		(34,744	)		(40,234	)		(44,744	)
Total liabilities, redeemable preferred stock and shareholders’ deficit	$	32,374		$	24,919		$	22,115

The accompanying notes are an integral part of these consolidated financial statements.

F-2

Rand Worldwide, Inc.

Consolidated Statements of Operations

(Amounts in thousands, except per share data)

							Eight
							months
	Year ended						ended
	October 31,						June 30,
	2008			2009			2010
Revenue
Product sales	$	44,385		$	25,522		$	16,869
Service revenue		21,700			16,236			10,055
Commission revenue		13,083			11,505			5,786
Total revenue		79,168			53,263			32,710
Cost of revenue
Product sales		30,653			17,199			11,199
Service revenue		19,832			13,802			7,592
Total cost of revenue		50,485			31,001			18,791
Gross profit		28,683			22,262			13,919
Operating expenses
Selling, general and administrative		28,915			22,942			15,529
Depreciation and amortization		6,205			1,333			733
Restructuring charges (Note 8)		1,166			1,740			665
Impairment of acquired intangible assets (Note 4)		11,914			-			-
Impairment of goodwill (Note 5)		9,235			-			-
Total operating expenses		57,435			26,015			16,927
Loss from operations		(28,752	)		(3,753	)		(3,008	)
Other expenses (income)
Interest expense		1,409			2,049			1,260
Currency exchange losses (gains)		(227	)		(40	)		51
Other expense (income)		40			-			(1,600	)
Loss from continuing operations before income taxes		(29,974	)		(5,762	)		(2,719	)
Income tax expense (benefit)		95			(348	)		35
Loss from continuing operations		(30,069	)		(5,414	)		(2,754	)
Loss from discontinued operations, net of tax of $83, $0 and $0, respectively (Note 17)		(920	)		(860	)		-
Gain (loss) on sale or disposition of discontinued operations, net   of tax of $0, $380 and $0, respectively (Note 17)		(1,342	)		2,914			-
Net loss	$	(32,331	)	$	(3,360	)	$	(2,754	)
Net loss from continuing operations	$	(30,069	)	$	(5,414	)	$	(2,754	)
Accretion of dividends and issuance costs on Series A Preferred Stock		(2,667	)		(2,678	)		(1,928	)
Net loss from continuing operations available to common stock holders	$	(32,736	)	$	(8,092	)	$	(4,682	)
Basic and diluted net loss per common share from continuing operations	$	(3.52	)	$	(0.85	)	$	(0.49	)
Basic and diluted net income (loss) per common share from discontinued operations		(0.24	)		0.22			-
Basic and diluted net loss per common share	$	(3.76	)	$	(0.63	)	$	(0.49	)
Diluted net loss per common share from continuing operations	$	(3.52	)	$	(0.85	)	$	(0.49	)
Diluted net loss per common share from discontinued operations		(0.24	)		0.22			-
Diluted net loss per common share	$	(3.76	)	$	(0.63	)	$	(0.49	)
Weighted average shares used in computing losses per common share:
Basic		9,313			9,500			9,500
Diluted		9,313			9,500			9,500

The accompanying notes are an integral part of these consolidated financial statements.

F-3

Rand Worldwide, Inc.

Consolidated Statements of Redeemable Preferred Stock and Shareholders’ Deficit

(Amounts in thousands, except share data)
												Accumulated
	Series A											Other
	Redeemable Preferred								Additional			Compre-					Total			Compre-
	Stock				Common Stock				Paid-in			hensive		Accumulated			Shareholders’			hensive
	Shares		Amount		Shares		Par value		Capital			Income		Deficit			Deficit			Loss
Balance at October 31, 2007		31,000,000	$	30,813		8,500,000	$	9	$	-		$	-	$	(9	)	$	-
Issuance of fully vested common stock to consultants and others						1,000,000		1		121								122
Share-based compensation for awards granted to employees										6								6
Accretion of dividends and issuance costs on Series A preferred stock				2,667						(127	)				(2,540	)		(2,667	)
Comprehensive loss:
Net loss															(32,331	)		(32,331	)	$	(32,331	)
Foreign currency translation adjustment													126					126			126
Comprehensive loss																				$	(32,205	)
Balance at October 31, 2008		31,000,000		33,480		9,500,000		10		-			126		(34,880	)		(34,744	)
Share-based compensation for awards granted to employees										39								39
Accretion of dividends on Series A preferred stock				2,678						(39	)				(2,639	)		(2,678	)
Comprehensive loss:
Net loss															(3,360	)		(3,360	)	$	(3,360	)
Foreign currency translation adjustment													509					509			509
Comprehensive loss																				$	(2,851	)
Balance at October 31, 2009		31,000,000		36,158		9,500,000		10		-			635		(40,879	)		(40,234	)
Share-based compensation for awards granted to employees										33								33
Accretion of dividends on Series A preferred stock				1,928						(33	)				(1,895	)		(1,928	)
Comprehensive loss:
Net loss															(2,754	)		(2,754	)	$	(2,754	)
Foreign currency translation adjustment													139					139			139
Comprehensive loss																				$	(2,615	)
Balance at June 30, 2010		31,000,000	$	38,086		9,500,000	$	10	$	-		$	774	$	(45,528	)	$	(44,744	)

The accompanying notes are an integral part of these consolidated financial statements.

F-4

Rand Worldwide, Inc.

Consolidated Statements of Cash Flows

							Eight months
	Years Ended October 31,						ended June 30,
(Amounts in thousands)	2008			2009			2010
Cash flows from operating activities
Net loss	$	(32,331	)	$	(3,360	)	$	(2,754	)
Loss from discontinued operations		(920	)		(860	)		-
Gain (loss) on sale or disposition of discontinued operations		(1,342	)		2,914			-
Loss from continuing operations		(30,069	)		(5,414	)		(2,754	)
Adjustments to reconcile loss from continuing operations to net cash provided by (used in) operating activities
Amortization of acquired intangible assets		5,310			993			569
Depreciation of property and equipment		1,336			781			457
Impairment of acquired intangible assets and goodwill		21,149			-			-
Share-based compensation		128			39			33
Provision for doubtful accounts		92			14			238
Non-cash portion of restructuring charge		161			-			-
Loss on dispostion of equity-method investments		40			-			-
Gain on sale of investment		-			-			(1,600	)
Changes in operating assets and liabilities, net of acquisition and divestitures
Accounts receivable, including amounts due from related parties		826			1,648			2,475
Inventory		1,369			558			(88	)
Prepaid expenses, other receivables and other assets		26			(470	)		245
Accounts payable, accrued and other liabilities		(3,681	)		(3,892	)		558
Income taxes payable		20			(208	)		(348	)
Due to related parties		817			(104	)		1,020
Deferred revenue and customer advance payments		2,973			(743	)		(842	)
Net cash provided by (used in) operating activities of continuing operations		497			(6,798	)		(37	)
Net cash used in operating activities of discontinued operations		(686	)		(854	)		-
Net cash used in operating activities		(189	)		(7,652	)		(37	)
Loss from continuing operations before income taxes
Acquisition of Rand A Technology Corporation, net of cash acquired		(38,543	)		-			-
Purchases of property and equipment		(711	)		(498	)		(902	)
Proceeds from sale of investment		-			-			1,600
Net cash used in investing activities of continuing operations		(39,254	)		(498	)		698
Net cash provided by (used in) investing activities of discontinued operations		(184	)		2,902			-
Net cash provided by (used in) investing activities		(39,438	)		2,404			698
Cash flows from financing activities
Proceeds from issuance of preferred stock		31,000			-			-
Proceeds from issuance of common stock		1			-			-
Proceeds from revolving line of credit		-			16,967			31,549
Repayments on revolving line of credit		-			(12,941	)		(32,250	)
Proceeds from issuance of notes to related party		17,118			2,000			-
Repayment of notes to related party		(3,336	)		(4,653	)		-
Increase in (repayment of) obligations under capital leases		(10	)		24			(40	)
Net cash provided by (used in) financing activities of continuing operations		44,773			1,397			(741	)
Net cash provided by financing activities of discontinued operations		404			-			-
Net cash provided by (used in) financing activities		45,177			1,397			(741	)
Effect of exchange rate changes on cash from continuing operations		(1,028	)		267			110
Effect of exchange rate changes on cash from discontinued operations		214			16			-
Weighted average shares used in computing losses per common share:		4,988			(5,632	)		30
Net cash provided by (used in) used in discontinued operations		(252	)		2,064			-
Net increase (decrease) in cash and cash equivalents		4,736			(3,568	)		30
Cash and cash equivalents, beginning of period		-			4,736			1,168
Cash and cash equivalents, end of period	$	4,736		$	1,168		$	1,198
Supplemental disclosures of cash flow information
Interest paid	$	50		$	2,316		$	240
Income taxes paid	$	297		$	208		$	357
Non-cash investing and financing activities
Property and equipment acquired under capital leases	$	155		$	13		$	-
Accretion of dividends on redeemable preferred stock	$	2,480		$	2,678		$	1,928
Accretion of issuance cost on redeemable preferred stock	$	187		$	-		$	-

The accompanying notes are an integral part of these consolidated financial statements.

F-5

Rand Worldwide, Inc.

Notes to Consolidated Financial Statements

1.	Nature of Business and Basis of Presentation
	Nature of the Business
	Rand Worldwide, Inc. (collectively with its subsidiaries referred to as the “Company”) is a leading provider of design automation solutions to various manufacturing and engineering industries. The Company also specializes in providing value-added services, such as technical support, training, and consulting aimed at improving the design efficiencies of its customers. These solutions and services enable the Company’s customers to enhance their productivity, profitability and overall competitive position.
	The Company is organized into two divisions: the IMAGINiT division (“IMAGINiT”) and the Rand Professional Services division (“RPS”). The IMAGINiT division is the largest licensed value-added reseller of Autodesk, Inc. (“Autodesk”) products in North America, providing Autodesk solutions and value-added services to customers in the manufacturing, infrastructure, building, and media and entertainment industries. RPS is a reseller of product lifecycle management (“PLM”) products and a provider of services related to solutions sold by Dassault Systèmes S.A. (“Dassault”), Autonomy PLC. (“Autonomy”) and other software vendors. RPS also sells its own proprietary software products and related services, enhancing its total client solution offerings.
	Formation of Rand Worldwide, Inc.
	The Company, a corporation registered in the state of Delaware, was formed in August 2007 and was later capitalized on October 31, 2007 and November 1, 2007 with an aggregate investment of $44.5 million by certain limited partnerships of a domestic private investment firm (collectively the “Stockholder”) in exchange for preferred stock with a purchase price of $31.0 million less cost of issuance of $187,000 and notes with a $13.5 million principal amount (Notes 10 and 13). Immediately thereafter, the Company acquired all of the outstanding shares of Rand A Technology Corporation, a publicly traded Canadian corporation, for $44.5 million (Note 3). That business combination created a new basis of accounting for Rand A Technology, which has been reflected as of November 1, 2007 in these consolidated financial statements.
	Recapitalization and Merger
	On August 17, 2010, the Company was acquired by Avatech Solutions, Inc. (“Avatech”) in a reverse merger transaction (the “Merger”).
	Immediately prior to the Merger, the Company was recapitalized. The holders of the common stock, redeemable preferred stock and term notes of the Company exchanged their respective securities for a commensurate number of membership interests in RWWI Holdings LLC (“RWWI”), formerly a subsidiary of the Company. Simultaneously, the Company merged with a subsidiary of RWWI, with the Company being the surviving entity and RWWI being the sole stockholder of the Company. Immediately following, RWWI caused the Company to merge with a subsidiary of Avatech with the Company again being the surviving entity as a subsidiary of Avatech.
	In consideration for the Merger, RWWI received shares of Avatech common stock representing approximately 66.1% of the outstanding shares of Avatech common stock and Avatech’s stockholders retained approximately 33.9% of the outstanding shares of Avatech common stock. When calculated based on the number of shares of Avatech common stock outstanding on a fully diluted basis, the common stock issued to RWWI is equal to approximately 59.3% of the total common equivalent shares as of the date of the Merger. As RWWI acquired more than 50% of the outstanding shares of Avatech common stock, RWWI was deemed, for accounting and SEC reporting purposes to be the continuing reporting entity. As such, the historical financial results of the merged entity will reflect those of RWWI, which are, in substance, those of the Company.

F-6

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

	As a result of all such transactions: the Company’s common stock, its redeemable preferred stock and its term notes are no longer outstanding. The Company has no remaining financial obligations pursuant to these items, including the cumulative dividends related to its formerly outstanding redeemable preferred stock and the unpaid interest related to its formerly outstanding term notes. The operations of the Company continue as a subsidiary of Avatech and RWWI is a controlling shareholder of Avatech but not part of the ongoing Avatech consolidated reporting entity.
	Basis of Presentation
	Effective with the Merger, the Company elected to change its fiscal year end from October 31 to June 30. References to 2008 and 2009 mean the twelve month periods ended October 31, 2008 and 2009, respectively. References to 2010 mean the eight-month period ended June 30, 2010.
	On February 12, 2008, the Company affected a 10,000-for-1 stock split of its shares of common stock. All references in these consolidated financial statements to shares of common stock have been retroactively adjusted to reflect this stock split.
	The accompanying financial statements have been prepared on a basis that contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company’s long-term viability is dependent on its ability to generate sufficient product revenue, net income and cash flows from operations to support its business as well as its ability to obtain additional financing, if needed. The Company has a working capital deficit as of June 30, 2010 and, for its liquidity, relies on a bank revolving credit facility that expires on August 13, 2012 (Note 11). As of September 30, 2010, borrowings against the facility were $3.2 million, with permitted additional borrowings of $2.6 million. In conjunction with its merger with Avatech, the Company is negotiating a revised credit facility with the same bank. Management believes that the Company’s existing cash together with cash generated from future operations and borrowings available under the current or revised revolving credit facility will be sufficient to meet its working capital and capital expenditure requirements through at least June 30, 2011.
	Certain prior period balances have been reclassified to conform to the current period presentation.
2.	Summary of Significant Accounting Policies
	Principles of Consolidation
	The consolidated financial statements include the accounts of the Company and its subsidiaries, including those in Canada, Australia, Singapore and Malaysia. All significant intercompany accounts and transactions have been eliminated.
	Discontinued Operations
	During 2008 and 2009, the Company restructured certain of its operations, which included the sale or closure of several subsidiaries. The Company determined these disposed subsidiaries to be discontinued operations under the provisions of Accounting Standards Codification (“ASC”) No. 360-10, Accounting for the Impairment or Disposal of Long-lived Assets. In accordance with ASC No. 360-10, the Company has determined that its subsidiaries are the lowest level for which the results of operations and cash flows can be clearly distinguished. Any gain or loss resulting from disposal of a subsidiary, together with the results of its operations up to the date of disposal, is reported separately as a discontinued operation. The financial information of a discontinued operation is excluded from the respective captions in the consolidated financial statements and related notes and is reported separately.

F-7

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Company to make estimates and judgments that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates these estimates and judgments, including those related to revenue recognition, the valuation of accounts receivable and inventory, the useful lives and realizability of intangible assets and goodwill, contingencies, the fair value of share-based compensation and income taxes. The Company bases these estimates on historical and anticipated results and trends and on various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results may differ from the Company’s estimates.

Revenue Recognition

The Company generates revenue from three principal sources: (i) license fees for packaged software products; (ii) service fees from installation, training and consulting engagements, telephone support contracts, and maintenance and support contracts; and (iii) commission fees from the resale of Autodesk software support agreements and from the referral of customers to Autodesk.

Product Sales

For revenue derived from license fees for packaged software products, the Company follows ASC 985-605 Software-Revenue Recognition and ASC 605-10 Revenue Recognition. The Company recognizes revenue from the sale of software licenses and training materials upon shipment of the products, provided that evidence of the arrangement exists, the arrangement fee is fixed or determinable, and collection of the related receivable is probable and free of contingencies.

Service Revenue

Revenue from installation, training and consulting services is recognized upon completion of the requested service, which typically occurs within ninety days of receipt of an order. Revenue from telephone support contracts and maintenance and support contracts is recognized ratably over the contract period, which is typically twelve months. Maintenance and support services typically include only telephone and internet-based support, but in limited circumstances include software updates, when and if available, provided by the vendor of the software. Installation and consulting services provided by the Company are not considered essential to the functionality of any software products sold as those services do not alter the functionality or capabilities of the product and could be performed by customers or other vendors.

F-8

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

Commission Revenue

Fees earned from the resale of Autodesk’s software support agreements are reported as commission revenue and presented net of their related costs. For these transactions, the Company considers Autodesk to be the primary obligor in the arrangement as Autodesk has the responsibility of providing the end-customer all the deliverables under the contract, including software upgrades and various support services. As a result, the Company assumes an agency relationship in these transactions, and recognizes the net fee associated with serving as an agent in revenue.

Commissions revenue also includes referral fees paid by Autodesk for certain types of customer transactions, determined based on specified percentages of the amount billed by Autodesk to the referred customer. These referral fees are recorded as revenue in the period earned, based on reporting by Autodesk.

Multiple-Element Arrangements

The Company’s arrangements with its customers typically involve the sale of one or more products and services at the same time. The Company considers these to be multiple elements of a single arrangement. The Company uses the residual method to recognize revenues from such arrangements with one or more elements that are to be delivered at a future date, provided that evidence of the fair value of all undelivered elements exists. Under the residual method, the fair value of the undelivered elements, such as installation and software support services, is deferred at date of product shipment and the remaining portion of the total arrangement fee is recognized as revenue. The Company determines vendor-specific objective evidence (“VSOE”) of the fair value of undelivered services based on the prices that are charged when the same element is sold separately to customers. If the fair value of each undelivered element in a multiple-element arrangement cannot be determined based on VSOE, all revenue under the arrangement is deferred until those undelivered elements are later delivered or until such time as the only remaining undelivered element is software support, at which time total revenue is recognized ratably over the remaining software support period.

Fixed or Determinable Fee

Management assesses whether the total fee payable to the Company for the order is fixed or determinable and free of contingencies at the time of delivery. Management considers the payment terms of the transaction, including whether the terms are extended, and its collection experience in similar transactions that did not require concessions, among other factors. If the total consideration payable to the Company is not fixed or determinable, revenue is recognized only as payments become due from the customer, provided that all other revenue recognition criteria are met.

Customer Acceptance Criteria

If an arrangement includes customer acceptance criteria, the Company defers all revenue from the arrangement until acceptance is received or the acceptance period has lapsed, unless those acceptance criteria only require that the product perform in accordance with the software vendor’s standard published product specifications. If a customer’s obligation to pay the Company is contingent upon a future event, such as installation or acceptance, the Company defers all revenue from the arrangement until that event has occurred.

F-9

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

Deferred Revenue

Deferred product revenue is comprised of amounts that have been invoiced to customers upon delivery of a product, but are not yet recognizable as revenue because one or more of the conditions required for revenue recognition have not yet been met. Deferred service revenue represents amounts invoiced to customers for telephone support contracts or maintenance and support contracts, which are recognized ratably as revenue over the term of the arrangements, or for installation or training services that have not yet been provided.

Product Returns

The Company’s arrangements with customers do not contain any rights of product return, other than those related to standard warranty provisions that permit replacement of defective goods. As of October 31, 2008 and 2009 and June 30, 2010, the Company had no reserve recorded for product returns because such returns have been insignificant.

Shipping and Handling Fees

The Company records as revenue any amounts billed to customers for shipping and handling costs and records as cost of revenue its actual shipping costs incurred.

Cost of Revenue

Cost of product revenue consists of the cost of purchasing products from software suppliers as well as any associated shipping and handling costs. Cost of service revenue includes the direct costs and personnel costs associated with the implementation of software solutions as well as training, support services, and consulting services provided to customers. These costs include employee compensation, travel, printed materials, and the costs of third-party contractors engaged by the Company.

Earnings Per Common Share

Basic earnings per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding. Diluted earnings per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding and, when dilutive, all potential common equivalent shares outstanding including options and unvested restricted stock. The dilutive effect of options and unvested restricted stock to purchase common stock is determined under the treasury stock method using the average fair value of common stock for the period.

Cash, Cash Equivalents and Investments

The Company considers all highly liquid investments with an original maturity of 90 days or less at the date of purchase to be cash equivalents. Cash equivalents are stated at cost plus accrued interest, if any, which approximates their fair value. At October 31, 2008 and 2009 and June 30, 2010, the Company’s holdings of cash equivalents were not material. In addition, as of that date, the Company had no amounts classified as short-term or long-term investments.

Concentrations of Credit Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of accounts receivable. The Company provides credit to customers in the ordinary course of business. The Company performs ongoing evaluations of its customers for potential credit losses, and management believes its credit policies are prudent and reflect industry practices and business risk. The Company does not invest any of its excess cash. Accordingly, the Company believes that its financial instruments are not subject to any material credit or market risk.

Fair Value of Financial Instruments

The carrying values of the Company’s financial instruments, including cash equivalents, accounts receivable,

F-10

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

and accounts payable, approximate their fair values due to their short-term maturities. In addition, the carrying value of the Company’s related-party notes approximates their fair values because borrowing costs currently available to the Company approximate those reflected in the related-party debt.

Inventory

Inventory consists of packaged computer software and is stated at the lower of cost or market value. Cost is determined by the first-in, first-out method, and market value represents the lower of replacement cost or estimated net realizable value

Property and Equipment

Property and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the related asset. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to operations. Repairs and maintenance costs are expensed as incurred.

Business Combinations

The Company allocates the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed as well as to in-process research and development based upon their estimated fair values at the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions, especially at acquisition date with respect to intangible assets, software support obligations assumed, estimated restructuring liabilities and pre-acquisition contingencies.

Although the Company believes the assumptions and estimates that have been made in the past are reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. Examples of critical estimates used in valuing certain of the intangible assets the Company has acquired or may acquire in the future include but are not limited to (i) future expected cash flows from software license sales, support agreements, consulting contracts, other customer contracts and acquired developed technology; (ii) expected costs to develop in-process research and development projects into commercially viable products and the estimated cash flows from the projects; (iii) the acquired company’s brand and competitive position, as well as assumptions about the period of time the acquired brand will continue to be used in the combined company’s product portfolio; and (iv) discount rates used to determine the present value of expected future cash flows. Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results.

In connection with the purchase price allocations for the Company’s acquisitions, management estimates the fair market value of legal performance commitments to customers, which are classified as deferred revenue.

For a given acquisition, the Company may identify certain pre-acquisition contingencies. If, during the purchase price allocation period, the Company is able to determine the fair value of a pre-acquisition contingency, this amount will be included in the purchase price allocation. If, as of the end of the purchase price allocation period, the Company is unable to determine the fair value of a pre-acquisition contingency, evaluation will be made whether to include an amount in the purchase price allocation based on whether it is probable that a liability had been incurred and whether an amount can be reasonably estimated. After the end of the purchase price allocation period, any adjustment to amounts recorded for a pre-acquisition contingency will be included in the Company’s operating results in the period in which the adjustment is determined.

F-11

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

Goodwill and Other Intangible Assets

The Company accounts for its goodwill and intangible assets in accordance with ASC No. 350-30, Goodwill and Other Intangible Assets (ASC No. 350-30). Goodwill is assessed for impairment at least annually as of October 31, on a segment basis, or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. Such events or conditions could include an economic downturn in the industries to which the Company provides products and services; increased competition; an increase in operating or other costs; or the pace of technological improvements. When the Company determines that the carrying value of goodwill may not be recoverable based upon one or more of these indicators of impairment, the Company initially assesses any impairment using fair value measurements based on projected discounted cash flow valuation models. If the book value of a segment exceeds its fair value, the implied fair value of goodwill is compared with the carrying amount of goodwill. If the carrying amount of goodwill exceeds the implied fair value, an impairment loss is recorded in an amount equal to that excess.

Intangible assets other than goodwill are amortized over their estimated useful economic lives and are carried at cost less accumulated amortization. In accordance with ASC No. 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the long-lived assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Factors that could lead to an impairment of acquired customer relationships include a worsening in customer attrition rates compared to historical attrition rates, or lower than initially anticipated cash flows associated with customer relationships. Each impairment test is based on a comparison of the estimated undiscounted cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value based on a discounted cash flow analysis. The cash flow estimates used to determine the impairment, if any, contain management’s best estimates using appropriate assumptions and projections at that time.

Research and Development and Software Development Costs

Costs incurred in the research and development of the Company’s products are expensed as incurred, except for certain software development costs. Costs associated with the development of computer software to be licensed to customers are expensed prior to establishment of technological feasibility and are capitalized thereafter until the product is available for general release to customers. No software development costs have been capitalized to date since costs incurred between the establishment of technological feasibility and the available-for-sale date of the software have been immaterial.

Accounting for Share-Based Compensation

The Company applies ASC No. 718-10, Share-Based Payment, which requires companies to measure the cost of share-based awards to employees based on the grant-date fair value of the award using an option pricing model, and to recognize that cost over the period during which an employee is required to provide service in exchange for the award. The Company uses the Black-Scholes option pricing model to determine the fair value of stock options granted to employees and recognizes the compensation cost of employee share-based awards in its statement of operations using the straight-line method over the vesting period of the award, net of estimated forfeitures.

The use of the Black-Scholes option pricing model to estimate the fair value of share-based awards requires that the Company make certain assumptions and estimates for required inputs to the model, including (i) the fair value of the Company’s common stock at each grant date, (ii) the expected volatility of the Company’s common stock value based on industry comparisons, (iii) the expected life of the share-based award, (iv) the risk-free interest rate, and (v) the dividend yield, which were considered as follows:

F-12

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

			Eight months
	Year ended October 31,		ended June 30,
	2008	2009	2010
Fair value of common stock	$0.31	$0.26	$0.26
Share price volatility	41%	41%	50%
Expected Life	4 years	4 years	4 years
Risk-free interest rate	3.62% to 3.64%	3.00% to 3.62%	3.00% to 3.50%
Dividend yield	0%	0%	0%

Common Stock Fair Value

As there has been no public market for the Company’s common stock historically, the fair value of the Company’s common stock for 2008 and 2009 and the eight-month period ended June 30, 2010 was estimated by considering a number of objective and subjective factors, including peer-group company trading multiples, the amount of preferred stock liquidation preference, the illiquid nature of common stock, the size of the Company and the Company’s lack of historical profitability. At the midpoint of the 2008 and 2009 fiscal years, independent valuations were obtained to provide additional support for estimates of the fair value of the Company’s common stock. Under the probability-weighted expected return method used in that valuation, the fair market value of common stock was estimated based upon an analysis of the future values for the Company, assuming various outcomes. The share value was based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available to the Company as well as the rights of each share class. The possible outcomes considered were a sale of the Company, an initial public offering of the Company’s stock, dissolution, and continued operation as a private company. The resulting values represent the Company’s estimate of fair market value of common stock at that date, which is then reconsidered at each valuation date.

Share Price Volatility

The Company determined the share price volatility for stock options granted in 2008, 2009 and 2010 based on an analysis of reported data for a peer group of companies that granted options with substantially similar terms. The expected volatility of options granted was determined using an average of the historical volatility measures of this peer group of companies for a period equal to the expected life of each option.

Expected Life of Options, Risk-Free Interest Rate and Dividend Yield

The Company determined the expected life of options based on the period of time that the options are expected to be outstanding until a future liquidity event, such as a sale of the Company or an initial public offering of the Company’s stock. The risk-free interest rate is based on the daily treasury yield curve rate whose term is consistent with the expected life of the stock options. The Company has not paid, and does not anticipate paying, cash dividends on its shares of common stock; therefore, the expected dividend yield was assumed to be zero.

Non-employee Stock-Based Awards
For stock options granted to non-employees, the Company recognizes compensation expense in accordance ASC No. 718-10, Stock Compensation and ASC No. 505-50, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods and Services, which require each such equity award to be recorded at its fair value on the measurement date. The measurement of share-based compensation is subject to periodic adjustment as the underlying stock options vest. The Company records compensation expense related to these nonemployee share-based awards in accordance with the expense attribution model as prescribed in ASC No. 718-10.

F-13

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

Redeemable Preferred Stock
The Company accounts for the difference between the initial carrying value of redeemable preferred stock and the redemption amount payable on that stock through recognition of accretion adjustments (including stated unpaid cumulative dividends) over the period from date of issue to the first redemption date, such that the carrying amount of the preferred stock will equal the redemption amount at the redemption date. These increases in carrying value were recorded initially through charges against additional paid-in capital and then to accumulated deficit if the balance of additional paid-in capital is reduced to zero. As the Company’s Series A preferred stock was mandatorily redeemable upon request of the holders of at least a majority of such stock, the carrying value of the Series A preferred stock equals its redemption amount at each balance sheet date (Note 13).

As a result of the Merger, the Company’s redeemable preferred stock is no longer outstanding and the Company has no remaining financial obligations relative to the redeemable preferred stock or its related formerly accruing dividends.

Advertising Costs
Advertising costs are expensed as incurred and consist primarily of promotional expenditures. Advertising costs incurred in 2008, 2009 and the eight-month period ending June 30, 2010 were immaterial.

Comprehensive Loss
Comprehensive loss is comprised of two components: net loss and foreign currency translation adjustments. In 2008, 2009 and the eight-month period ending June 30, 2010, unrealized currency translation gains of $126,000, $509,000 and $139,000 respectively, were recorded in accumulated other comprehensive income within shareholder’s deficit.

Income Taxes
Income taxes are accounted for under the liability method, under which deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation allowance against net deferred tax assets is recorded if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company records liabilities for uncertain tax positions in accordance with ASC 740-10 Income Taxes (FIN 48).

Foreign Currency Translation
Assets and liabilities of the Company’s foreign subsidiaries, whose functional currencies are the respective local currencies, are translated into U.S. dollars at the current rates of exchange in effect at the balance sheet dates. Revenues and expenses are translated using the average exchange rates for the period. The resulting translation adjustments are included as a separate component of shareholders’ deficit in the consolidated balance sheets within accumulated other comprehensive income. Foreign currency transaction gains or losses resulting from the re-measurement of monetary assets and liabilities stated in a currency other than the functional currency are included in the Company’s results of operations.

In addition, in 2008, 2009 and 2010, realized currency transaction gains from continuing operations of $227,000 and $40,000, as well as realized currency transaction loss of $51,000, respectively, were recorded in the statement of operations and realized currency translation gains from discontinued operations of $1.4 million, $6,000 and $0 respectively, were recorded in the statement of operations within gain (loss) on sale or disposition of discontinued operations, net of tax.

F-14

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

Investments Accounted for Using the Equity Method
The Company uses the equity method of accounting for its investments in companies in which it owns 50% or less and over which it exercises significant influence. Under this method, the Company includes in net earnings its proportional share of the net earnings or losses of these associated companies, net of any cash distributions or dividends. When net losses from an equity-method investment exceed the carrying value recorded by the Company, the investment balance is maintained at zero and additional losses are not recognized, as the Company is not committed to provide financial support to the investee. The Company resumes accounting for the investment under the equity method when the entity subsequently reports net income and the Company’s share of that net income exceeds the share of net losses not recognized during that period that the equity-method loss recognition had been suspended.

Investments in Majority-Owned Entities
In 2008 and for a portion of 2009, the Company held a 60% ownership interest in Sigmetrix L.L.C. (“Sigmetrix”) and an 80% ownership interest in Rand Technologies Singapore PTE Ltd (“Rand Singapore”). The Company consolidated these entities in its financial statements as if it owned 100% of each entity, and did not present minority-interest amounts in its statement of operations and its balance sheet, because these entities were in a net shareholder deficit position and because the minority interest holders were not required to fund the net losses of these entities.

On July 1, 2009, the Company sold its 60% ownership interest in Sigmetrix, to Cybernet Systems Holdings U.S. Inc. (“Cybernet”) for cash consideration of $122,000 and repayment of intercompany accounts payable of $3.1 million. On September 11, 2009, the Company completed the sale of its 80% ownership interest in Rand Singapore to an individual for cash consideration of one Singapore dollar (Note 17).

Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are recognized in the statement of operations on a straight-line basis over the term of the lease. Leases in which the Company has substantially all the risk and rewards of ownership are classified as capital leases. Capital leases are recorded at commencement of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. Property and equipment acquired under capital leases are depreciated over the shorter of the useful life of the assets and the lease term.

In January 2010, the Company signed a new lease for its head office space for a term of sixty five months, commencing in May 2010, with an annual base rent ranging between $192,000 and $248,000. The lease contains a renewal option for an additional five-year term. The Company does not expect to incur additional obligations as a result of entering into a new lease. The security deposit of $175,000 reduces the amount of the borrowing available to the Company on its revolving line of credit.

As a result of the signed lease, the landlord has made certain leasehold improvements in May 2010 that approximated $175,000. The Company has adopted a policy of recording these incentives as leasehold improvements and amortizing them over the course of the lease

Recent Accounting Pronouncements
In May 2009, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance related to subsequent events, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. This guidance is set forth in Topic 855 in the Accounting Standards Codification (ASC 855). ASC 855 provides guidance on the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial

F-15

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The adoption of this accounting guidance did not impact on the Company’s consolidated financial statements. The Company has performed an evaluation of subsequent events through the date these financial statements were issued.

In June 2009, the FASB issued the FASB Accounting Standards Codification (“ASC” or the “Codification”). The Codification became the single source for all authoritative generally accepted accounting principles, or GAAP, recognized by the FASB and is required to be applied to financial statements issued for interim and annual periods ending after September 15, 2009. The Codification does not change GAAP and did not impact the Company’s financial position or results of operations.

In September 2009, the FASB issued new accounting guidance related to the revenue recognition of multiple element arrangements as well as certain revenue arrangements that include software elements. The new guidance states that if vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined, companies will be required to develop a best estimate of the selling price to separate deliverables and allocate arrangement consideration using the relative selling price method. The accounting guidance will be applied prospectively and will become effective during the 2011 fiscal year. Early adoption is allowed. The adoption of this accounting guidance is not expected to materially impact the Company’s financial statements.

In January 2010, the FASB issued new accounting guidance related to the disclosure requirements for fair value measurements and provides clarification for existing disclosure requirements. This guidance clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair value and requires disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. Those disclosure requirements are effective for fiscal years ending after October 31, 2010. The adoption of this accounting guidance is not expected to materially impact the Company’s financial statements.

On November 1, 2009, the Company adopted ASC 740-10 Income Taxes (“FIN 48”). ASC 740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on de-recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. At the adoption date for the Company, there were no gross unrecognized tax affected amounts, and there was no impact on the Company as a result of adopting ASC 740-10. We had no adjustments to retained earnings at the adoption of ASC 740-10. The Company records interest and penalties relating to unrecognized tax benefits as part of its income tax expense recorded in the accompanying financial statements. It is reasonably possible that the total amount of unrecognized tax benefits will increase or decrease in the next twelve months.

F-16

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

3. Acquisition of Rand A Technology Corporation

On November 1, 2007, the Company acquired all of the outstanding capital stock of Rand A Technology Corporation (“RATC”) to serve as its primary business. RATC was acquired for cash of $44.5 million plus related transaction costs incurred by the Company of $805,000. No stock options of the Company were issued in connection with the acquisition. The results of operations of the acquired business have been included in the consolidated financial statements of the Company since the date of acquisition.

The purchase price allocation for the acquisition of RATC was based on the fair values of assets acquired and liabilities assumed as of November 1, 2007, summarized as follows (in thousands):

Total purchase consideration:
Cash paid	$	44,509
Transaction costs		805
Total purchase consideration	$	45,314
Allocation of the purchase consideration:
Assets:
Cash	$	5,967
Accounts receivable		14,408
Inventory		2,080
Prepaid expenses and other assets		1,814
Due from related parties		1,538
Property and equipment		2,440
Equity-method investments		201
Deferred tax assets		26,976
Valuation allowance related to deferred tax assets		(19,386	)
Acquired intangible assets		20,424
Goodwill		16,639
Total assets acquired		73,101
Liabilities:
Accounts payable and accrued liabilities		16,062
Deferred revenue		2,066
Customer advance payments		323
Income taxes payable		568
Other current liabilities		844
Deferred tax liability related to nondeductible acquired intangible assets		7,590
Due to related parties		334
Total liabilities assumed		27,787
Total purchase consideration	$	45,314

Identifiable intangible assets acquired consisted of customer relationships, with a value of $17.6 million; trademarks and trade names, with a value of $1.5 million; and intellectual property related to the training business, with a value of $1.3 million. Customer relationship intangibles represent the underlying relationships and agreements with RATC’s customers. Of the amount recorded for customer relationships, $14.7 million related to the Company’s IMAGINiT segment and $2.9 million related to the Company’s RPS segment. Of the amount recorded for trademarks and trade names, $1.2 million related to the IMAGINiT

F-17

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

segment and $300,000 related to the RPS segment. Of the amount recorded for intellectual property, $662,000 related to the IMAGINiT segment and $662,000 related to the RPS segment.

Deferred revenue recorded in the acquisition reflects an amount equivalent to the estimated cost plus a reasonable profit margin to fulfill the remaining service obligations of RATC’s software support agreements.

In the acquisition, the Company acquired approximately $27.0 million of net deferred tax assets of RATC, which consisted primarily of net operating loss carryforwards. However, the Company recorded such assets with a full valuation allowance due to the significant uncertainty about whether those deferred tax assets will be realized, particularly due to the Company’s history of losses and limitations that will be imposed on the amount of net operating losses which may be used annually to offset any taxable income the Company may generate in the future. If and when such acquired deferred tax assets are realized, the release of the associated valuation allowance will be recorded as a tax benefit in the consolidated statement of operations, pursuant to new business combination rules effective for the Company as of November 1, 2009. None of the intangible assets acquired in the acquisition is deductible for income tax purposes. As a result, and in accordance with ASC 740-10, Income Taxes, the Company recorded in the purchase accounting a deferred tax liability of $7.6 million, equal to the tax effect of the amount of the acquired intangible assets other than goodwill. As a result of recording that deferred tax liability, the Company also reduced the valuation allowance recorded against net deferred tax assets by a corresponding amount. In addition, $14.0 million of the goodwill amount is not deductible for income tax purposes.

This transaction resulted in $16.6 million of purchase price that exceeded the estimated fair values of tangible assets and identifiable intangible assets and liabilities, which was allocated to goodwill. The Company attributes the high amount of goodwill relative to identifiable tangible and intangible assets to its assertion that the implementation of a revised corporate strategy for RATC would be more profitable over the longer-term life of the business than was the strategy that had been employed prior to the acquisition. Of the amount recorded for goodwill in the acquisition, $12.3 million was assigned to the Company’s IMAGINiT segment and $4.4 million was assigned to the Company’s RPS segment. In 2008, the Company recorded a goodwill impairment charge of $9.2 million, including the full impairment of goodwill of the Company’s RPS segment (refer to Note 5).

4. Acquired Intangible Assets

Acquired intangible assets result from the Company’s acquisition of RATC on November 1, 2007 (Note 3). Customer relationship intangible assets, which represent the underlying relationships and agreements with RATC’s customers, are amortized based upon patterns in which their economic benefits are expected to be realized and over a weighted-average expected life of eight years. Other finite-lived identifiable intangible assets are amortized on a straight-line basis, including trademarks and trade names, which are being amortized over a weighted-average useful life of ten years, and intellectual property related to the training business, which is being amortized over a useful life of three years. The following is a summary of intangible assets acquired, amortization expense and asset impairment charges recorded and the resulting carrying values of the acquired intangible assets (in thousands):

F-18

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

2008
	Acquisition value		Amortization						Weighted
	on November 1,		expense for the		Impairment		Net book value at		average life (in
	2007		period		charge recorded		October 31, 2008		years)
Customer relationships	$	17,600	$	4,719	$	11,696	$	1,185		8
Trademarks and trade names		1,500		150		218		1,132		10
Intellectual property		1,324		441		-		883		3
	$	20,424	$	5,310	$	11,914	$	3,200

2009
			Amortization						Weighted
	Net book value at		expense for the		Impairment		Net book value at		average life (in
	October 31, 2008		period		charge recorded		October 31, 2009		years)
Customer relationships	$	1,185	$	426	$	-	$	759		8
Trademarks and trade names		1,132		126		-		1,006		10
Intellectual property		883		441		-		442		3
	$	3,200	$	993	$	-	$	2,207

2010
			Amortization						Weighted
	Net book value at		expense for the		Impairment		Net book value at		average life (in
	October 31, 2009		period		charge recorded		June 30, 2010		years)
Customer relationships	$	759	$	190	$	-	$	569		8
Trademarks and trade names		1,006		86		-		920		10
Intellectual property		442		293		-		149		3
	$	2,207	$	569	$	-	$	1,638

Amortization expense of intellectual property, totaling $441,000 for each of 2008 and 2009 and $293,000 for the eight months ended June 30, 2010, is included as a component of cost of service revenue in the consolidated statement of operations. Amortization expense for all other acquired intangible assets is included in operating expenses in the consolidated statement of operations.

The Company experienced a significant decline in demand for its products and services during the second half of 2008 and concluded that the decline was not anticipated to recover in the short term. As a result, the Company determined that such decline was an indication that the carrying value of its long-lived intangible assets may not be recoverable and, accordingly, conducted recoverability tests in accordance with ASC No. 360-10. The Company performed its assessment at the asset group level, which represented the lowest level of cash flows that are largely independent of cash flows of other assets and liabilities. In performing the assessment, when it was determined that the undiscounted cash flows were lower than the carrying value of any asset group, the Company compared the fair value of each long-lived asset to its carrying value.

As a result of performing those tests as of October 31, 2008, the Company recorded an impairment charge totaling $11.9 million in 2008, which reduced the carrying value of intangible assets to $3.2 million, as indicated in the table above. The Company also reassessed the amortization method and remaining amortization period for the assets, and determined that the method utilized was appropriately matching the expected economic benefit of use of the customer relationship asset, and that the overall expected life of the asset was still appropriate.

In the original purchase accounting, total acquired intangible assets recorded for the Company’s IMAGINiT segment were $16.6 million and for the RPS segment were $3.9 million. After the impairment charges and regular amortization expense recorded in 2008, the book value of acquired intangible assets of the IMAGINiT segment were reduced to $2.3 million and the acquired intangible assets of the RPS segment were reduced to $900,000.

F-19

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

Future estimated amortization expense for the acquired intangibles assets remaining as of June 30, 2010 is as follows: $494,000 in fiscal 2011, $268,000 in fiscal 2012, $218,000 in fiscal 2013, $187,000 in fiscal 2014, $166,000 in 2015 and $305,000 thereafter.

5. Goodwill

The Company typically performs an annual impairment test of its goodwill on October 31 and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. ASC No. 350-30 requires that the impairment test be performed through the application of a two-step process. The first step compares the carrying value of the Company’s segments to their estimated fair values as of the test date. If fair value is less than carrying value, a second step is performed to quantify the amount of the impairment, if any.

The Company performs its annual goodwill impairment assessment as of June 30, 2010, using the two-step process required by ASC No. 350-30. The Company estimates the fair value of its two segments, IMAGINiT and RPS, using an income approach, which estimates fair value of each segment based upon future cash flows discounted to their present value. If step one of this assessment results in the carrying value of a segment exceeding its fair value, accordingly, the Company performs the second step to determine the implied fair value of goodwill by comparing the fair value of the segment to the aggregate fair value of all the assets and liabilities of the segment. In step two of the impairment analysis, the Company compared the implied fair value of goodwill in the segment to its carrying value.

As a result of performing those tests as of June 30, 2010 and October 31, 2009, there was no impairment. As a result of performing those tests as of October 31, 2008, the Company recorded an impairment charge of $9.2 million, including the full write-down of goodwill of the Company’s RPS segment. Assessing the impairment of goodwill requires the Company to make certain significant assumptions, estimates and judgments, including future revenue, expenses, cash flows and discount rates. The actual results may differ from these assumptions and estimates and it is possible that such differences could have a material impact on the Company’s financial statements. The Company based the valuations of its segments, in part, on its actual historical performance and its estimate of the future performance of the segments. The Company attributes the goodwill impairment that resulted from its assessment in 2008 to the significant decline in demand for its products and services experienced during the second half of 2008, which was not anticipated to recover in the short term.

F-20

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

Carrying values of goodwill were as follows (in thousands):

	Imaginit			RPS
	reporting			reporting
	unit			unit			Total
Goodwill balance at October 31, 2007, gross	$	-		$	-		$	-
Acquisition of Rand A Technology		12,280			4,359			16,639
Impairment charge		(4,876	)		(4,359	)		(9,235	)
Currency translation effects		(381	)		-			(381	)
Goodwill balance at October 31, 2008, net	$	7,023		$	-		$	7,023
Goodwill balance at October 31, 2008, gross	$	12,280		$	4,359		$	16,639
Accumulated impairment		(4,876	)		(4,359	)		(9,235	)
Currency translation effects		(203	)		-			(203	)
Goodwill balance at October 31, 2009, net	$	7,201		$	-		$	7,201
Goodwill balance at October 31, 2009, gross	$	12,280		$	4,359		$	16,639
Accumulated impairment		(4,876	)		(4,359	)		(9,235	)
Currency translation effects		(172	)		-			(172	)
Goodwill balance at June 30, 2010, net	$	7,232		$	-		$	7,232

6.	Property and Equipment
	Property and equipment consisted of the following (in thousands):

	Estimated
	Useful Life		As of October 31,						As of June 30,
	(Years)		2008			2009			2010
Computer and office equipment		3 to 5	$	2,610		$	2,964		$	3,623
Furniture and fixtures		10		269			344			425
Motor vehicles		3		5			5			5
Leasehold improvements		2 to 5		212			201			380
				3,096			3,514			4,433
Less accumulated depreciation and amortization				(1,369	)		(2,150	)		(2,610	)
			$	1,727		$	1,364		$	1,823

Depreciation and amortization expense for both continuing and discontinuing operations in 2008, 2009 and the eight-month period ended June 30, 2010 was $1.3 million, $781,000 and $457,000 respectively. For 2008, 2009 and the eight-month period ended June 30, 2010 the net book value of assets under capital lease obligations was $115,000, $66,000 and $90,000 respectively.

F-21

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

7.	Accrued Liabilities
	Accrued liabilities consisted of the following (in thousands):

	As of October 31,				As of June 30,
	2008		2009		2010
Accrued compensation and benefits	$	2,361	$	1,430	$	1,219
Inventory received but not yet invoiced		1,211		196		815
Accrued professional fees		832		653		622
Accrued capital and property taxes		471		304		-
Accrued sales taxes		459		190		-
Accrued marketing expenses		-		314		454
Accrued facilities expenses		-		205		352
Accrued other liabilities		58		124		222
	$	5,392	$	3,416	$	3,684

8.	Restructuring Charges
	The Company accounts for charges resulting from operational restructuring actions in accordance with ASC No. 420-10, Accounting for Costs Associated with Exit or Disposal Activities, which addresses financial accounting reporting associated with certain exit or disposal activities. Under ASC No. 420-10, costs associated with certain exit or disposal activities are recognized and measured at their fair value in the period in which the liability is incurred rather than at the date of a commitment to an exit or disposal plan. The determination of restructuring charges requires management’s judgment and may include such costs and charges as those related to employee severance, termination benefits, the write-off of assets, professional service fees and costs for future lease commitments on excess facilities, net of any estimated income from subleases. All such judgments and related estimates are reviewed and, if necessary, revised on an annual basis, which may result in adjustments to previously recorded liability accruals.
	In 2008, the Company incurred and recorded restructuring charges of $1.2 million, consisting primarily of termination benefits paid to two employees whose positions were eliminated as a result of commencement of a plan to relocate the Company’s corporate headquarters and certain senior management positions from Canada to the United States. Of that charge, $161,000 was a non-cash expense related to the transfer to an employee of shares held of an equity-method investment of the Company and $78,000 was share-based compensation expense related to the issuance of common stock. Of the total restructuring charge, $53,000 was recorded in the RPS segment, and $1.1 million was unallocated. As of October 31, 2008, all of the severance costs had been paid and no restructuring accrual existed in connection with this plan.
	In 2009, the Company implemented a series of restructuring actions to right-size its operations, to relocate its corporate headquarters and to reduce expenses. As a result of these activities, the Company reduced its headcount by 126 employees and incurred severance-related expenses of approximately $1.7 million. Of the total restructuring charge, $1.1 million was recorded in the IMAGINiT segment, $79,000 was recorded in the RPS segment, and $577,000 was unallocated. As of October 31, 2009, there were $12,000 of workforce-related unpaid severance costs and $205,000 of accrued restructuring costs related to facility closures, primarily in the IMAGINiT segment.
	In 2010, the Company continued to implement certain actions to restructure its operations. During the eight-month period, these actions resulted in the involuntary termination of 31 employees which resulted in

F-22

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

severance-related expenses of $616,000 as well as $55,000 in facility lease terminations. Of the total restructuring charge, $70,000 was recorded in the IMAGINiT segment, $562,000 was recorded in the RPS segment, and $33,000 was unallocated.

The following table summarizes the merger and restructuring reserve activity for 2008, 2009 and 2010 respectively (in thousands):

	Year ended			Year ended			Eight months
	October 31,			October			ended June
	2008			31, 2009			30, 2010
Beginning balance	$	-		$	-		$	217
Restructuring charges recorded for employee severance		1,166			1,529			616
Cash payments related to liabilities recorded for employee severance		(1,166	)		(1,728	)		(344	)
Restructuring charges recorded for facility lease terminations		-			211			55
Cash payments		(1,005	)		(1,523	)		(628	)
Settlement of non-cash charges related to restructuring		(161	)		-			(6	)
Effect of exchange rate changes		-			-			(25	)
Ending balance	$	-		$	217		$	229

The ending balance of all such items has been included as a component of accrued liabilities at each balance sheet date.

9.	Income Taxes
	The components of losses from continuing operations before income taxes for the years ended October 31, 2008 and 2009 and for the eight month period ended June 30, 2010 were as follows (in thousands):

	Year ended						Eight months ended
	October 31,						June 30,
	2008			2009			2010
Domestic	$	(26,571	)	$	(7,023	)	$	(2,732	)
Foreign		(3,403	)		1,261			13
	$	(29,974	)	$	(5,762	)	$	(2,719	)

F-23

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

For 2008, 2009 and for the eight month period ended June 30, 2010 the provision for income taxes for continuing operations consisted of the following (in thousands):

						Eight months
	Year ended					ended
	October 31,					June 30,
	2008		2009			2010
Current tax provision (benefit):
Federal	$	-	$	(394	)	$	35
State		86		32			-
Foreign		9		14			-
	$	95	$	(348	)	$	35

There was no deferred tax provision or benefit recorded in either year.

A reconciliation of the statutory income tax rates to the Company’s effective income tax rates for the years ended October 31, 2008 and 2009 and eight months ended June 30, 2010 was as follows:

	October 31,						June 30,
	2008			2009			2010
Statutory federal income tax rate		(34.0	)%		(34.0	)%		(34.0	)%
State taxes, net of federal tax benefit		(2.2	)		(3.5	)		(6.1	)
Foreign tax rate and law differential		6.6			(0.5	)		-
Nondeductible goodwill impairment		8.2			-			-
Change in valuation allowance		(32.5	)		8.4			58.9
Liquidation adjustments		16.7			(1.9	)		1.3
Nondeductible expenses		37.7			25.5			(18.8	)
Effective income tax rate		0.5	%		(6.0	)%		1.3	%

F-24

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

The components of the Company’s net deferred tax asset and the related valuation allowance were as follows (in thousands):

	October 31,						June 30,
	2008			2009			2010
Net operating loss carryforwards	$	16,098		$	15,848		$	16,259
Expenses not currently deductible		386			311			363
Capital loss carryforwards		-			-			1,610
Accrued expenses		759			504			85
Property and equipment		180			346			442
Intangible assets		500			171			424
Deferred revenue		7			7			4
Translation effects		-			-			399
Total deferred tax assets		17,930			17,187			19,586
Acquired intangible assets not deductible		(1,180	)		(610	)		(620	)
Total deferred tax assets		16,750			16,577			18,966
Valuation allowance		(16,750	)		(16,577	)		(18,966	)
Net deferred tax assets	$	-		$	-		$	-

On November 1, 2009 the Company adopted the provisions of ASC 740-10 Income Taxes (FIN 48). As a result of the implementation, the Company recognized no material adjustment in the liability for unrecognized income tax benefits.

As of October 31, 2008 and 2009 and June 30, 2010, the Company has U.S. federal net operating loss carryforwards available to reduce future taxable income of approximately $17.1 million, $22.8 million and $27.8 million, respectively. Under IRC 382 certain changes in the Company’s ownership structure may result in a limitation on the amount of net operating loss carryforwards that may be used in future years. These carryforwards expire between 2009 and 2029. As of October 31, 2008 and 2009 and June 30, 2010, the Company also has foreign net operating loss carryforwards of approximately $31.8 million, $24.7 million and $18.2 million, respectively, available to reduce future taxable income. These carryforwards expire between 2009 and 2028 for some jurisdictions, and for other jurisdictions, the losses may be carried forward indefinitely.

As of October 31, 2008 and 2009 and June 30, 2010, the Company has established a full valuation allowance against the amount of its net deferred tax assets, in all jurisdictions including the United States, because it believes that it is more likely than not that the tax assets in those jurisdictions will not be realized prior to their expiration.

During 2008 and 2009, the Company disposed of several of its subsidiaries (Note 17). As a result of those dispositions or closures, deferred tax assets of $4.3 million for 2008 and $1. 5 million for 2009 for foreign net operating loss carryforwards recorded in the acquisition of RATC with a full valuation allowance were removed from the accounts as they are no longer available for use by the Company. For the years ended

F-25

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

October 31, 2008 and 2009, the income tax provision for discontinued operations was $83,000 and $380,000, respectively.

The Company conducts business globally and, as a result, it or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before fiscal 2002. Carryforward attributes that were generated prior to 2002 may still be adjusted upon examination by tax authorities if they have been or will be used in the future. Similar tax laws may also apply for state and international tax purposes.

At June 30, 2010, United States income taxes were not provided on permanently undistributed earnings for certain non-US subsidiaries as the Company will reinvest these earnings indefinitely in its operations outside of the United States.

At June 30, 2010, the Company had no accrual for uncertain tax positions. It is reasonably possible that the total amount of unrecognized tax benefits will increase or decrease in the next 12 months, and as of the filing date of this Form 10-K, an estimate of the possible change cannot be made. The Company recognizes interest and penalties related to income taxes as a component of the provision for income tax expense on the consolidated statement of operations.

10.	Debt and Other Related-Party Transactions
	Stockholder loans
	On October 31, 2007, the Company entered into a term loan agreement (the “Term Loan”) with the Stockholder, which owned 100% of the outstanding preferred stock and 89% of the outstanding common stock of the Company as of October 31, 2009 and 2008. The Term Loan consisted of two promissory notes: one for $10.0 million bearing interest of 10% or 12% per year based upon the timing of repayments, and another for $3.5 million bearing interest of 10% or 14% per year based upon the timing of repayments. Per the original terms of the promissory notes, all principal and interest were to be fully repaid by November 1, 2012, with scheduled principal and interest payments beginning in December 2007. The Company incurred issuance costs related to the Term Loan of $269,000, which was recorded as a discount on the carrying value of the debt and will be amortized as additional interest expense over the term of the debt through November 1, 2012. Amortization of debt issuance cost recognized as interest expense was $54,000 in each of 2008 and 2009 and $36,000 for the eight-months ended June 30, 2010.
	Between November 1, 2007 and February 14, 2008, the Company repaid $2.3 million of principal and paid $50,000 of interest under the Term Loan.
	On February 14, 2008, the Term Loan was amended to reflect the amalgamation of all amounts outstanding under the two original promissory notes as well as the inclusion of $2.3 million of new borrowings. In addition, accrued interest of $309,000 was converted to principal, resulting in a revised principal balance of $13.8 million as of that date. Of this amount, $1.7 million was required to be repaid on September 1, 2008, and thereafter payments of $242,000 were to be made monthly through November 1, 2012, at which time all remaining principal and interest were due. Unpaid principal balances were to incur interest of 10% per year; however, that rate was increased to 12% per year retroactive to February 14, 2008 because the entire principal balance was not repaid by August 31, 2008, which date was later amended to be September 30, 2009. The amended Term Loan contained covenants that prevented the Company from incurring additional debt or creating other liens, except for those arising in the normal course of business; entering into sale-leaseback transactions; making investments; selling assets; making acquisitions or other business

F-26

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

combinations; paying dividends; or repurchasing stock. The Term Loan also specified events of default, including among other circumstances the Company’s failure to make payments of principal or interest when due and its failure to maintain certain non-financial covenants, in case of which the Stockholder could have required immediate repayment of all outstanding principal and interest.

On July 30, 2008, the Company entered into a series of unsecured, demand promissory notes with the Stockholder, receiving proceeds of $1.0 million. Unpaid principal balances on these notes incurred interest of 10% per year. The $1.0 million of borrowings under these notes was repaid in full in 2008 by the Company.

On September 4, 2008 and October 23, 2008, the Term Loan was further amended, resulting in revised payment terms that required a principal repayment of $2.6 million on December 20, 2008 and monthly payments of principal of $242,000 thereafter through November 1, 2012.

As of October 31, 2008, the Term Loan had a principal balance of $13.8 million, which was required to be repaid as follows: $4.8 million in fiscal 2009, $2.9 million in fiscal 2010, $2.9 million in fiscal 2011 and $3.2 million in fiscal 2012. Accordingly, $9.0 million of the principal balance of the Term Loan had been classified as the long-term portion of amounts due to related parties in the consolidated balance sheet, net of remaining debt issuance costs of $215,000. As of October 31, 2008, the current portion of the amounts due to related parties in the consolidated balance sheet, totaling $7.0 million, consisted of the $4.8 million of principal due to the Stockholder under the Term Loan, $1.0 million of accrued interest under the Term Loan, and $1.3 million due to the Stockholder for reimbursement of professional fees incurred by the Company in connection with its acquisition of RATC (Note 3) as well as other fees due to the Stockholder.

On January 10, 2009, the Term Loan was amended, resulting in revised payment terms that required a principal repayment of $4.8 million on October 1, 2009 and thereafter principal repayments of $242,000 monthly through November 1, 2012, at which time all principal and accrued interest are due.

On April 29, 2009, the Company entered into a series of unsecured, demand promissory notes with the Stockholder receiving proceeds of $2.0 million. Unpaid principal balances on these notes incurred interest of 10% per year, until they were repaid in full on August 14, 2009.

On August 14, 2009, the Company made a series of payments totaling $8.1 million for the amounts owed to the Stockholder, including $1.1 million primarily related to reimbursement of transaction fees paid in connection with the RATC acquisition and the Company’s issuance of preferred stock; $2.1 million for all principal and interest amounts then outstanding in relation to the unsecured, demand promissory notes; $2.3 million for unpaid interest accrued on the Term Loan; and $2.7 million of principal repayments under the Term Loan. As a result of these payments, the principal balance of the Term Loan was reduced to $11.1 million on that date.

In conjunction with the establishment of the revolving line of credit (Note 11), the Stockholder entered into a subordination agreement with the domestic bank that prioritized the guarantees and security interest associated with the revolving line of credit in advance of those included in the Company’s Term Loan. In addition, the Term Loan was modified to conform its payment terms to those permitted under the bank revolving line of credit agreement. The revolving line of credit agreement allows the Company to make periodic repayments of amounts due under the Term Loan as long as certain financial covenants are maintained by the Company. Absent satisfying those covenants, no repayments under the Term Loan are permitted. The Term Loan modification removes the obligation of the Company to pay the amounts due under the existing payment schedule of the Term Loan if such payments would violate the terms of the revolving credit agreement. Further, delays in payments under the Term Loan that arise from this

F-27

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

prioritization of the bank revolving line of credit are not deemed to be events of default under the modified Term Loan agreement.

As the entire principal balance of the Term Loan was not repaid prior to September 30, 2009, the interest rate of the loan increased to 12% retroactive to February 14, 2008 on all unpaid principal balances.

As June 30, 2010, the Company was in compliance with the terms of the Term Loan agreement and there existed no default or events of default under the Term Loan agreement.

As a result of the Merger, the Company’s Term Loan is no longer outstanding and the Company has no remaining financial obligations relative to its Term Loan or the related formerly-accruing interest.

Rand North America

Rand North America (“RNA”) is a business that purchases services from the Company and was formed in 2004 as a joint venture that, during 2008 and 2009, was 30% owned by the Company and 70% owned by Dassault. During 2008 and 2009, the Company provided various training and consulting services to RNA, which resulted in $4.1 million and $2.4 million of related party revenue, respectively. As of October 31, 2008 and 2009, accounts receivable due from RNA related to purchases of those services totaled $1.2 million and $627,000, respectively. During 2008 and 2009, the Company also purchased various consulting services from RNA totaling $175,000 and $35,000, respectively. No amount was payable to RNA as of October 31, 2008 or 2009 for these purchases.

In April 2010, the Company sold its ownership interest in RNA to Dassault for proceeds of approximately $1.6 million. As the carrying value of the ownership interest was zero, the full value of the proceeds were recorded as a gain on sale of an investment in the eight months ended June 30, 2010. After the transaction, RNA was no longer a related party and all accounts receivable due from RNA ceased to be classified as such.

11.	Revolving Line of Credit
	On August 14, 2009, the Company entered into a three-year revolving credit and security agreement with a domestic bank. The primary use of this facility was to allow the Company to repay a portion of its Term Loan and to fund regular working capital requirements. The facility permits borrowing by the Company of up to $10.0 million against eligible accounts receivable and up to an additional $2.5 million supported by a guarantee provided by the Stockholder. The applicable interest rate under this facility is either (i) the bank’s daily set rate plus specified margins, determined based on the Company’s operating performance, or (ii) the bank’s lending rate. As of October 31, 2009, and June 30, 2010 the applicable interest rate under the facility was 6.0%. The bank also charges the Company a monthly facility fee of 50 basis points of the outstanding balance, a collateral evaluation and monitoring fee, and a fee for each letter of credit. Borrowings under this new revolving line of credit are collateralized by substantially all of the assets of the Company. Upon execution of the facility, the Company borrowed $8.4 million, of which $8.1 million was used to repay amounts then due to the Stockholder and $314,000 was used to pay transaction costs associated with the facility.
	Several affirmative and negative covenants are associated with the facility. The most restrictive of these covenants are minimum operating performance requirements that became effective during the three-months ended April 30, 2010. In addition, the covenants establish limits on annual capital expenditures and limit the Company’s ability to acquire or divest of certain assets.
	As of October 31, 2009 and June 30, 2010, the outstanding principal balance under this credit facility was $4.0 million and $3.3 million, respectively. As of those dates, the Company was in compliance with the

F-28

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

terms of the credit agreement and its covenants and there existed no default or events of default under the credit agreement.

In conjunction with its merger with Avatech, the Company is negotiating a revised credit facility with the same bank.

12.	Commitments and Contingencies
	Lease Commitments
	The Company leases its office space and certain office equipment under non-cancelable operating leases that expire at various dates through 2015. Rent expenses under operating leases during 2008, 2009 and 2010 were $3.0 million, $2.2 million and $1.3 million, respectively. Future minimum lease payments under non-cancelable operating and capital leases as of June 30, 2010 are as follows (in thousands):

	Operating		Capital
Fiscal year	Leases		Leases
2011	$	2,001	$	59
2012		1,219		31
2013		808		2
2014		705		2
2015		553		2
Thereafter		822		-
	$	6,108		96
Less: amount representing interest				6
Present value of minimum lease payments				90
Less: amounts due within one year				55
Long-term portion of capital lease obligations			$	35

Litigation

The Company is party to various litigation matters that management considers routine and incidental to the Company’s business. As of October 31, 2008 and 2009, the Company had accrued no material amounts related to these matters.

In November 2010, the Company agreed to settle a lawsuit for $350,000 that alleged it breached certain clauses of an asset purchase agreement entered in 2006. The full amount of the settlement was accrued as of June 30, 2010 and is included as a component of accrued professional fees.

Guarantees

In the normal course of business, the Company indemnifies third parties and enters into commitments and guarantees (“Agreements”) under which it may be required to make payments. These Agreements include indemnities to the following parties: lenders in connection with the Term Loan; lessors in connection with facility leases; customers in relation to the performance of services; vendors in connection with guarantees of expenses incurred by employees in the normal course of business; former employees in connection with their prior services as a director or officer of the Company or its subsidiary companies; vendors or principals in

F-29

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

connection with performance under asset or share purchase and sale agreements and performance under credit facilities and other agreements of the Company’s subsidiaries. The duration of these Agreements varies, and in certain cases, is indefinite. Furthermore, the majority of these Agreements do not limit the Company’s maximum potential payment exposure. In addition, the Company is party to a guarantee with its largest vendor, Autodesk, Inc., in relation to all of the Company’s subsidiaries’ obligations to Autodesk. The Company has recorded no accrued liability related to these Agreements, based on its historical experience and information known as of June 30, 2010.

13.	Redeemable Preferred Stock
	On November 1, 2007, the Company issued 31,000,000 shares of Series A redeemable preferred stock (“Series A”) for $1.00 per share. At October 31, 2008 and 2009, and June 30, 2010, 31,858,922 shares of Series A were authorized and designated, of which 31,000,000 shares were issued and outstanding.
	In conjunction with its August 2010 recapitalization and Merger, the Company’s redeemable preferred stock is no longer outstanding.
	Series A Preferred Stock
	The Series A preferred stock had the following characteristics:
	Voting
	Each holder of Series A preferred stock was entitled to vote together with the holders of common stock and was entitled to one vote per share of Series A preferred stock held by such holder. In addition, holders of the Series A preferred stock, as a separate class, were entitled to elect three members of the Company’s Board of Directors.
	Dividends
	Dividends accrued from the date of issuance of the Series A preferred stock at a rate of 8% per year (the “Accruing Dividends”). The Accruing Dividends accrued whether or not declared, are cumulative and compounded annually. However, the Accruing Dividends were payable in cash only when and if declared by the Board of Directors. The Company could not declare or pay any dividends on shares of any other class unless all accrued and unpaid dividends were paid in full to the holders of Series A preferred stock. As of October 31, 2008 and 2009, accrued but unpaid cumulative dividends totaled $2.7 million and $5.3 million, respectively. As of June 30, 2010, accrued but unpaid cumulative dividends totaled $7.3 million and were recorded as an increase in the carrying value of the preferred stock, based on the redemption amount of the stock.
	Redemption
	Series A preferred stock was mandatorily redeemable upon request of the holders of at least a majority of such stock at a price equal to the original price of $1.00 per share (adjusted to reflect subsequent stock dividends, stock splits or other recapitalizations) plus any Accruing Dividends accrued but unpaid thereon, whether or not declared. As the Series A preferred stock was mandatorily redeemable upon request of the holders of at least a majority of such stock, the carrying value of the Series A preferred stock was accreted to its then-determined redemption amount at each balance sheet date.
	Conversion
	The holders of the Series A preferred stock were not entitled to convert their preferred stock into shares of common stock.

F-30

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

Liquidation Preference

In the event of any liquidation, dissolution or winding-up of the affairs of the Company, whether voluntary or involuntary, the holders of the then outstanding Series A preferred stock were entitled, before any payment was made to the holders of the common stock, to receive an amount per share equal to the original issue price of $1.00 per share (adjusted to reflect subsequent stock dividends, stock splits or other recapitalizations) plus any Accruing Dividends accrued but unpaid thereon. In the event that the assets to be distributed were not sufficient to permit payment in full of such liquidation payments, the entire assets of the Company were to be distributed ratably to the holders of Series A preferred stock. After the holders of the then outstanding Series A preferred stock had been paid in full their liquidation payments, the remaining assets of the Company were to be distributed to the holders of the common stockholders on a pro rata basis.

14. Common Stock and Stock Option Plan

As a result of the Merger, the Company’s common stock and stock-based awards are no longer outstanding.

Common Stock
Each share of common stock was entitled to one vote. The voting, dividend and liquidation rights of the holders of common stock were subject to and qualified by the rights and preferences of the holders of the Company’s preferred stock.

Prior to and through October 31, 2007, the Company issued to the Stockholder (Note 10) an aggregate of 8,500,000 shares of common stock for nominal consideration in connection with the formation and capitalization of the Company.

During 2008, the Company also issued 1,000,000 shares of common stock to consultant and a former employee. In December 2007, the Company issued 750,000 fully vested shares of common stock, with a fair value of $0.06 per share, and recorded stock-based compensation expense of $44,000. In May 2008, the Company issued 250,000 fully vested shares of common stock, with a fair value of $0.31 per share, and recorded stock-based compensation expense of $78,000.

Stock Option Plan
Under the Company’s Amended and Restated 2007 Equity Incentive Plan (the “Plan”), an aggregate of 770,000 shares of the Company’s common stock were reserved for issuance to employees, directors and consultants. Options granted under the Plans may be incentive stock options (“ISOs”) or nonstatutory stock options (“NSOs”). ISOs may only be granted to employees. The Board of Directors of the Company determines the period over which options become exercisable. Options granted to date become exercisable over a four-year period at each anniversary date of the date of grant at a rate of 25% per year. The exercise price of ISOs shall be no less than the fair market value per share of the Company’s common stock on the grant date (or 110% of fair market value for ISOs granted to holders of more than 10% of the voting stock of the Company). The exercise price of each NSO shall be determined by the Board of Directors. The term of the options is determined by the Board of Directors, but in the case of ISOs the term may not exceed 10 years from date of grant.

In March 2009, the Company amended the Plan, increasing the aggregate number of shares of the Company’s common stock reserved for issuance to employees, directors and consultants from 770,000 to 1,070,000.

F-31

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

In December 2009, the Company amended the Plan, increasing the Company’s common stock reserved for issuance to employees, directors and consultants from 1,070,000 to 1,130,000.

In conjunction with the recapitalization of the Company (Note 1), the Plan was transferred and became an arrangement of RWWI. As a result, no further shares of the Company can be issued pursuant to the Plan.

Restricted Common Stock
The Plan also permits in certain circumstances the issuance of common stock subject to certain restrictions, including forfeitures and the Company’s right to repurchase such shares. These restrictions will be determined by the Board of Directors.

Share-Based Compensation
In 2008, 2009 and for the eight-month period ended June 30, 2010, the Company recorded compensation expense of $128,000, $39,000 and $33,000, respectively in connection with employee share-based awards. As of October 31, 2008 and 2009 and for the eight-months period ended June 30, 2010, unrecognized share-based compensation for non-vested stock options totaled $44,000, $125,000 and $154,000, respectively, (net of expected forfeitures) and was expected to be recognized as future expense using the straight-line method over a weighted-average period of 3.8 years, 3.2 years and 2.7 years, respectively.

The following table summarizes the activity under the Plan.

	2008				2009				2010
			Weighted				Weighted					Weighted
			Average				Average					Average
	Number of		Exercise		Number of		Exercise		Number of			Exercise
	Shares		Price		Shares		Price		Shares			Price
Outstanding at beginning of period		-	$	-		317,025	$	0.31		1,011,780		$	0.31
Granted		317,025		0.31		694,755		0.31		101,829			0.26
Exercised		-		-		-		-
Canceled/forfeited		-		-		-		-		(130,000	)		0.31
Outstanding at end of period		317,025	$	0.31		1,011,780	$	0.31		983,609		$	0.30
Exercisable at end of period		-	$	-		79,256	$	0.31		272,201		$	0.31
Weighted-average remaining contructual life of outstanding options			9.8 years				9.15 years					9.15 years

All options granted have an exercise price equal to the fair value of the Company’s common stock on the date of grant. Exercise prices for options outstanding as of June 30, 2010 ranged from $0.26 to $0.31 as follows:

						Weighted						Weighted
						Average				Weigted		Average
				Weighted		Remaining				Average		Remaining
				Average Exercise		Contractual Life				Exercise Prices		Contractual Life
Option		Options		Prices of Options		of Options		Options		of Options		of Options
Prices		Outstanding		Outstanding		Outstanding		Exercisable		Exercisable		Exercisable
$	0.31		884,780	$	0.31		8.53		272,201	$	0.31		8.53
	0.26		98,829		0.26		9.39		-		-		-
			983,609						272,201

F-32

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

For the years ended October 31, 2008 and 2009, and eight month period ending June 30, 2010 the weighted average grant-date fair value of options determined by the use of the Black-Scholes option pricing model was $0.16, $0.17 and $0.15 per share, respectively.

As a result of the Merger, the Company’s common stock and stock-based awards are no longer outstanding (Note 1).

15. Net Income/(Loss) per Common Share

The following table sets forth the computation of basic and diluted net income/(loss) per common share (in thousands):

	Year ended October 31,						Eight months
							ended June 30,
	2008			2009			2010
Net loss from continuing operations	$	(30,069	)	$	(5,414	)	$	(2,754	)
Loss from discontinued operations, net of tax		(920	)		(860	)		-
Gain (loss) on sale or disposition of discontinued operations, net of tax		(1,342	)		2,914			-
Net loss	$	(32,331	)	$	(3,360	)	$	(2,754	)
Net loss from continuing operations	$	(30,069	)	$	(5,414	)	$	(2,754	)
Accretion of dividends and issuance costs on Series A Preferred Stock		(2,667	)		(2,678	)		(1,928	)
Net loss from continuing operations available to common stock holders	$	(32,736	)	$	(8,092	)	$	(4,682	)
Weighted average shares used in computing basic net loss per share:		9,313			9,500			9,500
Effect of dilutive securities:		-			-			-
Weighted average shares used in computing diluted net loss per share:		9,313			9,500			9,500
Basic net loss per common share from continuing operations	$	(3.52	)	$	(0.85	)	$	(0.49	)
Basic net loss per common share from discontinued operations		(0.24	)		0.22			-
Basic net loss per common share	$	(3.76	)	$	(0.63	)	$	(0.49	)
Diluted net loss per common share from continuing operations	$	(3.52	)	$	(0.85	)	$	(0.49	)
Diluted net loss per common share from discontinued operations		(0.24	)		0.22			-
Diluted net loss per common share	$	(3.76	)	$	(0.63	)	$	(0.49	)
Shares used in computing net loss per common share:
Basic		9,313			9,500			9,500
Diluted		9,313			9,500			9,500

Weighted average common stock equivalents related to stock options of 95,000, 758,000 and 976,000 were outstanding as of the years ended October 31, 2008 and 2009 and the eight months ended June 30, 2010, respectively, but were not included in the calculation of diluted loss per share as the Company’s losses in those respective periods would render their inclusion antidilutive.

16. Significant Customers and Suppliers

For the years ended October 31, 2008 and 2009, and the eight-month period ended June 30, 2010 no single customer or account receivable balance accounted for greater than 10% of the Company’s total revenue. For the fiscal years ended October 31, 2009 and 2008, and the eight-month period ended June 30, 2010, the

F-33

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

Company’s inventory purchases from Autodesk, Synnex, Inc., Autonomy and Techdata, Inc. combined were approximately 93%,100% and 100% respectively. The Company’s product revenue related to the resale of products from these combined suppliers for the years ended October 31, 2008 and 2009 and the eight-month period ended June 30, 2010 was approximately 90%, 100% and 100% respectively.

17. Discontinued Operations

2009
Sale of Sigmetrix, L.L.C.
On July 1, 2009, the Company sold its 60% ownership interest in Sigmetrix to Cybernet for cash consideration of $122,000 and repayment of intercompany accounts payable of $3.1 million. The cash consideration of $122,000 to be received is subject to possible adjustment for qualified claims made by Cybernet through December 31, 2010 against indemnification guarantees made by the Company in the transaction. The operating results through July 1, 2009 and the related gain on sale of Sigmetrix have been presented as a discontinued operation in the consolidated statements of operations.

Closure of Subsidiary in Belgium
On August 6, 2009, the Company’s Belgium subsidiary, Axis S.A. (“Belgium”), filed for bankruptcy protection and was closed. The operating results through the closure date and the loss on disposition of the entity have been presented as discontinued operations in the consolidated statements of operations.

Sale of Rand Technologies Singapore PTE Ltd.
On September 11, 2009, the Company completed the sale of its 80% ownership interest in Rand Singapore to an individual for cash consideration of one Singapore dollar. The operating results through September 11, 2009 and the related gain on the sale of Rand Singapore have been presented as a discontinued operation in the consolidated statements of operations.

2008
The Netherlands
In July 2008, the Company completed the sale of its 100% ownership interest in its Dutch subsidiary (“Rand B.V.”) to H&P Structured B.V. for cash consideration of $28.9 million. Upon receipt, the Company also paid a liability of Rand B.V. of $28.7 million. The operating results through July 2008 and the related loss on the sale of Rand B.V. have been presented as a discontinued operation in the consolidated statements of operations. During 2009, the Company received $115,000 of tax refunds related to the sale transaction. These refunds were recorded as a reduction of closing costs.

Japan
In July 2008, the Company completed the sale of its 100% ownership interest in its Japanese subsidiary (“Rand Japan”) for cash consideration of $791,000. The operating results through July 2008 and the related gain on the sale of Rand Japan have been presented as a discontinued operation in the consolidated statements of operations.

Spain, Slovakia, the Czech Republic, Poland and Ireland (collectively “Rand Europe”)
During 2008, the Company closed its subsidiaries in Rand Europe. Operating results for these entities in 2008 consisted solely of currency exchange gains totaling $57,000. The operating results through the closure date in 2008 and the loss on disposition of each of these entities have been presented as discontinued operations in the consolidated statements of operations.

F-34

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

The following tables summarize the operating results of all operations discontinued during 2008 and 2009 through their disposition dates as well as the gain (loss) that resulted from sale or disposition of each operation, net of tax (in thousands):

	Year ending October 31, 2008
	Netherlands			Japan			Rand Europe			Sigmetrix			Belgium			Singapore			Total
Income (loss) from discontinued operations
Revenue	$	10		$	1,020		$	-		$	2,264		$	1,667		$	741		$	5,702
Cost of revenue		(5	)		(467	)		-			(156	)		(968	)		(440	)		(2,036	)
Operating expenses and currency gain (loss)		(22	)		(1,067	)		57			(2,277	)		(802	)		(475	)		(4,586	)
Income (loss) from discontinued operations, net of tax provision of $83	$	(17	)	$	(514	)	$	57		$	(169	)	$	(103	)	$	(174	)	$	(920	)
Gain (loss) on sale or disposition of discontinued operations
Cash consideration received	$	28,895		$	791		$	-		$	-		$	-		$	-		$	29,686
Carrying value of net assets (liabilities) disposed		28,680			(446	)		(158	)		-			-			-			28,076
Gain (loss) before disposal cost		215			1,237			158			-			-			-			1,610
Cost of disposal, including currency gain (loss)		(1,540	)		(1,006	)		(406	)		-			-			-			(2,952	)
Gain (loss) on sale or disposition, net of tax	$	(1,325	)	$	231		$	(248	)	$	-		$	-		$	-		$	(1,342	)

	Year ending October 31, 2009
	Sigmetrix			Belgium			Singapore			Netherlands		Total
Income (loss) from discontinued operations
Revenue	$	1,172		$	721		$	437		$	-	$	2,330
Cost of revenue		(16	)		(573	)		(370	)		-		(959	)
Operating expenses and currency gain (loss)		(1,597	)		(364	)		(270	)		-		(2,231	)
Income (loss) from discontinued operations, net of tax provision of $0	$	(441	)	$	(216	)	$	(203	)	$	-	$	(860	)
Gain (loss) on sale or disposition of discontinued operations
Cash consideration received	$	-		$	-		$	1		$	-	$	1
Consideration receivable		122			-			-			-		122
Carrying value of net assets (liabilities) disposed		(3,192	)		(279	)		(209	)		-		(3,680	)
Gain (loss) before disposal cost		3,314			279			210			-		3,803
Cost of disposal, including currency gain (loss)		(818	)		(146	)		(40	)		115		(889	)
Gain (loss) on sale or disposition, net of tax	$	2,496		$	133		$	170		$	115	$	2,914

There were no discontinued operations in the eight months ended June 30, 2010.

18. Equity-Method Investments

Equity-method investments held by the Company during 2008 consisted of ownership interests in Rand North America, Inc. (“RNA”) of 30% and Engineering.com of 28% of the fully diluted shares of each company, respectively. In May 2008, the Company divested its ownership in Engineering.com. At that time, the investment had a fair value of $161,000 and a carrying value of $201,000, resulting in a loss of $40,000 being recorded in the statement of operations for 2008. The Company’s investment in RNA was recorded at zero value in connection with its purchase price allocation for RATC (Note 3), and no change was subsequently recorded in that investment balance during 2008 and 2009.

In April 2010, the Company sold its ownership interest in RNA to Dassault for proceeds of approximately $1.6 million.

F-35

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

19. Savings Plan

The Company has a defined contribution savings plan under Section 401(k) of the Internal Revenue Code. This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pretax basis. Company contributions to the plan may be made at the discretion of the Board of Directors. The Company made contributions of $0, $163,000 and $132,000 to the plan in 2008, 2009 and for the eight-month period ending June 30, 2010, respectively.

20. Segment Information

The Company provides design automation solutions and related services to various manufacturing and engineering industries. The Company serves these industries through two operating segments: IMAGINiT, which services customers who primarily utilize Autodesk solution platforms, and RPS, which services customers who primarily utilize other vendors’ solution platforms. These operating segments are considered reportable segments as defined by ASC 280-10, Segment Reporting. There are significant functions, and therefore costs, that are considered corporate expenses and are not allocated to the divisions for the purposes of assessing performance and making operating decisions. These unallocated corporate expenses include certain marketing and general and administrative costs. Costs and expenses of each division include direct costs associated with selling, supporting, developing and marketing the products and services sold by each division, as well as amortization of acquired intangible assets and restructuring charges.

Asset information by reportable segment is not reported as the Company does not accumulate such information internally. The accounting policies of the segments are the same as those described in Note 2 to these consolidated financial statements. The products and services sold by the segments are described in Note 1. The following table summarizes financial information about the Company’s reportable segments (in thousands):

F-36

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

							Eight
							months
	Year ended						ended
	October 31,						June 30,
	2008			2009			2010
Revenue:
Product sales:
IMAGINiT	$	43,025		$	21,730		$	15,894
RPS		1,360			3,791			974
Total Product sales	$	44,385		$	25,522		$	16,869
Service revenue:
IMAGINiT	$	10,077		$	8,479		$	5,249
RPS		11,623			7,757			4,805
Total Service revenue	$	21,700		$	16,236		$	10,055
Commission revenue:
IMAGINiT	$	13,083		$	11,505		$	5,787
Total Commission revenue	$	13,083		$	11,505		$	5,787
Total Revenue	$	79,168		$	53,263		$	32,710
Cost of revenue:
Cost of Product sales:
IMAGINiT	$	29,709		$	16,186		$	10,952
RPS		944			1,013			247
Total Cost of product sales	$	30,653		$	17,199		$	11,199
Cost of Service revenue:
IMAGINiT	$	10,232		$	6,486		$	3,456
RPS		9,600			7,317			4,136
Total Cost of Service revenue	$	19,832		$	13,802		$	7,592
Gross Profit
IMAGINiT	$	26,245		$	19,043		$	12,521
RPS		2,439			3,219			1,397
Total Gross Profit	$	28,683		$	22,262		$	13,919
Operating expenses:
IMAGINiT	$	38,788		$	15,318		$	9,038
RPS		11,063			2,834			1,976
Unallocated		7,585			7,863			5,624
Total operating expenses	$	57,435		$	26,015		$	16,638
Income (loss) from operations:
IMAGINiT	$	(12,543	)	$	3,725		$	3,484
RPS		(8,624	)		385			(580	)
Unallocated		(7,585	)		(7,863	)		(5,624	)
Total loss from operations	$	(28,752	)	$	(3,753	)	$	(2,719	)

F-37

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

Geographic Information
The Company’s continuing operations conduct business in the United States, Canada, Australia, Singapore and Malaysia. For internal reporting purposes, the results of the Company’s Australian, Singaporean and Malay subsidiaries are combined and reported under the category of “Rest of World.” Revenue for any particular geographic region is determined by sales made by the company to the customers in that particular region. The following table illustrates certain financial information about these geographies in the corresponding fiscal periods:

					Eight
					months
	Year ended				ended
	October 31,				June 30,
	2008		2009		2010
Revenue:
US:
IMAGINiT Product sales	$	27,347	$	12,432	$	8,157
IMAGINiT Service revenue		6,056		5,374		3,129
IMAGINiT Commission revenue		9,918		8,340		4,012
RPS Product sales		1,097		3,436		837
RPS Service revenue		9,026		5,773		4,156
Total US revenue:	$	53,443	$	35,355	$	20,292
Canada:
IMAGINiT Product sales	$	9,377	$	5,483	$	4,619
IMAGINiT Service revenue		2,886		2,357		1,995
IMAGINiT Commission revenue		2,519		2,611		1,659
RPS Product sales		264		355		137
RPS Service revenue		2,597		1,984		649
Total Canada revenue:	$	17,643	$	12,790	$	9,058
Rest of World:
IMAGINiT Product sales	$	6,301	$	3,816	$	3,118
IMAGINiT Service revenue		1,135		748		126
IMAGINiT Commission revenue		646		554		116
Total Rest of World revenue:	$	8,082	$	5,118	$	3,360
Total revenue:
IMAGINiT Product sales	$	43,025	$	21,730	$	15,894
IMAGINiT Service revenue		10,077		8,479		5,249
IMAGINiT Commission revenue		13,083		11,505		5,787
RPS Product sales		1,360		3,791		974
RPS Service revenue		11,623		7,757		4,805
Total revenue:	$	79,168	$	53,263	$	32,710

	As of October 31,				As of June 30,
	2008		2009		2010
Long lived assets
US	$	708	$	483	$	1,123
Canada		864		751		590
Rest of World		155		130		110
Total	$	1,727	$	1,364	$	1,823

F-38

Rand Worldwide, Inc.
Notes to Consolidated Financial Statements

21. Comparable Period Data (unaudited)

The following table contains the unaudited information relating to the Company’s statement of operations for the eight months ended June 30, 2009 (unaudited) and 2010:

(Amounts in thousands, except per share data)

	Eight months ended June 30,
	2009			2010
	(unaudited)
Revenue
Product sales	$	19,584		$	16,869
Service revenue		12,551			10,055
Commission revenue		5,250			5,786
Total revenue		37,385			32,710
Cost of revenue
Product sales		12,130			11,199
Service revenue		10,746			7,592
Total cost of revenue		22,876			18,791
Gross profit		14,509			13,919
Operating expenses
Selling, general and administrative		15,401			15,529
Depreciation and amortization		1,105			733
Restructuring charges		957			665
Total operating expenses		17,463			16,927
Loss from operations		(2,954	)		(3,008	)
Other expenses (income)
Interest expense		1,033			1,260
Currency exchange losses (gains)		6			51
Other expense (income)		22			(1,600	)
Loss from continuing operations before income taxes		(4,015	)		(2,719	)
Income tax expense (benefit)		20			35
Loss from continuing operations	$	(4,035	)	$	(2,754	)
Net loss from continuing operations	$	(4,035	)	$	(2,754	)
Accretion of dividends and issuance costs on Series A Preferred Stock		(1,786	)		(1,928	)
Net loss from continuing operations available to common stock holders	$	(5,821	)	$	(4,682	)
Basic and diluted net loss per common share from continuing operations	$	(0.61	)	$	(0.49	)
Weighted average shares used in computing losses per common share:
Basic		9,500			9,500
Diluted		9,500			9,500

F-39

22. Valuation and Qualifying Accounts

						Eight months
	Year ended October 31,					ended June 30,
	2008		2009			2010
Valuation Allowance for Deferred Tax Assets
Beginning balance	$	—	$	16,751		$	16,577
Allowance for acquired losses		19,386		—			—
Increase (decrease) net of temporary differences		(2,636)		(174	)		2,389
Ending balance	$	16,750	$	16,577		$	18,966

						Eight months
	Year ended October 31,					ended June 30,
	2008		2009			2010
Allowance for Doubtful Accounts
Beginning balance	$	—	$	363		$	215
Allowance for acquired accounts receivable		271		—			—
Write-offs		—		(162	)		(63	)
Charges to costs and expenses		92		14			238
Ending balance	$	363	$	215		$	390

F-40

EX-10.24

Exhibit 10.24

Value Added Reseller (“VAR”) Agreement

“VAR”

RAND IMAGINIT Technologies, Inc.
8001 Sweet Valley Drive
Valley View, OH 44125
United States

RAND IMAGINIT Technologies, Inc.
5285 Solar Drive
Mississauga, ON L4W 5B8
Canada

Phone Number: 216-834-8300 & 905-602-8783
Fax number: 216-834-8301 & 905-602-5279
Email address: bheeg@rand.com

Autodesk Account #: 0070001739 & 0070000380

“AUTODESK”

Autodesk, Inc.
111 Mclnnis Parkway
San Rafael
California
94903
United States

In consideration of the mutual promises contained herein, the parties have read, understood and agree to be bound to this agreement, its exhibits, the Program Guide, the Channel Partner Policies and Procedures, and all other documents which are specifically incorporated therein by reference, and which form an integral part of, and constitute the entire agreement (this “Agreement”), and have caused their Authorized representatives to sign this Agreement in duplicate. Notwithstanding the date of execution, this Agreement shall be deemed to have commenced on 1 February 2010 (the “ Effective Date”).

AUTODESK	VAR
/s/ Steve Dlum	/s/ Marc Dulude
Signature	Signature
Steve Dlum	Marc Dulude
Printed Name	Printed Name
Sr. Vice President, Americas	President & CEO
Title	Title
2/1/10	1.28.10
Date	Date

Autodesk Confidential v8 1-26-2010	Page 1 of 18	Global VAR FY11
		Form Rev 10/10

Value Added Reseller (“VAR”) Agreement

1. DEFINITIONS

1.1 In this Agreement the following words and expressions shall have the following meanings unless the context otherwise requires:

     “Autodesk Software” means those Products comprised of one or more computer programs licensed by Autodesk individually or as part of a bundled package, suite, or series pursuant to an Autodesk End User License Agreement, excluding all third party computer programs delivered as part of that bundled package, suite or series.

     “Authorized”/ “Authorization” means having the ability to sell commercial versions of Authorized Products in accordance with the Requirements set out in the Program Guide, and specifically that VAR has met the Requirements to sell the applicable Products commensurate with its Tier. VAR’s Authorizations and Tiers are shown on the Authorization Chart appended to this Agreement.

     “Authorized Location” means the VAR’s physical “headquarters” location within the Territory listed on the Authorization Chart appended to this Agreement. An Authorized Location may not be a home office.

     “Authorized Products” means the commercial and NFR versions of the machine readable (object code) computer programs developed or marketed by Autodesk (and the accompanying documentation) and their respective Subscriptions, Updates and Upgrades (if any), and Hardware (if any) obtained from an entity authorized by Autodesk to resell Authorized Products to VAR (“Authorized Distributor”) or from Autodesk directly if VAR has executed the Direct VAR Terms and Conditions as part of this Agreement, and other corresponding Autodesk Services and offerings made available by Autodesk to VAR in accordance with VAR’s Authorization. Authorized Products do not include Open Distribution products or educational or student versions of Autodesk Software.

     “Autodesk Fiscal Quarter” means the three month periods February-April, May-July, August-October, November-January during an Autodesk Fiscal Year which commences on February 1 in any given calendar year and ends on January 31 in the following calendar year.

     “Autodesk Services” means any separately contracted services performed by Autodesk, or on Autodesk’s behalf by a third-party, including without limitation, Autodesk’s collaboration services, support, training and consulting services.

     “Benefits” means the various incentives and benefits available to VAR as the result of its Authorization Tier and also discretionary benefits such as marketing funds, documented in the applicable Autodesk Program Guide and other program documentation.

     “Channel Partner Policies and Procedures” means the documents posted to the Partner Portal that set forth policies and procedures to be followed by VAR, (including but not limited to ordering guidelines, Autodesk’s returns policy and procedures, marketing and branding guidelines and trademark use guidelines) that are hereby incorporated by reference. Autodesk reserves the right to modify the Channel Partner Policies and Procedures as per the terms of this Agreement and it shall be VAR’s responsibility to review the said policies and procedures regularly.

     “Confidential Information” means (i) in the case of Autodesk, all information and materials relating to Autodesk and/or its business disclosed by Autodesk to VAR and identified by Autodesk as confidential (including but not limited to, product plans, product designs, product costs, product prices, product names, finances, marketing plans, business opportunities, research [including survey results and customer satisfaction data], development, the contents of this Agreement, know-how and any of Autodesk’s End-User Records and End User data which may be made available to VAR by Autodesk, as well as information which from the circumstances VAR might reasonably expect to be confidential and (ii) in the case of VAR, all nonpublic VAR information and materials requested by Autodesk, including but not limited to marketing plans and financial information produced in accordance with Section 3.5 of this Agreement, and provided to Autodesk by VAR in writing (excluding any Autodesk confidential information described in (i) above), that are clearly labeled as VAR Confidential Information, or if such requested information is communicated verbally it must be identified as being confidential at the time it is communicated and VAR must confirm such by writing to Autodesk within ten business days of its disclosure.

Autodesk Confidential v8 1-26-2010	Page 2 of 18	Global VAR FY11
		Form Rev 10/10

Value Added Reseller (“VAR”) Agreement

     “Direct” means that VAR has the option of purchasing certain Authorized Products (as identified by Autodesk) directly from Autodesk subject to the “Direct VAR Terms and Conditions” and “Security Agreement” attached hereto as Exhibit 1 and Exhibit 1A respectively.

     “Direct Customer” means any End User to whom Autodesk sells Product(s) directly or which Autodesk designates as a Direct Customer. Direct Customers include all Autodesk named (or strategic, key, global or major) accounts; federal, state, provincial and local government End Users; and all educational institutions, student and faculty End Users. Autodesk will provide a list of Direct Customers, and such list will be posted to the Partner Portal and Autodesk will use reasonable efforts to update the Direct Customer List on a regular basis.

     “ESD” means electronic software download over a network.

     “End User” means a third party desiring to lawfully purchase, or who has lawfully purchased, one or more legitimate Products for use, and not for transfer or resale.

     “End User License Agreement”/ “EULA” means the then-current Autodesk Software License Agreement setting forth the terms and conditions under which an End User may use the Product.

     “End User Records” means the records independently maintained by VAR that show, at a minimum, the name and contact information (address, telephone number and e-mail) for each End User to whom VAR has sold the Product(s), and the list of Products sold to that End User along with the Products’ serial numbers.

     “Hardware” means any computer equipment sourced from Autodesk for use in connection with the Autodesk Software.

     “Indirect” means that if VAR wishes to purchase Authorized Products, it must do so from an Authorized Distributor.

     “Marketing Materials” means the marketing information and other advertising materials that Autodesk may make available to VAR from time to time during the term of this Agreement.

     “NFR” means not for resale versions of a Product, as further defined in the EULA accompanying each applicable Product.

     “Open Distribution Products” means the commercial and NFR versions of the machine readable (object code) computer programs developed or marketed by Autodesk (and the accompanying documentation) and their respective Subscriptions, Updates and Upgrades (if any), and Autodesk Services and offerings, not requiring authorization from Autodesk for resale, designated as such by Autodesk in the Program Guide or Partner Portal.

     “Partner Portal” means the current Autodesk partner web site or any other site designated by Autodesk.

     “Product(s)” means Authorized Product(s), Open Distribution Product(s) which Autodesk may make available to VAR from time to time in accordance with this Agreement.

     “Program Guide” means the Autodesk document listing the Requirements and Benefits applicable to VAR, made available to VAR by Autodesk on the Partner Portal, or otherwise, and hereby incorporated by reference. Autodesk reserves the right to modify the Program Guide as per the terms of this Agreement.

     “Requirements” means the requirements and obligations that Autodesk may set or modify from time to time as set forth in the Program Guide and the Channel Partner Policies and Procedures, including without limitation, reporting requirements, the mandatory personnel, technical and minimum purchase requirements, support and service Tier requirements as well as any other requirements and obligations which are commensurate with the Tier of Authorization VAR has achieved. Requirements may also refer to the requirements to participate in Benefits programs or qualify as an Autodesk Direct VAR.

Autodesk Confidential v8 1-26-2010	Page 3 of 18	Global VAR FY11
		Form Rev 10/10

Value Added Reseller (“VAR”) Agreement

     “Subscription” means, the then-current Autodesk subscription, maintenance, support and other similar and/or related programs, as Autodesk may designate from time to time, and standard agreements setting forth the terms and conditions between Autodesk and an End User concerning the delivery of specified product and service benefits related to Autodesk Products.

     “Tier” means the VAR’s status from both a Requirements and Benefits perspective as specified on the Authorization Chart appended to this Agreement. Tiers may include the Silver and Gold designations and such other tier designations as Autodesk may make available during the term of this Agreement.

     “Territory” means each separate and distinct geographic area specified on the VAR Authorization Chart. In the absence of any other description, a Territory shall be the geographic area within a two hundred and fifty mile radius from the city or Authorized Location noted on the Authorization Chart appended to this Agreement.

     “Update(s)” means improved versions of Autodesk Software, or portions thereof, which incorporate corrections or minor enhancements for which Autodesk does not normally charge a fee.

     “Upgrade(s)” means commercial releases of Autodesk Software designated as such by Autodesk and for which Autodesk normally charges a fee.

1.2 All references in this Agreement to “sales” or “selling” or purchasing of Products shall mean the sale of the applicable End User license to use with respect to computer programs (including but not limited to the Autodesk Software) and shall under no circumstances constitute, or be construed to constitute the sale or transfer of intellectual property.

2. VAR AUTHORIZATION

2.1 Subject to VAR’s compliance with the applicable Requirements, Autodesk grants VAR a non-exclusive, non-transferable license to purchase, market, distribute, sell and support the Authorized Product(s) made available by Autodesk in the Territory which correspond with VAR’s Authorization and Tier, (or as otherwise expressly permitted by Autodesk) solely to End Users within the applicable Territory (unless an exception is expressly authorized by Autodesk in writing). VAR shall be entitled to participate in the Benefits program in accordance with the applicable Requirements in the Program Guide. VAR may not assign, sublicense, delegate or subcontract its rights, duties or obligations under this Agreement without the express prior written consent of Autodesk and VAR shall not engage in any sub-distribution, agency or broker arrangements with regard to Authorized Products. Notwithstanding the foregoing limitations, VAR may permit the financing of any Product by an End User through a financial institution approved by Autodesk (such approval not to be unreasonably withheld) and subject to Autodesk’s reasonable requirements, provided such financial institution secures no rights to such Product as a licensee thereof.

In addition, Autodesk may elect to deliver the Product directly to the End User via ESD in accordance with such procedures as Autodesk may establish. VAR shall not agree or consent to ESD without first obtaining the approval of Autodesk. A Product shall be considered fulfilled via ESD when Autodesk has enabled its download, Autodesk will use reasonable efforts do so promptly upon request of the VAR.

2.2 Autodesk reserves the unrestricted right without any liability to VAR to (i) license, market, distribute, sell and support any Product(s) in any location worldwide, including (but not limited to) in the VAR’s Territory, directly to End Users or through any other reseller or channel, including, but not limited to, original equipment manufacturers, channel partners, distributors, on-line sales or retail outlets, systems integrators and independent software vendors and (ii) modify, augment, or otherwise change the methods in which Autodesk licenses, markets, distributes, or supports any Product(s).

     2.2.1 On a case by case basis, Autodesk may further authorize VAR as a non-exclusive sales representative in relation to Authorized Product(s) corresponding with VAR’s Authorization in accordance with the Requirements in the Program Guide, or as otherwise specified by Autodesk, for the limited purposes expressly set forth in the Agreement. Such appointment shall be for specific sales opportunities only and VAR shall not be appointed, nor represent itself to be appointed, as a permanent sales agent of Autodesk. VAR’s compensation in such cases will be determined in accordance with the provisions in the Program Guide. Consistent with the terms of this Agreement, VAR shall act as Autodesk’s non-exclusive sales representative to assist with sales activities to Direct Customers at Autodesk’s sole discretion, but VAR shall refrain from making any commitments on behalf of Autodesk, or representing itself as Autodesk or an Autodesk employee. Autodesk hereby gives VAR notice that it has reserved all Direct Customers for direct sales from Autodesk, or its nominated major account master reseller only or other third parties as may be designated by Autodesk.

Autodesk Confidential v8 1-26-2010	Page 4 of 18	Global VAR FY11
		Form Rev 10/10

Value Added Reseller (“VAR”) Agreement

Unless otherwise directed by Autodesk in writing, VAR may only engage in sales activities for Authorized Product(s) to such Direct Customers as an intermediary or agent on Autodesk’s approval or behalf, as expressly permitted by Autodesk, and may not sell Authorized Product(s) from its commercial inventory to Direct Customers.

2.3 VAR agrees and acknowledges that Autodesk may unilaterally amend, supplement, change or discontinue any: Product(s), Autodesk Services, the whole or any part of the Program Guide (including Requirements), or Channel Partner Policy and Procedure(s) and Direct VAR Terms and Conditions at any time following thirty (30) days’ notice (or such other notice period expressly provided for in this Agreement) to VAR of such action, provided however, that to the extent that any such changes are made, such changes shall apply in a similar manner to similarly situated VARs.

2.4. Autodesk shall not be under any obligation to accept Direct orders from a VAR that has not qualified for and agreed to Autodesk’s Direct VAR Terms and Conditions by executing a copy of this Agreement to which they are appended.

3. VAR OBLIGATIONS

3.1 Compliance with this Agreement. VAR agrees to comply with all the obligations contained in this Agreement, including but not limited to the applicable Requirements, Direct VAR Terms and Conditions (if applicable) and other obligations contained in the Program Guide and Channel Partner Policies and Procedures, and all other documents incorporated by reference into this Agreement.

3.2 Value Added Services. VAR shall actively market, sell and support (as per the applicable service Tier Requirements established by Autodesk and commensurate with VAR’s Tier), the Products. With each Authorized Product sale, including but not limited to each sale by mail, Internet, or telephone, VAR shall provide value added services to End Users, including but not limited to pre-sales Product assessment, demonstrations, briefings, and recommendations in accordance with the terms of this Agreement, the Program Guide and the Channel Partner Policies and Procedures.

3.3 Territory. VAR shall not actively sell, promote, advertise, market or solicit orders for Products, or open branches or maintain distribution depots for supply or support of Products outside the Territory.

3.4 Product Integrity and Compliance with Autodesk Terms. VAR shall deliver Products without modification and with all packaging, documentation, disclaimers, proprietary rights and other notices, marks, serial numbers, and license agreements intact unless otherwise requested by Autodesk in writing. VAR shall not reproduce, modify, translate, adapt, reverse engineer or decompile any Products in whole or in part without the express prior written consent of Autodesk. VAR shall dispose of Product packaging in accordance with the laws of the Territory. VAR shall notify End Users that the Products are subject to an End User License in advance of purchase, as applicable, and upon request by End User, VAR shall make available to End Users the applicable End User License, Subscription and other applicable Product or Autodesk Service use terms and conditions. VAR shall not supplement, amend, modify or conflict with any terms and conditions, warranties, obligations or other requirements or limitation included with or related to the Products, or otherwise pursue, waive or compromise any of Autodesk’s rights relating to End-Users or other parties without the prior written consent from an authorized representative of Autodesk. VAR shall comply with the terms of the licenses of software programs supplied by Autodesk to VAR for use by VAR and not reproduce, lend, rent or otherwise transfer software programs supplied to VAR. VAR shall not license or transfer or otherwise distribute or provide in any manner Products in contravention of Autodesk’s program policies, terms or conditions, including but not limited to the policies, terms and conditions around Upgrades, educational versions, student versions, multiseat licenses, Autodesk Services and Subscription. VAR shall verify that an End User qualifies to receive different Product types as per Autodesk policies and applicable laws including but not limited to US trade laws and regulations. When one or more Products are bundled together and sold to VAR, VAR may not unbundle and resell the individual component Product(s).

3.5 Financial Statements and Insurance. VAR shall submit updated financial statements and other material financial information as reasonably requested by Autodesk, within ten (10) working days following Autodesk’s request. Moreover, during the term of this Agreement, VAR shall maintain in full force and effect, at its own expense, reasonable general liability insurance coverage. If requested, VAR agrees to provide Autodesk with a certificate evidencing its insurance coverage.

3.6 VAR Pricing and Terms. Subject to Autodesk’s right to impose maximum retail price limitations when permitted by applicable law, VAR shall determine the prices at which and (except as provided in this

Autodesk Confidential v8 1-26-2010	Page 5 of 18	Global VAR FY11
		Form Rev 10/10

Value Added Reseller (“VAR”) Agreement

Agreement) the terms and conditions on which it supplies and supports Products, provided, however, that the terms and conditions may not supplement, amend, modify or conflict with any Autodesk terms and conditions, warranties, obligations or other requirements or limitation related to the Products, without the prior written consent from an authorized representative of Autodesk.

3.7 End User Records. Subject to applicable privacy laws, all End User Records and information, including without limitation, such End User data described in Confidential Information, are and shall remain the sole and exclusive property of Autodesk and VAR shall have no right, title or interest in or to such End User Records or End User data.

4. PROTECTION OF AUTODESK PROPRIETARY RIGHTS

4.1 All rights relating to Products, Marketing Materials, the Partner Portal, customer satisfaction surveys or other Autodesk survey results, End User Records, End User data supplied to VAR by Autodesk, and any other Autodesk website, materials or translations thereof, including (but not limited to) patents, copyrights and trademarks as well as all trade names, logos, or domain names pertaining to Autodesk, are owned by and remain the valuable exclusive property of Autodesk or its licensors. VAR shall not use any Autodesk published acronym, trademark, trade name, logo or domain name of Autodesk except as expressly permitted by Autodesk. During the term of this Agreement VAR may (i) indicate to the public that it is an “Autodesk Value Added Reseller” of Authorized Products with the specific designation applicable to VAR and (ii) advertise Products under the trademarks, tradenames and logos that Autodesk may adopt from time to time (“Autodesk’s Trademarks”), always in accordance with any branding guidelines and trademark use guidelines published by Autodesk from time to time on Partner Portal (or otherwise made available to VAR by Autodesk upon request).

Upon loss of or change to VAR’s Authorization for any Authorized Products, VAR shall immediately cease using the applicable Autodesk designations in relation to those Authorized Products.

VARs may not market themselves as “Direct” or any equivalent thereto absent being granted that status by Autodesk.

4.2 VAR shall not use or attempt to register in any way any designation, trademark, trade name, logo (including but not limited to Autodesk published acronyms) or domain name, or any product or service name, used or disclosed by Autodesk or any affiliated company of Autodesk or any name which is confusingly similar to any product or service name, trademark, trade name, logo or domain name of Autodesk or any affiliated company of Autodesk.

4.3 VAR shall not market, distribute or sell unlicensed copies of Autodesk Software or software which VAR knows, or is made aware, unlawfully manipulates Autodesk Software or contributes or incites breach of Autodesk intellectual property rights. VAR shall notify Autodesk promptly if it knows of or suspects any unauthorized use of Products or other violations of Autodesk’s proprietary rights in Products, shall provide reasonable assistance to Autodesk in the prosecution of any claims arising therefrom, and shall participate in other Autodesk license compliance programs. VAR may not circumvent any Product locking or other copy protection system in any manner or instruct or assist any third party to do so.

4.4 Autodesk hereby grants VAR a non-exclusive, non-transferable and non-sub-licensable right during the term of this Agreement to reproduce and distribute the Marketing Materials in connection with the sale, distribution and support of Products, subject to and in accordance with the restrictions and guidelines published by Autodesk from time to time on Partner Portal (or otherwise made available to VAR on request from Autodesk). Except as expressly provided herein, VAR is not granted any other right or license to patents, copyrights, trade secrets, trademarks or other intellectual property right with respect to the Marketing Materials. VAR shall take all reasonable measures to protect Autodesk’s proprietary rights in the Marketing Materials. VAR shall notify Autodesk promptly in writing upon its discovery of any unauthorized use of the Marketing Materials. Within thirty (30) days of any Autodesk request, VAR shall destroy all of the foregoing property and certify to its complete destruction. Autodesk reserves the right to charge VAR a fee for Marketing Materials provided to VAR if the charge applies to all similarly situated VARs.

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4.5 Pornographic, defamatory or otherwise unlawful use of Marketing Materials is strictly prohibited whether directly or in context with specific subject matter. Marketing Materials shall not be incorporated into a logo, trademark or service mark by VAR. Marketing Materials shall not be used contrary to any restriction that is provided in writing by Autodesk to VAR. Marketing Materials shall not be used in (i) a manner that would lead a reasonable person to believe that the model within the Marketing Material personally uses or endorses a product or service; or (ii) in a manner that would be considered unflattering or controversial to a reasonable person. With respect to any Marketing Materials delivered or stored in an electronic form VAR must retain the copyright symbol and markings thereon. VAR may not make additional high-resolution copies of the Marketing Materials and VAR will maintain a robust firewall to safeguard against unauthorized third-party access to the Marketing Materials.

5. END USER SOFTWARE LICENSE AND PRODUCTS

5.1 VAR may not register or facilitate registration of any Product sold to an End User without the express written permission from such End User. Autodesk reserves the right to modify such registration information. VAR may not enter into any license agreement or Subscriptions on behalf of Autodesk. In addition, VAR may not register in its own name any Product sold to an End User.

5.2 VAR shall notify each of its End Users that Updates, Upgrades (if any), and Subscription (if any) for Products will only be supplied to the End Users who have registered with Autodesk.

5.3 VAR shall reimburse End-User its purchase price upon return of the Products to VAR in accordance with the terms and conditions of the End User License Agreement or Subscription (as the case may be). VAR shall be entitled to return those Products puchased from Autodesk to Autodesk for a replacement, refund, or credit, at Autodesk’s sole election, in accordance with Autodesk’s RMA Policy.

5.4 Nothing in this Agreement shall require Autodesk to produce Upgrades to the Products in accordance with any particular timetable or make available Subscriptions, Updates or Upgrades to VAR or End Users.

6. WARRANTIES

6.1 Standard Limited Warranty.

     6.1.1. VAR is not granted any warranties under this Agreement. In the event VAR uses the Autodesk Software (including but not limited to the NFR versions) as an End User it will be subject to the applicable End User License or applicable Subscription terms and conditions and any warranties and/or restrictions contained therein.

     6.1.2. Pursuant to applicable End User License(s) and Subscription terms and conditions (if applicable) and Autodesk Services terms and conditions (if applicable), Autodesk makes a limited warranty to the End-User regarding the functionality of Autodesk Software and the media on which the copy of the Autodesk Software obtained by such End User is contained or the service and benefits that are to be provided to End User. Subject to Section 6.1.3 below, Autodesk may provide certain limited warranties in writing with respect to its other Products (the “Limited Warranty”). The End User License(s) and the Subscription terms and conditions specifically disclaim all other warranties relating to the Products. VAR shall not make or offer to any party any warranty or representation on behalf of Autodesk or any Autodesk subsidiary or affiliate.

     6.1.3. Hardware and third-party software that are delivered by either Autodesk or its channel partners for use in conjunction with Autodesk Software shall be subject to the third-party terms and conditions and/or license agreements between End User and the third-party vendor (“Third Party Vendor Terms and Conditions”). The Hardware and third-party software is provided by Autodesk “as is,” subject to the Third Party Vendor Terms and Conditions or warranty, if any, that accompany such products. Any representations, warranties, or other similar obligations with respect to the Hardware and third-party software flow directly from the third party vendor to End User and forms a binding agreement between End User and the third party vendor.

6.2 NO WARRANTY. TO THE FULLEST EXTENT PERMITTED BY LAW AUTODESK GRANTS NO WARRANTIES TO VAR, EXPRESS OR IMPLIED, BY STATUTE, USAGE OF TRADE, COURSE OF DEALING OR OTHERWISE. AUTODESK SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY AS TO QUALITY, MERCHANTABILITY, SUITABILITY OR PERFORMANCE OR FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS, WHICH WARRANTIES ARE SPECIFICALLY EXCLUDED. AUTODESK DOES NOT WARRANT THAT THE OPERATION OF THE

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PRODUCTS WILL BE UNINTERRUPTED OR ERROR FREE, THAT ANY DELIVERABLES WILL BE PROVIDED UNDER SUBSCRIPTION, OR THAT THE AUTODESK SERVICES SHALL BE SATISFACTORY. NOR DOES AUTODESK MAKE ANY WARRANTY WITH REGARD TO THE USE OF NAMES, PEOPLE, TRADEMARKS, REGISTERED, UNREGISTERED OR COPYRIGHTED DESIGNS OR WORKS OF ART OR ACHITECTURE DEPICTED IN ANY MARKETING MATERIALS.

7. THIRD PARTY INTELLECTUAL PROPERTY RIGHTS

7.1 Obligation to Defend. Autodesk will defend, at its expense, any claim or action brought against VAR which alleges that any of the Autodesk Software infringes the copyright, patent, trademark or trade secret of any third party provided that VAR (i) promptly notifies Autodesk in writing of any claim; (ii) makes no admission or settlement without Autodesk’s prior written consent; (iii) gives Autodesk sole control of the defense and settlement thereof; and (iv) provides all reasonable assistance in connection therewith.

7.2 Obligation to Indemnify. Subject to the limitation of liability provision of this Agreement, Autodesk will pay any settlement amount or damages awarded by a court in a final non-appealable judgment to a third party arising from such a claim of infringement defended by Autodesk in accordance with Section 7.1.

7.3 Exclusive Remedy. If a Product is permanently enjoined as infringing the patent, copyright, trademark or trade secret of a third party, or if Autodesk settles the claim and the result of the settlement is that a Product is permanently enjoined, Autodesk shall, at its option, (i) procure for VAR the right to continue to resell the Product; (ii) modify the Product so that it no longer infringes; (iii) replace the Product with a functionally equivalent, non-infringing Product; or (iv) accept return of the affected Product and refund its purchase price, where Product was purchased directly from Autodesk. Notwithstanding anything in this Section 7, Autodesk shall have no liability for:

7.4 any infringement claims arising out of the use of the Autodesk Software in combination with other products if the infringement would not occur but for such combination; or

7.5 the modification of the Product, or any part thereof, unless such modification was made by Autodesk or at the direction of Autodesk; or

7.6 any infringement claims attributable to use of the Autodesk Software in violation of any terms of the EULA; or

7.7 any trademark infringements involving any marking or branding not applied by Autodesk

7.8 This Section 7 states VAR’s sole and exclusive remedy with respect to claims of infringement of third party proprietary rights of any kind.

8. LIMITATION OF LIABILITY

8.1 EXCEPT FOR AUTODESK’S OBLIGATIONS UNDER SECTION 7 OF THIS AGREEMENT WHERE THE MAXIMUM CUMULATIVE AND AGGREGATE LIABILITY OF AUTODESK AND ITS AFFILIATES, SUBSIDIARIES AND RELATED COMPANIES, AND THEIR EMPLOYEES, OFFICERS, DIRECTORS, REPRESENTATIVES, AND AGENTS FOR ALL COSTS, LOSSES OR DAMAGES FROM CLAIMS ARISING UNDER OR RELATED IN ANY WAY TO SECTION 7, SHALL NOT EXCEED THE SUM OF ONE MILLION DOLLARS ($1,000,000). TO THE EXTENT PERMITTED BY LAW THE MAXIMUM CUMULATIVE AND AGGREGATE LIABILITY OF AUTODESK AND ITS AFFILIATES, SUBSIDIARIES AND RELATED COMPANIES, AND THEIR EMPLOYEES, OFFICERS, DIRECTORS, REPRESENTATIVES, AND AGENTS FOR ALL COSTS, LOSSES OR DAMAGES FROM CLAIMS ARISING UNDER OR RELATED IN ANY WAY TO THIS AGREEMENT, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE, IS LIMITED TO VAR’S DIRECT DAMAGES ONLY AND SHALL NOT EXCEED THE LESSER OF (i) THE VALUE OF AGGREGATE PURCHASES OF PRODUCTS UNDER THIS AGREEMENT DURING THE SIX (6) MONTHS IMMEDIATELY PRECEEDING THE CLAIM, OR (ii) $100,000 (ONE HUNDRED THOUSAND DOLLARS).

8.2 TO THE EXTENT PERMITTED BY LAW IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, OR EXEMPLARY DAMAGES OR FOR LOSS OF PROFITS, REVENUES, CONTRACTS, CUSTOMERS, LOSS OF USE, LOSS OF DATA, LOSS OF GOODWILL, BUSINESS INTERRUPTION, COST OF REPLACEMENT GOODS OR SERVICES, OR

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FAILURE TO REALIZE EXPECTED COST SAVINGS EVEN IF ADVISED OF THE POSSIBILITY OF SAME OR SAME WERE REASONABLY FORESEEABLE.

8.3 THE FOREGOING LIMITATIONS OF LIABILITY SHALL APPLY NOTWITHSTANDING ANY FUNDAMENTAL BREACH, BREACH OF MATERIAL TERM OR FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. THE FOREGOING LIMITATIONS OF LIABILITY SHALL NOT APPLY TO ANY LIABILITY OF EITHER PARTY FOR DEATH OR PERSONAL INJURY CAUSED BY NEGLIGENCE.

9. CONFIDENTIALITY

9.1 Limitations on Disclosure and Use of Confidential Information. Autodesk shall exercise the same degree of care (but not less than reasonable care) employed by Autodesk to prevent the unauthorized use and disclosure of it’s own Confidential Information to prevent the unauthorized use and disclosure of VAR’s Confidential Information. VAR shall keep Confidential Information made available by Autodesk in strictest confidence and (i) prevent the unauthorized use, dissemination or publication of the Confidential Information, (ii) not to divulge Confidential Information to any third party, and (iii) not to make any use of such Confidential Information except for purposes consistent with VAR’s obligations pursuant to this Agreement; and (iv) not to reverse engineer any such Confidential Information. Any copies of Confidential Information made by VAR will include appropriate marking identifying same as constituting or containing Confidential Information of Autodesk. VAR shall limit the use of and access to Autodesk Confidential Information to the VAR’s employees or authorized representatives who have: (i) a need to know and have been notified that such information is Confidential Information to be used solely for purposes consistent with VAR’s obligations pursuant to this Agreement; and (ii) entered into binding confidentiality obligations no less protective of Autodesk than those contained in this Agreement. VAR shall not use or disclose any Confidential Information to which it has access but which Confidential Information was not intended, or which in the circumstances VAR could reasonably deduce was not intended, for VAR. VAR shall not amend, edit or otherwise alter any Confidential Information without the prior written consent of Autodesk.

9.2 Exceptions. The foregoing limitations on disclosure and use shall not apply to information that (i) is rightfully received from a third party without restriction or violation of confidentiality, (ii) is developed independently without use of the Confidential Information of Autodesk, or VAR, as the case may be (iii) is or becomes generally known to the public by other than a breach of duty hereunder, or (iv) has been approved in advance for release by written authorization of the party otherwise with rights to designate the information as its Confidential Information.

9.3 To ensure protection of valuable trade secrets, pre-release versions of Authorized Products and other Confidential Information which Autodesk will from time to time disclose to VAR hereunder, VAR agrees that it is not and during the term of this Agreement shall not be involved in the development, marketing, sale or distribution of any product(s) which in Autodesk’s reasonable opinion compete with or perform the same or substantially similar functions as the Authorized Products, without giving Autodesk at least three (3) months advance written notice of its intent to engage in such conduct.

9.4 In the event VAR begins to resell or distribute one or more competing product(s), VAR shall immediately take the following steps to ensure that Confidential Information shall not be misused or misappropriated for the purpose of promoting, marketing or benefiting the competing product(s): VAR shall establish and maintain at all times a separate team of sales and technical personnel dedicated exclusively to the promotion, marketing and support of the Authorized Products whose names shall be furnished to Autodesk, each of whom shall have signed a binding non-disclosure agreement which contains confidentiality obligations equivalent to those which VAR is subject to hereunder; VAR shall also strictly comply with the Confidential Information obligations set forth in this Agreement to ensure that such separate personnel gains no access to Confidential Information for any purpose.

10. TERM AND TERMINATION

10.1 This Agreement shall be effective from the Effective Date until the end of the then current Autodesk Fiscal Year, after which it shall renew automatically on an annual basis for up to two successive twelve (12) month periods comporting to the Autodesk Fiscal Year, provided that:

10.1.1 VAR meets and continues to meet all of its obligations hereunder;

10.1.2 Prior to the commencement of each successive twelve (12) month period VAR meets Autodesk’s Requirements, as applicable, for each successive twelve (12) month period; and

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10.1.3 This Agreement is not terminated in accordance with any other provision of this Section 10.

10.1.4 Notwithstanding any other provision of this Agreement, and absent earlier termination, this Agreement shall expire automatically on 31 January 2013. Moreover, each of Autodesk or VAR may terminate this Agreement effective at the end of the then current Autodesk Fiscal Year, provided the terminating party gives the other party at least sixty (60) days written notice of termination prior to the end of the then current Autodesk Fiscal Year.

10.2 Either party may terminate this Agreement according to written notice given upon the breach by one party of any of its obligations under this Agreement and its failure to remedy the breach within thirty (30) days following written notice from the other party.

10.3 Autodesk may terminate this Agreement according to written notice given upon any of the following events:

10.3.1 transfer or cessation by VAR of any part of its business relating to distribution of Products or transfer by VAR’s owners or shareholders of a controlling interest in VAR; or

10.3.2 a receiver or similar officer is appointed for the benefit of VAR’s creditors, or if VAR becomes the object of any proceedings for bankruptcy, insolvency or the like; or

10.3.3 breach by VAR of any provision of this Agreement that cannot be remedied (including but not limited to breach of confidentiality, fraud, misconduct or violation of Autodesk’s proprietary rights); or

10.3.4 if VAR contests Autodesk’s or any of its affiliates’ intellectual property rights, or attempts to register any domain name using an Autodesk product or service name, trademark, trade name, logo or any designation communicated to VAR by Autodesk.

10.5 This Agreement may be terminated for any reason or no reason, by VAR upon thirty (30) days written notice to Autodesk

10.6 If Autodesk determines, in it sole discretion that it is necessary or desirable to (i) restructure its distribution system or the distribution of some or all of the Products in the Territory, or (ii) reduce the number of resellers or value added resellers for some or all of the Products in the Territory, Autodesk may terminate this Agreement or VAR’s appointment to resell any Products hereunder by giving no less than three (3) months written notice of such matters to VAR. If Autodesk’s restructured distribution system includes independent resellers for Products, Autodesk will inform VAR of the requirements and give VAR an opportunity to participate in the new distribution system provided VAR meets the requirements communicated to VAR.

10.7 Autodesk may terminate or suspend VAR’s authorization to resell any Authorized Product hereunder completely, or on an Authorized Location basis, if VAR is not in compliance with any of the Requirements related to those Authorized Products, and fails to remedy said non-compliance within thirty (30) days following written notice from Autodesk (during which notice period Autodesk, at its sole discretion, may also suspend VAR’s authorization to resell those Authorized Products). Autodesk may downgrade VAR’s Tier for any Authorized Products to a lower Tier if VAR is not in compliance with any of the Requirements applicable to VAR’s Authorization and Tier for those Authorized Products, and fails to remedy said non-compliance within thirty (30) days following written notice from Autodesk. A Tier downgrade may restricts VAR’s access to Products affected.

10.8 Each of Sections 10.1, 10.2, 10.3, 10.4, 10.5, 10.6 and 10.7 provides a separate and distinct right to terminate this Agreement.

10.9 In the event Autodesk exercises partial termination rights under this Section 10, said partial termination shall not affect this Agreement’s application with respect to the remaining Authorization(s) or affect any remaining part of any other Autodesk written agreement(s) entered into by the parties. In the event this Agreement is terminated or VAR loses its Authorization to resell one or more Authorized Products for any reason, VAR may not reapply for Authorization to resell those Authorized Products for a minimum of six (6) months after the effective date of the termination. Nothing herein shall require Autodesk to consider VAR for any Authorization or program.

10.10 No Liability on Termination. In the event this entire Agreement or VAR’s appointment to distribute any Authorized Products expires or terminates hereunder, neither party shall be liable to the other party for

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compensation, reimbursement or damages on account of the loss of prospective profits or anticipated sales or on account of expenditures, inventory, investments, leases or commitments in connection with a party’s business or goodwill. Termination shall not, however, relieve either party of obligations incurred prior to the termination and still remaining to be fulfilled following such termination. Further, neither party shall be entitled to any indemnification as a result of termination of this Agreement.

10.11 Upon expiration or termination of this Agreement, in whole or in part:

10.11.1 All applicable rights, and permissions granted by Autodesk to VAR shall cease, and VAR shall immediately cease to use or refer to Autodesk’s Trademarks, trade names and logos;

10.11.2 VAR shall promptly discontinue use and return to Autodesk all applicable promotional and other materials or documentation furnished by Autodesk, as well as all copies of Products and documentation supplied by Autodesk to VAR for the purposes of demonstration or evaluation (including but not limited to any NFR versions of Products, whether supplied as standalone NFR versions of Products or via NFR versions of Subscriptions), and all applicable Confidential Information in its possession. VAR shall not be entitled to any refund on any NFR versions of Subscriptions which are unexpired at the date of termination;

10.11.3 VAR shall be entitled to return Products purchased from Autodesk and held by VAR in inventory and carried on Autodesk’s then-current price list up to the quarterly percentage under the then current RMA policy, provided VAR has paid for such Products, Autodesk shall refund the price paid less any shipping within thirty days after receipt of such returned Products from VAR. Any other returns shall require Autodesk approval.

10.11.4 If VAR is in breach hereunder, then the due date of all outstanding Autodesk invoices for Products will automatically be accelerated so that they become due and payable no later than the effective date of termination, even if longer terms had been provided previously; and

10.11.5 Except as otherwise provided herein, all applicable orders or portions thereof remaining unshipped as of the effective date of termination shall automatically be cancelled.

10.12 Sections 2.2, 3.7, 4.1, 4.2 4.3, 5.1, 5.3, 5.4, 6, 8, 9, 10, 11, Section 5 of Exhibit 1 and Exhibit 1(A) of this Agreement shall survive expiration or termination of this Agreement.

11. GENERAL

11.1 Personal Data.

11.1.1 VAR agrees to comply with all federal, state, provincial, county, and local laws, statutes, ordinances, and regulations that are related to privacy and data protection, including, but not limited to those applicable to the collection, storage, transfer, sharing and/or other processing of End User data, End User Records and any other personal data (if any) made available to VAR by Autodesk. Moreover, VAR shall only use data made available by Autodesk in accordance with Autodesk’s current Privacy Policy available at www.autodesk.com and Autodesk’s written instructions. In addition, it shall be VAR’s responsibility when collecting information from End User customers with the intention of passing such information to Autodesk (e.g. customer satisfaction or customer support surveys) to obtain the consent of the End User to the transfer of such information to Autodesk.

11.1.2 In using End User data made available by Autodesk for the promotion, sale and support of the Autodesk Product(s), VAR shall include an “unsubscribe” or “opt-out” option on every marketing piece sent to End User regardless of form and limit marketing contact with End Users to a reasonable number of contacts per month.

11.2 Independent contractors. The relationship of Autodesk and VAR established by this Agreement is that of independent contractors, and nothing in this Agreement shall be construed to:

11.2.1 create an agency, partnership, franchise, joint venture, sales representative, employment or any other type of legal association between Autodesk and VAR;

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11.2.2 give either party the power to direct and control the day-to-day activities of the other;

11.2.3 constitute the parties as partners, joint venturers, co-owners or otherwise as participants in a joint or common undertaking; or

11.2.4 allow either party to create or assume any obligation on behalf of the other for any purpose whatsoever.

Except as expressly provided in Section 2.2.1, above VAR shall in all dealings relating to Products make clear it is acting as a principal on its own account and not as an employee, agent or representative of Autodesk.

All financial obligations associated with VAR’s business are the sole responsibility of VAR. All sales and other agreements between VAR and its customers, suppliers, or between VAR and any Authorized Distributor are VAR’s exclusive responsibility and shall have no effect on VAR’s obligations under this Agreement.

11.3 Compliance with Laws and Audit.

11.3.1 VAR shall conduct its business through a corporation or other form of business organization recognized by the laws of the Territory, obtain and maintain at its own expense all permissions, consents and licenses necessary to enable VAR to distribute and support Products in accordance with this Agreement, comply with all laws and regulations applicable to the marketing, license and support of Products, and conduct its business in a manner that does not negatively affect the reputation, goodwill or prospects of Autodesk or its Products.

11.3.2 As between VAR and Autodesk, VAR is responsible for the collection and payment of all taxes, fees, and other charges, including all applicable VAR income and sales taxes, as well as penalties and interest in relation to VAR’s business.

11.3.3 In conformity with the United States Foreign Corrupt Practices Act (“FCPA”), or any rules or regulations thereunder, all similar international laws and Autodesk’s established corporate policies regarding foreign business practices (collectively referred to as “FCPA laws”), VAR shall not take any action which would cause it to be in violation of such FCPA laws, including, the use of any corporate funds for unlawful contributions, gifts, entertainment, or other expenses relating to political activity; making, attempting to make, offering, or authorizing any unlawful payment, thing of value, bribe, rebate, payoff, influence payment, kickback or other similar unlawful payment to a foreign or domestic government official, for the purpose of influencing an act or decision (including a decision not to act) or inducing such a person to use his or her influence to affect any such governmental act or decision to obtain, retain, or direct any business. VAR will provide Autodesk with access to its Books and Records for the purpose of ensuring compliance with FCPA laws and agreements.

11.3.4 VAR agrees and understands that the Products, and any related technology, technical data, services, documents, or information provided by Autodesk under this Agreement, are subject to U.S. laws and regulations, including those that restrict trade, investment, and business activities with certain countries, organizations, entities, individuals, and in support of certain end-uses (collectively referred to as “U.S. trade laws and regulations”) and VAR agrees to comply with such U.S. trade laws and regulations. Specifically, VAR covenants that it shall not, directly or indirectly, sell, import, export, re-export, transfer, use, divert, disclose, or otherwise dispose of any Products, Autodesk Software, software, documentation, technologies, or technical data (including products derived from or based on such technologies) in contravention of U.S. trade laws and regulations.

11.3.5 VAR agrees and understands it shall be solely responsible for (i) complying with applicable U.S. and non-U.S. laws and regulations; and (ii) obtaining, at its own expense, all licenses and approvals required by U.S. and non-U.S. trade laws and regulations.

11.3.6 VAR’s failure to comply with U.S. or non-U.S. trade laws and regulations shall be deemed a material breach of this Agreement and VAR shall notify Autodesk immediately upon learning of any such failure to comply.

11.3.7 VAR agrees to indemnify Autodesk, to the fullest extent permitted by law, from and against any fines, penalties, attorney’s fees, or other related costs that may arise as a result of VAR’s breach of this provision. This clause shall survive termination, expiration or cancellation of this Agreement.

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11.3.8 VAR shall keep full, true, and accurate books and records, in accordance with generally accepted accounting principles, related to each transaction in which a Product is purchased and resold, including information regarding compliance with Autodesk marketing and sales programs, Software usage and transfer, and exportation, as well as serial number records showing the name and address of each End User to whom VAR sold each Product. VAR shall ensure that each VAR End User invoice reflects the Product type and serial number for the relevant Product(s) delivered by VAR. VAR shall make all of these books and records available for audit by Autodesk upon fifteen (15) business days prior written notice, during regular business hours, at those locations where VAR may maintain relevant books and records. VAR shall bear all reasonable costs incurred by Autodesk in the performance of any audit which discloses any material breach of this Agreement._VAR additionally acknowledges that from time to time Autodesk or its independent auditors may conduct additional specific audits with the purpose of monitoring and ensuring compliance by VARs with Autodesk’s policies and applicable laws. Said audits may include, without limitation, investigations in order to prevent the acquisition, use, promotion or resale of counterfeit and unauthorized product. When requested, VAR shall collaborate with Autodesk’s auditors and provide accurate and truthful information. In all cases, VAR agrees to bear, and/or promptly repay to Autodesk, all reasonable costs, fees and expenses, incurred by Autodesk in the performance of any such audit and/or investigation that discloses any material breach of this Agreement by VAR. VAR acknowledges and accepts that, in addition to the above audit rights, Autodesk may directly contact any End User at any time in order to verify and/or inform End Users about VAR’s compliance or non-compliance with this Agreement and Autodesk’s policies.

11.4 VAR Indemnity. VAR agrees to indemnify, hold harmless and defend Autodesk against any claim, demand, action, proceeding, investigation, and the resulting cost, loss, liability, or expense, including court costs and reasonable fees for attorneys or other professionals, suffered or incurred by Autodesk, its directors, officers, employees, or agents or by a third party arising from (i) any warranty or representation made by VAR to an End User or any other third party in relation to the Products beyond those made by Autodesk in the applicable Autodesk Product End User License, Subscription terms and conditions or Autodesk terms of use license, (ii) any action brought by an employee, contractor or agent of VAR allegedly based or claiming an employment relationship with Autodesk, and (ii) any failure by VAR to comply with any applicable law, statute, ordinance or regulation.

11.5 Waivers. No failure or delay in exercising any right hereunder shall operate as a waiver of that right. A waiver of any breach of this Agreement must be in writing and shall not be a waiver of any other breach or of the provision breached.

11.6 Entire Agreement. This Agreement, its Exhibits, the Program Guide, the Channel Partner Policies and Procedures, and all other documents which are specifically incorporated therein by reference), form an integral part of, and constitute the entire agreement and merges and supersedes all prior agreements or communications regarding the subject matter hereof. Business plans do not form part of this Agreement and are not binding upon Autodesk. If there is any conflict among the contractual parts of this Agreement, the conflict shall be resolved in accordance with the following order of precedence: 1) The Autodesk Value Added Reseller Agreement 2) The Exhibits to this Agreement 3) The Program Guide; and 4) The Channel Partner Policies and Procedures and all other documents, terms and conditions incorporated by reference therein. If any of the provisions of this Agreement shall be invalid or unenforceable, such invalidity or unenforceability shall not invalidate or render unenforceable the entire Agreement, but rather the entire Agreement shall be construed as if not containing the particular invalid or unenforceable provision or provisions, and the rights and obligations of Autodesk and VAR shall be construed and enforced accordingly.

Except as specifically provided in Section 2.3, or otherwise in this Agreement, this Agreement may be amended only by written agreement signed by authorized representatives of both parties.

11.7 VAR acknowledges that Autodesk is relying upon VAR’s reputation, business standing, and goodwill under VAR’s present ownership in entering into this Agreement. Accordingly, VAR agrees that its rights and obligations under this Agreement may not be transferred or assigned and its duties may not be delegated directly or indirectly without the prior written consent of Autodesk in its sole and absolute discretion. VAR shall notify Autodesk promptly in writing of any change of ownership of VAR or of any sale of all or substantially all of VAR’s assets. VAR acknowledges that any change of ownership, sale of all or substantially all of VAR’s assets, or attempted assignment by VAR of this Agreement, or any part thereof, without Autodesk’s prior written consent may result in immediate termination of this Agreement by Autodesk. Autodesk may assign or otherwise transfer its rights and obligations to successors-in-interest (whether by purchase of stock or assets, merger, operation of law, or otherwise) of that portion of its business related to the subject matter hereof. Subject to the restrictions set forth in this Section 11.7, all of the terms and

Autodesk Confidential v8 1-26-2010	Page 13 of 18	Global VAR FY11
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Value Added Reseller (“VAR”) Agreement

conditions of this Agreement shall be binding upon, inure to the benefit of, and be enforceable by the respective successors and permitted assigns of the parties hereto.

11.8 Notices. Notices required under this Agreement shall be in writing, sent by registered post or delivered by hand to the addresses stated below or to such other addresses as may be notified in accordance with this section. In addition a copy shall be sent to the Autodesk General Counsel. Notices under this Agreement which are served by Autodesk may be served by electronic postings on the Partner Portal (or any equivalent substituted therefor by Autodesk), by regular mail, by fax or by e-mail. In particular, notices which apply to all VARs or to an entire category of VARs may be published, either by an electronic posting or by inclusion in a newletter. Notices shall be effective when sent, published or when posted if by electronic posting. VAR’s fax number and email address for receiving notices hereunder are as set out above (or such other fax number or email address as VAR notifies Autodesk in accordance with the provisions of this section).

11.9 Governing Law and Forum. This Agreement shall be governed by the laws of the State of California (excluding its rules regarding conflicts of law) and the United States of America. All disputes arising hereunder which cannot be settled amicably by the parties shall be submitted to the courts in the Superior Court of the State of California, County of Marin or County of Santa Clara, and the United States District Court for the Northern District of California in San Francisco. Each party expressly consents to service of process being effected upon it by registered mail sent to the address set forth above. Autodesk expressly reserves the right to file actions for injunctive relief before any competent judicial or administrative tribunal in the Territory. The rights and obligations of the parties under this Agreement shall not be governed by the UN Convention on contracts for the International Sale of Goods.

11.10 English Language: The parties hereto confirm that it is their wish that this Agreement, as well as other documents relating hereto, including notices hereunder, have been and shall be written in the English language only.

11.11 Les parties ci dessus confirment leur désir que cet accord ainsi que tous les documents, y compris tous avis qui s’y rattachent, soient rédigés en langue anglaise.

Autodesk Confidential v8 1-26-2010	Page 14 of 18	Global VAR FY11
		Form Rev 10/10

Value Added Reseller (“VAR”) Agreement

EXHIBIT 1

Direct VAR Terms and Conditions

VAR agrees to comply with these terms and conditions as set forth below.

I. Additional Requirements. In addition to any other Requirements applicable to VAR pursuant to the Agreement, VAR shall meet Autodesk’s credit standards and the following additional Requirements:

Commercial Revenue	U.S. VAR: Web Self Service orders only. Annual Minimum Purchase Requirement of US$1.5M per Vertical Authorization Canada VAR: Self serve orders only, no minimum order value. Media and Entertainment Only VAR: Web Self Service orders only. Purchase minimum of US$400,000 per four quarters* per any M&E Vertical Authorization
Authorization	Maintain at least one Vertical Authorization
Accounts Receivable	Must be current on all financial status and payment obligations to Autodesk including credit limit, and continuously maintain good credit standing as determined by Autodesk in its sole judgment.

II. Commercial Terms and Conditions. Orders for Products submitted by VAR to Autodesk shall be subject to the commercial terms and conditions in this Section. Nothing contained in any order document submitted by VAR shall modify the Agreement or these terms and conditions, or add any additional terms or conditions. In the event of conflict between these terms and conditions and any order document submitted by VAR, these terms and condition shall prevail.

1. Prices. The prices to VAR for each of the Products are contained in the applicable price list on the Partner Portal. Autodesk may change currency, prices (including but not limited to prices on the Autodesk issued Territory suggested retail price List) and/or discounts and other applicable price related incentives and benefits on thirty (30) days written notice. Price increases shall not affect unfulfilled orders accepted by Autodesk prior to the effective date of the price increase. Price decreases shall apply to pending orders accepted by Autodesk prior to the effective date of the decrease.

2. Order and Acceptance.

2.1 Orders for Products shall be submitted to Autodesk by VAR in writing and in accordance with the Channel Partner Policies and Procedures. Subject to Section 2.5 below, VAR’s purchase orders shall be deemed accepted unless VAR is notified of their rejection and Autodesk shall use reasonable efforts to notify VAR within 7 business days of receipt if the purchase order is to be rejected.

2.2 Notwitstanding the foregoing, Autodesk may reject orders for any reason including but not limited to the following (i) VAR’s failure to meet the requirements of the Channel Partner Policies and Procedures, (ii) VAR exceeds recommended maximum stock limits, if any (iii) VAR has not paid amounts due to Autodesk, or (iv) VAR exceeds its credit limit (if any). Autodesk shall use its reasonable efforts to notify VAR of the rejection of an order within seven (7) business days of Autodesk’s receipt thereof. No partial shipment of an order shall constitute the acceptance of the entire order.

2.3 Autodesk reserves the right to accept orders containing price and discount variances deemed immaterial by Autodesk at its sole discretion. Autodesk reserves the right to reject any order or to cancel any unshipped order previously accepted if Autodesk determines that VAR is in breach of the VAR Agreement. For the avoidance of doubt, written orders accepted and confirmed by Autodesk reflecting special price concessions, promotions or discounts to VAR shall be deemed to be part of the Agreement.

2.4 Autodesk shall use its reasonable efforts to deliver Products at the times specified in the Channel Partner Policies and Procedures.

2.5 Electronic Orders and Invoicing.

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2.5.1 Where such a facility is made available by Autodesk in writing, VAR may place orders for Products electronically in accordance with the Channel Partner Policies and Procedures. Electronic confirmation of order receipt by Autodesk shall not constitute acceptance by Autodesk of the order, which order may be rejected in accordance with the other paragraphs of Section 2.

2.5.2 Each Party may, at its discretion, print and store electronic orders received from VAR, or electronic invoices sent by Autodesk to VAR, in the same manner that it stores written orders or invoices. The parties agree that in the event of a dispute over an order or an invoice, Autodesk’s electronic order and invoice records shall be admissible before the relevant court and shall constitute evidence of the facts contained therein.

2.5.3 VAR recognizes that any electronic orders submitted to Autodesk are submitted at VAR’s sole risk and VAR waives any right to contest the validity of electronic orders submitted to Autodesk.

3. Shipping. Except in the case of Subscriptions and Autodesk Services, Autodesk shall ship Products to fulfill orders FCA Autodesk manufacturing facilities Fremont, CA or other location as designed by Autodesk. Title to the Products shall pass to VAR on delivery of the Products to the carrier. In the case of fulfillments pursuant to Subscriptions and Autodesk Services which are shipped to VAR for delivery to End Users in accordance with the Channel Partner Practices and Procedures, such fulfillments shall be shipped to VAR FCA Autodesk manufacturing facilities Fremont, CA or other location as designed by Autodesk. In all cases, Autodesk shall designate the carrier. Autodesk reserves the right to charge VAR reasonable fees for shipment costs when paid by Autodesk, and to change the aforementioned Incoterms at any time on 30 days notice in writing to VAR.

4. Credit Limit. A credit limit (if any), may be set by Autodesk at its sole discretion. VAR shall provide Autodesk such financial information as Autodesk deems necessary to determine VAR’s creditworthiness. Autodesk may increase or decrease such credit limit from time to time as it deems appropriate. The total amount owed by VAR to Autodesk at any time shall not exceed VAR’s credit limit (if any) set by Autodesk, and orders to Autodesk above the credit limit shall be paid in cash in advance of delivery or by other means of secured payment chosen by Autodesk.

5. Payment. Autodesk reserves the right not to issue a permanent license for any Autodesk Software to VAR and/or End Users until receipt of payment in full. Autodesk may, in it sole discretion, choose either option below

Option 1 — Credit

Autodesk shall submit an invoice to VAR for each shipment of Product ordered by VAR and as set forth below. Upon approval of VAR’s credit limit by Autodesk, payment terms shall be thirty (30) days from the date of invoice. Autodesk reserves the right to demand a deposit of fifty percent (50%) of the total invoice amount at the time VAR places a purchase order requiring the shipment of Hardware. Any invoiced amount not received within thirty (30) days of the date of invoice may be subject to a service charge of one and one-half percent (1.5%) per month (or, if less, the maximum allowable by applicable law). Nowithstanding the foregoing, if any payment is not received by Autodesk when due, Autodesk may, without prejudice to any other remedies at law, equity or under this Agreement, (i) offset the receivables against any amounts that may be due or become due to VAR from Autodesk, (ii) require that all future orders be fully paid in advance of shipment, (iii) revoke or suspend VAR’s credit terms, (iv) suspend Autodesk’s obligations under this Agreement, (v) require further assurances from VAR that such invoiced amounts shall be paid, (vi) require VAR to purchase all Authorized Product(s) through an Autodesk Distribution Partner and/or (vii) terminate the Agreement. VAR shall pay all of Autodesk’s reasonable outside legal expenses to enforce and preserve Autodesk’s rights under this Section 5. VAR’s payment obligations hereunder shall survive the termination or expiration of this Agreement and this Exhibit 1.

In the event that Autodesk has extended a line of credit to VAR and that VAR exceeds its credit limit, VAR hereby authorizes Autodesk to transact directly with the End User at VAR’s originally quoted prices. For any such purchase order secured by Autodesk, Autodesk agrees to pay VAR an amount equal to the VAR discounts applicable to the sales transaction, and reserves the right to apply any such amount against the outstanding balance of VAR’s line of credit.

Option 2 — NO CREDIT

Autodesk Confidential v8 1-26-2010	Page 16 of 18	Global VAR FY11
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Value Added Reseller (“VAR”) Agreement

Payment of any Products ordered shall be on the basis of pre-payment and shall be made in United States dollars. Autodesk shall not be bound to deliver any Products pursuant to any purchase order until payment of the Products in full has been made. Payment shall be made upon demand in writing by Autodesk and shall be, at Autodesk’s option, either by way of (i) the electronic transfer of funds into such account as Autodesk may notify in writing to VAR or (ii) the issuance of an irrevocable letter of credit at sight confirmed by a bank in the Territory. Without limiting any of Autodesk’s rights or remedies under the law or this Agreement, failure of VAR to make payment in full upon demand shall entitle Autodesk to (a) reject any order or cancel any order previously accepted, or (b) to withhold shipment of the Products to VAR until such payment has been received in full by Autodesk. Notwithstanding prepayment by VAR, Autodesk reserves the right to subsequently invoice VAR for any additional expenses incurred by Autodesk but to be borne by VAR respecting any given shipment of the Products including but not limited to any freight, taxes, insurance or other applicable costs. The invoiced amount shall be due within thirty (30) days of the invoice date. Any amount which is due from VAR and not paid in full within the applicable time period shall be subject to a service charge of one and one-half percent (1.5%) per month (or, if less, the maximum allowable by applicable law). VAR shall pay all of Autodesk’s costs and expenses (including attorney’s fees) to enforce and preserve Autodesk’s rights under this Section 5.

6. Security Interest. As security for VAR’s payment of all monetary obligations to Autodesk, VAR hereby grants to Autodesk a security interest in all of VAR’s inventory purchased from Autodesk (“VAR’s Inventory”), all of VAR’s accounts receivable evidencing any obligation to VAR for payment for Product(s) sold, and all proceeds of any character, whether cash or non-cash, arising from the disposition of VAR’s Inventory and accounts. VAR agrees to execute all documents necessary to perfect Autodesk’s security interest described herein upon request by Autodesk, including but not limited to, Exhibit 1A attached hereto.

7. Taxes. All prices and payments due under this Agreement are exclusive of any tax, levy or similar governmental charge, including, without limitation, any export, federal, state or local VAT, sales, use or goods and services taxes and business taxes, customs or excise duties except for withholding taxes on a fee payment, net income, net worth or franchise taxes assessed on Autodesk (“Taxes”), that may be assessed by any jurisdiction. VAR shall be responsible for all Taxes of any nature arising upon or from (a) the sale or delivery of Products to VAR, (b) the resale or further distribution of Products by VAR, and/or (c) payment to Autodesk hereunder. Any taxes required by local law to be withheld by VAR shall be remitted to the appropriate governmental authorities by VAR on behalf of Autodesk, with a copy of the tax receipt or certificate forwarded to Autodesk. VAR shall obtain any such tax receipt or certificate as soon as possible following remittance of corresponding taxes, and shall forward such tax receipt or certificate to Autodesk within thirty (30) days of receipt by VAR.

Autodesk Confidential v8 1-26-2010	Page 17 of 18	Global VAR FY11
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Value Added Reseller (“VAR”) Agreement

Exhibit 1A

Security Agreement

This Security Agreement (“Agreement”) is made as of February 1, 2010 (“Effective Date”), by “VAR” (named below) in favor of Autodesk, Inc., a Delaware corporation (“Autodesk”).

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, VAR, intending to be bound hereby, agrees as follows:

1. Definitions / Construction. “VAR Agreement” means the Autodesk Value Added Reseller Agreement of even date between Autodesk and VAR executed and delivered by VAR contemporaneously herewith and any later VAR Agreement between Autodesk and VAR. This Agreement is intended by the Parties to be read consistently with, and complementary to, the VAR Agreement. The initially capitalized terms used in this Agreement shall have the meanings defined in the VAR Agreement unless defined herein.

2. Security interest. As security for VAR’s payment of all monetary obligations to Autodesk, VAR hereby grants to Autodesk a security interest in all of VAR’s inventory purchased from Autodesk (“VAR’s Inventory”), all of VAR’s accounts receivable evidencing any obligation to VAR for payment for Product(s) sold, and all proceeds of any character, whether cash or non-cash, arising from the disposition of VAR’s Inventory and accounts. VAR agrees to execute all documents necessary to perfect Autodesk’s security interest described herein upon request by Autodesk.

3. Amendments / Choice of Law. No purported amendment or modification of this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless contained in a writing executed by VAR and Autodesk. This Agreement shall be construed in accordance with the laws of the State of California, excluding rules regarding conflicts of law. VAR hereby submits to the exclusive personal jurisdiction of and venue in the Superior Court of the State of California, County of Marin, and the United States District Court for the Northern District of California in San Francisco.

4. Survival. This Agreement shall survive the expiration or termination of the VAR Agreement for so long as there are sums outstanding, due or payable to Autodesk.

IN WITNESS WHEREOF, VAR has executed or caused this Agreement to be executed by its authorized representative, and agrees to be bound by its terms, as of the Effective Date.

“VAR”

Company: RAND IMAGINIT Technologies, Inc.

/s/ Marc Dulude

Signature

Marc Dulude

Printed Name

President & CEO

Title

1.28.10

Date

Autodesk Confidential v8 1-26-2010	Page 18 of 18	Global VAR FY11
		Form Rev 10/10

EX-10.25

Exhibit 10.25

EXECUTION COPY

REVOLVING CREDIT

AND

SECURITY AGREEMENT

PNC BANK, NATIONAL ASSOCIATION
(AS LENDER AND AS AGENT)

WITH

RAND WORLDWIDE U.S. HOLDINGS, INC.

RAND A TECHNOLOGY CORPORATION

RAND TECHNOLOGIES OF MICHIGAN, INC.

AND

RAND IMAGINIT TECHNOLOGIES, INC.

(BORROWERS)

August 14, 2009

TABLE OF CONTENTS

	Page
I. DEFINITIONS		1
1.1. Accounting Terms		1
1.2. General Terms		1
1.3. Uniform Commercial Code Terms		26
1.4. Certain Matters of Construction		26
II. ADVANCES, PAYMENTS		28
2.1. Revolving Advances		28
2.2. Procedure for Revolving Advances Borrowing		30
2.3. Disbursement of Advance Proceeds		32
2.4. Reserved		32
2.5. Maximum Advances		32
2.6. Repayment of Advances		32
2.7. Repayment of Excess Advances		33
2.8. Statement of Account		33
2.9. Letters of Credit		33
2.10. Issuance of Letters of Credit		34
2.11. Requirements For Issuance of Letters of Credit		34
2.12. Disbursements, Reimbursement		35
2.13. Repayment of Participation Advances		36
2.14. Documentation		36
2.15. Determination to Honor Drawing Request		37
2.16. Nature of Participation and Reimbursement Obligations		37
2.17. Indemnity		38
2.18. Liability for Acts and Omissions		39
2.19. Additional Payments		40
2.20. Manner of Borrowing and Payment		40
2.21. Mandatory Prepayments		42
2.22. Use of Proceeds		42
2.23. Defaulting Lender		42
III. INTEREST AND FEES		43
3.1. Interest		43
3.2. Letter of Credit Fees		44
3.3. Closing Fee and Facility Fee		45
3.4. Collateral Evaluation Fee and Collateral Monitoring Fee		45
3.5. Computation of Interest and Fees		46
3.6. Maximum Charges		46
3.7. Increased Costs		46
3.8. Basis For Determining Interest Rate Inadequate or Unfair		47
3.9. Capital Adequacy		47
3.10. Gross Up for Taxes		48

i

	Page
3.11. Withholding Tax Exemption		48
IV. COLLATERAL: GENERAL TERMS		49
4.1. Security Interest in the Collateral		49
4.2. Perfection of Security Interest		50
4.3. Disposition of Collateral		50
4.4. Preservation of Collateral		50
4.5. Ownership of Collateral		51
4.6. Defense of Agent’s and Lenders’ Interests		51
4.7. Books and Records		52
4.8. Financial Disclosure		52
4.9. Compliance with Laws		52
4.10. Inspection of Premises		53
4.11. Insurance		53
4.12. Failure to Pay Insurance		54
4.13. Payment of Taxes		54
4.14. Payment of Leasehold Obligations		54
4.15. Receivables		54
4.16. Inventory		57
4.17. Maintenance of Equipment		57
4.18. Exculpation of Liability		57
4.19. Environmental Matters		57
4.20. Financing Statements		60
4.21. Canadian Attachment		60
V. REPRESENTATIONS AND WARRANTIES		60
5.1. Authority		60
5.2. Formation and Qualification		60
5.3. Survival of Representations and Warranties		61
5.4. Tax Returns		61
5.5. Financial Statements		61
5.6. Entity Names		62
5.7. O.S.H.A. and Environmental Compliance		62
5.8. Solvency; No Litigation, Violation, Indebtedness or Default; ERISA Compliance		62
5.9. Patents, Trademarks, Copyrights and Licenses		64
5.10. Licenses and Permits		64
5.11. Default of Indebtedness		64
5.12. No Default		64
5.13. No Burdensome Restrictions		64
5.14. No Labor Disputes		65
5.15. Margin Regulations		65
5.16. Investment Company Act		65
5.17. Disclosure		65
5.18. Delivery of Subordinated Loan Documents		65
5.19. Swaps		65
5.20. Conflicting Agreements		66
5.21. Application of Certain Laws and Regulations		66

ii

	Page
5.22. Business and Property of Borrowers		66
5.23. Section 20 Subsidiaries		66
5.24. Anti-Terrorism Laws		66
5.25. Trading with the Enemy		67
5.26. Federal Securities Laws		67
5.27. Equity Interests. The authorized and outstanding Equity Interests of each Borrower is as shown on Schedule 5.27 hereto		67

VI. AFFIRMATIVE COVENANTS	67
6.1. Payment of Fees	67
6.2. Conduct of Business and Maintenance of Existence and Assets	68
6.3. Violations	68
6.4. Government Receivables	68
6.5. Fixed Charge Coverage Ratio	68
6.6. Execution of Supplemental Instruments	68
6.7. Payment of Indebtedness	68
6.8. Standards of Financial Statements	69
6.9. Federal Securities Laws	69
6.10. Post Closing Conditions. Cause to be delivered to Agent:	69
VII. NEGATIVE COVENANTS	70
7.1. Merger, Consolidation, Acquisition and Sale of Assets	70
7.2. Creation of Liens	70
7.3. Guarantees	70
7.4. Investments	70
7.5. Loans	71
7.6. Capital Expenditures	71
7.7. Dividends	71
7.8. Indebtedness	72
7.9. Nature of Business	72
7.10. Transactions with Affiliates	72
7.11. Leases	72
7.12. Subsidiaries	72
7.13. Fiscal Year and Accounting Changes	72
7.14. Pledge of Credit	72
7.15. Amendment of Articles of Incorporation, By-Laws, Certificate of Formation, Operating Agreement	73

7.16. Compliance with ERISA	73
7.17. Prepayment of Indebtedness	73
7.18. Anti-Terrorism Laws	73
7.19. Trading with the Enemy Act	74
7.20. Subordinated Indebtedness	74
7.21. Other Agreements	74
VIII. CONDITIONS PRECEDENT	74
8.1. Conditions to Initial Advances	74
8.2. Conditions to Each Advance	77

iii

	Page
IX. INFORMATION AS TO BORROWERS		78
9.1. Disclosure of Material Matters		78
9.2. Schedules		78
9.3. Environmental Reports		79
9.4. Litigation		79
9.5. Material Occurrences		79
9.6. Government Receivables		79
9.7. Annual Financial Statements		80
9.8. Quarterly Financial Statements		80
9.9. Monthly Financial Statements		80
9.10. Other Reports		80
9.11. Additional Information		80
9.12. Projected Operating Budget		81
9.13. Variances From Operating Budget		81
9.14. Notice of Suits, Adverse Events		81
9.15. ERISA Notices and Requests		81
9.16. Additional Documents		82
X. EVENTS OF DEFAULT		82
10.1. Nonpayment		82
10.2. Breach of Representation		82
10.3. Financial Information		82
10.4. Judicial Actions		82
10.5. Noncompliance		82
10.6. Judgments		83
10.7. Bankruptcy		83
10.8. Inability to Pay		83
10.9. Intentionally Omitted;		83
10.10. Material Adverse Effect. The occurrence of any Material Adverse Effect;		83
10.11. Lien Priority		83
10.12. Subordinated Loan Default		83
10.13. Cross Default		83
10.14. Breach of Guaranty		84
10.15. Change of Ownership		84
10.16. Invalidity		84
10.17. Licenses		84
10.18. Seizures		84
10.19. Pension Plans		84
10.20. Intercreditor Default		84
10.21. Fixed Charge Coverage Cure Right		85
XI. LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT		85
11.1. Rights and Remedies		85
11.2. Agent’s Discretion		87
11.3. Setoff		87
11.4. Rights and Remedies not Exclusive		87

iv

	Page
11.5. Allocation of Payments After Event of Default		87
XII. WAIVERS AND JUDICIAL PROCEEDINGS		88
12.1. Waiver of Notice		88
12.2. Delay		89
12.3. Jury Waiver		89
XIII. EFFECTIVE DATE AND TERMINATION		89
13.1. Term		89
13.2. Termination		89
XIV. REGARDING AGENT		90
14.1. Appointment		90
14.2. Nature of Duties		90
14.3. Lack of Reliance on Agent and Resignation		91
14.4. Certain Rights of Agent		91
14.5. Reliance		91
14.6. Notice of Default		92
14.7. Indemnification		92
14.8. Agent in its Individual Capacity		92
14.9. Delivery of Documents		92
14.10. Borrowers’ Undertaking to Agent		92
14.11. No Reliance on Agent’s Customer Identification Program		93
14.12. Other Agreements		93
XV. BORROWING AGENCY		93
15.1. Borrowing Agency Provisions; Several Nature of Foreign Borrower		93
15.2. Waiver of Subrogation		94
15.3. Limitation on Liability of Foreign Borrowers		94
XVI. MISCELLANEOUS		94
16.1. Governing Law		95
16.2. Entire Understanding		95
16.3. Successors and Assigns; Participations; New Lenders		97
16.4. Application of Payments		100
16.5. Indemnity		100
16.6. Currency Indemnity		100
16.7. Notice		101
16.8. Survival		103
16.9. Severability		103
16.10. Expenses		103
16.11. Injunctive Relief		103
16.12. Consequential Damages		103
16.13. Captions		104
16.14. Counterparts; Facsimile Signatures		104
16.15. Construction		104
16.16. Confidentiality; Sharing Information		104

v

	Page
16.17. Publicity		105
16.18. Certifications From Banks and Participants; USA PATRIOT Act		105

vi

LIST OF EXHIBITS AND SCHEDULES

Exhibits
Exhibit 1.2	Borrowing Base Certificate
Exhibit 2.1(a)	Revolving Credit Note
Exhibit 8.1(k)	Financial Condition Certificate
Exhibit 16.3	Commitment Transfer Supplement
Schedules
Schedule 1.2	Permitted Encumbrances
Schedule 4.5	Locations
Schedule 4.15(h)	Deposit and Investment Accounts
Schedule 4.19	Real Property
Schedule 4.19A	Leased Interests
Schedule 5.1	Consents
Schedule 5.2(a)	States of Qualification and Good Standing
Schedule 5.2(b)	Subsidiaries
Schedule 5.4	Federal Tax Identification Number
Schedule 5.5	Financial Statements
Schedule 5.6	Prior Names
Schedule 5.8(b)	Litigation; Indebtedness
Schedule 5.8(d)	Plans
Schedule 5.9	Intellectual Property, Source Code Escrow Agreements
Schedule 5.10	Licenses and Permits
Schedule 5.13	Material Contracts
Schedule 5.14	Labor Disputes
Schedule 5.27	Equity Interests
Schedule 6.10	Post-Closing Items
Schedule 7.3	Guarantees

vii

REVOLVING CREDIT

AND

SECURITY AGREEMENT

     Revolving Credit and Security Agreement dated as of August 14, 2009 among RAND WORLDWIDE U.S. HOLDINGS, INC., a corporation organized under the laws of the State of Delaware (“Rand Worldwide U.S.”), RAND IMAGINIT TECHNOLOGIES, INC., a corporation organized under the laws of the State of Delaware (“Rand Imaginit”), RAND TECHNOLOGIES OF MICHIGAN, INC., a corporation organized under the laws of the State of Michigan (“Rand Michigan”) (Rand Worldwide U.S., Rand Imaginit and Rand Michigan, each a “US Borrower” and collectively the “US Borrowers”) and RAND A TECHNOLOGY CORPORATION, a corporation organized under the laws of the Province of Ontario (“Foreign Borrower”) (US Borrowers and Foreign Borrower, each a “Borrower” and collectively the “Borrowers”), the financial institutions which are now or which hereafter become a party hereto (collectively, the “Lenders” and each individually a “Lender”) and PNC BANK, NATIONAL ASSOCIATION (“PNC”), as agent for Lenders (PNC, in such capacity, the “Agent”).

     IN CONSIDERATION of the mutual covenants and undertakings herein contained, Borrowers, Lenders and Agent hereby agree as follows:

I. DEFINITIONS.

     1.1. Accounting Terms. As used in this Agreement, the Other Documents or any certificate, report or other document made or delivered pursuant to this Agreement, accounting terms not defined in Section 1.2 or elsewhere in this Agreement and accounting terms partly defined in Section 1.2 to the extent not defined, shall have the respective meanings given to them under GAAP; provided, however, whenever such accounting terms are used for the purposes of determining compliance with financial covenants in this Agreement, such accounting terms shall be defined in accordance with GAAP as applied in preparation of the unaudited financial statements of Holdings and its Subsidiaries for the fiscal year ended October 31, 2008.

     1.2. General Terms. For purposes of this Agreement the following terms shall have the following meanings:

     “Accountants” shall have the meaning set forth in Section 9.7 hereof.

     “Advance Rates” shall have the meaning set forth in Section 2.1(c)(y)(i).

     “Advances” shall mean and include the Revolving Advances and Letters of Credit.

     “Affiliate” of any Person shall mean (a) any Person which, directly or indirectly, is in control of, is controlled by, or is under common control with such Person, or (b) any Person who is a director, managing member, general partner or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person described in clause (a) above. For purposes of this definition, control of a Person shall mean the power, direct or indirect, (x) to vote 10% or more of the Equity Interests having ordinary voting power for the election of directors of such

Person or other Persons performing similar functions for any such Person, or (y) to direct or cause the direction of the management and policies of such Person whether by ownership of Equity Interests, contract or otherwise.

     “Agent” shall have the meaning set forth in the preamble to this Agreement and shall include its successors and assigns.

     “Agreement” shall mean this Revolving Credit and Security Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time.

     “Alternate Base Rate” shall mean, for any day, a rate per annum equal to the higher of (i) the Base Rate in effect on such day, (ii) the Federal Funds Open Rate in effect on such day plus one half of one-percent (1/2 of 1%), and (iii) the sum of the Daily LIBOR Rate in effect on such day plus one percent (1.0%), so long as a Daily LIBOR Rate is offered, ascertainable and not unlawful.

     “Ampersand 2001 Limited” shall mean Ampersand 2001 Limited Partnership, a Delaware limited partnership.

     “Ampersand 2001 Companion” shall mean Ampersand 2001 Companion Fund Limited Partnership, a Delaware limited partnership.

     “Ampersand 2006 Limited” shall mean Ampersand 2006 Limited Partnership, a Delaware limited partnership.

     “Ampersand Guarantors” shall mean, collectively, Ampersand 2001 Limited, Ampersand 2001 Companion and Ampersand 2006 Limited.

     “Anti-Terrorism Laws” shall mean any Applicable Laws relating to terrorism or money laundering, including Executive Order No. 13224, the USA PATRIOT Act, the Applicable Laws comprising or implementing the Bank Secrecy Act, the Applicable Laws administered by the United States Treasury Department’s Office of Foreign Asset Control, and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) (as any of the foregoing Applicable Laws may from time to time be amended, renewed, extended, or replaced).

     “Applicable Law” shall mean all laws, rules and regulations applicable to the Person, conduct, transaction, covenant, Other Document or contract in question, including all applicable common law and equitable principles; all provisions of all applicable state, federal and foreign constitutions, statutes, rules, regulations and orders of any Governmental Body, and all orders, judgments and decrees of all courts and arbitrators.

     “Applicable Margin” for Revolving Advances and the facility fee under Section 3.3(b) hereof (herein referred to as the “Facility Fee”) shall mean, as of the Closing Date and through the delivery of the quarterly financial statements of Borrowers on a Consolidated Basis for the fiscal quarter ending July 31, 2010, the applicable percentage specified below:

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APPLICABLE MARGINS	APPLICABLE MARGINS
FOR REVOLVING	FOR REVOLVING
ADVANCES THAT ARE	ADVANCES THAT ARE	APPLICABLE MARGINS
DOMESTIC RATE LOANS	EURODOLLAR RATE LOANS	FOR FACILITY FEE
2.75%	3.50%	0.50%

     Thereafter, effective as of the first Business Day following receipt by Agent of the annual financial statements of Borrowers on a Consolidated Basis for the fiscal quarter ending July 31, 2010 required under Section 9.8, and thereafter upon the receipt of the quarterly financial statements of Borrowers on a Consolidated Basis required under Section 9.8 for the previous fiscal quarter (each day of such delivery, an “Adjustment Date”), the Applicable Margin for the Revolving Advances or the Facility Fee, as applicable, shall be adjusted, if necessary, to the applicable percent per annum set forth in the pricing table set forth below corresponding to the Fixed Charge Coverage Ratio (as determined in accordance with Section 6.5) ending on the last day of the most recently completed fiscal quarter prior to the applicable Adjustment Date (each such period, a “Calculation Period”):

				APPLICABLE MARGINS
	APPLICABLE MARGINS			FOR REVOLVING
	FOR REVOLVING			ADVANCES THAT ARE
FIXED CHARGE COVERAGE	ADVANCES THAT ARE			EURODOLLAR RATE			APPLICABLE MARGINS
RATIO	DOMESTIC RATE LOANS			LOANS			FOR FACILITY FEE
Less than 1.25 to 1.00		3.00	%		3.75	%		0.50	%
Greater than or equal to 1.25 to 1.00 but less than 1.50 to 1.00		2.75	%		3.50	%		0.50	%
Greater than or equal to 1.50 to 1.00		2.25	%		3.00	%		0.375	%

     If the Borrowers shall fail to deliver the financial statements, certificates and/or other information required under Sections 9.7 or 9.8 by the dates required pursuant to such sections, each Applicable Margin shall be conclusively presumed to equal the highest Applicable Margin specified in the pricing table set forth above until the date of delivery of such financial statements, certificates and/or other information, at which time the rate will be adjusted based upon the Fixed Charge Coverage Ratio reflected in such statements.

     If, as a result of any restatement of, or other adjustment to, the financial statements of Borrowers on a Consolidated Basis or for any other reason, the Agent determines that (a) the Fixed Charge Coverage Ratio as previously calculated as of any applicable date was inaccurate, and (b) the proper calculation of the Fixed Charge Coverage Ratio would have resulted in different pricing for any period, then (i) if the proper calculation of the Fixed Charge Coverage Ratio would have resulted in higher pricing for such period, the Borrowers shall automatically and retroactively be obligated to pay to the Agent, promptly upon demand by the Agent, an amount equal to the excess of the amount of interest that should have been paid for such period over the amount of interest actually paid for such period; and (ii) if the proper calculation of the

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Fixed Charge Coverage Ratio would have resulted in lower pricing for such period, Lenders shall have no obligation to repay interest to the Borrowers; provided, that, if as a result of any restatement or other event a proper calculation of the Fixed Charge Coverage Ratio would have resulted in higher pricing for one or more periods and lower pricing for one or more other periods (due to the shifting of income or expenses from one period to another period or any similar reason), then the amount payable by the Borrowers pursuant to clause (i) above shall be based upon the excess, if any, of the amount of interest that should have been paid for all applicable periods over the amounts of interest actually paid for such periods.

     “Authority” shall have the meaning set forth in Section 4.19(d).

     “Availability Block” shall mean, initially, an amount equal to $958,782.30, representing the sum of (a) $418,782.30, representing the Borrowers estimation of the amount that will be required to settle certain one-time employee severance arrangements and lease modification and termination costs; (b) $400,000, representing the estimated amount necessary to settle a dispute with the Internal Revenue Service, and (c) $140,000, representing the estimated amount necessary to settle a tax dispute with the State of New York. Such amount shall be reduced on a dollar-for-dollar basis by (i) cash payments made in respect of that portion of the Availability Block accrued on the balance sheet(s) of the Borrowers at the Closing Date ($760,000 of the total Availability Block, representing $300,000 of the amount under (a) above, $400,000 of the amount under (b) above, and $60,000 of the amount under (c) above); (ii) cash payments made in respect of that portion of the Availability Block projected to be accrued and paid subsequent to the Closing Date (the remainder of the total Availability Block); and (iii) any reductions of accruals in (i) above, or projected costs in (ii) above, in each case subject to documentation satisfactory to Agent, in the event that such cash payments are not ultimately required to be made.

     “Base Rate” shall mean the base commercial lending rate of PNC as publicly announced to be in effect from time to time, such rate to be adjusted automatically, without notice, on the effective date of any change in such rate. This rate of interest is determined from time to time by PNC as a means of pricing some loans to its customers and is neither tied to any external rate of interest or index nor does it necessarily reflect the lowest rate of interest actually charged by PNC to any particular class or category of customers of PNC.

     “Blocked Accounts” shall have the meaning set forth in Section 4.15(h).

     “Blocked Account Bank” shall have the meaning set forth in Section 4.15(h).

     “Blocked Person” shall have the meaning set forth in Section 5.24(b) hereof.

     “Borrower” or “Borrowers” shall have the meaning set forth in the preamble to this Agreement and shall extend to all permitted successors and assigns of such Persons.

     “Borrowers on a Consolidated Basis” shall mean the consolidation in accordance with GAAP of the accounts or other items of the Borrowers and their respective Subsidiaries.

     “Borrowers’ Account” shall have the meaning set forth in Section 2.8.

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     “Borrowing Agent” shall mean Rand Worldwide U.S.

     “Borrowing Base Certificate” shall mean a certificate in substantially the form of Exhibit 1.2 duly executed by the Chief Executive Officer, Chief Financial Officer or Controller of the Borrowing Agent and delivered to the Agent, appropriately completed, by which such officer shall certify to Agent the Formula Amount and calculation thereof as of the date of such certificate.

     “Borrowing Group” shall mean, as the context indicates, the US Borrowers taken as a whole and/or Foreign Borrower.

     “Business Day” shall mean any day other than Saturday or Sunday or a legal holiday on which commercial banks are authorized or required by law to be closed for business in East Brunswick, New Jersey and, if the applicable Business Day relates to any Eurodollar Rate Loans, such day must also be a day on which dealings are carried on in the London interbank market.

     “Canadian Borrower” shall mean any Borrower existing pursuant to the laws of Canada or any province or territory thereof.

     “Canadian Dollars” shall mean lawful money of Canada.

     “Canadian Stock Pledge Agreement” shall mean the agreement, dated as of the Closing Date, pursuant to which Rand Worldwide U.S. pledged to Agent as Collateral for the Obligations 65% of the issued and outstanding shares of the Equity Interests of Foreign Borrower.

     “Capital Expenditures” shall mean expenditures made or liabilities incurred for the acquisition of any fixed assets or improvements, replacements, substitutions or additions thereto which have a useful life of more than one year, including the total principal portion of Capitalized Lease Obligations, which, in accordance with GAAP, would be classified as capital expenditures.

     “Capitalized Lease Obligation” shall mean any Indebtedness of any Borrower represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.

     “CERCLA” shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. §§9601 et seq.

     “Change of Control” shall mean (a) the occurrence of any event (whether in one or more transactions) which results in a transfer of control of any Borrower to a Person who is not an Original Owner or (b) any merger or consolidation of or with any Borrower or sale of all or substantially all of the property or assets of any Borrower in which a Borrower is not the surviving entity. For purposes of this definition, “control of Borrower” shall mean the power, direct or indirect (x) to vote 50% or more of the Equity Interests having ordinary voting power for the election of directors (or the individuals performing similar functions) of any Borrower or (y) to direct or cause the direction of the management and policies of any Borrower by contract or otherwise.

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     “Change of Ownership” shall mean (a) 100% of the Equity Interests of Rand Worldwide U.S. is no longer owned or controlled by a Person who is an Original Owner, (b) 100% of the Equity Interests of any Borrower (other than Rand Worldwide U.S.) is no longer owned or controlled by a Person who is an Original Owner, (c) 51% of the Equity Interests of Holdings is no longer owned or controlled by a Person who is an Original Owner, or (c) any merger, consolidation or sale of substantially all of the property or assets of any Borrower unless such Borrower is merged or consolidated with and into another Borrower or such sale of property or assets is to another Borrower.

     “Charges” shall mean all taxes, charges, fees, imposts, levies or other assessments, including all net income, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation and property taxes, custom duties, fees, assessments, liens, claims and charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts, imposed by any taxing or other authority, domestic or foreign (including the Pension Benefit Guaranty Corporation or any environmental agency or superfund), upon the Collateral or any Borrower.

     “Closing Date” shall mean August 14, 2009 or such other date as may be agreed to by the parties hereto.

     “Code” shall mean the Internal Revenue Code of 1986, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect.

     “Collateral” shall mean and include:

          (a) all Receivables;

          (b) all Equipment;

          (c) all General Intangibles;

          (d) all Inventory;

          (e) all Investment Property;

          (f) all Domestic Subsidiary Stock and 65% of the Equity Interests of Foreign Borrower;

          (g) all of each Borrower’s right, title and interest in and to, whether now owned or hereafter acquired and wherever located; (i) its respective goods and other property including, but not limited to, all merchandise returned or rejected by Customers, relating to or securing any of the Receivables; (ii) all of each Borrower’s rights as a consignor, a consignee, an unpaid vendor, mechanic, artisan, or other lienor, including stoppage in transit, setoff, detinue, replevin, reclamation and repurchase; (iii) all additional amounts due to any Borrower from any Customer relating to the Receivables; (iv) other property, including warranty claims, relating to any goods securing the Obligations; (v) all of each Borrower’s contract rights, rights of payment

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which have been earned under a contract right, instruments (including promissory notes), documents, chattel paper (including electronic chattel paper), warehouse receipts, deposit accounts, letters of credit and money; (vi) all commercial tort claims (whether now existing or hereafter arising); (vii) if and when obtained by any Borrower, all real and personal property of third parties in which such Borrower has been granted a lien or security interest as security for the payment or enforcement of Receivables; (viii) all letter of credit rights (whether or not the respective letter of credit is evidenced by a writing); (ix) all supporting obligations; and (x) any other goods, personal property or real property now owned or hereafter acquired in which any Borrower has expressly granted a security interest or may in the future grant a security interest to Agent hereunder, or in any amendment or supplement hereto or thereto, or under any other agreement between Agent and any Borrower;

          (h) all of each Borrower’s ledger sheets, ledger cards, files, correspondence, records, books of account, business papers, computers, computer software (owned by any Borrower or in which it has an interest), computer programs, tapes, disks and documents relating to (a), (b), (c), (d), (e), (f) or (g) of this paragraph; and

          (i) all proceeds and products of (a), (b), (c), (d), (e), (f), (g) and (h) in whatever form, including, but not limited to: cash, deposit accounts (whether or not comprised solely of proceeds), certificates of deposit, insurance proceeds (including hazard, flood and credit insurance), negotiable instruments and other instruments for the payment of money, chattel paper, security agreements, documents, eminent domain proceeds, condemnation proceeds and tort claim proceeds.

     “Commitment Percentage” of any Lender shall mean the percentage set forth below such Lender’s name on the signature page hereof as same may be adjusted upon any assignment by a Lender pursuant to Section 16.3(c) or (d) hereof.

     “Commitment Transfer Supplement” shall mean a document in the form of Exhibit 16.3 hereto, properly completed and otherwise in form and substance satisfactory to Agent by which the Purchasing Lender purchases and assumes a portion of the obligation of Lenders to make Advances under this Agreement.

     “Compliance Certificate” shall mean a compliance certificate to be signed by the Chief Executive Officer, Chief Financial Officer or Controller of Borrowing Agent, which shall state that, based on an examination sufficient to permit such officer to make an informed statement, no Default or Event of Default exists, or if such is not the case, specifying such Default or Event of Default, its nature, when it occurred, whether it is continuing and the steps being taken by Borrowers with respect to such default and, such certificate shall have appended thereto calculations which set forth Borrowers’ compliance with the requirements or restrictions imposed by Sections 6.5, 7.4, 7.5, 7.6, 7.7, 7.8 and 7.11.

     “Consents” shall mean all filings and all licenses, permits, consents, approvals, authorizations, qualifications and orders of Governmental Bodies and other third parties, domestic or foreign, necessary to carry on any Borrower’s business or necessary (including to avoid a conflict or breach under any agreement, instrument, other document, license, permit or other authorization) for the execution, delivery or performance of this Agreement, the Other

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Documents or the Subordinated Loan Documents, including any Consents required under all applicable federal, state or other Applicable Law.

     “Controlled Group” shall mean, at any time, each Borrower and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control and all other entities which, together with any Borrower, are treated as a single employer under Section 414 of the Code.

     “Customer” shall mean and include the account debtor with respect to any Receivable and/or the prospective purchaser of goods, services or both with respect to any contract or contract right, and/or any party who enters into or proposes to enter into any contract or other arrangement with any Borrower, pursuant to which such Borrower is to deliver any personal property or perform any services.

     “Customs” shall have the meaning set forth in Section 2.11(b) hereof.

     “Daily LIBOR Rate” shall mean, for any day, the rate per annum determined by the Agent by dividing (x) the Published Rate by (y) a number equal to 1.00, minus the Reserve Percentage.

     “Debt Payments” shall mean and include (a) all cash actually expended by any Borrower to make interest payments on any Advances hereunder, plus (b) accrued but unpaid interest on account of Eurodollar Rate Loans, plus (c) to the extent not already deducted in the calculation of EBITDA, all cash actually expended by any Borrower to make payments for all fees, commissions and charges set forth herein and with respect to any Advances, plus (d) all cash actually expended by any Borrower to make payments on Capitalized Lease Obligations, plus (e) all cash actually expended by any Borrower to make payments with respect to any other Indebtedness for borrowed money.

     “Default” shall mean an event, circumstance or condition which, with the giving of notice or passage of time or both, would constitute an Event of Default.

     “Default Rate” shall have the meaning set forth in Section 3.1 hereof.

     “Defaulting Lender” shall have the meaning set forth in Section 2.23(a) hereof.

     “Depository Accounts” shall have the meaning set forth in Section 4.15(h) hereof.

     “Designated Lender” shall have the meaning set forth in Section 16.2(b) hereof.

     “Documents” shall have the meaning set forth in Section 8.1(c) hereof.

     “Dollar” and the sign “$” shall mean lawful money of the United States of America.

     “Domestic Rate Loan” shall mean any Advance that bears interest based upon the Alternate Base Rate.

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     “Domestic Subsidiary Stock” shall mean all of the issued and outstanding shares of the Equity Interests owned by Holdings of Rand Worldwide U.S. and by Rand Worldwide U.S. of Rand Michigan and Rand Imaginit.

     “Drawing Date” shall have the meaning set forth in Section 2.12(b) hereof.

     “Early Termination Date” shall have the meaning set forth in Section 13.1 hereof.

     “Earnings Before Interest and Taxes” shall mean for any period the sum of (i) net income (or loss) of Borrowers on a Consolidated Basis for such period (excluding extraordinary gains or losses), plus (ii) all interest expense of Borrowers on a Consolidated Basis for such period, plus (iii) all charges against income of Borrowers on a Consolidated Basis for such period for federal, state and local taxes.

     “EBITDA” shall mean for any period the sum of (i) Earnings Before Interest and Taxes for such period, plus (ii) depreciation expenses for such period, plus (iii) amortization expenses for such period.

     “Eligible Foreign Receivables” shall mean and include with respect to Foreign Borrower, the invoice amount, net of all goods and services, harmonized taxes and sales taxes (which shall be the US Dollar Equivalent at such time of any amount denominated in currency other than Dollars) owing on each account of such Person (after deducting any credit balance, returns, trade discounts, unapplied cash, unbilled amounts or retention or finance charges), of each Receivable of Foreign Borrower, arising in the Ordinary Course of Business (which are not rendered ineligible by any of the criteria contained in this definition) and which Agent, in its Permitted Discretion, shall deem to be an Eligible Foreign Receivable, based on such considerations as Agent may from time to time deem appropriate. A Receivable of Foreign Borrower shall not be deemed eligible unless such Receivable is subject to Agent’s first priority perfected security interest and no other Lien (other than Permitted Encumbrances), and is evidenced by an invoice or other documentary evidence satisfactory to Agent. In addition, no Receivable shall be an Eligible Foreign Receivable if:

          (a) it arises out of a sale made by Foreign Borrower to an Affiliate of Foreign Borrower or to a Person controlled by an Affiliate of Foreign Borrower;

          (b) it is due or unpaid more than ninety (90) days after the original invoice date;

          (c) fifty percent (50%) or more of the Receivables from such Customer are not deemed Eligible Foreign Receivables hereunder. Such percentage may, in Agent’s Permitted Discretion, be increased or decreased from time to time;

          (d) any covenant, representation or warranty contained in this Agreement with respect to such Receivable has been breached;

          (e) the Customer shall (i) apply for, suffer, or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or call a meeting of its creditors, (ii) admit in writing its inability,

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or be generally unable, to pay its debts as they become due or cease operations of its present business, (iii) make a general assignment for the benefit of creditors, (iv) commence a voluntary case or proceeding under any Canadian bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is filed against it in any involuntary case under such bankruptcy laws, or (viii) take any action for the purpose of effecting any of the foregoing;

          (f) the sale is to a Customer outside Canada;

          (g) the sale to the Customer is on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment or any other repurchase or return basis or is evidenced by chattel paper;

          (h) Reserved.

          (i) the Customer is the federal government of Canada, the government of any province or territory of Canada or any department, agency or instrumentality of any of them, unless Foreign Borrower assigns its right to payment of such Receivable to Agent pursuant to the Financial Administration Act (Canada) or has otherwise complied with other applicable statutes or ordinances (if any);

          (j) the goods giving rise to such Receivable have not been delivered to and accepted by the Customer or the services giving rise to such Receivable have not been performed by Foreign Borrower and accepted by the Customer or the Receivable otherwise does not represent a final sale;

          (k) Reserved.

          (l) the Receivable is subject to any offset, deduction, defense, dispute, or counterclaim, the Customer is also a creditor or supplier of a Borrower or the Receivable is contingent in any respect or for any reason (but only to the extent of such offset, deduction, defense, dispute, counterclaim or contingency);

          (m) Foreign Borrower has made any agreement with any Customer for any deduction therefrom, except for discounts or allowances made in the Ordinary Course of Business for prompt payment, all of which discounts or allowances are reflected in the calculation of the face value of each respective invoice related thereto;

          (n) any return, rejection or repossession of the merchandise has occurred or the rendition of services has been disputed in writing or Foreign Borrower has knowledge of such dispute;

          (o) such Receivable is not payable to Foreign Borrower; or

          (p) such Receivable is not otherwise satisfactory to Agent as determined in its Permitted Discretion.

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     “Eligible US Receivables” shall mean and include with respect to each US Borrower, each Receivable of such US Borrower arising in the Ordinary Course of Business and which Agent, in its Permitted Discretion, shall deem to be an Eligible US Receivable, based on such considerations as Agent may from time to time deem appropriate. A Receivable shall not be deemed eligible unless such Receivable is subject to Agent’s first priority perfected security interest and no other Lien (other than Permitted Encumbrances), and is evidenced by an invoice or other documentary evidence satisfactory to Agent. In addition, no Receivable shall be an Eligible US Receivable if:

          (q) it arises out of a sale made by any US Borrower to an Affiliate of any US Borrower or to a Person controlled by an Affiliate of any US Borrower; provided however Receivables arising out of sales to Rand North America shall be eligible to the extent it otherwise constitutes an Eligible US Receivable);

          (r) it is due or unpaid more than ninety (90) days after the original invoice date;

          (s) fifty percent (50%) or more of the Receivables from such Customer are not deemed Eligible US Receivables hereunder. Such percentage may, in Agent’s Permitted Discretion, be increased or decreased from time to time;

          (t) any covenant, representation or warranty contained in this Agreement with respect to such Receivable has been breached;

          (u) the Customer shall (i) apply for, suffer, or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or call a meeting of its creditors, (ii) admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business, (iii) make a general assignment for the benefit of creditors, (iv) commence a voluntary case or proceeding under any state, federal or Canadian bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is filed against it in any involuntary case under such bankruptcy laws, or (viii) take any action for the purpose of effecting any of the foregoing;

          (v) the sale is to a Customer outside the United States of America or Canada, unless the sale is on letter of credit, guaranty or acceptance terms, in each case acceptable to Agent in its Permitted Discretion;

          (w) the sale to the Customer is on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment or any other repurchase or return basis or is evidenced by chattel paper;

          (x) Reserved.

          (y) the Customer is the United States of America, any state, the federal government of Canada, the government of any province or territory of Canada or any department, agency or instrumentality of any of them, unless the applicable US Borrower assigns

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its right to payment of such Receivable to Agent pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq.) or the Financial Administration Act (Canada) or has otherwise complied with other applicable statutes or ordinances (if any);

          (z) the goods giving rise to such Receivable have not been delivered to and accepted by the Customer or the services giving rise to such Receivable have not been performed by the applicable US Borrower and accepted by the Customer or the Receivable otherwise does not represent a final sale;

          (aa) Reserved.

          (bb) the Receivable is subject to any offset, deduction, defense, dispute, or counterclaim, the Customer is also a creditor or supplier of a US Borrower or the Receivable is contingent in any respect or for any reason (but only to the extent of such offset, deduction, defense, dispute, counterclaim or contingency);

          (cc) the applicable US Borrower has made any agreement with any Customer for any deduction therefrom, except for discounts or allowances made in the Ordinary Course of Business for prompt payment, all of which discounts or allowances are reflected in the calculation of the face value of each respective invoice related thereto;

          (dd) any return, rejection or repossession of the merchandise has occurred or the rendition of services has been disputed in writing or if such Borrower has knowledge of such dispute;

          (ee) such Receivable is not payable to a US Borrower; or

          (ff) such Receivable is not otherwise satisfactory to Agent as determined in its Permitted Discretion.

     “Environmental Complaint” shall have the meaning set forth in Section 4.19(d) hereof.

     “Environmental Laws” shall mean all federal, Canadian, state, provincial and local environmental, land use, zoning, health, chemical use, safety and sanitation laws, statutes, ordinances and codes relating to the protection of the environment and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of Hazardous Substances and the rules, regulations, policies, guidelines, interpretations, decisions, orders and directives of federal, state and local governmental agencies and authorities with respect thereto.

     “Equipment” shall mean and include as to each Borrower all of such Borrower’s goods (other than Inventory) whether now owned or hereafter acquired and wherever located including all equipment, machinery, apparatus, motor vehicles, fittings, furniture, furnishings, fixtures, parts, accessories and all replacements and substitutions therefor or accessions thereto.

     “Equity Interests” of any Person shall mean any and all shares, rights to purchase, options, warrants, general, limited or limited liability partnership interests, member interests,

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participation or other equivalents of or interest in (regardless of how designated) equity of such Person, whether voting or nonvoting, including common stock, preferred stock, convertible securities or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act).

     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time and the rules and regulations promulgated thereunder.

     “Eurodollar Rate” shall mean for any Eurodollar Rate Loan for the then current Interest Period relating thereto, the interest rate per annum determined by Agent by dividing (the resulting quotient rounded upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the rate which appears on the Bloomberg Page BBAM1 (or on such other substitute Bloomberg page that displays rates at which US dollar deposits are offered by leading banks in the London interbank deposit market), or the rate which is quoted by another source selected by Agent which has been approved by the British Bankers’ Association as an authorized information vendor for the purpose of displaying rates at which U.S. dollar deposits are offered by leading banks in the London interbank deposit market (an “Alternate Source”), at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period as the London interbank offered rate for U.S. Dollars for an amount comparable to such Eurodollar Rate Loan and having a borrowing date and a maturity comparable to such Interest Period (or if there shall at any time, for any reason, no longer exist a Bloomberg Page BBAM1 (or any substitute page) or any Alternate Source, a comparable replacement rate determined by Agent at such time (which determination shall be conclusive absent manifest error)), by (ii) a number equal 1.00 minus the Reserve Percentage. The Eurodollar Rate may also be expressed by the following formula:

	Average of London interbank offered rates quoted by Bloomberg or appropriate successor as shown on Bloomberg Page BBAM1
Eurodollar Rate =	1.00 — Reserve Percentage

     The Eurodollar Rate shall be adjusted with respect to any Eurodollar Rate Loan that is outstanding on the effective date of any change in the Reserve Percentage as of such effective date. The Agent shall give prompt notice to the Borrowing Agent of the Eurodollar Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error.

     “Eurodollar Rate Loan” shall mean an Advance at any time that bears interest based on the Eurodollar Rate.

     “Event of Default” shall have the meaning set forth in Article X hereof.

     “Exchange Act” shall have the mean the Securities Exchange Act of 1934, as amended.

     “Executive Order No. 13224” shall mean the Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.

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     “Federal Funds Effective Rate” for any day shall mean the rate per annum (based on a year of 360 days and actual days elapsed and rounded upward to the nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the “Federal Funds Effective Rate” as of the date of this Agreement; provided, if such Federal Reserve Bank (or its successor) does not announce such rate on any day, the “Federal Funds Effective Rate” for such day shall be the Federal Funds Effective Rate for the last day on which such rate was announced.

     “Federal Funds Open Rate” for any day shall mean the rate per annum (based on a year of 360 days and actual days elapsed) which is the daily federal funds open rate as quoted by ICAP North America, Inc. (or any successor) as set forth on the Bloomberg Screen BTMM for that day opposite the caption “OPEN” (or on such other substitute Bloomberg Screen that displays such rate), or as set forth on such other recognized electronic source used for the purpose of displaying such rate as selected by PNC (an “Alternate Source”) (or if such rate for such day does not appear on the Bloomberg Screen BTMM (or any substitute screen) or on any Alternate Source, or if there shall at any time, for any reason, no longer exist a Bloomberg Screen BTMM (or any substitute screen) or any Alternate Source, a comparable replacement rate determined by PNC at such time (which determination shall be conclusive absent manifest error); provided, however; that if such day is not a Business Day, the Federal Funds Open Rate for such day shall be the “open” rate on the immediately preceding Business Day. If and when the Federal Funds Open Rate changes, the rate of interest with respect to any advance to which the Federal Funds Open Rate applies will change automatically without notice to the Borrowers, effective on the date of any such change.

     “Fixed Charge Coverage Ratio” shall mean and include, with respect to any fiscal period, the ratio of (a) EBITDA, minus Unfunded Capital Expenditures made during such period, minus distributions (including tax distributions made during such period) and dividends, minus cash taxes paid during such period to (b) all Debt Payments made during such period.

     “Foreign Blocked Accounts” shall mean any lockbox account, dominion account or other “blocked account” of a Borrower which are established at a Blocked Account Bank in Canada.

     “Foreign Borrower” shall have the meaning set forth in the preamble to this Agreement and shall extend to all permitted successors and assigns of such Person.

     “Foreign Formula Amount” shall have the meaning set forth in Section 2.1(c).

     “Foreign Obligations” shall mean the aggregate of (a) the Obligations of Foreign Borrower and (b) the Obligations of the Guarantors, to the extent they relate to the Obligations of Foreign Borrower, each as they may exist from time to time.

     “Foreign Receivables Advance Rates” shall have the meaning set forth in Section 2.1(c)(y)(i).

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     “Foreign Security Agreements” shall mean and include the Canadian Stock Pledge Agreement and any other security documents executed and or delivered by Foreign Borrower to Agent.

     “Foreign Subsidiary” of any Person, shall mean any Subsidiary of such Person that is not organized or incorporated in the United States or any State or territory thereof.

     “Formula Amount” shall have the meaning set forth in Section 2.1(a).

     “GAAP” shall mean generally accepted accounting principles in the United States of America in effect from time to time.

     “General Intangibles” shall mean and include as to each Borrower all of such Borrower’s general intangibles, whether now owned or hereafter acquired, including all payment intangibles, all choses in action, causes of action, corporate or other business records, inventions, designs, patents, patent applications, equipment formulations, manufacturing procedures, quality control procedures, trademarks, trademark applications, service marks, trade secrets, goodwill, copyrights, design rights, software, computer information, source codes, codes, records and updates, registrations, licenses, franchises, customer lists, tax refunds, tax refund claims, computer programs, all claims under guaranties, security interests or other security held by or granted to such Borrower to secure payment of any of the Receivables by a Customer (other than to the extent covered by Receivables) all rights of indemnification and all other intangible property of every kind and nature (other than Receivables).

     “Governmental Acts” shall have the meaning set forth in Section 2.17.

     “Governmental Body” shall mean any nation or government, any state or other political subdivision thereof or any entity, authority, agency, division or department exercising the legislative, judicial, regulatory or administrative functions of or pertaining to a government.

     “Guarantor” shall mean the Ampersand Guarantors, Holdings and any other Person who may hereafter guarantee payment or performance of the whole or any part of the Obligations and “Guarantors” means collectively all such Persons.

     “Guarantor Security Agreement” shall mean any security agreement executed by any Guarantor in favor of Agent securing the Obligations or the Guaranty of such Guarantor.

     “Guaranty” shall mean any guaranty of the obligations of Borrowers executed by a Guarantor in favor of Agent for its benefit and for the ratable benefit of Lenders.

     “Hazardous Discharge” shall have the meaning set forth in Section 4.19(d) hereof.

     “Hazardous Substance” shall mean, without limitation, any flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or related materials as defined in CERCLA, the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of

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the New York State Environmental Conservation Law or any other applicable Environmental Law and in the regulations adopted pursuant thereto.

     “Hazardous Wastes” shall mean all waste materials subject to regulation under CERCLA, RCRA or applicable state law, and any other applicable Federal and state laws or Canadian and provincial laws now in force or hereafter enacted relating to hazardous waste disposal.

     “Hedge Liabilities” shall have the meaning provided in the definition of “Lender-Provided Interest Rate Hedge”.

     “Holdings” shall mean Rand Worldwide, Inc., a Delaware corporation.

     “Indebtedness” of a Person at a particular date shall mean all obligations of such Person which in accordance with GAAP would be classified upon a balance sheet as liabilities (except capital stock and surplus earned or otherwise) and in any event, without limitation by reason of enumeration, shall include all indebtedness, debt and other similar monetary obligations of such Person whether direct or guaranteed, and all premiums, if any, due at the required prepayment dates of such indebtedness, and all indebtedness secured by a Lien on assets owned by such Person, whether or not such indebtedness actually shall have been created, assumed or incurred by such Person. Any indebtedness of such Person resulting from the acquisition by such Person of any assets subject to any Lien shall be deemed, for the purposes hereof, to be the equivalent of the creation, assumption and incurring of the indebtedness secured thereby, whether or not actually so created, assumed or incurred.

     “Ineligible Security” shall mean any security which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.

     “Intellectual Property” shall mean property constituting under any Applicable Law a patent, patent application, copyright, trademark, service mark, trade name, mask work, trade secret or license or other right to use any of the foregoing.

     “Intellectual Property Claim” shall mean the assertion by any Person of a claim (whether asserted in writing, by action, suit or proceeding or otherwise) that any Borrower’s ownership, use, marketing, sale or distribution of any Inventory, Equipment, Intellectual Property or other property or asset is violative of any ownership of or right to use any Intellectual Property of such Person.

     “Intercreditor Agreement” shall mean that certain Intercreditor Agreement between Autodesk, Inc. and Agent.

     “Interest Period” shall mean the period provided for any Eurodollar Rate Loan pursuant to Section 2.2(b).

     “Interest Rate Hedge” shall mean an interest rate exchange, collar, cap, swap, adjustable strike cap, adjustable strike corridor or similar agreements entered into by any Borrower or its Subsidiaries in order to provide protection to, or minimize the impact upon, such Borrower, any

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Guarantor and/or their respective Subsidiaries of increasing floating rates of interest applicable to Indebtedness.

     “Inventory” shall mean and include as to each Borrower all of such Borrower’s now owned or hereafter acquired goods, merchandise and other personal property, wherever located, to be furnished under any consignment arrangement, contract of service or held for sale or lease, all raw materials, work in process, finished goods and materials and supplies of any kind, nature or description which are or might be used or consumed in such Borrower’s business or used in selling or furnishing such goods, merchandise and other personal property, and all documents of title or other documents representing them.

     “Investment Property” shall mean and include as to each Borrower, all of such Borrower’s now owned or hereafter acquired securities (whether certificated or uncertificated), securities entitlements, securities accounts, commodities contracts and commodities accounts.

     “Issuer” shall mean any Person who issues a Letter of Credit and/or accepts a draft pursuant to the terms hereof.

     “Leasehold Interests” shall mean all of each Borrower’s right, title and interest in and to, and as lessee, of the premises identified on Schedule 4.19(A) hereto.

     “Lender” and “Lenders” shall have the meaning ascribed to such term in the preamble to this Agreement and shall include each Person which becomes a transferee, successor or assign of any Lender.

     “Lender-Provided Interest Rate Hedge” shall mean an Interest Rate Hedge which is provided by any Lender and with respect to which Agent confirms meets the following requirements: such Interest Rate Hedge (i) is documented in a standard International Swap Dealer Association Agreement, (ii) provides for the method of calculating the reimbursable amount of the provider’s credit exposure in a reasonable and customary manner, and (iii) is entered into for hedging (rather than speculative) purposes. The liabilities of any Borrower to the provider of any Lender-Provided Interest Rate Hedge (the “Hedge Liabilities”) shall be “Obligations” hereunder, guaranteed obligations under any Guaranty and secured obligations under any Guarantor Security Agreement and otherwise treated as Obligations for purposes of each of the Other Documents. The Liens securing the Hedge Liabilities shall be pari passu with the Liens securing all other Obligations under this Agreement and the Other Documents.

     “Letter of Credit Fees” shall have the meaning set forth in Section 3.2.

     “Letter of Credit Borrowing” shall have the meaning set forth in Section 2.12(d).

     “Letter of Credit Sublimit” shall mean $100,000.

     “Letters of Credit” shall have the meaning set forth in Section 2.9.

     “License Agreement” shall mean any agreement between any Borrower and a Licensor pursuant to which such Borrower is authorized to use any Intellectual Property in connection

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with the manufacturing, marketing, sale or other distribution of any Inventory of such Borrower or otherwise in connection with such Borrower’s business operations.

     “Licensor” shall mean any Person from whom any Borrower obtains the right to use (whether on an exclusive or non-exclusive basis) any Intellectual Property in connection with such Borrower’s manufacture, marketing, sale or other distribution of any Inventory or otherwise in connection with such Borrower’s business operations.

     “Licensor/Agent Agreement” shall mean an agreement between Agent and a Licensor, in form and content satisfactory to Agent, by which Agent is given the unqualified right, vis-a-vis such Licensor, to enforce Agent’s Liens with respect to and to dispose of any Borrower’s Inventory with the benefit of any Intellectual Property applicable thereto, irrespective of such Borrower’s default under any License Agreement with such Licensor.

     “Lien” shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, security interest, lien (whether statutory or otherwise), Charge, claim or encumbrance, or preference, priority or other security agreement or preferential arrangement held or asserted in respect of any asset of any kind or nature whatsoever including any conditional sale or other title retention agreement, any lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction.

     “Lien Waiver Agreement” shall mean an agreement which is executed in favor of Agent by a Person who owns or occupies premises at which any Collateral may be located from time to time and by which such Person shall waive any Lien that such Person may ever have with respect to any of the Collateral and shall authorize Agent from time to time to enter upon the premises to inspect or remove the Collateral from such premises or to use such premises to store or dispose of such Inventory.

     “Material Adverse Effect” shall mean a material adverse effect on (a) the condition (financial or otherwise), results of operations, assets, business, or properties of the Borrowers and Guarantors (excluding the Ampersand Guarantors), taken as a whole, (b) the ability of the Borrowers and Guarantors (excluding the Ampersand Guarantors) taken as a whole, to duly and punctually pay or perform the Obligations in accordance with the terms thereof, (c) the aggregate value of the Collateral, or Agent’s Liens on the Collateral or the priority of any such Lien or (d) the practical realization of the benefits of Agent’s and each Lender’s rights and remedies under this Agreement and the Other Documents.

     “Maximum Face Amount” shall mean, with respect to any outstanding Letter of Credit, the face amount of such Letter of Credit including all automatic increases provided for in such Letter of Credit, whether or not any such automatic increase has become effective.

     “Maximum Foreign Revolving Advance Amount” shall mean, subject to Section 2.1(d) hereof, $2,000,000.

     “Maximum Loan Amount” shall mean $12,500,000.

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     “Maximum Revolving Advance Amount” shall mean $12,500,000; provided, however, that when such term is used with respect solely to US Borrowers it shall mean the Maximum US Revolving Advance Amount and when used with respect solely to Foreign Borrower it shall mean the Maximum Foreign Revolving Advance Amount.

     “Maximum Undrawn Amount” shall mean with respect to any outstanding Letter of Credit, the amount of such Letter of Credit that is or may become available to be drawn, including all automatic increases provided for in such Letter of Credit, whether or not any such automatic increase has become effective.

     “Maximum US Revolving Advance Amount” shall mean $12,500,000.

     “Modified Commitment Transfer Supplement” shall have the meaning set forth in Section 16.3(d).

     “Multiemployer Plan” shall mean a “multiemployer plan” as defined in Sections 3(37) or 4001(a)(3) of ERISA to which contributions are required by any Borrower or any member of the Controlled Group.

     “Multiple Employer Plan” shall mean a Plan which has two or more contributing sponsors (including any Borrower or any member of the Controlled Group) at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.

     “Note” shall mean the Revolving Credit Note.

     “Obligations” shall mean and include any and all loans (including without limitation, all Advances) debts, liabilities, obligations, covenants and duties owing by any Borrower to Lenders or Agent or to any other direct or indirect subsidiary or affiliate of Agent or any Lender of any kind or nature, present or future (including any interest or other amounts accruing thereon, and any costs and expenses of any Person payable by any Borrower and any indemnification obligations payable by any Borrower arising or payable after maturity, or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to any Borrower, whether or not a claim for post-filing or post-petition interest or other amounts is allowable or allowed in such proceeding), whether or not evidenced by any note, guaranty or other instrument, whether arising under any agreement, instrument or document, (including this Agreement and the Other Documents) whether or not for the payment of money, whether arising by reason of an extension of credit, opening of a letter of credit, loan, equipment lease or guarantee, under any interest or currency swap, future, option or other similar agreement, or in any other manner, whether arising out of overdrafts or deposit or other accounts or electronic funds transfers (whether through automated clearing houses or otherwise) or out of Agent’s or any Lenders non-receipt of or inability to collect funds or otherwise not being made whole in connection with depository transfer check or other similar arrangements, whether direct or indirect (including those acquired by assignment or participation), absolute or contingent, joint or several, due or to become due, now existing or hereafter arising, contractual or tortious, liquidated or unliquidated, regardless of how such indebtedness or liabilities arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument, including, but not limited to, any and all of any Borrower’s Indebtedness and/or

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liabilities under this Agreement, the Other Documents or under any other agreement between Agent or Lenders and any Borrower and any amendments, extensions, renewals or increases and all costs and expenses of Agent and any Lender incurred in the documentation, negotiation, modification, enforcement, collection or otherwise in connection with any of the foregoing, including but not limited to reasonable attorneys’ fees and expenses and all obligations of any Borrower to Agent or Lenders to perform acts or refrain from taking any action.

     “Ordinary Course of Business” shall mean with respect to any Borrower, the ordinary course of such Borrower’s business as conducted on the Closing Date.

     “Original Owners” shall mean with respect: (i) to Holdings, the Ampersand Guarantors; (ii) to Rand Worldwide U.S. or Rand A, Holdings, and (iii) to any other Borrower, Rand Worldwide U.S.

     “Other Documents” shall mean the Note, the Perfection Certificates, the Pledge Agreements, any Guaranty, any Guarantor Security Agreement, any Lender-Provided Interest Rate Hedge, the Intercreditor Agreement, the Subordination Agreement(s), each of the Foreign Security Agreements and any and all other agreements, instruments and documents, including intercreditor agreements, guaranties, pledges, powers of attorney, consents, interest or currency swap agreements or other similar agreements and all other writings heretofore, now or hereafter executed by any Borrower or any Guarantor and/or delivered to Agent or any Lender in respect of the transactions contemplated by this Agreement.

     “Out-of-Formula Loans” shall have the meaning set forth in Section 16.2(b).

     “Parent” of any Person shall mean a corporation or other entity owning, directly or indirectly at least 50% of the shares of stock or other ownership interests having ordinary voting power to elect a majority of the directors of the Person, or other Persons performing similar functions for any such Person.

     “Participant” shall mean each Person who shall be granted the right by any Lender to participate in any of the Advances and who shall have entered into a participation agreement in form and substance satisfactory to such Lender.

     “Participation Advance” shall have the meaning set forth in Section 2.12(d).

     “Participation Commitment” shall mean each Lender’s obligation to buy a participation of the Letters of Credit issued hereunder.

     “Payee” shall have the meaning set forth in Section 3.10.

     “Payment Office” shall mean initially Two Tower Center Boulevard, East Brunswick, New Jersey 08816; thereafter, such other office of Agent, if any, which it may designate by notice to Borrowing Agent and to each Lender to be the Payment Office.

     “PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor.

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     “Perfection Certificates” shall mean collectively, the Perfection Certificates and the responses thereto provided by each Borrower and delivered to Agent.

     “Pension Benefit Plan” shall mean at any time any employee pension benefit plan (including a Multiple Employer Plan, but not a Multiemployer Plan) which is covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code or is a pension benefit plan within the meaning of the Pension Benefits Act (Ontario) and either (i) is maintained or to which contributions are required by any member of the Controlled Group for employees of any member of the Controlled Group; or (ii) has at any time within the preceding five years been maintained or to which contributions have been required by any entity which was at such time a member of the Controlled Group for employees of any entity which was at such time a member of the Controlled Group.

     “Permitted Discretion” shall mean, with respect to Agent, the exercise in good faith of its reasonable business judgment from the perspective of an asset based lender.

     “Permitted Encumbrances” shall mean (a) Liens in favor of Agent for the benefit of Agent and Lenders; (b) Liens for taxes, assessments or other governmental charges not delinquent or being Properly Contested; (c) Liens disclosed in the financial statements referred to in Section 5.5, the existence of which Agent has consented to in writing; (d) deposits or pledges to secure obligations under worker’s compensation, social security or similar laws, or under unemployment insurance; (e) deposits or pledges to secure bids, tenders, contracts (other than contracts for the payment of money), leases, statutory obligations, surety and appeal bonds and other obligations of like nature arising in the Ordinary Course of Business; (f) Liens arising by virtue of the rendition, entry or issuance against any Borrower or any Subsidiary, or any property of any Borrower or any Subsidiary, of any judgment, writ, order, or decree for so long as each such Lien (x) is in existence for less than 20 consecutive days after it first arises or is being Properly Contested and (y) is at all times junior in priority to any Liens in favor of Agent; (g) mechanics’, workers’, materialmen’s or other like Liens arising in the Ordinary Course of Business with respect to obligations which are not due or which are being Properly Contested; (h) Liens placed upon fixed assets hereafter acquired to secure a portion of the purchase price thereof, provided that (x) any such lien shall not encumber any other property of any Borrower and (y) the aggregate amount of Indebtedness secured by such Liens incurred as a result of such purchases during any fiscal year shall not exceed the amount provided for in Section 7.6; (i) other Liens incidental to the conduct of any Borrower’s business or the ownership of its property and assets which were not incurred in connection with the borrowing of money or the obtaining of advances or credit, and which do not in the aggregate materially detract from Agent’s or Lenders’ rights in and to the Collateral or the value of any Borrower’s property or assets or which do not materially impair the use thereof in the operation of any Borrower’s business; and (j) Liens disclosed on Schedule 1.2.

     “Permitted Overadvance” shall mean, at any time of determination, an amount equal to $2,500,000 to be reduced on the first day of each November, February, May and August following the Closing Date by $208,334 (by way of example, on November 1, 2009, the Permitted Overadvance shall be reduced by $208,334 to $2,291,666, on February 1, 2010 the Permitted Overadvance shall be reduced by $208,334 to $2,083,332 and so on until the Permitted Overadvances reaches $0).

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     “Person” shall mean any individual, sole proprietorship, partnership, corporation, business trust, joint stock company, trust, unincorporated organization, association, limited liability company, limited liability partnership, institution, public benefit corporation, joint venture, entity or Governmental Body (whether federal, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof).

     “Plan” shall mean any employee benefit plan within the meaning of Section 3(3) of ERISA or within the meaning of the Pension Benefits Act (Ontario) (including a Pension Benefit Plan and a Multiemployer Plan), maintained for employees of any Borrower or any member of the Controlled Group or any such Plan to which any Borrower or any member of the Controlled Group is required to contribute on behalf of any member of the Controlled Group.

     “Pledge Agreements” shall mean that certain (i) Pledge Agreement executed by Holdings in favor of Agent dated as of even date herewith and (ii) Pledge Agreement executed by Rand Worldwide U.S. in favor of Agent dated as of even date herewith.

     “PNC” shall have the meaning set forth in the preamble to this Agreement and shall extend to all of its successors and assigns.

     “Pro Forma Balance Sheet” shall have the meaning set forth in Section 5.5(a) hereof.

     “Pro Forma Financial Statements” shall have the meaning set forth in Section 5.5(b) hereof.

     “Properly Contested” shall mean, in the case of any Indebtedness or Lien, as applicable, of any Person (including any taxes) that is not paid as and when due or payable by reason of such Person’s bona fide dispute concerning its liability to pay same or concerning the amount thereof, (i) such Indebtedness or Lien, as applicable, is being properly contested in good faith by appropriate proceedings promptly instituted and diligently conducted; (ii) such Person has established appropriate reserves as shall be required in conformity with GAAP; (iii) the non-payment of such Indebtedness could not reasonably be expected to have a Material Adverse Effect and will not result in the forfeiture of any assets of such Person; (iv) no Lien is imposed upon any of such Person’s assets with respect to such Indebtedness unless such Lien is at all times junior and subordinate in priority to the Liens in favor of Agent (except only with respect to property taxes that have priority as a matter of applicable state law) and enforcement of such Lien is stayed during the period prior to the final resolution or disposition of such dispute; (v) if such Indebtedness or Lien, as applicable, results from, or is determined by the entry, rendition or issuance against a Person or any of its assets of a judgment, writ, order or decree, enforcement of such judgment, writ, order or decree is stayed pending a timely appeal or other judicial review; and (vi) if such contest is abandoned, settled or determined adversely (in whole or in part) to such Person, such Person forthwith pays such Indebtedness and all penalties, interest and other amounts due in connection therewith.

     “Projections” shall have the meaning set forth in Section 5.5(b) hereof.

     “Published Rate” shall mean the rate of interest published each Business Day in the Wall Street Journal “Money Rates” listing under the caption “London Interbank Offered Rates” for a one month period (or, if no such rate is published therein for any reason, then the Published

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Rate shall be the Eurodollar Rate for a one month period as published in another publication selected by the Agent in its reasonable discretion).

     “Purchasing CLO” shall have the meaning set forth in Section 16.3(d) hereof.

     “Purchasing Lender” shall have the meaning set forth in Section 16.3(c) hereof.

     “Rand North America” shall mean Rand North America, Inc., a Delaware corporation.

     “RCRA” shall mean the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., as same may be amended from time to time.

     “Real Property” shall mean all of each Borrower’s right, title and interest in and to the owned and leased premises identified on Schedule 4.19 hereto or which is hereafter owned or leased by any Borrower.

     “Receivables” shall mean and include, as to each Borrower, all of such Borrower’s accounts, contract rights, instruments (including those evidencing indebtedness owed to such Borrower by its Affiliates), documents, chattel paper (including electronic chattel paper), general intangibles relating to accounts, drafts and acceptances, credit card receivables and all other forms of obligations owing to such Borrower arising out of or in connection with the sale or lease of Inventory or the rendition of services, all supporting obligations, guarantees and other security therefor, whether secured or unsecured, now existing or hereafter created, and whether or not specifically sold or assigned to Agent hereunder.

     “Receivables Advance Rate” shall have the meaning set forth in Section 2.1(a)(y)(i) hereof.

     “Register” shall have the meaning set forth in Section 16.3(e).

     “Reimbursement Obligation” shall have the meaning set forth in Section 2.12(b)hereof.

     “Release” shall have the meaning set forth in Section 5.7(c)(i) hereof.

     “Replacement Letter of Credit” shall mean that certain Letter of Credit to be issued by Issuer for the benefit of 61 Broadway Owner, LLC on behalf of Rand Imaginit in the approximate amount of $20,000.

     “Reportable Event” shall mean a reportable event described in Section 4043(c) of ERISA or the regulations promulgated thereunder.

     “Required Lenders” shall mean Lenders holding at least sixty six and two-thirds percent (66-2/3%) of the Advances and, if no Advances are outstanding, shall mean Lenders holding sixty six and two-thirds percent (66-2/3%) of the Commitment Percentages; provided, however, if there are fewer than three (3) Lenders, Required Lenders shall mean all Lenders.

     “Reserve Percentage” shall mean as of any day the maximum percentage in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any

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successor) for determining the reserve requirements (including supplemental, marginal and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as “Eurocurrency Liabilities”.

     “Revolving Advances” shall mean Advances made other than Letters of Credit.

     “Revolving Credit Note” shall mean, collectively, the promissory notes referred to in Section 2.1(a) hereof.

     “Revolving Interest Rate” shall mean an interest rate per annum equal to (a) the sum of the Alternate Base Rate plus the Applicable Margin with respect to Domestic Rate Loans and (b) the sum of the Applicable Margin plus the greater of (i) the Eurodollar Rate and (ii) two percent (2.00%) with respect to Eurodollar Rate Loans.

     “SEC” shall mean the Securities and Exchange Commission or any successor thereto.

     “Section 20 Subsidiary” shall mean the Subsidiary of the bank holding company controlling PNC, which Subsidiary has been granted authority by the Federal Reserve Board to underwrite and deal in certain Ineligible Securities.

     “Securities Act” shall mean the Securities Act of 1933, as amended.

     “Settlement Date” shall mean the Closing Date and thereafter Wednesday or Thursday of each week or more frequently if Agent deems appropriate unless such day is not a Business Day in which case it shall be the next succeeding Business Day.

     “Subordinated Indebtedness” shall mean all obligations of the Holdings and its Subsidiaries pursuant to the Subordinated Loan Documents.

     “Subordinated Loan Documents” shall mean (i) that certain Second Amended and Restated Term Loan Agreement dated as of the date hereof, among Holdings and the Ampersand Guarantors, (ii) any notes issued in favor of Ampersand 2001 Limited, Ampersand 2001 Companion and Ampersand 2006 Limited by Holdings in connection therewith, (iii) that certain Security Agreement dated as of October 31, 2007, by and among Rand Delaware LLC, Rand Worldwide U.S., Rand Michigan, Rand Development LLC, Rand Imaginit and Ampersand 2006 Limited, as agent, (iv) that certain Security Agreement dated as of October 31, 2007, by and between Holdings and Ampersand 2006 Limited, as agent, (v) that certain Guaranty dated as of October 31, 2007 by and among Rand Delaware LLC, Rand Worldwide U.S., Rand Michigan, Rand Development LLC, Rand Imaginit and Ampersand 2006 Limited, as agent, (vi) that certain Pledge Agreement dated as of October 31, 2007 by and among Holdings, Rand Worldwide U.S. and Ampersand 2006 Limited, as agent, (vii) the Subordination Agreement dated as of October 31, 2007 by and among Autodesk, Inc., Rand Imaginit and Ampersand 2006 Limited, as agent, and (viii) and any other documents, agreements and instruments delivered in connection therewith, as any of the foregoing may be amended, modified, restated or supplemented from time to time.

     “Subordination Agreement” shall mean that certain Intercreditor Agreement by and among Ampersand Guarantors, Borrowers, Holdings and the Agent.

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     “Subsidiary” of any Person shall mean a corporation or other entity of whose Equity Interests having ordinary voting power (other than Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the directors of such corporation, or other Persons performing similar functions for such entity, are owned, directly or indirectly, by such Person.

     “Term” shall have the meaning set forth in Section 13.1 hereof.

     “Termination Event” shall mean (i) a Reportable Event with respect to any Plan; (ii) the withdrawal of any Borrower or any member of the Controlled Group from a Plan during a plan year in which such entity was a “substantial employer” as defined in Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to terminate a Plan in a distress termination described in Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to terminate a Plan; (v) any event or condition (a) which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or (b) that may result in termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or complete withdrawal within the meaning of Section 4203 or 4205 of ERISA, of any Borrower or any member of the Controlled Group from a Multiemployer Plan.

     “Toxic Substance” shall mean and include any material present on the Real Property or the Leasehold Interests which has been shown to have significant adverse effect on human health or which is subject to regulation under the Toxic Substances Control Act (TSCA), 15 U.S.C. §§ 2601 et seq., applicable state law, or any other applicable Federal or state laws or Canadian or provincial laws now in force or hereafter enacted relating to toxic substances. “Toxic Substance” includes but is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.

     “Trading with the Enemy Act” shall mean the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any enabling legislation or executive order relating thereto.

     “Transactions” shall have the meaning set forth in Section 5.5(a) hereof.

     “Transferee” shall have the meaning set forth in Section 16.3(d) hereof.

     “Undrawn Availability” at a particular date shall mean an amount equal to (a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving Advance Amount less the Maximum Undrawn Amount, minus (b) the sum of (i) the outstanding amount of Advances, minus (ii) cash on hand in an account subject to a Foreign Blocked Account in favor of Agent, plus (iii) all amounts due and owing to any Borrower’s trade creditors which are outstanding beyond sixty (60) days, plus (iv) fees and expenses for which Borrowers are liable but which have not been paid or charged to Borrowers’ Account.

     “Undrawn Availability/Closing Date” on the Closing Date, shall mean an amount equal to (a) the lesser of (i) the Formula Amount (without giving effect to the Permitted Overadvance, the Availability Block or rent reserves established pursuant to Section 6.10), or (ii) the Maximum Revolving Advance Amount, less the Maximum Undrawn Amount, minus (b) the sum of (i) the outstanding amount of Advances, minus (ii) cash on hand held by Rand A in a Canadian bank

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account, plus (iii) all amounts due and owing to any Borrower’s trade creditors which are outstanding beyond sixty (60) days, plus (iv) fees and expenses for which Borrowers are liable but which have not been paid or charged to Borrowers’ Account.

     “Unfunded Capital Expenditures” shall mean Capital Expenditures made through Revolving Advances or out of Borrowers’ own funds other than through equity contributed subsequent to the Closing Date or purchase money or other financing or lease transactions permitted hereunder.

     “Uniform Commercial Code” shall have the meaning set forth in Section 1.3 hereof.

     “US Borrowers” shall have meaning set forth in the preamble to this Agreement and sall extend to all permitted successors and assigns of such Persons.

     “US Dollar Equivalent” shall mean, at the date of determination, the amount of Dollars that the Agent could purchase, in accordance with its normal practice, with a specified amount of Canadian Dollars based on the Bank of Canada noon spot rate on such date.

     “US Formula Amount” shall have the meaning set forth in Section 2.1(b).

     “US Obligations” shall mean the aggregate of the Obligations of each of the US Borrowers as they may exist from time to time other than the Foreign Obligations.

     “USA PATRIOT Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.

     “Week” shall mean the time period commencing with the opening of business on a Wednesday and ending on the end of business the following Tuesday.

     1.3. Uniform Commercial Code Terms. All terms used herein and defined in the Uniform Commercial Code as adopted in the State of Illinois from time to time (the “Uniform Commercial Code”) shall have the meaning given therein unless otherwise defined herein. Without limiting the foregoing, the terms “accounts,” “chattel paper,” “commercial tort claims,” “instruments,” “general intangibles,” “goods,” “payment intangibles,” “proceeds,” “supporting obligations,” “securities,” “investment property,” “documents,” “deposit accounts,” “software,” “letter of credit rights,” “inventory,” “equipment” and “fixtures,” as and when used in the description of Collateral shall have the meanings given to such terms in Articles 8 or 9 of the Uniform Commercial Code. To the extent the definition of any category or type of collateral is expanded by any amendment, modification or revision to the Uniform Commercial Code, such expanded definition will apply automatically as of the date of such amendment, modification or revision. With respect to Foreign Borrower, any reference to the Uniform Commercial Code shall be deemed to mean the Personal Property Security Act of the relevant province.

     1.4. Certain Matters of Construction.

          (a) General. The terms “herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph

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or subdivision. All references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement. Any pronoun used shall be deemed to cover all genders. Wherever appropriate in the context, terms used herein in the singular also include the plural and vice versa. All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations. Unless otherwise provided, all references to any instruments or agreements to which Agent is a party, including references to any of the Other Documents, shall include any and all modifications, supplements or amendments thereto, any and all restatements or replacements thereof and any and all extensions or renewals thereof. All references herein to the time of day shall mean the time in New York, New York. Unless otherwise provided, all financial calculations shall be performed with Inventory valued on a first-in, first-out basis. Whenever the words “including” or “include” shall be used, such words shall be understood to mean “including, without limitation” or “include, without limitation”. A Default or Event of Default shall be deemed to exist at all times during the period commencing on the date that such Default or Event of Default occurs to the date on which such Default or Event of Default is waived in writing pursuant to this Agreement or, in the case of a Default, is cured within any period of cure expressly provided for in this Agreement; and an Event of Default shall “continue” or be “continuing” until such Event of Default has been waived in writing by the Required Lenders or all Lenders, as applicable. Any Lien referred to in this Agreement or any of the Other Documents as having been created in favor of Agent, any agreement entered into by Agent pursuant to this Agreement or any of the Other Documents, any payment made by or to or funds received by Agent pursuant to or as contemplated by this Agreement or any of the Other Documents, or any act taken or omitted to be taken by Agent, shall, unless otherwise expressly provided, be created, entered into, made or received, or taken or omitted, for the benefit or account of Agent and Lenders. Wherever the phrase “to the best of Borrowers’ knowledge” or words of similar import relating to the knowledge or the awareness of any Borrower are used in this Agreement or Other Documents, such phrase shall mean and refer to (i) the actual knowledge of a senior officer of any Borrower or (ii) the knowledge that a senior officer would have obtained if he had engaged in good faith and diligent performance of his duties, including the making of such reasonably specific inquiries as may be necessary of the employees or agents of such Borrower and a good faith attempt to ascertain the existence or accuracy of the matter to which such phrase relates. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or otherwise within the limitations of, another covenant shall not avoid the occurrence of a default if such action is taken or condition exists. In addition, all representations and warranties hereunder shall be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached will not affect the incorrectness of a breach of a representation or warranty hereunder.

          (b) Canadian Terms. In this Agreement, (i) any term defined in this Agreement by reference to the “Uniform Commercial Code” shall also have any extended, alternative or analogous meaning given to such term in applicable Canadian personal property security and other laws (including, without limitation, the Personal Property Security Act (Ontario), the Bills of Exchange Act (Canada) and the Depository Bills and Notes Act (Canada)), in all cases for the extension, preservation or betterment of the security and rights of the Agent, (ii) all references in this Agreement to “Article 8 of the Code” or “Article 8 of the Uniform

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Commercial Code” shall be deemed to refer also to applicable Canadian securities transfer laws (including, without limitation, the Securities Transfer Act, 2006 (Ontario)), (iii) all references in this Agreement to the United States Copyright Office or the United States Patent and Trademark Office shall be deemed to refer also to the Canadian Intellectual Property Office, (iv) all references in this Agreement to a financing statement, continuation statement, amendment or termination statement shall be deemed to refer also to the analogous documents used under applicable Canadian personal property security laws, (v) all references to the United States of America, or to any subdivision, department, agency or instrumentality thereof shall be deemed to refer also to Canada, or to any subdivision, department, agency or instrumentality thereof, (vi) all references to federal or state securities law of the United States shall be deemed to refer also to analogous federal and provincial securities laws in Canada, (vii) all references to “state or federal bankruptcy laws” shall be deemed to refer also to any insolvency proceeding occurring in Canada or under Canadian law, and (viii) all calculations of Dollar amounts which utilize amounts expressed in Canadian Dollars shall be made using the US Dollar Equivalent of such Canadian Dollar amounts in a manner reasonably calculated by the Agent.

II. ADVANCES, PAYMENTS.

     2.1. Revolving Advances.

          (a) Revolving Advances. Subject to the terms and conditions set forth in this Agreement including, without limitation, Sections 2.1(b), (c), (d) and (e), each Lender, severally and not jointly, will make Revolving Advances to Borrowers in aggregate amounts outstanding at any time equal to such Lender’s Commitment Percentage of the lesser of (x) the Maximum Revolving Advance Amount minus the aggregate Maximum Undrawn Amount and (y) the Formula Amount. The “Formula Amount” shall at all times be an amount equal to the Dollar Equivalent of the sum of the following:

               (i) up to 85%, subject to adjustment pursuant to the provisions of Section 2.1(d) hereof (“Receivables Advance Rate”), of Eligible US Receivables and Eligible Foreign Receivables, plus

               (ii) the Permitted Overadvance, minus

               (iii) the Availability Block, minus

               (iv) the aggregate Maximum Undrawn Amount, minus

               (v) such reserves as Agent may deem proper and necessary from time to time in its Permitted Discretion.

     The Revolving Advances shall be evidenced by secured promissory notes (which may be amended and restated promissory notes), issued by the US Borrowers with respect to their Revolving Advances and issued by the Foreign Borrower with respect to its Revolving Advances (collectively, the “Revolving Credit Note”) substantially in the form attached hereto as Exhibits 2.1-US and 2.1-F

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          (b) US Borrowing Group Sublimit. Notwithstanding the provisions of Section 2.1(a), and in addition to the discretionary rights set forth in Section 2.1(d) with respect to further limitations on any particular Borrower or Borrowers and the limitations in Section 2.1(e), in no event may the Revolving Advances to US Borrowers exceed the lesser of (x) the sum of (A) the Maximum US Revolving Advance Amount minus (B) the sum of (1) the aggregate Maximum Undrawn Amount plus (2) the aggregate outstanding Revolving Advances to Foreign Borrower, or (y) an amount equal to the sum of:

               (i) up to the Receivables Advance Rate of Eligible US Receivables, plus

               (ii) the Permitted Overadvance, minus

               (iii) the Availability Block, minus

               (iv) the aggregate Maximum Undrawn Amount, minus

               (v) the aggregate outstanding Revolving Advances to Foreign Borrower, minus

               (vi) such reserves as Agent may deem proper and necessary from time to time in its Permitted Discretion.

     The amount derived from the sum of (x) Sections 2.1(b)(y)(i) and (ii), minus (y) Sections 2.1(b)(y)(iii), (iv), (v) and (vi) at any time and from time to time shall be referred to as the “US Formula Amount”.

          (c) Foreign Borrowing Group Sublimit. Notwithstanding the provisions of Section 2.1(a), and in addition to the discretionary rights set forth in Section 2.1(d) with respect to further limitations on any particular Borrower or Borrowers and the limitations in Section 2.1(e), in no event may the Revolving Advances to Foreign Borrower exceed the lesser of (x) the Maximum Foreign Revolving Advance Amount or (y) the US Dollar Equivalent of an amount equal to the sum of:

               (i) up to 85%, subject to the provisions of Sections 2.1(d) and (e) hereof (“Foreign Receivables Advance Rate” and together with the Receivables Advance Rate, the “Advance Rates”), of Eligible Foreign Receivables, minus

               (ii) such reserves as Agent may deem proper and necessary from time to time in its Permitted Discretion.

     The amount derived from (x) Section 2.1(c)(y)(i) minus (y) Section 2.1(c)(y)(ii) at any time and from time to time shall be referred to as the “Foreign Formula Amount”.

          (d) Discretionary Rights. The Advance Rates may be increased or decreased by Agent at any time and from time to time in the exercise of its Permitted Discretion with five (5) Business Day’s prior written notice to the Borrowing Agent. Each Borrower consents to any such increases or decreases and acknowledges that decreasing the Advance Rates or increasing

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or imposing reserves may limit or restrict Advances requested by Borrowing Agent. The rights of Agent under this subsection are subject to the provisions of Section 16.2(b).From time to time Agent may, upon five (5) Business Days prior written notice to Borrowing Agent of its intention to do so, but only after the occurrence and during the continuation of a Default or Event of Default or if Agent reasonably believes that an event or condition has occurred which is likely to result in or have a Material Adverse Effect, impose any other maximum revolving advance amount for any particular Borrower or group of Borrowers and/or limit the maximum Dollar amount of Revolving Advances which may be extended to any individual Borrower or group of Borrowers.

          (e) Sublimit for Rand North America. Advances against Eligible US Receivables on account of Rand North America shall not exceed One Million Dollars ($1,000,000) in the aggregate at any one time.

     2.2. Procedure for Revolving Advances Borrowing.

          (a) Borrowing Agent on behalf of any Borrower may notify Agent prior to 10:00 a.m. (New York time) on a Business Day of a Borrower’s request to incur, on that day, a Revolving Advance hereunder, and specifying which Borrower, or Borrowing Group, is to incur such Revolving Advance. Should any amount required to be paid as interest hereunder, or as fees or other charges under this Agreement or any other agreement with Agent or Lenders, or with respect to any other Obligation, become due, same shall be deemed a request for a Revolving Advance maintained as a Domestic Rate Loan as of the date such payment is due, in the amount required to pay in full such interest, fee, charge or Obligation under this Agreement or any other agreement with Agent or Lenders, and such request shall be irrevocable.

          (b) Notwithstanding the provisions of subsection (a) above, in the event any Borrower desires to obtain a Eurodollar Rate Loan, Borrowing Agent shall give Agent written notice by no later than 10:00 a.m. on the day which is three (3) Business Days prior to the date such Eurodollar Rate Loan is to be borrowed, specifying (i) the date of the proposed borrowing (which shall be a Business Day), (ii) the type of borrowing and the amount on the date of such Advance to be borrowed, which amount shall be in a minimum amount of $200,000 and in integral multiples of $50,000 thereafter, and (iii) the duration of the first Interest Period therefor. Interest Periods for Eurodollar Rate Loans shall be for one, two or three months; provided, if an Interest Period would end on a day that is not a Business Day, it shall end on the next succeeding Business Day unless such day falls in the next succeeding calendar month in which case the Interest Period shall end on the next preceding Business Day. No Eurodollar Rate Loan shall be made available to any Borrower during the continuance of a Default or an Event of Default. After giving effect to each requested Eurodollar Rate Loan, including those which are converted from a Domestic Rate Loan under Section 2.2(d), there shall not be outstanding more than five (5) Eurodollar Rate Loans, in the aggregate.

          (c) Each Interest Period of a Eurodollar Rate Loan shall commence on the date such Eurodollar Rate Loan is made and shall end on such date as Borrowing Agent may elect as set forth in subsection (b)(iii) above provided that the exact length of each Interest Period shall be determined in accordance with the practice of the interbank market for offshore Dollar deposits and no Interest Period shall end after the last day of the Term. Borrowing Agent shall

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elect the initial Interest Period applicable to a Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to Section 2.2(b) or by its notice of conversion given to Agent pursuant to Section 2.2(d), as the case may be. Borrowing Agent shall elect the duration of each succeeding Interest Period by giving irrevocable written notice to Agent of such duration not later than 10:00 a.m. on the day which is three (3) Business Days prior to the last day of the then current Interest Period applicable to such Eurodollar Rate Loan. If Agent does not receive timely notice of the Interest Period elected by Borrowing Agent, Borrowing Agent shall be deemed to have elected to convert to a Domestic Rate Loan subject to Section 2.2(d) hereinbelow.

          (d) Provided that no Event of Default shall have occurred and be continuing, Borrowing Agent may, on the last Business Day of the then current Interest Period applicable to any outstanding Eurodollar Rate Loan, or on any Business Day with respect to Domestic Rate Loans, convert any such loan into a loan of another type in the same aggregate principal amount provided that any conversion of a Eurodollar Rate Loan shall be made only on the last Business Day of the then current Interest Period applicable to such Eurodollar Rate Loan. If Borrowing Agent desires to convert a loan, Borrowing Agent shall give Agent written notice by no later than 10:00 a.m. (i) on the day which is three (3) Business Days’ prior to the date on which such conversion is to occur with respect to a conversion from a Domestic Rate Loan to a Eurodollar Rate Loan, or (ii) on the day which is one (1) Business Day prior to the date on which such conversion is to occur with respect to a conversion from a Eurodollar Rate Loan to a Domestic Rate Loan, specifying, in each case, the date of such conversion, the loans to be converted and if the conversion is from a Domestic Rate Loan to any other type of loan, the duration of the first Interest Period therefor.

          (e) At its option and upon written notice given prior to 10:00 a.m. (New York time) at least three (3) Business Days’ prior to the date of such prepayment, any Borrower may prepay the Eurodollar Rate Loans in whole at any time or in part from time to time with accrued interest on the principal being prepaid to the date of such repayment. Such Borrower shall specify the date of prepayment of Advances which are Eurodollar Rate Loans and the amount of such prepayment. In the event that any prepayment of a Eurodollar Rate Loan is required or permitted on a date other than the last Business Day of the then current Interest Period with respect thereto, such Borrower shall indemnify Agent and Lenders therefor in accordance with Section 2.2(f) hereof.

          (f) Each Borrower shall indemnify Agent and Lenders and hold Agent and Lenders harmless from and against any and all losses or expenses that Agent and Lenders may sustain or incur as a consequence of any prepayment, conversion of or any default by any Borrower in the payment of the principal of or interest on any Eurodollar Rate Loan or failure by any Borrower to complete a borrowing of, a prepayment of or conversion of or to a Eurodollar Rate Loan after notice thereof has been given, including, but not limited to, any interest payable by Agent or Lenders to lenders of funds obtained by it in order to make or maintain its Eurodollar Rate Loans hereunder. A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by Agent or any Lender to Borrowing Agent shall be conclusive absent manifest error.

          (g) Notwithstanding any other provision hereof, if any Applicable Law or any change therein or in the interpretation or application thereof, shall make it unlawful for any

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Lender (for purposes of this subsection (g), the term “Lender” shall include any Lender and the office or branch where any Lender or any corporation or bank controlling such Lender makes or maintains any Eurodollar Rate Loans) to make or maintain its Eurodollar Rate Loans, the obligation of Lenders to make Eurodollar Rate Loans hereunder shall forthwith be cancelled and Borrowers shall, if any affected Eurodollar Rate Loans are then outstanding, promptly upon request from Agent, either pay all such affected Eurodollar Rate Loans or convert such affected Eurodollar Rate Loans into loans of another type. If any such payment or conversion of any Eurodollar Rate Loan is made on a day that is not the last day of the Interest Period applicable to such Eurodollar Rate Loan, Borrowers shall pay Agent, upon Agent’s request, such amount or amounts as may be necessary to compensate Lenders for any loss or expense sustained or incurred by Lenders in respect of such Eurodollar Rate Loan as a result of such payment or conversion, including (but not limited to) any interest or other amounts payable by Lenders to lenders of funds obtained by Lenders in order to make or maintain such Eurodollar Rate Loan. A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by Lenders to Borrowing Agent shall be conclusive absent manifest error.

     2.3. Disbursement of Advance Proceeds. All Advances shall be disbursed from whichever office or other place Agent may designate from time to time and, together with any and all other Obligations of Borrowers to Agent or Lenders, shall be charged to Borrowers’ Account on Agent’s books. In no event, however, shall Agent disburse Advances other than to an account located in the United States of America. During the Term, Borrowers may use the Revolving Advances by borrowing, prepaying and reborrowing, all in accordance with the terms and conditions hereof. The proceeds of each Revolving Advance requested by Borrowing Agent on behalf of any Borrower or deemed to have been requested by any Borrower under Section 2.2(a) hereof shall, with respect to requested Revolving Advances to the extent Lenders make such Revolving Advances, be made available to the applicable Borrower on the day so requested by way of credit to such Borrower’s operating account at PNC, or such other bank as Borrowing Agent may designate following notification to Agent, in immediately available federal funds or other immediately available funds or, with respect to Revolving Advances deemed to have been requested by any Borrower, be disbursed to Agent to be applied to the outstanding Obligations giving rise to such deemed request.

     2.4. Reserved.

     2.5. Maximum Advances. The aggregate balance of Revolving Advances outstanding at any time shall not exceed the lesser of (a) the Maximum Revolving Advance Amount less the Maximum Undrawn Amount or (b) the Formula Amount.

     2.6. Repayment of Advances.

          (a) The Revolving Advances shall be due and payable in full on the last day of the Term subject to earlier prepayment as herein provided.

          (b) Each Borrower recognizes that the amounts evidenced by checks, notes, drafts or any other items of payment relating to and/or proceeds of Collateral may not be collectible by Agent on the date received. In consideration of Agent’s agreement to conditionally credit Borrowers’ Account as of the next Business Day following Agent’s receipt

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of those items of payment, each Borrower agrees that, in computing the charges under this Agreement, all items of payment shall be deemed applied by Agent on account of the Obligations one (1) Business Day after the Business Day following Agent’s receipt of such payments via check, wire transfer, electronic depository check or in any other manner. Agent is not, however, required to credit Borrowers’ Account for the amount of any item of payment which is unsatisfactory to Agent and Agent may charge Borrowers’ Account for the amount of any item of payment which is returned to Agent unpaid.

          (c) All payments of principal, interest and other amounts payable hereunder, or under any of the Other Documents shall be made to Agent at the Payment Office not later than 1:00 P.M. (New York time) on the due date therefor in lawful money of the United States of America in federal funds or other funds immediately available to Agent. Agent shall have the right to effectuate payment on any and all Obligations due and owing hereunder by charging Borrowers’ Account or by making Advances as provided in Section 2.2 hereof.

          (d) Borrowers shall pay principal, interest, and all other amounts payable hereunder, or under any related agreement, without any deduction whatsoever, including, but not limited to, any deduction for any setoff or counterclaim.

     2.7. Repayment of Excess Advances. The aggregate balance of Advances outstanding at any time in excess of the maximum amount of Advances permitted hereunder shall be immediately due and payable without the necessity of any demand, at the Payment Office, whether or not a Default or Event of Default has occurred.

     2.8. Statement of Account. Agent shall maintain, in accordance with its customary procedures, a loan account for the US Borrowers and a loan account for the Foreign Borrower (each a “Borrowers’ Account”), each in the name of Borrowing Agent, in which shall be recorded the date and amount of each Advance made by Agent and the date and amount of each payment in respect thereof; provided, however, the failure by Agent to record the date and amount of any Advance shall not adversely affect Agent or any Lender. Each month, Agent shall send Borrowing Agent a statement showing the accounting for the Advances made, payments made or credited in respect thereof, and other transactions between Agent and the respective Borrowing Group, during such month. The monthly statements shall be deemed correct and binding upon Borrowers in the absence of manifest error and shall constitute an account stated between Lenders and Borrowers unless Agent receives a written statement of Borrowers’ specific exceptions thereto within thirty (30) days after such statement is received by Borrowing Agent. The records of Agent with respect to the loan account shall be conclusive evidence absent manifest error of the amounts of Advances and other charges thereto and of payments applicable thereto.

     2.9. Letters of Credit. Subject to the terms and conditions hereof, Agent shall issue or cause the issuance of standby and/or trade Letters of Credit (“Letters of Credit”) for the account of any US Borrower; provided, however, that Agent will not be required to issue or cause to be issued any Letters of Credit to the extent that the issuance thereof would then cause the sum of (i) the outstanding Revolving Advances to all US Borrowers plus (ii) the Maximum Undrawn Amount plus (iii) the outstanding Revolving Advances to Foreign Borrower to exceed the lesser of (x) the Maximum US Revolving Advance Amount or (y) the US Formula Amount. All

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disbursements or payments related to Letters of Credit shall be deemed to be Domestic Rate Loans consisting of Revolving Advances and shall bear interest at the Revolving Interest Rate for Domestic Rate Loans; Letters of Credit that have not been drawn upon shall not bear interest.

     2.10. Issuance of Letters of Credit.

          (a) Borrowing Agent, on behalf of US Borrowers, may request Agent to issue or cause the issuance of a Letter of Credit by delivering to Agent at the Payment Office, prior to 10:00 a.m. (New York time), at least five (5) Business Days’ prior to the proposed date of issuance, Agent’s form of Letter of Credit Application (the “Letter of Credit Application”) completed to the satisfaction of Agent; and, such other certificates, documents and other papers and information as Agent may reasonably request. Borrowing Agent, on behalf of US Borrowers, also has the right to give instructions and make agreements with respect to any application, any applicable letter of credit and security agreement, any applicable letter of credit reimbursement agreement and/or any other applicable agreement, any letter of credit and the disposition of documents, disposition of any unutilized funds, and to agree with Agent upon any amendment, extension or renewal of any Letter of Credit.

          (b) Each Letter of Credit shall, among other things, (i) provide for the payment of sight drafts, other written demands for payment, or acceptances of usance drafts when presented for honor thereunder in accordance with the terms thereof and when accompanied by the documents described therein and (ii) have an expiry date not later than twelve (12) months after such Letter of Credit’s date of issuance and in no event later than the last day of the Term; provided that the Replacement Letter of Credit may be issued with an expiry date later than twelve (12) months but not later than the Term. Each standby Letter of Credit shall be subject either to the Uniform Customs and Practice for Documentary Credits as most recently published by the International Chamber of Commerce at the time the Letter of Credit is issued (“UCP”) or the International Standby Practices (ISP98-International Chamber of Commerce Publication Number 590) (“ISP98 Rules”), and any subsequent revision thereof at the time a standby Letter of Credit is issued, as determined by Agent, and each trade Letter of Credit shall be subject to the UCP.

          (c) Agent shall use its reasonable efforts to notify Lenders of the request by Borrowing Agent for a Letter of Credit hereunder.

     2.11. Requirements For Issuance of Letters of Credit.

          (a) Borrowing Agent shall authorize and direct any Issuer to name the applicable US Borrower as the “Applicant” or “Account Party” of each Letter of Credit. If Agent is not the Issuer of any Letter of Credit, Borrowing Agent shall authorize and direct the Issuer to deliver to Agent all instruments, documents, and other writings and property received by the Issuer pursuant to the Letter of Credit and to accept and rely upon Agent’s instructions and agreements with respect to all matters arising in connection with the Letter of Credit or the application therefor.

          (b) In connection with all Letters of Credit issued or caused to be issued by Agent under this Agreement, each US Borrower hereby appoints Agent, or its designee, as its

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attorney, with full power and authority if an Event of Default shall have occurred and be continuing, (i) to sign and/or endorse such US Borrower’s name upon any warehouse or other receipts, letter of credit applications and acceptances, (ii) to sign such US Borrower’s name on bills of lading; (iii) to clear Inventory through the United States of America Customs Department (“Customs”) in the name of such US Borrower or Agent or Agent’s designee, and to sign and deliver to Customs officials powers of attorney in the name of such US Borrower for such purpose; and (iv) to complete in such US Borrower’s name or Agent’s, or in the name of Agent’s designee, any order, sale or transaction, obtain the necessary documents in connection therewith, and collect the proceeds thereof. Neither Agent nor its attorneys will be liable for any acts or omissions nor for any error of judgment or mistakes of fact or law, except for Agent’s or its attorney’s willful misconduct. This power, being coupled with an interest, is irrevocable as long as any Letters of Credit remain outstanding.

     2.12. Disbursements, Reimbursement.

          (a) Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from Agent a participation in such Letter of Credit and each drawing thereunder in an amount equal to such Lender’s Commitment Percentage of the Maximum Face Amount of such Letter of Credit and the amount of such drawing, respectively.

          (b) In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, Agent will promptly notify Borrowing Agent. Provided that Borrowing Agent shall have received such notice, the US Borrowers shall reimburse (such obligation to reimburse Agent shall sometimes be referred to as a “Reimbursement Obligation”) Agent prior to 12:00 Noon, New York time on each date that an amount is paid by Agent under any Letter of Credit (each such date, a “Drawing Date”) in an amount equal to the amount so paid by Agent. In the event US Borrowers fail to reimburse Agent for the full amount of any drawing under any Letter of Credit by 12:00 Noon, New York time, on the Drawing Date, Agent will promptly notify each Lender thereof, and US Borrowers shall be deemed to have requested that a Revolving Advance maintained as a Domestic Rate Loan be made by the Lenders to be disbursed on the Drawing Date under such Letter of Credit, subject to the amount of the unutilized portion of the lesser of the Maximum Revolving Advance Amount less the Maximum Undrawn Amount, or the Formula Amount and subject to Section 8.2 hereof. Any notice given by Agent pursuant to this Section 2.12(b) may be oral if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

          (c) Each Lender shall upon any notice pursuant to Section 2.12(b) make available to Agent an amount in immediately available funds equal to its Commitment Percentage of the amount of the drawing, whereupon the participating Lenders shall (subject to Section 2.12(d)) each be deemed to have made a Revolving Advance maintained as a Domestic Rate Loan to US Borrowers in that amount. If any Lender so notified fails to make available to Agent the amount of such Lender’s Commitment Percentage of such amount by no later than 2:00 p.m., New York time on the Drawing Date, then interest shall accrue on such Lender’s obligation to make such payment, from the Drawing Date to the date on which such Lender makes such payment (i) at a rate per annum equal to the Federal Funds Rate during the first three

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days following the Drawing Date and (ii) at a rate per annum equal to the rate applicable to a Revolving Advance maintained as Domestic Rate Loans on and after the fourth day following the Drawing Date. Agent will promptly give notice of the occurrence of the Drawing Date, but failure of Agent to give any such notice on the Drawing Date or in sufficient time to enable any Lender to effect such payment on such date shall not relieve such Lender from its obligation under this Section 2.12(c), provided that such Lender shall not be obligated to pay interest as provided in Section 2.12(c) (i) and (ii) until and commencing from the date of receipt of notice from Agent of a drawing.

          (d) With respect to any unreimbursed drawing that is not converted into a Revolving Advance maintained as a Domestic Rate Loan to US Borrowers in whole or in part as contemplated by Section 2.12(b), because of Borrowers’ failure to satisfy the conditions set forth in Section 8.2 (other than any notice requirements) or for any other reason, US Borrowers shall be deemed to have incurred from Agent a borrowing (each a “Letter of Credit Borrowing”) in the amount of such drawing. Such Letter of Credit Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the rate per annum applicable to a Revolving Advance maintained as a Domestic Rate Loan. Each Lender’s payment to Agent pursuant to Section 2.12(c) shall be deemed to be a payment in respect of its participation in such Letter of Credit Borrowing and shall constitute a “Participation Advance” from such Lender in satisfaction of its Participation Commitment under this Section 2.12.

          (e) Each Lender’s Participation Commitment shall continue until the last to occur of any of the following events: (x) Agent ceases to be obligated to issue or cause to be issued Letters of Credit hereunder; (y) no Letter of Credit issued or created hereunder remains outstanding and uncancelled; and (z) all Persons (other than the applicable US Borrower) have been fully reimbursed for all payments made under or relating to Letters of Credit.

     2.13. Repayment of Participation Advances.

          (a) Upon (and only upon) receipt by Agent for its account of immediately available funds from US Borrowers (i) in reimbursement of any payment made by the Agent under the Letter of Credit with respect to which any Lender has made a Participation Advance to Agent, or (ii) in payment of interest on such a payment made by Agent under such a Letter of Credit, Agent will pay to each Lender, in the same funds as those received by Agent, the amount of such Lender’s Commitment Percentage of such funds, except Agent shall retain the amount of the Commitment Percentage of such funds of any Lender that did not make a Participation Advance in respect of such payment by Agent.

          (b) If Agent is required at any time to return to any Borrower, or to a trustee, receiver, liquidator, custodian, or any official in any insolvency proceeding, any portion of the payments made by US Borrowers to Agent pursuant to Section 2.13(a) in reimbursement of a payment made under the Letter of Credit or interest or fee thereon, each Lender shall, on demand of Agent, forthwith return to Agent the amount of its Commitment Percentage of any amounts so returned by Agent plus interest at the Federal Funds Effective Rate.

     2.14. Documentation. Each Borrower agrees to be bound by the terms of the Letter of Credit Application and by Agent’s interpretations of any Letter of Credit issued on behalf of

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such Borrower and by Agent’s written regulations and customary practices relating to letters of credit, though Agent’s interpretations may be different from such Borrower’s own. In the event of a conflict between the Letter of Credit Application and this Agreement, this Agreement shall govern. It is understood and agreed that, except in the case of gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment), Agent shall not be liable for any error, negligence and/or mistakes, whether of omission or commission, in following the Borrowing Agent’s or any Borrower’s instructions or those contained in the Letters of Credit or any modifications, amendments or supplements thereto.

     2.15. Determination to Honor Drawing Request. In determining whether to honor any request for drawing under any Letter of Credit by the beneficiary thereof, Agent shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of such Letter of Credit and that any other drawing condition appearing on the face of such Letter of Credit has been satisfied in the manner so set forth.

     2.16. Nature of Participation and Reimbursement Obligations. Each Lender’s obligation in accordance with this Agreement to make the Revolving Advances or Participation Advances as a result of a drawing under a Letter of Credit, and the obligations of US Borrowers to reimburse Agent upon a draw under a Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Section 2.16 under all circumstances, including the following circumstances:

          (a) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against Agent, any Borrower or any other Person for any reason whatsoever;

          (b) the failure of any Borrower or any other Person to comply, in connection with a Letter of Credit Borrowing, with the conditions set forth in this Agreement for the making of a Revolving Advance, it being acknowledged that such conditions are not required for the making of a Letter of Credit Borrowing and the obligation of the Lenders to make Participation Advances under Section 2.12;

          (c) any lack of validity or enforceability of any Letter of Credit;

          (d) any claim of breach of warranty that might be made by Borrower or any Lender against the beneficiary of a Letter of Credit, or the existence of any claim, set-off, recoupment, counterclaim, crossclaim, defense or other right which any Borrower or any Lender may have at any time against a beneficiary, any successor beneficiary or any transferee of any Letter of Credit or the proceeds thereof (or any Persons for whom any such transferee may be acting), Agent or any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between any Borrower or any Subsidiaries of such Borrower and the beneficiary for which any Letter of Credit was procured);

          (e) the lack of power or authority of any signer of (or any defect in or forgery of any signature or endorsement on) or the form of or lack of validity, sufficiency, accuracy,

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enforceability or genuineness of any draft, demand, instrument, certificate or other document presented under or in connection with any Letter of Credit, or any fraud or alleged fraud in connection with any Letter of Credit, or the transport of any property or provisions of services relating to a Letter of Credit, in each case even if Agent or any of Agent’s Affiliates has been notified thereof;

          (f) payment by Agent under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit;

          (g) the solvency of, or any acts or omissions by, any beneficiary of any Letter of Credit, or any other Person having a role in any transaction or obligation relating to a Letter of Credit, or the existence, nature, quality, quantity, condition, value or other characteristic of any property or services relating to a Letter of Credit;

          (h) any failure by the Agent or any of Agent’s Affiliates to issue any Letter of Credit in the form requested by Borrowing Agent, unless the Agent has received written notice from Borrowing Agent of such failure within three (3) Business Days after the Agent shall have furnished Borrowing Agent a copy of such Letter of Credit and such error is material and no drawing has been made thereon prior to receipt of such notice;

          (i) any Material Adverse Effect on any Borrower or any Guarantor;

          (j) any breach of this Agreement or any Other Document by any party thereto;

          (k) the occurrence or continuance of an insolvency proceeding with respect to any Borrower or any Guarantor;

          (l) the fact that a Default or Event of Default shall have occurred and be continuing;

          (m) the fact that the Term shall have expired or this Agreement or the Obligations hereunder shall have been terminated; and

          (n) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.

     2.17. Indemnity. In addition to amounts payable as provided in Section 16.5, each US Borrower hereby agrees to protect, indemnify, pay and save harmless Agent and any of Agent’s Affiliates that have issued a Letter of Credit from and against any and all claims, demands, liabilities, damages, taxes, penalties, interest, judgments, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs of internal counsel) which the Agent or any of Agent’s Affiliates may incur or be subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit, other than as a result of (a) the gross negligence or willful misconduct of the Agent as determined by a final and non-appealable judgment of a court of competent jurisdiction or (b) the wrongful dishonor by the Agent or any of Agent’s Affiliates of a proper demand for payment made under any Letter of

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Credit, except if such dishonor resulted from any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Governmental Body (all such acts or omissions herein called “Governmental Acts”).

     2.18. Liability for Acts and Omissions. As between Borrowers and Agent and Lenders, each US Borrower assumes all risks of the acts and omissions of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the respective foregoing, Agent shall not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for an issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged (even if Agent shall have been notified thereof); (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) the failure of the beneficiary of any such Letter of Credit, or any other party to which such Letter of Credit may be transferred, to comply fully with any conditions required in order to draw upon such Letter of Credit or any other claim of any US Borrower against any beneficiary of such Letter of Credit, or any such transferee, or any dispute between or among any US Borrower and any beneficiary of any Letter of Credit or any such transferee; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, facsimile, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of Agent, including any governmental acts, and none of the above shall affect or impair, or prevent the vesting of, any of Agent’s rights or powers hereunder. Nothing in the preceding sentence shall relieve Agent from liability for Agent’s gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment) in connection with actions or omissions described in such clauses (i) through (viii) of such sentence. In no event shall Agent or Agent’s Affiliates be liable to any US Borrower for any indirect, consequential, incidental, punitive, exemplary or special damages or expenses (including without limitation attorneys’ fees), or for any damages resulting from any change in the value of any property relating to a Letter of Credit.

     Without limiting the generality of the foregoing, Agent and each of its Affiliates: (i) may rely on any oral or other communication believed in good faith by Agent or such Affiliate to have been authorized or given by or on behalf of the applicant for a Letter of Credit; (ii) may honor any presentation if the documents presented appear on their face substantially to comply with the terms and conditions of the relevant Letter of Credit; (iii) may honor a previously dishonored presentation under a Letter of Credit, whether such dishonor was pursuant to a court order, to settle or compromise any claim of wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the same extent as if such presentation had initially been honored, together with any interest paid by Agent or its Affiliates; (iv) may honor any drawing that is payable upon presentation of a statement advising negotiation or payment, upon receipt of such statement (even if such statement indicates that a draft or other document is being delivered separately), and shall not be liable for any failure of any such draft or other document to arrive, or to conform

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in any way with the relevant Letter of Credit; (v) may pay any paying or negotiating bank claiming that it rightfully honored under the laws or practices of the place where such bank is located; and (vi) may settle or adjust any claim or demand made on Agent or its Affiliate in any way related to any order issued at the applicant’s request to an air carrier, a letter of guarantee or of indemnity issued to a carrier or any similar document (each an “Order”) and honor any drawing in connection with any Letter of Credit that is the subject of such Order, notwithstanding that any drafts or other documents presented in connection with such Letter of Credit fail to conform in any way with such Letter of Credit.

     In furtherance and extension and not in limitation of the specific provisions set forth above, any action taken or omitted by Agent under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith and without gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment), shall not put Agent under any resulting liability to any Borrower or any Lender.

     2.19. Additional Payments. Any sums expended by Agent or any Lender due to any Borrower’s failure to perform or comply with its obligations under this Agreement or any Other Document including any Borrower’s obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be charged to Borrowers’ Account as a Revolving Advance and added to the Obligations.

     2.20. Manner of Borrowing and Payment.

          (a) Each borrowing of Revolving Advances shall be advanced according to the applicable Commitment Percentages of Lenders.

          (b) Each payment (including each prepayment) by any Borrower on account of the principal of and interest on the Revolving Advances, shall be applied to the Revolving Advances of the relevant Borrowing Group pro rata according to the applicable Commitment Percentages of Lenders. Except as expressly provided herein, all payments (including prepayments) to be made by any Borrower on account of principal, interest and fees shall be made without set off or counterclaim and shall be made to Agent on behalf of the Lenders to the Payment Office, in each case on or prior to 1:00 P.M., New York time, in Dollars and in immediately available funds.

          (c) (i) Notwithstanding anything to the contrary contained in Sections 2.20(a) and (b) hereof, commencing with the first Business Day following the Closing Date, each borrowing of Revolving Advances shall be advanced by Agent and each payment by any Borrower on account of Revolving Advances shall be applied first to those Revolving Advances advanced by Agent. On or before 1:00 P.M., New York time, on each Settlement Date commencing with the first Settlement Date following the Closing Date, Agent and Lenders shall make certain payments as follows: (I) if the aggregate amount of new Revolving Advances made by Agent during the preceding Week (if any) exceeds the aggregate amount of repayments applied to outstanding Revolving Advances during such preceding Week, then each Lender shall provide Agent with funds in an amount equal to its applicable Commitment Percentage of the difference between (w) such Revolving Advances and (x) such repayments and (II) if the

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aggregate amount of repayments applied to outstanding Revolving Advances during such Week exceeds the aggregate amount of new Revolving Advances made during such Week, then Agent shall provide each Lender with funds in an amount equal to its applicable Commitment Percentage of the difference between (y) such repayments and (z) such Revolving Advances.

               (ii) Each Lender shall be entitled to earn interest at the applicable Revolving Interest Rate on outstanding Advances which it has funded.

               (iii) Promptly following each Settlement Date, Agent shall submit to each Lender a certificate with respect to payments received and Advances made during the Week immediately preceding such Settlement Date. Such certificate of Agent shall be conclusive in the absence of manifest error.

          (d) If any Lender or Participant (a “benefited Lender”) shall at any time receive any payment of all or part of its Advances, or interest thereon, or receive any Collateral in respect thereof (whether voluntarily or involuntarily or by set-off) in a greater proportion than any such payment to and Collateral received by any other Lender, if any, in respect of such other Lender’s Advances, or interest thereon, and such greater proportionate payment or receipt of Collateral is not expressly permitted hereunder, such benefited Lender shall purchase for cash from the other Lenders a participation in such portion of each such other Lender’s Advances, or shall provide such other Lender with the benefits of any such Collateral, or the proceeds thereof, as shall be necessary to cause such benefited Lender to share the excess payment or benefits of such Collateral or proceeds ratably with each of the other Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. Each Lender so purchasing a portion of another Lender’s Advances may exercise all rights of payment (including rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion.

          (e) Unless Agent shall have been notified by telephone, confirmed in writing, by any Lender that such Lender will not make the amount which would constitute its applicable Commitment Percentage of the Advances available to Agent, Agent may (but shall not be obligated to) assume that such Lender shall make such amount available to Agent on the next Settlement Date and, in reliance upon such assumption, make available to Borrowers a corresponding amount. Agent will promptly notify Borrowing Agent of its receipt of any such notice from a Lender. If such amount is made available to Agent on a date after such next Settlement Date, such Lender shall pay to Agent on demand an amount equal to the product of (i) the daily average Federal Funds Effective Rate (computed on the basis of a year of 360 days) during such period as quoted by Agent, times (ii) such amount, times (iii) the number of days from and including such Settlement Date to the date on which such amount becomes immediately available to Agent. A certificate of Agent submitted to any Lender with respect to any amounts owing under this paragraph (e) shall be conclusive, in the absence of manifest error. If such amount is not in fact made available to Agent by such Lender within three (3) Business Days after such Settlement Date, Agent shall be entitled to recover such an amount, with interest thereon at the rate per annum then applicable to such Revolving Advances hereunder, on demand from the applicable Borrowing Group; provided, however, that Agent’s right to such recovery shall not prejudice or otherwise adversely affect Borrowers’ rights (if any) against such Lender.

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     2.21. Mandatory Prepayments. Subject to Section 4.3 hereof, when any Borrower sells or otherwise disposes of any Collateral other than (i) Inventory in the Ordinary Course of Business and (ii) other Collateral (excluding Receivables) having a market value in the aggregate not to exceed $250,000 per annum, Borrowers shall repay the Advances in an amount equal to the net proceeds of such sale (i.e., gross proceeds less the reasonable costs of such sales or other dispositions), such repayments to be made promptly but in no event more than one (1) Business Day following receipt of such net proceeds, and until the date of payment, such proceeds shall be held in trust for Agent. The foregoing shall not be deemed to be implied consent to any such sale otherwise prohibited by the terms and conditions hereof. Such repayments shall be applied to, in the case of US Borrowers, the Advances extended to US Borrowers and in the case of Foreign Borrower, the Advances extended to Foreign Borrower, in such order as Agent may determine, subject to Borrowers’ ability to reborrow Revolving Advances in accordance with the terms hereof.

     2.22. Use of Proceeds.

          (a) Borrowers shall apply the proceeds of Advances to (i) repay existing Indebtedness owed to the Ampersand Guarantors, (ii) pay fees and expenses relating to this transaction and costs and expenses incurred by the Ampersand Guarantors in connection with the transactions involving Holdings and its Subsidiaries prior to the date hereof, and (iii) provide for its general corporate purposes, including but not limited to working capital needs, capital expenditures and reimbursement of drawings under Letters of Credit.

          (b) Without limiting the generality of Section 2.22(a) above, neither the Borrowers, the Guarantors, nor any other Person which may in the future become party to this Agreement or the Other Documents as a Borrower or Guarantor, intends to use nor shall they use any portion of the proceeds of the Advances, directly or indirectly, for any purpose in violation of the Trading with the Enemy Act.

     2.23. Defaulting Lender.

          (a) Notwithstanding anything to the contrary contained herein, in the event any Lender (x) has refused (which refusal constitutes a breach by such Lender of its obligations under this Agreement) to make available its portion of any Advance or (y) notifies either Agent or Borrowing Agent that it does not intend to make available its portion of any Advance (if the actual refusal would constitute a breach by such Lender of its obligations under this Agreement) (each, a “Lender Default”), all rights and obligations hereunder of such Lender (a “Defaulting Lender”) as to which a Lender Default is in effect and of the other parties hereto shall be modified to the extent of the express provisions of this Section 2.23 while such Lender Default remains in effect.

          (b) Advances shall be incurred pro rata from Lenders (the “Non-Defaulting Lenders”) which are not Defaulting Lenders based on their respective Commitment Percentages, and no Commitment Percentage of any Lender or any pro rata share of any Advances required to be advanced by any Lender shall be increased as a result of such Lender Default. Amounts received in respect of principal of any type of Advances shall be applied to reduce the applicable Advances of each Lender (other than any Defaulting Lender) pro rata based on the aggregate of

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the outstanding Advances of that type of all Lenders at the time of such application; provided, that, Agent shall not be obligated to transfer to a Defaulting Lender any payments received by Agent for the Defaulting Lender’s benefit, nor shall a Defaulting Lender be entitled to the sharing of any payments hereunder (including any principal, interest or fees). Amounts payable to a Defaulting Lender shall instead be paid to or retained by Agent. Agent may hold and, in its discretion, re-lend to a Borrower the amount of such payments received or retained by it for the account of such Defaulting Lender.

          (c) A Defaulting Lender shall not be entitled to give instructions to Agent or to approve, disapprove, consent to or vote on any matters relating to this Agreement and the Other Documents. All amendments, waivers and other modifications of this Agreement and the Other Documents may be made without regard to a Defaulting Lender and, for purposes of the definition of “Required Lenders”, a Defaulting Lender shall be deemed not to be a Lender and not to have either Advances outstanding or a Commitment Percentage.

          (d) Other than as expressly set forth in this Section 2.23, the rights and obligations of a Defaulting Lender (including the obligation to indemnify Agent) and the other parties hereto shall remain unchanged. Nothing in this Section 2.23 shall be deemed to release any Defaulting Lender from its obligations under this Agreement and the Other Documents, shall alter such obligations, shall operate as a waiver of any default by such Defaulting Lender hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender may have against any Defaulting Lender as a result of any default by such Defaulting Lender hereunder.

          (e) In the event a Defaulting Lender retroactively cures to the satisfaction of Agent the breach which caused a Lender to become a Defaulting Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall be treated as a Lender under this Agreement.

III. INTEREST AND FEES.

     3.1. Interest.

          (a) Interest on Advances shall be payable by each Borrowing Group with respect to its Advances in arrears on the first day of each month with respect to Domestic Rate Loans and, with respect to Eurodollar Rate Loans, at the end of each Interest Period or, for Eurodollar Rate Loans with an Interest Period in excess of three months, at the earlier of (a) each three months from the commencement of such Eurodollar Rate Loan or (b) the end of the Interest Period. Interest charges shall be computed on the actual principal amount of Advances outstanding during the month at a rate per annum equal to, with respect to Revolving Advances, the applicable Revolving Interest Rate. Whenever, subsequent to the date of this Agreement, the Alternate Base Rate is increased or decreased, the Revolving Interest Rate for Domestic Rate Loans shall be similarly changed without notice or demand of any kind by an amount equal to the amount of such change in the Alternate Base Rate during the time such change or changes remain in effect. The Eurodollar Rate shall be adjusted with respect to Eurodollar Rate Loans without notice or demand of any kind on the effective date of any change in the Reserve Percentage as of such effective date. Upon and after the occurrence of an Event of Default, and during the continuation thereof, at the option of Agent or at the direction of Required Lenders,

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the Obligations shall bear interest at the applicable Revolving Interest Rate plus two (2%) percent per annum (the “Default Rate”).

          (b) For the purposes of the Interest Act (Canada) and disclosure thereunder, whenever any interest or any fee to be paid hereunder or in connection herewith is to be calculated on the basis of a 360-day year, the yearly rate of interest to which the rate used in such calculation is equivalent is the rate so used multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by 360. The rates of interest under this Agreement are nominal rates, and not effective rates or yields. The principle of deemed reinvestment of interest does not apply to any interest calculation under this Agreement.

          (c) Any provision of this Agreement that would oblige a Canadian Borrower to pay any fine, penalty or rate of interest on any arrears of principal or interest secured by a mortgage on real property or hypothec on immovables that has the effect of increasing the charge on arrears beyond the rate of interest payable on principal money not in arrears shall not apply to such Canadian Borrower, which shall be required to pay interest on money in arrears at the same rate of interest payable on principal money not in arrears.

          (d) If any provision of this Agreement would oblige a Canadian Borrower to make any payment of interest or other amount payable to any Lender in an amount or calculated at a rate which would be prohibited by law or would result in a receipt by that Lender of “interest” at a “criminal rate” (as such terms are construed under the Criminal Code (Canada)), then, notwithstanding such provision, such amount or rate shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by applicable law or so result in a receipt by that Lender of “interest” at a “criminal rate”, such adjustment to be effected, to the extent necessary (but only to the extent necessary), as follows:

               (i) first, by reducing the amount or rate of interest; and

               (ii) thereafter, by reducing any fees, commissions, costs, expenses, premiums and other amounts required to be paid which would constitute interest for purposes of section 347 of the Criminal Code (Canada).

     3.2. Letter of Credit Fees.

          (a) US Borrowers shall pay (x) to Agent, for the ratable benefit of Lenders, fees for each Letter of Credit for the period from and excluding the date of issuance of same to and including the date of expiration or termination, equal to the average daily face amount of each outstanding Letter of Credit multiplied by the Applicable Margin for Eurodollar Rate Loans then in effect, such fees to be calculated on the basis of a 360-day year for the actual number of days elapsed and to be payable quarterly in arrears on the first day of each quarter and on the last day of the Term, and (y) to the Issuer, a fronting fee of one quarter of one percent (0.25%) per annum, together with any and all administrative, issuance, amendment, payment and negotiation charges with respect to Letters of Credit and all fees and expenses as agreed upon by the Issuer and the Borrowing Agent in connection with any Letter of Credit, including in connection with the opening, amendment or renewal of any such Letter of Credit created thereunder and shall

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reimburse Agent for any and all fees and expenses, if any, paid by Agent to the Issuer (all of the foregoing fees, the “Letter of Credit Fees”). All such charges shall be deemed earned in full on the date when the same are due and payable hereunder and shall not be subject to rebate or pro-ration upon the termination of this Agreement for any reason. Any such charge in effect at the time of a particular transaction shall be the charge for that transaction, notwithstanding any subsequent change in the Issuer’s prevailing charges for that type of transaction. All Letter of Credit Fees payable hereunder shall be deemed earned in full on the date when the same are due and payable hereunder and shall not be subject to rebate or pro-ration upon the termination of this Agreement for any reason. Upon and after the occurrence of an Event of Default, and during the continuation thereof, at the option of Agent or at the direction of Required Lenders, the Letter of Credit Fees described in clause (x) of this Section 3.2(a) shall be increased by an additional two percent (2%) per annum.

          (b) At the option of the Agent or at the direction of the Required Lenders, at any time following the occurrence of an Event of Default or the expiration of the Term, US Borrowers will cause cash to be deposited and maintained in an account with Agent, as cash collateral, in an amount equal to one hundred and five percent (105%) of the Maximum Undrawn Amount, and each Borrower hereby irrevocably authorizes Agent, in its discretion, on such Borrower’s behalf and in such Borrower’s name, to open such an account and to make and maintain deposits therein, or in an account opened by such Borrower, in the amounts required to be made by such Borrower, out of the proceeds of Receivables or other Collateral or out of any other funds of such Borrower coming into any Lender’s possession at any time. Agent will invest such cash collateral (less applicable reserves) in such short-term money-market items as to which Agent and such Borrower mutually agree and the net return on such investments shall be credited to such account and constitute additional cash collateral. No Borrower may withdraw amounts credited to any such account except upon waiver by Agent in writing of all existing Events of Default or upon the occurrence of all of the following: (x) payment and performance in full of all Obligations; (y) expiration of all Letters of Credit; and (z) termination of this Agreement.

     3.3. Closing Fee and Facility Fee.

          (a) Upon the execution of this Agreement, Borrowers shall pay to Agent for the ratable benefit of Lenders a closing fee of $100,000 less that portion of the deposit fee of $70,000, heretofore paid by Borrowers to Agent remaining after application of such fees to out of pocket costs and expenses.

          (b) If, for any calendar quarter during the Term, the average daily unpaid balance of the Revolving Advances and Maximum Undrawn Amount for each day of such calendar quarter does not equal the Maximum Revolving Advance Amount, then Borrowers shall pay to Agent for the ratable benefit of Lenders a fee at a per annum rate equal to the Applicable Margin For Facility Fee corresponding to the Fixed Charge Coverage Ratio. Such fee shall be payable at such Applicable Margin on the amount by which the Maximum Revolving Advance Amount exceeds the average daily unpaid balance and shall be payable to Agent in arrears on the first day of each calendar quarter with respect to the previous calendar quarter.

     3.4. Collateral Evaluation Fee and Collateral Monitoring Fee.

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          (a) Borrowers shall pay Agent a collateral monitoring fee equal to $1,500 per month commencing on the first day of the month following the Closing Date and on the first day of each month thereafter during the Term. The collateral monitoring fee shall be deemed earned in full on the date when same is due and payable hereunder and shall not be subject to rebate or proration upon termination of this Agreement for any reason.

          (b) Borrowers shall pay to Agent on the first day of each month following any month in which Agent performs any collateral evaluation — namely any field examination, collateral analysis, the need for which is to be determined by Agent and which evaluation is undertaken by Agent or for Agent’s benefit — a collateral evaluation fee in an amount equal to $850 per day for each person employed to perform such evaluation, plus all reasonable out of pocket costs and disbursements incurred by Agent in the performance of such examination or analysis.

     3.5. Computation of Interest and Fees. Subject to, in the case of Foreign Borrower, to Section 3.1(b) hereof, interest and fees hereunder shall be computed on the basis of a year of 360 days and for the actual number of days elapsed. If any payment to be made hereunder becomes due and payable on a day other than a Business Day, the due date thereof shall be extended to the next succeeding Business Day and interest thereon shall be payable at the Revolving Interest Rate for Domestic Rate Loans during such extension.

     3.6. Maximum Charges. In no event whatsoever shall interest and other charges charged hereunder exceed the highest rate permissible under law. In the event interest and other charges as computed hereunder would otherwise exceed the highest rate permitted under law, such excess amount shall be first applied to any unpaid principal balance owed by Borrowers, and if the then remaining excess amount is greater than the previously unpaid principal balance, Lenders shall promptly refund such excess amount to Borrowers and the provisions hereof shall be deemed amended to provide for such permissible rate.

     3.7. Increased Costs. In the event that any Applicable Law or any change therein or in the interpretation or application thereof, or compliance by any Lender (for purposes of this Section 3.7, the term “Lender” shall include Agent or any Lender and any corporation or bank controlling Agent or any Lender) and the office or branch where Agent or any Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any request or directive (whether or not having the force of law) from any central bank or other financial, monetary or other authority, shall:

          (a) subject Agent or any Lender to any tax of any kind whatsoever with respect to this Agreement or any Other Document or change the basis of taxation of payments to Agent or any Lender of principal, fees, interest or any other amount payable hereunder or under any Other Documents (except for changes in the rate of tax on the overall net income of Agent or any Lender by the jurisdiction in which it maintains its principal office);

          (b) impose, modify or hold applicable any reserve, special deposit, assessment or similar requirement against assets held by, or deposits in or for the account of, advances or loans by, or other credit extended by, any office of Agent or any Lender, including pursuant to Regulation D of the Board of Governors of the Federal Reserve System;

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          (c) impose on Agent or any Lender or the London interbank Eurodollar market any other condition with respect to this Agreement or any Other Document;

     and the result of any of the foregoing is to increase the cost to Agent or any Lender of making, renewing or maintaining its Advances hereunder by an amount that Agent or such Lender deems to be material or to reduce the amount of any payment (whether of principal, interest or otherwise) in respect of any of the Advances by an amount that Agent or such Lender deems to be material, then, in any case Borrowers shall promptly pay Agent or such Lender, upon its demand, such additional amount as will compensate Agent or such Lender for such additional cost or such reduction, as the case may be, provided that the foregoing shall not apply to increased costs which are reflected in the Eurodollar Rate, as the case may be. Agent or such Lender shall certify the amount of such additional cost or reduced amount to Borrowing Agent, and such certification shall be conclusive absent manifest error.

     3.8. Basis For Determining Interest Rate Inadequate or Unfair. In the event that Agent or any Lender shall have determined that:

          (a) reasonable means do not exist for ascertaining the Eurodollar Rate applicable pursuant to Section 2.2 hereof for any Interest Period; or

          (b) Dollar deposits in the relevant amount and for the relevant maturity are not available in the London interbank Eurodollar market, with respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan, or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate Loan,

     then Agent shall give Borrowing Agent prompt written, telephonic or telegraphic notice of such determination. If such notice is given, (i) any such requested Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrowing Agent shall notify Agent no later than 10:00 a.m. (New York City time) two (2) Business Days prior to the date of such proposed borrowing, that its request for such borrowing shall be cancelled or made as an unaffected type of Eurodollar Rate Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have been converted to an affected type of Eurodollar Rate Loan shall be continued as or converted into a Domestic Rate Loan, or, if Borrowing Agent shall notify Agent, no later than 10:00 a.m. (New York City time) two (2) Business Days prior to the proposed conversion, shall be maintained as an unaffected type of Eurodollar Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loans shall be converted into a Domestic Rate Loan, or, if Borrowing Agent shall notify Agent, no later than 10:00 a.m. (New York City time) two (2) Business Days prior to the last Business Day of the then current Interest Period applicable to such affected Eurodollar Rate Loan, shall be converted into an unaffected type of Eurodollar Rate Loan, on the last Business Day of the then current Interest Period for such affected Eurodollar Rate Loans. Until such notice has been withdrawn, Lenders shall have no obligation to make an affected type of Eurodollar Rate Loan or maintain outstanding affected Eurodollar Rate Loans and no Borrower shall have the right to convert a Domestic Rate Loan or an unaffected type of Eurodollar Rate Loan into an affected type of Eurodollar Rate Loan.

     3.9. Capital Adequacy.

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          (a) In the event that Agent or any Lender shall have determined that any Applicable Law or guideline regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Body, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by Agent or any Lender (for purposes of this Section 3.9, the term “Lender” shall include Agent or any Lender and any corporation or bank controlling Agent or any Lender) and the office or branch where Agent or any Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on Agent or any Lender’s capital as a consequence of its obligations hereunder to a level below that which Agent or such Lender could have achieved but for such adoption, change or compliance (taking into consideration Agent’s and each Lender’s policies with respect to capital adequacy) by an amount deemed by Agent or any Lender to be material, then, from time to time, Borrowers shall pay upon demand to Agent or such Lender such additional amount or amounts as will compensate Agent or such Lender for such reduction. In determining such amount or amounts, Agent or such Lender may use any reasonable averaging or attribution methods. The protection of this Section 3.9 shall be available to Agent and each Lender regardless of any possible contention of invalidity or inapplicability with respect to the Applicable Law or condition.

          (b) A certificate of Agent or such Lender setting forth such amount or amounts as shall be necessary to compensate Agent or such Lender with respect to Section 3.9(a) hereof when delivered to Borrowing Agent shall be conclusive absent manifest error.

     3.10. Gross Up for Taxes. If any Borrower shall be required by Applicable Law to withhold or deduct any taxes from or in respect of any sum payable under this Agreement or any of the Other Documents to Agent, or any Lender, assignee of any Lender, or Participant (each, individually, a “Payee” and collectively, the “Payees”), (a) the sum payable to such Payee or Payees, as the case may be, shall be increased as may be necessary so that, after making all required withholding or deductions, the applicable Payee or Payees receives an amount equal to the sum it would have received had no such withholding or deductions been made (the “Gross-Up Payment”), (b) such Borrower shall make such withholding or deductions, and (c) such Borrower shall pay the full amount withheld or deducted to the relevant taxation authority or other authority in accordance with Applicable Law. Notwithstanding the foregoing, no Borrower shall be obligated to make any portion of the Gross-Up Payment that is attributable to any withholding or deductions that would not have been paid or claimed had the applicable Payee or Payees properly claimed a complete exemption with respect thereto pursuant to Section 3.11 hereof.

     3.11. Withholding Tax Exemption.

          (a) Each Payee that is not incorporated under the Laws of the United States of America or a state thereof (and, upon the written request of Agent, each other Payee) agrees that it will deliver to Borrowing Agent and Agent two (2) duly completed appropriate valid Withholding Certificates (as defined under §1.1441-1(c)(16) of the Income Tax Regulations (“Regulations”)) certifying its status (i.e., U.S. or foreign person) and, if appropriate, making a claim of reduced, or exemption from, U.S. withholding tax on the basis of an income tax treaty

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or an exemption provided by the Code. The term “Withholding Certificate” means a Form W-9; a Form W-8BEN; a Form W-8ECI; a Form W-8IMY and the related statements and certifications as required under §1.1441-1(e)(2) and/or (3) of the Regulations; a statement described in §1.871-14(c)(2)(v) of the Regulations; or any other certificates under the Code or Regulations that certify or establish the status of a payee or beneficial owner as a U.S. or foreign person.

          (b) Each Payee required to deliver to Borrowing Agent and Agent a valid Withholding Certificate pursuant to Section 3.11(a) hereof shall deliver such valid Withholding Certificate as follows: (i) each Payee which is a party hereto on the Closing Date shall deliver such valid Withholding Certificate at least five (5) Business Days prior to the first date on which any interest or fees are payable by any Borrower hereunder for the account of such Payee; (ii) each Payee shall deliver such valid Withholding Certificate at least five (5) Business Days before the effective date of such assignment or participation (unless Agent in its sole discretion shall permit such Payee to deliver such Withholding Certificate less than five (5) Business Days before such date in which case it shall be due on the date specified by Agent). Each Payee which so delivers a valid Withholding Certificate further undertakes to deliver to Borrowing Agent and Agent two (2) additional copies of such Withholding Certificate (or a successor form) on or before the date that such Withholding Certificate expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent Withholding Certificate so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by Borrowing Agent or Agent.

          (c) Notwithstanding the submission of a Withholding Certificate claiming a reduced rate of or exemption from U.S. withholding tax required under Section 3.11(b) hereof, Agent shall be entitled to withhold United States federal income taxes at the full 30% withholding rate if in its reasonable judgment it is required to do so under the due diligence requirements imposed upon a withholding agent under §1.1441-7(b) of the Regulations. Further, Agent is indemnified under §1.1461-1(e) of the Regulations against any claims and demands of any Payee for the amount of any tax it deducts and withholds in accordance with regulations under §1441 of the Code.

IV. COLLATERAL: GENERAL TERMS

     4.1. Security Interest in the Collateral.

          (a) To secure the prompt payment and performance to Agent and each Lender of the Obligations, each US Borrower hereby assigns, pledges and grants to Agent for its benefit and for the ratable benefit of each Lender a continuing security interest in and to and Lien on all of its Collateral, whether now owned or existing or hereafter acquired or arising and wheresoever located; provided, however, that the grant of the security interest in Collateral consisting of 65% of the Equity Interest of Foreign Borrower shall have been granted pursuant to the respective Foreign Security Agreements and shall not be deemed granted hereunder.

          (b) To secure the prompt payment and performance to Agent and each Lender of the Foreign Obligations, Foreign Borrower hereby assigns, pledges and grants to Agent for its benefit and for the ratable benefit of each Lender a continuing security interest in and to and Lien

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on all of its Collateral, whether now owned or existing or hereafter acquired or arising and wheresoever located.

          (c) Each Borrower shall mark its books and records as may be necessary or appropriate to evidence, protect and perfect Agent’s security interest and shall cause its financial statements to reflect such security interest. Each Borrower shall promptly provide Agent with written notice of all commercial tort claims, such notice to contain the case title together with the applicable court and a brief description of the claim(s). Upon delivery of each such notice, such Borrower shall be deemed to hereby grant to Agent a security interest and lien in and to such commercial tort claims and all proceeds thereof.

     4.2. Perfection of Security Interest. Each Borrower shall take all action that may be necessary or desirable, or that Agent may reasonably request, so as at all times to maintain the validity, perfection, enforceability and priority of Agent’s security interest in and Lien on the Collateral or to enable Agent to protect, exercise or enforce its rights hereunder and in the Collateral, including, but not limited to, (i) immediately discharging all Liens other than Permitted Encumbrances, (ii) obtaining Lien Waiver Agreements, with respect to the chief executive officer of the Borrowers, (iii) delivering to Agent, endorsed or accompanied by such instruments of assignment as Agent may specify, and stamping or marking, in such manner as Agent may specify, any and all chattel paper, instruments, letters of credits and advices thereof and documents evidencing or forming a part of the Collateral, (iv) entering into warehousing, lockbox and other custodial arrangements satisfactory to Agent, and (v) executing and delivering financing statements, control agreements, instruments of pledge, mortgages, notices and assignments, in each case in form and substance satisfactory to Agent, relating to the creation, validity, perfection, maintenance or continuation of Agent’s security interest and Lien under the Uniform Commercial Code or other Applicable Law (subject to any limitations expressly stated herein or in any Other Document). By its signature hereto, each Borrower hereby authorizes Agent to file against such Borrower, one or more financing, continuation or amendment statements pursuant to the Uniform Commercial Code in form and substance satisfactory to Agent (which statements may have a description of collateral which is broader than that set forth herein). All charges, expenses and fees Agent may incur in doing any of the foregoing, and any local taxes relating thereto, shall be charged to Borrowers’ Account as a Revolving Advance of a Domestic Rate Loan and added to the Obligations, or, at Agent’s option, shall be paid to Agent for its benefit and for the ratable benefit of Lenders immediately upon demand.

     4.3. Disposition of Collateral. Each Borrower will safeguard and protect all Collateral for Agent’s general account and make no disposition thereof whether by sale, lease or otherwise except (a) the sale of Inventory in the Ordinary Course of Business and (b) the disposition or transfer of obsolete and worn out Equipment in the Ordinary Course of Business during any fiscal year having an aggregate fair market value of not more than $250,000 and only to the extent that (i) the proceeds of any such disposition are used to acquire replacement Equipment which is subject to Agent’s first priority security interest or (ii) the proceeds of which are remitted to Agent to be applied pursuant to and to the extent required by Section 2.21 and (c) the disposition of Collateral by any Borrower to any other Borrower.

     4.4. Preservation of Collateral. Following the occurrence and during the continuance of an Event of Default in addition to the rights and remedies set forth in Section 11.1 hereof,

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Agent: (a) may at any time take such steps as Agent deems necessary to protect Agent’s interest in and to preserve the Collateral, including the hiring of such security guards or the placing of other security protection measures as Agent may deem appropriate; (b) may employ and maintain at any of any Borrower’s premises a custodian who shall have full authority to do all acts necessary to protect Agent’s interests in the Collateral; (c) may lease warehouse facilities to which Agent may move all or part of the Collateral; (d) may use any Borrower’s owned or leased lifts, hoists, trucks and other facilities or equipment for handling or removing the Collateral; and (e) shall have, and is hereby granted, a right of ingress and egress to the places where the Collateral is located, and may proceed over and through any of Borrowers’ owned or leased property. Each Borrower shall cooperate fully with all of Agent’s efforts to preserve the Collateral and will take such actions to preserve the Collateral as Agent may direct. All of Agent’s expenses of preserving the Collateral, including any expenses relating to the bonding of a custodian, shall be charged to Borrowers’ Account as a Revolving Advance maintained as a Domestic Rate Loan and added to the Obligations.

     4.5. Ownership of Collateral.

          (a) With respect to the Collateral, at the time the Collateral becomes subject to Agent’s security interest: (i) each Borrower shall be the sole owner of and fully authorized and able to sell, transfer, pledge and/or grant a first priority security interest in each and every item of the its respective Collateral to Agent; and, except for Permitted Encumbrances the Collateral shall be free and clear of all Liens and encumbrances whatsoever; (ii) each document and agreement executed by each Borrower or delivered to Agent or any Lender in connection with this Agreement shall be true and correct in all respects; (iii) all signatures and endorsements of each Borrower that appear on such documents and agreements shall be genuine and each Borrower shall have full capacity to execute same; and (iv) each Borrower’s Equipment and Inventory shall be located as set forth on Schedule 4.5 and shall not be removed from such location(s) (it being understood that Borrowers may move such Equipment and Inventory among such locations) without the prior written consent of Agent except with respect to the sale of Inventory in the Ordinary Course of Business and Equipment to the extent permitted in Section 4.3 hereof. Borrowers, Agent and Lenders acknowledge and agree that Schedule 4.5 shall be deemed to be updated to include any additional locations that Agent is notified of in accordance with Section 9.11.

          (b) (i) Schedule 4.5 hereto sets forth a correct and complete list as of the Closing Date of (A) each place of business of each Borrower and (B) the chief executive office of each Borrower; and (ii) Schedule 4.5 hereto sets forth a correct and complete list as of the Closing Date of the location, by state and street address, of all Real Property owned or leased by each Borrower.

     4.6. Defense of Agent’s and Lenders’ Interests. Until (a) payment and performance in full of all of the Obligations and (b) termination of this Agreement, Agent’s interests in the Collateral shall continue in full force and effect. During such period no Borrower shall, without Agent’s prior written consent, pledge, sell (except Inventory in the Ordinary Course of Business and Equipment to the extent permitted in Section 4.3 hereof), assign, transfer, create or suffer to

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exist a Lien upon or encumber or allow or suffer to be encumbered in any way except for Permitted Encumbrances, any part of the Collateral. Each Borrower shall defend Agent’s interests in the Collateral against any and all Persons whatsoever. At any time following demand by Agent for payment of all Obligations, Agent shall have the right to take possession of the indicia of the Collateral and the Collateral in whatever physical form contained, including: labels, stationery, documents, instruments and advertising materials. If Agent exercises this right to take possession of the Collateral, Borrowers shall, upon demand, assemble it and make it available to Agent at a place reasonably convenient to Agent. In addition, with respect to all Collateral, Agent and Lenders shall be entitled to all of the rights and remedies set forth herein and further provided by the Uniform Commercial Code or other Applicable Law. Each Borrower shall, and Agent may, at its option, instruct all suppliers, carriers, forwarders, warehousers or others receiving or holding cash, checks, Inventory, documents or instruments in which Agent holds a security interest to deliver same to Agent and/or subject to Agent’s order and if they shall come into any Borrower’s possession, they, and each of them, shall be held by such Borrower in trust as Agent’s trustee, and such Borrower will immediately deliver them to Agent in their original form together with any necessary endorsement.

     4.7. Books and Records. Each Borrower shall (a) keep proper books of record and account in which full, true and correct entries will be made of all dealings or transactions of or in relation to its business and affairs; (b) set up on its books accruals with respect to all taxes, assessments, charges, levies and claims; and (c) on a reasonably current basis set up on its books, from its earnings, allowances against doubtful Receivables, advances and investments and all other proper accruals (including by reason of enumeration, accruals for premiums, if any, due on required payments and accruals for depreciation, obsolescence, or amortization of properties), which should be set aside from such earnings in connection with its business. All determinations pursuant to this subsection shall be made in accordance with, or as required by, GAAP consistently applied in the opinion of such independent public accountant as shall then be regularly engaged by Borrowers.

     4.8. Financial Disclosure. Each Borrower hereby irrevocably authorizes and directs all accountants and auditors employed by such Borrower at any time during the Term to exhibit and deliver to Agent and each Lender copies of any of such Borrower’s financial statements, trial balances or other accounting records of any sort in the accountant’s or auditor’s possession, and to disclose to Agent and each Lender any information such accountants may have concerning such Borrower’s financial status and business operations. Each Borrower hereby authorizes all Governmental Bodies to furnish to Agent and each Lender copies of reports or examinations relating to such Borrower, whether made by such Borrower or otherwise; however, Agent and each Lender will attempt to obtain such information or materials directly from such Borrower prior to obtaining such information or materials from such accountants or Governmental Bodies.

     4.9. Compliance with Laws. Each Borrower shall comply with all Applicable Laws with respect to the Collateral or any part thereof or to the operation of such Borrower’s business the non-compliance with which could reasonably be expected to have a Material Adverse Effect. The assets of Borrowers at all times shall be maintained in accordance with the requirements of all insurance carriers which provide insurance with respect to the assets of Borrowers so that such insurance shall remain in full force and effect.

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     4.10. Inspection of Premises. At all reasonable times Agent and each Lender shall have full access to and the right to audit, check, inspect and make abstracts and copies from each Borrower’s books, records, audits, correspondence and all other papers relating to the Collateral and the operation of each Borrower’s business. Agent, any Lender and their agents may enter upon any premises of any Borrower at any time during business hours and at any other reasonable time, and from time to time, for the purpose of inspecting the Collateral and any and all records pertaining thereto and the operation of such Borrower’s business.

     4.11. Insurance. The assets and properties of each Borrower at all times shall be maintained in accordance with the requirements of all insurance carriers which provide insurance with respect to the assets and properties of such Borrower so that such insurance shall remain in full force and effect. Each Borrower shall bear the full risk of any loss of any nature whatsoever with respect to the Collateral. At each Borrower’s own cost and expense in amounts and with carriers acceptable to Agent, each Borrower shall (a) keep all its insurable properties and properties in which such Borrower has an interest insured against the hazards of fire, flood, sprinkler leakage, those hazards covered by extended coverage insurance and such other hazards, and for such amounts, as is customary in the case of companies engaged in businesses similar to such Borrower’s; (b) maintain a bond in such amounts as is customary in the case of companies engaged in businesses similar to such Borrower insuring against larceny, embezzlement or other criminal misappropriation of insured’s officers and employees who may either singly or jointly with others at any time have access to the assets or funds of such Borrower either directly or through authority to draw upon such funds or to direct generally the disposition of such assets; (c) maintain public and product liability insurance against claims for personal injury, death or property damage suffered by others; (d) maintain all such worker’s compensation or similar insurance as may be required under the laws of any state or jurisdiction in which such Borrower is engaged in business; (e) reserved; (f) furnish Agent with (i) copies of all policies and evidence of the maintenance of such policies by the renewal thereof no more than thirty (30) days following any expiration date, provided that such Borrower’s failure to provide such policies and evidence shall not constitute an Event of Default unless such Borrower continues to fail to provide the same within ten (10) days after receipt of written notice from Agent, and (ii) appropriate loss payable endorsements in form and substance satisfactory to Agent, naming Agent as a co-insured and loss payee as its interests may appear with respect to all insurance coverage referred to in clauses (a) and (c) above, and providing (A) that all proceeds thereunder shall be payable to Agent, (B) no such insurance shall be affected by any act or neglect of the insured or owner of the property described in such policy, and (C) that such policy and loss payable clauses may not be cancelled, amended or terminated unless at least thirty (30) days’ prior written notice is given to Agent. In the event of any loss thereunder, the carriers named therein hereby are directed by Agent and the applicable Borrower to make payment for such loss to Agent and not to such Borrower and Agent jointly. If any insurance losses are paid by check, draft or other instrument payable to any Borrower and Agent jointly, Agent may endorse such Borrower’s name thereon and do such other things as Agent may deem advisable to reduce the same to cash. Agent is hereby authorized to adjust and compromise claims under insurance coverage referred to in clauses (a), and (b) above. All loss recoveries received by Agent upon any such insurance may be applied to the Obligations, in such order as Agent in its reasonable discretion shall determine. Any surplus shall be paid by Agent to Borrowers or applied as may be otherwise required by law. Any deficiency thereon shall be paid by Borrowers to Agent, on demand.

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     4.12. Failure to Pay Insurance. If any Borrower fails to obtain insurance as hereinabove provided, or to keep the same in force, Agent, if Agent so elects, may obtain such insurance and pay the premium therefor on behalf of such Borrower, and charge Borrowers’ Account therefor as a Revolving Advance of a Domestic Rate Loan and such expenses so paid shall be part of the Obligations.

     4.13. Payment of Taxes. Each Borrower will pay, when due, all taxes, assessments and other Charges lawfully levied or assessed upon such Borrower or any of the Collateral including real and personal property taxes, assessments and charges and all franchise, income, employment, social security benefits, withholding, and sales taxes, provided that no such tax, assessment or charge need be paid if it is being Properly Contested. If any tax by any Governmental Body is or may be imposed on or as a result of any transaction between any Borrower and Agent or any Lender which Agent or any Lender may be required to withhold or pay or if any taxes, assessments, or other Charges remain unpaid after the date fixed for their payment, or if any claim shall be made which, in Agent’s or any Lender’s opinion, may possibly create a valid Lien on the Collateral, Agent may without notice to Borrowers pay the taxes, assessments or other Charges and the relevant Borrowing Group hereby indemnifies and holds Agent and each Lender harmless in respect thereof. Agent will not pay any taxes, assessments or Charges to the extent that such taxes, assessments or Charges are being Properly Contested. The amount of any payment by Agent under this Section 4.13 shall be charged to the relevant Borrowers’ Account as a Revolving Advance maintained as a Domestic Rate Loan and added to the Obligations and, until Borrowers shall furnish Agent with an indemnity therefor (or supply Agent with evidence satisfactory to Agent that due provision for the payment thereof has been made), Agent may hold without interest any balance standing to Borrowers’ credit and Agent shall retain its security interest in and Lien on any and all Collateral held by Agent.

     4.14. Payment of Leasehold Obligations. Each Borrower shall at all times pay, when and as due, its rental obligations under all leases under which it is a tenant, and shall otherwise comply, in all material respects, with all other terms of such leases and keep them in full force and effect and, at Agent’s request will provide evidence of having done so.

     4.15. Receivables.

          (a) Nature of Receivables. Each of the Receivables shall be a bona fide and valid account representing a bona fide indebtedness incurred by the Customer therein named, for a fixed sum as set forth in the invoice relating thereto (provided immaterial or unintentional invoice errors shall not be deemed to be a breach hereof) with respect to an absolute sale or lease and delivery of goods upon stated terms of a Borrower, or work, labor or services theretofore rendered by a Borrower as of the date each Receivable is created. Same shall be due and owing in accordance with the applicable Borrower’s standard terms of sale without dispute, setoff or counterclaim except as may be stated on the accounts receivable schedules delivered by Borrowers to Agent.

          (b) Solvency of Customers. Each Customer, to the Borrowers’ knowledge, as of the date each Receivable is created, is solvent and able to pay all Receivables on which the Customer is obligated in full when due or with respect to such Customers of any Borrower who

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are known to such Borrower not to be solvent such Borrower has set up on its books and in its financial records bad debt reserves adequate to cover such Receivables.

          (c) Location of Borrowers. Each Borrower’s chief executive office is located at 1601 Trapelo Road, Suite 162, Waltham, Massachusetts 02451 and 5285 Solar Drive, Mississauga, Ontario, Canada L4W5B8. Until written notice is given to Agent by Borrowing Agent of any other office at which any Borrower keeps its records pertaining to Receivables, all such records shall be kept at such executive office.

          (d) Collection of Receivables. Each Borrower shall instruct its Customers to deliver all remittances upon Receivables to such lockbox account or Blocked Account as Agent shall designate from time to time as contemplated by Section 4.15(h) or as otherwise agreed to from time to time by Agent. Notwithstanding the foregoing, to the extent any Borrower directly receives any remittances upon Receivables, such Borrower will, at its sole cost and expense, but on Agent’s behalf and for Agent’s account, collect as Agent’s property and in trust for Agent such amounts received on Receivables, and shall not commingle such collections with any Borrower’s or use the same except to pay Obligations. Each Borrower shall, upon request, deliver to Agent, or deposit in a Blocked Account, in original form and on the date of receipt thereof, all checks, drafts, notes, money orders, acceptances, cash and other evidences of Indebtedness.

          (e) Notification of Assignment of Receivables. At any time following the occurrence and during the continuance of an Event of Default or when Agent in its Permitted Discretion deems it to be in the Lenders’ best interest to do so, Agent shall have the right to send notice of Agent’s security interest in, and Lien on, the Receivables to any and all Customers and directing such Customer to pay such Receivable to Borrowers’ Blocked Account for the benefit of Agent. Upon the occurrence and during the continuance of an Event of Default, Agent shall have the sole right to collect the Receivables, take possession of the Collateral, or both. Agent’s actual collection expenses, including, but not limited to, stationery and postage, telephone and telegraph, secretarial and clerical expenses and the salaries of any collection personnel used for collection, may be charged to Borrowers’ Account and added to the Obligations.

          (f) Power of Agent to Act on Borrowers’ Behalf. Agent shall have the right to receive, endorse, assign and/or deliver in the name of Agent or any Borrower any and all checks, drafts and other instruments for the payment of money relating to the Receivables, and each Borrower hereby waives notice of presentment, protest and non-payment of any instrument so endorsed. Each Borrower hereby constitutes Agent or Agent’s designee as such Borrower’s attorney with power (i) at any time: (A) to endorse such Borrower’s name upon any notes, acceptances, checks, drafts, money orders or other evidences of payment or Collateral; (B) to sign such Borrower’s name on any invoice or bill of lading relating to any of the Receivables, drafts against Customers, assignments and verifications of Receivables; (C) to send verifications of Receivables to any Customer as provided in Section 9.2 hereof; (D) to sign such Borrower’s name on all financing statements or any other documents or instruments deemed necessary or appropriate by Agent to preserve, protect, or perfect Agent’s interest in the Collateral and to file same; and (ii) at any time following the occurrence and during the continuance of an Event of Default: (A) to demand payment of the Receivables; (B) to enforce payment of the Receivables by legal proceedings or otherwise; (C) to exercise all of such Borrower’s rights and remedies

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with respect to the collection of the Receivables and any other Collateral; (D) to settle, adjust, compromise, extend or renew the Receivables; (E) to settle, adjust or compromise any legal proceedings brought to collect Receivables; (F) to prepare, file and sign such Borrower’s name on a proof of claim in bankruptcy or similar document against any Customer; (G) to prepare, file and sign such Borrower’s name on any notice of Lien, assignment or satisfaction of Lien or similar document in connection with the Receivables; and (H) to do all other acts and things necessary to carry out this Agreement. All acts of said attorney or designee are hereby ratified and approved, and said attorney or designee shall not be liable for any acts of omission or commission nor for any error of judgment or mistake of fact or of law, unless done maliciously or with gross (not mere) negligence (as determined by a court of competent jurisdiction in a final non-appealable judgment); this power being coupled with an interest is irrevocable while any of the Obligations remain unpaid. Agent shall have the right at any time following the occurrence and during the continuance of an Event of Default, to change the address for delivery of mail addressed to any Borrower to such address as Agent may designate and to receive, open and dispose of all mail addressed to any Borrower.

          (g) No Liability. Neither Agent nor any Lender shall, under any circumstances or in any event whatsoever, have any liability for any error or omission or delay of any kind occurring in the settlement, collection or payment of any of the Receivables or any instrument received in payment thereof, or for any damage resulting therefrom. Following the occurrence and during the continuance of an Event of Default, Agent may, without notice or consent from any Borrower, sue upon or otherwise collect, extend the time of payment of, compromise or settle for cash, credit or upon any terms any of the Receivables or any other securities, instruments or insurance applicable thereto and/or release any obligor thereof. Agent is authorized and empowered to accept following the occurrence and during the continuance of an Event of Default the return of the goods represented by any of the Receivables, without notice to or consent by any Borrower, all without discharging or in any way affecting any Borrower’s liability hereunder.

          (h) Establishment of a Lockbox Account, Dominion Account. All proceeds of Collateral shall be deposited by Borrowers into either (i) a lockbox account, dominion account or such other “blocked account” (“Blocked Accounts”) established at a bank or banks (each such bank, a “Blocked Account Bank”) pursuant to an arrangement with such Blocked Account Bank as may be selected by Borrowing Agent and be acceptable to Agent or (ii) depository accounts (“Depository Accounts”) established at the Agent for the deposit of such proceeds. Each applicable Borrower, Agent and each Blocked Account Bank shall enter into a deposit account control agreement in form and substance satisfactory to Agent directing such Blocked Account Bank to transfer such funds so deposited to Agent, (i) to any account maintained by Agent at said Blocked Account Bank, (ii) by wire transfer to appropriate account(s) of Agent or (iii) with respect to the Foreign Blocked Accounts, in accordance with the instructions given by Agent to such Blocked Account Bank following the delivery of any revocation notice; provided that, with respect to any Foreign Blocked Accounts, prior to the occurrence of an Event of Default, the respective Borrower may, from time to time, transfer funds from a Foreign Blocked Account (into which collections of Receivables are directed to be paid) to an operating account at the same bank (which, to the extent practicable in the respective jurisdiction, shall also constitute a Blocked Account), and utilize such funds for general operating needs and for loans and investments to the extent permitted under this Agreement, and deliver to Agent an accounting

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thereof no less frequently then on a monthly basis. Agent reserves the right, however, to notify the respective bank with respect to any Blocked Account, at any time, that funds may only be transferred thereafter from the collection account to the operating account with the written approval of Agent. All funds deposited in such Blocked Accounts shall immediately become the property of Agent (except as otherwise provided in agreements entered into by Agent with respect to Blocked Accounts located outside of the United States) and Borrowing Agent shall obtain the agreement by such Blocked Account Bank to waive any offset rights against the funds so deposited. Neither Agent nor any Lender assumes any responsibility for such blocked account arrangement, including any claim of accord and satisfaction or release with respect to deposits accepted by any Blocked Account Bank thereunder. All deposit accounts and investment accounts of each Borrower and its Subsidiaries are set forth on Schedule 4.15(h).

          (i) Adjustments. No Borrower will, without Agent’s consent, compromise or adjust any material amount of the Receivables (or materially extend the time for payment thereof) or accept any material returns of merchandise or grant any additional discounts, allowances or credits thereon except for those compromises, adjustments, returns, discounts, credits and allowances as have been heretofore customary in the business of such Borrower.

     4.16. Inventory. To the extent Inventory held for sale or lease has been produced by any Borrower, it has been and will be produced by such Borrower in accordance with the Federal Fair Labor Standards Act of 1938, as amended, and all rules, regulations and orders thereunder.

     4.17. Maintenance of Equipment. The Equipment shall be maintained in good operating condition and repair (reasonable wear and tear excepted) and all necessary replacements of and repairs thereto shall be made so that the value and operating efficiency of the Equipment shall be maintained and preserved. No Borrower shall use or operate the Equipment in violation of any law, statute, ordinance, code, rule or regulation. Each Borrower shall have the right to sell Equipment to the extent permitted in Section 4.3 hereof.

     4.18. Exculpation of Liability. Nothing herein contained shall be construed to constitute Agent or any Lender as any Borrower’s agent for any purpose whatsoever, nor shall Agent or any Lender be responsible or liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same may be located and regardless of the cause thereof. Neither Agent nor any Lender, whether by anything herein or in any assignment or otherwise, assume any of any Borrower’s obligations under any contract or agreement assigned to Agent or such Lender, and neither Agent nor any Lender shall be responsible in any way for the performance by any Borrower of any of the terms and conditions thereof.

     4.19. Environmental Matters.

          (a) Borrowers shall ensure that the Real Property and all operations and businesses conducted thereon remains in compliance with all Environmental Laws and they shall not place or permit to be placed any Hazardous Substances on any Real Property except as permitted by Applicable Law or appropriate governmental authorities.

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          (b) Borrowers shall establish and maintain a system to assure and monitor continued compliance with all applicable Environmental Laws which system shall include periodic reviews of such compliance.

          (c) Borrowers shall (i) employ in connection with the use of the Real Property appropriate technology necessary to maintain compliance with any applicable Environmental Laws and (ii) dispose of any and all Hazardous Waste generated at the Real Property only at facilities and with carriers that maintain valid permits under RCRA and any other applicable Environmental Laws. Borrowers shall use their commercially reasonable efforts to obtain certificates of disposal, such as hazardous waste manifest receipts, from all treatment, transport, storage or disposal facilities or operators employed by Borrowers in connection with the transport or disposal of any Hazardous Waste generated at the Real Property.

          (d) In the event any Borrower obtains, gives or receives notice of any Release or threat of Release of a reportable quantity of any Hazardous Substances at the Real Property (any such event being hereinafter referred to as a “Hazardous Discharge”) or receives any notice of violation, request for information or notification that it is potentially responsible for investigation or cleanup of environmental conditions at the Real Property, demand letter or complaint, order, citation, or other written notice with regard to any Hazardous Discharge or violation of Environmental Laws affecting the Real Property or any Borrower’s interest therein (any of the foregoing is referred to herein as an “Environmental Complaint”) from any Person, including any state agency responsible in whole or in part for environmental matters in the state in which the Real Property is located or the United States Environmental Protection Agency (any such person or entity hereinafter the “Authority”), then Borrowing Agent shall, within five (5) Business Days, give written notice of same to Agent detailing facts and circumstances of which any Borrower is aware giving rise to the Hazardous Discharge or Environmental Complaint. Such information is to be provided to allow Agent to protect its security interest in and Lien on the Real Property and the Collateral and is not intended to create nor shall it create any obligation upon Agent or any Lender with respect thereto.

          (e) Borrowing Agent shall promptly forward to Agent copies of any request for information, notification of potential liability, demand letter relating to potential responsibility with respect to the investigation or cleanup of Hazardous Substances at any other site owned, operated or used by any Borrower to dispose of Hazardous Substances and shall continue to forward copies of correspondence between any Borrower and the Authority regarding such claims to Agent until the claim is settled. Borrowing Agent shall promptly forward to Agent copies of all documents and reports concerning a Hazardous Discharge at the Real Property that any Borrower is required to file under any Environmental Laws. Such information is to be provided solely to allow Agent to protect Agent’s security interest in and Lien on the Real Property and the Collateral.

          (f) Borrowers shall respond promptly to any Hazardous Discharge or Environmental Complaint and take all necessary action in order to safeguard the health of any Person and to avoid subjecting the Collateral or Real Property to any Lien. If any Borrower shall fail to respond promptly to any Hazardous Discharge or Environmental Complaint or any Borrower shall fail to comply with any of the requirements of any Environmental Laws, Agent on behalf of Lenders may, but without the obligation to do so, for the sole purpose of protecting

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Agent’s interest in the Collateral: (i) give such notices or (ii) enter onto the Real Property (or authorize third parties to enter onto the Real Property) and take such actions as Agent (or such third parties as directed by Agent) deem reasonably necessary or advisable, to clean up, remove, mitigate or otherwise deal with any such Hazardous Discharge or Environmental Complaint. All reasonable costs and expenses incurred by Agent and Lenders (or such third parties) in the exercise of any such rights, including any sums paid in connection with any judicial or administrative investigation or proceedings, fines and penalties, together with interest thereon from the date expended at the Default Rate for Domestic Rate Loans constituting Revolving Advances shall be paid upon demand by Borrowers, and until paid shall be added to and become a part of the Obligations secured by the Liens created by the terms of this Agreement or any other agreement between Agent, any Lender and any Borrower.

          (g) Promptly upon the reasonable written request of Agent from time to time, Borrowers shall provide Agent, at Borrowers’ expense, with an environmental site assessment or environmental audit report prepared by an environmental engineering firm acceptable in the reasonable opinion of Agent, to assess with a reasonable degree of certainty the existence of a Hazardous Discharge and the potential costs in connection with abatement, cleanup and removal of any Hazardous Substances found on, under, at or within any Real Property owned by the Borrowers. Any report or investigation of such Hazardous Discharge proposed and acceptable to an appropriate Authority that is charged to oversee the clean-up of such Hazardous Discharge shall be acceptable to Agent. If such estimates, individually or in the aggregate, exceed $100,000, Agent shall have the right to require Borrowers to post a bond, letter of credit or other security reasonably satisfactory to Agent to secure payment of these costs and expenses.

          (h) Borrowers shall defend and indemnify Agent and Lenders and hold Agent, Lenders and their respective employees, agents, directors and officers harmless from and against all loss, liability, damage and expense, claims, costs, fines and penalties, including attorney’s fees, suffered or incurred by Agent or Lenders under or on account of any Environmental Laws, including the assertion of any Lien thereunder, with respect to any Hazardous Discharge, the presence of any Hazardous Substances affecting the Real Property, whether or not the same originates or emerges from the Real Property or any contiguous real estate, including any loss of value of the Real Property as a result of the foregoing except to the extent such loss, liability, damage and expense is attributable to any Hazardous Discharge resulting from actions on the part of Agent or any Lender. Borrowers’ obligations under this Section 4.19 shall arise upon the discovery of the presence of any Hazardous Substances at the Real Property, whether or not any federal, state, or local environmental agency has taken or threatened any action in connection with the presence of any Hazardous Substances. Borrowers’ obligation and the indemnifications hereunder shall survive the termination of this Agreement.

          (i) For purposes of Section 4.19 and 5.7, except as otherwise expressly indicated, all references to Real Property shall be deemed to include all of each Borrower’s right, title and interest in and to its owned and leased premises.

          (j) For purposes of Section 4.19 and 5.7, all references to Borrower shall be deemed to refer to the applicable Borrowing Group.

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     4.20. Financing Statements. Except as respects the financing statements filed by Agent and the financing statements described on Schedule 1.2, no financing statement covering any of the Collateral or any proceeds thereof is on file in any public office.

     4.21. Canadian Attachment. The security interests granted herein shall not attach to (i) any consumer goods of a Canadian Borrower, or (ii) the last day of any real property lease, or any agreement to lease, to which a Canadian Borrower is now or becomes a party as lessee, provided that any such last day shall be held in trust by a Canadian Borrower for the Agent and, on the exercise by the Agent of it rights and remedies hereunder, shall be assigned by a Canadian Borrower as directed by the Agent. Notwithstanding Section 4.1 hereof, the Agent shall only have a security interest in, and not a present assignment of, any Canadian trademarks forming part of the Collateral.

V. REPRESENTATIONS AND WARRANTIES.

     Each Borrower represents and warrants as follows:

     5.1. Authority. Each Borrower has full power, authority and legal right to enter into this Agreement and the Other Documents to which such Borrower is party and to perform all its respective Obligations hereunder and thereunder. This Agreement, the Subordination Agreement and the Other Documents have been duly executed and delivered by each Borrower to the extent a party thereto and this Agreement, the Subordination Agreement and such Other Documents constitute the legal, valid and binding obligation of such Borrower enforceable in accordance with their terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, moratorium or similar laws affecting creditors’ rights generally. The execution, delivery and performance of this Agreement and of such Other Documents (a) are within such Borrower’s corporate/limited liability company powers, have been duly authorized by all necessary corporate/company action, are not in contravention of law or the terms of such Borrower’s by-laws, certificate or articles of incorporation, operating agreement, certificate of formation or other applicable documents relating to such Borrower’s formation or to the conduct of such Borrower’s business or of any material agreement or undertaking to which such Borrower is a party or by which such Borrower is bound, including the Subordinated Loan Documents, (b) will not conflict with or violate any law or regulation, or any judgment, order or decree of any Governmental Body, (c) will not require the Consent of any Governmental Body or any other Person, except those Consents set forth on Schedule 5.1 hereto, all of which will have been duly obtained, made or compiled prior to the Closing Date and which are in full force and effect and (d) will not conflict with, nor result in any breach in any of the provisions of or constitute a default under or result in the creation of any Lien except Permitted Encumbrances upon any asset of such Borrower under the provisions of any agreement, charter document, instrument, by-law, operating agreement or other instrument to which such Borrower is a party or by which it or its property is a party or by which it may be bound, including under the provisions of the Subordinated Loan Documents.

     5.2. Formation and Qualification.

          (a) Each Borrower is duly incorporated or formed and in good standing under the laws of the jurisdiction listed on Schedule 5.2(a) and is qualified to do business and is in

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good standing in the jurisdictions listed on Schedule 5.2(a) which constitute all jurisdictions in which qualification and good standing are necessary for such Borrower to conduct its business and own its property and where the failure to so qualify could reasonably be expected to have a Material Adverse Effect on such Borrower. Each Borrower has delivered to Agent true and complete copies of its certificate of incorporation and by-laws or certificate of formation and operating agreement, as applicable, and will promptly notify Agent of any amendment or changes thereto.

          (b) The only Subsidiaries of each Borrower are listed on Schedule 5.2(b).

     5.3. Survival of Representations and Warranties. All representations and warranties of such Borrower contained in this Agreement and the Other Documents shall be true at the time of such Borrower’s execution of this Agreement and the Other Documents, and shall survive the execution, delivery and acceptance thereof by the parties thereto and the closing of the transactions described therein or related thereto.

     5.4. Tax Returns. Each Borrower’s federal tax identification number is set forth on Schedule 5.4. Except as set forth on Schedule 5.4, each Borrower has filed all federal, state, Canadian, provincial and local tax returns and other reports each is required by law to file and has paid all taxes, assessments, fees and other governmental charges that are due and payable. The provision for taxes on the books of Borrowers on a Consolidated Basis is adequate for all years not closed by applicable statutes, and for their current fiscal year, and except as set forth on Schedule 5.4, no Borrower has any knowledge of any deficiency or additional assessment in connection therewith not provided for on its books.

     5.5. Financial Statements.

          (a) The pro forma financial statements of the Borrowers on a Consolidated Basis for the periods ended October 31, 2008 and October 31, 2009 (“Pro Forma Financial Statements”) included in Schedule 5.5(a)(i) reflect the consummation of the transactions contemplated under this Agreement (collectively, the “Transactions”) and are accurate, complete and materially correct and fairly reflect the financial condition of the Borrowers on a Consolidated Basis as of June 30, 2009 after giving effect to the Transactions and (ii) have been prepared in accordance with GAAP, unless otherwise noted.

          (b) The twelve-month financial statement projections included in the Pro Forma Financial Statements (the “Projections”) were prepared by the Chief Financial Officer of Borrowing Agent and are based on underlying assumptions which provide a reasonable basis for the Projections contained therein.

          (c) The unaudited company prepared consolidated and consolidating balance sheet of Holdings and its Subsidiaries and such other Persons described therein (including the accounts of all Subsidiaries for the respective periods during which a subsidiary relationship existed) as of October 31, 2008, and the related statements of income, changes in stockholder’s equity, and changes in cash flow for the period ended on such date, copies of which have been delivered to Agent, have been prepared in accordance with GAAP, consistently applied except for changes in application, and present fairly the financial position of Holdings and its

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Subsidiaries at such date and the results of their operations for such period. Except as set forth on Schedule 5.5, since October 31, 2008 there has been no change in the condition, financial or otherwise, of Holdings and its Subsidiaries as shown on the consolidated balance sheet as of such date and no change in the aggregate value of machinery, equipment and Real Property owned by Holdings and its Subsidiaries, except changes in the Ordinary Course of Business, none of which individually or in the aggregate could reasonably be expected to cause a Material Adverse Effect.

     5.6. Entity Names. Except as set forth on Schedule 5.6, no Borrower has been known by any other corporate name in the past five years and does not sell Inventory under any other name nor has any Borrower been the surviving corporation of a merger or consolidation or acquired all or substantially all of the assets of any Person during the preceding five (5) years.

     5.7. O.S.H.A. and Environmental Compliance.

          (a) Each Borrower has materially complied with, and its facilities, business, assets, property, leaseholds, Real Property and Equipment are in compliance in all material respects with, the provisions of the Federal Occupational Safety and Health Act, the Environmental Protection Act, RCRA and all other Environmental Laws; there are no outstanding citations, notices or orders of non-compliance issued to any Borrower or relating to its business, assets, property, leaseholds or Equipment under any such laws, rules or regulations.

          (b) Each Borrower has been issued all required federal, state, Canadian, provincial and local licenses, certificates or permits relating to all applicable Environmental Laws.

          (c) (i) There are no visible signs of releases, spills, discharges, leaks or disposal (collectively referred to as “Releases”) of Hazardous Substances at, upon, under or within any Real Property including any premises leased by any Borrower; (ii) to such Borrowers’ knowledge, there are no underground storage tanks or polychlorinated biphenyls on the Real Property including any premises leased by any Borrower; (iii) to such Borrowers’ knowledge, the Real Property including any premises leased by any Borrower has never been used as a treatment, storage or disposal facility of Hazardous Waste; and (iv) to such Borrowers’ knowledge, no Hazardous Substances are present on the Real Property including any premises leased by any Borrower, excepting such quantities as are handled in accordance with all applicable manufacturer’s instructions and governmental regulations and in proper storage containers and as are necessary for the operation of the commercial business of any Borrower or of its tenants.

     5.8. Solvency; No Litigation, Violation, Indebtedness or Default; ERISA Compliance.

          (a) After giving effect to the Transactions, Borrowers, taken as a whole, will be solvent, able to pay their debts as they mature, will have capital sufficient to carry on their business and all businesses in which they are about to engage, and (i) as of the Closing Date, the fair present saleable value of their assets, calculated on a going concern basis, are in excess of the amount of their liabilities and (ii) subsequent to the Closing Date, the fair saleable value of their assets (calculated on a going concern basis) will be in excess of the amount of their liabilities.

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          (b) Except as disclosed in Schedule 5.8(b), no Borrower has (i) any pending or threatened litigation, arbitration, actions or proceedings which could reasonably be expected to have a Material Adverse Effect, and (ii) any liabilities or indebtedness for borrowed money other than the Obligations and the Subordinated Indebtedness.

          (c) No Borrower is in violation of any applicable statute, law, rule, regulation or ordinance in any respect which could reasonably be expected to have a Material Adverse Effect, nor is any Borrower in violation of any order of any court, Governmental Body or arbitration board or tribunal.

          (d) No Borrower nor any member of the Controlled Group maintains or is required to contribute to any Plan other than those listed on Schedule 5.8(d) hereto. (i) No Plan has incurred any “accumulated funding deficiency,” as defined in Section 302(a)(2) of ERISA or Section 412(a) of the Code, whether or not waived, each Borrower and each member of the Controlled Group has met all applicable minimum funding requirements under Section 302 of ERISA and Section 412 of the Code in respect of each Plan, and each Plan is in compliance with Sections 412, 430 and 436 of the Code and Sections 206(g), 302 and 303 of ERISA, without regard to waivers and variances; (ii) each Plan which is intended to be a qualified plan under Section 401(a) of the Code as currently in effect has been determined by the Internal Revenue Service to be qualified under Section 401(a) of the Code and the trust related thereto is exempt from federal income tax under Section 501(a) of the Code; (iii) neither any Borrower nor any member of the Controlled Group has incurred any liability to the PBGC other than for the payment of premiums, and there are no premium payments which have become due which are unpaid; (iv) no Plan has been terminated by the plan administrator thereof nor by the PBGC, and there is no occurrence which would cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Plan; (v) at this time, the current value of the assets of each Plan exceeds the present value of the accrued benefits and other liabilities of such Plan and neither any Borrower nor any member of the Controlled Group knows of any facts or circumstances which would materially change the value of such assets and accrued benefits and other liabilities; (vi) neither any Borrower nor any member of the Controlled Group has breached in any material respect any of the responsibilities, obligations or duties imposed on it by ERISA with respect to any Plan; (vii) neither any Borrower nor any member of the Controlled Group has incurred any liability for any excise tax arising under Section 4971, 4972 or 4980B of the Code, and no fact exists which could give rise to any such liability; (viii) neither any Borrower nor any member of the Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has engaged in a “prohibited transaction” described in Section 406 of the ERISA or Section 4975 of the Code nor taken any action nor omitted to take any action which would constitute or result in a Termination Event with respect to any such Plan which is subject to ERISA; (ix) each Borrower and each member of the Controlled Group has made all contributions due and payable with respect to each Plan; (x) there exists no event described in Section 4043(b) of ERISA, for which the thirty (30) day notice period has not been waived; (xi) neither any Borrower nor any member of the Controlled Group has any fiduciary responsibility for investments with respect to any plan existing for the benefit of persons other than employees or former employees of any Borrower or any member of the Controlled Group; (xii) except as listed on Schedule 5.8(d) hereto, neither any Borrower nor any member of the Controlled Group maintains or is required to contribute to any Plan which provides health, accident or life insurance benefits to former employees, their spouses or dependents, other than in accordance with Section 4980B of the Code; (xiii) neither

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any Borrower nor any member of the Controlled Group has withdrawn, completely or partially, within the meaning of Section 4203 or 4205 of ERISA, from any Multiemployer Plan so as to incur liability under the Multiemployer Pension Plan Amendments Act of 1980 and there exists no fact which would reasonably be expected to result in any such liability; and (xiv) no Plan fiduciary (as defined in Section 3(21) of ERISA) has any liability for breach of fiduciary duty or for any failure in connection with the administration or investment of the assets of a Plan; in each case (i) — (xiv) with respect to any member of the Controlled Group other than the Borrowers or any Subsidiary that could reasonably be expected to have a Material Adverse Effect.

     5.9. Patents, Trademarks, Copyrights and Licenses. All patents, patent applications, trademarks, trademark applications, service marks, service mark applications, copyrights, copyright applications, design rights, tradenames, assumed names, trade secrets and licenses owned or utilized by any Borrower are set forth on Schedule 5.9, are valid and have been duly registered or filed with all appropriate Governmental Bodies and constitute all of the intellectual property rights which are necessary for the operation of its business; there is no objection to or pending challenge to the validity of any such patent, trademark, copyright, design rights, tradename, trade secret or license and no Borrower is aware of any grounds for any challenge, except as set forth in Schedule 5.9 hereto. Except as set forth in Schedule 5.9 hereto, each patent, patent application, patent license, trademark, trademark application, trademark license, service mark, service mark application, service mark license, design rights, copyright, copyright application and copyright license owned or held by any Borrower and all trade secrets used by any Borrower consist of original material or property developed by such Borrower or was lawfully acquired by such Borrower from the proper and lawful owner thereof. Each of such items has been maintained so as to preserve the value thereof from the date of creation or acquisition thereof.

     5.10. Licenses and Permits. Except as set forth in Schedule 5.10, each Borrower (a) is in compliance with and (b) has procured and is now in possession of, all material licenses or permits required by any applicable federal, state, provincial or local law, rule or regulation for the operation of its business in each jurisdiction wherein it is now conducting or proposes to conduct business and where the failure to procure such licenses or permits could reasonably be expected to have a Material Adverse Effect.

     5.11. Default of Indebtedness. No Borrower is in default in the payment of the principal of or interest on any Indebtedness or under any instrument or agreement under or subject to which any Indebtedness has been issued and no event has occurred under the provisions of any such instrument or agreement which with or without the lapse of time or the giving of notice, or both, constitutes or would constitute an event of default thereunder.

     5.12. No Default. No Borrower is in default in the payment or performance of any of its contractual obligations except where such default could not reasonably be expected to have a Material Adverse Effect.

     5.13. No Burdensome Restrictions. No Borrower is party to any contract or agreement the performance of which could reasonably be expected to have a Material Adverse Effect. Each Borrower has heretofore delivered to Agent true and complete copies of all material contracts to

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which it is a party or to which it or any of its properties is subject that, as of the Closing Date, provide for payments to or from the Borrowers in excess of $250,000 per year, all Subordinated Loan Documents, all executive employment agreements and all equity financing agreements between Holdings and its Affiliates, all of which are set forth on Schedule 5.13. No Borrower has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien which is not a Permitted Encumbrance.

     5.14. No Labor Disputes. No Borrower is involved in any labor dispute; there are no strikes or walkouts or union organization of any Borrower’s employees threatened in writing or in existence and no labor contract is scheduled to expire during the Term other than as set forth on Schedule 5.14 hereto.

     5.15. Margin Regulations. No Borrower is engaged, nor will it engage, principally or as one of its important activities, in the business of extending credit for the purpose of “purchasing” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. No part of the proceeds of any Advance will be used for “purchasing” or “carrying” “margin stock” as defined in Regulation U of such Board of Governors.

     5.16. Investment Company Act. No Borrower is an “investment company” registered or required to be registered under the Investment Company Act of 1940, as amended, nor is it controlled by such a company.

     5.17. Disclosure. No representation or warranty made by any Borrower in this Agreement, the Subordinated Loan Documents or in any financial statement, report or certificate furnished in connection herewith or therewith contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading. There is no fact known to any Borrower or which reasonably should be known to such Borrower which such Borrower has not disclosed to Agent in writing with respect to the transactions contemplated or evidenced by this Agreement or the Subordinated Loan Documents which could reasonably be expected to have a Material Adverse Effect.

     5.18. Delivery of Subordinated Loan Documents. Agent has received complete copies of the Subordinated Loan Documents (including all exhibits, schedules and disclosure letters referred to therein or delivered pursuant thereto, if any) and all amendments thereto, waivers relating thereto and other side letters or agreements affecting the terms thereof. None of such documents and agreements has been amended or supplemented, nor have any of the provisions thereof been waived, except pursuant to a written agreement or instrument which has heretofore been delivered to Agent.

     5.19. Swaps. No Borrower is a party to, nor will it be a party to, any swap agreement whereby such Borrower has agreed or will agree to swap interest rates or currencies unless same provides that damages upon termination following an event of default thereunder are payable on an unlimited “two-way basis” without regard to fault on the part of either party.

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     5.20. Conflicting Agreements. No provision of any mortgage, indenture, contract, agreement, judgment, decree or order binding on any Borrower or affecting the Collateral conflicts with, or requires any Consent which has not already been obtained to, or would in any way prevent the execution, delivery or performance of, the terms of this Agreement or the Other Documents.

     5.21. Application of Certain Laws and Regulations. The Borrowers are not subject to any law, statute, rule or regulation which regulates the incurrence of any Indebtedness (other than applicable fraudulent transfer laws), including laws, statutes, rules or regulations relative to common or interstate carriers or to the sale of electricity, gas, steam, water, telephone, telegraph or other public utility services.

     5.22. Business and Property of Borrowers. Upon and after the Closing Date, Borrowers do not propose to engage in any business other than providing professional services and technology to the engineering community, activities necessary to conduct the foregoing and activities reasonably related to such business. On the Closing Date and at all times thereafter, each Borrower owns all the property and possess all of the rights and Consents as required by this Agreement.

     5.23. Section 20 Subsidiaries. Borrowers do not intend to use and shall not use any portion of the proceeds of the Advances, directly or indirectly, to purchase during the underwriting period, or for 30 days thereafter, Ineligible Securities being underwritten by a Section 20 Subsidiary.

     5.24. Anti-Terrorism Laws.

          (a) General. Neither any Borrower nor any Affiliate of any Borrower is in violation of any Anti-Terrorism Law or engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

          (b) Executive Order No. 13224. Neither any Borrower nor any Affiliate of any Borrower or their respective agents acting or benefiting in any capacity in connection with the Advances or other transactions hereunder, is any of the following (each a “Blocked Person”):

               (i) a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;

               (ii) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;

               (iii) a Person or entity with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

               (iv) a Person or entity that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order No. 13224;

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               (v) a Person or entity that is named as a “specially designated national” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website or any replacement website or other replacement official publication of such list, or

               (vi) a Person or entity who is affiliated or associated with a Person or entity listed above.

     Neither any Borrower nor to the knowledge of any Borrower, any of its agents acting in any capacity in connection with the Advances or other transactions hereunder (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order No. 13224.

     5.25. Trading with the Enemy. No Borrower has engaged, nor does it intend to engage, in any business or activity prohibited by the Trading with the Enemy Act.

     5.26. Federal Securities Laws. Neither any Borrower nor any of its Subsidiaries (i) is required to file periodic reports under the Exchange Act, (ii) has any securities registered under the Exchange Act or (iii) has filed a registration statement that has not yet become effective under the Securities Act.

     5.27. Equity Interests. The authorized and outstanding Equity Interests of each Borrower is as shown on Schedule 5.27 hereto. All of the Equity Interests of each Borrower have been duly and validly authorized and issued and are fully paid and non-assessable and have been sold and delivered to the holders thereof in compliance with, or under valid exemption from, all federal and state laws and the rules and regulations of each Governmental Body governing the sale and delivery of securities. Except for the rights and obligations shown on Schedule 5.27, there are no subscriptions, warrants, options, calls, commitments, rights or agreements by which any Borrower or any of the shareholders of any Borrower is bound relating to the issuance, transfer, voting or redemption of shares of its Equity Interests or any pre-emptive rights held by any Person with respect to the Equity Interests of Borrowers. Except as shown on Schedule 5.27, Borrowers have not issued any securities convertible into or exchangeable for shares of its Equity Interests or any options, warrants or other rights to acquire such shares or securities convertible into or exchangeable for such shares.

VI. AFFIRMATIVE COVENANTS.

     Each Borrower shall, until payment in full of the Obligations and termination of this Agreement:

     6.1. Payment of Fees. Pay to Agent on demand all usual and customary fees and expenses which Agent incurs in connection with (a) the forwarding of Advance proceeds and (b) the establishment and maintenance of any Blocked Accounts or Depository Accounts as provided for in Section 4.15(h). Agent may, without making demand, charge Borrowers’ Account for all such fees and expenses.

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     6.2. Conduct of Business and Maintenance of Existence and Assets. (a) Conduct continuously and operate actively its business according to good business practices and maintain all of its properties useful or necessary in its business in good working order and condition (reasonable wear and tear excepted and except as may be disposed of in accordance with the terms of this Agreement), including all licenses, patents, copyrights, design rights, tradenames, trade secrets and trademarks and take all actions necessary to enforce and protect the validity of any intellectual property right or other right included in the Collateral; (b) keep in full force and effect its existence and comply in all material respects with the laws and regulations governing the conduct of its business where the failure to do so could reasonably be expected to have a Material Adverse Effect; and (c) make all such reports and pay all such franchise and other taxes and license fees and do all such other acts and things as may be lawfully required to maintain its rights, licenses, leases, powers and franchises under the laws of the United States or its jurisdiction of organization or any political subdivision thereof where the failure to do so could reasonably be expected to have a Material Adverse Effect.

     6.3. Violations. Promptly after becoming aware thereof, notify Agent in writing of any violation of any law, statute, regulation or ordinance of any Governmental Body, or of any agency thereof, applicable to any Borrower which could reasonably be expected to have a Material Adverse Effect.

     6.4. Government Receivables. To the extent that any Receivables from a Governmental Body are included in the Formula Amount, take all steps necessary to protect Agent’s interest in the Collateral under the Federal Assignment of Claims Act, the Financial Administration Act (Canada), the Uniform Commercial Code and all other applicable state or local statutes or ordinances and deliver to Agent appropriately endorsed, any instrument or chattel paper connected with any Receivable arising out of contracts between any Borrower and the United States, any state, Canada, any province or any department, agency or instrumentality of any of them.

     6.5. Fixed Charge Coverage Ratio. Commencing as of April 30, 2010, cause to be maintained as of the end of each fiscal quarter, a Fixed Charge Coverage Ratio as follows: (a) for the three month period ending April 30, 2010, of not less than 1.0 to 1.0; (b) for the six month period ending July 31, 2010, of not less than 1.0 to 1.0; (c) for the nine month period ending October 31, 2010, of not less than 1.0 to 1.0; and (d) for the twelve month period ending January 31, 2011 and at the end of each fiscal quarter thereafter calculated on a rolling four quarter basis, of not less than 1.15 to 1.0.

     6.6. Execution of Supplemental Instruments. Execute and deliver to Agent from time to time, upon demand, such supplemental agreements, statements, assignments and transfers, or instructions or documents relating to the Collateral, and such other instruments as Agent may reasonably request, in order that the full intent of this Agreement may be carried into effect.

     6.7. Payment of Indebtedness. Pay, discharge or otherwise satisfy at or before maturity (subject, where applicable, to specified grace periods and, in the case of the trade payables, to normal payment practices) all its obligations and liabilities of whatever nature, except when the failure to do so could not reasonably be expected to have a Material Adverse

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Effect or when the amount or validity thereof is being Properly Contested subject at all times to any applicable subordination arrangement in favor of Lenders.

     6.8. Standards of Financial Statements. Cause all financial statements referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, and 9.13 as to which GAAP is applicable to be complete and correct in all material respects (subject, in the case of interim financial statements, to normal year-end audit adjustments) and to be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein (except as concurred in by such reporting accountants or officer, as the case may be, and disclosed therein).

     6.9. Federal Securities Laws. Promptly notify Agent in writing if any Borrower or any of its Subsidiaries (i) is required to file periodic reports under the Exchange Act, (ii) registers any securities under the Exchange Act or (iii) files a registration statement under the Securities Act.

     6.10. Post Closing Conditions. Cause to be delivered to Agent:

          (a) On or before September 30, 2009, audited financial statements of Holding and its subsidiaries on a consolidating and consolidated basis including, but not limited to, statements of income and stockholders’ equity, cash flow and the balance sheet for fiscal year ending October 31, 2008, all prepared in accordance with GAAP applied on a basis consistent with prior practices, and in reasonable detail and reported upon without qualification by the Accountants, such statements to be in form and substance acceptable to Agent and shall not contain any material changes from the financial statements described in Section 5.5 hereof, except as disclosed in Schedule 5.5;

          (b) Within 30 days of the Closing Date, good standing and foreign qualification certificates for the entities and the jurisdictions listed on Schedule 6.10;

          (c) Within 30 days of the Closing Date, Foreign Blocked Accounts for each of Borrowers’ collection and/or disbursement accounts;

          (d) Within 30 days of the Closing Date, use commercially reasonable efforts to obtain a Lien Waiver Agreement for each of the following premises (each to be in form and substance satisfactory to Agent): (i) 1601 Trapelo Road, Suite 162, Waltham, Massachusetts, and (ii) 5285 Solar Drive, Mississauga, Ontario, Canada; provided, that, as of the Closing Date, Agent has the right to impose a three (3) month rent reserve for each location listed in subsection (i) and (ii) above for which Agent does not have a Lien Waver Agreement; and provided further, that the failure to obtain a Lien Waiver Agreement shall not be an Event of Default hereunder;

          (e) Within 30 days of the Closing Date, cause Silicon Valley Bank to execute and deliver to Agent a springing blocked account agreement with respect to Holdings’ bank account number 3300578963; and

          (f) For the period from the Closing Date through August 28, 2009, cause on a daily basis all Excess Funds held or deposited in the Borrowers’ Deposit Account numbers 118-339-745 and 118-339-524 (collectively, the “HSBC Accounts”) maintained with HSBC Bank USA, National Association (“HSBC”) to be wire transferred to Borrowers’ collection account maintained with Agent. For purposes of this Section 6.10(f), “Excess Funds” shall mean all

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funds in the HSBC Accounts in excess of the amount of checks written on the HSBC Accounts, which have not yet cleared HSBC. Borrowers’ acknowledge that on August 27, 2009 or such later date that may be agreed to by Borrowers and Agent, Agent shall have the right to cause HSBC to automatically wire transfer all funds in the HSBC Accounts to Borrowers’ collection account maintained with Agent.

VII. NEGATIVE COVENANTS.

     No Borrower shall, until satisfaction in full of the Obligations and termination of this Agreement:

     7.1. Merger, Consolidation, Acquisition and Sale of Assets.

          (a) Enter into any merger, consolidation or other reorganization with or into any other Person or acquire all or a substantial portion of the assets or Equity Interests of any Person or permit any other Person to consolidate with or merge with it; provided that (i) a Borrower shall be permitted to merge with and into another Borrower and (ii) a Borrower shall be permitted to acquire up to $250,000 of assets per year outside of the Ordinary Course of Business so long as such assets are free of all Liens; provided that, in each case, both before and after giving effect to such transaction no Default or Event of Default is continuing or would occur after giving pro forma effect to such transaction.

          (b) Sell, lease, transfer or otherwise dispose of any of its properties or assets, except (i) dispositions of Inventory and Equipment to the extent expressly permitted by Section 4.3 and (ii) any other sales or dispositions expressly permitted by this Agreement.

     7.2. Creation of Liens. Create or suffer to exist any Lien or transfer upon or against any of its property or assets now owned or hereafter acquired, except Permitted Encumbrances.

     7.3. Guarantees. Become liable upon the obligations or liabilities of any Person by assumption, endorsement or guaranty thereof or otherwise (other than to Lenders) except (a) the endorsement of checks in the Ordinary Course of Business, (b) as disclosed on Schedule 7.3, (c) guarantees in the Ordinary Course of Business up to an aggregate amount for all such guarantees of $100,000 and (d) guarantees of the obligations of another Borrower.

     7.4. Investments. Purchase or acquire obligations or Equity Interests of, or any other interest in, any Person, except (a) obligations issued or guaranteed by the United States of America or any agency thereof, (b) commercial paper with maturities of not more than 180 days and a published rating of not less than A-1 or P-1 (or the equivalent rating), (c) certificates of time deposit and bankers’ acceptances having maturities of not more than 180 days and repurchase agreements backed by United States government securities of a commercial bank if (i) such bank has a combined capital and surplus of at least $500,000,000, or (ii) its debt obligations, or those of a holding company of which it is a Subsidiary, are rated not less than A (or the equivalent rating) by a nationally recognized investment rating agency, (d) U.S. money market funds that invest solely in obligations issued or guaranteed by the United States of America or an agency thereof, (e) so long as no Default or Event of Default has occurred or would occur after giving effect to such investments, purchases or redemptions of Equity Interests of Holdings owned by former employees of the Borrowers or Holdings in connection with the

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termination of such employment not in excess of $100,000 in any fiscal year; (f) investments in Subsidiaries (other than Borrowers) so long as after giving effect to such investments: (i) such investments together with the amount of any loans made under Section 7.5(iv) hereof during such period and distributions made under Section 7.7(ii) hereof during such period do not exceed $250,000 in any fiscal year; (ii) no Event of Default or Default is continuing or would occur after giving pro forma effect to such loan and (iii) at the time of and after giving effect to such distribution, Borrowers would have Undrawn Availability of not less than $3,000,000; and (g) investments by a Borrower in another Borrower.

     7.5. Loans. Make advances, loans or extensions of credit to any Person, including any Parent, Subsidiary or Affiliate except (i) with respect to the extension of commercial trade credit in connection with the sale of Inventory in the Ordinary Course of Business, (ii) loans to another Borrower, (iii) loans to employees and officers of Holdings and its Subsidiaries in an aggregate amount not to exceed $25,000 at any time, and (iv) loans to their Affiliates (subsidiaries of Holdings other than the Borrowers) so long as after giving effect to such loans: (A) such loans together with the amount of any investments made under Section 7.4(f) hereof during such period and distributions made under Section 7.7(ii) hereof during such period do not exceed $250,000 in any fiscal year; (B) no Event of Default or Default is continuing or would occur after giving pro forma effect to such loan; (C) at the time of and after giving effect to such distribution, Borrowers would have Undrawn Availability of not less than $3,000,000; and (D) such loans are made pursuant to documents in form and substance satisfactory to Agent.

     7.6. Capital Expenditures. Contract for, purchase or make any expenditure or commitments for Unfunded Capital Expenditures in any fiscal year in an aggregate amount for all Borrowers in excess of $1,000,000.

     7.7. Dividends. Declare, pay or make any dividend or distribution on any Equity Interests of any Borrower (other than dividends or distributions payable in its stock, or split-ups or reclassifications of its stock) or apply any of its funds, property or assets to the purchase, redemption or other retirement of any Equity Interest, or of any options to purchase or acquire any Equity Interest of any Borrower; provided however, Borrowers may make a (i) distribution(s) to Holdings on or after the one year anniversary of the Closing Date (payable on and after the 15^th day after delivery of the financial statements required to be delivered pursuant to Section 9.8 hereof for the quarters ending October 31 and April 30 of each year through and including the 30^th day after delivery of such financial statements) to enable Holdings to make regularly scheduled payments of interest and principal due on the Subordinated Indebtedness so long as: (A) at the time of and after giving pro forma effect to such distribution(s), no Event of Default or Default has occurred or would occur, (B) at the time of and after giving effect to such distribution, Borrowers would have Undrawn Availability of not less than $3,000,000 and (C) after giving pro forma effect to such distribution(s), Borrowers would have achieved as of the end of the prior fiscal quarter, and will achieve on a pro-forma basis at the end of the current and the projected quarter thereafter, a Fixed Charge Coverage Ratio, on a trailing twelve month basis, of not less than 1.15 to 1.0, and (ii) distribution(s) to Holdings so long as after giving effect to the making of such distributions (A) such distributions together with the amount of any investments made under Section 7.4(f) hereof during such period and loans made under Section 7.5(iv) hereof during such period do not exceed $250,000 in any fiscal year; (B) no Event of Default or Default has occurred or would occur after giving pro forma effect to such distribution,

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and (C) at the time of and after giving effect to such distribution, Borrowers would have Undrawn Availability of not less than $3,000,000.

     7.8. Indebtedness. Create, incur, assume or suffer to exist any Indebtedness (exclusive of trade debt) except in respect of: (i) Indebtedness to Lenders; (ii) Indebtedness incurred for Capital Expenditures permitted under Section 7.6 hereof; (iii) Indebtedness incurred by one Borrower to another Borrower as permitted under Section 7.5 hereof; (iv) Indebtedness due under the Subordinated Loan Documents; (v) unsecured Indebtedness in aggregate principal amount not to exceed $250,000; and (vi) other Indebtedness set forth on Schedule 5.8(b).

     7.9. Nature of Business. Substantially change the nature of the business in which it is presently engaged or reasonable extensions thereof, nor except as specifically permitted hereby purchase or invest, directly or indirectly, in any assets or property other than in the Ordinary Course of Business for assets or property which are useful in, necessary for and are to be used in its business as presently conducted.

     7.10. Transactions with Affiliates. Directly or indirectly, purchase, acquire or lease any property from, or sell, transfer or lease any property to, or otherwise enter into any transaction or deal with, any Affiliate, except: (a) transactions disclosed to the Agent, which are in the Ordinary Course of Business, on an arm’s-length basis on terms and conditions no less favorable than terms and conditions which would have been obtainable from a Person other than an Affiliate, and (b) transactions permitted under Section 7.1, 7.3, 7.4, 7.5, 7.7 or 7.8 hereof.

     7.11. Leases. Enter as lessee into any lease arrangement for real or personal property (unless capitalized and permitted under Section 7.6 hereof) if after giving effect thereto, aggregate annual rental payments for all leased property would exceed $2,500,000 in any one fiscal year in the aggregate for all Borrowers.

     7.12. Subsidiaries.

          (a) Form any Subsidiary unless (i) such Subsidiary expressly joins in this Agreement as a borrower and becomes jointly and severally liable for the obligations of Borrowers hereunder, under the Notes, and under any other agreement between any Borrower and Lenders and (ii) Agent shall have received all documents, including legal opinions, it may reasonably require to establish compliance with each of the foregoing conditions.

          (b) Enter into any partnership, joint venture or similar arrangement.

     7.13. Fiscal Year and Accounting Changes. Change its fiscal year from October 31 without the consent of the Agent (such consent not to be unreasonably withheld) or make any material change (i) in accounting treatment and reporting practices except as required by GAAP or (ii) in tax reporting treatment except as required by law.

     7.14. Pledge of Credit. Now or hereafter pledge Agent’s or any Lender’s credit on any purchases or for any purpose whatsoever or use any portion of any Advance in or for any business other than such Borrower’s business as conducted on the date of this Agreement.

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     7.15. Amendment of Articles of Incorporation, By-Laws, Certificate of Formation, Operating Agreement. Amend, modify or waive any term or material provision of its Articles of Incorporation, By-Laws, Certificate of Formation or Operating Agreement, as applicable, unless required by law.

     7.16. Compliance with ERISA. (i) (x) Maintain, or permit any member of the Controlled Group to maintain, or (y) become obligated to contribute, or permit any member of the Controlled Group to become obligated to contribute, to any Plan, other than those Plans disclosed on Schedule 5.8(d), (ii) engage, or permit any member of the Controlled Group to engage, in any non-exempt “prohibited transaction”, as that term is defined in Section 406 of ERISA or Section 4975 of the Code, (iii) incur, or permit any Plan to incur, any “accumulated funding deficiency”, as that term is defined in Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any member of the Controlled Group to terminate, any Plan where such event could result in any liability of any Borrower or any member of the Controlled Group or the imposition of a lien on the property of any Borrower or any member of the Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit any member of the Controlled Group to assume, any obligation to contribute to any Multiemployer Plan not disclosed on Schedule 5.8(d), (vi) incur, or permit any member of the Controlled Group to incur, any withdrawal liability to any Multiemployer Plan, (vii) fail promptly to notify Agent of the occurrence of any Termination Event, (viii) fail to comply, or permit a member of the Controlled Group to fail to comply, with the requirements of ERISA or the Code or other Applicable Laws in respect of any Plan, (ix) fail to meet, or permit any member of the Controlled Group to fail to meet, all minimum funding requirements under ERISA and the Code, without regard to any waivers or variances, or postpone or delay or allow any member of the Controlled Group to postpone or delay any funding requirement with respect of any Plan, or (x) cause, or permit any member of the Controlled Group to cause, a representation or warranty in Section 5.8(d) to cease to be true and correct; in each case (i) — (x) with respect to any member of the Controlled Group other than Borrowers or any Subsidiary that could reasonably be expected to have a Material Adverse Effect.

     7.17. Prepayment of Indebtedness. Except to the extent permitted under Section 7.20, at any time, directly or indirectly, prepay any Indebtedness (other than to Lenders), or repurchase, redeem, retire or otherwise acquire any Indebtedness of any Borrower.

     7.18. Anti-Terrorism Laws. No Borrower shall, until satisfaction in full of the Obligations and termination of this Agreement, nor shall it permit any Affiliate or agent to:

          (a) Conduct any business or engage in any transaction or dealing with any Blocked Person, including the making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person.

          (b) Deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order No. 13224.

          (c) Engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in the Executive Order No. 13224, the USA PATRIOT Act or any other Anti-Terrorism Law.

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Borrower shall deliver to Lenders any certification or other evidence requested from time to time by any Lender in its sole discretion, confirming Borrower’s compliance with this Section.

     7.19. Trading with the Enemy Act. Engage in any business or activity in violation of the Trading with the Enemy Act.

     7.20. Subordinated Indebtedness. At any time, directly or indirectly, pay, prepay, repurchase, redeem, retire or otherwise acquire, or make any payment on account of any principal of, interest on or premium payable in connection with the repayment or redemption of any Subordinated Indebtedness except to the extent expressly permitted in the applicable Subordination Agreement.

     7.21. Other Agreements. Enter into any material amendment, waiver or modification of any Subordinated Loan Documents, or any related agreements except as expressly permitted in the Subordination Agreement.

VIII. CONDITIONS PRECEDENT.

     8.1. Conditions to Initial Advances. The agreement of Lenders to make the initial Advances requested to be made on the Closing Date is subject to the satisfaction, or waiver by Agent, immediately prior to or concurrently with the making of such Advances, of the following conditions precedent:

          (a) Note. Agent shall have received the Notes duly executed and delivered by an authorized officer of each Borrower;

          (b) Filings, Registrations and Recordings. Each document (including any Uniform Commercial Code financing statement) required by this Agreement, any related agreement or under law or reasonably requested by the Agent to be filed, registered or recorded in order to create, in favor of Agent, a perfected security interest in or lien upon the Collateral shall have been properly filed, registered or recorded in each jurisdiction in which the filing, registration or recordation thereof is so required or requested, and Agent shall have received an acknowledgment copy, or other evidence satisfactory to it, of each such filing, registration or recordation and satisfactory evidence of the payment of any necessary fee, tax or expense relating thereto;

          (c) Company Proceedings of Borrowers. Agent shall have received a copy of the resolutions in form and substance reasonably satisfactory to Agent, of the Board of Directors, Management Committee, Managing Member or Manager of each Borrower, as applicable, authorizing (i) the execution, delivery and performance of this Agreement, the Notes, and any related agreements (collectively the “Documents”) and (ii) the granting by each Borrower of the security interests in and liens upon the Collateral in each case certified by the Secretary, an Assistant Secretary, or Manager, as applicable, of each Borrower as of the Closing Date; and, such certificate shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded as of the date of such certificate;

          (d) Incumbency Certificates of Borrowers. Agent shall have received a certificate of the Secretary, an Assistant Secretary or the Manager, as applicable, of each

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Borrower, dated the Closing Date, as to the incumbency and signature of the officers of each Borrower executing this Agreement, the Other Documents, any certificate or other documents to be delivered by it pursuant hereto, together with evidence of the incumbency of such Secretary or Assistant Secretary;

          (e) Company Proceedings of each Guarantor. Agent shall have received a copy of the resolutions in form and substance reasonably satisfactory to Agent, of the Board of Directors, Management Committee, Managing Member, Manager or General Partner of each Guarantor, as applicable, authorizing (i) the execution, delivery and performance of the Guaranty and each Other Document to which it is a party; and (ii) the granting by such Guarantor (excluding the Ampersand Guarantors) of any security interests in and liens upon any assets of such Guarantor, to the extent applicable, in each case certified by the Secretary, an Assistant Secretary, Manager or General Partner, as applicable, of each Guarantor as of the Closing Date; and, such certificate shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded as of the date of such certificate.

          (f) Incumbency Certificates of each Guarantor. Agent shall have received a certificate of the Secretary, an Assistant Secretary, (or, with respect to the Ampersand Guarantors, the General Partner), as applicable, of each Guarantor, dated the Closing Date, as to the incumbency and signature of the officers or other authorized persons of each Guarantor executing the Guaranty and each Other Document to which it is a party together with evidence of the incumbency of such Secretary or Assistant Secretary (or, with respect to the General Partner of the Ampersand Guarantor, the authorized person signing on behalf of the General Partner);

          (g) Certificates. Agent shall have received a copy of the Articles or Certificate of Incorporation or Certificate of Formation of each US Borrower and Holdings and all amendments thereto, and the corresponding documents for Foreign Borrower, certified by the Secretary of State or other appropriate official of its jurisdiction of incorporation, if applicable, together with copies of the By-Laws (or similar foreign document) of each Borrower and Holdings and all agreements of each Borrower’s and Holdings’ shareholders certified as accurate and complete by the respective Secretary of each Borrower and Holdings;

          (h) Good Standing Certificates. Agent shall have received good standing certificates (or similar foreign document, where applicable) for each Borrower and each Guarantor dated not more than 20 days prior to the Closing Date, issued by the Secretary of State or other appropriate official of each Borrower’s and each Guarantor’s jurisdiction of incorporation and each jurisdiction where the conduct of each Borrower’s and each Guarantor’s business activities or the ownership of its properties necessitates qualification (except such jurisdictions in which the failure to be so qualified could not reasonably be expected to result in a Material Adverse Effect);

          (i) Legal Opinion. Agent shall have received the executed legal opinions of Edwards Angell Palmer & Dodge LLP and Blake Cassels & Graydon LLP, each in form and substance satisfactory to Agent which shall cover such matters incident to the transactions contemplated by this Agreement, the Note, the Other Documents, and related agreements as Agent may reasonably require and each Borrower hereby authorizes and directs such counsel to deliver such opinions to Agent and Lenders;

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          (j) No Litigation. (i) No litigation, investigation or proceeding before or by any arbitrator or Governmental Body shall be continuing or threatened against any Borrower or against the officers or directors of any Borrower (A) in connection with this Agreement, the Other Documents or any of the transactions contemplated thereby and which, in the reasonable opinion of Agent, is deemed material or (B) which could, in the reasonable opinion of Agent, be expected to have a Material Adverse Effect; and (ii) no injunction, writ, restraining order or other order of any nature materially adverse to any Borrower or the conduct of its business or inconsistent with the due consummation of the Transactions shall have been issued by any Governmental Body;

          (k) Financial Condition Certificates. Agent shall have received an executed Financial Condition Certificate in the form of Exhibit 8.1(k);

          (l) Collateral Examination. Agent shall have completed Collateral examinations, the results of which shall be satisfactory in form and substance to Lenders, of the Receivables of each Borrower and all books and records in connection therewith;

          (m) Fees. Agent shall have received all fees payable to Agent and Lenders on or prior to the Closing Date hereunder, including pursuant to Article III hereof;

          (n) Financial Statements. Agent shall have received a copy of the Borrowers’ Financial Statements, including projections and pro forma financial statements to the extent requested by Agent, which shall be satisfactory in all respects to Lenders;

          (o) Subordinated Loan Documents. Agent shall have received final executed copies of the Subordinated Loan Documents and all related agreement, documents and instruments as in effect on the Closing Date all of which shall be satisfactory in form and substance to Agent;

          (p) Subordination Agreement and Intercreditor Agreement. Agent shall have received fully executed copies of the Subordination Agreement and the Intercreditor Agreement;

          (q) Insurance. Agent shall have received in form and substance satisfactory to Agent, certified copies of Borrowers’ casualty insurance policies, together with lender loss payable endorsements on Agent’s standard form of loss payee endorsement naming Agent as loss payee, and certified copies of Borrowers’ liability insurance policies, together with endorsements naming Agent as an additional insured;

          (r) Payment Instructions. Agent shall have received written instructions from Borrowing Agent directing the application of proceeds of the initial Advances made pursuant to this Agreement;

          (s) Blocked Accounts. Agent shall have received duly executed agreements establishing the Blocked Accounts or Depository Accounts with financial institutions acceptable to Agent for the collection or servicing of the Receivables and proceeds of the Collateral;

          (t) Consents. Agent shall have received any and all Consents necessary to permit the effectuation of the transactions contemplated by this Agreement and the Other

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Documents; and, Agent shall have received such Consents and waivers of such third parties as might assert claims with respect to the Collateral, as Agent and its counsel shall reasonably deem necessary;

          (u) No Adverse Material Change. (i) since October 31, 2008, there shall not have occurred any event, condition or state of facts which could reasonably be expected to have a Material Adverse Effect and (ii) no representations made or information supplied to Agent or Lenders shall have been proven to be inaccurate or misleading in any material respect;

          (v) Leasehold Agreements. Agent shall have received landlord, mortgagee or warehouseman agreements satisfactory to Agent with respect to the chief executive offices leased by Borrowers;

          (w) Contract Review. Agent shall have reviewed all material contracts of Borrowers set forth on Schedule 5.13 and any other contracts requested by Agent, and such contracts and agreements shall be satisfactory in all respects to Agent;

          (x) Closing Certificate. Agent shall have received a closing certificate signed by the Chief Executive Officer or Chief Financial Officer of each Borrower dated as of the date hereof, stating that (i) all representations and warranties set forth in this Agreement and the Other Documents are true and correct on and as of such date, (ii) Borrowers are on such date in compliance with all the terms and provisions set forth in this Agreement and the Other Documents and (iii) on such date no Default or Event of Default has occurred or is continuing;

          (y) Borrowing Base. Agent shall have received evidence from Borrowers that the aggregate amount of Eligible US Receivables and Eligible Foreign Receivables, is sufficient in value and amount to support Advances in the amount requested by Borrowers on the Closing Date;

          (z) Undrawn Availability. After giving effect to the initial Advances hereunder, Borrowers shall have Undrawn Availability/Closing Date of at least $3,000,000;

          (aa) Compliance with Laws. Agent shall be reasonably satisfied that each Borrower is in compliance with all pertinent federal, state, Canadian, provincial, local or territorial regulations, including those with respect to the Federal Occupational Safety and Health Act, the Environmental Protection Act, ERISA and the Trading with the Enemy Act; and

          (bb) Other. All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the Transactions shall be satisfactory in form and substance to Agent and its counsel.

     8.2. Conditions to Each Advance. The agreement of Lenders to make any Advance requested to be made on any date (including the initial Advance), is subject to the satisfaction of the following conditions precedent as of the date such Advance is made:

          (a) Representations and Warranties. Each of the representations and warranties made by any Guarantor and any Borrower in or pursuant to this Agreement, the Other Documents and any related agreements to which it is a party, and each of the representations and

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warranties contained in any certificate, document or financial or other statement furnished at any time under or in connection with this Agreement, the Other Documents or any related agreement shall be true and correct in all material respects on and as of such date as if made on and as of such date (except to the extent such representations and warranties expressly relate to an earlier date);

          (b) No Default. No Event of Default or Default shall have occurred and be continuing on such date, or would exist after giving effect to the Advances requested to be made, on such date; provided, however that Agent, in its sole discretion, may continue to make Advances notwithstanding the existence of an Event of Default or Default and that any Advances so made shall not be deemed a waiver of any such Event of Default or Default; and

          (c) Maximum Advances. In the case of any type of Advance requested to be made, after giving effect thereto, the aggregate amount of such type of Advance shall not exceed the maximum amount of such type of Advance permitted under this Agreement.

     Each request for an Advance by any Borrower hereunder shall constitute a representation and warranty by each Borrower as of the date of such Advance that the conditions contained in this subsection shall have been satisfied.

IX. INFORMATION AS TO BORROWERS.

     Each Borrower shall, or (except with respect to Section 9.11) shall cause Borrowing Agent on its behalf to, until satisfaction in full of the Obligations and the termination of this Agreement:

     9.1. Disclosure of Material Matters. Promptly upon learning thereof, report to Agent all matters materially affecting the value, enforceability or collectability of any portion of the Collateral, including any Borrower’s reclamation or repossession of, or the return to any Borrower of, a material amount of goods or claims or disputes asserted by any Customer or other obligor.

     9.2. Schedules. Deliver to Agent on or before the twenty first (21^st) day of the first calendar month following the Closing Date, and on or before the fifteenth (15^th) day of each month thereafter, as and for the prior month (a) accounts receivable ageings inclusive of reconciliations to the general ledger, (b) accounts payable schedules inclusive of reconciliations to the general ledger, (c) a Borrowing Base Certificate in form and substance satisfactory to Agent (which shall be calculated as of the last day of such month and which shall not be binding upon Agent or restrictive of Agent’s rights under this Agreement; provided that monetary entries for Foreign Borrower on each Borrowing Base Certificate shall be translated into the US Dollar Equivalent of Canadian Dollars), and (e) report evidencing Borrowers’ deferred revenue compared to Borrowers’ receivables in form and substance acceptable to Agent. Borrowers shall deliver to Agent on Wednesday of each week as for the prior week, sales reports. In addition, each Borrower will deliver to Agent at such intervals as Agent may require: (i) confirmatory assignment schedules, (ii) copies of Customer’s invoices, (iii) evidence of shipment or delivery, and (iv) such further schedules, documents and/or information regarding the Collateral as Agent may require including trial balances and test verifications. Agent shall have the right to confirm

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and verify all Receivables by any manner and through any medium it considers advisable and do whatever it may deem reasonably necessary to protect its interests hereunder; provided that, so long as no Event of Default is continuing, Agent shall work and cooperate with the Borrowers to conduct such confirmation and verification in a manner designed to minimize interruption of the Borrowers’ business and keep confidential the transactions contemplated hereby. The items to be provided under this Section are to be in form satisfactory to Agent and executed by each Borrower and delivered to Agent from time to time solely for Agent’s convenience in maintaining records of the Collateral, and any Borrower’s failure to deliver any of such items to Agent shall not affect, terminate, modify or otherwise limit Agent’s Lien with respect to the Collateral.

     9.3. Environmental Reports. Furnish Agent, concurrently with the delivery of the financial statements referred to in Sections 9.7 and 9.8, with a certificate signed by the President of Borrowing Agent stating, to the best of his knowledge, that each Borrower is in compliance in all material respects with all federal, state and local Environmental Laws. To the extent any Borrower is not in compliance with the foregoing laws, the certificate shall set forth with specificity all areas of non-compliance and the proposed action such Borrower will implement in order to achieve full compliance.

     9.4. Litigation. Promptly notify Agent in writing upon becoming aware of any claim, litigation, suit or administrative proceeding affecting any Borrower or any Guarantor, whether or not the claim is covered by insurance, and of any litigation, suit or administrative proceeding, which in any such case affects the Collateral or which could reasonably be expected to have a Material Adverse Effect.

     9.5. Material Occurrences. Promptly notify Agent in writing upon becoming aware of the occurrence of (a) any Event of Default or Default; (b) any event which with the giving of notice or lapse of time, or both, would constitute an event of default under the Subordinated Loan Documents, (d) any event, development or circumstance whereby any financial statements or other reports furnished to Agent fail in any material respect to present fairly, in accordance with GAAP consistently applied, the financial condition or operating results of any Borrower as of the date of such statements; (d) any accumulated retirement plan funding deficiency which, if such deficiency continued for two plan years and was not corrected as provided in Section 4971 of the Code, could subject any Borrower to a tax imposed by Section 4971 of the Code; (e) each and every default by any Borrower which might result in the acceleration of the maturity of any Indebtedness, including the names and addresses of the holders of such Indebtedness with respect to which there is a default existing or with respect to which the maturity has been or could be accelerated, and the amount of such Indebtedness; and (f) any other development in the business or affairs of any Borrower or Guarantor, which could reasonably be expected to have a Material Adverse Effect; in each case describing the nature thereof and the action Borrowers propose to take with respect thereto.

     9.6. Government Receivables. Notify Agent promptly (which may be by a separate notification or by inclusion of a notation in the Borrowing Base Certificates delivered hereunder) if any of its Receivables arise out of contracts between any Borrower and the United States, any state, Canada, any province or any department, agency or instrumentality of any of them.

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     9.7. Annual Financial Statements. Furnish Agent and Lenders within one hundred twenty (120) days after the end of each fiscal year of Borrowers, financial statements of Holdings and its Subsidiaries on a consolidating and consolidated basis including, but not limited to, statements of income and stockholders’ equity and cash flow from the beginning of the current fiscal year to the end of such fiscal year and the balance sheet as at the end of such fiscal year, all prepared in accordance with GAAP applied on a basis consistent with prior practices, and in reasonable detail and reported upon without qualification by an independent certified public accounting firm selected by Borrowers and satisfactory to Agent (the “Accountants”). The report of the Accountants shall be accompanied by a statement of the Accountants certifying that (i) they have caused this Agreement to be reviewed, (ii) in making the examination upon which such report was based either no information came to their attention which to their knowledge constituted an Event of Default or a Default under this Agreement or any related agreement or, if such information came to their attention, specifying any such Default or Event of Default, its nature, when it occurred and whether it is continuing, and such report shall contain or have appended thereto calculations which set forth Borrowers’ compliance with the requirements or restrictions imposed by Sections 6.5, 7.4, 7.5,7.6, 7.7, 7.8 and 7.11 hereof. In addition, the reports shall be accompanied by a Compliance Certificate.

     9.8. Quarterly Financial Statements. Furnish Agent and Lenders within forty-five (45) days after the end of each fiscal quarter, an unaudited balance sheet of Borrowers on a consolidated and consolidating basis and unaudited statements of income and stockholders’ equity and cash flow of Borrowers on a consolidated and consolidating basis reflecting results of operations from the beginning of the fiscal year to the end of such quarter and for such quarter, prepared on a basis consistent with prior practices and complete and correct in all material respects, subject to normal and recurring year end adjustments that individually and in the aggregate are not material to Borrowers’ business. The reports shall be accompanied by a Compliance Certificate.

     9.9. Monthly Financial Statements. Furnish Agent and Lenders within forty-five (45) days after the end of each month for the first six months following the Closing Date and within thirty (30) days after the end of each month thereafter (other than for the months of January, April, July and October which shall be delivered in accordance with Sections 9.7 and 9.8 as applicable), an unaudited balance sheet of Borrowers on a consolidated and consolidating basis and unaudited statements of income and stockholders’ equity and cash flow of Borrowers on a consolidated and consolidating basis reflecting results of operations from the beginning of the fiscal year to the end of such month and for such month, prepared on a basis consistent with prior practices and complete and correct in all material respects, subject to normal and recurring year end adjustments that individually and in the aggregate are not material to Borrowers’ business. The reports shall be accompanied by a Compliance Certificate.

     9.10. Other Reports. Furnish Agent as soon as available, but in any event within ten (10) days after the issuance thereof, with copies of such financial statements, reports and returns as each Borrower shall send to its stockholders or members, as applicable.

     9.11. Additional Information. Furnish Agent with such additional information as Agent shall reasonably request in order to enable Agent to determine whether the terms, covenants, provisions and conditions of this Agreement and the Notes have been complied with by

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Borrowers including, without the necessity of any request by Agent, (a) copies of all environmental audits and reviews, (b) at least thirty (30) days prior thereto, notice of the closing or relocation of any Borrower’s chief executive office, (c) promptly upon the request of Agent, an updated list of Real Property, and (d) promptly upon any Borrower’s learning thereof, notice of any labor dispute to which any Borrower may become a party, any strikes or walkouts relating to any of its plants or other facilities, and the expiration of any labor contract to which any Borrower is a party or by which any Borrower is bound.

     9.12. Projected Operating Budget. Furnish Agent and Lenders, no later than thirty (30) days following the beginning of Borrowers 2010 fiscal year and thirty (30) days prior to the beginning of each Borrower’s fiscal year thereafter, a month by month projected operating budget and cash flow of Borrowers on a consolidated and consolidating basis for such fiscal year (including an income statement for each month and a balance sheet as at the end of the last month in each fiscal quarter), such projections to be accompanied by a certificate signed by the President or Chief Financial Officer of each Borrower to the effect that such projections have been prepared consistent with past practices (except to the extent otherwise indicated) and are based on assumptions that were reasonable when made.

     9.13. Variances From Operating Budget. Furnish Agent, concurrently with the delivery of the financial statements referred to in Section 9.7 and each quarterly and monthly report, a written report summarizing all material variances from budgets submitted by Borrowers pursuant to Section 9.12 and a discussion and analysis by management with respect to such variances.

     9.14. Notice of Suits, Adverse Events. Furnish Agent with prompt written notice of (i) any lapse or other termination of any Consent issued to any Borrower by any Governmental Body or any other Person that is material to the operation of any Borrower’s business, (ii) any refusal by any Governmental Body or any other Person to renew or extend any such Consent; and (iii) copies of any periodic or special reports filed by any Borrower with any Governmental Body or Person, if such reports indicate any material change in the business, operations, affairs or condition of any Borrower, or if copies thereof are requested by Lender, and (iv) copies of any material notices and other communications from any Governmental Body or Person which specifically relate to any Borrower.

     9.15. ERISA Notices and Requests. Furnish Agent with prompt written notice in the event that (i) any Borrower or any member of the Controlled Group knows or has reason to know that a Termination Event has occurred, together with a written statement describing such Termination Event and the action, if any, which such Borrower or any member of the Controlled Group has taken, is taking, or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, Department of Labor or PBGC with respect thereto, (ii) any Borrower or any member of the Controlled Group knows or has reason to know that a prohibited transaction (as defined in Sections 406 of ERISA or 4975 of the Code) has occurred together with a written statement describing such transaction and the action which such Borrower or any member of the Controlled Group has taken, is taking or proposes to take with respect thereto, (iii) a funding waiver request has been filed with respect to any Plan together with all communications received by any Borrower or any member of the Controlled Group with respect to such request, (iv) any increase in the benefits of any existing Plan or the establishment

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of any new Plan or the commencement of contributions to any Plan to which any Borrower or any member of the Controlled Group was not previously contributing shall occur, (v) any Borrower or any member of the Controlled Group shall receive from the PBGC a notice of intention to terminate a Plan or to have a trustee appointed to administer a Plan, together with copies of each such notice, (vi) any Borrower or any member of the Controlled Group shall receive any favorable or unfavorable determination letter from the Internal Revenue Service regarding the qualification of a Plan under Section 401(a) of the Code, together with copies of each such letter; (vii) any Borrower or any member of the Controlled Group shall receive a notice regarding the imposition of withdrawal liability, together with copies of each such notice; (viii) any Borrower or any member of the Controlled Group shall fail to make a required installment or any other required payment to a Plan on or before the due date for such installment or payment; (ix) any Borrower or any member of the Controlled Group knows that (a) a Multiemployer Plan has been terminated, (b) the administrator or plan sponsor of a Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC has instituted or will institute proceedings under Section 4042 of ERISA to terminate a Multiemployer Plan.

     9.16. Additional Documents. Execute and deliver to Agent, upon request, such documents and agreements as Agent may, from time to time, reasonably request to carry out the purposes, terms or conditions of this Agreement.

X. EVENTS OF DEFAULT.

     The occurrence of any one or more of the following events shall constitute an “Event of Default”:

     10.1. Nonpayment. Failure by any Borrower to pay any principal or interest on the Obligations when due, whether at maturity or by reason of acceleration pursuant to the terms of this Agreement or by notice of intention to prepay, or by required prepayment or failure to pay any other liabilities or make any other payment, fee or charge provided for herein when due or in any Other Document;

     10.2. Breach of Representation. Any representation or warranty made or deemed made by any Borrower or any Guarantor in this Agreement, any Other Document or any related agreement or in any certificate, document or financial or other statement furnished at any time in connection herewith or therewith shall prove to have been misleading in any material respect on the date when made or deemed to have been made;

     10.3. Financial Information. Failure by any Borrower to (i) furnish financial information when due or promptly following any request for additional information for which a specified delivery time is not set forth in this Agreement or (ii) permit the inspection of its books or records;

     10.4. Judicial Actions. Issuance of a notice of a Lien (other than a Permitted Encumbrance), levy, assessment, injunction or attachment against any Borrower’s Receivables or against a material portion of any Borrower’s other property;

     10.5. Noncompliance. Except as otherwise provided for in Sections 10.1, 10.3 and 10.5(ii), (i) failure or neglect of any Borrower, any Guarantor or any Person to perform, keep or

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observe any term, provision, condition, covenant herein contained, or contained in any Other Document or any other agreement or arrangement (beyond any applicable grace or cure), now or hereafter entered into between such Borrower, such Guarantor or such Person on the one hand, and Agent or any Lender on the other hand in connection with this Agreement or the Other Documents, or (ii) failure or neglect of any Borrower to perform, keep or observe any term, provision, condition or covenant, contained in Sections 4.6, 4.7, 4.9, 6.1, 6.3, 6.4, 9.4 or 9.6 hereof which is not cured within ten (10) days from the occurrence of such failure or neglect;

     10.6. Judgments. Any judgment or judgments are rendered against any Borrower or any Guarantor (excluding the Ampersand Guarantors) for an aggregate amount in excess of $250,000 (or the US Dollar Equivalent) or against all Borrowers or Guarantors (excluding the Ampersand Guarantors) for an aggregate amount in excess of $250,000 (or the US Dollar Equivalent) and (i) enforcement proceedings shall have been commenced by a creditor upon such judgment, (ii) there shall be any period of forty (40) consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, shall not be in effect, or (iii) any such judgment results in the creation of a Lien upon any of the Collateral (other than a Permitted Encumbrance);

     10.7. Bankruptcy. Any Borrower or any Guarantor (excluding the Ampersand Guarantors) shall (i) apply for, consent to or suffer the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or similar fiduciary of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of creditors, (iii) commence a voluntary case under any state or federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vi) acquiesce to, or fail to have dismissed, within sixty (60) days, any petition filed against it in any involuntary case under such bankruptcy laws, or (vii) take any action for the purpose of effecting any of the foregoing;

     10.8. Inability to Pay. Any Borrower or any Guarantor (excluding the Ampersand Guarantors) shall admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business;

     10.9. Intentionally Omitted;

     10.10. Material Adverse Effect. The occurrence of any Material Adverse Effect;

     10.11. Lien Priority. Any Lien created hereunder or provided for hereby or under any related agreement for any reason ceases to be or is not a valid and perfected Lien having a first priority interest;

     10.12. Subordinated Loan Default. An event of default has occurred under the Subordinated Loan Documents or the Subordination Agreement, which default shall not have been cured or waived within any applicable grace period;

     10.13. Cross Default. A default of the obligations of any Borrower under any other agreement to which it is a party shall occur which causes a Material Adverse Effect which default is not cured within any applicable grace period;

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     10.14. Breach of Guaranty. Termination or breach of any Guaranty or Guaranty Security Agreement or any provision or term contained therein or similar agreement executed and delivered to Agent in connection with the Obligations of any Borrower, or if any Guarantor attempts to terminate, challenges the validity of, or its liability under, any such Guaranty or Guaranty Security Agreement or similar agreement;

     10.15. Change of Ownership. Any Change of Ownership or Change of Control shall occur;

     10.16. Invalidity. Any material provision of this Agreement or any Other Document shall, for any reason, cease to be valid and binding on any Borrower or any Guarantor, or any Borrower or any Guarantor shall so claim in writing to Agent or any Lender;

     10.17. Licenses. (i) Any Governmental Body shall (A) revoke, terminate, suspend or adversely modify any license, permit, patent trademark or tradename of any Borrower or any Guarantor (excluding the Ampersand Guarantors), or (B) commence proceedings to suspend, revoke, terminate or adversely modify any such license, permit, trademark, tradename or patent and such proceedings shall not be dismissed or discharged within sixty (60) days, or (C) schedule or conduct a hearing on the renewal of any license, permit, trademark, tradename or patent necessary for the continuation of any Borrower’s or any Guarantor’s business and the staff of such Governmental Body issues a report recommending the termination, revocation, suspension or material, adverse modification of such license, permit, trademark, tradename or patent, and any of (A) through (C) above could reasonably be expected to have a Material Adverse Effect; (ii) any agreement which is necessary or material to the operation of any Borrower’s or any Guarantor’s (excluding the Ampersand Guarantors) business shall be revoked or terminated and not replaced by a substitute acceptable to Agent within thirty (30) days after the date of such revocation or termination, and such revocation or termination and non-replacement would reasonably be expected to have a Material Adverse Effect;

     10.18. Seizures. Any portion of the Collateral shall be seized or taken by a Governmental Body, or any Borrower or any Guarantor (excluding the Ampersand Guarantors) or the title and rights of any Borrower, any Guarantor or any Original Owner which is the owner of any material portion of the Collateral shall have become the subject matter of claim, litigation, suit or other proceeding which might, in the opinion of Agent, upon final determination, result in impairment or loss of the security provided by this Agreement or the Other Documents;

     10.19. Pension Plans. An event or condition specified in Sections 7.16 or 9.15 hereof shall occur or exist with respect to any Plan and, as a result of such event or condition, together with all other such events or conditions, any Borrower or any member of the Controlled Group shall incur, or in the opinion of Agent be reasonably likely to incur, a liability to a Plan or the PBGC (or both) which, in the reasonable judgment of Agent, would have a Material Adverse Effect; or

     10.20. Intercreditor Default. Termination or breach of the Intercreditor Agreement by any Person party thereto (other than Agent).

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     10.21. Fixed Charge Coverage Cure Right. Notwithstanding anything to the contrary contained in this Article X, in the event that any Borrower fails to comply with any of the financial covenants set forth in Section 6.5 (the “Financial Covenants”), then on or before sixty (60) days following the end of the applicable quarter in which Borrowers failed to satisfy the requirements of Section 6.5, Holdings or its Affiliates may irrevocably commit solely at its option to (i) purchase Equity Interests of any Borrower for cash or (ii) make subordinated loans to Borrowers pursuant to documents in form and substance satisfactory to Agent and make payment for such Equity Interests or subordinated loans within five (5) Business Days of such commitment (collectively the “Cure Right”), and upon the receipt by such Borrower of such cash (the “Specified Equity/Debt Contribution” and the amount of such Specified Equity/Debt Contribution, the “Cure Amount”) pursuant to the exercise by Holdings or its Affiliates of such Cure Right, such Borrower shall pay the Cure Amount to Agent on account of the Advances (to be applied in the sole discretion of Agent), and thereafter the applicable Financial Covenant(s) shall be recalculated giving effect to the following pro forma adjustments:

          (a) EBITDA shall be increased by the Cure Amount, for the purpose of determining compliance with the Financial Covenants for such period; and

          (b) if after giving effect to the foregoing recalculations Borrowers would have satisfied such Financial Covenants, Borrowers shall then be in compliance with the requirements of such Financial Covenants, Borrowers shall be deemed to have complied with such Financial Covenants as to the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable breach or default of such Financial Covenants that had occurred shall not be deemed an Event of Default; and

          (c) Notwithstanding anything set forth herein, Holdings or its Affiliates may not exercise such Cure Right in more than three consecutive quarters.

XI. LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT.

     11.1. Rights and Remedies.

          (a) Upon the occurrence and during the continuance of (i) an Event of Default pursuant to Section 10.7 all Obligations shall be immediately due and payable and this Agreement and the obligation of Lenders to make Advances shall be deemed terminated; and, (ii) any of the other Events of Default and at any time thereafter during the continuance thereof, at the option of Required Lenders all Obligations shall be immediately due and payable and Lenders shall have the right to terminate this Agreement and to terminate the obligation of Lenders to make Advances and (iii) a filing of a petition against any Borrower in any involuntary case under any state or federal bankruptcy laws, all Obligations shall be immediately due and payable and the obligation of Lenders to make Advances hereunder shall be terminated other than as may be required by an appropriate order of the bankruptcy court having jurisdiction over such Borrower. Upon the occurrence and during the continuance of any Event of Default, Agent shall have the right to exercise any and all rights and remedies provided for herein, under the Other Documents (including the Foreign Security Agreements), under the Uniform Commercial Code and at law or equity generally, including the right to foreclose the security interests granted herein and to realize upon any Collateral by any available judicial procedure and/or to take

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possession of and sell any or all of the Collateral with or without judicial process. Agent may enter any of any Borrower’s premises or other premises without legal process and without incurring liability to any Borrower therefor, and Agent may thereupon, or at any time thereafter, in its discretion without notice or demand, take the Collateral and remove the same to such place as Agent may deem advisable and Agent may require Borrowers to make the Collateral available to Agent at a convenient place. With or without having the Collateral at the time or place of sale, Agent may sell the Collateral, or any part thereof, at public or private sale, at any time or place, in one or more sales, at such price or prices, and upon such terms, either for cash, credit or future delivery, as Agent may elect. Except as to that part of the Collateral which is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Agent shall give Borrowers reasonable notification of such sale or sales, it being agreed that in all events written notice mailed to Borrowing Agent at least ten (10) days prior to such sale or sales is reasonable notification. At any public sale Agent or any Lender may bid for and become the purchaser, and Agent, any Lender or any other purchaser at any such sale thereafter shall hold the Collateral sold absolutely free from any claim or right of whatsoever kind, including any equity of redemption and all such claims, rights and equities are hereby expressly waived and released by each Borrower. In connection with the exercise of the foregoing remedies, including the sale of Inventory, Agent is granted a perpetual nonrevocable, royalty free, nonexclusive license and Agent is granted permission to use all of each Borrower’s (a) trademarks, trade styles, trade names, patents, patent applications, copyrights, service marks, licenses, franchises and other proprietary rights which are used or useful in connection with Inventory for the purpose of marketing, advertising for sale and selling or otherwise disposing of such Inventory and (b) Equipment for the purpose of completing the manufacture of unfinished goods. The cash proceeds realized from the sale of any Collateral shall be applied to the Obligations in the order set forth in Section 11.5 hereof. Noncash proceeds will only be applied to the Obligations as they are converted into cash. If any deficiency shall arise, Borrowers shall remain liable to Agent and Lenders therefor.

          (b) To the extent that Applicable Law imposes duties on the Agent to exercise remedies in a commercially reasonable manner, each Borrower acknowledges and agrees that it is not commercially unreasonable for the Agent (i) to fail to incur expenses reasonably deemed significant by the Agent to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (ii) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against Customers or other Persons obligated on Collateral or to remove Liens on or any adverse claims against Collateral, (iv) to exercise collection remedies against Customers and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other Persons, whether or not in the same business as any Borrower, for expressions of interest in acquiring all or any portion of such Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capacity of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail

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markets, (x) to disclaim disposition warranties, such as title, possession or quiet enjoyment, (xi) to purchase insurance or credit enhancements to insure the Agent against risks of loss, collection or disposition of Collateral or to provide to the Agent a guaranteed return from the collection or disposition of Collateral, or (xii) to the extent deemed appropriate by the Agent, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist the Agent in the collection or disposition of any of the Collateral. Each Borrower acknowledges that the purpose of this Section 11.1(b) is to provide non-exhaustive indications of what actions or omissions by the Agent would not be commercially unreasonable in the Agent’s exercise of remedies against the Collateral and that other actions or omissions by the Agent shall not be deemed commercially unreasonable solely on account of not being indicated in this Section 11.1(b). Without limitation upon the foregoing, nothing contained in this Section 11.1(b) shall be construed to grant any rights to any Borrower or to impose any duties on Agent that would not have been granted or imposed by this Agreement or by Applicable Law in the absence of this Section 11.1(b).

          (c) Without limiting any right or remedy of the Agent in this Agreement, upon the occurrence and during the continuance of any Event of Default, the Agent may by instrument in writing appoint any person as a receiver of all or any part of the Collateral of any Canadian Borrower. The Agent may from time to time remove or replace a receiver, or make application to any court of competent jurisdiction for the appointment of a receiver. Any receiver appointed by the Agent shall (for purposes relating to responsibility for the receiver’s acts or omissions) be considered to be the agent of the applicable Canadian Borrower. The Agent may from time to time fix the receiver’s remuneration and the Borrowers shall pay the amount of such remuneration to the Agent. The Agent shall not be liable to any Canadian Borrower or any other person in connection with appointing or not appointing a receiver or in connection with the receiver’s actions or omissions.

     11.2. Agent’s Discretion. Agent shall have the right in its sole discretion to determine which rights, Liens, security interests or remedies Agent may at any time pursue, relinquish, subordinate, or modify or to take any other action with respect thereto and such determination will not in any way modify or affect any of Agent’s or Lenders’ rights hereunder.

     11.3. Setoff. Subject to Section 14.12, in addition to any other rights which Agent or any Lender may have under Applicable Law, upon the occurrence and during the continuance of an Event of Default hereunder, Agent and such Lender shall have a right, immediately and without notice of any kind, to apply any Borrower’s property held by Agent and such Lender (excluding IRA, Keogh and trust accounts) to reduce the Obligations.

     11.4. Rights and Remedies not Exclusive. The enumeration of the foregoing rights and remedies is not intended to be exhaustive and the exercise of any rights or remedy shall not preclude the exercise of any other right or remedies provided for herein or otherwise provided by law, all of which shall be cumulative and not alternative.

     11.5. Allocation of Payments After Event of Default. Notwithstanding any other provisions of this Agreement to the contrary, after the occurrence and during the continuance of an Event of Default, all amounts collected or received by the Agent on account of the

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Obligations or any other amounts outstanding under any of the Other Documents or in respect of the Collateral may, at Agent’s discretion, be paid over or delivered as follows:

     FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees) of the Agent in connection with enforcing its rights and the rights of the Lenders under this Agreement and the Other Documents and any protective advances made by the Agent with respect to the Collateral under or pursuant to the terms of this Document;

     SECOND, to payment of any fees owed to the Agent;

     THIRD, to the payment of all reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees) of each of the Lenders to the extent owing to such Lender pursuant to the terms of this Agreement;

     FOURTH, to the payment of all of the Obligations consisting of accrued fees and interest;

     FIFTH, to the payment of the outstanding principal amount of the Obligations (including the payment or cash collateralization of any outstanding Letters of Credit);

     SIXTH, to all other Obligations and other obligations which shall have become due and payable under the Other Documents or otherwise and not repaid pursuant to clauses “FIRST” through “FIFTH” above; and

     SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully entitled to receive such surplus.

     In carrying out the foregoing, (i) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category; (ii) each of the Lenders shall receive (so long as it is not a Defaulting Lender) an amount equal to its pro rata share (based on the proportion that the then outstanding Advances held by such Lender bears to the aggregate then outstanding Advances) of amounts available to be applied pursuant to clauses “FOURTH”, “FIFTH” and “SIXTH” above; and (iii) to the extent that any amounts available for distribution pursuant to clause “FIFTH” above are attributable to the issued but undrawn amount of outstanding Letters of Credit, such amounts shall be held by the Agent in a cash collateral account and applied (A) first, to reimburse the Issuer from time to time for any drawings under such Letters of Credit and (B) then, following the expiration of all Letters of Credit, to all other obligations of the types described in clauses “FIFTH” and “SIXTH” above in the manner provided in this Section 11.5.

XII. WAIVERS AND JUDICIAL PROCEEDINGS.

     12.1. Waiver of Notice. Each Borrower hereby waives notice of non-payment of any of the Receivables, demand, presentment, protest and notice thereof with respect to any and all instruments, notice of acceptance hereof, notice of loans or advances made, credit extended, Collateral received or delivered, or any other action taken in reliance hereon, and all other demands and notices of any description, except such as are expressly provided for herein.

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     12.2. Delay. No delay or omission on Agent’s or any Lender’s part in exercising any right, remedy or option shall operate as a waiver of such or any other right, remedy or option or of any Default or Event of Default.

     12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

XIII. EFFECTIVE DATE AND TERMINATION.

     13.1. Term. This Agreement, which shall inure to the benefit of and shall be binding upon the respective successors and permitted assigns of each Borrower, Agent and each Lender, shall become effective on the date hereof and shall continue in full force and effect until August 13, 2012 (the “Term”) unless sooner terminated as herein provided. Borrowers may terminate this Agreement at any time upon ninety (90) days’ prior written notice upon payment in full of the Obligations. In the event the Obligations are prepaid in full prior to the last day of the Term (the date of such prepayment hereinafter referred to as the “Early Termination Date”), Borrowers shall pay to Agent for the benefit of Lenders an early termination fee in an amount equal to (x) one and one-half of one percent (1.5%) of the Maximum Loan Amount if the Early Termination Date occurs on or after the Closing Date to and including the date immediately preceding the first anniversary of the Closing Date, (y) one percent (1%) of the Maximum Loan Amount if the Early Termination Date occurs on or after the first anniversary of the Closing Date to and including the date immediately preceding the second anniversary of the Closing Date, and (z) one-half of one percent (.5%) of the Maximum Loan Amount if the Early Termination Date occurs on or after the second anniversary of the Closing Date to and including the date immediately preceding the third anniversary of the Closing Date.

     13.2. Termination. The termination of the Agreement shall not affect any Borrower’s, Agent’s or any Lender’s rights, or any of the Obligations having their inception prior to the effective date of such termination, and the provisions hereof shall continue to be fully operative until all transactions entered into, rights or interests created or Obligations have been fully and indefeasibly paid, disposed of, concluded or liquidated. The security interests, Liens and rights granted to Agent and Lenders hereunder and the financing statements filed hereunder shall continue in full force and effect, notwithstanding the termination of this Agreement or the fact

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that Borrowers’ Account may from time to time be temporarily in a zero or credit position, until all of the Obligations of each Borrower have been indefeasibly paid and performed in full after the termination of this Agreement or each Borrower has furnished Agent and Lenders with an indemnification satisfactory to Agent and Lenders with respect thereto. Accordingly, each Borrower waives any rights which it may have under the Uniform Commercial Code to demand the filing of termination statements with respect to the Collateral, and Agent shall not be required to send such termination statements to each Borrower, or to file them with any filing office, unless and until this Agreement shall have been terminated in accordance with its terms and all Obligations have been indefeasibly paid in full in immediately available funds. All representations, warranties, covenants, waivers and agreements contained herein shall survive termination hereof until all Obligations are indefeasibly paid and performed in full.

XIV. REGARDING AGENT.

     14.1. Appointment. Each Lender hereby designates PNC to act as Agent for such Lender under this Agreement and the Other Documents. Each Lender hereby irrevocably authorizes Agent to take such action on its behalf under the provisions of this Agreement and the Other Documents and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto and Agent shall hold all Collateral, payments of principal and interest, fees (except the fees set forth in Sections 3.3(a) and 3.4), charges and collections (without giving effect to any collection days) received pursuant to this Agreement, for the ratable benefit of Lenders. Agent may perform any of its duties hereunder by or through its agents or employees. As to any matters not expressly provided for by this Agreement (including collection of the Note) Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding; provided, however, that Agent shall not be required to take any action which exposes Agent to liability or which is contrary to this Agreement or the Other Documents or Applicable Law unless Agent is furnished with an indemnification reasonably satisfactory to Agent with respect thereto.

     14.2. Nature of Duties. Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the Other Documents. Neither Agent nor any of its officers, directors, employees or agents shall be (i) liable for any action taken or omitted by them as such hereunder or in connection herewith, unless caused by their gross (not mere) negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment), or (ii) responsible in any manner for any recitals, statements, representations or warranties made by any Borrower or any officer thereof contained in this Agreement, or in any of the Other Documents or in any certificate, report, statement or other document referred to or provided for in, or received by Agent under or in connection with, this Agreement or any of the Other Documents or for the value, validity, effectiveness, genuineness, due execution, enforceability or sufficiency of this Agreement, or any of the Other Documents or for any failure of any Borrower to perform its obligations hereunder. Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any of the Other Documents, or to inspect the properties, books or records of any Borrower. The duties of Agent

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as respects the Advances to Borrowers shall be mechanical and administrative in nature; Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender; and nothing in this Agreement, expressed or implied, is intended to or shall be so construed as to impose upon Agent any obligations in respect of this Agreement except as expressly set forth herein.

     14.3. Lack of Reliance on Agent and Resignation.

          (a) Independently and without reliance upon Agent or any other Lender, each Lender has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of each Borrower and each Guarantor in connection with the making and the continuance of the Advances hereunder and the taking or not taking of any action in connection herewith, and (ii) its own appraisal of the creditworthiness of each Borrower and each Guarantor. Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before making of the Advances or at any time or times thereafter except as shall be provided by any Borrower pursuant to the terms hereof. Agent shall not be responsible to any Lender for any recitals, statements, information, representations or warranties herein or in any agreement, document, certificate or a statement delivered in connection with or for the execution, effectiveness, genuineness, validity, enforceability, collectability or sufficiency of this Agreement or any Other Document, or of the financial condition of any Borrower or any Guarantor, or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement, the Note, the Other Documents or the financial condition of any Borrower, or the existence of any Event of Default or any Default.

          (b) Agent may resign on sixty (60) days’ written notice to each of Lenders and Borrowing Agent and upon such resignation, the Required Lenders will promptly designate a successor Agent reasonably satisfactory to Borrowers.

          (c) Any such successor Agent shall succeed to the rights, powers and duties of Agent, and the term “Agent” shall mean such successor agent effective upon its appointment, and the former Agent’s rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent. After any Agent’s resignation as Agent, the provisions of this Article XIV shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement.

     14.4. Certain Rights of Agent. If Agent shall request instructions from Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any Other Document, Agent shall be entitled to refrain from such act or taking such action unless and until Agent shall have received instructions from the Required Lenders; and Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, Lenders shall not have any right of action whatsoever against Agent as a result of its acting or refraining from acting hereunder in accordance with the instructions of the Required Lenders.

     14.5. Reliance. Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier

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message, cablegram, order or other document or telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper person or entity, and, with respect to all legal matters pertaining to this Agreement and the Other Documents and its duties hereunder, upon advice of counsel selected by it. Agent may employ agents and attorneys-in-fact and shall not be liable for the default or misconduct of any such agents or attorneys-in-fact selected by Agent with reasonable care.

     14.6. Notice of Default. Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder or under the Other Documents, unless Agent has received notice from a Lender or Borrowing Agent referring to this Agreement or the Other Documents, describing such Default or Event of Default and stating that such notice is a “notice of default”. In the event that Agent receives such a notice, Agent shall give notice thereof to Lenders. Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided, that, unless and until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of Lenders.

     14.7. Indemnification. To the extent Agent is not reimbursed and indemnified by Borrowers, each Lender will reimburse and indemnify Agent in proportion to its respective portion of the Advances (or, if no Advances are outstanding, according to its Commitment Percentage), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Agent in performing its duties hereunder, or in any way relating to or arising out of this Agreement or any Other Document; provided that, Lenders shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agent’s gross (not mere) negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment).

     14.8. Agent in its Individual Capacity. With respect to the obligation of Agent to lend under this Agreement, the Advances made by it shall have the same rights and powers hereunder as any other Lender and as if it were not performing the duties as Agent specified herein; and the term “Lender” or any similar term shall, unless the context clearly otherwise indicates, include Agent in its individual capacity as a Lender. Agent may engage in business with any Borrower as if it were not performing the duties specified herein, and may accept fees and other consideration from any Borrower for services in connection with this Agreement or otherwise without having to account for the same to Lenders.

     14.9. Delivery of Documents. To the extent Agent receives financial statements required under Sections 9.7, 9.8, 9.9, 9.12 and 9.13 or Borrowing Base Certificates from any Borrower pursuant to the terms of this Agreement which any Borrower is not obligated to deliver to each Lender, Agent will promptly furnish such documents and information to Lenders.

     14.10. Borrowers’ Undertaking to Agent. Without prejudice to their respective obligations to Lenders under the other provisions of this Agreement, each Borrower hereby undertakes with Agent to pay to Agent from time to time on demand all amounts from time to

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time due and payable by it for the account of Agent or Lenders or any of them pursuant to this Agreement to the extent not already paid. Any payment made pursuant to any such demand shall pro tanto satisfy the relevant Borrower’s obligations to make payments for the account of Lenders or the relevant one or more of them pursuant to this Agreement.

     14.11. No Reliance on Agent’s Customer Identification Program. Each Lender acknowledges and agrees that neither such Lender, nor any of its Affiliates, participants or assignees, may rely on the Agent to carry out such Lender’s, Affiliate’s, participant’s or assignee’s customer identification program, or other obligations required or imposed under or pursuant to the USA PATRIOT Act or the regulations thereunder, including the regulations contained in 31 CFR 103.121 (as hereafter amended or replaced, the “CIP Regulations”), or any other Anti-Terrorism Law, including any programs involving any of the following items relating to or in connection with any Borrower, its Affiliates or its agents, this Agreement, the Other Documents or the transactions hereunder or contemplated hereby: (1) any identity verification procedures; (2) any record-keeping; (3) comparisons with government lists; (4) customer notices; or (5) other procedures required under the CIP Regulations or such other laws.

     14.12. Other Agreements. Each of the Lenders agrees that it shall not, without the express consent of Agent, and that it shall, to the extent it is lawfully entitled to do so, upon the request of Agent, set off against the Obligations, any amounts owing by such Lender to any Borrower or any deposit accounts of any Borrower now or hereafter maintained with such Lender. Anything in this Agreement to the contrary notwithstanding, each of the Lenders further agrees that it shall not, unless specifically requested to do so by Agent, take any action to protect or enforce its rights arising out of this Agreement or the Other Documents, it being the intent of Lenders that any such action to protect or enforce rights under this Agreement and the Other Documents shall be taken in concert and at the direction or with the consent of Agent or Required Lenders.

XV. BORROWING AGENCY.

     15.1. Borrowing Agency Provisions; Several Nature of Foreign Borrower.

          (a) Each Borrower hereby irrevocably designates Borrowing Agent to be its attorney and agent and in such capacity to borrow, sign and endorse notes, and execute and deliver all instruments, documents, writings and further assurances now or hereafter required hereunder, on behalf of such Borrower or Borrowers, and hereby authorizes Agent to pay over or credit all loan proceeds hereunder in accordance with the request of Borrowing Agent.

          (b) The handling of this credit facility as a co-borrowing facility with a borrowing agent in the manner set forth in this Agreement is solely as an accommodation to Borrowers and at their request. Neither Agent nor any Lender shall incur liability to Borrowers as a result thereof. To induce Agent and Lenders to do so and in consideration thereof, each Borrower hereby indemnifies Agent and each Lender and holds Agent and each Lender harmless from and against any and all liabilities, expenses, losses, damages and claims of damage or injury asserted against Agent or any Lender by any Person arising from or incurred by reason of the handling of the financing arrangements of Borrowers as provided herein, reliance by Agent or any Lender on any request or instruction from Borrowing Agent or any other action taken by

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Agent or any Lender with respect to this Section 15.1 except due to willful misconduct or gross (not mere) negligence by the indemnified party (as determined by a court of competent jurisdiction in a final and non-appealable judgment).

          (c) All Obligations shall be joint and several, and each Borrower shall make payment upon the maturity of the Obligations by acceleration or otherwise, and such obligation and liability on the part of each Borrower shall in no way be affected by any extensions, renewals and forbearance granted to Agent or any Lender to any Borrower, failure of Agent or any Lender to give any Borrower notice of borrowing or any other notice, any failure of Agent or any Lender to pursue or preserve its rights against any Borrower, the release by Agent or any Lender of any Collateral now or thereafter acquired from any Borrower, and such agreement by each Borrower to pay upon any notice issued pursuant thereto is unconditional and unaffected by prior recourse by Agent or any Lender to the other Borrowers or any Collateral for such Borrower’s Obligations or the lack thereof. Each Borrower waives all suretyship defenses.

     15.2. Waiver of Subrogation. Each Borrower expressly waives any and all rights of subrogation, reimbursement, indemnity, exoneration, contribution of any other claim which such Borrower may now or hereafter have against the other Borrowers or other Person directly or contingently liable for the Obligations hereunder, or against or with respect to the other Borrowers’ property (including, without limitation, any property which is Collateral for the Obligations), arising from the existence or performance of this Agreement, until termination of this Agreement and repayment in full of the Obligations.

     15.3. Limitation on Liability of Foreign Borrowers. It is the intent of the parties and the parties hereby agree that, notwithstanding any provision of this Agreement or any Other Documents, Foreign Borrower shall not be liable for any US Obligations, the present and future assets of Foreign Borrower shall not be subject to any Charges, claim or action by the Agent or the Lenders to satisfy any US Obligations and neither the Agent nor the Lenders shall have any recourse under this Agreement or any Other Documents against Foreign Borrower or its assets in respect of any US Obligations. All amounts paid by Foreign Borrower and all value derived from its assets shall be applied only to Obligations of Foreign Borrower. As and when the Obligations owing in respect of Revolving Advances due and owing from Foreign Borrower have been reduced to zero, and the agreement of Agent and Lenders to make any further Revolving Advances to Foreign Borrower shall have been irrevocably terminated, then Foreign Borrower shall cease to be a Borrower and shall be entitled to be released and discharged from all obligations under this Agreement and the Other Documents, the Agent and Lenders shall have no further claim against Foreign Borrower or its assets and all provisions of this Agreement that relate to Foreign Borrower, other than provisions which apply generally to Subsidiaries or Foreign Subsidiaries, shall cease to have further force and effect. Any references in this Agreement or in any Other Documents to specific statutes or to governmental agencies of the United States of America, shall be, when applied to Foreign Borrower, deemed to refer to the applicable provisions or governmental agencies of Canada, as the case may be, if any, provided, however, that Sections 5.25, 7.16, 7.18 and 9.15 shall be inapplicable to Foreign Borrower. Any reference in a financial covenant or otherwise to any Dollar figure shall be deemed, when applied to Foreign Borrower, to refer to the U.S Dollar Equivalent of the applicable foreign currency.

XVI. MISCELLANEOUS.

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     16.1. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois applied to contracts to be performed wholly within the State of Illinois. Any judicial proceeding brought by or against any Borrower with respect to any of the Obligations, this Agreement, the Other Documents or any related agreement may be brought in any court of competent jurisdiction in the State of Illinois, United States of America, and, by execution and delivery of this Agreement, each Borrower accepts for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement. Each Borrower hereby waives personal service of any and all process upon it and consents that all such service of process may be made by registered mail (return receipt requested) directed to Borrowing Agent at its address set forth in Section 16.7 and service so made shall be deemed completed five (5) days after the same shall have been so deposited in the mails of the United States of America, or, at the Agent’s option, by service upon Borrowing Agent which each Borrower irrevocably appoints as such Borrower’s Agent for the purpose of accepting service within the State of Illinois. Nothing herein shall affect the right to serve process in any manner permitted by law or shall limit the right of Agent or any Lender to bring proceedings against any Borrower in the courts of any other jurisdiction. Each Borrower waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. Each Borrower waives the right to remove any judicial proceeding brought against such Borrower in any state court to any federal court. Any judicial proceeding by any Borrower against Agent or any Lender involving, directly or indirectly, any matter or claim in any way arising out of, related to or connected with this Agreement or any related agreement, shall be brought only in a federal or state court located in the County of Cook, State of Illinois.

     16.2. Entire Understanding.

          (a) This Agreement and the documents executed concurrently herewith contain the entire understanding between each Borrower, Agent and each Lender and supersedes all prior agreements and understandings, if any, relating to the subject matter hereof. Any promises, representations, warranties or guarantees not herein contained and hereinafter made shall have no force and effect unless in writing, signed by each Borrower’s, Agent’s and each Lender’s respective officers. Neither this Agreement nor any portion or provisions hereof may be changed, modified, amended, waived, supplemented, discharged, cancelled or terminated orally or by any course of dealing, or in any manner other than by an agreement in writing, signed by the party to be charged. Each Borrower acknowledges that it has been advised by counsel in connection with the execution of this Agreement and Other Documents and is not relying upon oral representations or statements inconsistent with the terms and provisions of this Agreement.

          (b) The Required Lenders, Agent with the consent in writing of the Required Lenders, and Borrowers may, subject to the provisions of this Section 16.2(b), from time to time enter into written supplemental agreements to this Agreement or the Other Documents executed by Borrowers, for the purpose of adding or deleting any provisions or otherwise changing, varying or waiving in any manner the rights of Lenders, Agent or Borrowers thereunder or the conditions, provisions or terms thereof or waiving any Event of Default thereunder, but only to

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the extent specified in such written agreements; provided, however, that no such supplemental agreement shall, without the consent of all Lenders:

               (i) increase the Commitment Percentage, the maximum dollar commitment of any Lender or the Maximum Loan Amount;

               (ii) extend the maturity of any Note or the due date for any amount payable hereunder, or decrease the rate of interest or reduce any fee payable by Borrowers to Lenders pursuant to this Agreement;

               (iii) alter the definition of the term Required Lenders or alter, amend or modify this Section 16.2(b);

               (iv) release any Collateral during any calendar year (other than in accordance with the provisions of this Agreement) having an aggregate value in excess of $500,000;

               (v) change the rights and duties of Agent;

               (vi) permit any Revolving Advance to be made if after giving effect thereto the total of Revolving Advances outstanding hereunder would exceed the Formula Amount for more than sixty (60) consecutive Business Days or exceed one hundred and ten percent (110%) of the Formula Amount;

               (vii) increase the Advance Rates above the Advance Rates in effect on the Closing Date; or

               (viii) release any Guarantor.

     Any such supplemental agreement shall apply equally to each Lender and shall be binding upon Borrowers, Lenders and Agent and all future holders of the Obligations. In the case of any waiver, Borrowers, Agent and Lenders shall be restored to their former positions and rights, and any Event of Default waived shall be deemed to be cured and not continuing, but no waiver of a specific Event of Default shall extend to any subsequent Event of Default (whether or not the subsequent Event of Default is the same as the Event of Default which was waived), or impair any right consequent thereon.

     In the event that Agent requests the consent of a Lender pursuant to this Section 16.2 and such Lender shall not respond or reply to Agent in writing within five (5) days of delivery of such request, such Lender shall be deemed to have consented to the matter that was the subject of the request. In the event that Agent requests the consent of a Lender pursuant to this Section 16.2 and such consent is denied, then PNC may, at its option, require such Lender to assign its interest in the Advances to PNC or to another Lender or to any other Person designated by the Agent (the “Designated Lender”), for a price equal to (i) the then outstanding principal amount thereof plus (ii) accrued and unpaid interest and fees due such Lender, which interest and fees shall be paid when collected from Borrowers. In the event PNC elects to require any Lender to assign its interest to PNC or to the Designated Lender, PNC will so notify such Lender in writing within forty five (45) days following such Lender’s denial, and such Lender will assign its

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interest to PNC or the Designated Lender no later than five (5) days following receipt of such notice pursuant to a Commitment Transfer Supplement executed by such Lender, PNC or the Designated Lender, as appropriate, and Agent.

     Notwithstanding (a) the existence of a Default or an Event of Default, (b) that any of the other applicable conditions precedent set forth in Section 8.2 hereof have not been satisfied or (c) any other provision of this Agreement, Agent may at its discretion and without the consent of the Required Lenders, voluntarily permit the outstanding Revolving Advances at any time to exceed the Formula Amount by up to ten percent (10%) of the Formula Amount for up to sixty (60) consecutive Business Days (the “Out-of-Formula Loans”) whether with respect to Revolving Advances made to US Borrowers, to Foreign Borrowers or to Borrowers in the aggregate. If Agent is willing in its sole and absolute discretion to make such Out-of-Formula Loans, such Out-of-Formula Loans shall be payable on demand and shall bear interest at the Default Rate for Revolving Advances consisting of Domestic Rate Loans; provided that, if Lenders do make Out-of-Formula Loans, neither Agent nor Lenders shall be deemed thereby to have changed the limits of Section 2.1(a). For purposes of this paragraph, the discretion granted to Agent hereunder shall not preclude involuntary overadvances that may result from time to time due to the fact that the Formula Amount was unintentionally exceeded for any reason, including, but not limited to, Collateral previously deemed to be either “Eligible US Receivables,” or “Eligible Foreign Receivables,” as applicable, becomes ineligible, collections of Receivables applied to reduce outstanding Revolving Advances are thereafter returned for insufficient funds or overadvances are made to protect or preserve the Collateral. In the event Agent involuntarily permits the outstanding Revolving Advances to exceed the Formula Amount by more than ten percent (10%), whether with respect to Revolving Advances made to US Borrowers, to Foreign Borrower or to Borrowers in the aggregate, Agent shall use its efforts to have the applicable Borrowing Group decrease such excess in as expeditious a manner as is practicable under the circumstances and not inconsistent with the reason for such excess. Revolving Advances made after Agent has determined the existence of involuntary overadvances shall be deemed to be involuntary overadvances and shall be decreased in accordance with the preceding sentence.

     In addition to (and not in substitution of) the discretionary Revolving Advances permitted above in this Section 16.2, the Agent is hereby authorized by Borrowers and the Lenders, from time to time in the Agent’s sole discretion, (A) after the occurrence and during the continuation of a Default or an Event of Default, or (B) at any time that any of the other applicable conditions precedent set forth in Section 8.2 hereof have not been satisfied, to make Revolving Advances to Borrowers on behalf of the Lenders which the Agent, in its reasonable business judgment, deems necessary or desirable (a) to preserve or protect the Collateral, or any portion thereof, (b) to enhance the likelihood of, or maximize the amount of, repayment of the Advances and other Obligations, or (c) to pay any other amount chargeable to the applicable Borrowing Group pursuant to the terms of this Agreement; provided, that at any time after giving effect to any such Revolving Advances the outstanding Revolving Advances do not exceed one hundred and ten percent (110%) of the Formula Amount with respect to US Borrowers, to Foreign Borrower or to Borrowers in the aggregate.

     16.3. Successors and Assigns; Participations; New Lenders.

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          (a) This Agreement shall be binding upon and inure to the benefit of Borrowers, Agent, each Lender, all future holders of the Obligations and their respective successors and assigns, except that no Borrower may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of Agent and each Lender.

          (b) Each Borrower acknowledges that in the regular course of commercial banking business one or more Lenders may at any time and from time to time sell participating interests in the Advances to other financial institutions (each such transferee or purchaser of a participating interest, a “Participant”). Each Participant may exercise all rights of payment (including rights of set-off) with respect to the portion of such Advances held by it or other Obligations payable hereunder as fully as if such Participant were the direct holder thereof provided that Borrowers shall not be required to pay to any Participant more than the amount which it would have been required to pay to Lender which granted an interest in its Advances or other Obligations payable hereunder to such Participant had such Lender retained such interest in the Advances hereunder or other Obligations payable hereunder and in no event shall Borrowers be required to pay any such amount arising from the same circumstances and with respect to the same Advances or other Obligations payable hereunder to both such Lender and such Participant. Each Borrower hereby grants to any Participant a continuing security interest in any deposits, moneys or other property actually or constructively held by such Participant as security for the Participant’s interest in the Advances.

          (c) Any Lender, with the consent of Agent which shall not be unreasonably withheld or delayed, may sell, assign or transfer all or any part of its rights and obligations under or relating to Revolving Advances under this Agreement and the Other Documents to one or more additional banks or financial institutions and one or more additional banks or financial institutions may commit to make Advances hereunder (each a “Purchasing Lender”), in minimum amounts of not less than $2,000,000, pursuant to a Commitment Transfer Supplement, executed by a Purchasing Lender, the transferor Lender, and Agent and delivered to Agent for recording. Upon such execution, delivery, acceptance and recording, from and after the transfer effective date determined pursuant to such Commitment Transfer Supplement, (i) Purchasing Lender thereunder shall be a party hereto and, to the extent provided in such Commitment Transfer Supplement, have the rights and obligations of a Lender thereunder with a Commitment Percentage as set forth therein, and (ii) the transferor Lender thereunder shall, to the extent provided in such Commitment Transfer Supplement, be released from its obligations under this Agreement, the Commitment Transfer Supplement creating a novation for that purpose. Such Commitment Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender and the resulting adjustment of the Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under this Agreement and the Other Documents. Any and all such sales, assignments and transfers shall be pro rata as to the Commitment Percentages of the transferor Lender in all Advances; in no event shall any Lender hold, sell or acquire differing percentages of Advances or commitments to fund Advances, including without limitation relating to US Obligations versus Foreign Obligations. Each Borrower hereby consents to the addition of such Purchasing Lender and the resulting adjustment of the Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under this

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Agreement and the Other Documents. Borrowers shall execute and deliver such further documents and do such further acts and things in order to effectuate the foregoing.

          (d) Any Lender, with the consent of Agent which shall not be unreasonably withheld or delayed, may directly or indirectly sell, assign or transfer all or any portion of its rights and obligations under or relating to Revolving Advances under this Agreement and the Other Documents to an entity, whether a corporation, partnership, trust, limited liability company or other entity that (i) is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and (ii) is administered, serviced or managed by the assigning Lender or an Affiliate of such Lender (a “Purchasing CLO” and together with each Participant and Purchasing Lender, each a “Transferee” and collectively the “Transferees”), pursuant to a Commitment Transfer Supplement modified as appropriate to reflect the interest being assigned (“Modified Commitment Transfer Supplement”), executed by any intermediate purchaser, the Purchasing CLO, the transferor Lender, and Agent as appropriate and delivered to Agent for recording. Upon such execution and delivery, from and after the transfer effective date determined pursuant to such Modified Commitment Transfer Supplement, (i) Purchasing CLO thereunder shall be a party hereto and, to the extent provided in such Modified Commitment Transfer Supplement, have the rights and obligations of a Lender thereunder and (ii) the transferor Lender thereunder shall, to the extent provided in such Modified Commitment Transfer Supplement, be released from its obligations under this Agreement, the Modified Commitment Transfer Supplement creating a novation for that purpose. Such Modified Commitment Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing CLO. Each Borrower hereby consents to the addition of such Purchasing CLO. Borrowers shall execute and deliver such further documents and do such further acts and things in order to effectuate the foregoing.

          (e) Agent shall maintain at its address a copy of each Commitment Transfer Supplement and Modified Commitment Transfer Supplement delivered to it and a register (the “Register”) for the recordation of the names and addresses of each Lender and the outstanding principal, accrued and unpaid interest and other fees due hereunder. The entries in the Register shall be conclusive, in the absence of manifest error, and each Borrower, Agent and Lenders may treat each Person whose name is recorded in the Register as the owner of the Advance recorded therein for the purposes of this Agreement. The Register shall be available for inspection by Borrowing Agent or any Lender at any reasonable time and from time to time upon reasonable prior notice. Agent shall receive a fee in the amount of $3,500 payable by the applicable Purchasing Lender and/or Purchasing CLO upon the effective date of each transfer or assignment (other than to an intermediate purchaser) to such Purchasing Lender and/or Purchasing CLO.

          (f) Each Borrower authorizes each Lender to disclose to any Transferee and any prospective Transferee any and all financial information in such Lender’s possession concerning such Borrower which has been delivered to such Lender by or on behalf of such Borrower pursuant to this Agreement or in connection with such Lender’s credit evaluation of such Borrower, so long as such Transferee is bound by a confidentiality agreement in form and substance similar to the confidentiality agreement between Borrowers and Agent.

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     16.4. Application of Payments. Agent shall have the continuing and exclusive right to apply or reverse and re-apply any payment and any and all proceeds of Collateral to any portion of the Obligations. To the extent that any Borrower makes a payment or Agent or any Lender receives any payment or proceeds of the Collateral for any Borrower’s benefit, which are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver, custodian or any other party under any bankruptcy law, common law or equitable cause, then, to such extent, the Obligations or part thereof intended to be satisfied shall be revived and continue as if such payment or proceeds had not been received by Agent or such Lender.

     16.5. Indemnity. Each Borrower shall indemnify Agent, each Lender and each of their respective officers, directors, Affiliates, attorneys, employees and agents from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever (including fees and disbursements of counsel) which may be imposed on, incurred by, or asserted against Agent or any Lender in any claim, litigation, proceeding or investigation instituted or conducted by any Governmental Body or instrumentality or any other Person with respect to any aspect of, or any transaction contemplated by, or referred to in, or any matter related to, this Agreement or the Other Documents, whether or not Agent or any Lender is a party thereto, except to the extent that any of the foregoing arises out of the willful misconduct of the party being indemnified (as determined by a court of competent jurisdiction in a final and non-appealable judgment). Without limiting the generality of the foregoing, this indemnity shall extend to any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever (including fees and disbursements of counsel) asserted against or incurred by any of the indemnitees described above in this Section 16.5 by any Person under any Environmental Laws or similar laws by reason of any Borrower’s or any other Person’s failure to comply with laws applicable to solid or hazardous waste materials, including Hazardous Substances and Hazardous Waste, or other Toxic Substances. Additionally, if any taxes (excluding taxes imposed upon or measured solely by the net income of Agent and Lenders, but including any intangibles taxes, stamp tax, recording tax or franchise tax) shall be payable by Agent, Lenders or Borrowers on account of the execution or delivery of this Agreement, or the execution, delivery, issuance or recording of any of the Other Documents, or the creation or repayment of any of the Obligations hereunder, by reason of any Applicable Law now or hereafter in effect, Borrowers will pay (or will promptly reimburse Agent and Lenders for payment of) all such taxes, including interest and penalties thereon, and will indemnify and hold the indemnitees described above in this Section 16.5 harmless from and against all liability in connection therewith.

     16.6. Currency Indemnity. If, for the purposes of obtaining judgment in any court in any jurisdiction with respect to this Agreement or any Other Document, it becomes necessary to convert into the currency of such jurisdiction (the “Judgment Currency”) any amount due under this Agreement or under any Other Document in any currency other than the Judgment Currency (the “Currency Due”), then conversion shall be made at the rate of exchange prevailing on the Business Day before the day on which judgment is given. For this purpose “rate of exchange” means the rate at which the Agent is able, on the relevant date, to purchase the Currency Due with the Judgment Currency in accordance with its normal practice. In the event that there is a change in the rate of exchange prevailing between the Business Day before the day on which the

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judgment is given and the date of receipt by the Agent of the amount due, the Borrowers will, on the date of receipt by the Agent, pay such additional amounts, if any, or be entitled to receive reimbursement of such amount, if any, as may be necessary to ensure that the amount received by the Agent on such date is the amount in the Judgment Currency which when converted at the rate of exchange prevailing on the date of receipt by the Agent is the amount then due under this Agreement or such Other Document in the Currency Due. If the amount of the Currency Due which the Agent is so able to purchase is less than the amount of the Currency Due originally due to it, the Borrowers shall indemnify and save the Agent and the Lenders harmless from and against all loss or damage arising as a result of such deficiency. This indemnity shall constitute an obligation separate and independent from the other obligations contained in this Agreement and the Other Documents, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by the Agent from time to time and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due under this Agreement or any Other Document or under any judgment or order.

     16.7. Notice. Any notice or request hereunder may be given to Borrowing Agent or any Borrower or to Agent or any Lender at their respective addresses set forth below or at such other address as may hereafter be specified in a notice designated as a notice of change of address under this Section. Any notice, request, demand, direction or other communication (for purposes of this Section 16.7 only, a “Notice”) to be given to or made upon any party hereto under any provision of this Loan Agreement shall be given or made by telephone or in writing (which includes by means of electronic transmission (i.e., “e-mail”) or facsimile transmission or by setting forth such Notice on a site on the World Wide Web (a “Website Posting”) if Notice of such Website Posting (including the information necessary to access such site) has previously been delivered to the applicable parties hereto by another means set forth in this Section 16.7) in accordance with this Section 16.7. Any such Notice must be delivered to the applicable parties hereto at the addresses and numbers set forth under their respective names on Section 16.7 hereof or in accordance with any subsequent unrevoked Notice from any such party that is given in accordance with this Section 16.7. Any Notice shall be effective:

          (a) In the case of hand-delivery, when delivered;

          (b) If given by mail, four days after such Notice is deposited with the United States or Canadian Postal Service, with first-class postage prepaid, return receipt requested;

          (c) In the case of a telephonic Notice, when a party is contacted by telephone, if delivery of such telephonic Notice is confirmed no later than the next Business Day by hand delivery, a facsimile or electronic transmission, a Website Posting or an overnight courier delivery of a confirmatory Notice (received at or before noon on such next Business Day);

          (d) In the case of a facsimile transmission, when sent to the applicable party’s facsimile machine’s telephone number, if the party sending such Notice receives confirmation of the delivery thereof from its own facsimile machine;

          (e) In the case of electronic transmission, when actually received;

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          (f) In the case of a Website Posting, upon delivery of a Notice of such posting (including the information necessary to access such site) by another means set forth in this Section 16.7; and

          (g) If given by any other means (including by overnight courier), when actually received.

     Any Lender giving a Notice to Borrowing Agent or any Borrower shall concurrently send a copy thereof to the Agent, and the Agent shall promptly notify the other Lenders of its receipt of such Notice.

(A) If to Agent or PNC at:

PNC Bank, National Association
200 South Wacker Drive, Suite 600
Chicago, Illinois 60606
Attention: Portfolio Manager
Telephone: (312) 454-2920
Facsimile: (312) 454-2919
with a copy to:

Blank Rome LLP

One Logan Square
130 N. 18th Street
Philadelphia, Pennsylvania 19103
Attention: Lawrence F. Flick II, Esquire
Telephone: 215-569-5556
Facsimile: 215-832-5556

(B) If to a Lender other than Agent, as specified on the signature pages hereof

(C) If to Borrowing Agent or any Borrower:

c/o Rand Worldwide U.S. Holdings, Inc.
1601 Trapelo Road, Suite 162
Waltham, Massachusetts 02451
Attention: Greg Magoon and Lori Henderson
Telephone: 781-547-8900
Facsimile: 781-547-8901

with a copy to:

Edwards Angell Palmer & Dodge LLP
111 Huntington Avenue
Boston, Massachusetts 02199
Attention: Matthew V. P. McTygue, Esquire
Telephone: 617-239-0494

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Facsimile: 617-316-8287

And
Ampersand Ventures
55 William Street, Suite 240
Wellesley, MA 02481
Attention: J. David Jacobs, General Counsel
Telephone: 781-239-0700
Facsimile: 781-239-0824

     16.8. Survival. The obligations of Borrowers under Sections 2.2(f), 3.7, 3.8, 3.9, 4.19(h), and 16.5 and the obligations of Lenders under Section 14.7, shall survive termination of this Agreement and the Other Documents and payment in full of the Obligations.

     16.9. Severability. If any part of this Agreement is contrary to, prohibited by, or deemed invalid under Applicable Laws, such provision shall be inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given effect so far as possible.

     16.10. Expenses. All costs and expenses including reasonable attorneys’ fees (including the allocated costs of in house counsel) and disbursements incurred by Agent on its behalf or on behalf of Lenders (a) in all efforts made to enforce payment of any Obligation or effect collection of any Collateral, or (b) in connection with the entering into, modification, amendment, administration and enforcement of this Agreement, the Subordination Agreements, the Intercreditor Agreement or any consents or waivers hereunder or thereunder and all related agreements, documents and instruments, or (c) in instituting, maintaining, preserving, enforcing and foreclosing on Agent’s security interest in or Lien on any of the Collateral, or maintaining, preserving or enforcing any of Agent’s or any Lender’s rights hereunder, under the Subordination Agreements, the Intercreditor Agreement, and under all related agreements, documents and instruments, whether through judicial proceedings or otherwise, or (d) in defending or prosecuting any actions or proceedings arising out of or relating to Agent’s or any Lender’s transactions with any Borrower, any Guarantor, or any Person party to the Subordination Agreement or Intercreditor Agreement or (e) in connection with any advice given to Agent or any Lender with respect to its rights and obligations under this Agreement, the Subordination Agreement, the Intercreditor Agreement and all related agreements, documents and instruments, may be charged to Borrowers’ Account and shall be part of the Obligations.

     16.11. Injunctive Relief. Each Borrower recognizes that, in the event any Borrower fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, or threatens to fail to perform, observe or discharge such obligations or liabilities, any remedy at law may prove to be inadequate relief to Lenders; therefore, Agent, if Agent so requests, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving that actual damages are not an adequate remedy.

     16.12. Consequential Damages. Neither Agent nor any Lender, nor any agent or attorney for any of them, shall be liable to any Borrower or any Guarantor (or any Affiliate of any such Person) for indirect, punitive, exemplary or consequential damages arising from any

103

breach of contract, tort or other wrong relating to the establishment, administration or collection of the Obligations or as a result of any transaction contemplated under this Agreement or any Other Document.

     16.13. Captions. The captions at various places in this Agreement are intended for convenience only and do not constitute and shall not be interpreted as part of this Agreement.

     16.14. Counterparts; Facsimile Signatures. This Agreement may be executed in any number of and by different parties hereto on separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any signature delivered by a party by facsimile or other electronic transmission shall be deemed to be an original signature hereto.

     16.15. Construction. The parties acknowledge that each party and its counsel have reviewed this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments, schedules or exhibits thereto.

     16.16. Confidentiality; Sharing Information. Agent, each Lender and each Transferee shall hold all non-public information obtained by Agent, such Lender or such Transferee pursuant to the requirements of this Agreement in accordance with Agent’s, such Lender’s and such Transferee’s customary procedures for handling confidential information of this nature; provided, however, Agent, each Lender and each Transferee may disclose such confidential information (a) to its examiners, Affiliates, outside auditors, counsel and other professional advisors, (b) to Agent, any Lender or to any prospective Transferees, and (c) as required or requested by any Governmental Body or representative thereof or pursuant to legal process; provided, further that (i) unless specifically prohibited by Applicable Law, Agent, each Lender and each Transferee shall use its reasonable best efforts prior to disclosure thereof, to notify the applicable Borrower of the applicable request for disclosure of such non-public information (A) by a Governmental Body or representative thereof (other than any such request in connection with an examination of the financial condition of a Lender or a Transferee by such Governmental Body) or (B) pursuant to legal process and (ii) in no event shall Agent, any Lender or any Transferee be obligated to return any materials furnished by any Borrower other than those documents and instruments in possession of Agent or any Lender in order to perfect its Lien on the Collateral once the Obligations have been paid in full and this Agreement has been terminated. Each Borrower acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to such Borrower or one or more of its Affiliates (in connection with this Agreement or otherwise) by any Lender or by one or more Subsidiaries or Affiliates of such Lender and each Borrower hereby authorizes each Lender to share any information delivered to such Lender by such Borrower and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of such Lender, it being understood that any such Subsidiary or Affiliate of any Lender receiving such information shall be bound by the provisions of this Section 16.16 as if it were a Lender hereunder. Such authorization shall survive the repayment of the other Obligations and the termination of this Agreement.

104

     16.17. Publicity. Each Borrower and each Lender hereby authorizes Agent to make appropriate announcements of the financial arrangement entered into among Borrowers, Agent and Lenders, including announcements which are commonly known as tombstones, in such publications and to such selected parties as Agent shall in its sole and absolute discretion deem appropriate.

     16.18. Certifications From Banks and Participants; USA PATRIOT Act. Each Lender or assignee or participant of a Lender that is not incorporated under the Laws of the United States of America or a state thereof (and is not excepted from the certification requirement contained in Section 313 of the USA PATRIOT Act and the applicable regulations because it is both (i) an affiliate of a depository institution or foreign bank that maintains a physical presence in the United States or foreign country, and (ii) subject to supervision by a banking authority regulating such affiliated depository institution or foreign bank) shall deliver to the Agent the certification, or, if applicable, recertification, certifying that such Lender is not a “shell” and certifying to other matters as required by Section 313 of the USA PATRIOT Act and the applicable regulations: (1) within 10 days after the Closing Date, and (2) as such other times as are required under the USA PATRIOT Act.

105

     Each of the parties has signed this Agreement as of the day and year first above written.

RAND WORLDWIDE U.S. HOLDINGS, INC.
By:
	Name:
	Title:
RAND A TECHNOLOGY CORPORATION
By:
	Name:
	Title:
RAND TECHNOLOGIES OF MICHIGAN, INC.
By:
	Name:
	Title:
RAND IMAGINIT TECHNOLOGIES, INC.
By:
	Name:
	Title:
PNC BANK, NATIONAL ASSOCIATION, as Lender and as Agent
By:
	Name:
	Title:
Commitment Percentage: 100%

[SIGNATURE PAGE TO LOAN AGREEMENT]

S-1

EX-10.26

Exhibit 10.26

FIRST AMENDMENT TO REVOLVING CREDIT
AND SECURITY AGREEMENT

     This First Amendment to Revolving Credit and Security Agreement (the “Amendment”) is made this 22^nd day of January, 2010by and among RAND WORLDWIDE U.S. HOLDINGS, INC., a corporation organized under the laws of the State of Delaware (“Rand Worldwide U.S.”), RAND IMAGINIT TECHNOLOGIES, INC., a corporation organized under the laws of the State of Delaware (“Rand Imaginit”), RAND TECHNOLOGIES OF MICHIGAN, INC., a corporation organized under the laws of the State of Michigan (“Rand Michigan”) (Rand Worldwide U.S., Rand Imaginit and Rand Michigan, each a “US Borrower” and collectively the “US Borrowers”) and RAND A TECHNOLOGY CORPORATION, a corporation organized under the laws of the Province of Ontario (“Foreign Borrower”) (US Borrowers and Foreign Borrower, each a “Borrower” and collectively the “Borrowers”) (each a “Borrower”, and collectively “Borrowers”), the financial institutions which are now or which hereafter become a party hereto (collectively, the “Lenders” and each individually a “Lender”) and PNC BANK, NATIONAL ASSOCIATION (“PNC”), as agent for Lenders (PNC, in such capacity, the “Agent”).

BACKGROUND

     A. On August 14, 2009, Borrowers, Lenders and Agent entered into that certain Revolving Credit and Security Agreement (as same has been or may be amended, modified, renewed, extended, replaced or substituted from time to time, the “Loan Agreement”) to reflect certain financing arrangements between the parties thereto. The Loan Agreement and all other documents executed in connection therewith to the date hereof are collectively referred to as the “Existing Financing Agreements.” All capitalized terms not otherwise defined herein shall have the meaning ascribed thereto in the Loan Agreement.

     B. Borrowers have requested that Agent and Lenders modify the definition of “Letter of Credit Sublimit” contained in the Loan Agreement, and Agent and Lenders are willing to do so on the terms and conditions hereafter set forth.

     NOW THEREFORE, with the foregoing background hereinafter deemed incorporated by reference herein and made part hereof, the parties hereto, intending to be legally bound, promise and agree as follows:

     1. Amendments to Loan Agreement.

          (a) On the Effective Date, the following definition contained in Section 1.2 of the Loan Agreement is hereby amended and restated in its entirety as follows:

     “Letter of Credit Sublimit” shall mean $500,000.

     2. Representations and Warranties of Borrowers. Each Borrower hereby:

          (a) reaffirms all representations and warranties made to Agent and Lenders under the Loan Agreement and all of the other Existing Financing Agreements and confirms that

all are true and correct in all material respects as of the date hereof (except to the extent any such representations and warranties specifically relate to a specific date, in which case such representations and warranties were true and correct in all material respects on and as of such other specific date);

          (b) reaffirms all of the covenants contained in the Loan Agreement (as amended hereby), covenants to abide thereby until all Advances, Obligations and other liabilities of Borrowers to Agent and Lenders under the Loan Agreement of whatever nature and whenever incurred, are satisfied and/or released by Agent and Lenders;

          (c) represents and warrants that no Default or Event of Default has occurred and is continuing under any of the Existing Financing Agreements;

          (d) represents and warrants that it has the authority and legal right to execute, deliver and carry out the terms of this Amendment, that such actions were duly authorized by all necessary limited liability company or corporate action, as applicable, and that the officers executing this Amendment on its behalf were similarly authorized and empowered, and that this Amendment does not contravene any provisions of its certificate of incorporation or formation, operating agreement, bylaws, or other formation documents, as applicable, or of any contract or agreement to which it is a party or by which any of its properties are bound; and

          (e) represents and warrants that this Amendment and all assignments, instruments, documents, and agreements executed and delivered in connection herewith, are valid, binding and enforceable in accordance with their respective terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, moratorium or similar laws affecting creditors’ rights generally.

     3. Conditions Precedent/Effectiveness Conditions. This Amendment shall be effective upon the date of satisfaction of the following conditions precedent (“Effective Date”) (all documents to be in form and substance reasonably satisfactory to Agent and Agent’s counsel):

          (a) Agent shall have received this Amendment fully executed by the Borrowers; and

          (b) Agent shall have received such other agreements, documents or information as requested by Agent in its reasonable discretion.

     4. Further Assurances. Each Borrower hereby agrees to take all such actions and to execute and/or deliver to Agent and Lenders all such documents, assignments, financing statements and other documents, as Agent and Lenders may reasonably require from time to time, to effectuate and implement the purposes of this Amendment.

     5. Payment of Expenses. Borrowers shall pay or reimburse Agent and Lenders for its reasonable attorneys’ fees and expenses in connection with the preparation, negotiation and execution of this Amendment and the documents provided for herein or related hereto.

     6. Reaffirmation of Loan Agreement. Except as modified by the terms hereof, all of the terms and conditions of the Loan Agreement, as amended, and all other of the Existing Financing Agreements are hereby reaffirmed and shall continue in full force and effect as therein written.

     7. Confirmation of Indebtedness. Borrowers confirm and acknowledge that as of the close of business on January 14, 2010, US Borrowers were indebted to Agent and Lenders for the Advances under the Loan Agreement without any deduction, defense, setoff, claim or counterclaim, of any nature, in the aggregate principal amount of ($2,883,300.00), due on account of Revolving Advances and ($20,000) on account of undrawn Letters of Credit, Foreign Borrower was indebted to Agent and Lenders for the Advances under the Loan Agreement without any deduction, defense, setoff, claim or counterclaim, of any nature, in the aggregate principal amount of ($0.00), plus in each case all fees, costs and expenses incurred to date in connection with the Loan Agreement and the Other Documents.

     8. Acknowledgment of Guarantors. By execution of this Amendment, each Guarantor hereby covenants and agrees that its Limited Guaranty and Suretyship Agreement or Guaranty and Suretyship Agreement, as applicable, dated August 14, 2009 shall remain in full force and effect and shall continue to cover the Guaranteed Obligations (as defined in their respective Limited Guaranty and Suretyship Agreements).

     9. Acknowledgment of Subordinated Creditors. By execution of this Amendment, Subordinated Agent, on behalf of subordinated lenders, hereby covenants and agrees that the Intercreditor Agreement dated August 14, 2009 shall remain in full force and effect.

     10. Miscellaneous.

          (a) Third Party Rights. No rights are intended to be created hereunder for the benefit of any third party donee, creditor, or incidental beneficiary.

          (b) Headings. The headings of any paragraph of this Amendment are for convenience only and shall not be used to interpret any provision hereof.

          (c) Modifications. No modification hereof or any agreement referred to herein shall be binding or enforceable unless in writing and signed on behalf of the party against whom enforcement is sought.

          (d) Governing Law. The terms and conditions of this Amendment shall be governed by the laws of the State of Illinois.

          (e) Counterparts. This Amendment may be executed in any number of and by different parties hereto on separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any signature delivered by a party by facsimile or pdf transmission shall be deemed to be an original signature hereto.

[SIGNATURES TO APPEAR ON FOLLOWING PAGE]

     IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and delivered by their duly authorized officers as of the date first above written.

BORROWERS: RAND WORLDWIDE U.S. HOLDINGS, INC.
By:
	Name:
	Title:

RAND A TECHNOLOGY CORPORATION
By:
	Name:
	Title:

RAND TECHNOLOGIES OF MICHIGAN, INC.
By:
	Name:
	Title:

RAND IMAGINIT TECHNOLOGIES, INC.
By:
	Name:
	Title:
PNC BANK, NATIONAL ASSOCIATION, as Lender and as Agent
By:
	John M. Cunningham, Vice President

[SIGNATURES CONTINUED ON NEXT PAGE]

GUARANTORS:

AMPERSAND 2001 COMPANION FUND LIMITED PARTNERSHIP By: AMP-01 Management Company Limited Liability        Company, its General Partner
By:
	Name:
	Title:	Principal Managing Member
AMPERSAND 2001 LIMITED PARTNERSHIP By: AMP-01 Management Company Limited Liability        Company, its General Partner
By:
	Name:
	Title:	Principal Managing Member
AMPERSAND 2006 LIMITED PARTNERSHIP By: AMP-06 Management Company Limited Partnership,        its General Partner By: AMP-06 MC LLC, its General Partner
By:
	Name:
	Title:	Principal Managing Member
RAND WORLDWIDE, INC.
By:
	Name:	Marc Dulude, President

[SIGNATURES CONTINUED ON NEXT PAGE]

SUBORDINATED CREDITOR: AMPERSAND 2006 LIMITED PARTNERSHIP, as agent for subordinated lenders By: AMP-06 Management Company Limited Partnership,        its General Partner
By:
	Name:
	Title:

EX-10.27

Exhibit 10.27

SECOND AMENDMENT TO REVOLVING CREDIT
AND SECURITY AGREEMENT

     This Second Amendment to Revolving Credit and Security Agreement (the “Amendment”) is made this 23rd day of July, 2010by and among RAND WORLDWIDE U.S. HOLDINGS, INC., a corporation organized under the laws of the State of Delaware (“Rand Worldwide U.S.”), RAND IMAGINIT TECHNOLOGIES, INC., a corporation organized under the laws of the State of Delaware (“Rand Imaginit”), RAND TECHNOLOGIES OF MICHIGAN, INC., a corporation organized under the laws of the State of Michigan (“Rand Michigan”) (Rand Worldwide U.S., Rand Imaginit and Rand Michigan, each a “US Borrower” and collectively the “US Borrowers”) and RAND A TECHNOLOGY CORPORATION, a corporation organized under the laws of the Province of Ontario (“Foreign Borrower”) (US Borrowers and Foreign Borrower, each a “Borrower” and collectively the “Borrowers”) (each a “Borrower”, and collectively “Borrowers”), the financial institutions which are now or which hereafter become a party hereto (collectively, the “Lenders” and each individually a “Lender”) and PNC BANK, NATIONAL ASSOCIATION (“PNC”), as agent for Lenders (PNC, in such capacity, the “Agent”).

BACKGROUND

     A. On August 14, 2009, Borrowers, Lenders and Agent entered into that certain Revolving Credit and Security Agreement (as same has been or may be amended, modified, renewed, extended, replaced or substituted from time to time, the “Loan Agreement”) to reflect certain financing arrangements between the parties thereto. The Loan Agreement and all other documents executed in connection therewith to the date hereof are collectively referred to as the “Existing Financing Agreements.” All capitalized terms not otherwise defined herein shall have the meaning ascribed thereto in the Loan Agreement.

     B. Borrowers have requested that Agent and Lenders modify the definition of “Permitted Overadvance” contained in the Loan Agreement, and Agent and Lenders are willing to do so on the terms and conditions hereafter set forth.

     NOW, THEREFORE, with the foregoing background hereinafter deemed incorporated by reference herein and made part hereof, the parties hereto, intending to be legally bound, promise and agree as follows:

     1. Amendments to Loan Agreement.

          (a) On the Effective Date, the following definition contained in Section 1.2 of the Loan Agreement is hereby amended and restated in its entirety as follows:

“Permitted Overadvance” shall mean, at any time of determination, an amount equal to $2,500,000 to be reduced on the first day of each February, May, August and November beginning February 1, 2011 by $357,142.86 (by way of example, on February 1, 2011, the Permitted Overadvance shall be reduced by $357,142.86 to $2,142,857.14, on May 1, 2011 the Permitted Overadvance shall

be reduced by $357,142.86 to $1,785,714.28 and so on until the Permitted Overadvance reaches $0).

     2. Representations and Warranties of Borrowers. Each Borrower hereby:

          (a) reaffirms all representations and warranties made to Agent and Lenders under the Loan Agreement and all of the other Existing Financing Agreements and confirms that all are true and correct in all material respects as of the date hereof (except to the extent any such representations and warranties specifically relate to a specific date, in which case such representations and warranties were true and correct in all material respects on and as of such other specific date);

          (b) reaffirms all of the covenants contained in the Loan Agreement (as amended hereby), covenants to abide thereby until all Advances, Obligations and other liabilities of Borrowers to Agent and Lenders under the Loan Agreement of whatever nature and whenever incurred, are satisfied and/or released by Agent and Lenders;

          (c) represents and warrants that no Default or Event of Default has occurred and is continuing under any of the Existing Financing Agreements;

          (d) represents and warrants that it has the authority and legal right to execute, deliver and carry out the terms of this Amendment, that such actions were duly authorized by all necessary limited liability company or corporate action, as applicable, and that the officers executing this Amendment on its behalf were similarly authorized and empowered, and that this Amendment does not contravene any provisions of its certificate of incorporation or formation, operating agreement, bylaws, or other formation documents, as applicable, or of any contract or agreement to which it is a party or by which any of its properties are bound; and

          (e) represents and warrants that this Amendment and all assignments, instruments, documents, and agreements executed and delivered in connection herewith, are valid, binding and enforceable in accordance with their respective terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, moratorium or similar laws affecting creditors’ rights generally.

     3. Fee. On the date first noted above, Borrowers shall deliver to Agent, for the benefit of Lenders, a fee of $15,000 in immediately available funds, such fee to be fully earned upon receipt.

     4. Conditions Precedent/Effectiveness Conditions. This Amendment shall be effective upon the date of satisfaction of the following conditions precedent (“Effective Date”) (all documents to be in form and substance reasonably satisfactory to Agent and Agent’s counsel):

          (a) Agent shall have received this Amendment fully executed by the Borrowers; and

          (b) Agent shall have received the (i) Amended and Restated Guaranty and Suretyship Agreement by Ampersand 2001 Limited Partnership in favor of Agent and Lenders in the form of Exhibit 4(b)(i), (ii) Amended and Restated Guaranty and Suretyship Agreement by Ampersand 2006 Limited Partnership in favor of Agent and Lenders, in the form of Exhibit 4(b)(ii), and (iii) Amended and Restated Guaranty and Suretyship Agreement by Ampersand 2001 Companion Fund Limited Partnership in favor of Agent and Lenders, in the form of Exhibit 4(b)(iii).

          (c) Agent shall have received such other agreements, documents or information as requested by Agent in its reasonable discretion.

     5. Further Assurances. Each Borrower hereby agrees to take all such actions and to execute and/or deliver to Agent and Lenders all such documents, assignments, financing statements and other documents, as Agent and Lenders may reasonably require from time to time, to effectuate and implement the purposes of this Amendment.

     6. Payment of Expenses. Borrowers shall pay or reimburse Agent and Lenders for its reasonable attorneys’ fees and expenses in connection with the preparation, negotiation and execution of this Amendment and the documents provided for herein or related hereto.

     7. Reaffirmation of Loan Agreement. Except as modified by the terms hereof, all of the terms and conditions of the Loan Agreement, as amended, and all other of the Existing Financing Agreements are hereby reaffirmed and shall continue in full force and effect as therein written.

     8. Confirmation of Indebtedness. Borrowers confirm and acknowledge that as of the close of business on July 23, 2010, US Borrowers were indebted to Agent and Lenders for the Advances under the Loan Agreement without any deduction, defense, setoff, claim or counterclaim, of any nature, in the aggregate principal amount of $3,403,823.03, due on account of Revolving Advances and $195,000 on account of undrawn Letters of Credit, Foreign Borrower was indebted to Agent and Lenders for the Advances under the Loan Agreement without any deduction, defense, setoff, claim or counterclaim, of any nature, in the aggregate principal amount of $0, plus in each case all fees, costs and expenses incurred to date in connection with the Loan Agreement and the Other Documents.

     9. Acknowledgment of Guarantors. By execution of this Amendment, each Guarantor hereby covenants and agrees that its Guaranty shall remain in full force and effect and shall continue to cover all of the Borrowers’ Obligations to Agent and Lenders in accordance with its respective Guaranty.

     10. Acknowledgment of Subordinated Creditors. By execution of this Amendment, Subordinated Agent, on behalf of subordinated lenders, hereby covenants and agrees that the Intercreditor Agreement dated August 14, 2009 shall remain in full force and effect.

     11. Miscellaneous.

          (a) Third Party Rights. No rights are intended to be created hereunder for the benefit of any third party donee, creditor, or incidental beneficiary.

          (b) Headings. The headings of any paragraph of this Amendment are for convenience only and shall not be used to interpret any provision hereof.

          (c) Modifications. No modification hereof or any agreement referred to herein shall be binding or enforceable unless in writing and signed on behalf of the party against whom enforcement is sought.

          (d) Governing Law. The terms and conditions of this Amendment shall be governed by the laws of the State of Illinois.

          (e) Counterparts. This Amendment may be executed in any number of and by different parties hereto on separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any signature delivered by a party by facsimile or pdf transmission shall be deemed to be an original signature hereto.

[SIGNATURES TO APPEAR ON FOLLOWING PAGE]

     IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and delivered by their duly authorized officers as of the date first above written.

BORROWERS: RAND WORLDWIDE U.S. HOLDINGS, INC.
By:
	Name:
	Title:

RAND A TECHNOLOGY CORPORATION
By:
	Name:
	Title:

RAND TECHNOLOGIES OF MICHIGAN, INC.
By:
	Name:
	Title:

RAND IMAGINIT TECHNOLOGIES, INC.
By:
	Name:
	Title:

PNC BANK, NATIONAL ASSOCIATION, as Lender and as Agent
By:
	John M. Cunningham, Vice President

[SIGNATURES CONTINUED ON NEXT PAGE]

GUARANTORS: AMPERSAND 2001 COMPANION FUND LIMITED PARTNERSHIP By: AMP-01 Management Company Limited Liability        Company, its General Partner
By:
	Name:
	Title:	Principal Managing Member

AMPERSAND 2001 LIMITED PARTNERSHIP By: AMP-01 Management Company Limited Liability        Company, its General Partner
By:
	Name:
	Title:	Principal Managing Member

AMPERSAND 2006 LIMITED PARTNERSHIP By: AMP-06 Management Company Limited Partnership,        its General Partner By: AMP-06 MC LLC, its General Partner
By:
	Name:
	Title:	Principal Managing Member

RAND WORLDWIDE, INC.
By:
	Name:	Marc Dulude, President

[SIGNATURES CONTINUED ON NEXT PAGE]

SUBORDINATED CREDITOR: AMPERSAND 2006 LIMITED PARTNERSHIP, as agent for subordinated lenders By: AMP-06 Management Company Limited Partnership,        its General Partner
By:
	Name:
	Title:

EX-10.28

Exhibit 10.28

THIRD AMENDMENT TO REVOLVING CREDIT AND SECURITY AGREEMENT

     This Third Amendment to Revolving Credit and Security Agreement (“Amendment”), is made this 23rd day of July, 2010 amongRAND WORLDWIDE U.S. HOLDINGS, INC., a corporation organized under the laws of the State of Delaware (“Rand Worldwide U.S.”), RAND IMAGINIT TECHNOLOGIES, INC., a corporation organized under the laws of the State of Delaware (“Rand Imaginit”), RAND TECHNOLOGIES OF MICHIGAN, INC., a corporation organized under the laws of the State of Michigan (“Rand Michigan”) (Rand Worldwide U.S., Rand Imaginit and Rand Michigan, each a “US Borrower” and collectively the “US Borrowers”) and RAND A TECHNOLOGY CORPORATION, a corporation organized under the laws of the Province of Ontario (“Foreign Borrower”) (US Borrowers and Foreign Borrower, each a “Borrower” and collectively the “Borrowers”), the guarantors signatory hereto, the financial institutions which are now or which hereafter become a party hereto (collectively, the “Lenders” and each individually a “Lender”) and PNC BANK, NATIONAL ASSOCIATION (“PNC”), as agent for Lenders (in such capacity, the “Agent”).

BACKGROUND

     A. On August 14, 2009, Borrowers, Lenders and Agent entered into, inter alia, that certain Revolving Credit and Security Agreement (as same may hereafter be amended, modified, renewed, extended, restated or supplemented from time to time, the “Loan Agreement”) to reflect certain financing arrangements among the parties thereto. The Loan Agreement and all other documents executed in connection therewith are collectively referred to as the “Loan Documents.” All capitalized terms used not otherwise defined herein shall have the meaning ascribed thereto in the Loan Agreement, as amended hereby.

     B. Borrowers have informed Agent that the Ampersand Guarantors and Rand Worldwide Inc., a Delaware corporation and a Pledgor and Guarantor under the Loan Agreement (“Holdings”), intend to effectuate a series of transactions described below, which may or may not result in an Event of Default under the Loan Agreement.

     C. Holdings shall form RWWI Holdings LLC, a Delaware limited liability company (“RWW LLC”), which in turn shall form a transitory Delaware entity (the “Transitory Sub”) that will be a wholly-owned subsidiary of RWW LLC. Holdings will merge with Transitory Sub, pursuant to which Holdings will be the surviving entity and the sole wholly-owned subsidiary of RWW LLC. In accordance with the terms of a letter of intent dated May 24, 2010 (the “Letter of Intent”), Holdings shall then merge with ASRW Acquisition Sub, Inc., a wholly-owned subsidiary of Avatech Solutions, Inc., a Delaware corporation (“Avatech”), pursuant to which Holdings will be the surviving entity and a wholly-owned subsidiary of Avatech. In connection with the merger, Avatech shall issue to RWW LLC a number of shares of its common stock equal to approximately 150% of Avatech’s outstanding shares immediately prior to the merger (on a fully diluted basis). In connection with these transactions, Holdings shall assign its obligations to the Ampersand Guarantors (including all obligations under the Subordinated Loan Documents) to RWW LLC and any debt payable by RWW LLC to the Ampersand Guarantors will be exchanged for equity interests in RWW LLC. As a result, immediately following the closing of the transactions described above, RWW LLC, which is majority owned by the

Ampersand Guarantors, shall own approximately sixty percent (60%) of the outstanding common shares of Avatech (on a fully diluted basis) (all of the foregoing, collectively, the “Transaction”).

     D. Borrowers have requested and Agent and Lenders have agreed to (i) consent to the execution of the Letter of Intent, (ii) consent to the Transaction, and (iii) modify certain terms and provisions of the Loan Agreement, in each case on the terms and subject to the conditions contained in this Amendment.

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

     Section 1. Consent to Amendment in Connection with Transaction.

          (a) In reliance upon the documentation and information provided to Agent in connection with the Transaction and the Letter of Intent, including without limitation, the final form of Letter of Intent and the transaction documents attached hereto as Exhibit A (the “Transaction Documents”) in form and substance satisfactory to Agent, and notwithstanding anything to the contrary contained in the Loan Agreement, upon satisfaction of the conditions set forth herein, Agent and Lenders hereby (i) consent to the execution of the Letter of Intent and the Transaction Documents, and the consummation of the Transaction in accordance with the Transaction Documents; and (ii) upon consummation of the Transactions, consent to the change in the Borrowers’ fiscal year end from October 31 to June 30.

          (b) In connection with, and at the time of the consummation of, the Transaction, Agent hereby agrees to modify the Loan Agreement to accurately reflect the resulting ownership structure of Borrowers upon closing of the Transaction; provided, however, that the agreements, instruments, certificates and other documents necessary to be executed in connection with, and to consummate, the Transaction, shall be in form and substance satisfactory to Agent in its sole discretion.

          (c) This consent shall not be deemed a consent to the breach by Borrowers of other covenants or agreements contained in any Loan Documents with respect to any other transaction or matter. Borrowers agree that the consent set forth in the preceding paragraphs shall be limited to the precise meaning of the words as written therein and shall not be deemed (i) to be a consent to or any waiver or modification of any other term or condition of any Loan Agreement, or (ii) to prejudice any right or remedy that Agent or Lenders may now have or may in the future have under or in connection with any Loan Agreement other than with respect to the matters for which the consent in the preceding paragraph has been provided. Other than as described in this Amendment, the consent described in the preceding paragraph shall not alter, affect, release or prejudice in any way any of the Borrowers’ Obligations under the Loan Agreement. This consent shall not be construed as establishing a course of conduct on the part of Agent or Lenders upon which the Borrowers may rely at any time in the future. Borrowers expressly waive any right to assert any claim to such effect at any time.

     Section 2. Amendments to Loan Agreement.

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          (a) Definitions. Upon the Effective Date, the following new definitions shall be added to the Loan Agreement:

“Avatech Solutions Inc.” shall mean Avatech Solutions Inc., a Delaware corporation.

“Rand A” shall mean Rand A Technology Corporation, a corporation organized under the laws of the Province of Ontario.

“RWW LLC” shall mean RWWI Holdings LLC, a Delaware limited liability company.

          (b) Definitions. Upon the Effective Date, the definition of “Subordination Agreement” shall be deleted in its entirety.

          (c) Definitions. Upon the Effective Date, the definitions of “Change of Ownership,” “Holdings” “Original Owners,” and “Pledge Agreements” shall be deleted in their entirety and replaced as follows:

“Change of Ownership” shall mean (a) 100% of the Equity Interests of Rand Worldwide U.S. is no longer owned or controlled by a Person who is an Original Owner, (b) 100% of the Equity Interests of any Borrower (other than Rand Worldwide U.S.) is no longer owned or controlled by a Person who is an Original Owner, (c) 51% of the Equity Interests of Holdings is no longer owned or controlled by a Person who is an Original Owner, (d) 51% of the Equity Interests of Avatech Solutions is no longer owned or controlled by a Person who is an Original Owner, (e) 80% of the Equity Interests of RWW LLC is no longer owned or controlled by a Person who is an Original Owner, or (f) any merger, consolidation or sale of substantially all of the property or assets of any Borrower unless such Borrower is merged or consolidated with and into another Borrower or such sale or property or assets is to another Borrower.

“Original Owners” shall mean with respect (i) to RWW LLC, the Ampersand Guarantors, (ii) to Avatech Solutions, RWW LLC, (iii) to Holdings, Avatech Solutions, (iv) to Rand Worldwide U.S. or Rand A, Holdings, and (v) to any other Borrower, Rand Worldwide U.S.

“Pledge Agreement” shall mean that certain (i) Amended and Restated Pledge Agreement executed by Holdings in favor of Agent dated as of July __, 2010 and (ii) Pledge Agreement executed by Rand Worldwide U.S. in favor of Agent dated as of even date herewith.

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          (d) Upon the Effective Date, Section 5.8(d) shall be deleted in its entirety and replaced as follows:

     No Borrower nor any of their Subsidiaries maintains or is required to contribute to any Plan other than those listed on Schedule 5.8(d) hereto. Schedule 5.8(d) separately schedules all Plans subject to Title IV of ERISA. (i) No Plan has incurred any “accumulated funding deficiency,” as defined in Section 302(a)(2) of ERISA or Section 412(a) of the Code, whether or not waived, each Borrower and each member of the Controlled Group has met all applicable minimum funding requirements under Section 302 of ERISA and Section 412 of the Code in respect of each Plan, and each Plan is in compliance with Sections 412, 430 and 436 of the Code and Sections 206(g), 302 and 303 of ERISA, without regard to waivers and variances; (ii) each Plan which is intended to be a qualified plan under Section 401(a) of the Code as currently in effect has been determined by the Internal Revenue Service to be qualified under Section 401(a) of the Code and the trust related thereto is exempt from federal income tax under Section 501(a) of the Code; (iii) neither any Borrower nor any member of the Controlled Group has incurred any liability to the PBGC other than for the payment of premiums, and there are no premium payments which have become due which are unpaid; (iv) no Plan has been terminated by the plan administrator thereof nor by the PBGC, and there is no occurrence which would cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Plan; (v) at this time, the current value of the assets of each Plan exceeds the present value of the accrued benefits and other liabilities of such Plan and neither any Borrower nor any member of the Controlled Group knows of any facts or circumstances which would materially change the value of such assets and accrued benefits and other liabilities; (vi) neither any Borrower nor any member of the Controlled Group has breached in any material respect any of the responsibilities, obligations or duties imposed on it by ERISA with respect to any Plan; (vii) neither any Borrower nor any member of the Controlled Group has incurred any liability for any excise tax arising under Section 4971, 4972 or 4980B of the Code, and no fact exists which could give rise to any such liability; (viii) neither any Borrower nor any member of the Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has engaged in a “prohibited transaction” described in Section 406 of the ERISA or Section 4975 of the Code nor taken any action nor omitted to take any action which would constitute or result in a Termination Event with respect to any such Plan which is subject to ERISA; (ix) each Borrower and each member of the Controlled Group has made all contributions due and payable with respect to each Plan; (x) there

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exists no event described in Section 4043(b) of ERISA, for which the thirty (30) day notice period has not been waived; (xi) neither any Borrower nor any member of the Controlled Group has any fiduciary responsibility for investments with respect to any plan existing for the benefit of persons other than employees or former employees of any Borrower or any member of the Controlled Group; (xii) except as listed on Schedule 5.8(d) hereto, neither any Borrower nor any member of the Controlled Group maintains or is required to contribute to any Plan which provides health, accident or life insurance benefits to former employees, their spouses or dependents, other than in accordance with Section 4980B of the Code; (xiii) neither any Borrower nor any member of the Controlled Group has withdrawn, completely or partially, within the meaning of Section 4203 or 4205 of ERISA, from any Multiemployer Plan so as to incur liability under the Multiemployer Pension Plan Amendments Act of 1980 and there exists no fact which would reasonably be expected to result in any such liability; and (xiv) no Plan fiduciary (as defined in Section 3(21) of ERISA) has any liability for breach of fiduciary duty or for any failure in connection with the administration or investment of the assets of a Plan; in each case (i) — (xiv) with respect to any member of the Controlled Group other than the Borrowers or any Subsidiary that could reasonably be expected to have a Material Adverse Effect.

          (e) Upon the Effective Date, Section 9.15 shall be deleted in its entirety and replaced as follows:

ERISA Notices and Requests. Except as hereinafter provided in this Section, furnish Agent with prompt written notice in the event that (i) any Borrower or any member of the Controlled Group knows or has reason to know that a Termination Event has occurred, together with a written statement describing such Termination Event and the action, if any, which such Borrower or any member of the Controlled Group has taken, is taking, or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, Department of Labor or PBGC with respect thereto, (ii) any Borrower or any member of the Controlled Group knows or has reason to know that a prohibited transaction (as defined in Sections 406 of ERISA or 4975 of the Code) has occurred together with a written statement describing such transaction and the action which such Borrower or any member of the Controlled Group has taken, is taking or proposes to take with respect thereto, (iii) a funding waiver request has been filed with respect to any Plan together with all communications received by any

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Borrower or any member of the Controlled Group with respect to such request, (iv) any increase in the benefits of any existing Plan or the establishment of any new Plan or the commencement of contributions to any Plan to which any Borrower or any member of the Controlled Group was not previously contributing shall occur, (v) any Borrower or any member of the Controlled Group shall receive from the PBGC a notice of intention to terminate a Plan or to have a trustee appointed to administer a Plan, together with copies of each such notice, (vi) any Borrower or any member of the Controlled Group shall receive any favorable or unfavorable determination letter from the Internal Revenue Service regarding the qualification of a Plan under Section 401(a) of the Code, together with copies of each such letter; (vii) any Borrower or any member of the Controlled Group shall receive a notice regarding the imposition of withdrawal liability, together with copies of each such notice; (viii) any Borrower or any member of the Controlled Group shall fail to make a required installment or any other required payment to a Plan on or before the due date for such installment or payment; (ix) any Borrower or any member of the Controlled Group knows that (a) a Multiemployer Plan has been terminated, (b) the administrator or plan sponsor of a Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC has instituted or will institute proceedings under Section 4042 of ERISA to terminate a Multiemployer Plan. With respect to the Borrowers and each Subsidiary, the events described in (i) through (ix) above required prompt written notice and, with respect to any other member of the Controlled Group, prompt written notice will be required if any such event results, or could reasonably be expected to result, in liability to any Borrower or any of their Subsidiaries.

     Section 3. Ancillary Agreements.

(a) Upon the effectiveness of the Transaction, the Subordination Agreement by and among the Ampersand Guarantors, Borrowers, Holdings, and the Agent, dated as of August 14, 2009 (“Subordination Agreement”), shall be terminated, all obligations of Borrowers and Holdings to the Ampersand Guarantors pursuant to the Subordination Agreement shall be cancelled and all references to the Subordination Agreement in the Loan Agreement shall be deleted.

     Section 4. Conditions Precedent. This Amendment shall be effective on the date (such date, the “Effective Date”) when each of the following conditions precedent shall have occurred:

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(a) Agent shall have received this Amendment, duly executed and delivered by an authorized officer of each of the Borrowers and the Lenders and the Guarantors.

(b) Agent shall have received a fully executed copy of the Letter of Intent and the Transaction Documents (together with all exhibits and schedules thereto);

(c) Agent shall have received a copy of the resolutions in form and substance reasonably satisfactory to Agent, of the board of directors of each Borrower, authorizing the execution and delivery of, and the performance of such Borrower’s obligations under, this Amendment, the Transaction Documents and any related agreements, in each case certified by the secretary or an assistant secretary (or other appropriate officer) of such Borrower, as of the Effective Date; and each such certificate shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded as of the date of such certificate.

(d) No Event of Default or Default shall have occurred and be continuing on the Effective Date, or would exist after giving effect to the transactions contemplated by this Amendment.

(e) No litigation, investigation or proceeding before or by any arbitrator or Governmental Body shall be continuing or, to the knowledge of any Borrower, threatened against any Borrower or against the officers or directors of any Borrower (A) in connection with this Amendment, the Loan Agreement, the Other Documents, the Letter of Intent or any of the transactions contemplated hereby or thereby and which, in the reasonable opinion of Agent, is deemed material or (B) which, in the reasonable opinion of Agent, could reasonably be expected to have a Material Adverse Effect; and (ii) no injunction, writ, restraining order or other order of any nature materially adverse to any Borrower or the conduct of such Borrower’s business or inconsistent with the due consummation of the transactions contemplated by this Amendment (including, without limitation, the Transaction) shall have been issued by any Governmental Body.

(f) All of the conditions precedent set forth in Section 8.2 of the Loan Agreement and in the Transaction Documents shall have been satisfied.

     Section 5. Conditions Subsequent. Each of the Borrowers covenant and agree that no later than 180 days after the closing of the Transaction, the Avatech credit facility and the credit facility in connection with the Loan Agreement shall be amended, restated and consolidated into one agreement or such other agreements reasonably acceptable to PNC Business Credit.

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     Section 6. Representations and Warranties. Each of the Borrowers represents and warrants (which representations and warranties shall be true at the time of the Borrowers’ execution of this Amendment, and shall survive the execution, delivery and acceptance hereof by the parties hereto and the closing of the transactions contemplated herein or related hereto) to the Lenders and the Agent that:

(a) Each Borrower has full power, authority and legal right to enter into this Amendment, and the other documents to be executed by it in connection herewith, and to perform all of their respective obligations hereunder and thereunder. The Amendment has been duly executed and delivered by each Borrower and constitutes the legal, valid and binding obligation of each Borrower, enforceable in accordance with its terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, moratorium or similar laws affecting creditors’ rights generally. The execution, delivery and performance of this Amendment and the transactions contemplated herein (i) are within each Borrower’s corporate powers, have been duly authorized by all necessary corporate action, are not in contravention of any Applicable Law or the terms of each Borrower’s by-laws, certificate or articles of incorporation or other applicable documents relating to each Borrower’s formation or to the conduct of each Borrower’s business, (ii) will not conflict with or violate any law or regulation, or any judgment, order or decree of any Governmental Body applicable to or binding upon the Borrowers or their property, (iii) will not require the Consent of any Governmental Body or any other Person (other than any consents that have been or will be obtained on or prior to the Effective Date), and (iv) will not conflict with, nor result in any breach of any of the provisions of, or constitute a default under or result in the creation of any Lien (except Permitted Encumbrances) upon any asset of any Borrower under the provisions of, any material agreement, or other document to which any Borrower is a party or by which it or its property may be bound, including the Letter of Intent.

(b) After giving effect to the transactions contemplated by this Amendment, each Borrower is solvent, able to pay its debts as they mature, has capital sufficient to carry on its business and all businesses in which it is about to engage, and (i) as of the Effective Date, the fair present saleable value of its assets, calculated on a going concern basis, is in excess of the amount of its liabilities and (ii) subsequent to the Effective Date, the fair saleable value of its assets (calculated on a going concern basis) will be in excess of the amount of its liabilities.

(c) The Borrowers have delivered to Agent complete copies of the Letter of Intent and the Transaction Documents (including all exhibits, schedules and disclosure letters referred to therein or delivered pursuant thereto, if any) and all amendments thereto, waivers relating thereto and other side

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letters or agreements affecting the terms thereof. None of such documents and agreements has been amended or supplemented, nor have any of the provisions thereof been waived, except pursuant to a written agreement or instrument which has heretofore been delivered to Agent.

(d) On the Effective Date, and after giving effect to the transactions contemplated by this Amendment, no Default or Event of Default has occurred and is continuing.

(e) All representations, warranties and schedules set forth in or annexed to the Loan Agreement are true and correct in all material respects on and as of the Effective Date (except to the extent any such representations and warranties specifically relate to a specific date, in which case such representations and warranties were true and correct in all material respects on and as of such other specific date).

     Section 7. Acknowledgement of Guarantors. By execution of this Amendment, each Guarantor hereby covenants and agrees that its Guaranty shall remain in full force and effect and shall continue to cover all of the Borrowers’ Obligations to Agent and Lenders in accordance with its respective Guaranty.

     Section 8. Acknowledgment of Ampersand 2006 Limited. By execution of this Amendment, Ampersand 2006 Limited, as agent for the Ampersand Guarantors, confirms that on or prior to the Effective Date, the Subordinated Indebtedness will be exchanged for equity interests in RWW LLC; that the Subordinated Loan Documents will be terminated, cancelled and are of no further force or effect; and all security interests and liens upon any and all properties and assets of the Borrowers heretofore granted to the Ampersand Guarantors will be released and terminated.

     Section 9. Confirmation of Indebtedness. Borrowers confirm and acknowledge that as of the close of business on July __, 2010, Borrowers were indebted to Agent and Lenders for the Advances under the Loan Agreement without any deduction, defense, setoff, claim or counterclaim, of any nature, in the aggregate principal amount of ($____________), due on account of Revolving Advances and ($_________) on account of undrawn Letters of Credit, plus in each case all fees, costs and expenses incurred to date in connection with the Loan Agreement and the Other Documents.

     Section 10. General Provisions.

(a) Except as herein expressly amended, the Loan Agreement, the Other Documents and any other agreements, documents, instruments and certificates executed in connection therewith, are ratified and confirmed in all respects and shall remain in full force and effect in accordance with their respective terms.

(b) From and after the Effective Date, all references in this Amendment, the Loan Agreement and the Other Documents to “this Loan Agreement,”

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“the Loan Agreement”, “hereof,” “herein,” “therein” or similar terms, shall mean and refer to the Loan Agreement as amended by this Amendment.

(c)	The captions at various places in this Amendment are intended for convenience only and do not constitute and shall not be interpreted as part of this Amendment.
(d)	This Amendment may be executed in any number of and by different parties hereto on separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any signature delivered by a party by facsimile or email transmission shall be deemed to be an original signature hereto

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.

LENDER AND AGENT:	PNC BANK, NATIONAL ASSOCIATION
	By:
		Name:	John Stanescki
		Title:	Senior Vice President

BORROWERS:	RAND WORLDWIDE U.S. HOLDINGS, INC.
	By:
		Name:
		Title:

RAND A TECHNOLOGY CORPORATION
By:
	Name:
	Title:

RAND TECHNOLOGIES OF MICHIGAN, INC.
By:
	Name:
	Title:

RAND IMAGINIT TECHNOLOGIES, INC.
By:
	Name:
	Title:

Signature Page to Third Amendment to Revolving Credit and Security Agreement

S-1

GUARANTORS:

AMPERSAND 2001 COMPANION FUND LIMITED PARTNERSHIP By: AMP-01 Management Company Limited Liability        Company, its General Partner
By:
	Name:
	Title:	Principal Managing Member

AMPERSAND 2001 LIMITED PARTNERSHIP By: AMP-01 Management Company Limited Liability        Company, its General Partner
By:
	Name:
	Title:	Principal Managing Member

AMPERSAND 2006 LIMITED PARTNERSHIP By: AMP-06 Management Company Limited Partnership,        its General Partner By: AMP-06 MC LLC, its General Partner
By:
	Name:
	Title:	Principal Managing Member

RAND WORLDWIDE, INC.
By:
	Name:
	Title:

[SIGNATURES CONTINUED ON NEXT PAGE]

Signature Page to Third Amendment to Revolving Credit and Security Agreement

S-2

SUBORDINATED CREDITOR: AMPERSAND 2006 LIMITED PARTNERSHIP, as agent for subordinated lenders By: AMP-06 Management Company Limited Partnership,       its General Partner
By:
	Name:
	Title:

Signature Page to Third Amendment to Revolving Credit and Security Agreement

S-3

EXHIBIT A

EX-21.1

Exhibit 21.1

Subsidiaries
Avatech Solutions Subsidiary, Inc.
Rand Worldwide, Inc.

EX-23.1

23.1 CONSENT OF PRICEWATERHOUSECOOPERS LLP

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-107017, 333-108354, 333-131721, 333-147823) of Avatech Solutions, Inc. of our report dated November 15, 2010 relating to the financial statements, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP
Boston, MA
November 15, 2010

EX-31.1

Exhibit 31.1

Certifications of the Chief Executive Officer
Pursuant to Securities Exchange Act Rules 13a-1 and 15d-14
As adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

          I, Marc L. Dulude, certify that:

          1.          I have reviewed this Transition Report on Form 10-K of Avatech Solutions, Inc.;

          2.          Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

          3.          Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

          4.          The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

          5.          The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: November 15, 2010	/s/ Marc L. Dulude Marc L. Dulude
	Chief Executive Officer

EX-31.2

Exhibit 31.2

Certifications of the Chief Financial Officer
Pursuant to Securities Exchange Act Rules 13a-1 and 15d-14
As adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

          I, Lawrence Rychlak, certify that:

          1.          I have reviewed this Annual Report on Form 10-K of Avatech Solutions, Inc.;

          2.          Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

          3.          Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

          4.          The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

          5.          The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: November 15, 2010	/s/ Lawrence Rychlak Lawrence Rychlak
	President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certifications of Periodic Report by the Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350
As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

          In connection with the Transition Report of Avatech Solutions, Inc. (the “Company”) on Form 10-K for the transition period ending June 30, 2010 as filed with the Securities and Exchange Commission and to which this Certification is an exhibit (the “Report”), the undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company for the periods reflected therein.

Date: November 15, 2010	/s/ Marc L. Dulude Marc L. Dulude
	Chief Executive Officer

/s/ Lawrence Rychlak Lawrence Rychlak

President and Chief Financial Officer