8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported):  August 17, 2010

AVATECH SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-31265	84-1035353
(State of Incorporation)	(Commission File No.)	(IRS Employer Identification Number)

10715 Red Run Boulevard, Suite 101, Owings Mills, Maryland  21117

(Address of principal executive offices, including Zip Code)

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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

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

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

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

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

INFORMATION TO BE INCLUDED IN THE REPORT

Item 1.01.         Entry into a Material Definitive Agreement.

Acquisition of RAND Worldwide, Inc.

On August 17, 2010 (the “Closing Date”), Avatech Solutions, Inc., a Delaware corporation (“Avatech”, “we” or “us”), 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, a Delaware limited liability company and the sole stockholder of Rand Worldwide (“RWWI”).  At the effective time of the Acquisition (the “Closing”), we caused Merger Sub to merge with and into Rand Worldwide, with Rand Worldwide as the surviving entity.  As a result of the Acquisition, Rand Worldwide became our wholly-owned subsidiary.  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.  A copy of the Merger Agreement is filed herewith as Exhibit 2.1 and is incorporated herein by reference.

Rand Worldwide is one of the world’s leading providers of professional services and technology to the engineering community, targeting organizations in the building, infrastructure and manufacturing industries.  Rand Worldwide enables its customers to improve their competitiveness, productivity and profitability by enhancing key aspects of their Product Lifecycle Management (“PLM”) capabilities, including planning, development and management.  As a leading technology independent systems integrator, Rand Worldwide employs approximately 250 people in over 40 sales and client service centers around the world.

Issuance of Shares to RWWI

On the Closing Date, RWWI received an aggregate of 34,232,682 shares (the “Merger Shares”) of our common stock, par value $.01 per share (“Common Stock”), in exchange for all of the outstanding shares of capital stock of Rand Worldwide.  Of this number, 28,800,022 shares (the “Initial Shares”) are currently held by RWWI and 5,432,660 shares (the “Escrowed Shares”) are being held in escrow by us for the benefit of RWWI for up to 18 months from the Closing Date (the “Escrow Period”).  RWWI may be required to surrender some or all of the Escrowed Shares to Avatech in certain circumstances described below.  After giving effect to the issuance of the Merger Shares, the Merger Shares represent approximately 66.1% of our outstanding shares of Common Stock.

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In addition to its Common Stock, Avatech has a total of 1,189,209 shares of its Series D Convertible Preferred Stock and 937 shares of its Series E Convertible Preferred Stock outstanding (each, an “Outstanding Preferred Share” and collectively, the “Outstanding Preferred Shares”), which are presently convertible into 2,180,234 and 1,441,539, respectively, shares of Common Stock.  The terms of the Outstanding Preferred Shares entitle the holders thereof to vote together with holders of our Common Stock, as a single class, on any matter submitted to holders of our Common Stock, with each Outstanding Preferred Share entitled to one vote for each share of Common Stock into which such Outstanding Preferred Share is then convertible.  The Merger Shares represent approximately 61.8% of the outstanding voting rights of the holders of our capital stock, after giving effect to the voting rights of the Outstanding Preferred Shares and the issuance of the Merger Shares.  As a result of the Acquisition, RWWI became a controlling stockholder of Avatech.

The Merger Shares were issued in a private placement to a single sophisticated purchaser without general solicitation in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”).  The Merger Shares have not been registered under the Securities Act and, thus, constitute “restricted securities” as defined in Securities Act Rule 144.

The Escrowed Shares

The Merger Agreement provides that if, at any time during the Escrow Period, we redeem or repurchase any of the Outstanding Preferred Shares, then RWWI will surrender to us that number of Escrowed Shares equal to 150% of the number of shares of Common Stock into which such redeemed Outstanding Preferred Shares could have been converted immediately following the Closing after giving effect to the issuance of the Initial Shares.  Any Escrowed Shares so surrendered will be canceled and will constitute authorized but unissued shares of Common Stock.  During the Escrow Period, RWWI will have all the rights and liabilities of a stockholder with respect to the outstanding Escrowed Shares, including the right to vote such Escrowed Shares and the right to receive dividends and other distributions thereon.  Upon the expiration of the Escrow Period, all Escrowed Shares that have not been surrendered to us during the Escrow Period will be delivered to RWWI.

Indemnification Agreements

On the Closing Date, Avatech entered into indemnification agreements (the “Indemnification Agreements”) with each of its directors and with Larry Rychlak, Avatech’s President and Chief Financial Officer (each, an “Indemnitee” and collectively, the “Indemnitees”), the form of which is filed herewith as Exhibit 10.1 and incorporated herein by reference.  Under the Indemnification Agreements, Avatech agreed to indemnify each Indemnitee to the fullest extent permitted by law against any liability arising out of the Indemnitee’s performance of his or her duties to Avatech. The indemnification provided by the Indemnification Agreements is in addition to the indemnification required by Avatech’s bylaws and applicable law. Among other things, each Indemnification Agreement indemnifies the Indemnitee (and under certain circumstances, investment funds affiliated with the Indemnitee) against certain expenses (including reasonable attorneys’ fees) incurred by the Indemnitee in any action or proceeding, including any action by or in the right of Avatech, arising out of the Indemnitee’s service to Avatech or to any other entity to which the Indemnitee provides services at Avatech’s request.  Further, each Indemnification Agreement requires Avatech to advance funds to the Indemnitee to cover any expenses the Indemnitee incurs in connection with any proceeding against the Indemnitee as to which the Indemnitee could be indemnified.

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Registration Rights Agreement

At the Closing, we entered into a Registration Rights Agreement with RWWI pursuant to which we agreed to (i) file a registration statement (the “Shelf Registration Statement”) under the Securities Act with the Securities and Exchange Commission (the “SEC”) covering the resale of the Merger Shares by RWWI as soon as practicable but no later than 75 days after the Closing Date, (ii) use our reasonable best efforts to cause the Shelf Registration Statement to be declared effective by the SEC as soon as practicable thereafter, and (iii) cause the Shelf Registration Statement to remain effective thereafter until all Merger Shares have been sold or may be sold without restriction pursuant to Securities Act Rule 144.

In addition, the Registration Rights Agreement grants RWWI a right to request that we register for resale under the Securities Act all or part of the Merger Shares (a “Demand Registration”) if we have failed to file, cause to be declared effective or maintain the effectiveness of, the Shelf Registration Statement and the number of Merger Shares covered by the Demand Registration would, if fully sold, reasonably be expected to yield gross proceeds of at least $3,000,000.

The Registration Rights Agreement also grants piggyback registration rights to RWWI if we propose (i) to register any shares of our Common Stock under the Securities Act (other than on a registration statement on Form S-8, F-8, S-4 or F-4), whether for our own account or for the account of another person or (ii) to sell shares of our Common Stock that have already been registered “off the shelf” by means of a prospectus supplement.

We agreed in the Registration Rights Agreement to pay for all expenses, including the reasonable legal expenses of RWWI, relating to the registration of any Merger Shares.

A copy of the Registration Rights Agreement is filed herewith as Exhibit 10.2 and is incorporated herein by reference.

The Stockholders’ Agreement

At the Closing, Avatech and each person who was serving as a director or an executive officer immediately prior to the Closing (each, a “Holder”) entered into a Stockholders’ Agreement with RWWI.  Under the Stockholders’ Agreement, until the date on which RWWI ceases to hold at least 25% of the Merger Shares (the “Designation Period”), the parties agreed that (i) Avatech will maintain a board of directors consisting of no more than six directors, (ii) our board of directors will nominate three individuals designated by RWWI to serve on our board of directors (each, a “Designator Nominee”) and will recommend that our stockholders vote to elect such Designator Nominees as directors, (iii) the board of directors will fill any vacancy that may arise upon the resignation, removal, death or disability of any of the elected Designator Nominees with a new director chosen by RWWI, and (iv) our board of directors will nominate for election and recommend that our stockholders vote to elect our Chief Executive Officer to serve as a director (upon such election, the “CEO Director”) until our next Annual Meeting of Stockholders and that the initial CEO Director will be Marc L. Dulude (who is also the Chief Executive Officer of Rand Worldwide).

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During the Designation Period, each Holder agreed to vote, and to cause each of his affiliates to vote, all of our voting securities held by such Holder or affiliate (i) for the election of Designator Nominees, (ii) against the removal of any elected Designator Nominee except for cause unless such removal is directed or approved by RWWI, (iii) for the removal of any elected Designator Nominee if such removal is directed or approved by RWWI, and (iv) for the election of a nominee designated to fill any vacancy created by the resignation, removal, death or disability of an elected Designator Nominee or the CEO Director.  All Holders agreed to execute, and to cause their affiliates to execute, any written consents required to effectuate their obligations under the Stockholders’ Agreement.

Until the earlier of the expiration of the Designation Period and the date immediately preceding the date of our second Annual Meeting of Stockholders following the Closing (the “Continuing Director Period”), the parties agreed that (i) at our first Annual Meeting of Stockholders following the Closing, our board of directors will nominate for election and recommend that our stockholders vote to elect two individuals, each of whom must have been serving on our board of directors immediately prior to the Closing (each, “Continuing Director Nominee”) to serve until the next Annual Meeting of Stockholders, and (ii) our board of directors will fill any vacancy that may arise upon the resignation, removal, death or disability of any elected Continuing Director with a new director who was serving our board of directors immediately prior to the Closing, provided that if no director who was serving on our board of directors immediately prior to the Closing is willing or able to serve, then our board of directors will have discretion to fill any such vacancy.  In addition, during the Continuing Director Period, RWWI agreed to vote, and to cause each of its affiliates to vote, (a) for the election to our board of directors of the Continuing Director Nominees, (b) against the removal of any elected Continuing Director Nominee except for cause unless such removal is directed or approved by the remaining elected Continuing Director, if any, (c) for the removal of any elected Continuing Director Nominee if such removal is directed or approved by the remaining elected Continuing Director Nominee, and (d) for the election of a nominee designated by the remaining elected Continuing Director Nominee, if any, to fill any vacancy created by the resignation, removal, death or disability of an elected Continuing Director Nominee.  RWWI agreed to execute, and to cause its affiliates to execute, any written consents required to effectuate their obligations under the Stockholders’ Agreement.

A copy of the Stockholders’ Agreement is filed herewith as Exhibit 9.1 and is incorporated herein by reference.

Accounting Treatment

The Acquisition is being accounted for as a reverse acquisition because the number of Merger Shares represents more than 50% of the number of shares of our Common Stock outstanding immediately after the Acquisition.  For accounting and 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 our consolidated financial statements will be those of Rand Worldwide.

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Amendment to Avatech’s Credit Facility

The Acquisition required the consent of PNC Bank, National Association (“PNC”), the lender under Avatech’s credit facility (the “Avatech Loan”), which is evidenced by a Loan and Security Agreement dated as of January 27, 2006 (the “Loan Agreement”).  PNC conditioned its consent on Avatech’s agreement to modify the terms of the Loan Agreement pursuant to a Fifth Modification Agreement (the “Fifth Modification”), which the parties executed on August 17, 2010.  Under the Fifth Modification, (i) the maturity date of the Avatech Loan was amended to be the earlier of the date which is 120 days after the Closing and December 31, 2010, unless extended by the parties, (ii) Avatech and Avatech Solutions Subsidiary, Inc. (the “Avatech Borrowers”) agreed to maintain Rand Worldwide as a separate legal entity and wholly-owned subsidiary until such time as the Avatech Borrowers and Rand Worldwide consolidate the Avatech Loan and Rand Worldwide’s credit facility described in Item 2.03 of this report into a single credit facility (a “New Credit Facility”), (iii) the Avatech Borrowers agreed not to change the persons holding key management positions with the Avatech Borrowers, (iv) the Avatech Borrowers agreed that a cross-default under the Loan Agreement will occur if there is a default under the documents evidencing Rand Worldwide’s credit facility or under any related guaranty, and (v) PNC agreed that the financial covenants contained in the Loan Agreement will apply only to the Avatech Borrowers until such time as a New Credit Facility is established.

The Borrower Entities and Rand Worldwide intend to secure a single credit facility within 120 days of the Closing.

A copy of the Fifth Modification is filed herewith as Exhibit 10.3 and is incorporated herein by reference.

Miscellaneous Acquisition Matters

The foregoing information relating to the Acquisition and the related transactions is intended only as a summary and is qualified in its entirety by reference to the terms of the Merger Agreement, the Indemnification Agreement, the Registration Rights Agreement, and the Stockholders’ Agreement (the “Operative Documents”).  Likewise, the information relating to the Fifth Modification is intended only as a summary and is qualified in its entirety by reference to the terms of the Fifth Modification.  Avatech has included copies of the Operative Documents and the Fifth Modification as exhibits to this report pursuant to Item 601 of the SEC’s Regulation S-K and to provide investors and security holders with information regarding their terms.  This report is not intended to provide any other factual or financial information about Avatech, Rand Worldwide, or their respective subsidiaries or affiliates.  The representations, warranties and covenants contained in the Operative Documents and the Fifth Modification were made only for purposes of those documents and as of specific dates; were solely for the benefit of the parties to the Operative Documents and the Fifth Modification; may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Operative Documents and the Fifth Modification instead of establishing these matters as facts; and may be subject to standards of materiality applicable to the parties that differ from those applicable to investors.  Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of Avatech, Rand Worldwide, or any of their subsidiaries or affiliates.  Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Operative Documents and/or the Fifth Modification, which subsequent information may or may not be fully reflected in public disclosures by Avatech and/or Rand Worldwide.

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Common Stock Purchase Warrants

In connection with the termination of the Financing Agreements described in Item 1.02 of this report, on the Closing Date, we entered into Amended and Restated Common Stock Purchase Warrants to purchase an aggregate of 726,102 shares of Common Stock (the “Restated Warrants”) with Sigma Opportunity Fund, LLC, Sigma Capital Advisors, LLC, Garnett Y. Clark, Jr., Robert Post and George Davis to (i) reduce the per-share exercise price from $1.5205 to $1.11, (ii) remove certain anti-dilution provisions and (iii) make certain conforming changes to reflect the termination of the Financing Agreements.  Thom Waye, a former director of Avatech, is the managing member of Sigma Capital Advisors, LLC, which is the managing member of Sigma Opportunity Fund, LLC.  Messrs. Clark and Post are former directors of Avatech.  Mr. Davis is Avatech’s former Chief Executive Officer and a current director.  The Restated Warrants expire on January 29, 2011.  The foregoing description of the Restated Warrants is only a general description and is qualified in its entirety by reference to the Form of Restated Warrant, a copy of which is attached hereto as Exhibit 4.1 and incorporated herein by reference.

Item 1.02.            Termination of a Material Definitive Agreement.

In connection with the Acquisition and the execution of the Restated Warrants, on the Closing Date, the following agreements were terminated by Avatech and the other parties thereto:

· The Common Stock and Warrant Purchase Agreement and the Investor Rights Agreement, each dated January 29, 2007, by and among Avatech, Sigma Opportunity Fund, LLC, Garnett Y. Clark, Jr., Robert Post and George Davis (the “2007 Financing Agreements”); and

· The Common Stock and Warrant Purchase Agreement and the Investor Rights Agreement, each dated June 12, 2006, by and among Avatech, Sigma Opportunity Fund, LLC and Pacific Asset Partners (together with the 2007 Financing Agreements, the “Financing Agreements”).

Under the Financing Agreements, the purchasers named above (the “Purchasers”) were entitled to certain ongoing anti-dilution protections as well as certain ongoing registration rights.  In connection with the termination of the Financing Agreements:

· the Purchasers (i) waived all rights arising as a result of any failures by Avatech to comply with any of the provisions of the Financing Agreements prior to the date of termination and (ii) received a total of 400,015 shares of Common Stock from Avatech, issued as follows:  284,031 shares to Sigma Opportunity Fund, LLC; 3,112 shares to each of Messrs. Clark and Post; 12,448 shares to Mr. Davis; and 97,312 shares to Pacific Asset Partners (together, the “Termination Shares”); and

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· Avatech agreed to include and register for resale in the Shelf Registration Statement (i) the Termination Shares and (ii) the Registrable Securities (as defined in the Financing Agreements); in each case other than those shares that are eligible for resale without restriction pursuant to Securities Act Rule 144.

The Termination Shares were issued to a limited number of accredited investors without general solicitation in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act.  The Termination Shares have not been registered under the Securities Act and, thus, constitute “restricted securities” as defined in Securities Act Rule 144.

Item 2.01. Completion of Acquisition or Disposition of Assets.

The information set forth above in Item 1.01 of this report is incorporated herein by reference.

Item 2.03.  Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

Certain of Rand Worldwide’s subsidiaries (together, the “Borrowing Companies”) are parties to a $12.5 million credit facility consisting of revolving loans, including a $500,000 sublimit for the issuance of standby or trade letters of credit (the “RWW Credit Facility”) with PNC, as Agent and Lender.  The RWW Credit Facility is provided pursuant to a Revolving Credit and Security Agreement dated as of August 14, 2009 and amended on January 22, 2010 and July 23, 2010 (as amended, the “RWW Credit Agreement”) among the Borrowing Companies and PNC.  A portion of the RWW Credit Facility is guaranteed by certain funds (together, the “Ampersand Funds”) affiliated with Ampersand, a private equity firm located in Wellesley, Massachusetts (“Ampersand”), pursuant to a series of Amended and Restated Limited Guaranty and Suretyship Agreements, each dated as of July 23, 2010 (collectively, the “Ampersand Guaranties”).  The Ampersand Guaranties collectively provide for a guaranty of $2.5 million of the RWW Credit Facility, which represents the amount of the “Permitted Overadvance” as defined in the RWW 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 RWW Credit Facility guarantied by the Ampersand Funds is reduced by approximately $357,000, until the amount reaches $0.  The Borrowing Companies currently have approximately $4,727,213 outstanding under the RWW Credit Facility.

The RWW Credit Facility has a term of three years, and matures on August 13, 2012.  Amounts borrowed under the RWW Credit Facility bear interest at a rate equal to, at the Borrowing Companies’ 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) PNC’s “Alternate Base Rate”, which is determine by reference to the base commercial lending rate of PNC 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 the Borrowing Companies’ (a) EBITDA (as defined in the RWW Credit Agreement), 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 RWW 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 the Borrowing Companies for the nine month period ending October 31, 2010, and for each fiscal quarter thereafter, on a rolling four quarter basis.

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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.

In addition to guaranties provided pursuant to the Ampersand Guaranties, Rand Worldwide is a guarantor of the Borrowing Companies’ obligations under the RWW Credit Facility pursuant to a Guaranty and Suretyship Agreement dated as of August 14, 2009.  In addition, the Borrowing Companies’ obligations are secured by (i) a first priority, perfected lien on substantially all the property and assets of the Borrowing Companies and Rand Worldwide and (ii) a pledge of 100% of the capital stock of certain of the Borrowing Companies and their direct and indirect domestic subsidiaries and 65% of the capital stock of Rand Worldwide’s Canadian subsidiary.

The RWW Credit Agreement contains customary representations, warranties and covenants, including covenants by the Borrowing Companies limiting additional debt, liens, guaranties, mergers and consolidations, substantial asset sales, investments and loans, sale and leasebacks and other fundamental changes.  In addition, the RWW Credit Agreement contains financial covenants by the Borrowing Companies that impose a minimum Fixed Charge Coverage Ratio.  The RWW Credit Agreement also contains a covenant requiring that the RWW Credit Facilities and the Loan Agreement be amended, restated and consolidated into one agreement or such other agreements reasonably acceptable to PNC within 180 days after the closing of the Acquisition; provided, that the Fifth Modification requires such amendment, restatement and consolidation within 120 days after the closing of the Acquisition.

The RWW 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 PNC 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 RWW Credit Facility will become payable immediately.

Prior to the Acquisition, the holders of the common stock, redeemable preferred stock and term notes of Rand Worldwide exchanged their respective securities for membership interests in 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 of the then outstanding redeemable preferred stock and term notes in Rand Worldwide were settled in full and such securities no longer remain outstanding.  Following this exchange, pursuant to the Acquisition, all of RWWI’s ownership in Rand Worldwide was exchanged for shares of Avatech Common Stock as described in Item 1.01 of this report.

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Item 2.05             Costs Associated with Exit or Disposal Activities.

In connection with the Acquisition, Avatech and Rand Worldwide have committed to a plan of termination for certain employees.  Avatech and Rand Worldwide expect to incur costs in the range of $800,000 to $1.2 million related to this plan over the course of 15 months after the Closing Date.

Item 3.02.            Unregistered Sales of Equity Securities.

The information set forth above in Item 1.01 and Item 1.02 of this report is incorporated herein by reference.

Item 4.01.            Changes in Registrant’s Certifying Accountant.

Change in Certifying Accountant by Virtue of Reverse Merger

Prior to the Acquisition, Rand Worldwide’s fiscal year end was October 31.  The annual financial statements of Rand Worldwide for the years ended October 31, 2009 and 2008 were audited by the independent registered public accounting firm of PricewaterhouseCoopers LLP (“PWC”).  We intend to file an amendment to this report within 71 calendar days of its filing date to include these financial statements as required by Item 9.01 of Form 8-K.  Prior to the Acquisition, Avatech’s consolidated financial statements for the fiscal years ended June 30, 2009 and 2008 were audited by Stegman and Company ("Stegman").

The SEC has released guidance that, unless the same accountant reported on the most recent financial statements of both the accounting acquirer and the acquired company, a reverse acquisition results in a change in accountants.

On August 17, 2010, Avatech’s Board of Directors dismissed PWC as Avatech’s independent registered public accounting firm.  Such dismissal will become effective upon completion by PWC of its procedures on the financial statements of Rand Worldwide and the filing of the respective financial statements on the Transition Report on Form 10-K for the period between November 1, 2009 and June 30, 2010.

On August 17, 2010, Avatech’s Board of Directors engaged Stegman as Avatech’s independent registered public accounting firm.  During the two most recent fiscal years and through August 17, 2010, Rand Worldwide has not consulted with Stegman regarding any of the matters described in Item 304(a)(2)(i) or Item 304(a)(2)(ii) of Regulation S-K.

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The reports of PWC on the consolidated financial statements of Rand Worldwide for the fiscal years ended October 31, 2009 and 2008 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle, except that the report for the year ended October 31, 2009 included an explanatory paragraph expressing substantial doubt about Rand Worldwide’s ability to continue as a going concern, as, at that date, Rand Worldwide had a working capital deficit and outstanding preferred stock that could be redeemed upon request of at least a majority of holders, which would require a payment of approximately $36.2M if called.

During the years ended October 31, 2009 and 2008, and during the interim period from the end of the most recently completed fiscal year through August 17, 2010, there were no disagreements between Rand Worldwide and PWC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of PWC would have caused it to make reference to such disagreement in its reports on the financial statements for such years.

During the years ended October 31, 2009 and 2008, and during the interim period from the end of the most recently completed fiscal year through August 17, 2010, there were no reportable events between Rand Worldwide and PWC, except that during the year ended October 31, 2008, PWC advised Rand Worldwide that it had identified a material weakness relating to the insufficiency of appropriate resources (personnel and systems) in the finance function, leading to an inability of Rand Worldwide to independently record all transactions (in accordance with US GAAP) without error and to timely report results in its financial statements. Rand Worldwide has since remediated that weakness for the year ended October 31, 2009.

We provided PWC with a copy of this report prior to the date it was filed with the SEC and requested that PWC furnish us with a letter addressed to the SEC stating whether it agrees with above statements and, if it does not agree, the respects in which it does not agree.  A copy of the letter, dated August 17, 2010, is filed as Exhibit 16.1 to this report.

Item 5.01.            Changes in Control of Registrant.

The information set forth above in Item 1.01 of this report is incorporated herein by reference.

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Item 5.02.            Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Departure of Directors and Certain Officers; Election of Directors

In connection with the Acquisition, the size of our Board of Directors was reduced to six directors, and, effective at the Closing, each of Garnett Y. Clark, Jr., George W. Cox, Aris Melissaratos, Robert J. Post, David C. Reymann and Thom Waye (the “Resigning Directors”) resigned as directors of Avatech.  Eugene J. Fischer and George Davis will continue to serve on our Board of Directors until their successors are duly elected and qualified, subject to the terms of the Stockholders’ Agreement.  Mr. Davis has resigned as CEO of Avatech and, following a brief transition period, will no longer be employed by Avatech.  The termination of Mr. Davis’ employment is being treated as a termination without cause, which entitles him to receive certain severance benefits as set forth in his employment agreement.  Immediately prior to the Closing, each stock option held by the Resigning Directors was amended to extend the period during which the Resigning Director may exercise the option until the earlier of (i) one year following the Closing Date and (ii) the expiration of the option’s term.  The amendments were approved by the full Board of Directors, which recognized that the Resigning Directors were resigning in furtherance of the Acquisition.  Prior to the amendments, the 2002 Stock Option Plan and stock option agreements did not separately address the period of exercisability when a director resigns in furtherance of a Change in Control (as defined in the 2002 Stock Option Plan).  The form of amendment to the stock option agreement is filed herewith as Exhibit 10.4 and incorporated herein by reference.

As stated in Item 1.01 of this report, pursuant to the Stockholders’ Agreement, the number of directors who will serve on our Board of Directors has been reduced to six.  In accordance with our bylaws, the Board filled the four resulting vacancies by electing Richard Charpie (Chairman), Marc L. Dulude, Suzanne MacCormack, and Charles D. Yie as directors of Avatech, each of whom will serve until his or her successor is duly elected and qualified, subject to the terms of the Stockholders’ Agreement.  The Board intends to consider and, if deemed appropriate, appoint committees of the Board at a later date and will act until such time as a full Board for all actions that may have previously been taken by such committees.  Unless and until modified, our current director compensation plan (discussed in our definitive proxy statement filed with the SEC on September 29, 2009) will apply to each of our directors.

Richard A. Charpie, PhD, 58, has nearly 30 years of private equity experience and is a Managing Partner of Ampersand.  Ampersand was, prior to the Acquisition, the largest stockholder in Rand Worldwide and is currently the largest equity owner of RWWI.  Dr. Charpie joined Ampersand’s predecessor in 1980 and led its activities beginning in 1983.  He has served as a director of more than 35 companies and as Chairman of more than 10.  He holds an M.S. in Physics and a Ph.D. in Economics and Finance, both from the Massachusetts Institute of Technology.  Dr. Charpie serves on the boards of directors of CoreLab Partners, a clinical trial services company, Endeca Technologies, Inc., an internet search application company, and Talecris Biotherapeutics Holdings Corp. (NASDAQ: TLCR), a biotherapeutics company, and prior to the Acquisition, of Rand Worldwide.  Dr. Charpie previously served on the board of directors of Panacos Pharmaceuticals, Inc., a drug delivery and development company.

Marc L. Dulude, 49, has served as the President, Chief Executive Officer, and Chairman of the Board of Rand Worldwide since April 1, 2009.  He acted in these roles on an interim basis starting in May 2008.  Mr. Dulude joined Ampersand in 2002 and served as General Partner through 2008.  Prior to joining Ampersand, he spent six years at Moldflow Corporation, a product design simulation software company, where he was Chairman, President and CEO.  Mr. Dulude has nearly two decades of experience as a senior information technology executive, including serving as Senior VP of Marketing at Parametric Technology Corporation (NASDAQ: PMTC), a product lifecycle management company, and in various positions at Nortel, a telecommunications company.  Mr. Dulude holds an M.Eng. in Mechanical Engineering from Carleton University.  Mr. Dulude is on the boards of directors of FirstRain, Inc., a search and analytics technology company and Kortec, Inc., a PET packaging equipment manufacturing company.

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Suzanne E. MacCormack, 52, has been a Partner at Ampersand since 2005.  Prior to that, she served as Executive VP of Finance and Administration and as CFO at Moldflow Corporation for eight years.  Ms. MacCormack holds a B.A. in Business from Stonehill College and is a C.P.A.  Ms. MacCormack is on the board of directors of CoreLab Partners, and prior to the Acquisition, was on the board of directors of Rand Worldwide.

Charles D. Yie, 52, joined Ampersand’s predecessor in 1985 and serves as a General Partner.  Mr. Yie has been a director of more than 10 companies.  Mr. Yie formerly served as a systems engineer and manufacturing specialist at Hewlett-Packard Company, a leading global provider of products, technologies, software, solutions and services to individual consumers, small- and medium-sized businesses, and large enterprises, including customers in the government, health and education sectors.  He holds a B.S. in Electrical Engineering and an M.S. in Management, both from Massachusetts Institute of Technology.  Mr. Yie currently serves on the board of directors of Kortec, Inc.

Appointment of Executive Officer; Compensatory Arrangements

Effective at the Closing, Marc L. Dulude was elected as our Chief Executive Officer.

Rand Technologies of Michigan, Inc., a wholly-owned subsidiary of Rand Worldwide (“RTOMI”), and Mr. Dulude are parties to an Employment Agreement dated August 17, 2010, a copy of which is filed herewith as Exhibit 10.5 and incorporated herein by reference (the “Dulude Employment Agreement”).  Pursuant to the Dulude Employment Agreement, Mr. Dulude is entitled to an annual base salary of $275,000 plus an annual discretionary bonus of up to $125,000.  The term of the Dulude Employment Agreement runs through December 31, 2010, but may be terminated sooner by RTOMI or Mr. Dulude.  If the Dulude Employment Agreement is terminated by Mr. Dulude, the termination must be preceded by a written notice given not less than 90 days before the termination date.  If RTOMI terminates the Dulude Employment Agreement without “Cause” (as defined in Dulude Employment Agreement), Mr. Dulude is entitled to RTOMI’s costs of continuing Mr. Dulude’s employee benefits over the following 12 months.  RTOMI will be deemed to have terminated Mr. Dulude without “Cause” if within 12 months following a “Change of Control” (as defined in Dulude Employment Agreement) Mr. Dulude terminates the Dulude Employment Agreement and any of the following events occur and RTOMI does not take action to remedy such event within 30 days of receiving notice from Mr. Dulude of such event:  (i) RTOMI substantially reduces or diminishes Mr. Dulude’s duties and responsibilities without “Cause”; (ii) RTOMI reduces Mr. Dulude’s base salary (other than in connection with a proportional reduction of the base salaries of a majority of the executive employees of Rand Worldwide); or (iii) RTOMI permanently relocates Mr. Dulude without his  written consent to another primary office unless Mr. Dulude’s primary office following such relocation is within 50 miles of his primary office imediately before the relocation or his permanent residence immediately prior to the date of his relocation.  If Mr. Dulude is terminated by RTOMI with “Cause” or if Mr. Dulude voluntarily resigns, then Mr. Dulude is entitled only to the amount owed to Mr. Dulude for work done prior to the termination or resignation.  In connection with the Dulude Employment Agreement, Mr. Dulude executed an Employee Confidentiality, Assignment of Inventions, Non-Competition and Non-Solicitation Agreement (the “Confidentiality Agreement”) pursuant to which he agreed, among other things, not to compete with RTOMI or any of its affiliates, including Avatech, during the term of his employment or for 12 months thereafter.

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Pursuant to the terms of the Dulude Employment Agreement, Mr. Dulude was granted a stock option to purchase 528,500 shares of Rand Worldwide common stock, of which 25% vest on each of the first four anniversaries of the Dulude Employment Agreement. In addition, during his period of employment by Rand Worldwide, Mr. Dulude was granted other options to purchase shares of Rand Worldwide common stock (collectively, the “Dulude Options”).  The Dulude Employment Agreement provides that if RTOMI terminates, or is deemed to terminate, Mr. Dulude without “Cause” within 12 months of a “Change of Control”, all of the Dulude Options vest and become exercisable immediately.  In connection with the Acquisition all of the options to purchase common stock of Rand Worldwide, including the Dulude Options, were automatically converted into options to purchase membership interests of RWWI and the terms and conditions of the Dulude Options continue in full force and effect with respect to such entity.  The Acquisition was not a Change of Control under the Dulude Employment Agreement.

Lawrence Rychlak will continue to serve as our President and Chief Financial Officer.  On the Closing Date, Avatech and Mr. Rychlak entered into an Amended and Restated Employment Agreement, a copy of which is filed herewith as Exhibit 10.6 (the “Amended Rychlak Agreement”), to ensure that Mr. Rychlak’s employment agreement complies with Section 409A of the Internal Revenue Code and also to provide that, in the event Mr. Rychlak terminates his employment for “Good Reason” (as defined in the Amended Rychlak Agreement”), he will be entitled to the severance benefits.  As was the case under his original employment agreement, the Amended Rychlak Agreement provides for severance benefits if we terminate Mr. Rychlak’s employment without “Cause” (as defined in the Amended Rychlak Agreement”) or if he voluntarily resigns upon a Change in Control (as defined in the Rychlak Agreement).  These severance benefits were amended to provide for the continuation of base salary and benefits (to the extent those benefit plans permit continued participation) for (i) 24 months if the termination occurs at any time prior to June 30, 2011, (ii) a period of months equal to 12 plus the number of full months remaining before July 1, 2012 if the termination occurs on or after June 30, 2011 but before June 30, 2012, and (iii) 12 months if the termination occurs on or after June 30, 2012.  Mr. Rychlak agreed in the Amended Rychlak Agreement that the Acquisition is not a “Change in Control” that entitles him to voluntarily resign and thereafter receive severance.

Certain Relationships; Arrangements with Directors and Executive Officers

RWWI, the holder of the Merger Shares, is majority-owned by funds associated with Ampersand, and, as such, these funds collectively are the controlling stockholders of Avatech.  These funds collectively are guarantors of a portion of the indebtedness under the RWW Credit Facility as described under Section 2.03 of this report and such description is incorporated herein by reference.

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The information provided in Item 1.01 under the heading “Indemnification Agreements” is incorporated herein by reference.

Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

In connection with the Acquisition, the board of directors of Rand Worldwide changed its fiscal year end from October 31st to June 30th to match our fiscal year end.  Because Rand Worldwide is considered the accounting acquirer in the Acquisition, this change in fiscal year end is deemed to be a change in our fiscal year end.  A Transition Report on Form 10-K covering the transition period of November 1, 2009 to June 30, 2010 will be filed as required by applicable SEC rules.

Item 7.01.            Regulation FD Disclosure.

On August 17, 2010, Avatech and Rand Worldwide issued a press release announcing the Acquisition.  A copy of this press release is furnished herewith as Exhibit 99.1.

The information contained in this Item 7.01 and in Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01.            Financial Statements and Exhibits.

(a), (b)  Financial Statements of Business Acquired; Pro Forma Financial Information.

The financial statements and pro forma financial information required by paragraphs (a) and (b) of this Item will be filed by amendment within 71 calendar days of the date this report is filed with the SEC.

(d)         Exhibits.

The exhibits filed or furnished with this report are listed on the Exhibit Index that immediately follows the signatures hereto, which Exhibit Index is incorporated herein by reference.

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SIGNATURES

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

	AVATECH SOLUTIONS, INC.
Date: August 17, 2010	By:	/s/ Lawrence Rychlak
		Lawrence Rychlak
		President and Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.	Description
2.1	Agreement and Plan Merger dated as of August 17, 2010 by and among Avatech Solutions, Inc, ASRW Acquisition Sub, Inc., RAND Worldwide, Inc., and the RWWI Holdings LLC (filed herewith)*
4.1	Form of Amended and Restated Warrant (filed herewith)
9.1	Stockholders’ Agreement dated as of August 17, 2010 by and among Avatech Solutions, Inc., RWWI Holdings LLC and certain holders of Common Stock (filed herewith)
10.1	Form of Indemnification Agreement (filed herewith)
10.2	Registration Rights Agreement dated as of August 17, 2010 by and between Avatech Solutions, Inc. and RWWI Holdings LLC (filed herewith)
10.3	Fifth Modification Agreement dated as of August 17, 2010 by and among Avatech Solutions, Inc., Avatech Solutions Subsidiary, Inc. and PNC Bank, National Association (filed herewith)
10.4	Form of First Amendment to Stock Option (filed herewith)
10.5	Employment Agreement dated as of August 17, 2010 by and between Marc L. Dulude and Rand Worldwide, Inc. (filed herewith)
10.6	Amended and Restated Employment Agreement dated as of August 17, 2010 by and between Avatech Solutions, Inc. and Lawrence Rychlak (filed herewith)
16.1	Letter from PricewaterhouseCoopers, LLP dated August 17, 2010 (filed herewith)
99.1	Press release dated August 17, 2010 (furnished herewith)
99.2	Audited financial statements of Rand Worldwide, Inc. for each of the years ended October 31, 2009 and 2008**
99.3	Pro forma financial information**

* All exhibits (other than Exhibit A) and schedules to the Agreement and Plan of Merger have been omitted pursuant to Item 601(b)(2) of Regulation S-K.  The Company hereby agrees to furnish supplementally a copy of any omitted exhibit or schedule to the Securities and Exchange Commission upon request.

** To be filed by amendment within 71 calendar days after the date this report is filed.

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EX-2.1

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

among:

AVATECH SOLUTIONS, INC.,

a Delaware corporation;

ASRW ACQUISITION SUB, INC.,

a Delaware corporation;

RAND WORLDWIDE, INC.,

a Delaware corporation; and

RWWI HOLDINGS LLC,

a Delaware limited liability company

Dated as of August 17, 2010

TABLE OF CONTENTS

			Page
1.	DESCRIPTION OF TRANSACTION		1
	1.1	The Merger	1
	1.2	Effects of the Merger	2
	1.3	Closing; Effective Time	2
	1.4	Certificate of Incorporation and Bylaws	2
	1.5	Conversion of Merger Partner Shares	2
	1.6	Closing of Merger Partner’s Transfer Books	3
	1.7	Surrender of Certificates	3
	1.8	Further Action	3
	1.9	Tax Consequences	3
2.	REPRESENTATIONS AND WARRANTIES OF MERGER PARTNER		4
	2.1	Due Organization; Subsidiaries; Etc	4
	2.2	Certificate of Incorporation and Bylaws; Records	5
	2.3	Capitalization, Etc	5
	2.4	Financial Statements	6
	2.5	Absence of Changes	7
	2.6	Title to Assets	9
	2.7	Bank Accounts; Receivables	9
	2.8	Equipment; Leasehold	9
	2.9	Intellectual Property	10
	2.10	Contracts	12
	2.11	Liabilities; Fees, Costs and Expenses	15
	2.12	Compliance with Legal Requirements	15
	2.13	Tax Matters	15
	2.14	Employee and Labor Matters; Benefit Plans	17
	2.15	Environmental Matters	22
	2.16	Legal Proceedings; Orders	23
	2.17	Non-Contravention; Consents	23
	2.18	Vote Required	24
	2.19	No Broker	24

TABLE OF CONTENTS

(continued)

			Page
	2.20	Authority; Binding Nature of Agreement	24
	2.21	Anti-Takeover Law	24
	2.22	Insurance	25
	2.23	Related Party Transactions	25
	2.24	Merger Partner Action	25
	2.25	Controls and Procedures	26
	2.26	Objections to the Merger	26
3.	REPRESENTATIONS AND WARRANTIES OF AVATECH AND MERGER SUB		26
	3.1	Due Organization; Subsidiaries; Etc	26
	3.2	Certificate of Incorporation and Bylaws; Records	27
	3.3	Capitalization, Etc	28
	3.4	SEC Filings; Financial Statements	29
	3.5	Absence of Changes	30
	3.6	Title to Assets	32
	3.7	Bank Accounts; Receivables	32
	3.8	Equipment; Leasehold	32
	3.9	Intellectual Property	33
	3.10	Contracts	35
	3.11	Liabilities; Fees, Costs and Expenses	37
	3.12	Compliance with Legal Requirements	37
	3.13	Tax Matters	38
	3.14	Employee and Labor Matters; Benefit Plans	40
	3.15	Environmental Matters	44
	3.16	Legal Proceedings; Orders	45
	3.17	Non-Contravention; Consents	45
	3.18	No Vote Required	46
	3.19	No Broker	46
	3.20	Authority; Binding Nature of Agreement	46
	3.21	Anti-Takeover Law; Rights Agreement	46

ii

TABLE OF CONTENTS

(continued)

			Page
	3.22	Insurance	47
	3.23	Related Party Transactions	47
	3.24	Valid Issuance	47
	3.25	Controls and Procedures, Certifications and Other Matters Relating to the Sarbanes-Oxley Act	48
	3.26	Objections to the Merger	48
4.	REPRESENTATIONS, WARRANTIES AND COVENANTS OF DESIGNATOR		48
	4.1	Representations	49
	4.2	Covenants	51
5.	CERTAIN AGREEMENTS OF THE PARTIES		51
	5.1	Indemnification of Officers and Directors; Liability Insurance	51
	5.2	Additional Agreements	53
	5.3	Disclosure	53
	5.4	Directors and Officers	54
	5.5	Tax Matters	55
	5.6	Surrender of Escrowed Shares	55
6.	CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH PARTY		56
	6.1	No Restraints	56
	6.2	Stockholder Approval	56
	6.3	Governmental Authorization	56
	6.4	Fairness Opinion	56
	6.5	Third Party Consents	57
	6.6	No Adverse Litigation	57
7.	ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATIONS OF AVATECH AND MERGER SUB		57
	7.1	Accuracy of Merger Partner Representations	57
	7.2	Accuracy of Designator Representations	57
	7.3	Performance of Covenants	57
	7.4	Merger Partner Obligations Triggered by Contemplated Transactions	58
	7.5	Agreements and Other Documents	58

iii

TABLE OF CONTENTS

(continued)

			Page
	7.6	No Merger Partner Material Adverse Effect	59
8.	ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATION OF MERGER PARTNER		59
	8.1	Accuracy of Avatech and Merger Sub Representations	59
	8.2	Performance of Covenants	59
	8.3	Avatech Obligations Triggered by Merger	59
	8.4	Agreements and Other Documents	59
	8.5	No Avatech Material Adverse Effect	60
9.	ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATION OF DESIGNATOR		60
	9.1	Accuracy of Representations	60
	9.2	Performance of Covenants	60
	9.3	Agreements and Other Documents	60
10.	MISCELLANEOUS PROVISIONS		61
	10.1	Non-Survival of Representations, Warranties and Covenants	61
	10.2	Amendment	61
	10.3	Reserved	61
	10.4	Expenses	61
	10.5	Waiver	61
	10.6	Entire Agreement; Counterparts; Exchanges of Signatures	62
	10.7	Applicable Law; Jurisdiction	62
	10.8	Attorneys’ Fees	62
	10.9	Assignability; No Third Party Beneficiaries	62
	10.10	Notices	63
	10.11	Cooperation	64
	10.12	Severability	64
	10.13	Other Remedies; Specific Performance	64
	10.14	Waiver of Jury Trial	65
	10.15	Construction	65

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of August 17, 2010, by and among Avatech Solutions, Inc., a Delaware corporation (“Avatech”); ASRW Acquisition Sub, Inc., a Delaware corporation and wholly owned subsidiary of Avatech (“Merger Sub”); Rand Worldwide, Inc., a Delaware corporation (“Merger Partner”); and RWWI Holdings LLC, a Delaware limited liability company and sole stockholder of Merger Partner (the “Designator”), with its principal office located in Massachusetts.  Certain capitalized terms used in this Agreement are defined in Exhibit A hereto.

RECITALS

A.           Avatech and Merger Partner intend to enter into a business combination transaction pursuant to which Merger Sub will merge with and into Merger Partner (the “Merger”) in accordance with and subject to the terms of this Agreement and the DGCL, as a result of which Merger Partner will become a wholly-owned subsidiary of Avatech.

B.           Avatech and Merger Partner intend that the Merger qualify as a tax-free reorganization within the meaning of Section 368 of the Code.

C.           The Merger Shares will be issued by Avatech in reliance upon the exemption from U.S. federal securities registration afforded by the provisions of Regulation D as promulgated by the SEC under the Securities Act.

D.           The board of directors of Avatech (i) has determined that the Merger is fair to, and in the best interests of, Avatech and its stockholders and (ii) has approved this Agreement, the Merger, the issuance of shares of Avatech Common Stock to the sole stockholder of Merger Partner pursuant to the terms of this Agreement, and the other Contemplated Transactions.

E.            The board of directors of Merger Partner (i) has determined that the Merger is advisable and fair to, and in the best interests of, Merger Partner and its sole stockholder, (ii) has approved this Agreement, the Merger and the other Contemplated Transactions and has deemed this Agreement advisable and (iii) has approved and determined to recommend the adoption of this Agreement to the sole stockholder of Merger Partner.

AGREEMENT

The Parties to this Agreement, intending to be legally bound, agree as follows:

1.            DESCRIPTION OF TRANSACTION

1.1          The Merger.  Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time (as defined in Section 1.3), Merger Sub shall be merged with and into Merger Partner, the separate existence of Merger Sub shall cease, and Merger Partner shall continue as the surviving corporation in the Merger (the “Surviving Corporation”).

1.2          Effects of the Merger.  The Merger shall have the effects set forth in this Agreement and in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of Merger Partner and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of Merger Partner and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

1.3          Closing; Effective Time.  Subject to the satisfaction or waiver of the conditions set forth in Sections 5, 6 and 7 of this Agreement, the consummation of the Merger (the “Closing”) shall take place at the offices of Edwards Angell Palmer & Dodge LLP, 111 Huntington Avenue, Boston, Massachusetts 02199 contemporaneously with the execution of this Agreement and the adoption of this Agreement by the Designator, as the sole stockholder of Merger Partner, and Avatech, as the sole stockholder of Merger Sub.  The date on which the Closing actually takes place is referred to as the “Closing Date.”  At the Closing, the Parties hereto shall cause the Merger to be consummated by executing and filing with the Secretary of State of the State of Delaware a Certificate of Merger with respect to the Merger, satisfying the applicable requirements of the DGCL and in a form reasonably acceptable to Avatech and Merger Partner. The Merger shall become effective at the time of the filing of such Certificate of Merger with the Secretary of State of the State of Delaware or at such later time as may be agreed upon by Avatech and Merger Partner and specified in such Certificate of Merger (the time as of which the Merger becomes effective being referred to as the “Effective Time”).

1.4          Certificate of Incorporation and Bylaws.  At the Effective Time:

(a)           the Certificate of Incorporation of Merger Partner shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided by the DGCL and such Certificate of Incorporation; and

(b)           the bylaws of Merger Partner shall be the bylaws of the Surviving Corporation until thereafter amended, if at all, as provided by the DGCL and such bylaws.

1.5          Conversion of Merger Partner Shares.

(a)           At the Effective Time, by virtue of the Merger and without any further action on the part of Avatech, Merger Partner or the sole stockholder of Merger Partner:

(i)           any shares of Merger Partner Common Stock held as treasury stock or held or owned by Merger Partner immediately prior to the Effective Time shall be canceled and shall cease to exist, and no consideration shall be delivered in exchange therefor;

(ii)           subject to Section 1.5(b), each share of Merger Partner Common Stock outstanding immediately prior to the Effective Time (excluding shares to be canceled pursuant to Section 1.5(a)(i)) shall be converted into the right to receive (A) 28,800,022 shares of Avatech Common Stock (the “Initial Merger Shares”) plus (B) that number of shares of Avatech Common Stock (the “Escrowed Shares”) equal to 150% of the shares of Avatech Common Stock into which the outstanding shares of Avatech Series D Preferred Stock and Avatech Series E Preferred Stock (collectively, the “Outstanding Preferred Shares”)could be converted as of immediately following the Effective Time after giving effect to the issuance of the shares of Avatech Common Stock pursuant to (A) above (the Initial Merger Shares and the Escrowed Shares are collectively referred to herein as the “Merger Shares”).

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(b)           No fractional shares of Avatech Common Stock shall be issued in connection with the Merger, and no certificates or scrip for any such fractional shares shall be issued. Any fractional share of Avatech Common Stock that would otherwise be issued in connection with the Merger shall be rounded up to a whole share.

(c)           Each share of Common Stock, $.01par value per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of Common Stock, $0.001 par value per share, of the Surviving Corporation. Each outstanding stock certificate evidencing ownership of shares of Common Stock of Merger Sub shall, as of the Effective Time, evidence ownership of shares of Common Stock of the Surviving Corporation.

1.6          Closing of Merger Partner’s Transfer Books.  At the Effective Time: (a) all shares of Merger Partner Common Stock outstanding immediately prior to the Effective Time shall automatically be canceled and shall cease to exist, and all holders of certificates representing shares of Merger Partner Common Stock (a “Merger Partner Stock Certificate”) that were outstanding immediately prior to the Effective Time shall cease to have any rights as stockholders of Merger Partner except as otherwise provided herein; and (b) the stock transfer books of Merger Partner shall be closed with respect to all shares of Merger Partner Common Stock outstanding immediately prior to the Effective Time. No further transfer of any such shares of Merger Partner Common Stock shall be made on such stock transfer books after the Effective Time. If, after the Effective Time, a Merger Partner Stock Certificate is presented to the Surviving Corporation, such Merger Partner Stock Certificate shall be canceled and no consideration shall be payable therefor.

1.7          Surrender of Certificates.  At the Closing, the sole holder of Merger Partner Common Stock shall deliver to Avatech a Merger Partner Stock Certificate representing all of the outstanding shares of Merger Partner Common Stock in exchange for (a) a certificate representing the Initial Merger Shares and (b) a certificate representing the Escrowed Shares (the “Escrowed Shares Certificate”); provided, however, that custody of the Escrow Shares Certificate shall be retained by Avatech until the date that is eighteen (18) months after the Closing Date (the “Escrow Period”), at which time Avatech shall deliver to the Designator a stock certificate evidencing that number of Escrowed Shares that have not been surrendered pursuant to Section 5.6 hereof.

1.8          Further Action.  If, at any time after the Effective Time, any further action is determined by the Surviving Corporation to be necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Corporation with full right, title and possession of and to all rights and property of Merger Partner, then the officers and directors of the Surviving Corporation shall be fully authorized, and shall use their commercially reasonable efforts (in the name of Merger Partner and otherwise) to take such action.

1.9          Tax Consequences.  For federal income tax purposes, the Merger is intended to constitute a reorganization within the meaning of Section 368(a) of the Code. The Parties to this Agreement adopt this Agreement as a “plan of reorganization” within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.

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2.           REPRESENTATIONS AND WARRANTIES OF MERGER PARTNER

Except as Disclosed (as defined below), Merger Partner makes the following representations and warranties to Avatech and Merger Sub, as of the date hereof and as of the Closing Date.  For purposes of this Agreement, the term “Disclosed” means disclosed in the written information included in the written disclosure schedule (a “Schedule”) delivered or made available by a party to this Agreement to another party, which describe in reasonable detail the matters contained therein.  Each disclosure made in a Schedule shall specifically reference each Section of this Agreement under which such disclosure is made.  Information required to be disclosed in a Schedule with respect to one Section may be incorporated by reference into another Schedule required by this Agreement.  Merger Partner’s Schedule is referred to herein as the “Merger Partner Disclosure Schedule”.

2.1          Due Organization; Subsidiaries; Etc.

(a)           Merger Partner is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with the corporate power and authority to carry on its business as now being conducted and as currently proposed to be conducted.

(b)           Except as Disclosed in Part 2.1(b) of the Merger Partner Disclosure Schedule, Merger Partner has not conducted any business under or otherwise used, for any purpose or in any jurisdiction, any fictitious name, assumed name, trade name or other name, other than the name “Rand Worldwide, Inc.”

(c)           Merger Partner is not and has not been required to be qualified, authorized, registered or licensed to do business as a foreign corporation in any jurisdiction other than the jurisdictions Disclosed in Part 2.1(c) of the Merger Partner Disclosure Schedule, except where the failure to be so qualified, authorized, registered or licensed, individually or in the aggregate, has not had, and would not reasonably be expected to have, a Merger Partner Material Adverse Effect. Merger Partner is in good standing as a foreign corporation in each of the jurisdictions Disclosed in Part 2.1(c) of the Merger Partner Disclosure Schedule.

(d)           Part 2.1(d) of the Merger Partner Disclosure Schedule accurately sets forth (i) the names of the members of the board of directors of Merger Partner, (ii) the names of the members of each committee of the board of directors of Merger Partner and (iii) the names and titles of Merger Partner’s officers.

(e)           Merger Partner has no direct or indirect ownership of any capital stock of, or other voting securities or equity interests in, any Entity except for the Entities Disclosed in Part 2.1(e) of the Merger Partner Disclosure Schedule.  Neither Merger Partner nor any Merger Partner Subsidiary has agreed or is obligated to make any future investment in or capital contribution to any Entity.  Except as Disclosed in Part 2.1(e) of the Merger Partner Disclosure Schedule, neither Merger Partner nor any Merger Partner Subsidiary has guaranteed or is responsible or liable for any obligation of any of the Entities in which it owns or has owned any equity or other financial interest.

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(f)           Part 2.1(f) of the Merger Partner Disclosure Schedule sets forth a true and complete list of each Merger Partner Subsidiary and the jurisdiction of its organization.  Each of the Merger Partner Subsidiaries is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, with the power and authority to carry on its business as now being conducted and as currently proposed to be conducted.  Part 2.1(f) of the Merger Partner Disclosure Schedule identifies all jurisdictions in which each Merger Partner Subsidiary is qualified, authorized, registered or licensed to do business as a foreign Entity, except where the failure to be so qualified, authorized, registered or licensed, individually or in the aggregate, has not had, and would not reasonably be expected to have, a Merger Partner Material Adverse Effect, and each Merger Subsidiary is in good standing in such jurisdictions, except where the failure to be in good standing, individually or in the aggregate, has not had, and would not reasonably be expected to have, a Merger Partner Material Adverse Effect.

2.2          Certificate of Incorporation and Bylaws; Records.  Merger Partner has delivered or made available to Avatech accurate and complete copies of:  (a) Merger Partner’s certificate of incorporation (as amended and restated, the “Merger Partner Certificate of Incorporation”) and bylaws, including all amendments thereto; (b) the stock records of Merger Partner; (c) the minutes and other records of the meetings and other proceedings (including any actions taken by written consent or otherwise without a meeting) of the stockholders of Merger Partner, the board of directors of Merger Partner and all committees of the board of directors of Merger Partner since November 1, 2007 and of Rand A Technology Corporation from January 1, 2005 through November 1, 2007 (the items described in (a) and (b) above, collectively, the “Merger Partner Constituent Documents”); and (d) the governing documents of Rand A Technology Corporation, Rand Worldwide U.S. Holdings, Inc., Rand Technologies of Michigan and Rand Imaginit Technologies, Inc. and all amendments thereto (the “Merger Partner Subsidiary Constituent Documents”). Since November 1, 2007, there have been no formal meetings or actions taken by written consent or otherwise without a meeting of the stockholders of Merger Partner, the board of directors of Merger Partner or any committee of the board of directors of Merger Partner that are not fully reflected in the minutes and other records delivered or made available to Avatech pursuant to clause (c) above. There has not been any violation in any material respect of the Merger Partner Constituent Documents or the Merger Partner Subsidiary Constituent Documents, and neither Merger Partner nor any of the Merger Partner Subsidiaries has taken any action that is inconsistent in any material respect with the Merger Partner Constituent Documents or any Merger Partner Subsidiary Constituent Documents, respectively, except, in the case of the Merger Partner Subsidiaries, for any actions, individually or in the aggregate, that have not had and would not reasonably be expected to have, a Merger Partner Material Adverse Effect.  Except as disclosed in Part 2.2 of the Merger Partner Disclosure Schedule, the books of account, stock records, minute books and other records of Merger Partner and of each Merger Partner Subsidiary are accurate, up to date and complete in all material respects, and have been maintained in accordance with prudent business practices.

2.3          Capitalization, Etc.

(a)           The authorized capital stock of Merger Partner consists of one hundred (100)shares of Merger Partner Common Stock. Ten (10) shares of Merger Partner Common Stock are issued and outstanding, and such shares represent all of the issued and outstanding shares of capital stock of Merger Partner.  All of the outstanding shares of Merger Partner Common Stock have been duly authorized and validly issued, are fully paid and non assessable, and are held, beneficially and of record, by the Designator free and clear of all Encumbrances.

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(b)           There is no: (i) outstanding subscription, option, call, warrant or right (whether or not currently exercisable) to acquire any shares of capital stock or other securities of Merger Partner; (ii) outstanding security, instrument or obligation that is or may become convertible into or exchangeable for any shares of capital stock or other securities of Merger Partner; (iii) Contract under which Merger Partner is or may become obligated to sell or otherwise issue any shares of its capital stock or any other securities of Merger Partner; or (iv) condition or circumstance that would give rise to or provide a basis for the assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive any shares of capital stock or other securities of Merger Partner. Merger Partner has not issued any debt securities which grant the holder thereof any right to vote on, or veto, any action of Merger Partner.

(c)           All outstanding shares of Merger Partner Common Stock have been issued and granted in compliance with (i) all applicable federal and state securities laws and other applicable Legal Requirements, and (ii) all requirements set forth in the Merger Partner Constituent Documents and applicable Contracts.

(d)           All securities of Merger Partner Subsidiaries have been issued and granted in compliance in all material respects with (i) all applicable federal and state securities laws and other applicable Legal Requirements, and (ii) all requirements set forth in the Merger Partner Subsidiary Constituent Documents and applicable Contracts.

2.4          Financial Statements.

(a)           Merger Partner has delivered or made available to Avatech the following financial statements and notes (collectively, the “Merger Partner Financial Statements”):

(i)           the audited balance sheet of Merger Partner for each of the two years ended October 31, 2009 (the “Merger Partner Audited Balance Sheet”) and the related audited statement of operations, statement of stockholders’ equity and statement of cash flows of Merger Partner for the two years ended October 31, 2009, together with the notes thereto and the report and opinion of PricewaterhouseCoopers LLPrelating thereto; and

(ii)           the unaudited balance sheet of Merger Partner as of April 30, 2010 (the “Merger Partner Balance Sheet”) and the related unaudited statement of operations and statement of cash flows of Merger Partner for the six (6) months then ended.

(b)           The Merger Partner Financial Statements are accurate and complete in all material respects and present fairly the financial position of Merger Partner as of the respective dates thereof and the consolidated results of operations and cash flows of Merger Partner for the periods covered thereby. Except as may be indicated in the notes to the Merger Partner Financial Statements, the Merger Partner Financial Statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods covered (except that the financial statements referred to in Section 2.4(a)(ii) do not contain footnotes and are subject to normal and recurring year-end audit adjustments).

(c)           Except as Disclosed in Part 2.4(c) of the Merger Partner Disclosure Schedule, to the Knowledge of Merger Partner the Merger Partner Financial Statements meet the requirements of the SEC’s Regulation S-X in all material respects as if Merger Partner was subject thereto.  For purposes of this Section 2.4(c), the term “Knowledge” shall be limited to the Knowledge of Marc Dulude, Greg Magoon and Lori Henderson.

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2.5          Absence of Changes.  Other than in connection with the LLC Merger, since the date of the Merger Partner Balance Sheet:

(a)           there has not been any Merger Partner Material Adverse Effect, and no event has occurred that will, or would reasonably be expected to, cause a Merger Partner Material Adverse Effect;

(b)           there has not been any material loss, damage or destruction to, or any material interruption in the use of, any of the material assets of Merger Partner or any Merger Partner Subsidiary (whether or not covered by insurance);

(c)           Merger Partner has not declared, accrued, set aside or paid any dividend or made any other distribution in respect of any shares of its capital stock, and has not repurchased, redeemed or otherwise reacquired any shares of its capital stock or other securities;

(d)           Merger Partner has not sold, issued, granted or authorized the issuance of (i) any capital stock or other securities of Merger Partner; (ii) any option, call or right to acquire any capital stock or any other security of Merger Partner; (iii) any instrument convertible into or exchangeable for any capital stock or other security of Merger Partner; or (iv) reserved for issuance any additional grants or shares under the Merger Partner Stock Option Plan;

(e)           Merger Partner has not amended or waived any of its rights under, or permitted the acceleration of vesting under, the Merger Partner Stock Option Plan, any Merger Partner Option or agreement evidencing or relating to any outstanding stock option or warrant, any restricted stock purchase agreement, or any other Contract evidencing or relating to any equity award;

(f)           there has been no amendment to the certificate of incorporation or bylaws of Merger Partner or any Merger Partner Subsidiary and Merger Partner has not effected or been a party to any merger, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction;

(g)           Merger Partner has not formed any Subsidiary of Merger Partner or acquired any equity interest or other interest in any other Entity;

(h)           except as Disclosed in Part 2.5(h) of the Merger Partner Disclosure Schedule, neither Merger Partner nor any Merger Partner Subsidiary has made any capital expenditure which, when added to all other capital expenditures made on behalf of Merger Partner or any Merger Partner Subsidiary since the date of the Merger Partner Balance Sheet, exceeds $75,000;

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(i)           except as Disclosed in Part 2.5(i) of the Merger Partner Disclosure Schedule, neither Merger Partner nor any Merger Partner Subsidiary has (i) entered into or permitted any of the assets owned or used by it to become bound by any Contract that contemplates or involves (A) the payment or delivery of cash or other consideration in an amount or having a value in excess of $75,000 in the aggregate, other than in the Ordinary Course of Business, or (B) the purchase or sale of any product, or performance of services by or to Merger Partner or any Merger Partner Subsidiary having a value in excess of $75,000 in the aggregate, other than in the Ordinary Course of Business, or (ii) waived any right or remedy under any material Contract, or amended or prematurely terminated any material Contract;

(j)           neither Merger Partner nor any Merger Partner Subsidiary has (i) acquired, leased or licensed any material right or other asset from any other Person, (ii) sold or otherwise disposed of, or leased or licensed, any material right or other asset to any other Person, or (iii) waived or relinquished any material right, except for rights or assets acquired, leased, licensed or disposed of in the Ordinary Course of Business;

(k)           neither Merger Partner nor any Merger Partner Subsidiary has written off as uncollectible, or established any extraordinary reserve with respect to, any account receivable or other indebtedness, other than in the Ordinary Course of Business;

(l)            except as Disclosed in Part 2.5(l) of the Merger Partner Disclosure Schedule, neither Merger Partner nor any Merger Partner Subsidiary has made any pledge of any of its assets or otherwise permitted any of its assets to become subject to any Encumbrance, except for pledges of immaterial assets made in the Ordinary Course of Business;

(m)          except as Disclosed in Part 2.5(m) of the Merger Partner Disclosure Schedule, neither Merger Partner nor any Merger Partner Subsidiary has (i) lent money to any Person (other than pursuant to routine travel advances made to employees in the Ordinary Course of Business), (ii) incurred or guaranteed any indebtedness for borrowed money in the aggregate in excess of $75,000 or (iii) issued or sold any debt securities or options, warrants, calls or similar rights to acquire any debt securities of Merger Partner or any Merger Partner Subsidiary;

(n)           except as Disclosed in Part 2.5(n) of the Merger Partner Disclosure Schedule, neither Merger Partner nor any Merger Partner Subsidiary has (i) established or adopted any employee benefit plan, (ii) paid any bonus or made any profit sharing, incentive compensation or similar payment to, or materially increased the amount of the wages, salary, commissions, fringe benefits or other compensation or remuneration payable to, any of its directors, officers or employees with an annual salary in excess of $100,000, or (iii) hired any new employee having an annual salary in excess of $100,000;

(o)           neither Merger Partner nor any Merger Partner Subsidiary has changed any of its personnel policies or other business policies, or any of its methods of accounting or accounting practices in any material respect;

(p)           neither Merger Partner nor any Merger Partner Subsidiary has threatened, commenced or settled any material Legal Proceeding;

(q)           neither Merger Partner nor any Merger Partner Subsidiary has entered into any transaction or taken any other action outside the Ordinary Course of Business, other than entering into this Agreement and the Contemplated Transactions;

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(r)            neither Merger Partner nor any Merger Partner Subsidiary has paid, discharged or satisfied any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise) other than the payment, discharge or satisfaction of non-material amounts in the Ordinary Course of Business or as required by any Merger Partner or Merger Partner Subsidiary Contract or Legal Requirement; and

(s)           neither Merger Partner nor any Merger Partner Subsidiary has agreed to take, or committed to take, any of the actions referred to in clauses (c) through (r) of this Section 2.5.

2.6          Title to Assets.  Except as Disclosed in Part 2.6 of the Merger Partner Disclosure Schedule, Merger Partner and each Merger Partner Subsidiary owns, and has good, valid and marketable title to, all assets (tangible and intangible) purported to be owned by it. All of such assets are owned by Merger Partner or the applicable Merger Partner Subsidiary free and clear of any Encumbrances, except for (y) any lien for current Taxes not yet due and payable, and (z) minor liens that have arisen in the Ordinary Course of Business and that do not (individually or in the aggregate) materially detract from the value of the assets subject thereto or materially impair the operations of Merger Partner or the applicable Merger Partner Subsidiary.

2.7          Bank Accounts; Receivables.

(a)           Part 2.7(a) of Merger Partner Disclosure Schedule provides accurate information with respect to each account maintained by or for the benefit of Merger Partner or any Merger Partner Subsidiary at any bank or other financial institution, including the name of the bank or financial institution, the account number, the balance as of May 31, 2010 and the names of all individuals authorized to draw on or make withdrawals from such accounts.

(b)           All existing accounts receivable of Merger Partner or any Merger Partner Subsidiary (including those accounts receivable reflected on the Merger Partner Balance Sheet that have not yet been collected and those accounts receivable that have arisen since the date of the Merger Partner Balance Sheet and have not yet been collected) (i) represent valid obligations of customers of Merger Partner or any Merger Partner Subsidiary arising from bona fide transactions entered into in the Ordinary Course of Business, and (ii) are current and are expected to be collected in full when due, without any counterclaim or set off, net of applicable reserves for bad debts on the Merger Partner Balance Sheet.

2.8          Equipment; Leasehold.

(a)           All items of equipment and other tangible assets owned by or leased to Merger Partner or any Merger Partner Subsidiary (i) are adequate for the uses to which they are being put and (ii) are adequate for the conduct of the businesses of Merger Partner and Merger Partner Subsidiaries in the manner in which such businesses are currently being conducted and as they are proposed to be conducted.

(b)           Neither Merger Partner nor any Merger Partner Subsidiary owns any real property or any interest in real property, except for the leasehold interest created under the real property leases Disclosed in Part 2.8(b) of the Merger Partner Disclosure Schedule. All premises leased or subleased by Merger Partner or any Merger Partner Subsidiary are supplied with utilities and other services necessary for the operation of their respective businesses.

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2.9          Intellectual Property.

(a)           To the Knowledge of Merger Partner, Merger Partner and/or Merger Partner Subsidiaries own Intellectual Property Rights, or otherwise have the necessary rights or licenses under Intellectual Property Rights owned by third parties, necessary for the conduct of the business of Merger Partner and Merger Partner Subsidiaries as currently conducted and expected to be conducted subsequent to the Contemplated Transactions.  Except as Disclosed in Part 2.9(a) of the Merger Partner Disclosure Schedule, neither the execution, delivery, or performance of this Agreement (or any of the agreements contemplated by this Agreement) nor the consummation of any of the Contemplated Transactions will, with or without notice or lapse of time, result in, or give any other Person the right or option to cause or declare, (i) a loss of, or Encumbrance on, any Merger Partner IP Rights or Merger Partner Licensed IP; (ii) a breach by Merger Partner or any Merger Partner Subsidiary of any Merger Partner IP Rights Agreement; (iii) a right to terminate a Merger Partner IP Rights Agreement or result in the change of any material term or require the payment of any additional fees under such a Merger Partner IP Rights Agreement; (iv) the release, disclosure, or delivery of any source code of any Merger Partner Software Products by or to any escrow agent or other Person; or (v) the grant, assignment, or transfer to any other Person, or otherwise change the ownership, status, effectiveness, validity and/or other disposition, of any license or other right or interest under, to, or in any of Merger Partner IP Rights and/or Merger Partner Licensed IP.

(b)           No infringement, misappropriation, or similar claim or Legal Proceeding is pending or, to Merger Partner’s Knowledge, threatened against Merger Partner or any Merger Partner Subsidiary or against any other Person who may be entitled to be indemnified, defended, held harmless, or reimbursed by Merger Partner or any Merger Partner Subsidiary with respect to such claim or Legal Proceeding, and Merger Partner has no Knowledge of any set of facts which should reasonably lead it to believe that any claim is likely or threatened.  To Merger Partner’s Knowledge, the operation of Merger Partner’s and Merger Partner Subsidiaries’ businesses, as currently conducted, does not infringe, misappropriate or otherwise violate any Intellectual Property Rights of any Person.  To Merger Partner’s Knowledge, no Person is infringing, misappropriating, or violating the Merger Partner IP Rights.  Except as Disclosed in Part 2.9(b) of the Merger Partner Disclosure Schedule, neither Merger Partner nor any Merger Partner Subsidiary has received since November 1, 2007 any unresolved written claim challenging the scope, ownership, validity, or enforceability of the Merger Partner IP Rights or of Merger Partner’s or Merger Partner Subsidiaries’ rights under the Merger Partner Licensed IP.

(c)           Merger Partner and/or Merger Partner Subsidiaries hold all right, title and interest in and to the Merger Partner IP Rights, free and clear of any Encumbrances.  Except as Disclosed in Part 2.9(c) of the Merger Partner Disclosure Schedule, to the Knowledge of Merger Partner no Person has any claim or interest in any Merger Partner IP Rights by reason of such Person’s participation in the creation of such Merger Partner IP Rights.  Other than (i) the agreements that are Disclosed in Part 2.9(c) of the Merger Partner Disclosure Schedule and (ii) non-exclusive licenses granted to customers in the Ordinary Course of Business, Merger Partner and Merger Partner Subsidiaries have not granted any Person any rights to or under the Merger Partner IP Rights, Merger Partner Licensed IP, and Merger Partner Software Products.

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(d)           Part 2.9(d) of the Merger Partner Disclosure Schedule contains, as of the date of this Agreement, a true and complete list of all Merger Partner Registered IP.  Merger Partner and Merger Partner Subsidiaries have taken all actions necessary to maintain the Merger Partner Registered IP, including as applicable payment of applicable maintenance fees, filing of applicable statements of use, timely response to office actions, and all assignments of the Merger Partner Registered IP have been duly recorded with the appropriate Governmental Bodies (or, with respect to domain name registrations, the applicable domain name registrar or agent).  None of the Merger Partner Registered IP has been adjudged invalid or unenforceable in whole or part and, to the Knowledge of Merger Partner, all Merger Partner Registered IP is valid and enforceable.

(e)           Part 2.9(e) of the Merger Partner Disclosure Schedule contains a true and complete list of all licenses and other Contracts pursuant to which Merger Partner and Merger Partner Subsidiaries have been granted the Merger Partner Licensed IP, including with respect to any embodiments of the Intellectual Property Rights underlying such Merger Partner IP Licenses such as software, that is either (A)  incorporated into or distributed with any Merger Partner Software Product or necessary of the use or distribution of such Merger Partner Software Product or (B) used or held for use by Merger Partner for any other purpose (excluding, for purposes of clause (B) only, any generally commercially available, non-customized software programs non-exclusively licensed by Merger Partner on standard terms).

(f)            Merger Partner and Merger Partner Subsidiaries have taken commercially reasonable steps to protect their trade secret rights in the Merger Partner IP Rights and to protect any confidential information provided to them by any other Person under obligation of confidentiality.  Without limitation of the foregoing, Merger Partner and Merger Partner Subsidiaries have not, to Merger Partner’s Knowledge, made any of their trade secrets or other confidential or proprietary information that they intended to maintain as confidential (including source code with respect to Merger Partner Software Products) available to any other Person except pursuant to written agreements, or other legally binding obligations, requiring such Person to maintain the confidentiality of such information or materials.

(g)           Merger Partner and Merger Partner Subsidiaries have obtained from all Persons who are or were involved in the creation or development of any portion of any Merger Partner Software Product (other than software licensed from third parties and distributed with or incorporated into Merger Partner Software Products as listed on Parts 2.9(e) or 2.9(i) of the Merger Partner Disclosure Schedule), or of any Merger Partner IP Rights, valid and enforceable agreement containing an assignment of Intellectual Property Rights to Merger Partner or a Merger Partner Subsidiary and confidentiality provision protecting trade secrets and confidential information of Merger Partner IP Rights, except where the failure to obtain such agreement, individually or in the aggregate, has not had, and would not reasonably be expected to have, a Merger Partner Material Adverse Effect. Except as Disclosed in Part 2.9(g) of the Merger Partner Disclosure Schedule, neither Merger Partner nor any of Merger Partner Subsidiaries is obligated to provide any consideration to any third party with respect to any exercise of rights by Merger Partner or any of Merger Partner Subsidiaries, or any successor to Merger Partner or Merger Party Subsidiaries, in any Merger Partner IP Rights, including with respect to the distribution or license of the Merger Partner Software Products.

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(h)           Part 2.9(h) of the Merger Partner Disclosure Schedule contains a true and complete list of all Merger Partner Software Products.

(i)            Except as Disclosed in Part 2.9(i) of the Merger Partner Disclosure Schedule, there are no pending disputes regarding (i) the scope of any Contracts under which Merger Partner and/or Merger Partner Subsidiaries (A) license Merger Partner Software Products or Merger Partner IP Rights or (B) provide customization, configuration, maintenance, or implementation services with respect to Merger Partner Software (collectively, “Merger Partner License and Service Agreements”), (ii) Merger Partner’s, Merger Partner Subsidiaries’, or their agents’ performance under any Merger Partner License and Service Agreements, or (iii) payment made or received under any Merger Partner License and Service Agreements, except where such disputes have not, individually or in the aggregate, had, and would not, individually or in the aggregate, reasonably be expected to have, a Merger Partner Material Adverse Effect.  Except as would not, individually or in the aggregate, reasonably be expected to have a Merger Partner Material Adverse Effect, no parties to the Merger Partner License and Service Agreements are in material breach thereof.

2.10           Contracts.

(a)           Part 2.10(a) of the Merger Partner Disclosure Schedule identifies each of the following Merger Partner Contracts:

(i)           each Merger Partner Contract relating to the employment of, or the performance of employment-related services by, any employee at the vice president level or above, consultant or independent contractor;

(ii)          each Merger Partner Contract relating to the acquisition, transfer, use, development, sharing or license of any technology or any Intellectual Property or Merger Partner IP Rights or Merger Partner Licensed IP;

(iii)         each Merger Partner Contract imposing any restriction on Merger Partner’s or any Merger Partner Subsidiary’s right or ability (A) to compete with any other Person, (B) to acquire any product or other asset or any services from any other Person, to sell any product or other asset to, or perform any services for, any other Person or to transact business or deal in any other manner with any other Person, or (C) to develop or distribute any technology;

(iv)         each Merger Partner Contract creating or involving any agency relationship, distribution arrangement or franchise relationship;

(v)         each Merger Partner Contract relating to the creation of any Encumbrance with respect to any asset of Merger Partner or any Merger Partner Subsidiary;

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(vi)         each Merger Partner Contract involving or that contemplates or requires any guaranty, any pledge, any performance or completion bond, any indemnity or any surety arrangement;

(vii)        each Merger Partner Contract creating or relating to any collaboration or joint venture or any sharing of technology, revenues, profits, losses, costs or liabilities, including Merger Partner Contracts involving investments by Merger Partner in, or loans by Merger Partner to, any other Entity;

(viii)       each Merger Partner Contract relating to the purchase or sale of any product or other asset by or to, or the performance of any services by or for, or otherwise involving as a counterparty, any Merger Partner Related Party;

(ix)         each Merger Partner Contract relating to indebtedness for borrowed money;

(x)          each Merger Partner Contract relating to the acquisition or disposition by Merger Partner or any Merger Partner Subsidiary of any operating business, material asset, capital stock or equity interest of Merger Partner, any Merger Partner Subsidiary or any other Person that has not been consummated or that has been consummatedbut contains representations, covenants, guaranties, indemnities or other obligations on the part of Merger Partner or any Merger Partner Subsidiary that remain in effect;

(xi)         any other Merger Partner Contract pursuant to which Merger Partner or any Merger Partner Subsidiary is required to actively perform that contemplates or involves (A) the payment or delivery of cash or other consideration in an amount or having a value in excess of $50,000 in the aggregate, other than in the Ordinary Course of Business, (B) the purchase or sale of any product, or performance of services by or to Merger Partner or any Merger Partner Subsidiary having a value in excess of $50,000 in the aggregate, other than in the Ordinary Course of Business, or (C) a term of more than sixty (60) days and that may not be terminated by Merger Partner or the applicable Merger Partner Subsidiary (without penalty) within sixty (60) days after the delivery of a termination notice by Merger Partner or the applicable Merger Partner Subsidiary, other than in the Ordinary Course of Business;

(xii)        each Merger Partner Contract with any Person, including without limitation any financial advisor, broker, finder, investment banker or other Person, providing advisory services to Merger Partner or any Merger Partner Subsidiary in connection with the Contemplated Transactions.

(b)           Merger Partner has delivered or made available to Avatech accurate and complete (except for applicable redactions thereto) copies of all written Merger Partner Contracts, including all amendments thereto. There are no Merger Partner Contracts that are not in written form. Each Merger Partner Contract is valid and in full force and effect, is enforceable by Merger Partner or the applicable Merger Partner Subsidiary in accordance with its terms, and after the Effective Time will continue to be legal, valid, binding and enforceable on identical terms. Except as Disclosed in Part 2.10(b) of the Merger Partner Disclosure Schedule, the consummation of the Contemplated Transactions shall not (either alone or upon the occurrence of additional acts or events) result in any payment or payments becoming due from Merger Partner or any Merger Partner Subsidiary, the Surviving Corporation or Avatech or any Avatech Subsidiary to any Person under any Merger Partner Contract or give any Person the right to terminate or alter the provisions of any Merger Partner Contract.

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(c)           Except as Disclosed in Part 2.10(c) of the Merger Partner Disclosure Schedule, neither Merger Partner nor any Merger Partner Subsidiary has materially violated or breached, or committed any material default under, any Merger Partner Contract, and, to the Knowledge of Merger Partner, no other Person has violated or breached, or committed any default under, any Merger Partner Contract.

(d)           No event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time) will, or would reasonably be expected to, (i) result in a material violation or breach of any of the provisions of any Merger Partner Contract, (ii) give any Person the right to declare a default or exercise any remedy under any Merger Partner Contract, (iii) give any Person the right to accelerate the maturity or performance of any Merger Partner Contract, or (iv) give any Person the right to cancel, terminate or modify any Merger Partner Contract.

(e)           Except as Disclosed in Part 2.10(e) of the Merger Partner Disclosure Schedule, neither Merger Partner nor any Merger Partner Subsidiary has received any written notice or other communication regarding any actual or possible violation or breach of, or default under, any Merger Partner Contract.

(f)           Neither Merger Partner nor any Merger Partner Subsidiary has waived any material rights under any Merger Partner Contract.

(g)           No Person is renegotiating, or has a right pursuant to the terms of any Merger Partner Contract to renegotiate, any amount paid or payable to Merger Partner or any Merger Partner Subsidiary under any Merger Partner Contract or any other material term or provision of any Merger Partner Contract.

(h)           There are no proposed Contracts that remain under consideration by Merger Partner, except for a Contract entered into in the Ordinary Course of Business, as to which any bid, offer, award, written proposal, term sheet or similar document has been submitted or received by Merger Partner or any Merger Partner Subsidiary (other than term sheets provided by Merger Partner or a Merger Partner Subsidiary or to Merger Partner or a Merger Partner Subsidiary by any third party related to the subject matter of this transaction).

(i)           Part 2.10(i) of the Merger Partner Disclosure Schedule provides an accurate and complete list of all Consents required under any Merger Partner Contract to consummate the Merger and the other Contemplated Transactions.

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2.11       Liabilities; Fees, Costs and Expenses.  Neither Merger Partner nor any Merger Partner Subsidiary has any accrued, contingent or other liabilities of any nature, either matured or unmatured (whether or not required to be reflected in financial statements in accordance with GAAP, and whether due or to become due), except for: (i) liabilities identified in the “liabilities” column of the Merger Partner Balance Sheet; (ii) accounts payable or accrued salaries that have been incurred in the Ordinary Course of Business; (iii) liabilities under Merger Partner Contracts Disclosed in Part 2.11 of the Merger Partner Disclosure Schedule, to the extent the nature and magnitude of such liabilities can be specifically ascertained by reference to the text of such Merger Partner Contracts; (iv) liabilities that have arisen since the date of the Merger Partner Balance Sheet in the Ordinary Course of Business; (v) contractual and other liabilities incurred in the Ordinary Course of Business which are not required by GAAP to be reflected on a balance sheet and (vi) liabilities which, individually or in the aggregate, have not, and would not reasonably be expected to, result in a Merger Partner Material Adverse Effect.

2.12      Compliance with Legal Requirements.  Merger Partner and each Merger Partner Subsidiary are, and since November 1, 2007 have been, in compliance in all material respects with all applicable Legal Requirements, except where any such noncompliance, individually or in the aggregate, has not, and would not reasonably be expected to, result in a Merger Partner Material Adverse Effect. Except as Disclosed in Part 2.12 of the Merger Partner Disclosure Schedule, Merger Partner has not received, since November 1, 2007, any written notice or other communication from any Governmental Body or any other Person regarding (a) any actual, alleged, possible or potential violation of, or failure to comply with, any Legal Requirement, except as has not, and would not reasonably be expected to, result in a Merger Partner Material Adverse Effect, or (b) any actual, alleged, possible or potential obligation on the part of Merger Partner or the applicable Merger Partner Subsidiary to undertake, or to bear all or any portion of the cost of, any material cleanup or any material remedial, corrective or responsive action of any nature. Merger Partner has delivered or made available to Avatech an accurate and complete copy of each report, study, survey or other document to which Merger Partner or any Merger Partner Subsidiary has access that addresses or otherwise relates to the compliance of Merger Partner and any Merger Partner Subsidiary with, or the applicability to Merger Partner or any Merger Partner Subsidiary of, any Legal Requirement.

2.13       Tax Matters.

(a)           Except as Disclosed Part 2.13(a) of the Merger Partner Disclosure Schedule, All Tax Returns required to be filed by or on behalf of Merger Partner or any Merger Partner Subsidiary with any Governmental Body with respect to any taxable period ending on or after November 1, 2007 and on or before the Closing Date (the “Merger Partner Returns”) (i) have been or will be filed on or before the applicable due date (including any permitted extensions of such due date), and (ii) have been, or will be when filed, accurately and completely prepared in all material respects. All Taxes due required to be paid by Merger Partner or any Merger Partner Subsidiary on or before the Closing Date have been or will be paid on or before the Closing Date. Merger Partner has delivered or made available to Avatech accurate and complete copies of all Merger Partner Returns filed which have been requested by Avatech.  Merger Partner has established in its books and records, in the Ordinary Course of Business, reserves adequate for the payment of all unpaid Taxes by Merger Partner or any Merger Partner Subsidiary for the period from October 31, 2009 through the Closing Date.

(b)           The Merger Partner Financial Statements fully accrue all liabilities for unpaid Taxes with respect to all periods through the dates thereof in accordance with GAAP.

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(c)           Except as Disclosed in Part 2.13(c) of the Merger Partner Disclosure Schedule, since November 1, 2007, no Merger Partner Return has ever been examined or audited by any Governmental Body and no examination or audit of any Merger Partner Return is currently in progress or, to the Knowledge of Merger Partner, threatened or contemplated.  Merger Partner has delivered or made available to Avatech accurate and complete copies of all audit reports, private letter rulings, revenue agent reports, information document requests, notices of proposed deficiencies, deficiency notices, protests, petitions, closing agreements, settlement agreements, pending ruling requests and any similar documents submitted by, received by, or agreed to by or on behalf of Merger Partner or any Merger Partner Subsidiary relating to Merger Partner Returns since November 1, 2007.  Since November 1, 2007, (i) no extension or waiver of the limitation period applicable to any of the Merger Partner Returns has been granted (by Merger Partner, any Merger Partner Subsidiary or any other Person), and no such extension or waiver has been requested from Merger Partner or any Merger Partner Subsidiary; (ii) all Taxes that Merger Partner was required by law to withhold or collect have been duly withheld or collected and, to the extent required, have been properly paid to the appropriate Governmental Body; and (iii) neither Merger Partner nor any Merger Partner Subsidiary has executed or filed any power of attorney with any taxing authority.

(d)           Since November 1, 2007, neither Merger Partner nor any Merger Partner Subsidiary (i) has been a member of an affiliated group (within the meaning of Section 1504(a) of the Code) filing a consolidated federal income Tax Return (other than a group the common parent of which was Merger Partner), (ii) has any liability for the Taxes of any person under Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local or foreign law), as a transferee or successor, or otherwise (other than a group the common parent of which was Merger Partner), and (iii) has been a party to any joint venture, collaboration, partnership or other agreement that could be treated as a partnership for Tax purposes. Neither Merger Partner nor any Merger Partner Subsidiary is or, since November 1, 2007 has been, a party to or bound by any Tax indemnity agreement, Tax-sharing agreement, Tax allocation agreement or similar Contract. Neither Merger Partner nor any Merger Partner Subsidiary has been either a “distributing corporation” or a “controlled corporation” in a distribution of stock intended to qualify for tax-free treatment under Section 355 of the Code (y) in the two (2) years prior to the date of this Agreement or (z) which could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with the Merger.

(e)           Except as Disclosed in Part 2.13(e) of the Merger Partner Disclosure Schedule, no claim or Legal Proceeding is pending or, to the Knowledge of Merger Partner, has been threatened against or with respect to Merger Partner or any Merger Partner Subsidiary in respect of any Tax. Except as Disclosed in Part 2.13(e) of the Merger Partner Disclosure Schedule, there are no unsatisfied liabilities for Taxes with respect to any notice of deficiency or similar document received by Merger Partner or any Merger Partner Subsidiary with respect to any Tax (other than liabilities for Taxes asserted under any such notice of deficiency or similar document which are being contested in good faith by Merger Partner or the applicable Merger Partner Subsidiary and with respect to which adequate reserves for payment have been established). There are no liens for Taxes upon any of the assets of Merger Partner or any Merger Partner Subsidiary except liens for current Taxes not yet due and payable.  Neither Merger Partner nor any Merger Partner Subsidiary has entered into or become bound by any agreement or consent pursuant to Section 341(f) of the Code. Merger Partner has not been, and Merger Partner will not be, required to include any adjustment in taxable income for any tax period (or portion thereof) pursuant to Section 481 or 263A of the Code or any comparable provision under state or foreign Tax laws as a result of transactions or events occurring, or accounting methods employed, prior to the Closing Date.

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(f)           None of the assets of Merger Partner or any Merger Partner Subsidiary (i) is property that is required to be treated as being owned by any other Person pursuant to the provisions of former Section 168(f)(8) of the Internal Revenue Code of 1954, (ii) is “tax-exempt use property” within the meaning of Section 168(h) of the Code, (iii) directly or indirectly secures any debt the interest on which is tax exempt under Section 103(a) of the Code, or (iv) is subject to a lease under Section 7701(h) of the Code or under any predecessor section.

(g)           Since November 1, 2007, neither Merger Partner nor any Merger Partner Subsidiary has participated in an international boycott as defined in Section 999 of the Code.

(h)           Neither Merger Partner nor any Merger Partner Subsidiary will be required to include any item of income in, or exclude any item of deduction from, taxable income for any period (or any portion thereof) ending after the Closing Date as a result of any (i) closing agreement as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign Tax law) executed on or prior to the Closing Date, (ii) installment sale or other open transaction disposition made on or prior to the Closing Date, or (iii) prepaid amount received on or prior to the Closing Date.

(i)           Since November 1, 2007, neither Merger Partner nor any Merger Partner Subsidiary has engaged in any “listed transaction” for purposes of Treasury Regulation sections 1.6011-4(b)(2) or 301.6111-2(b)(2) or any analogous provision of state or local law.

(j)            Neither Merger Partner nor any Merger Partner Subsidiary has taken or agreed to take any action that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.  Neither Merger Partner nor any Merger Partner Subsidiary is aware of any agreement, plan or other circumstance that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.

2.14        Employee and Labor Matters; Benefit Plans.

(a)           Part 2.14(a) of the Merger Partner Disclosure Schedule accurately sets forth, with respect to each employee of Merger Partner or any Merger Partner Subsidiary (including any employee of Merger Partner or any Merger Partner Subsidiary who is on a leave of absence) with an annual base salary in excess of $100,000:

(i)           the name of such employee and the date as of which such employee was originally hired by Merger Partner or any Merger Partner Subsidiary;

(ii)          such employee’s title;

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(iii)         the aggregate dollar amount of the wages, salary, and bonuses received by such employee from Merger Partner or any Merger Partner Subsidiary with respect to services performed in calendar year 2009;

(iv)         such employee’s annualized base salary as of the date of this Agreement; and

(v)          such employee’s primary office location.

(b)           Part 2.14(b) of the Merger Partner Disclosure Schedule accurately identifies each former employee of Merger Partner or any Merger Partner Subsidiary who is receiving or is scheduled to receive (or whose spouse or other dependent is receiving or is scheduled to receive) any benefits (from Merger Partner or any Merger Partner Subsidiary) relating to such former employee’s employment with Merger Partner or any Merger Partner Subsidiary; and Part 2.14(b) of the Merger Partner Disclosure Schedule accurately describes such benefits.

(c)           To the Knowledge of Merger Partner:

(i)           no Key Employee of Merger Partner or any Merger Partner Subsidiary intends to terminate his employment with Merger Partner or the applicable Merger Partner Subsidiary; and

(ii)           no employee of Merger Partner or any Merger Partner Subsidiary is a party to or is bound by any confidentiality agreement, noncompetition agreement or other Contract (with any Person) that may have an adverse effect on: (A) the performance by such employee of any of his duties or responsibilities as an employee of Merger Partner or the applicable Merger Partner Subsidiary; or (B) Merger Partner’s or any Merger Partner Subsidiary’s business or operations.

(d)           Neither Merger Partner nor any Merger Partner Subsidiary is a party to or bound by, and, since November 1, 2007, neither Merger Partner nor any Merger Partner Subsidiary has ever been a party to or bound by any union contract, collective bargaining agreement or similar Contract in the United States.

(e)           Neither Merger Partner nor any Merger Partner Subsidiary is engaged, and since November 1, 2007 neither Merger Partner nor any Merger Partner Subsidiary has ever been engaged, in any unfair labor practice of any nature. Since November 1, 2007, there has never been any slowdown, work stoppage, labor dispute or union organizing activity, or any similar activity or dispute, affecting Merger Partner or any Merger Partner Subsidiary.  To Merger Partner’s Knowledge, no event has occurred, and no condition or circumstance exists, that might directly or indirectly give rise to the commencement of any such slowdown, work stoppage, labor dispute or union organizing activity or any similar activity or dispute. Except as Disclosed in Part 2.14(e) of the Merger Partner Disclosure Schedule, there are no actions, suits, claims, labor disputes or grievances pending or, to the Knowledge of Merger Partner, threatened or reasonably anticipated relating to any labor, safety or discrimination matters involving any employee of Merger Partner or any Merger Partner Subsidiary, including, without limitation, charges of unfair labor practices or discrimination complaints. Merger Partner and each Merger Partner Subsidiary has good labor relations, and no reason to believe that the consummation of the Merger or any of the other Contemplated Transactions will have a material adverse effect on Merger Partner’s or any Merger Partner Subsidiary’s labor relations.

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(f)            Part 2.14(f) of the Merger Partner Disclosure Schedule identifies each Merger Partner Plan sponsored, maintained, contributed to or required to be contributed to by Merger Partner or any Merger Partner Subsidiary for the benefit of any employee of Merger Partner or any Merger Partner Subsidiary in effect as of the date hereof.  Except to the extent required to comply with Legal Requirements, neither Merger Partner nor any Merger Partner Subsidiary has committed to establish or enter into any new Merger Partner Plan, or to modify any Merger Partner Plan.

(g)           Merger Partner has delivered or made available to Avatech: (i) correct and complete copies of all documents setting forth the terms of each Merger Partner Plan, including all amendments thereto, and all related trust documents or funding vehicles and amendments thereto; (ii) the two (2) most recent annual reports (Form Series 5500 and all schedules and financial statements attached thereto), if any, required under ERISA or the Code in connection with each Merger Partner Plan; (iii) if required by ERISA, the two most recent auditor’s reports for each Merger Partner Plan; (iv) the most recent summary plan description together with the summaries of material modifications thereto, if any, required under ERISA with respect to each Merger Partner Plan; (v) all material written Contracts relating to each Merger Partner Plan, including administrative service agreements and group insurance contracts; (vi) all material written materials provided to any employee of Merger Partner or any Merger Partner Subsidiary relating to any Merger Partner Plan and any proposed Merger Partner Plans, in each case, relating to any amendments, terminations, establishments, increases or decreases in benefits, acceleration of payments or vesting schedules or other events that would result in any liability to Merger Partner or any Merger Partner Subsidiary; (vii) all material correspondence to or from any Governmental Body relating to any Plan; (viii) the form of all COBRA forms and related notices; (ix) all insurance policies in the possession of Merger Partner or any Merger Partner Subsidiary pertaining to fiduciary liability insurance covering the fiduciaries for each Merger Partner Plan; (x) all discrimination tests required under the Code for each Merger Partner Plan intended to be qualified under Section 401(a) of the Code for the three (3) most recent plan years; and (xi) the most recent Internal Revenue Service determination or opinion letter issued with respect to each Merger Partner Plan intended to be qualified under Section 401(a) of the Code.

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(h)           Merger Partner and each Merger Partner Subsidiary has performed all material obligations required to be performed by it under each Merger Partner Plan and is not in default under or violation of, and Merger Partner has no Knowledge of any default under or violation by any other party of, the terms of any Merger Partner Plan. Each Merger Partner Plan has been established and maintained substantially in accordance with its terms and in substantial compliance with all applicable Legal Requirements, including ERISA and the Code. Any Merger Partner Plan intended to be qualified under Section 401(a) of the Code has obtained a favorable determination letter (or opinion letter, if applicable) as to its qualified status under the Code or has remaining a period of time under applicable Treasury regulations or Internal Revenue Service pronouncements in which to apply for such a letter and make any amendments necessary to obtain a favorable determination as to the qualified status of that Merger Partner Plan. No “prohibited transaction,” within the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has occurred with respect to any Merger Partner Plan subject to ERISA or Section 4975 of the Code. There are no claims or Legal Proceedings pending, or, to the Knowledge of Merger Partner, threatened or reasonably anticipated (other than routine claims for benefits), against any Merger Partner Plan or against the assets of any Merger Partner Plan. There are no audits, inquiries or Legal Proceedings pending or, to the Knowledge of Merger Partner, threatened by any Governmental Body with respect to any Merger Partner Plan.  Since November 1, 2007, neither Merger Partner nor any Merger Partner Subsidiary has ever incurred any penalty or tax with respect to any Merger Partner Plan under Section 502(i) of ERISA or Sections 4975 through 4980 of the Code that remains unsatisfied, and all penalties and/or taxes so satisfied since November 1, 2007 are Disclosed in Part 2.14(h) of the Merger Partner Disclosure Schedule.  Merger Partner and each Merger Partner Subsidiary have made all contributions and other payments required by and due under the terms of each Merger Partner Plan.

(i)           Since November 1, 2007, neither Merger Partner nor any Merger Partner Subsidiary has (i) maintained, established, sponsored, participated in, or contributed to any: (A) employee benefit pension plan (as defined in Section 3(2) of ERISA) (“Pension Plan”) subject to Title IV of ERISA; (B) “multiemployer plan” within the meaning of Section (3)(37) of ERISA; or (C) “multiple employer welfare arrangement” (within the meaning of Section 3(40) of ERISA); (ii) maintained, established, sponsored, participated in or contributed to, any Pension Plan in which stock of Merger Partner or any Merger Partner Subsidiary is or was held as a plan asset; or (iii) maintained a Pension Plan or multiemployer plan, or the equivalent thereof, in a foreign jurisdiction (a “Merger Partner Foreign Plan”).

(j)           Except as Disclosed in Part 2.14(j) of the Merger Partner Disclosure Schedule, no Merger Partner Plan provides (except at no cost to Merger Partner or any Merger Partner Subsidiary), or reflects or represents any liability of Merger Partner or any Merger Partner Subsidiary to provide, life insurance, health benefits or other employee welfare benefits to any Person for any reason after termination of employment with the Merger Partner or any Merger Partner Subsidiary, or the spouses or dependents of any such Person, except as may be required by COBRA or other applicable Legal Requirements. Other than commitments made that involve no future costs to Merger Partner or any Merger Partner Subsidiary, neither Merger Partner nor any Merger Partner Subsidiary has any obligation (whether oral or written) to any employee of Merger Partner or any Merger Partner Subsidiary (either individually or as a group) or any other Person to provide such employee(s) or other Person with life insurance, health benefits or other employee welfare benefits after terminating employment with the Merger Partner or any Merger Partner Subsidiary, except to the extent required by applicable Legal Requirements.

(k)           Except as Disclosed in Part 2.14(k) of the Merger Partner Disclosure Schedule, neither the execution of this Agreement nor the consummation of the Contemplated Transactions will (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Merger Partner Plan, Merger Partner Contract, trust or loan that will or may result (either alone or in connection with any other circumstance or event) in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any employees of Merger Partner or any Merger Partner Subsidiary.

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(l)            Merger Partner and Merger Partner Subsidiaries:  (i) are, and at all times since November 1, 2007 have been, in substantial compliance with all applicable Legal Requirements respecting employment, employment practices, terms and conditions of employment and wages and hours, in each case, with respect to their employees, including the health care continuation requirements of COBRA, the requirements of FMLA, the requirements of HIPAA and any similar provisions of state law; (ii) have withheld and reported all amounts required by applicable Legal Requirements or by Contract to be withheld and reported with respect to wages, salaries and other payments to their employees; (iii) are not liable for any arrears of wages or any taxes or any penalty for failure to comply with the Legal Requirements applicable to the foregoing; and (iv) are not liable for any payment to any trust or other fund governed by or maintained by or on behalf of any Governmental Body with respect to unemployment compensation benefits, social security or other benefits or obligations for their employees (other than routine payments to be made in the normal course of business and consistent with past practice). There are no pending or, to the Knowledge of Merger Partner, threatened or reasonably anticipated claims or Legal Proceedings against Merger Partner or any Merger Partner Subsidiary under any worker’s compensation policy or long-term disability policy.

(m)          Neither Merger Partner nor any Merger Partner Subsidiary is required to be, and, has not since November 1, 2007 ever been required to be, treated as a single employer with any other Person under Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the Code.  Neither Merger Partner nor any Merger Partner Subsidiary has since November 1, 2007 ever made a complete or partial withdrawal from a multiemployer plan, as such term is defined in Section 3(37) of ERISA, resulting in “withdrawal liability,” as such term is defined in Section 4201 of ERISA (without regard to subsequent reduction or waiver of such liability under either Section 4207 or 4208 of ERISA).

(n)           To the Knowledge of Merger Partner, no officer of Merger Partner or any Merger Partner Subsidiary is subject to any injunction, writ, judgment, decree, or order of any court or other Governmental Body that would interfere with such officer’s efforts to promote the interests of Merger Partner or any Merger Partner Subsidiary, or that would interfere with the business of Merger Partner or any Merger Partner Subsidiary.  Neither the execution nor the delivery of this Agreement, nor the carrying on of the business of Merger Partner or any Merger Partner Subsidiary as presently conducted will, to the Knowledge of Merger Partner, conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default under, any Contract under which any employee of Merger Partner or any Merger Partner Subsidiary may be bound.

(o)           There is no agreement, plan, arrangement or other Contract covering any employee or independent contractor or former employee or independent contractor of Merger Partner or any Merger Partner Subsidiary that, considered individually or considered collectively with any other such Contracts and/or other events, will, or could reasonably be expected to, give rise directly or indirectly to the payment of any amount that would not be deductible pursuant to Section 280G or Section 162 of the Code.  Neither Merger Partner nor any Merger Partner Subsidiary is a party to any Contract, nor does Merger Partner or any Merger Partner Subsidiary have any obligation (current or contingent), to compensate any individual for excise taxes paid pursuant to Section 4999 of the Code.

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(p)           No holder of shares of Merger Partner Common Stock holds shares of Merger Partner Common Stock that are non-transferable and subject to a substantial risk of forfeiture within the meaning of Section 83 of the Code with respect to which a valid election under Section 83(b) of the Code has not been made unless such shares were acquired on the exercise of an incentive stock option as defined in Section 422 of the Code.

(q)           Every Merger Partner employee plan or arrangement, which includes any and all salary, bonus, deferred compensation, incentive compensation, stock purchase, stock option, severance pay, termination pay, hospitalization, medical, life or other insurance, supplemental unemployment benefits, profit-sharing, pension or retirement plan, program or agreement (collectively, the “Merger Partner Plans”, and each individually a “Merger Partner Plan”) sponsored, maintained, contributed to or required to be contributed to by Merger Partner or any Merger Partner Subsidiary for the benefit of any employee of Merger Partner or any Merger Partner Subsidiary and which is a “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of the Code) has been since November 1, 2007, and is in operational and document compliance with Code Section 409A and applicable regulations and guidance issued thereunder, so that the additional tax described in Code Section 409A(a)(1)(B) will not be assessed against the individuals participating in any such non-qualified deferred compensation plan.

(r)            Part 2.14(r) of the Merger Partner Disclosure Schedule sets forth each material employee benefit service provider Contract with Merger Partner or any Merger Partner Subsidiary (i) that may not be canceled with advance notice of sixty (60) days or less or (ii) under which Merger Partner or any Merger Partner Subsidiary will be assessed a material surrender charge or penalty upon cancellation.

(s)           No Merger Partner Plan is invested in any “stable value fund” (or similar arrangement) which assesses any back-end load or market value adjustment upon termination of such investment.

(t)           For purposes of each Merger Partner Plan, Merger Partner and each Merger Partner Subsidiary have correctly determined the status for each service provider to the Merger Partner and any Merger Partner Subsidiary as an employee, a leased employee or an independent contractor, as applicable.

2.15        Environmental Matters.  Merger Partner and each Merger Partner Subsidiary is in compliance in all material respects with all applicable Environmental Laws, which compliance includes the possession by Merger Partner and each Merger Partner Subsidiary of all permits and other Governmental Authorizations required under applicable Environmental Laws, and compliance with the terms and conditions thereof.  Neither Merger Partner nor any Merger Partner Subsidiary has received since November 1, 2007 any written notice or other communication (in writing or otherwise), whether from a Governmental Body, citizens group, employee or otherwise, that alleges that Merger Partner or any Merger Partner Subsidiary is not in compliance with any Environmental Law, and, to the Knowledge of Merger Partner, there are no circumstances that may prevent or interfere with Merger Partner’s or any Merger Partner Subsidiary’s compliance with any Environmental Law in the future. To the Knowledge of Merger Partner it has no material liability under any Environmental Laws. There are no Governmental Authorizations currently held by Merger Partner or any Merger Partner Subsidiary pursuant to Environmental Laws.

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2.16        Legal Proceedings; Orders.

(a)           Except as Disclosed in Part 2.16 of the Merger Partner Disclosure Schedule, there is no pending Legal Proceeding, and to the Knowledge of Merger Partner, no Person has threatened to commence any Legal Proceeding, that involves Merger Partner or any Merger Partner Subsidiary or any assets owned or used by Merger Partner or any Merger Partner Subsidiary or any Person whose liability Merger Partner or any Merger Partner Subsidiary has or may have retained or assumed, either contractually or by operation of law (i) claiming damages in an amount in excess of $50,000; or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, the Merger or any of the other Contemplated Transactions.  Except as Disclosed in Part 2.16 of the Merger Partner Disclosure Schedule, to the Knowledge of Merger Partner, no event has occurred, and no claim, dispute or other condition or circumstance exists, that will, or that would reasonable be expected to, give rise to or serve as a basis for the commencement of any such Legal Proceeding.

(b)           There is no order, writ, injunction, judgment or decree to which Merger Partner or any Merger Partner Subsidiary, or any of the assets owned or used by Merger Partner or any Merger Partner Subsidiary, is subject. To the Knowledge of Merger Partner, none of its Related Parties is subject to any order, writ, injunction, judgment or decree that relates to Merger Partner’s or any Merger Partner Subsidiary’s business or to any assets owned or used by Merger Partner or any Merger Partner Subsidiary.

2.17        Non-Contravention; Consents.  Subject to obtaining the Required Merger Partner Stockholder Vote for the applicable Contemplated Transactions and the filing of a Certificate of Merger as required by the DGCL, neither (a) the execution, delivery or performance of this Agreement or any of the Related Agreements, nor (b) the consummation of the Merger or any of the other Contemplated Transactions, will directly or indirectly (with or without notice or lapse of time):

(a)           contravene, conflict with or result in a violation of any of the provisions of the Merger Partner Constituent Documents;

(b)           contravene, conflict with or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions or to exercise any remedy or obtain any relief under, any Legal Requirement or any order, writ, injunction, judgment or decree to which Merger Partner or any Merger Partner Subsidiary, or any of the assets owned or used by Merger Partner or any Merger Partner Subsidiary, is subject;

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(c)           except as Disclosed in Part 2.17(c) of the Merger Partner Disclosure Schedule, result in a material conflict, violation or breach of, or result in a material default under, any provision of any Merger Partner Contract, or give any Person the right to (i) declare a default or exercise any remedy under any such Merger Partner Contract, (ii) accelerate the maturity or performance of any such Merger Partner Contract, or (iii) cancel, terminate or modify any such Merger Partner Contract; or

(d)           result in the imposition or creation of any Encumbrance upon or with respect to any material asset owned or used by Merger Partner or any Merger Partner Subsidiary (except for minor liens that will not, in any case or in the aggregate, materially detract from the value of the assets subject thereto or materially impair the operations of Merger Partner or any Merger Partner Subsidiary).

Except for those filings, notices or Consents disclosed in Part 2.17 of the Merger Partner Disclosure Schedule, no filing with, notice to or Consent from any Person is required in connection with (y) the execution, delivery or performance of this Agreement or any of the Related Agreements, or (z) the consummation of the Merger or any of the other Contemplated Transactions.

2.18        Vote Required.  The affirmative vote of the holders of a majority of the shares of Merger Partner Common Stock outstanding (the “Required Merger Partner Stockholder Vote”) is the only vote of the holders of any class or series of Merger Partner capital stock necessary to adopt this Agreement.

2.19        No Broker.  Merger Partner has not, directly or indirectly, engaged any broker, finder, investment banker or other intermediary in connection with the Merger or any of the other Contemplated Transactions, and no action by Merger Partner will cause or support any claim to be asserted against Merger Partner, the Surviving Corporation or Avatech by any broker, finder, investment banker or other intermediary in connection with any of the Contemplated Transactions.

2.20        Authority; Binding Nature of Agreement.  Merger Partner has the absolute and unrestricted right, power and authority to enter into and perform its obligations under this Agreement; and the execution, delivery and performance by Merger Partner of this Agreement has been duly authorized by all necessary action on the part of Merger Partner and the board of directors of Merger Partner, subject only to obtaining the Required Merger Partner Stockholder Vote (which shall be obtained contemporaneously with the execution of this Agreement) and the filing and recordation of the Certificate of Merger pursuant to the DGCL. This Agreement has been duly executed and delivered by Merger Partner, and assuming due authorization, execution and delivery by the other Parties thereto, constitutes the legal, valid and binding obligation of Merger Partner, enforceable against Merger Partner in accordance with its terms, except as enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application relating to or affecting enforcement of creditors’ rights and the exercise of judicial discretion in accordance with general principles of equity.

2.21        Anti-Takeover Law.  The board of directors of Merger Partner has taken all actions necessary to ensure that execution of this Agreement and the consummation of the Merger and the other Contemplated Transactions will be exempt from any anti-takeover or similar provisions of Merger Partner Constituent Documents, any Merger Partner Contract, and any applicable “moratorium”, “control share”, “fair price”, “interested stockholder” or other anti-takeover laws and regulations of any jurisdiction.

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2.22        Insurance.  Merger Partner maintains insurance policies with reputable insurance carriers against all risks of a character as usually insured against, and in such coverage amounts as are usually maintained, by similarly situated companies in the same or similar businesses. Each such insurance policy is in full force and effect. Since November 1, 2007, Merger Partner has not received any written notice or other communication regarding any actual or possible (a) cancellation or invalidation of any material insurance policy, (b) refusal of any coverage or rejection of any claim under any material insurance policy, or (c) material adjustment in the amount of the premiums payable with respect to any material insurance policy.

2.23        Related Party Transactions.

(a)           Except as Disclosed in Part 2.23(a) of the Merger Partner Disclosure Schedule, no Merger Partner Related Party has, and no Merger Partner Related Party has at any time since November 1, 2007 had, any direct or indirect interest in any material asset used in or otherwise relating to the business of Merger Partner or any Merger Partner Subsidiary.

(b)           Except as Disclosed in Part 2.23(a) of the Merger Partner Disclosure Schedule, no Merger Partner Related Party is, or since November 1, 2007 has been, indebted to Merger Partner or any Merger Partner Subsidiary.

(c)           Except as Disclosed in Part 2.23(a) of the Merger Partner Disclosure Schedule, since November 1, 2007, no Merger Partner Related Party has entered into, or has had any direct or indirect financial interest in, any Merger Partner Contract, transaction or business dealing involving Merger Partner or any Merger Partner Subsidiary.

(d)           No Merger Partner Related Party is competing, or has at any time since January 1, 2007 competed, directly or indirectly, with Merger Partner or any Merger Partner Subsidiary.

(e)           Except as Disclosed in Part 2.23(e) of the Merger Partner Disclosure Schedule, no Merger Partner Related Party has any claim or right against Merger Partner or any Merger Partner Subsidiary (other than rights under capital stock of Merger Partner and rights to receive compensation for services performed as an employee of Merger Partner or any Merger Partner Subsidiary).

2.24           Merger Partner Action.  The board of directors of Merger Partner (at a meeting duly called and held in accordance with Merger Partner Constituent Documents) has (a) unanimously determined that the Merger is advisable and in the best interests of Merger Partner and its sole stockholder and (b) unanimously recommended adoption of this Agreement by the sole stockholder of Merger Partner and directed that this Agreement be submitted to the sole stockholder of Merger Partner for adoption.

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2.25        Controls and Procedures.  Except as Disclosed in Part 2.25 of the Merger Partner Disclosure Schedule, since November 1, 2007, none of Marc Dulude, Greg Magoon, Lori Henderson or any director of Merger Partner has, and to their Knowledge neither Merger Partner nor its independent registered public accounting firm has, identified or been made aware of (i) any facts or circumstances regarding Merger Partner, its business or the Merger Partner Financial Statements that indicates any significant deficiency or material weakness in, or material concern regarding the integrity of, the system of internal control over financial reporting utilized by Merger Partner and Merger Partner Subsidiaries, in each case which has not been substantially remediated (it being understood and acknowledged by the parties that Merger Partner is not subject to and does not comply with the federal Sarbanes-Oxley Act of 2002), or (ii) any fraud which involves Merger Partner’s or Merger Partner Subsidiaries’ management or other employees who have a role in the preparation of financial statements or the internal control over financial reporting utilized by Merger Partner and Merger Partner Subsidiaries.

2.26        Objections to the Merger.  Neither any member of the board of directors of Merger Partner nor any executive officer of Merger Partner, nor any of their respective Representatives, has received any written or oral indication from the “group” of stockholders named in the Schedule 13D initially filed with the SEC on March 5, 2010 (the “Dissident Stockholders”) or from any Representative of the Dissident Stockholders that any of the Dissident Stockholders intends to object to or otherwise contest the Merger.

3.            REPRESENTATIONS AND WARRANTIES OF AVATECH AND MERGER SUB

Except as Disclosed, Avatech and Merger Sub make the following representations and warranties to Merger Partner, as of the date hereof and as of the Closing Date.  The Schedule of Avatech and Merger Sub are collectively referred to herein as the “Avatech Disclosure Schedule”.

3.1          Due Organization; Subsidiaries; Etc.

(a)           Avatech and Merger Sub are corporations duly organized, validly existing and in good standing under the laws of the State of Delaware, with the corporate power and authority to carry on their business as now being conducted and as currently proposed to be conducted.

(b)           Except as Disclosed in Part 3.1(b), Avatech has not conducted any business under or otherwise used, for any purpose or in any jurisdiction, any fictitious name, assumed name, trade name or other name, other than the name “Avatech Solutions, Inc.”

(c)           Avatech and Merger Sub are not and have not been required to be qualified, authorized, registered or licensed to do business as a foreign corporation in any jurisdiction other than the jurisdictions identified in Part 3.1(c) of the Avatech Disclosure Schedule, except where the failure to be so qualified, authorized, registered or licensed, individually or in the aggregate, has not had, and would not reasonably be expected to have, an Avatech Material Adverse Effect. Avatech and Avatech Subsidiaries are each in good standing as a foreign corporation in each of the jurisdictions Disclosed in Part 3.1(c) of the Avatech Disclosure Schedule.

(d)           Part 3.1(d) of the Avatech Disclosure Schedule accurately sets forth (i) the names of the members of the board of directors of Avatech, (ii) the names of the members of each committee of the board of directors of Avatech and (iii) the names and titles of Avatech’s officers.

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(e)           Avatech has no direct or indirect ownership of any capital stock of, or other voting securities or equity interests in, any Entity (other than Merger Sub) except for the Entities Disclosed in Part 3.1(e) of the Avatech Disclosure Schedule.  Neither Avatech nor any Avatech Subsidiary has agreed or is obligated to make any future investment in or capital contribution to any Entity.  Except as Disclosed in Part 3.1(e) of the Avatech Disclosure Schedule, neither Avatech nor any Avatech Subsidiary has guaranteed or is responsible or liable for any obligation of any of the Entities in which it owns or has owned any equity or other financial interest.

(f)           Part 3.1(f) of the Avatech Disclosure Schedule sets forth a true and complete list of each Avatech Subsidiary and identifies the jurisdiction of its organization.  Each of such Avatech Subsidiaries is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, with the power and authority to carry on its business as now being conducted and as currently proposed to be conducted.  Part 3.1(f) of the Avatech Disclosure Schedule identifies all jurisdictions in which each Avatech Subsidiary is qualified, authorized, registered or licensed to do business as a foreign Entity, except where the failure to be so qualified, authorized, registered or licensed, individually or in the aggregate, has not had, and would not reasonably be expected to have, an Avatech Material Adverse Effect, and each such Avatech Subsidiary is in good standing in such jurisdictions.

3.2          Certificate of Incorporation and Bylaws; Records.  Avatech and Merger Sub have delivered or made available to Merger Partner accurate and complete copies of:  (a) Avatech’s certificate of incorporation and bylaws, including all amendments thereto, and the certificate of incorporation and bylaws of Merger Sub; (b) the stock records of Avatech and Merger Sub; and (c) except as Disclosed in Part 3.2(c) of the Avatech Disclosure Schedule, the minutes and other records of the meetings and other proceedings (including any actions taken by written consent or otherwise without a meeting) of the stockholders of Avatech and Merger Sub, the board of directors of Avatech and Merger Sub and all committees of the board of directors of Avatech and Merger Sub since January 1, 2005 (the items described in (a) and (b) above, collectively, the “Avatech Constituent Documents”).  Since November 1, 2007, there have been no formal meetings or actions taken by written consent or otherwise without a meeting of the stockholders of Avatech or Merger Sub, the board of directors of Avatech or Merger Sub or any committee of the board of directors of Avatech or Merger Sub that are not fully reflected in the minutes and other records delivered or made available to Merger Partner pursuant to clause (c) above. There has not been any violation in any material respect of the Avatech Constituent Documents, and Avatech has not taken any action that is inconsistent in any material respect with the Avatech Constituent Documents. The books of account, stock records, minute books and other records of Avatech are accurate, up to date and complete in all material respects, and have been maintained in accordance with prudent business practices.

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3.3          Capitalization, Etc.

(a)           The authorized capital stock of Avatech consists of 100,000,000 shares, of which 80,000,000 shares are classified as shares of Avatech Common Stock and 20,000,000 shares are classified as shares of Preferred Stock, par value $.01 per share. As of the date hereof, 17,168,162 shares of Avatech Common Stock are outstanding.  The authorized shares of Avatech Preferred Stock are classified as (i) 1,297,537 shares of Series D Preferred Stock, of which 1,089,213 shares are outstanding and, as of the date hereof, are convertible into 2,180,244 shares of Avatech Stock, (ii) 1,200 shares of Series E Preferred Stock, of which 937 shares are outstanding and, as of the date hereof, are convertible into 1,441,539 shares of Avatech Common Stock, and (iii) 5,500 shares of Series F Preferred Stock, of which no shares are outstanding.  All outstanding shares of capital stock of Avatech have been duly authorized and validly issued, and are fully paid and non assessable. Avatech has no authorized shares of capital stock other than as set forth in this Section 3.3(a) and there are no issued and outstanding shares of Avatech’s capital stock other than as set forth in this Section 3.3(a).  Avatech has made available to Merger Partner copies of all outstanding warrants to purchase capital stock of Avatech and all documents related thereto.  The total number of shares of Avatech Common Stock outstanding on a Fully Diluted Basis, excluding the shares of Avatech Common Stock issuable upon exercise of the Avatech Excluded Warrants, is 22,396,997.

(b)           As of August 17, 2010:  (i) Avatech has reserved 3,100,000 shares of Avatech Common Stock for issuance under its 2002 Stock Option Plan, options to purchase 1,607,052 shares of Avatech Common Stock are outstanding thereunder, and 214,390 shares of Avatech Common Stock remain available for new grants thereunder; (ii) Avatech has reserved 2,000,000 shares of Avatech Common Stock for issuance under its Employee Stock Purchase Plan, no rights to purchase shares of Avatech Common Stock are outstanding thereunder, and 797,494 shares remain available for new grants thereunder; and (iii) Avatech has reserved 1,000,000 shares of Avatech Common Stock for issuance under its Amended and Restated Restricted Stock Award Plan, no restricted shares of Avatech Common Stock are outstanding thereunder, and 193,921 shares remain available for new awards thereunder.  Except as set forth in this Section 3.3(b) or Disclosed in Part 3.3(b) of the Avatech Disclosure Schedule, other than the Excluded Warrants and the Designator’s right to receive Merger Shares hereunder, there is no: (A) outstanding subscription, option, call, warrant or right (whether or not currently exercisable) to acquire any shares of the capital stock or other securities of Avatech; (B) outstanding security, instrument or obligation that is or may become convertible into or exchangeable for any shares of capital stock or other securities of Avatech; (C) Contract under which Avatech is or may become obligated to sell or otherwise issue any shares of its capital stock or any other securities of Avatech; or (D) condition or circumstance that would give rise to or provide a basis for the assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive any shares of capital stock or other securities of Avatech. Avatech has not issued any debt securities which grant the holder thereof any right to vote on, or veto, any action of Avatech.

(c)           All outstanding shares of Avatech Common Stock (including Avatech Restricted Shares), and all outstanding Avatech Options, have been issued and granted in compliance with (i) all applicable federal and state securities laws and other applicable Legal Requirements, and (ii) all requirements set forth in Avatech Constituent Documents and applicable Contracts.  All securities of Avatech Subsidiaries have been issued and granted in compliance in all material respects with (x) all applicable federal and state securities laws and other applicable Legal Requirements, and (y) all requirements set forth in the Avatech Subsidiary Constituent Documents and applicable Contracts.  All shares of Avatech Common Stock reserved for issuance under the Avatech 2002 Stock Option Plan, the Avatech Employee Stock Purchase Plan, and the Avatech Amended and Restated Restricted Stock Award Plan have been registered on a Form S-8 filed with the SEC.

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3.4          SEC Filings; Financial Statements.

(a)           Except as Disclosed in Part 3.4(a) of the Avatech Disclosure Schedule, a true, complete and correct copy of each final registration statement, prospectus, report, schedule and definitive proxy statement filed or furnished, or required to be filed or furnished, prior to the date hereof and since November 1, 2007 by Avatech with the SEC pursuant to the Securities Act or the Exchange Act (“Avatech SEC Documents”) is available to Merger Partner on the SEC’s Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) database, or, if not so available, has been provided to Merger Partner.  As of their respective dates, or, if amended, as of the date of the last such amendment, each of the Avatech SEC Documents complied in all material respects with all applicable SEC requirements, as in effect as of the time such Avatech SEC Document was filed, and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  All Avatech SEC Documents have been timely filed with the SEC.  Avatech has not received notice from any Governmental Entity challenging or questioning the accuracy, completeness, form or manner of any of the Avatech SEC Documents, including, without limitation, any certification required of any executive officer under Section 302 or 906 of the Sarbanes-Oxley Act.  Except for (i) requests to extend the duration of confidential treatment of redacted portions of exhibits filed with the SEC, (ii) correspondence relating to SEC reviews and comments as to which no comments remain outstanding, and (iii) as are available on the EDGAR database, Avatech has provided to Merger Partner copies of all correspondence sent to or received from the SEC by or on behalf of Avatech and Avatech Subsidiaries since November 1, 2007.  There are no outstanding comments from or unresolved issues raised by the SEC with respect to any of the Avatech SEC Documents.  None of the Avatech Subsidiaries is required to file any forms, reports or other documents with the SEC.

(b)           The consolidated financial statements contained in the Avatech SEC Documents (including, in each case, any related notes thereto) (the “Avatech Financial Statements”):  (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered, except as may be indicated in the notes to such consolidated financial statements and except that the unaudited interim consolidated financial statements contained in the Avatech SEC Documents do not contain information and footnotes required for annual financial statements; and (iii) fairly present in all material respects the consolidated financial position of Avatech as of the respective dates thereof and the consolidated results of operations and cash flows of Avatech for the periods covered thereby, except that the unaudited interim consolidated financial statements contained in the Avatech SEC Documents were or are subject to normal year-end audit adjustments.

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(c)           To the Knowledge of Avatech, Stegman & Company, Avatech’s independent registered public accounting firm, is, and has been at all times during its engagement by Avatech, (i) “independent” with respect to Avatech within the meaning of the SEC’s Regulation S-X and (ii) in compliance with Section 10A of the Exchange Act (to the extent applicable) and the related rules of the SEC and the Public Company Accounting Oversight Board, in each case as such subsections and rules apply to Stegman & Company’s engagement by Avatech.

3.5          Absence of Changes.  Other than in connection with the Contemplated Transactions and except as Disclosed in Part 3.5 of the Avatech Disclosure Schedule, since March 31, 2010:

(a)           there has not been any Avatech Material Adverse Effect, and no event has occurred that will, or would reasonably be expected to, cause a Avatech Material Adverse Effect;

(b)           there has not been any material loss, damage or destruction to, or any material interruption in the use of, any of the material assets of Avatech or any Avatech Subsidiary (whether or not covered by insurance);

(c)           Avatech has not declared, accrued, set aside or paid any dividend or made any other distribution in respect of any shares of its capital stock, and has not repurchased, redeemed or otherwise reacquired any shares of its capital stock or other securities;

(d)           Avatech has not sold, issued, granted or authorized the issuance of (i) any capital stock or other securities of Avatech; (ii) any option, call or right to acquire any capital stock or any other security of Avatech; (iii) any instrument convertible into or exchangeable for any capital stock or other security of Avatech; or (iv) reserved for issuance any additional grants or shares under the Avatech 2002 Stock Option Plan, the Avatech Employee Stock Purchase Plan or the Avatech Amended and Restated Restricted Stock Award Plan;

(e)           Avatech has not amended or waived any of its rights under, or permitted the acceleration of vesting under, the Avatech 2002 Stock Option Plan, the Avatech Employee Stock Purchase Plan, the Avatech Amended and Restated Restricted Stock Award Plan, any Avatech Option, Avatech Restricted Shares or agreement evidencing or relating to any outstanding stock option or warrant, any restricted stock purchase agreement, or any other Contract evidencing or relating to any equity award;

(f)            there has been no amendment to the certificate of incorporation or bylaws of Avatech or any Avatech Subsidiary and Avatech has not effected or been a party to any merger, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction;

(g)           Avatech has not acquired any equity interest or other interest in any Entity;

(h)           neither Avatech nor any Avatech Subsidiary has made any capital expenditure which, when added to all other capital expenditures made on behalf of Avatech or any Avatech Subsidiary since March 31, 2010, exceeds $75,000;

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(i)            neither Avatech nor any Avatech Subsidiary has (i) entered into or permitted any of the material assets owned or used by it to become bound by any Contract that contemplates or involves (A) the payment or delivery of cash or other consideration in an amount or having a value in excess of $75,000 in the aggregate, other than in the Ordinary Course of Business, or (B) the purchase or sale of any product, or performance of services by or to Avatech or any Avatech Subsidiary having a value in excess of $75,000 in the aggregate, other than in the Ordinary Course of Business, or (ii) waived any right or remedy under any material Contract other than in the Ordinary Course of Business, or amended or prematurely terminated any material Contract;

(j)            neither Avatech nor any Avatech Subsidiary has (i) acquired, leased or licensed any material right or other asset from any other Person, (ii) sold or otherwise disposed of, or leased or licensed, any material right or other asset to any other Person, or (iii) waived or relinquished any material right, except for rights or assets acquired, leased, licensed or disposed of in the Ordinary Course of Business;

(k)           neither Avatech nor any Avatech Subsidiary has written off as uncollectible, or established any extraordinary reserve with respect to, any account receivable or other indebtedness, other than in the Ordinary Course of Business;

(l)           neither Avatech nor any Avatech Subsidiary has made any pledge of any of its assets or otherwise permitted any of its assets to become subject to any Encumbrance, except for pledges of immaterial assets made in the Ordinary Course of Business;

(m)           neither Avatech nor any Avatech Subsidiary has (i) lent money to any Person (other than pursuant to routine travel advances made to employees in the Ordinary Course of Business), (ii) incurred or guaranteed any indebtedness for borrowed money in the aggregate in excess of $75,000 or (iii) issued or sold any debt securities or options, warrants, calls or similar rights to acquire any debt securities of Avatech or any Avatech Subsidiary;

(n)           neither Avatech nor any Avatech Subsidiary has (i) established or adopted any employee benefit plan, (ii) paid any bonus or made any profit sharing, incentive compensation or similar payment to, or materially increased the amount of the wages, salary, commissions, fringe benefits or other compensation or remuneration payable to, any of its directors, officers or employees with an annual salary in excess of $100,000, or (iii) hired any new employee having an annual salary in excess of $100,000;

(o)           neither Avatech nor any Avatech Subsidiary has changed any of its personnel policies or other business policies, or any of its methods of accounting or accounting practices in any material respect;

(p)           neither Avatech nor any Avatech Subsidiary has threatened, commenced or settled any material Legal Proceeding;

(q)           neither Avatech nor any Avatech Subsidiary has entered into any transaction or taken any other action outside the Ordinary Course of Business, other than entering into this Agreement and the Contemplated Transactions;

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(r)            neither Avatech nor any Avatech Subsidiary has paid, discharged or satisfied any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise) other than the payment, discharge or satisfaction of non-material amounts in the Ordinary Course of Business or as required by any Avatech or Avatech Subsidiary Contract or Legal Requirement; and

(s)           neither Avatech nor any Avatech Subsidiary has agreed to take, or committed to take, any of the actions referred to in clauses (c) through (r) of this Section 3.5.

3.6          Title to Assets.  Except as Disclosed in Part 3.6 of the Avatech Disclosure Schedule, Avatech and each Avatech Subsidiary owns, and has good, valid and marketable title to, all assets (tangible and intangible) purported to be owned by it. All of such assets are owned by Avatech or the applicable Avatech Subsidiary free and clear of any Encumbrances, except for (y) any lien for current Taxes not yet due and payable, and (z) minor liens that have arisen in the Ordinary Course of Business and that do not (individually or in the aggregate) materially detract from the value of the assets subject thereto or materially impair the operations of Avatech or the applicable Avatech Subsidiary.

3.7          Bank Accounts; Receivables.

(a)           Part 3.7(a) of the Avatech Disclosure Schedule provides accurate information with respect to each account maintained by or for the benefit of Avatech or any Avatech Subsidiary at any bank or other financial institution, including the name of the bank or financial institution, the account number, the balance as of May 31, 2010 and the names of all individuals authorized to draw on or make withdrawals from such accounts.

(b)           All existing accounts receivable of Avatech or any Avatech Subsidiary (including those accounts receivable reflected on the Avatech Balance Sheet that have not yet been collected and those accounts receivable that have arisen since the date of the Avatech Balance Sheet and have not yet been collected) (i) represent valid obligations of customers of Avatech or any Avatech Subsidiary arising from bona fide transactions entered into in the Ordinary Course of Business, and (ii) are current and are expected to be collected in full when due, without any counterclaim or set off, net of applicable reserves for bad debts on the unaudited interim consolidated balance sheet for Avatech as of March 31, 2010 delivered or made available to Merger Partner prior to the date of this Agreement.

3.8          Equipment; Leasehold.

(a)           All items of equipment and other tangible assets owned by or leased to Avatech or any Avatech Subsidiary (i) are adequate for the uses to which they are being put and (ii) are adequate for the conduct of Avatech’s business in the manner in which such business is currently being conducted and as it is proposed to be conducted.

(b)           Neither Avatech nor any Avatech Subsidiary owns any real property or any interest in real property, except for the leasehold interest created under the real property leases Disclosed in Part 3.8(b) of the Avatech Disclosure Schedule. All premises leased or subleased by Avatech or any Avatech Subsidiary are supplied with utilities and other services necessary for the operation of their respective businesses.

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3.9          Intellectual Property.

(a)           To the Knowledge of Avatech, Avatech and/or Avatech Subsidiaries own Intellectual Property Rights, or otherwise have the necessary rights or licenses under Intellectual Property Rights owned by third parties, necessary for the conduct of the business of Avatech and Avatech Subsidiaries as currently conducted and expected to be conducted subsequent to the Contemplated Transactions.  Neither the execution, delivery, or performance of this Agreement (or any of the agreements contemplated by this Agreement) nor the consummation of any of the Contemplated Transactions will, with or without notice or lapse of time, result in, or give any other Person the right or option to cause or declare, (i) a loss of, or Encumbrance on, any Avatech IP Rights or Avatech Licensed IP; (ii) a breach by Avatech or any Avatech Subsidiary of any Avatech IP Rights Agreement; (iii) a right to terminate an Avatech IP Rights Agreement or result in the change of any material term or require the payment of any additional fees under such an Avatech IP Rights Agreement; (iv) the release, disclosure, or delivery of any source code of any Avatech Software Products by or to any escrow agent or other Person; or (v) the grant, assignment, or transfer to any other Person, or otherwise change the ownership, status, effectiveness, validity and/or other disposition, of any license or other right or interest under, to, or in any of Avatech IP Rights or Avatech Licensed IP.

(b)           No infringement, misappropriation, or similar claim or Legal Proceeding is pending or, to Avatech’s Knowledge, threatened against Avatech or any Avatech Subsidiary or against any other Person who may be entitled to be indemnified, defended, held harmless, or reimbursed by Avatech or any Avatech Subsidiary with respect to such claim or Legal Proceeding, and Avatech has no Knowledge of any set of facts which should reasonably lead it to believe that any claim is likely or threatened.  To Avatech’s Knowledge, the operation of Avatech’s and the Avatech Subsidiaries’ businesses, as currently conducted, does not infringe, misappropriate or otherwise violate any Intellectual Property Rights of any Person.  To Avatech’s Knowledge, no Person is infringing, misappropriating, or violating the Avatech IP Rights.  Avatech has not received within the last five (5) years any unresolved written claim challenging the scope, ownership, validity, or enforceability of the Avatech IP Rights or of Avatech’s or Avatech Subsidiaries’ rights under the Avatech Licensed IP.

(c)           Avatech and/or its Subsidiaries hold all right, title and interest in and to the Avatech IP Rights, free and clear of any Encumbrances.  To the Knowledge of Avatech, no Person has any claim or interest in any Avatech IP Rights by reason of such Person’s participation in the creation of such Avatech IP Rights.  Other than the agreements (i) that are Disclosed in Part 3.9(c) of the Avatech Disclosure Schedule and (ii) Non-Exclusive Internal Use Licenses granted to customers in the Ordinary Course of Business, Avatech and Avatech Subsidiaries have not granted any Person any rights to or under the Avatech IP Rights, Merger Partner Licensed IP, and Merger Partner Software Products.

(d)           Part 3.9(d) of the Avatech Disclosure Schedule contains, as of the date of this Agreement, a true and complete list of all Avatech Registered IP.  Avatech and Avatech Subsidiaries have taken all actions necessary to maintain the Avatech Registered IP, including as applicable payment of applicable maintenance fees, filing of applicable statements of use, timely response to office actions, and all assignments of the Avatech Registered IP have been duly recorded with the appropriate Governmental Bodies (or, with respect to domain name registrations, the applicable domain name registrar or agent).  None of the Avatech Registered IP has been adjudged invalid or unenforceable in whole or part and, to the Knowledge of Avatech, all Avatech Registered IP is valid and enforceable.

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(e)           There are no licenses or other Contracts pursuant to which Avatech and Avatech Subsidiaries have been granted the Avatech Licensed IP, including with respect to any embodiments of the Intellectual Property Rights underlying such Avatech IP Licenses such as software, that is either (i) incorporated into or distributed with any Avatech Software Product or necessary of the use or distribution of such Avatech Software Product or (ii) used or held for use by Avatech for any other purpose (excluding, for purposes of clause (ii) only, any generally commercially available, non-customized software programs non-exclusively licensed by Avatech on standard terms).

(f)            Avatech and Avatech Subsidiaries have taken commercially reasonable steps to protect their respective trade secret rights in the Avatech IP Rights and to protect any confidential information provided to them by any other Person under obligation of confidentiality.  Without limitation of the foregoing, Avatech and Avatech Subsidiaries have not, to Avatech’s Knowledge, made any of their trade secrets or other confidential or proprietary information that they intended to maintain as confidential (including source code with respect to Avatech Software Products) available to any other Person except pursuant to written agreements, or other legally binding obligations, requiring such Person to maintain the confidentiality of such information or materials.

(g)           Avatech and Avatech Subsidiaries have obtained from all Persons who are or were involved in the creation or development of any portion of any Avatech Software Product (other than software licensed from third parties and distributed with or incorporated into Avatech Software Products as listed on Part 3.9(i) of the Avatech Disclosure Schedule), or of any Avatech IP Rights, valid and enforceable agreement containing an assignment of Intellectual Property Rights to Avatech or an Avatech Subsidiary and confidentiality provision protecting trade secrets and confidential information of Avatech IP Rights, except where the failure to obtain such agreement, individually or in the aggregate, has not had, and would not reasonably be expected to have, an Avatech Material Adverse Effect. Neither Avatech nor any of the Avatech Subsidiaries is obligated to provide any consideration to any third party with respect to any exercise of rights by Avatech or any of the Avatech Subsidiaries, or any successor to Avatech or the Avatech Subsidiaries, in any Avatech IP Rights, including with respect to the distribution or license of the Avatech Software Products.

(h)           Part 3.9(h) of the Avatech Disclosure Schedule contains a true and complete list of all Avatech Software Products.

(i)           Except as Disclosed in Part 3.9(i) of the Avatech Disclosure Schedule, there are no pending disputes regarding (i) the scope of any Contracts under which Avatech and/or Avatech Subsidiaries (A) license Avatech Software Products or Avatech IP Rights or (B) provide customization, configuration, maintenance, or implementation services with respect to Avatech Software (collectively, “Avatech License and Service Agreements”), (ii) Avatech’s, Avatech Subsidiaries’, or their agents’ performance under any Avatech License and Service Agreements, or (iii) payment made or received under any Avatech License and Service Agreements, except where such disputes have not, individually or in the aggregate, had, and would not, individually or in the aggregate, reasonably be expected to have, a Avatech Material Adverse Effect.  Except as would not, individually or in the aggregate, reasonably be expected to have a Avatech Material Adverse Effect, no parties to the Avatech License and Service Agreements are in material breach thereof.

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3.10        Contracts.

(a)           Part 3.10(a) of the Avatech Disclosure Schedule identifies each of the following Avatech Contracts:

(i)           each Avatech Contract relating to the employment of, or the performance of employment-related services by, any employee at the vice president level or above, consultant or independent contractor;

(ii)          each Avatech Contract relating to the acquisition, transfer, use, development, sharing or license of any technology or any Intellectual Property or Avatech IP Rights or Avatech Licensed IP;

(iii)         each Avatech Contract imposing any restriction on Avatech’s or any Avatech Subsidiary’s right or ability (A) to compete with any other Person, (B) to acquire any product or other asset or any services from any other Person, to sell any product or other asset to, or perform any services for, any other Person or to transact business or deal in any other manner with any other Person, or (C) to develop or distribute any technology;

(iv)         each Avatech Contract creating or involving any agency relationship, distribution arrangement or franchise relationship;

(v)         each Avatech Contract relating to the creation of any Encumbrance with respect to any asset of Avatech or any Avatech Subsidiary;

(vi)         each Avatech Contract involving or that contemplates or requires any guaranty, any pledge, any performance or completion bond, any indemnity or any surety arrangement;

(vii)        each Avatech Contract creating or relating to any collaboration or joint venture or any sharing of technology, revenues, profits, losses, costs or liabilities, including Avatech Contracts involving investments by Avatech in, or loans by Avatech to, any other Entity;

(viii)      each Avatech Contract relating to the purchase or sale of any product or other asset by or to, or the performance of any services by or for, or otherwise involving as a counterparty, any Avatech Related Party;

(ix)         each Avatech Contract relating to indebtedness for borrowed money;

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(x)          each Avatech Contract relating to the acquisition or disposition by Avatech or any Avatech Subsidiary of any operating business, material asset, capital stock or equity interest of Avatech, any Avatech Subsidiary or any other Person that has not been consummated or that has been consummated but contains representations, covenants, guaranties, indemnities or other obligations on the part of Avatech or any Avatech Subsidiary that remain in effect;

(xi)         any other Avatech Contract pursuant to which Avatech or any Avatech Subsidiary is required to actively perform that contemplates or involves (A) the payment or delivery of cash or other consideration in an amount or having a value in excess of $50,000 in the aggregate, other than in the Ordinary Course of Business, (B) the purchase or sale of any product, or performance of services by or to Avatech or any Avatech Subsidiary having a value in excess of $50,000 in the aggregate, other than in the Ordinary Course of Business or (C) a term of more than sixty (60) days and that may not be terminated by Avatech or the applicable Avatech Subsidiary (without penalty) within sixty (60) days after the delivery of a termination notice by Avatech or the applicable Avatech Subsidiary, other than in the Ordinary Course of Business;

(xii)        each Avatech Contract with any Person, including without limitation any financial advisor, broker, finder, investment banker or other Person, providing advisory services to Avatech or any Avatech Subsidiary in connection with the Contemplated Transactions.

(b)           Avatech has delivered or made available to Merger Partner accurate and complete (except for applicable redactions thereto) copies of all written Avatech Contracts, including all amendments thereto. There are no Avatech Contracts that are not in written form. Each Avatech Contract is valid and in full force and effect, is enforceable by Avatech or the applicable Avatech Subsidiary in accordance with its terms, and after the Effective Time will continue to be legal, valid, binding and enforceable on identical terms. The consummation of the Contemplated Transactions hereby shall not (either alone or upon the occurrence of additional acts or events) result in any payment or payments becoming due from Avatech or any Avatech Subsidiary, the Surviving Corporation or Merger Partner or any Merger Partner Subsidiary to any Person under any Avatech Contract or give any Person the right to terminate or alter the provisions of any Avatech Contract.

(c)           Except as Disclosed in Part 3.10(c) of the Avatech Disclosure Schedule, neither Avatech nor any Avatech Subsidiary has materially violated or breached, or committed any material default under, any Avatech Contract, and, to the Knowledge of Avatech, no other Person has violated or breached, or committed any default under, any Avatech Contract.

(d)           Except as Disclosed in Part 3.10(d) of the Avatech Disclosure Schedule, no event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time) will, or would reasonably be expected to, (i) result in a material violation or breach of any of the provisions of any Avatech Contract, (ii) give any Person the right to declare a default or exercise any remedy under any Avatech Contract, (iii) give any Person the right to accelerate the maturity or performance of any Avatech Contract, or (iv) give any Person the right to cancel, terminate or modify any Avatech Contract.

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(e)           Except as Disclosed in Part 3.10(e) of the Avatech Disclosure Schedule, neither Avatech nor any Avatech Subsidiary has received any written notice or other communication regarding any actual or possible violation or breach of, or default under, any Avatech Contract.

(f)           Neither Avatech nor any Avatech Subsidiary has waived any material rights under any Avatech Contract.

(g)           Except as Disclosed in Part 3.10(g) of the Avatech Disclosure Schedule, no Person is renegotiating, or has a right pursuant to the terms of any Avatech Contract to renegotiate, any amount paid or payable to Avatech or any Avatech Subsidiary under any Avatech Contract or any other material term or provision of any Avatech Contract.

(h)           There are no proposed Contracts that remains under consideration by Avatech, except for a Contract entered into in the Ordinary Course of Business, as to which any bid, offer, award, written proposal, term sheet or similar document has been submitted or received by Avatech (other than term sheets provided by Avatech or to Avatech by any third party related to the subject matter of this transaction).

(i)           Part 3.10(i) of the Avatech Disclosure Schedule provides an accurate and complete list of all Consents required under any Avatech Contract to consummate the Merger and the other Contemplated Transactions.

3.11       Liabilities; Fees, Costs and Expenses.

(a)           Neither Avatech nor any Avatech Subsidiary has any accrued, contingent or other liabilities of any nature, either matured or unmatured (whether or not required to be reflected in financial statements in accordance with GAAP, and whether due or to become due), except for:  (i) liabilities identified in Avatech’s balance sheet included in its Form 10-Q for the quarter ended March 31, 2010 (the “Avatech Balance Sheet”), or otherwise described in Avatech’s Form 10-Q for the quarter ended March 31, 2010; (ii) liabilities that have been incurred since March 31, 2010 in the Ordinary Course of Business; (iii) liabilities which have arisen since March 31, 2010 in the Ordinary Course of Business; (iv) contractual and other liabilities incurred in the Ordinary Course of Business which are not required by GAAP to be reflected on a balance sheet and (vi) liabilities which, individually or in the aggregate, have not, and would not reasonably be expected to, result in an Avatech Material Adverse Effect.

3.12       Compliance with Legal Requirements.  Avatech and each Avatech Subsidiary are, and since November 1, 2007 have been, in compliance in all material respects with all applicable Legal Requirements, except where any such noncompliance, individually or in the aggregate, has not, and would not reasonably be expected to, result in an Avatech Material Adverse Effect.  Avatech has not received, since November 1, 2007, any written notice or other communication from any Governmental Body or any other Person regarding (a) any actual, alleged, possible or potential violation of, or failure to comply with, any Legal Requirement, except as has not, and would not reasonably be expected to, result in an Avatech Material Adverse Effect, or (b) any actual, alleged, possible or potential obligation on the part of Avatech or the applicable Avatech Subsidiary to undertake, or to bear all or any portion of the cost of, any material cleanup or any material remedial, corrective or responsive action of any nature.  Avatech has delivered or made available to Merger Partner an accurate and complete copy of each report, study, survey or other document to which Avatech or any Avatech Subsidiary has access that addresses or otherwise relates to the compliance of Avatech and any Avatech Subsidiary with, or the applicability to Avatech or any Avatech Subsidiary of, any Legal Requirement.

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3.13       Tax Matters.

(a)           All Tax Returns required to be filed by or on behalf of Avatech or any Avatech Subsidiary with any Governmental Body with respect to any taxable period ending on or after November 1, 2007 and on or before the Closing Date (the “Avatech Returns”) (i) have been or will be filed on or before the applicable due date (including any permitted extensions of such due date), and (ii) have been, or will be when filed, accurately and completely prepared in all material respects. All Taxes due required to be paid by Avatech or any Avatech Subsidiary on or before the Closing Date have been or will be paid on or before the Closing Date. Avatech has delivered or made available to Merger Partner accurate and complete copies of all Avatech Returns filed which have been requested by Merger Partner. Avatech had established in its books and records, in the Ordinary Course of Business, reserves adequate for the payment of all unpaid Taxes by Avatech or any Avatech Subsidiary for the period from June 30, 2009 through the Closing Date.

(b)           The Avatech Financial Statements fully accrue all liabilities for unpaid Taxes with respect to all periods through the dates thereof in accordance with GAAP.

(c)           Since November 1, 2007, no Avatech Return has ever been examined or audited by any Governmental Body and no examination or audit of any Avatech Return is currently in progress or, to the Knowledge of Avatech, threatened or contemplated. Avatech has delivered or made available to Merger Partner accurate and complete copies of all audit reports, private letter rulings, revenue agent reports, information document requests, notices of proposed deficiencies, deficiency notices, protests, petitions, closing agreements, settlement agreements, pending ruling requests and any similar documents submitted by, received by, or agreed to by or on behalf of Avatech or any Avatech Subsidiary relating to Avatech Returns since November 1, 2007. Since November 1, 2007, (i) no extension or waiver of the limitation period applicable to any of the Avatech Returns has been granted (by Avatech, any Avatech Subsidiary or any other Person), and no such extension or waiver has been requested from Avatech or any Avatech Subsidiary; (ii) all Taxes that Avatech was required by law to withhold or collect have been duly withheld or collected and, to the extent required, have been properly paid to the appropriate Governmental Body; and (iii) neither Avatech nor any Avatech Subsidiary has executed or filed any power of attorney with any taxing authority.

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(d)           Since November 1, 2007, neither Avatech nor any Avatech Subsidiary (i) has been a member of an affiliated group (within the meaning of Section 1504(a) of the Code) filing a consolidated federal income Tax Return (other than a group of which only Avatech and Avatech Subsidiaries were members), (ii) has any liability for the Taxes of any person under Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local or foreign law), as a transferee or successor, or otherwise, and (iii) has been a party to any joint venture, collaboration, partnership or other agreement that could be treated as a partnership for Tax purposes. Neither Avatech nor any Avatech Subsidiary is or, since November 1, 2007 has been, a party to or bound by any Tax indemnity agreement, Tax-sharing agreement, Tax allocation agreement or similar Contract. Neither Avatech nor any Avatech Subsidiary has been either a “distributing corporation” or a “controlled corporation” in a distribution of stock intended to qualify for tax-free treatment under Section 355 of the Code (y) in the two (2) years prior to the date of this Agreement or (z) which could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with the Merger.

(e)           No claim or Legal Proceeding is pending or, to the Knowledge of Avatech, has been threatened against or with respect to Avatech or any Avatech Subsidiary in respect of any Tax. There are no unsatisfied liabilities for Taxes with respect to any notice of deficiency or similar document received by Avatech or any Avatech Subsidiary with respect to any Tax (other than liabilities for Taxes asserted under any such notice of deficiency or similar document which are being contested in good faith by Avatech or the applicable Avatech Subsidiary and with respect to which adequate reserves for payment have been established). There are no liens for Taxes upon any of the assets of Avatech or any Avatech Subsidiary except liens for current Taxes not yet due and payable. Neither Avatech nor any Avatech Subsidiary has entered into or become bound by any agreement or consent pursuant to Section 341(f) of the Code. Avatech has not been, and Avatech will not be, required to include any adjustment in taxable income for any tax period (or portion thereof) pursuant to Section 481 or 263A of the Code or any comparable provision under state or foreign Tax laws as a result of transactions or events occurring, or accounting methods employed, prior to the Closing Date.

(f)           None of the assets of Avatech or any Avatech Subsidiary (i) is property that is required to be treated as being owned by any other Person pursuant to the provisions of former Section 168(f)(8) of the Internal Revenue Code of 1954, (ii) is “tax-exempt use property” within the meaning of Section 168(h) of the Code, (iii) directly or indirectly secures any debt the interest on which is tax exempt under Section 103(a) of the Code, or (iv) is subject to a lease under Section 7701(h) of the Code or under any predecessor section.

(g)          Since November 1, 2007, neither Avatech nor any Avatech Subsidiary has participated in an international boycott as defined in Section 999 of the Code.

(h)          Neither Avatech nor any Avatech Subsidiary will be required to include any item of income in, or exclude any item of deduction from, taxable income for any period (or any portion thereof) ending after the Closing Date as a result of any (i) closing agreement as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign Tax law) executed on or prior to the Closing Date, (ii) installment sale or other open transaction disposition made on or prior to the Closing Date, or (iii) prepaid amount received on or prior to the Closing Date.

(i)           Since November 1, 2007, neither Avatech nor any Avatech Subsidiary has engaged in any “listed transaction” for purposes of Treasury Regulation sections 1.6011-4(b)(2) or 301.6111-2(b)(2) or any analogous provision of state or local law.

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(j)           Neither Avatech nor any Avatech Subsidiary has taken or agreed to take any action that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.  Neither Avatech nor any Avatech Subsidiary is aware of any agreement, plan or other circumstance that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.

3.14       Employee and Labor Matters; Benefit Plans.

(a)          Part 3.14(a) of the Avatech Disclosure Schedule accurately sets forth, with respect to each employee of Avatech or any Avatech Subsidiary (including any employee of Avatech or any Avatech Subsidiary who is on a leave of absence) with an annual base salary in excess of $100,000:

(i)           the name of such employee and the date as of which such employee was originally hired by Avatech or any Avatech Subsidiary;

(ii)          such employee’s title;

(iii)         the aggregate dollar amount of the wages, salary, and bonuses received by such employee from Avatech or any Avatech Subsidiary with respect to services performed in calendar year 2009;

(iv)         such employee’s annualized base salary as of the date of this Agreement; and

(v)          such employee’s primary office location.

(b)           There is no former employee of Avatech or any Avatech Subsidiary who is receiving or is scheduled to receive (or whose spouse or other dependent is receiving or is scheduled to receive) any benefits (from Avatech or any Avatech Subsidiary) relating to such former employee’s employment with Avatech or any Avatech Subsidiary.

(c)          To the Knowledge of Avatech:

(i)           no Key Employee of Avatech or any Avatech Subsidiary intends to terminate his employment with Avatech or the applicable Avatech Subsidiary; and

(ii)           no employee of Avatech or any Avatech Subsidiary is a party to or is bound by any confidentiality agreement, noncompetition agreement or other Contract (with any Person) that may have an adverse effect on:  (A) the performance by such employee of any of his duties or responsibilities as an employee of Avatech or the applicable Avatech Subsidiary; or (B) Avatech’s or any Avatech Subsidiary’s business or operations.

(d)          Neither Avatech nor any Avatech Subsidiary is a party to or bound by, and, since November 1, 2007, neither Avatech nor any Avatech Subsidiary has ever been a party to or bound by any union contract, collective bargaining agreement or similar Contract in the United States.

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(e)           Neither Avatech nor any Avatech Subsidiary is engaged, and since November 1, 2007 neither Avatech nor any Avatech Subsidiary has ever been engaged, in any unfair labor practice of any nature.  Since November 1, 2007, there has never been any slowdown, work stoppage, labor dispute or union organizing activity, or any similar activity or dispute, affecting Avatech or any Avatech Subsidiary. To Avatech’s Knowledge, no event has occurred, and no condition or circumstance exists, that might directly or indirectly give rise to the commencement of any such slowdown, work stoppage, labor dispute or union organizing activity or any similar activity or dispute.  Except as Disclosed in Part 3.14(e) of the Avatech Disclosure Schedule, there are no actions, suits, claims, labor disputes or grievances pending or, to the Knowledge of Avatech, threatened or reasonably anticipated relating to any labor, safety or discrimination matters involving any employee of Avatech or any Avatech Subsidiary, including, without limitation, charges of unfair labor practices or discrimination complaints.  Avatech and each Avatech Subsidiary has good labor relations, and no reason to believe that the consummation of the Merger or any of the other Contemplated Transactions will have a material adverse effect on Avatech or any Avatech Subsidiary’s labor relations.

(f)           Part 3.14(f) of the Avatech Disclosure Schedule identifies each Avatech Plan sponsored, maintained, contributed to or required to be contributed to by Avatech or any Avatech Subsidiary for the benefit of any employee of Avatech or any Avatech Subsidiary in effect as of the date hereof.  Except to the extent required to comply with Legal Requirements, neither Avatech nor any Avatech Subsidiary intends or has committed to establish or enter into any new Avatech Plan, or to modify any Avatech Plan.

(g)           Avatech has delivered or made available to Merger Partner:  (i) correct and complete copies of all documents setting forth the terms of each Avatech Plan, including all amendments thereto, and all related trust documents or funding vehicles and amendments thereto; (ii) the two (2) most recent annual reports (Form Series 5500 and all schedules and financial statements attached thereto), if any, required under ERISA or the Code in connection with each Avatech Plan; (iii) if required by ERISA, the two (2) most recent auditor’s reports for each Avatech Plan; (iv) the most recent summary plan description together with the summaries of material modifications thereto, if any, required under ERISA with respect to each Avatech Plan; (v) all material written Contracts relating to each Avatech Plan, including administrative service agreements and group insurance contracts; (vi) all material written materials provided to any employee of Avatech or any Avatech Subsidiary relating to any Avatech Plan and any proposed Avatech Plans, in each case, relating to any amendments, terminations, establishments, increases or decreases in benefits, acceleration of payments or vesting schedules or other events that would result in any liability to Avatech or any Avatech Subsidiary; (vii) all material correspondence to or from any Governmental Body relating to any Plan; (viii) the form of all COBRA forms and related notices; (ix) all insurance policies in the possession of Avatech or any Avatech Subsidiary pertaining to fiduciary liability insurance covering the fiduciaries for each Avatech Plan; (x) all discrimination tests required under the Code for each Avatech Plan intended to be qualified under Section 401(a) of the Code for the three (3) most recent plan years; and (xi) the most recent Internal Revenue Service determination or opinion letter issued with respect to each Avatech Plan intended to be qualified under Section 401(a) of the Code.

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(h)           Avatech and each Avatech Subsidiary has performed all material obligations required to be performed by it under each Avatech Plan and is not in default under or violation of, and Avatech has no Knowledge of any default under or violation by any other party of, the terms of any Avatech Plan.  Each Avatech Plan has been established and maintained substantially in accordance with its terms and in substantial compliance with all applicable Legal Requirements, including ERISA and the Code.  Any Avatech Plan intended to be qualified under Section 401(a) of the Code has obtained a favorable determination letter (or opinion letter, if applicable) as to its qualified status under the Code or has remaining a period of time under applicable Treasury regulations or Internal Revenue Service pronouncements in which to apply for such a letter and make any amendments necessary to obtain a favorable determination as to the qualified status of that Avatech Plan.  No “prohibited transaction,” within the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has occurred with respect to any Avatech Plan subject to ERISA or Section 4975 of the Code.  There are no claims or Legal Proceedings pending, or, to the Knowledge of Avatech, threatened or reasonably anticipated (other than routine claims for benefits), against any Avatech Plan or against the assets of any Avatech Plan.  There are no audits, inquiries or Legal Proceedings pending or, to the Knowledge of Avatech, threatened by any Governmental Body with respect to any Avatech Plan.  Since November 1, 2007, neither Avatech nor any Avatech Subsidiary has ever incurred any penalty or tax with respect to any Avatech Plan under Section 502(i) of ERISA or Sections 4975 through 4980 of the Code that remains unsatisfied.  Avatech and each Avatech Subsidiary have made all contributions and other payments required by and due under the terms of each Avatech Plan.

(i)           Since November 1, 2007, neither Avatech nor any Avatech Subsidiary has (i) maintained, established, sponsored, participated in, or contributed to any: (A) employee benefit pension plan (as defined in Section 3(2) of ERISA) (“Pension Plan”) subject to Title IV of ERISA; (B) “multiemployer plan” within the meaning of Section (3)(37) of ERISA; or (C) “multiple employer welfare arrangement” (within the meaning of Section 3(40) of ERISA); (ii) maintained, established, sponsored, participated in or contributed to, any Pension Plan in which stock of Avatech or any Avatech Subsidiary is or was held as a plan asset; or (iii) maintained a Pension Plan or multiemployer plan, or the equivalent thereof, in a foreign jurisdiction (a “Avatech Foreign Plan).

(j)           Except as Disclosed in Part 3.14(j) of the Avatech Disclosure Schedule, no Avatech Plan provides (except at no cost to Avatech or any Avatech Subsidiary), or reflects or represents any liability of Avatech or any Avatech Subsidiary to provide, life insurance, health benefits or other employee welfare benefits to any Person for any reason after termination of employment with the Avatech or any Avatech Subsidiary, or the spouses or dependents of any such Person, except as may be required by COBRA or other applicable Legal Requirements. Other than commitments made that involve no future costs to Avatech or any Avatech Subsidiary, neither Avatech nor any Avatech Subsidiary has any obligation (whether oral or written) to any employee of Avatech or any Avatech Subsidiary (either individually or as a group) or any other Person to provide such employee(s) or other Person with life insurance, health benefits or other employee welfare benefits after terminating employment with the Avatech or any Avatech Subsidiary, except to the extent required by applicable Legal Requirements.

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(k)           Neither the execution of this Agreement nor the consummation of the Contemplated Transactions will (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Avatech Plan, Avatech Contract, trust or loan that will or may result (either alone or in connection with any other circumstance or event) in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any employees of Avatech or any Avatech Subsidiary.

(l)           Avatech and Avatech Subsidiaries:  (i) are, and at all times since November 1, 2007 have been, in substantial compliance with all applicable Legal Requirements respecting employment, employment practices, terms and conditions of employment and wages and hours, in each case, with respect to their employees, including the health care continuation requirements of COBRA, the requirements of FMLA, the requirements of HIPAA and any similar provisions of state law; (ii) have withheld and reported all amounts required by applicable Legal Requirements or by Contract to be withheld and reported with respect to wages, salaries and other payments to their employees; (iii) are not liable for any arrears of wages or any taxes or any penalty for failure to comply with the Legal Requirements applicable to the foregoing; and (iv) are not liable for any payment to any trust or other fund governed by or maintained by or on behalf of any Governmental Body with respect to unemployment compensation benefits, social security or other benefits or obligations for their employees (other than routine payments to be made in the normal course of business and consistent with past practice). There are no pending or, to the Knowledge of Avatech, threatened or reasonably anticipated claims or Legal Proceedings against Avatech or any Avatech Subsidiary under any worker’s compensation policy or long-term disability policy.

(m)           Except as Disclosed on Part 3.14(m) of the Avatech Disclosure Schedule, neither Avatech nor any Avatech Subsidiary is required to be, and, has not since November 1, 2007 ever been required to be, treated as a single employer with any other Person under Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the Code.  Neither Avatech nor any Avatech Subsidiary has since November 1, 2007 ever made a complete or partial withdrawal from a multiemployer plan, as such term is defined in Section 3(37) of ERISA, resulting in “withdrawal liability,” as such term is defined in Section 4201 of ERISA (without regard to subsequent reduction or waiver of such liability under either Section 4207 or 4208 of ERISA).

(n)           To the Knowledge of Avatech, no officer of Avatech or any Avatech Subsidiary is subject to any injunction, writ, judgment, decree, or order of any court or other Governmental Body that would interfere with such officer’s efforts to promote the interests of Avatech or any Avatech Subsidiary, or that would interfere with the business of Avatech or any Avatech Subsidiary. Neither the execution nor the delivery of this Agreement, nor the carrying on of the business of Avatech or any Avatech Subsidiary as presently conducted will, to the Knowledge of Avatech, conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default under, any Contract under which any employee of Avatech or any Avatech Subsidiary may be bound.

(o)           There is no agreement, plan, arrangement or other Contract covering any employee or independent contractor or former employee or independent contractor of Avatech or any Avatech Subsidiary that, considered individually or considered collectively with any other such Contracts and/or other events, will, or could reasonably be expected to, give rise directly or indirectly to the payment of any amount that would not be deductible pursuant to Section 280G or Section 162 of the Code. Neither Avatech nor any Avatech Subsidiary is a party to any Contract, nor does Avatech or any Avatech Subsidiary have any obligation (current or contingent), to compensate any individual for excise taxes paid pursuant to Section 4999 of the Code.

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(p)           No holder of shares of Avatech Common Stock holds shares of Avatech Common Stock that are non-transferable and subject to a substantial risk of forfeiture within the meaning of Section 83 of the Code with respect to which a valid election under Section 83(b) of the Code has not been made unless such shares were acquired on the exercise of an incentive stock option as defined in Section 422 of the Code.

(q)           Except as Disclosed in Part 3.14(q) of the Avatech Disclosure Schedule, every Avatech employee plan or arrangement, which includes any and all salary, bonus, deferred compensation, incentive compensation, stock purchase, stock option, severance pay, termination pay, hospitalization, medical, life or other insurance, supplemental unemployment benefits, profit-sharing, pension or retirement plan, program or agreement (collectively, the “Avatech Plans”, and each individually a “Avatech Plan”) sponsored, maintained, contributed to or required to be contributed to by Avatech or any Avatech Subsidiary for the benefit of any employee of Avatech or any Avatech Subsidiary and which is a “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of the Code) has been since November 1, 2007, and is in operational and document compliance with Code Section 409A and applicable regulations and guidance issued thereunder, so that the additional tax described in Code Section 409A(a)(1)(B) will not be assessed against the individuals participating in any such non-qualified deferred compensation plan.

(r)           There is no service provider Contract with Avatech or any Avatech Subsidiary (i) that may not be canceled with advance notice of sixty (60) days or less or (ii) under which Merger Partner or any Merger Partner Subsidiary will be assessed a surrender charge or penalty upon cancellation.

(s)           Except as Disclosed on Part 3.14(s) of the Avatech Disclosure Schedule, no Avatech Plan is invested in any “stable value fund” (or similar arrangement) which assesses any back-end load or market value adjustment upon termination of such investment.

(t)           For purposes of each Avatech Plan, Avatech and each Avatech Subsidiary have correctly determined the status for each service provider to the Avatech and any Avatech Subsidiary as an employee, a leased employee or an independent contractor, as applicable.

3.15       Environmental Matters.  Avatech and each Avatech Subsidiary is in compliance in all material respects with all applicable Environmental Laws, which compliance includes the possession by Avatech and each Avatech Subsidiary of all permits and other Governmental Authorizations required under applicable Environmental Laws, and compliance with the terms and conditions thereof. Neither Avatech nor any Avatech Subsidiary has received since November 1, 2007 any written notice or other communication (in writing or otherwise), whether from a Governmental Body, citizens group, employee or otherwise, that alleges that Avatech or any Avatech Subsidiary is not in compliance with any Environmental Law, and, to the Knowledge of Avatech, there are no circumstances that may prevent or interfere with Avatech’s or any Avatech Subsidiary’s compliance with any Environmental Law in the future. To the Knowledge of Avatech it has no material liability under any Environmental Laws. There are no Governmental Authorizations currently held by Avatech or any Avatech Subsidiary pursuant to Environmental Laws.

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3.16       Legal Proceedings; Orders.

(a)           Except as Disclosed in Part 3.16(a) of the Avatech Disclosure Schedule, there is no pending Legal Proceeding, and to the Knowledge of Avatech, no Person has threatened to commence any Legal Proceeding, that involves Avatech or any Avatech Subsidiary or any assets owned or used by Avatech or any Avatech Subsidiary or any Person whose liability Avatech or any Avatech Subsidiary has or may have retained or assumed, either contractually or by operation of law (i) claiming damages in an amount in excess of $50,000; or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, the Merger or any of the other Contemplated Transactions. To the Knowledge of Avatech, no event has occurred, and no claim, dispute or other condition or circumstance exists, that will, or that would reasonable be expected to, give rise to or serve as a basis for the commencement of any such Legal Proceeding.

(b)           There is no order, writ, injunction, judgment or decree to which Avatech or any Avatech Subsidiary, or any of the assets owned or used by Avatech or any Avatech Subsidiary, is subject. To the Knowledge of Avatech, no officer or other employee of Avatech or any Avatech Subsidiary is subject to any order, writ, injunction, judgment or decree that relates to Avatech’s or any Avatech Subsidiary’s business or to any assets owned or used by Avatech or any Avatech Subsidiary.

3.17       Non-Contravention; Consents.  Subject to adoption of this Agreement by Avatech as the sole stockholder of Merger Sub and the filing of a Certificate of Merger as required by the DGCL, neither (a) the execution, delivery or performance of this Agreement or any of the Related Agreements, nor (b) the consummation of the Merger or any of the other Contemplated Transactions, will directly or indirectly (with or without notice or lapse of time):

(a)           contravene, conflict with or result in a violation of any of the provisions of the Avatech Constituent Documents;

(b)           contravene, conflict with or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions or to exercise any remedy or obtain any relief under, any Legal Requirement or any order, writ, injunction, judgment or decree to which Avatech or any Avatech Subsidiary, or any of the assets owned or used by Avatech or any Avatech Subsidiary, is subject;

(c)           result in a material conflict, violation or breach of, or result in a material default under, any provision of any Avatech Contract, or give any Person the right to (i) declare a default or exercise any remedy under any such Avatech Contract, (ii) accelerate the maturity or performance of any such Avatech Contract, or (iii) cancel, terminate or modify any such Avatech Contract; or

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(d)           result in the imposition or creation of any Encumbrance upon or with respect to any material asset owned or used by Avatech or any Avatech Subsidiary (except for minor liens that will not, in any case or in the aggregate, materially detract from the value of the assets subject thereto or materially impair the operations of Avatech or any Avatech Subsidiary).

Except for those filings, notices or Consents Disclosed in Part 3.17 of the Avatech Disclosure Schedule, no filing with, notice to or Consent from any Person is required in connection with (y) the execution, delivery or performance of this Agreement or any of the Related Agreements, or (z) the consummation of the Merger or any of the other Contemplated Transactions.

3.18       No Vote Required.  No vote of the holders of Avatech’s capital stock is necessary to approve the issuance of the Merger Shares in connection with the Merger or any of the other Contemplated Transactions.

3.19       No Broker.  Except for and with respect to Duff & Phelps Securities, LLC and Duff & Phelps, LLC, the compensation of which shall be payable by Avatech, (a) neither Avatech nor Merger Sub has, directly or indirectly, engaged any broker, finder, investment banker or other intermediary in connection with the Merger or any of the other Contemplated Transactions, and (b) no action by Avatech or Merger Sub will cause or support any claim to be asserted against Merger Partner, the Surviving Corporation, or Avatech by any broker, finder, investment banker or other intermediary in connection with the Merger or any of the Contemplated Transactions.

3.20       Authority; Binding Nature of Agreement.  Avatech and Merger Sub have the absolute and unrestricted right, power and authority to enter into and perform their obligations under this Agreement and the Related Agreements to which Avatech is a party; and the execution, delivery and performance by Avatech and Merger Sub of this Agreement (including the contemplated issuance of the Merger Shares pursuant to the Merger in accordance with this Agreement) have been duly authorized by all necessary action on the part of Avatech and Merger Sub and their respective boards of directors, subject only to the adoption of this Agreement by Avatech as the sole stockholder of Merger Sub and the filing and recordation of the Certificate of Merger pursuant to the DGCL. This Agreement and each of the Related Agreements to which Avatech is a party have been duly executed and delivered by Avatech and Merger Sub, and, assuming due authorization, execution and delivery by the other Parties hereto, constitutes the legal, valid and binding obligation of Avatech and Merger Sub, enforceable against them in accordance with its terms, except as enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application relating to or affecting enforcement of creditors’ rights and the exercise of judicial discretion in accordance with general principles of equity.

3.21       Anti-Takeover Law; Rights Agreement.  The boards of directors of Avatech and Merger Sub have taken all actions necessary to ensure that the execution of this Agreement and the consummation of the Merger and the other Contemplated Transactions will be exempt from any anti-takeover or similar provisions of Avatech Constituent Documents, any Avatech Contract, and any applicable “moratorium”, “control share”, “fair price”, “interested stockholder” or other anti-takeover laws and regulations of any jurisdiction.  The Rights Agreement dated as of March 11, 2002 between Avatech and Wells Fargo Bank Minnesota, National Association has been terminated.

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3.22       Insurance.  Avatech maintains insurance policies with reputable insurance carriers against all risks of a character as usually insured against, and in such coverage amounts as are usually maintained, by similarly situated companies in the same or similar businesses. Each such insurance policy is in full force and effect.  Since November 1, 2007, Avatech has not received any written notice or other communication regarding any actual or possible (a) cancellation or invalidation of any material insurance policy, (b) refusal of any coverage or rejection of any claim under any material insurance policy, or (c) material adjustment in the amount of the premiums payable with respect to any material insurance policy.

3.23       Related Party Transactions. 

(a)           No Avatech Related Party has, and no Avatech Related Party has at any time since November 1, 2007 had, any direct or indirect interest in any material asset used in or otherwise relating to the business of Avatech or any Avatech Subsidiary.

(b)           No Avatech Related Party is, or since November 1, 2007 has been, indebted to Avatech or any Avatech Subsidiary.

(c)           Except as Disclosed in Schedule 3.23(c) of the Avatech Disclosure Schedule, since November 1, 2007, no Avatech Related Party has entered into, or has had any direct or indirect financial interest in, any Avatech Contract, transaction or business dealing involving Avatech or any Avatech Subsidiary.

(d)           No Avatech Related Party is competing, or has at any time since November 1, 2007 competed, directly or indirectly, with Avatech or any Avatech Subsidiary.

(e)           No Avatech Related Party has any claim or right against Avatech or any Avatech Subsidiary (other than rights under capital stock of Avatech and rights to receive compensation for services performed as an employee of Avatech or any Avatech Subsidiary).

3.24       Valid Issuance.  The Merger Shares to be issued pursuant to the Merger will, when issued in accordance with the provisions of this Agreement, be validly issued, fully paid and nonassessable.

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3.25       Controls and Procedures, Certifications and Other Matters Relating to the Sarbanes-Oxley Act.

(a)           Avatech has established and maintains disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act.  Avatech’s disclosure controls and procedures are designed to ensure that all material information required to be disclosed by Avatech in the reports that it files or furnishes under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such material information is accumulated and communicated to Avatech’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act.  Avatech’s management has evaluated, with the participation of its principal executive and principal financial officers, the effectiveness of Avatech’s disclosure controls and procedures as of the end of its most recent fiscal quarter, and such assessment concluded that such controls were effective at the reasonable assurance level.  Avatech’s management has completed an assessment of the effectiveness of Avatech’s internal control over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act for the year ended June 30, 2009, and such assessment concluded that such controls were effective.  To the Knowledge of Avatech, there is no reason to believe that Avatech, its independent registered public accounting firm, and its principal executive officer and principal financial officer, as the case may be, will not be able to provide the reports, certifications or attestations required pursuant to the rules and regulations applicable to Avatech adopted pursuant to Section 302 or Section 404 of the Sarbanes-Oxley Act or Items 307 or 308 of Regulation S-K when Avatech next files an Annual Report on Form 10-K and a Quarterly Report on Form 10-Q under the Exchange Act, without limitation as to the effectiveness of Avatech’s internal control over financial reporting or disclosure controls and procedures.  Neither Avatech nor, to the Knowledge of Avatech, its independent registered public accounting firm, has identified or been made aware of (i) any significant deficiency or material weakness in the system of internal control over financial reporting utilized by Avatech and Avatech Subsidiaries, in each case which has not been substantially remediated, or (ii) any fraud which involves Avatech’s management or other employees who have a role in the preparation of financial statements or the internal control over financial reporting utilized by Avatech and Avatech Subsidiaries.  Since June 30, 2008, any material change in the internal control over financial reporting or failure or inadequacy of disclosure controls required to be disclosed in any Avatech SEC Document has been so disclosed.

(b)           Neither Avatech nor any of its officers has received notice from any Governmental Entity questioning or challenging the accuracy, completeness or manner of filing or submission of any filing with the SEC, including without limitation any certifications required by Section 906 of the Sarbanes-Oxley Act.

(c)           To the Knowledge of Avatech, Avatech has not, since July 30, 2002, extended or maintained credit, arranged for the extension of credit, modified or renewed an extension of credit, in the form of a personal loan or otherwise, to or for any director or executive officer of Avatech.

3.26       Objections to the Merger.  Neither any member of the board of directors of Avatech nor any executive officer of Avatech, nor any of their respective Representatives, has received any written or oral indication from the Dissident Stockholders or from any Representative of the Dissident Stockholders that any of the Dissident Stockholders intends to object to or otherwise contest the Merger.

4.           REPRESENTATIONS, WARRANTIES AND COVENANTS OF DESIGNATOR

Except as Disclosed, the Designator makes the following representations and warranties to Avatech and Merger Sub, as of the date hereof and as of the Closing Date.  The Schedule of the Designator is referred to herein as the “Designator Disclosure Schedule”.

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4.1         Representations.  The Designator makes the representations and warranties set forth below to Avatech and Merger Sub in respect of its acquisition of the Merger Shares pursuant to the terms of this Agreement, as of the date hereof and as of the Closing Date.  For the avoidance of doubt, the representations, warranties and covenants set forth in this Article 4: (i) are the only representations, warranties and covenants made by the Designator in this Agreement; (ii) are included in this Agreement solely for the purpose of supporting the exemption from registration under the federal securities laws in connection with the issuance and sale of the Merger Shares, and (iii) do not in any way qualify or otherwise modify the representations and warranties of Avatech or Merger Sub contained in this Agreement.

(a)          The Designator understands and acknowledges that Avatech is relying on the accuracy and completeness of the representations and warranties made in this Section 4 in complying with applicable federal and state securities laws.  The Designator has its principal office in the state listed in the Preamble to this Agreement, and has no present intention of changing such principal office.

(b)          The Designator has received from Avatech the following documents:  (i) Avatech’s annual report to stockholders for the year ended June 30, 2009; (ii) Avatech’s Annual Report on Form 10-K for the year ended June 30, 2009; (iii) Avatech’s definitive proxy statement on Schedule 14A for the annual meeting held on November 5, 2009; (iv) Avatech’s Quarterly Reports on Form 10-Q for the quarters ended September 30, 2009, December 31, 2009, and March 31, 2010; and (v) Avatech’s Current Reports on Form 8-K filed on August 13, 2009, October 16, 2009, December 30, 2009, January 15, 2010, June 29, 2010 (as amended on June 29, 2009).

(c)          The Designator is acquiring the Merger Shares solely for investment, solely for the Designator’s own account, not for the account of any other person, and not for distribution, assignment or resale to others except in compliance with federal and applicable state securities laws.

(d)          The Designator has carefully read this Agreement and, to the extent the Designator believes necessary, has discussed with the Designator’s professional and tax advisors with respect to the financial and tax consequences of an investment in Avatech, as well as the suitability of its acquisition of the Merger Shares, based on the Designator’s circumstances.

(e)          The Designator has had a reasonable opportunity, at a reasonable time prior to the Designator’s investment in Avatech, to ask questions of and receive answers from Avatech or other representative of Avatech concerning the terms and conditions of the offering of the Merger Shares, and Avatech and its operations.

(f)           No oral representations have been made to the Designator in connection with the offering of the Merger Shares which are in any manner inconsistent with the materials that have been disclosed to the Designator.

(g)          The Designator has neither relied upon nor seen any form of advertising or general or public solicitation, including communications published in or broadcasted by any print or electronic medium and mass mailings, in connection with the offering of the Merger Shares, and is aware of no such solicitation or advertisement received by others.

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(h)          The Designator (i) acknowledges that an investment in Avatech involves a high degree of risk, that there is a limited market for the Merger Shares, that no significant market for the Merger Shares may develop, that limited rights exist to transfer the Merger Shares, and, therefore, that the Designator may be required to hold the Merger Shares indefinitely and may not realize any liquidity from any sale of the Merger Shares; (ii) has the financial means to make an investment in Avatech; and (iii) is able to bear the economic risk of an investment in Avatech.

(i)           The Designator is not (i) an employee benefit plan subject to ERISA or Section 4975 of the Code or (ii) an entity whose assets are deemed to be assets of such an employee benefit plan.

(j)           As of the date of the Designator’s acquisition of the Merger Shares, (i) the value of all securities owned by the Designator of all issuers that are or would be, but for the exemption set forth in Section 3(c)(1)(A) of the Investment Company Act of 1940, as amended, excluded from the definition of “investment company” under such Act solely by reason of Section 3(c)(1) thereof, will not exceed 10% of the value of the Designator’s total assets, and (ii) the Designator is not relying on Section 3(c)(1) of such Act as an exemption from classification as an investment company.

(k)          The Designator acknowledges that (i) the Merger Shares have not been registered under the Securities Act or any applicable state securities or “Blue Sky” laws (the “State Acts”), and are being offered and sold pursuant to exemptions from registration under the Securities Act by virtue of Section 4(2) of the Act and/or the provisions of Regulation D promulgated under Section 3(b) of the Securities Act, and such exemptions depend in part upon the accuracy of the statements, representations and agreements made by the Designator in Section 4 of this Agreement, and (ii) the Designator understands that the merits of investment in the Merger Shares have not been reviewed by, passed on, or submitted for review to any federal or state agency or other regulatory organization.

(l)           The Designator has the absolute and unrestricted right, power and authority to enter into this Agreement; and the execution and delivery of this Agreement by the Designator have been duly authorized by all necessary action on the part of the Designator. This Agreement has been duly executed and delivered by the Designator, and, assuming due authorization, execution and delivery by the other Parties hereto, constitutes the legal, valid and binding obligation of the Designator, enforceable against the Designator in accordance with its terms, except as enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application relating to or affecting enforcement of creditors’ rights and the exercise of judicial discretion in accordance with general principles of equity.

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4.2         Covenants. 

(a)          The Designator agrees that the Designator will not take, or cause to be taken any action with respect to the Merger Shares that would cause the Designator to be deemed an “underwriter” with respect to the Merger Shares, as defined in Section 2(11) of the Securities Act.

(b)          Subject to Section 5.6(c) hereof, the Designator agrees to not sell, pledge, hypothecate, donate or otherwise transfer (whether or not for consideration) the Merger Shares except (i) pursuant to an effective registration statement under the Securities Act and all applicable State Acts, (ii) to Avatech, or (iii) pursuant to an exemption from registration under the Securities Act and the State Acts, subject to the right of Avatech, prior to any such offer, sale or transfer, to require the delivery of an opinion of counsel satisfactory to Avatech that such registration is not required.

5.           CERTAIN AGREEMENTS OF THE PARTIES

5.1         Indemnification of Officers and Directors; Liability Insurance.

(a)           From the Effective Time through the sixth (6th) anniversary of the date on which the Effective Time occurs, each of Avatech and the Surviving Corporation shall, jointly and severally, indemnify and hold harmless each person who is now, or has been at any time since November 1, 2007, or who becomes prior to the Effective Time, a director or officer of Avatech or Merger Partner, or any of their respective Subsidiaries (the “D&O Indemnified Parties”), against all claims, losses, liabilities, damages, judgments, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements (collectively, “Costs”), incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to the fact that the D&O Indemnified Party is or was a director or officer of Avatech or Merger Partner, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent permitted under the DGCL for directors or officers of Delaware corporations. Each D&O Indemnified Party will be entitled to advancement of expenses incurred in the defense of any such claim, action, suit, proceeding or investigation from each of Avatech and the Surviving Corporation, jointly and severally, upon receipt by Avatech or the Surviving Corporation from the D&O Indemnified Party of a request therefor; provided that any person to whom expenses are advanced provides an undertaking, to the extent then required by the DGCL, to repay such advances if it is ultimately determined that such person is not entitled to indemnification.

(b)           For six (6) years after the Closing Date, except as otherwise required by a Legal Requirement, (i) the board of directors of Avatech shall not take any action that will cause the certificate of incorporation and bylaws of Avatech to contain provisions less favorable with respect to indemnification, advancement of expenses and exculpation of present and former directors and officers of Avatech than are presently set forth in such certificate of incorporation and bylaws; and (ii) the board of directors of the Surviving Corporation shall not take any action that will cause the certificate of incorporation and bylaws of the Surviving Corporation to contain provisions less favorable with respect to indemnification, advancement of expenses and exculpation of present and former directors and officers of the Merger Partner or Surviving Corporation than are presently set forth in the certificate of incorporation and bylaws of Surviving Corporation.

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(c)           Surviving Corporation shall purchase an insurance policy, with an effective date as of the Closing Date, which, to the extent not otherwise provided for in Merger Partner’s current policy, to the extent such policy remains in effect following the Closing, maintains in effect for six (6) years from the Closing Date the current directors’ and officers’ liability insurance policies maintained by Merger Partner (provided that the Surviving Corporation may substitute therefor policies of at least the same coverage containing terms and conditions that are not materially less favorable) with respect to matters occurring prior to the Effective Time; provided, however, that in no event shall Surviving Corporation be required to expend pursuant to this Section 5.1(c) more than an amount equal to 200% of current annual premiums paid by Merger Partner for such insurance.

(d)           Avatech shall purchase an insurance policy, with an effective date as of the Closing Date, which, to the extent not otherwise provided for in Avatech’s current policy, to the extent such policy remains in effect following the Closing, maintains in effect for six (6) years from the Closing Date the current directors’ and officers’ liability insurance policies maintained by Avatech (provided that Avatech may substitute therefor policies of at least the same coverage containing terms and conditions that are not materially less favorable) with respect to matters occurring prior to the Effective Time; provided, however, that in no event shall Avatech be required to expend pursuant to this Section 5.1(d) more than an amount equal to 200% of current annual premiums paid by Avatech for such insurance.

(e)           Avatech shall maintain a policy of directors’ and officers’ liability insurance, with an effective date as of the Closing Date, on commercially available terms and conditions and with coverage limits customary for U.S. public companies similarly situated to Avatech, provided, however, that such coverage limits shall not be less than those of Merger Partner’s current policy of directors’ and officers’ liability insurance.

(f)           Avatech and the Surviving Corporation, as applicable, shall pay all expenses, including reasonable attorneys’ fees, that may be incurred by the Persons referred to in this Section 5.1 in connection with their enforcement of their rights provided in this Section 5.1.

(g)           The provisions of this Section 5.1 are intended to be in addition to the rights otherwise available to the current and former officers and directors of Avatech, Merger Partner and the Surviving Corporation by law, charter, statute, bylaw or agreement, and shall operate for the benefit of, and shall be enforceable by, each of such current and former officers and directors, their heirs and their representatives.

(h)           In the event Avatech or the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers all or substantially all of its properties and assets to any person, then, and in each such case, proper provision shall be made so that the successors and assigns of Avatech or the Surviving Corporation, as the case may be, shall succeed to the obligations set forth in this Section 5.1.

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(i)           Avatech shall take all actions necessary to cause the Surviving Corporation to perform its obligations under this Section 5.1.

5.2         Additional Agreements.

(a)           Subject to Section 5.2(b), the Parties shall use commercially reasonable efforts to cause to be taken all actions necessary to consummate the Merger and make effective the other Contemplated Transactions. Without limiting the generality of the foregoing, but subject to Section 5.2(b), each Party to this Agreement:  (i) shall make all filings and other submissions (if any) and give all notices (if any) required to be made and given by such Party in connection with the Merger and the other Contemplated Transactions; (ii) shall use commercially reasonable efforts to obtain each Consent (if any) reasonably required to be obtained (pursuant to any applicable Legal Requirement or Contract, or otherwise) by such Party in connection with the Merger or any of the other Contemplated Transactions or for such Contract to remain in full force and effect, (iii) shall use commercially reasonable efforts to lift any injunction prohibiting, or any other legal bar to, the Merger or any of the other Contemplated Transactions and (iv) shall use commercially reasonable efforts to satisfy the conditions precedent to the consummation of this Agreement.

(b)           Notwithstanding anything to the contrary contained in this Agreement, no Party shall have any obligation under this Agreement: (i) to dispose of or transfer or cause any of its Subsidiaries to dispose of or transfer any assets; (ii) to discontinue or cause any of its Subsidiaries to discontinue offering any product or service; (iii) to license or otherwise make available, or cause any of its Subsidiaries to license or otherwise make available to any Person any Intellectual Property; (iv) to hold separate or cause any of its Subsidiaries to hold separate any assets or operations; (v) to make or cause any of its Subsidiaries to make any commitment (to any Governmental Body or otherwise) regarding its future operations; or (vi) to contest any Legal Proceeding or any order, writ, injunction or decree relating to the Merger or any of the other Contemplated Transactions if such Party determines in good faith that contesting such Legal Proceeding or order, writ, injunction or decree might not be advisable.

5.3         Disclosure.  Without limiting any Party’s obligations under the Confidentiality Agreement or the Letter of Intent, dated as of May 24, 2010, by and between Avatech and Merger Partner, neither Avatech nor Merger Party shall, and neither shall permit any of its Subsidiaries or Representatives to, issue any press release, except with respect to the content set forth in Exhibit B hereto, or make any other disclosure (to its customers or employees, to the public or otherwise) regarding the Merger or any of the other Contemplated Transactions unless: (a) the non-disclosing Party shall have approved such press release or disclosure in writing; or (b) such disclosing Party shall have determined in good faith, upon the advice of outside legal counsel, that such disclosure is required by applicable Legal Requirements and, to the extent practicable, before such press release or disclosure is issued or made, the disclosing Party provides the non-disclosing Party with at least two (2) Business Days’ prior written notice along with a copy of such press release or other disclosure, and consults with the non-disclosing Party regarding the text of such press release or disclosure.

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5.4         Directors and Officers.

(a)           Prior to the Effective Time, Avatech shall take all action necessary (i) to cause the number of members of the board of directors of Avatech to be fixed at six (6) and the persons identified on Schedule 5.4(a)(i), concurrently with the Effective Time, to constitute the board of directors of Avatech, which action will be effective concurrently with the Effective Time, (ii) to cause the persons identified on Schedule 5.4(a)(ii), concurrently with the Effective Time, to be appointed as executive officers of Avatech, which action will be effective concurrently with the Effective Time, and (iii) to obtain the resignations of the directors identified on Schedule 5.4(a)(iii), which resignation will be effective concurrently with the effectiveness of the elections referred to in clause (i).  If any person so designated to be a director shall prior to the Effective Time be unable or unwilling to hold office beginning concurrently with the Effective Time, a majority of the directors of Avatech (if such person is an Affiliate of Avatech) or a majority of the directors of Merger Partner (if such person is an Affiliate of Merger Partner) shall designate another to be appointed or nominated for election as a director in his or her place.

(b)           For so long as the Designator continues to own at least twenty-five percent (25%) of the Merger Shares, (i) Avatech shall maintain a board of directors consisting of no more than six (6) individuals and (ii) the board of directors of Avatech shall nominate three (3) individuals designated by the Designator to serve on the board of directors of Avatech (the “Merger Partner Nominees”) and recommend that the Avatech stockholders vote to elect such Merger Partner Nominees as directors of Avatech and shall fill any vacancy that may arise upon the resignation of any of the Merger Partner Nominees with a new director designated by the Designator.  The rights and obligations set forth in this Section 5.4(b) shall be set forth in a stockholders agreement between Avatech, the Designator and the directors and executive officers of Avatech in the form attached as Exhibit C hereto (the “Stockholders Agreement”).

(c)           At Avatech’s first Annual Meeting of Stockholders following the Closing, the board of directors of Avatech shall (i) nominate two (2) individuals to serve on the board of directors of Avatech, each of which must have been serving on the board of directors of Avatech immediately prior to the Effective Time (the “Avatech Nominees”), and recommend that the Avatech stockholders vote to elect such Avatech Nominees as directors of Avatech, and (ii) until the earlier of the date immediately preceding the date of the second Annual Meeting of Stockholders of Avatech after the Closing Date and the date on which the Designator no longer owns at least twenty-five percent (25%) of the Merger Shares (the “Continuing Director Period”), fill any vacancy that may arise upon the resignation of any of the Avatech Nominees with a new director who is an individual who was serving on the board of directors of Avatech immediately prior to the Effective Time.  In the case of either items (i) or (ii) of the preceding sentence, in event that no individual who was serving on the board of directors of Avatech immediately prior to the Effective Time is available or willing to serve as a director of Avatech, then the identity of the nominee or new director, as the case may be, shall be at the discretion of the board of directors of Avatech provided that any such nominee or new director shall not be an “affiliate” of the Designator or Merger Partner as that term is defined in Securities Act Rule 405.  Notwithstanding the foregoing, in no event shall the rights and obligations under this Section 5.4(c) apply to the nomination, election or appointment of any director for any term, or in the case of an appointment to fill a vacancy in the board, any remaining portion of a term, that extends beyond the expiration of the Continuing Director Period.  The rights and obligations set forth in this Section 5.4(c) shall be set forth in the Stockholders Agreement.

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(d)           At the Effective Time, Avatech and the Surviving Corporation shall take all action necessary (i) to cause the number of members of the Surviving Corporation’s board of directors to be fixed at two (2) and Marc L. Dulude and Lawrence Rychlak to be elected to the Surviving Corporation’s board of directors, which action will be effective concurrently with the Effective Time, and (ii) effective concurrently with such appointment, to obtain the resignations, or to cause the removal without cause, of the directors identified on Schedule 5.4(d)(ii).  If any person so designated to be a director shall prior to the Effective Time be unable or willing to hold office beginning concurrently with the Effective Time, Merger Partner (if such person is an Affiliate of Merger Partner) shall designate another person to be appointed as a director to his or her place.

(e)           The board of directors of Avatech effective as of the Effective Time, shall appoint the following Persons as officers of Avatech, to serve in the capacity indicated:  Richard A. Charpie, Chairman of Avatech; Marc L. Dulude, CEO of Avatech; and Lawrence Rychlak, President and Chief Financial Officer of Avatech.

5.5         Tax Matters.

(a)           Avatech, Merger Sub and Merger Partner each agree to use their respective commercially reasonable efforts to cause the Merger to qualify, and will not take any actions or fail to take any actions, which could reasonably be expected to prevent the Merger from qualifying, as a “reorganization” under Section 368(a) of the Code.  Avatech, Merger Sub and Merger Partner shall report, to the extent required by the Code or the regulations thereunder, the Merger for United States federal income tax purposes as a reorganization within the meaning of Section of 368(a) of the Code.

(b)           This Agreement is intended to constitute, and the Parties hereto hereby adopt this Agreement as, a “plan or reorganization” within the meaning Treasury Regulation Sections 1.368-2(g) and 1.368-3(a). Avatech, Merger Sub and Merger Partner shall report the Merger as a reorganization within the meaning of Section 368(a) of the Code, unless otherwise required pursuant to a “determination” within the meaning of Section 1313(a) of the Code.

(c)           On or prior to the Closing, Merger Partner shall deliver to Avatech a notice that the Merger Partner Common Stock is not “U.S. real property interests” in accordance with Treasury Regulations under Sections 897 and 1445 of the Code, together with evidence reasonably satisfactory to Avatech that Merger Partner delivered or made available notice to the Internal Revenue Service in accordance with the provisions of Section 1.897-2(h)(2) of the Treasury Regulations.

5.6           Surrender of Escrowed Shares. 

(a)           If at any time during the Escrow Period Avatech redeems or repurchases any of the Outstanding Preferred Shares, then the Designator shall surrender to Avatech that number of Escrowed Shares equal to 150% of the shares of Avatech Common Stock into which such redeemed Outstanding Preferred Shares could have been converted immediately following the Effective Time after giving effect to the issuance of the Initial Merger Shares. Any Escrowed Shares so surrendered shall be canceled and shall constitute authorized but unissued shares of Avatech Common Stock.

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(b)           The Designator shall execute and deliver to Avatech at the Closing a stock power in the form attached hereto as Exhibit D, endorsed in blank, with respect to the Escrowed Shares (the “Stock Power”).  Avatech shall use the stock power to cancel any Escrowed Shares that are surrendered pursuant to Section 5.6(a) hereof.  Upon the expiration of the Escrow Period, subject to Section 5.6(a), Avatech shall return the stock power to the Designator and deliver to the Designator the stock certificate required under Section 1.7.

(c)           During the Escrow Period, (i) the Escrowed Shares may not be transferred or otherwise disposed of by the Designator, including by way of sale, assignment, transfer, pledge, hypothecation or otherwise, (ii) subject to the foregoing limitation on transfer, the Designator shall have all of the rights and liabilities of a stockholder with respect to the Escrowed Shares which have not been surrendered pursuant to Section 5.6(a), including, without limitation, the right to vote such Escrowed Shares and the right to receive dividends and other distributions thereon, and (iii) Avatech shall take such actions as may be necessary or proper to ensure that the Designator may enjoy and exercise such stockholder rights.  No purported sale, assignment, mortgage, hypothecation, transfer, pledge, encumbrance, gift, transfer in trust (voting or other) or other disposition of, or creation of a security interest in or lien on, any of the Escrowed Shares by the Designator in violation of item (i) of this Section 5.6(c) shall be valid, and Avatech will not transfer any of said Escrowed Shares on its books.

6.           CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH PARTY

The obligations of each Party to consummate the Contemplated Transactions at the Closing are subject to the satisfaction or, to the extent permitted by applicable law, the written waiver by each of the Parties, at or prior to the Closing, of each of the following conditions:

6.1         No Restraints.  No temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the Contemplated Transactions shall have been issued by any court of competent jurisdiction or other Governmental Body and remain in effect, and there shall not be any Legal Requirement which has the effect of making the consummation of the Merger or any of the Contemplated Transactions illegal.

6.2         Stockholder Approval.  This Agreement shall have been duly adopted by the Required Merger Partner Stockholder Vote.

6.3         Governmental Authorization.  Every Governmental Authorization required to be obtained by the Parties in respect of the Contemplated Transactions shall have been obtained and shall be in full force and effect, and all waiting periods required by such Government Authorization and/or applicable law to pass shall have passed or been waived.

6.4         Fairness Opinion.  Avatech’s board of directors shall have received an opinion from a nationally-recognized investment banking firm, in form reasonably satisfactory to such board of directors, to the effect that the Merger is fair and reasonable to the holders of Avatech’s capital stock.

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6.5         Third Party Consents.  Merger Partner and Merger Partner Subsidiaries and Avatech and Avatech Subsidiaries shall have made or obtained all material filings, notices or Consents (other than the filing of any required Certificate of Merger required in connection with the Merger) set forth in Part 2.17 of the Merger Partner Disclosure Schedule and Part 3.17 of the Avatech Disclosure Schedule, respectively, that are required to be made or obtained by them to execute and deliver this Agreement and the agreements required hereby and to consummate the Contemplated Transactions.

6.6         No Adverse Litigation.  As of the Closing, no action, suit, or proceeding shall be pending against any Party which might materially and adversely affect the Contemplated Transactions, including, without limitation, any suit by the Dissident Stockholders to prevent, enjoin or restrain the Merger.

7.           ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATIONS OF AVATECH AND MERGER SUB

The obligations of Avatech and Merger Sub to effect the Merger and otherwise consummate the transactions to be consummated at the Closing are subject to the satisfaction or the written waiver by Avatech, at or prior to the Closing, of each of the following conditions:

7.1         Accuracy of Merger Partner Representations.  The representations and warranties of Merger Partner contained in this Agreement shall have been true and correct as of the date of this Agreement and shall be true and correct on and as of the Closing Date with the same force and effect as if made on the Closing Date except (a) in each case, or in the aggregate, where the failure to be true and correct would not reasonably be expected to have a Merger Partner Material Adverse Effect, or (b) for those representations and warranties which address matters only as of a particular date (which representations shall have been true and correct, subject to the qualifications as set forth in the preceding clause (a), as of such particular date) (it being understood that, for purposes of determining the accuracy of such representations and warranties, all “Merger Partner Material Adverse Effect” qualifications and other qualifications based on the word “material” contained in such representations and warranties shall be disregarded); provided, however, that the representations and warranties set forth in Sections 2.1(a), 2.3(a) and (b), 2.18, and 2.19 shall be true and correct in all respects.

7.2         Accuracy of Designator Representations.  The representations and warranties of the Designator contained in this Agreement shall have been true and correct in all material respects as of the date of this Agreement and shall be true and correct in all material respects as of the Closing Date with the same force and effect as if made on the Closing Date except for those representations and warranties which address matters only as of a particular date (which representations shall have been true and correct in all material respects as of such date).

7.3         Performance of Covenants.  Merger Partner shall have performed and complied in all material respects with all obligations and agreements required by this Agreement to be performed or complied with by it prior to or on the Closing.

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7.4         Merger Partner Obligations Triggered by Contemplated Transactions.  All legal obligations of Merger Partner and Merger Partner Subsidiaries that would be triggered by the Contemplated Transactions, including, but not limited to, obligations of Merger Partner or Merger Partner Subsidiaries resulting from any “change of control” provisions, shall have been removed or otherwise resolved to the reasonable satisfaction of Avatech. 

7.5         Agreements and Other Documents.  Avatech shall have received the following documents:

(a)           a registration rights agreement in the form of Exhibit E hereto, providing certain registration rights to the Designator (the “Registration Rights Agreement”), executed by the Designator;

(b)           the Stockholders Agreement, executed by the Designator;

(c)           a certificate executed by the chief executive officer or chief financial officer of Merger Partner, dated as of the Closing Date, confirming that the conditions set forth in Sections 7.1 and 7.3 have been duly satisfied;

(d)           the notice contemplated by Section 5.5(c);

(e)           certificates of good standing (or equivalent documentation) issued in respect of Merger Partner and the Designator by the Delaware Secretary of State;

(f)           a copy of the Merger Partner Certificate of Incorporation certified by the Delaware Secretary of State of Delaware;

(g)           certificates executed by the secretary of Merger Partner as to (i) the incumbency of Merger Partner’s officers, and (ii) the adoption of resolutions of the board of directors of Merger Partner approving and authorizing this Agreement and declaring it advisable, authorizing the consummation by Merger Partner of the Contemplated Transactions to be performed by Merger Partner, and directing that the Agreement and the consummation of the Merger by Merger Partner be submitted to the sole stockholder of Merger Partner for consideration at a regular or special meeting thereof;

(h)           a certificate as to the adoption of resolutions of the sole stockholder of Merger Partner authorizing and approving the Merger on the terms set forth in this Agreement (or, alternatively, a copy of the written consent of sole stockholder approving the consummation by Merger Partner of the Contemplated Transactions);

(i)           a certificate representing all of the outstanding shares of Merger Partner Common Stock;

(j)           a copy of the executed agreement and plan of merger relating to the LLC Merger, including all exhibits and schedules thereto; and

(k)           the Stock Power, duly executed by the Designator.

7.6         No Merger Partner Material Adverse Effect.  Since the date of the Merger Partner Balance Sheet, there has not been a Merger Partner Material Adverse Effect.

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8.           ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATION OF MERGER PARTNER

The obligations of Merger Partner to effect the Merger and otherwise consummate the transactions to be consummated at the Closing are subject to the satisfaction or the written waiver by Merger Partner, at or prior to the Closing, of each of the following conditions:

8.1         Accuracy of Avatech and Merger Sub Representations.  The representations and warranties of Avatech and Merger Sub contained in this Agreement shall have been true and correct as of the date of this Agreement and shall be true and correct on and as of the Closing Date with the same force and effect as if made on the Closing Date except (a) in each case, or in the aggregate, where the failure to be true and correct would not reasonably be expected to have a Avatech Material Adverse Effect, or (b) for those representations and warranties which address matters only as of a particular date (which representations shall have been true and correct, subject to the qualifications as set forth in the preceding clause (a), as of such particular date) (it being understood that, for purposes of determining the accuracy of such representations and warranties, all “Avatech Material Adverse Effect” qualifications and other qualifications based on the word “material” contained in such representations and warranties shall be disregarded); provided, however, that the representations and warranties set forth in Sections 3.1(a), 3.3(a) and (b), 3.17, 3.18, and 3.19 shall be true and correct in all respects.

8.2         Performance of Covenants.  Avatech and Merger Sub shall have performed and complied in all material respects with all obligations and agreements required by this Agreement to be performed or complied with by them prior to or on the Closing.

8.3         Avatech Obligations Triggered by Merger.  All legal obligations of Avatech that would be triggered by the Merger or the execution of this Agreement, including, but not limited to, Avatech obligations stemming from any “change of control” provisions, anti-dilution provisions, participation or pre-emptive rights and any shareholder rights plan, shall have been removed or otherwise resolved to the reasonable satisfaction of Merger Partner.

8.4         Agreements and Other Documents.  Merger Partner shall have received the following documents:

(a)         a certificate executed by the chief executive officer or chief financial officer of Avatech, dated as of the Closing Date, confirming that the conditions set forth in Sections 8.1 and 8.2 have been duly satisfied;

(b)         certificates of good standing (or equivalent documentation) issued in respect of Avatech and Merger Sub by the Delaware Secretary of State;

(c)         a certificate executed by the secretary of Avatech as to (i) the incumbency of Avatech’s officers, and (ii) the adoption of resolutions of the board of directors of Avatech approving and authorizing the execution of this Agreement and the consummation of the Contemplated Transactions by Avatech and Merger Sub;

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(d)         a certificate executed by the secretary of Merger Sub as to (i) the incumbency of Merger Sub’s officers, and (ii) the adoption of resolutions of the board of directors of Merger Sub approving and authorizing this Agreement and declaring it advisable, authorizing the consummation by Merger Sub of the Contemplated Transactions, and directing that the Agreement and the consummation of the Merger by Merger Sub be submitted to the sole stockholder of Merger Sub for consideration at a regular or special meeting thereof;

(e)         a certificate as to the adoption of resolutions of the sole stockholder of Merger Sub authorizing and approving the Merger on the terms set forth in this Agreement (or, alternatively, a copy of the written consent of sole stockholder approving the consummation by Merger Sub of the Contemplated Transactions); and

8.5         No Avatech Material Adverse Effect.  Since March 30, 2010, there has not been an Avatech Material Adverse Effect.

8.6         Designator Closing Deliverables.  The Designator shall have received the documents set forth in Section 9.3.

9.           ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATION OF DESIGNATOR

The obligations of the Designator to consummate the transactions to be consummated by it at the Closing are subject to the satisfaction or the written waiver by the Designator, at or prior to the Closing, of each of the following conditions:

9.1         Accuracy of Representations.  The representations and warranties of Avatech, Merger Sub and Merger Partner contained in this Agreement shall have been true and correct as of the date of this Agreement and shall be true and correct on and as of the Closing Date with the same force and effect as if made on the Closing Date except (a) in each case, or in the aggregate, where the failure to be true and correct would not reasonably be expected to have a Avatech Material Adverse Effect or a Merger Partner Material Adverse Effect, respectively, or (b) for those representations and warranties which address matters only as of a particular date (which representations shall have been true and correct, subject to the qualifications as set forth in the preceding clause (a), as of such particular date) (it being understood that, for purposes of determining the accuracy of such representations and warranties, all “Avatech Material Adverse Effect” qualifications, all “Merger Partner Material Adverse Effect” qualifications, and all other qualifications based on the word “material” contained in such representations and warranties shall be disregarded); provided, however, that the representations and warranties set forth in Sections 2.1(a), 2.3(a) and (b), 2.18, 2.19, 3.1(a), 3.3(a) and (b), 3.17, 3.18, and 3.19 shall be true and correct in all respects.

9.2         Performance of Covenants.  Avatech, Merger Sub and Merger Partner shall have performed and complied in all material respects with all obligations and agreements required by this Agreement to be performed or complied with by them prior to or on the Closing.

9.3         Agreements and Other Documents.  The Designator shall have received the following documents:

(a)           the Registration Rights Agreement, executed by Avatech;

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(b)           the Stockholders Agreement, executed by Avatech and the directors and executive officers of Avatech and all investment funds affiliated with such directors;

(c)           a certificate representing the Initial Merger Shares; and

(d)           evidence that the Escrowed Shares Certificate has been issued.

10.          MISCELLANEOUS PROVISIONS

10.1       Non-Survival of Representations, Warranties and Covenants.  The representations, warranties and covenants of Merger Partner, Merger Sub, Avatech and the Designator contained in this Agreement or any certificate or instrument delivered pursuant to this Agreement shall terminate at the Effective Time; provided, however, that the covenants set forth in Sections 4.2, 5.1, 5.2, 5.3 (with respect to the initial public disclosure regarding the consummation of the transactions contemplated by this Agreement), 5.4, 5.5 and 5.6 shall survive the Effective Time in accordance with their terms. 

10.2       Amendment.  This Agreement may be amended with the approval of the respective boards of directors of Merger Partner and Avatech at any time (whether before or after the adoption of this Agreement by the stockholders of Merger Partner or Merger Sub); provided, however, that after any such adoption of this Agreement by the stockholders of Merger Partner or Merger Sub, no amendment shall be made which by law requires further approval of the stockholders of Merger Partner or Merger Sub without the further approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of Merger Partner, Avatech and Merger Sub.

10.3       Reserved. 

10.4       Expenses.  Subject toSection 10.8 and Section 10.13, all fees and expenses incurred in connection with this Agreement and the Contemplated Transactions shall be paid by the Party incurring such expenses, whether or not the Merger is consummated; provided, however, that all fees incurred in connection with the Registration Rights Agreement shall be paid in accordance with the terms thereof. 

10.5       Waiver.

(a)           No failure on the part of any Party to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any Party in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy.

(b)           No Party shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such Party; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.

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10.6       Entire Agreement; Counterparts; Exchanges of Signatures.  This Agreement and the other agreements referred to in this Agreement constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among or between any of the Parties with respect to the subject matter hereof and thereof; provided, however, that the Confidentiality Agreement and the confidentiality provisions set forth in the Letter of Intent, dated as of May 24, 2010, by and between Avatech and Merger Partner shall not be superseded and shall remain in full force and effect in accordance with their terms. This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. The exchange of a fully executed Agreement (in counterparts or otherwise) by all Parties by facsimile or electronic transmission shall be sufficient to bind the Parties to the terms and conditions of this Agreement.

10.7       Applicable Law; Jurisdiction.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws. Each of the Parties to this Agreement (a) consents to submit itself to the personal jurisdiction of the Court of Chancery of the State of Delaware in any action or proceeding arising out of or relating to this Agreement or any of the Contemplated Transactions, (b) agrees that all claims in respect of such action or proceeding may be heard and determined in any such court, (c) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (d) agrees not to bring any action or proceeding (including counter-claims) arising out of or relating to this Agreement or any of the Contemplated Transactions in any other court. Each of the Parties hereto waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other Party with respect thereto. Any Party hereto may make service on another Party by sending or delivering a copy of the process to the Party to be served at the address and in the manner provided for the giving of notices in Section 10.9.  Nothing in this Section 10.7, however, shall affect the right of any Party to serve legal process in any other manner permitted by law.

10.8       Attorneys’ Fees.  In any action at law or suit in equity to enforce this Agreement or the rights of any of the Parties under this Agreement, the prevailing Party in such action or suit shall be entitled to receive a reasonable sum for its attorneys’ fees and all other reasonable costs and expenses incurred in such action or suit.

10.9       Assignability; No Third Party Beneficiaries.  This Agreement shall be binding upon, and shall be enforceable by and inure solely to the benefit of, the Parties hereto and their respective successors and assigns; provided, however, that neither this Agreement nor any of a Party’s rights or obligations hereunder may be assigned or delegated by such Party without the prior written consent of the other Party, and any attempted assignment or delegation of this Agreement or any of such rights or obligations by such Party without the other Party’s prior written consent shall be void and of no effect. Nothing in this Agreement, express or implied, is intended to or shall confer upon any Person (other than: (a) the Parties hereto; (b) rights pursuant to Section 1, and (c) rights contemplated by Section 5.1 and Section 5.4) any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

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10.10     Notices.  Any notice or other communication required or permitted to be delivered to any Party under this Agreement shall be in writing and shall be deemed properly delivered, given and received when delivered by hand, by registered mail, by courier or express delivery service or by facsimile to the address or facsimile telephone number set forth beneath the name of such Party below (or to such other address or facsimile telephone number as such Party shall have specified in a written notice given to the other Parties hereto):

if to Avatech or Merger Sub:

Avatech Solutions, Inc.

10715 Red Run Boulevard, Suite 101

Owings Mills, MD 21117

Telephone:   (410) 581-8080

Facsimile:      (410) 753-1591

Attention:     Lawrence Rychlak, President/CFO

With a copy to:

Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC

The Garrett Building

233 East Redwood Street

Baltimore, MD 21202-3332

Telephone:    (410) 576-4000

Facsimile:       (410) 576-4196

Attention:      Andrew D. Bulgin, Esq.

Abba David Poliakoff, Esq.

if to Merger Partner:

Rand Worldwide, Inc.

161 Worcester Road, Suite 401

Framingham, MA  01701

Telephone:    (508) 663-1400

Facsimile:       (508) 663-1401

Attention:      Marc L. Dulude

With a copy to:

Edwards Angell Palmer & Dodge LLP

111 Huntington Avenue

Boston, MA  02199

Telephone:    (617) 239-0753

Facsimile:       (617) 227-4420

Attention:      James T. Barrett, Esq.

Matthew J. Gardella, Esq.

63

if to the Designator:

RWWI Holdings LLC

c/o Ampersand Ventures

55 William St., Ste. 240

Wellesley, MA 02481

Telephone:  (781) 239-0700

Facsimile:  (781) 239-0824

Attention: J. David Jacobs, Esq.

With a copy to:

Edwards Angell Palmer & Dodge LLP

111 Huntington Avenue

Boston, MA  02199

Telephone:    (617) 239-0753

Facsimile:       (617) 227-4420

Attention:      James T. Barrett, Esq.

Matthew J. Gardella, Esq.

10.11     Cooperation.  Each Party agrees to cooperate fully with the other Party and to execute and deliver such further documents, certificates, agreements and instruments and to take such other actions as may be reasonably requested by the other Party to evidence or reflect the Contemplated Transactions and to carry out the intent and purposes of this Agreement.

10.12     Severability.  Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions of this Agreement or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If a final judgment of a court of competent jurisdiction declares that any term or provision of this Agreement is invalid or unenforceable, the Parties hereto agree that the court making such determination shall have the power to limit such term or provision, to delete specific words or phrases or to replace such term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be valid and enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence, the Parties hereto agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term or provision.

10.13     Other Remedies; Specific Performance.  Except as otherwise provided herein, any and all remedies herein expressly conferred upon a Party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such Party, and the exercise by a Party of any one remedy will not preclude the exercise of any other remedy. The Parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being the addition to any other remedy to which they are entitled at law or in equity.

64

10.14     Waiver of Jury Trial.  EACH OF THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE CONTEMPLATED TRANSACTIONS.  FURTHER, EACH OF THE PARTIES HERETO HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF ANY OTHER PARTY OR ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY OR PERSON WOULD NOT, IN THE EVENT OF SUCH ACTION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.  EACH OF THE PARTIES HERETO HEREBY ACKNOWLEDGES THAT THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY THIS SECTION 10.14.

10.15     Construction.

(a)         For purposes of this Agreement, whenever the context requires: the singular number shall include the plural, and vice versa; the masculine gender shall include the feminine and neuter genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender shall include masculine and feminine genders.

(b)         The Parties hereto agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting Party shall not be applied in the construction or interpretation of this Agreement.

(c)         As used in this Agreement, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.”

(d)         Except as otherwise indicated, all references in this Agreement to “Sections,” “Exhibits” and “Schedules” are intended to refer to Sections of this Agreement and Exhibits and Schedules to this Agreement.

(e)         The bold-faced headings contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.

[Remainder of page intentionally left blank]

65

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first above written.

AVATECH SOLUTIONS, INC.
By:	/s/ Lawrence Rychlak
Name:	Lawrence Rychlak
Title:	President and Chief Financial Officer
ASRW ACQUISITION SUB, INC.
By:	/s/ Lawrence Rychlak
Name:	Lawrence Rychlak
Title:	President and Chief Financial Officer
RAND WORLDWIDE, INC.
By:	/s/ Marc L. Dulude
Name:	Marc L. Dulude
Title:	President and Chief Executive Officer
RWWI HOLDINGS LLC
By:	AMP-06 Management Company
	Limited Partnership, its General Partner
By:	AMP-06 MC LLC, its General Partner
By:	/s/ Richard A. Charpie
Name:	Richard A. Charpie
Title:	Principal Managing Member

SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER

 

EXHIBITS AND SCHEDULES

Exhibits

Exhibit A              Definitions

Exhibit B               Joint Press Release*

Exhibit C               Form of Stockholders Agreement*

Exhibit D               Form of Stock Power*

Exhibit E               Form of Registration Rights Agreement*

Schedules

Merger Partner Disclosure Schedule*

Avatech Disclosure Schedule*

Designator Disclosure Schedule*

Schedule 5.4(a)(i)               Directors of Avatech*

Schedule 5.4(a)(ii)              Executive Officers of Avatech*

Schedule 5.4(a)(iii)             Directors to Resign from Board of Directors of Avatech*

Schedule 5.4(b)(ii)              Directors to Resign from Board of Directors of Surviving Corporation*

*  All Exhibits other than Exhibit A and all schedules to the Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K.  The Company hereby agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request.

 

EXHIBIT A

DEFINITIONS

CERTAIN DEFINITIONS

For purposes of the Agreement (including this Exhibit A):

Affiliate.  “Affiliate” shall mean any Person under common control with such Party within the meaning of Sections 414(b), (c), (m) and (o) of the Code, and the regulations issued thereunder.

Agreement.  “Agreement” shall mean the Agreement and Plan of Merger to which this Exhibit A is attached, as it may be amended from time to time.

Avatech Common Stock.  “Avatech Common Stock” shall mean the Common Stock, $0.01 par value per share, of Avatech.

Avatech Contract.  “Avatech Contract” shall mean any material Contract:  (a) to which Avatech or any of its Subsidiaries is a party; (b) by which Avatech, any of its Subsidiaries or any Avatech IP Rights, Avatech Licensed IP or any other asset of Avatech or its Subsidiaries is or may become bound or under which Avatech or any of its Subsidiaries has, or may become subject to, any obligation; or (c) under which Avatech or any of its Subsidiaries has or may acquire any right or interest.

Avatech Excluded Warrants.  “Avatech Excluded Warrants” shall mean the warrants to purchase an aggregate of 726,102 shares of Avatech Common Stock held by Sigma Opportunity Fund, LLC, Gary Clark, Robert Post, George Davis, Sigma Capital Advisors, LLC.

Avatech IP Rights.  “Avatech IP Rights” shall mean all Intellectual Property Rights which Avatech or any of its Subsidiaries have or purport to have an ownership interest of any nature (whether exclusively, jointly with another Person, or otherwise).

Avatech IP Rights Agreement.  “Avatech IP Rights Agreement” shall mean any instrument or agreement governing any Avatech IP Rights or Avatech Licensed IP to which Avatech or any of its Subsidiaries are a party.

Avatech Licensed IP.  “Avatech Licensed IP” means all Intellectual Property Rights licensed to Avatech or any of its Subsidiaries (regardless whether licensed exclusively or nonexclusively), including but not limited to any licenses to use, distribute, resell, or access third party software or databases.

Avatech IP Rights Agreement.  “Avatech IP Rights Agreement” shall mean any instrument or agreement governing any Avatech IP Rights.

Avatech Options.  “Avatech Options” shall mean options to purchase shares of Avatech Common Stock issued by Avatech.

Avatech Material Adverse Effect.  “Avatech Material Adverse Effect” shall mean any effect, change, event, circumstance or development (each such item, an “Effect”) that, considered together with all other Effects that had occurred prior to the date of determination of the occurrence of the Avatech Material Adverse Effect, is or would reasonably be expected to be or to become materially adverse to, or has or would reasonably be expected to have or result in a material adverse effect on: (a) the business, financial condition, capitalization, assets (including Intellectual Property Rights), operations or financial performance or prospects of Avatech and its Subsidiaries taken as a whole; or (b) the ability of Avatech to consummate the Merger or any of the other Contemplated Transactions or to perform any of its covenants or obligations under the Agreement; provided, however, that none of the following shall be deemed in themselves, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there has been or will be a Avatech Material Adverse Effect:  (i) any change in the business, financial condition, capitalization, assets, operations or financial performance or prospects of Avatech and the Avatech Subsidiaries taken as a whole caused by, related to or resulting from, directly or indirectly, the Contemplated Transactions or the announcement thereof, (ii) any adverse change, effect or occurrence attributable to the United States economy as a whole or the industries in which Avatech competes, (iii) any act or threat of terrorism or war anywhere in the world, (iv) any change in accounting requirements or principles or any change in applicable laws, rules or regulations or the interpretation thereof (provided, that in the case of the foregoing clauses (ii), (iii) and (iv), to the extent such changes or developments referred to therein have a materially disproportionate impact on Avatech and its Subsidiaries, taken as a whole, relative to other companies in the industries and in the geographic markets in which Avatech and its Subsidiaries operate), (v) any Effect resulting from the announcement of the Merger, and (vi) any change in the stock price or trading volume of Avatech independent of any other event that would be deemed to have an Avatech Material Adverse Effect (provided that the exception in this clause (vi) shall not prevent or otherwise affect a determination that any fact, circumstance, event, condition, occurrence or change underlying such change has resulted in, or contributed to, an Avatech Material Adverse Effect).

Avatech Preferred Stock.  “Avatech Preferred Stock” shall mean the preferred stock, $0.01 par value per share, of Avatech authorized under its Certificate of Incorporation.

Avatech Registered IP.  “Avatech Registered IP” shall mean all Avatech IP Rights that are registered, filed or issued under the authority of, with or by any Governmental Body (or, with respect to domain names, a domain name registrar or agent), including all patents, registered copyrights, registered trademarks, domain name registrations, and all applications for any of the foregoing.

Avatech Related Party.  “Avatech Related Party” shall mean any affiliate, as defined in Rule 12b-2 under the Securities Act.

Avatech Restricted Shares.  “Avatech Restricted Shares” shall mean restricted shares of Avatech Common Stock.

Avatech Series D Preferred Stock.  “Avatech Series D Preferred Stock” shall mean the Series D Convertible Preferred Stock, $0.01 par value per share, of Avatech.

Avatech Series E Preferred Stock.  “Avatech Series E Preferred Stock” shall mean the Series E Convertible Preferred Stock, $0.01 par value per share, of Avatech.

Avatech Series F Preferred Stock.  “Avatech Series F Preferred Stock” shall mean the Series F 10% Cumulative Convertible Preferred Stock, $0.01 par value per share, of Avatech.

Avatech Software Products.  “Avatech Software Products” means all software products licensed, distributed, sold or offered, including but not limited to as software as a service, by Avatech or any of its Subsidiaries as of, or within the two (2) years before, the date of this Agreement.

Avatech Subsidiary.  “Avatech Subsidiary” means a Subsidiary of Avatech.

Business Day.  “Business Day” shall mean any day other than a day on which banks in the Commonwealth of Massachusetts are authorized or obligated to be closed.

COBRA.  “COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

Code.  “Code” shall mean the Internal Revenue Code of 1986, as amended.

Confidentiality Agreement.  “Confidentiality Agreement” shall mean the Confidentiality Agreement executed in 2008, between Merger Partner and Avatech.

Consent.  “Consent” shall mean any approval, consent, ratification, permission, waiver or authorization (including any Governmental Authorization).

Contemplated Transactions.  “Contemplated Transactions” shall mean the Merger and the other transactions and actions contemplated by the Agreement.

Contract.  “Contract” shall, with respect to any Person, mean any written, oral or other agreement, contract, subcontract, lease (whether real or personal property), mortgage, understanding, arrangement, instrument, note, option, warranty, purchase order, license, sublicense, insurance policy, benefit plan or legally binding commitment or undertaking of any nature to which such Person is a party or by which such Person or any of its assets are bound or affected under applicable law.

DGCL.  “DGCL” shall mean the General Corporation Law of the State of Delaware.

Effect.  “Effect” has the meaning given such term in the definition of “Avatech Material Adverse Effect” above.

Encumbrance.  “Encumbrance” shall mean any lien, pledge, hypothecation, charge, mortgage, security interest, encumbrance, claim, infringement, interference, option, right of first refusal, preemptive right, community property interest or restriction of any nature (including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset and any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset) other than (a) mechanic’s, materialmen’s and similar liens, (b) liens arising under worker’s compensation, unemployment insurance and similar legislation, and (c) liens on goods in transit incurred pursuant to documentary letters of credit, in each case arising in the Ordinary Course of Business.

Entity.  “Entity” shall mean any corporation (including any non-profit corporation), partnership (including any general partnership, limited partnership or limited liability partnership), joint venture, estate, trust, company (including any company limited by shares, limited liability company or joint stock company), firm, society or other enterprise, association, organization or entity.

Environmental Law.  “Environmental Law” means any federal, state, local or foreign Legal Requirement relating to pollution or protection of human health or the environment (including ambient air, surface water, ground water, land surface or subsurface strata), including any law or regulation relating to emissions, discharges, releases or threatened releases of Materials of Environmental Concern, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern.

ERISA.  “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

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

FMLA.  “FMLA” shall mean the Family Medical Leave Act of 1993, as amended.

Fully Diluted Basis.  “Fully Diluted Basis” shall mean, at any time, the sum of (x) the number of issued and outstanding shares of Avatech Common Stock (including Avatech Restricted Shares) at such time plus (y) the total number of shares of Avatech Common Stock issuable upon the exercise, exchange or conversion of all securities or obligations issued and outstanding at such time that are exercisable for, convertible into, or exchangeable for shares of Avatech Common Stock, including Avatech Stock Options and any other options, restricted stock units, Avatech stock-based awards, warrants or other rights to subscribe for or purchase Avatech Common Stock or to purchase other equity securities or obligations of Avatech that are, directly or indirectly, exercisable for, convertible into or exchangeable for Avatech Common Stock, in each case, whether or not then vested, exercisable, convertible or exchangeable.

Governmental Authorization.  “Governmental Authorization” shall mean any:  (a) permit, license, certificate, franchise, permission, variance, exceptions, orders, clearance, registration, qualification or authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement; or (b) right under any Contract with any Governmental Body.

Governmental Body.  “Governmental Body” shall mean any: (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, ministry, fund, foundation, center, organization, unit, body or Entity and any court or other tribunal, and for the avoidance of doubt, any Taxing authority); or (d) self-regulatory organization.

HIPAA.  “HIPAA” shall mean the Health Insurance Portability and Accountability Act of 1996, as amended.

Intellectual Property Rights. “Intellectual Property Rights” shall mean all United States, foreign and international (i) patents and patent applications, including provisional applications, statutory invention registrations, invention disclosures, (ii) inventions, whether or not patentable,  (iii) trademarks, service marks, trade dress, trade names, logos and other source identifies, whether or not registered, and all goodwill associated therewith, (iv) Internet domain name registrations, (v) rights of publicity and other rights to use the names and likeness of individuals, (vi) copyrights, rights in databases and related rights, and mask works, whether or not registered, (vii) trade secrets, confidential information and know-how, (viii) all registrations and applications for registration of the foregoing, (ix) all other intellectual property or proprietary rights.

Internal Revenue Service.  “Internal Revenue Service” shall mean the United States Internal Revenue Service.

Key Employee.  “Key Employee” shall mean an executive officer of Merger Partner or Avatech, as applicable, or any employee that reports directly to the board of directors or chief executive officer of Merger Partner or Avatech, as applicable.

Knowledge.  “Knowledge” means (a) in the case of a Person who is an individual, matters actually known to that individual, and (b) in the case of a Person that is an Entity, matters actually known to the directors and executive officers of such Entity and such Entity’s Subsidiaries, and with respect to (a) and (b), matters that any such Person, and with respect to Persons that are entities, the directors and executive officers of such entities, would reasonably be expected to know in the ordinary course of the performance of the individual’s duties and fulfillment of his or her responsibilities.

Legal Proceeding.  “Legal Proceeding” shall mean any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or other Governmental Body or any arbitrator or arbitration panel.

Legal Requirement.  “Legal Requirement” shall mean any federal, state, foreign, material local or municipal or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Body, including, without limitation, the Foreign Corrupt Practices Act of 1977, the Trading with the Enemy Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, any regulation, rule or order promulgated by the United States Department of the Treasury, including its Office of Foreign Assets Control.

LLC Merger.  “LLC Merger” shall mean the merger of Merger Partner with RWWI Merger Corporation pursuant to the Agreement and Plan of Merger dated as of the date hereof by and among Merger Partner, RWWI Merger Corporation and RWWI Holdings LLC, under which Merger Partner, as the surviving corporation, became a wholly-owned subsidiary of RWWI Holdings LLC, effective on the date hereof prior to the execution of this Agreement.

Merger Partner Common Stock.  “Merger Partner Common Stock” shall mean the Common Stock, $0.001 par value per share, of Merger Partner.

Merger Partner Contract.  “Merger Partner Contract” shall mean any material Contract:  (a) to which Merger Partner and/or any of Merger Partner Subsidiaries is a Party; (b) by which Merger Partner, any of Merger Partner Subsidiaries and/or any Merger Partner IP Rights, Merger Partner Licensed IP, and/or any other asset of Merger Partner and/or Merger Partner Subsidiaries is or may become bound or under which Merger Partner or any Merger Partner Subsidiaries has, or may become subject to, any obligation; or (c) under which Merger Partner or any of Merger Partner Subsidiaries has or may acquire any right or interest.

Merger Partner IP Rights.  “Merger Partner IP Rights” shall mean all Intellectual Property Rights in which Merger Partner and/or Merger Partner Subsidiaries have or purport to have a direct or indirect ownership interest of any nature (whether exclusively, jointly with another Person, or otherwise).

Merger Partner IP Rights Agreement.  “Merger Partner IP Rights Agreement” shall mean any Contract governing, related or pertaining to any Merger Partner IP Rights and/or Merger Partner Licensed IP to which Merger Partner and/or any Merger Partner Subsidiary is a party.

Merger Partner Licensed IP.  “Merger Partner Licensed IP” means all Intellectual Property Rights licensed to Merger Partner and/or any Merger Partner Subsidiary (regardless whether licensed exclusively or nonexclusively), including but not limited to any licenses to use, distribute, resell, or access third party software or databases.

Merger Partner Material Adverse Effect.  “Merger Partner Material Adverse Effect” shall mean any Effect that, considered together with all other Effects that had occurred prior to the date of determination of the occurrence of the Merger Partner Material Adverse Effect, is or would reasonably be expected to be or to become materially adverse to, or has or would reasonably be expected to have or result in a material adverse effect on: (a) the business, financial condition, capitalization, assets (including Intellectual Property Rights), operations or financial performance or prospects of Merger Partner and Merger Partner Subsidiaries, taken as a whole; or (b) the ability of Merger Partner to consummate the Merger or any of the other Contemplated Transactions or to perform any of its covenants or obligations under the Agreement; provided, however, that none of the following shall be deemed in themselves, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there has been or will be a Merger Partner Material Adverse Effect: (i) any change in the business, financial condition, capitalization, assets, operations or financial performance or prospects of Merger Partner and Merger Partner Subsidiaries taken as a whole caused by, related to or resulting from, directly or indirectly, the Contemplated Transactions or the announcement thereof, (ii) any adverse change, effect or occurrence attributable to the United States economy as a whole or the industries in which Merger Partner competes, (iii) any act or threat of terrorism or war anywhere in the world, (iv) any change in accounting requirements or principles or any change in applicable laws, rules or regulations or the interpretation thereof (provided, that in the case of the foregoing clauses (ii), (iii) and (iv), to the extent such changes or developments referred to therein have a materially disproportionate impact on Merger Sub and its Subsidiaries, taken as a whole, relative to other companies in the industries and in the geographic markets in which Avatech and its Subsidiaries operate) and (v) any Effect resulting from the announcement of the Merger.

Merger PartnerRelated Party.  “Merger Partner Related Party” shall mean (i) each of the Persons listed on Schedule 1 hereto; (ii) each individual who is, or who has at any time been, an officer or director of Merger Partner; (iii) each member of the immediate family of each of the individuals referred to in clause (i) and (ii) above; and (iv) any trust or other Entity (other than Merger Partner) in which any one of the Persons referred to in clauses (i), (ii) or (iii) above holds (or in which more than one of such Persons collectively hold), beneficially or otherwise, a material voting, proprietary, equity or other financial interest.

Merger Partner Registered IP.  “Merger Partner Registered IP” shall mean all Merger Partner IP Rights that are registered, pending, filed or issued under the authority of, with or by any Governmental Body (or, with respect to domain names, a domain name registrar or agent), including all patents, registered copyrights, registered trademarks, domain name registrations, and all applications for any of the foregoing.

Merger Partner Software Products.  “Merger Partner Software Products” means all software products licensed, distributed, sold or offered, including but not limited to as software as a service, by Merger Partner and Merger Partner Subsidiaries as of, or within the two (2) years before, the date of this Agreement.

Merger Partner Stock Option Plan.  “Merger Partner Stock Option Plan” shall mean the RAND Worldwide, Inc. Amended and Restated 2007 Equity Incentive Plan.

Merger Partner Subsidiary.  “Merger Partner Subsidiary” means a Subsidiary of Merger Partner.

Ordinary Course of Business.  “Ordinary Course of Business” shall mean, in the case of each of Merger Partner, Avatech and each of their respective Subsidiaries, such reasonable and prudent actions taken in the ordinary course of its normal operations and consistent with its past practices.

Party.  “Party” or “Parties” shall mean Merger Partner, Merger Sub and Avatech.

Person.  “Person” shall mean any individual, Entity or Governmental Body.

Personal Information.  “Personal Information” shall mean any information related to an identified or identifiable natural person and does not meet the definition of de-identified as defined by the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) section 164.514 (b)(2).

Privacy Laws.  “Privacy Laws” shall mean any laws, statutes, rules, regulations, codes, orders, decrees, and rulings thereunder of any federal, state, regional, county, city, municipal or local government of the United States or any other country having applicable jurisdiction or any department, agency, bureau or other administrative or regulatory body obtaining authority from any of the foregoing that relate to privacy, data protection or data transfer issues, including all implementing laws and regulations and all applicable state privacy, security, data protection and destruction, and data breach notification laws and regulations.

Related Agreements.  “Related Agreements” shall mean the Stockholders Agreement, Registration Rights Agreement and any other documents or agreements executed in connection with this Agreement or the Contemplated Transactions.

Representatives.  “Representatives” shall mean directors, officers, other employees, agents, attorneys, accountants, advisors and representatives.

Sarbanes-Oxley Act.  “Sarbanes-Oxley Act” shall mean the Sarbanes-Oxley Act of 2002, as it may be amended from time to time.

SEC.  “SEC” shall mean the United States Securities and Exchange Commission.

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

Subsidiary. An entity shall be deemed to be a “Subsidiary” of another Person if such Person directly or indirectly owns or purports to own, beneficially or of record, (a) an amount of voting securities of other interests in such entity that is sufficient to enable such Person to elect at least a majority of the members of such entity’s board of directors or other governing body, or (b) at least 50% of the outstanding equity, voting, beneficial or financial interests in such Entity.

Tax.  “Tax” shall mean any federal, state, local, foreign or other taxes, levies, charges and fees or other similar assessments or liabilities in the nature of a tax, including, without limitation, any income tax, franchise tax, capital gains tax, gross receipts tax, value-added tax, surtax, estimated tax, unemployment tax, national health insurance tax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business tax, withholding tax, payroll tax, customs duty, alternative or add-on minimum or other tax of any kind whatsoever, and including any fine, penalty, assessment, addition to tax or interest, whether disputed or not.

Tax Return.  “Tax Return” shall mean any return (including any information return), report, statement, declaration, estimate, schedule, notice, notification, form, election, certificate or other document or information, and any amendment, schedule, exhibit or supplement to any of the foregoing, filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax.

ADDITIONAL DEFINITIONS

Each of the following definitions is set forth in the section of the Agreement indicated below:

Definition	Section
Agreement	Preamble
Avatech	Preamble
Avatech Balance Sheet	3.11(a)
Avatech Constituent Documents	3.2
Avatech Disclosure Schedule	3
Avatech Financial Statements	3.4(b)
Avatech Foreign Plan	3.14(i)
Avatech License and Service Agreements	3.9(i)
Avatech Nominees	5.4(c)
Avatech Plan	3.14(q)
Avatech Returns	3.13(a)
Avatech SEC Documents	3.4(a)
Closing	1.3
Closing Date	1.3
Designator	Preamble
Disclosed	2
Dissident Stockholders	2.26
EDGAR	3.4(a)
Effective Time	1.3
Escrow Period	1.7
Escrowed Shares	1.5(a)(ii)
Escrowed Shares Certificate	1.7
GAAP	2.4(b)
Initial Merger Shares	1.5(a)(ii)
Merger	Recitals
Merger Partner	Recitals
Merger Partner Audited Balance Sheet	2.4(a)(i)
Merger Partner Balance Sheet	2.4(a)(ii)
Merger Partner Certificate of Incorporation	2.2
Merger Partner Constituent Documents	2.2
Merger Partner Disclosure Schedule	2
Merger Partner Financial Statements	2.4(a)
Merger Partner Foreign Plan	2.14(i)
Merger Partner License and Service Agreements	2.9(i)
Merger Partner Nominees	5.4(b)
Merger Partner Plan	2.14(q)
Merger Partner Returns	2.13(a)
Merger Partner Stock Certificate	1.6
Merger Partner Subsidiary Constituent Documents	2.2
Merger Shares	1.5(a)(ii)
Merger Sub	Preamble
Outstanding Preferred Shares	1.5(a)(ii)
Pension Plan	2.14(i)
Registration Rights Agreement	7.5(a)
Required Merger Partner Stockholder Vote	2.18
Schedule	2
State Acts	4.1(k)
Stockholders Agreement	5.4(b)
Stock Power	5.6(b)
Surviving Corporation	1.1

EX-4.1

Exhibit 4.1

FORM AMENDED AND RESTATED

COMMON STOCK PURCHASE WARRANT

THIS AMENDED AND RESTATED WARRANT (THIS “WARRANT”) AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, ASSIGNED OR TRANSFERRED, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER SAID ACT IS NOT REQUIRED.

THIS WARRANT DOES NOT REQUIRE PHYSICAL SURRENDER OF THE WARRANT IN THE EVENT OF A PARTIAL EXERCISE. AS A RESULT, FOLLOWING ANY EXERCISE OF ANY PORTION OF THIS WARRANT, THE NUMBER OF SHARES OF COMMON STOCK FOR WHICH THIS WARRANT MAY BE EXERCISED MAY BE LESS THAN THE NUMBER OF SHARES SET FORTH BELOW.

Issuance Date: January 29, 2007 Warrant No. _____

COMMON STOCK PURCHASE WARRANT

To Purchase _________ Shares of Common Stock of AVATECH SOLUTIONS, INC.

THIS IS TO CERTIFY THAT _____________, or registered assigns (the “Holder”), is entitled, during the Exercise Period (as hereinafter defined), to purchase from Avatech Solutions, Inc., a Delaware corporation (the “Company”), the Warrant Stock (as hereinafter defined and subject to adjustment as provided herein), in whole or in part, at a per share price equal to the Current Warrant Price, all on and subject to the terms and conditions hereinafter set forth.

1.           Definitions. As used in this Warrant, the following terms have the respective meanings set forth below:

“Affiliate” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act. With respect to a Holder of Warrants, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Holder will be deemed to be an Affiliate of such Holder.

“Appraised Value” means, in respect of any share of Common Stock on any date herein specified, the fair saleable value of such share of Common Stock (determined without giving effect to the discount for (i) a minority interest or (ii) any lack of liquidity of the Common Stock or to the fact that the Company may have no class of equity registered under the Exchange Act) as of the last day of the most recent fiscal month ending prior to such date specified, based on the value of the Company on a fully-diluted basis, as determined by a nationally recognized investment banking firm selected by the Company’s Board of Directors and having no prior relationship with the Company.

“Business Day” means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York generally are authorized or required by law or other government actions to close.

“Change of Control” means the (i) acquisition by an individual or legal entity or group (as set forth in Section 13(d) of the Exchange Act) of more than one-half of the voting rights or equity interests in the Company; or (ii) sale, conveyance, or other disposition of all or substantially all of the assets, property or business of the Company or the merger into or consolidation with any other corporation (other than a wholly owned subsidiary corporation) or effectuation of any transaction or series of related transactions where holders of the Company’s voting securities prior to such transaction or series of transactions fail to continue to hold at least 50% of the voting power of the Company (or, if other than the Company, the successor or acquiring entity) immediately following such transaction.

“Commission” means the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws.

“Common Stock” means (except where the context otherwise indicates) the Common Stock, $0.01 par value per share, of the Company, and any capital stock into which such Common Stock may thereafter be changed or converted, and shall also include (i) capital stock of the Company of any other class (regardless of how denominated) issued to the holders of shares of Common Stock upon any reclassification thereof which is also not preferred as to dividends or assets on liquidation over any other class of stock of the Company and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation received by or distributed to the holders of Common Stock of the Company in the circumstances contemplated by Section 4.5.

“Common Stock Purchase Agreement” means that certain Common Stock and Warrant Purchase Agreement dated as of January 29, 2007 among the Company and the other parties named therein and terminated on August 17, 2010, pursuant to which this Warrant was originally issued.

“Current Market Price” means, in respect of any share of Common Stock on any date herein specified,

(1)           if there shall not then be a public market for the Common Stock, the higher of

(a)           the book value per share of Common Stock at such date, and

(b)           the Appraised Value per share of Common Stock at such date,

or

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(2)          if there shall then be a public market for the Common Stock, the average of the daily market prices for the five (5) consecutive Trading Days immediately before such date. The daily market price for each such Trading Day shall be (i) the closing bid price on such day on the principal stock exchange on which such Common Stock is then listed or admitted to trading, or quoted, as applicable, (ii) if no sale takes place on such day on any such exchange, the last reported closing bid price on such day as officially quoted on any such exchange, (iii) if the Common Stock is not then listed or admitted to trading on any stock exchange, the last reported closing bid price on such day in the over-the-counter market, as furnished by the National Association of Securities Dealers Automatic Quotation System or the National Quotation Bureau, Inc., (iv) if neither such corporation at the time is engaged in the business of reporting such prices, as furnished by any similar firm then engaged in such business, or (v) if there is no such firm, as furnished by any member of the NASD selected mutually by the holder of this Warrant and the Company or, if they cannot agree upon such selection, as selected by two such members of the NASD, one of which shall be selected by holder of this Warrant and one of which shall be selected by the Company.

“Current Warrant Price” means, in respect of a share of Common Stock at any date herein specified, the price at which a share of Common Stock may be purchased pursuant to this Warrant on such date. Unless and until the Current Warrant Price is adjusted pursuant to the terms herein, the initial Current Warrant Price shall be $1.11 per share of Common Stock.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time.

“Exercise Period” means the period during which this Warrant is exercisable pursuant to Section 2.1.

“Expiration Date” means the fourth (4th) anniversary of the date of issuance hereof.

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

“NASD” means the National Association of Securities Dealers, Inc., or any successor corporation thereto.

“Other Property” has the meaning set forth in Section 4.5.

“Person” means any individual, sole proprietorship, partnership, joint venture, trust, incorporated organization, association, corporation, limited liability company, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof).

“Restricted Common Stock” means shares of Common Stock which are, or which upon their issuance upon the exercise of any Warrant would be required to be, evidenced by a certificate bearing the restrictive legend set forth in Section 3.2.

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“Securities Act” means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

“Trading Day” means any day on which the primary market on which shares of Common Stock are listed is open for trading.

“Transfer” means any disposition of any Warrant or Warrant Stock or of any interest in either thereof, which would constitute a sale thereof within the meaning of the Securities Act.

“Warrants” means this Warrant and all warrants issued upon transfer, division or combination of, or in substitution for, any thereof. All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised.

“Warrant Price” means an amount equal to (i) the number of shares of Common Stock being purchased upon exercise of this Warrant pursuant to Section 2.1, multiplied by (ii) the Current Warrant Price.

“Warrant Stock” means the _________ shares of Common Stock to be purchased upon the exercise hereof, subject to adjustment as provided herein.

2.           Exercise of Warrant.

2.1         Manner of Exercise. From and after the date of issuance hereof and until 5:00 P.M., New York time, on the Expiration Date (the “Exercise Period”), the Holder may exercise this Warrant, on any Business Day, for all or any part of the number of shares of Warrant Stock purchasable hereunder.

In order to exercise this Warrant, in whole or in part, the Holder shall deliver to the Company at its principal office or at the office or agency designated by the Company pursuant to Section 12, (i) a written notice of Holder’s election to exercise this Warrant, which notice shall specify the number of shares of Warrant Stock to be purchased, (ii) payment of the Warrant Price as provided herein, and (iii) upon exercise of this Warrant in full, this Warrant. Such notice shall be substantially in the form of the subscription form appearing at the end of this Warrant as Exhibit A, duly executed by the Holder or its agent or attorney. Upon receipt thereof, the Company shall, as promptly as practicable, and in any event within three Business Days thereafter, electronically transmit the Common Stock issuable upon exercise hereof to the Holder, by crediting the account of the Holder’s prime broker with Depository Trust Company (“DTC”) through its Deposit Withdrawal Agent Commission (“DWAC”) system using the Fast Automated Securities Transfer (“FAST”) program. The parties agree to coordinate with DTC to accomplish this objective. In lieu of such electronic delivery through DWAC, the Company shall, to the extent requested by the Holder or required by law, execute or cause to be executed and deliver or cause to be delivered to the Holder a certificate or certificates representing the aggregate number of full shares of Warrant Stock issuable upon exercise hereof. The time periods for delivery of physical certificates evidencing the Warrant Shares are the same as those described above. Any stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the Holder shall request in the notice and shall be registered in the name of the Holder or such other name as shall be designated in the notice. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a Holder of record of such shares for all purposes, as of the date when the notice to exercise is received by the Company as described above. If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Stock, if not effected using book entry as described below, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased shares of Common Stock called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant, or at the request of the Holder, appropriate notation may be made on this Warrant and the same returned to the Holder.

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Payment of the Warrant Price may be made at the option of the Holder by: (i) certified or official bank check payable to the order of the Company, (ii) wire transfer to the account of the Company or (iii) the surrender and cancellation of a portion of shares of Common Stock then held by the Holder or issuable upon such exercise of this Warrant, which shall be valued and credited toward the total Warrant Price due the Company for the exercise of the Warrant based upon the Current Market Price of the Common Stock. All shares of Common Stock issuable upon the exercise of this Warrant pursuant to the terms hereof shall be validly issued and, upon payment of the Warrant Price, shall be fully paid and nonassessable and not subject to any preemptive rights.

Book-Entry. Notwithstanding anything to the contrary set forth herein, upon exercise of any portion of this Warrant in accordance with the terms hereof, the warrantholder shall not be required to physically surrender this Warrant to the Company unless such holder is purchasing the full amount of Warrant Shares represented by this Warrant. The warrantholder and the Company shall maintain records showing the number of Warrant Shares so purchased hereunder and the dates of such purchases or shall use such other method, reasonably satisfactory to the warrantholder and the Company, so as not to require physical surrender of this Warrant upon each such exercise. In connection therewith a form of ledger to maintain a record of such transactions is attached hereto. The warrantholder and any assignee, by acceptance of this Warrant or a new Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following exercise of any portion of this Warrant, the number of Warrant Shares which may be purchased upon exercise of this Warrant may be less than the number of Warrant Shares set forth on the face hereof.

2.2         Fractional Shares. The Company shall not be required to issue a fractional share of Common Stock upon exercise of any Warrant. As to any fraction of a share which the Holder of one or more Warrants, the rights under which are exercised in the same transaction, would otherwise be entitled to purchase upon such exercise, the Company shall pay an amount in cash equal to the Current Market Price per share of Common Stock on the date of exercise multiplied by such fraction.

2.3         Continued Validity. A Holder of shares of Common Stock issued upon the exercise of this Warrant, in whole or in part (other than a Holder who acquires such shares after the same have been publicly sold pursuant to a Registration Statement under the Securities Act or sold pursuant to Rule 144 thereunder), shall continue to be entitled with respect to such shares to all rights to which it would have been entitled as the Holder under Sections 10 and 13 of this Warrant.

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2.4         Restrictions on Exercise Amount. In the event the Company is prohibited from issuing shares of Warrant Stock as a result of any restrictions or prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization, the Company shall as soon as practicable seek the approval of its stockholders and take such other action to authorize the issuance of the full number of shares of Common Stock issuable upon full exercise of this Warrant but in any event the Board of Directors shall call a special meeting of the stockholders of the Company in the manner set forth in the By-laws of the Company to be held within ninety (90) days following the inception of such occurrence, which inception shall occur at such time as the Company is not able to honor the full exercise of all outstanding Warrants due to such law, rule or regulation, whether or not any such conversion or exercise is actually attempted.

3.           Transfer, Division and Combination.

3.1         Transfer. The Warrants and the Warrant Stock shall be freely transferable, subject to compliance with all applicable laws, including, but not limited to the Securities Act. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant or the resale of the Warrant Stock, this Warrant or the Warrant Stock, as applicable, shall not be registered under the Securities Act, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant or the Warrant Stock as the case may be, furnish to the Company a written opinion of counsel that is reasonably acceptable to the Company to the effect that such transfer may be made without registration under the Securities Act, (ii) that the Holder or transferee execute and deliver to the Company an investment letter in form and substance reasonably acceptable to the Company, and (iii) that the transferee be an “accredited investor” as defined in Rule 501(a) promulgated under the Securities Act. Transfer of this Warrant and all rights hereunder, in whole or in part, in accordance with the foregoing provisions, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the principal office of the Company referred to in Section 2.1 or the office or agency designated by the Company pursuant to Section 12, together with a written assignment of this Warrant substantially in the form of Exhibit B hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute  and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Following a transfer that complies with the requirements of this Section 3.1, the Warrant may be exercised by a new Holder for the purchase of shares of Common Stock regardless of whether the Company issued or registered a new Warrant on the books of the Company. In connection with any transfer of this Warrant, the Holder or transferee of this Warrant shall reimburse the Company for its reasonable out of pocket costs in connection with such transfer (including without limitation the reasonable attorneys fees for preparing and filing any prospectus supplement with the SEC and/or delivering an updated opinion letter to the Seller’s transfer agent).

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3.2         Restrictive Legends. Each certificate for Warrant Stock initially issued upon the exercise of this Warrant, and each certificate for Warrant Stock issued to any subsequent transferee of any such certificate, unless, in each case, such Warrant Stock is registered under the Securities Act or is eligible for resale without registration pursuant to Rule 144 under the Securities Act, shall be stamped or otherwise imprinted with a legend in substantially the following form:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, AND MAY NOT BE OFFERED, SOLD, ASSIGNED OR TRANSFERRED, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER SAID ACT IS NOT REQUIRED.”

3.3         Division and Combination; Expenses; Books. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office or agency of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 3.1 as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. The Company shall prepare, issue and deliver at its own expense the new Warrant or Warrants under this Section 3. The Company agrees to maintain, at its aforesaid office or agency, books for the registration and the registration of transfer of the Warrants.

4.           Adjustments. The number of shares of Common Stock for which this Warrant is exercisable, and the price at which such shares may be purchased upon exercise of this Warrant, shall be subject to adjustment from time to time as set forth in this Section 4. The Company shall give the Holder notice of any event described below which requires an adjustment pursuant to this Section 4 in accordance with Sections 5.1 and 5.2.

4.1         Stock Dividends, Subdivisions and Combinations. If at any time while this Warrant is outstanding the Company shall:

(a)           declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock,

(b)           subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or

(c)           combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then:

(i)           the number of shares of Common Stock acquirable upon exercise of this Warrant immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock that would have been acquirable under this Warrant immediately prior to the record date for such dividend or distribution or the effective date of such subdivision or combination would own or be entitled to receive after such record date or the effective date of such subdivision or combination, as applicable, and

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(ii)          the Current Warrant Price shall be adjusted to equal:

(A)           the Current Warrant Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision or combination, multiplied by the number of shares of Common Stock into which this Warrant is exercisable immediately prior to the adjustment, divided by

(B)           the number of shares of Common Stock into which this Warrant is exercisable immediately after such adjustment.

Any adjustment made pursuant to clause (a) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clauses (b) or (c) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.

4.2         [Reserved.]

4.3         [Reserved.]

4.4         Other Provisions Applicable to Adjustments. The following provisions shall be applicable to the making of adjustments of the number of shares of Common Stock into which this Warrant is exercisable and the Current Warrant Price provided for in Section 4:

(a)           When Adjustments to Be Made. The adjustments required by Section 4 shall be made whenever and as often as any specified event requiring an adjustment shall occur. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence.

(b)           Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be taken into account to the nearest 1/100th of a share.

(c)           When Adjustment Not Required. If the Company undertakes a transaction contemplated under this Section 4 and as a result takes a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights or other benefits contemplated under this Section 4 and shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights or other benefits contemplated under this Section 4, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled.

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(d)           Escrow of Stock. If after any property becomes distributable pursuant to Section 4 by reason of the taking of any record of the holders of Common Stock, but prior to the occurrence of the event for which such record is taken, a holder of this Warrant exercises the Warrant during such time, then such holder shall continue to be entitled to receive any shares of Common Stock issuable upon exercise hereunder by reason of such adjustment and such shares or other property shall be held in escrow for the holder of this Warrant by the Company to be issued to holder of this Warrant upon and to the extent that the event actually takes place. Notwithstanding any other provision to the contrary herein, if the event for which such record was taken fails to occur or is rescinded, then such escrowed shares shall be canceled by the Company and escrowed property returned to the Company.

4.5         Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets.

(a)           If there shall occur a Change of Control and, pursuant to the terms of such Change of Control, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“Other Property”), are to be received by or distributed to the holders of Common Stock of the Company, then the Holder of this Warrant shall have the right thereafter to receive, upon the exercise of the Warrant, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and the Other Property receivable upon or as a result of such Change of Control by a holder of the number of shares of Common Stock into which this Warrant is exercisable immediately prior to such event.

(b)           In case of any such Change of Control described in Section 4.5(a) above, the resulting, successor or acquiring entity (if other than the Company) and, if an entity different from the successor or acquiring entity, the entity whose capital stock or assets the holders of the Common Stock are entitled to receive as a result of such Change of Control, shall expressly assume the due and punctual observance and performance of each and every covenant and condition contained in this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined by resolution of the Board of Directors of the Company) in order to provide for adjustments of shares of the Common Stock into which this Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in Section 4. For purposes of Section 4, common stock of the successor or acquiring corporation shall include stock of such corporation of any class which is not preferred as to dividends or assets on liquidation over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 4 shall similarly apply to successive Change of Control transactions.

4.6         [Reserved.]

4.7         Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any transaction which, by reason of any adjustment hereunder, would cause the Current Warrant Price to be less than the par value per share of Common Stock.

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4.8         Stock Transfer Taxes. The issue of stock certificates upon exercise of this Warrant shall be made without charge to the holder for any tax in respect of such issue. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares in any name other than that of the holder of this Warrant, and the Company shall not be required to issue or deliver any such stock certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

5.           Notices to Warrant Holders.

5.1         Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Current Warrant Price, the Company, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to the Holder of this Warrant a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of the Holder of this Warrant, furnish or cause to be furnished to such Holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Current Warrant Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, or other property which at the time would be received upon the exercise of Warrants owned by such Holder.

5.2         Notice of Corporate Action. If at any time:

(a)           the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of the Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or

(b)           there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation,

(c)           there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company, or

(d)           the Company shall cause the holders of its Common Stock to be entitled to receive (i) any dividend or other distribution of cash, (ii) any evidences of its indebtedness, or (iii) any shares of stock of any class or any other securities or property or assets of any nature whatsoever (other than cash or additional shares of Common Stock as provided in Section 4.1 hereof); or (iv) any warrants or other rights to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property or assets of any nature whatsoever;

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then, in any one or more of such cases, the Company shall give to the Holder (i) at least 20 days’ prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 20 days’ prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of the Holder appearing on the books of the Company and delivered in accordance with Section 15.2.

5.3         No Rights as Stockholder. This Warrant does not entitle the Holder to any voting or other rights as a stockholder of the Company prior to exercise and payment for the Warrant Price in accordance with the terms hereof.

6.           No Impairment. The Company shall not by any action, including, without limitation, amending its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (c) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. Upon the request of the Holder, the Company will at any time during the period this Warrant is outstanding acknowledge in writing, in form satisfactory to the Holder, the continuing validity of this Warrant and the obligations of the Company hereunder.

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7.           Reservation and Authorization of Common Stock; Registration With Approval of Any Governmental Authority. From and after the date of issuance hereof, the Company shall at all times reserve and keep available for issue upon the exercise of Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants. All shares of Common Stock which shall be so issuable, when issued upon exercise of any Warrant and payment therefor in accordance with the terms of such Warrant, shall be duly and validly issued and fully paid and nonassessable, and not subject to preemptive rights. Before taking any action which would cause an adjustment reducing the Current Warrant Price below the then par value, if any, of the shares of Common Stock issuable upon exercise of the Warrants, the Company shall take any corporate action which may be necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of such Common Stock at such adjusted Current Warrant Price. Before taking any action which would result in an adjustment in the number of shares of Common Stock for which this Warrant is exercisable or in the Current Warrant Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof. If any shares of Common Stock required to be reserved for issuance upon exercise of Warrants require registration or qualification with any governmental authority under any federal or state law before such shares may be so issued (other than as a result of a prior or contemplated distribution by the Holder of this Warrant), the Company will in good faith and as expeditiously as possible and at its expense endeavor to cause such shares to be duly registered.

8.           Taking of Record; Stock and Warrant Transfer Books. In the case of all dividends or other distributions by the Company to the holders of its Common Stock with respect to which any provision of Section 4 refers to the taking of a record of such holders, the Company will in each such case take such a record and will take such record as of the close of business on a Business Day. The Company will not at any time, except upon dissolution, liquidation or winding up of the Company, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrant.

9.           [Reserved.]

10.         RWW Strategic Transaction.The Holder hereby waives any rights, including, without limitation, any rights under this Warrant that existed prior to its amendment and restatement hereby, arising as a result of or in connection with (i) any failures by the Company to comply with any of the provisions of this Warrant prior to the date hereof; or (ii) the acquisition by the Company of Rand Worldwide, Inc. (“RWW”) in a reverse merger transaction, pursuant to which the Company will issue shares of its Common Stock to the sole stockholder of RWW, and the other transactions contemplated thereby.

11.         Loss or Mutilation. Upon receipt by the Company from the Holder of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and indemnity or security reasonably satisfactory to it and reimbursement to the Company of all reasonable expenses incidental thereto and in case of mutilation upon surrender and cancellation hereof, the Company will execute and deliver in lieu hereof a new Warrant of like tenor to the Holder; provided, however, that in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation.

12.         Office of the Company. As long as any of the Warrants remain outstanding, the Company shall maintain an office or agency (which may be the principal executive offices of the Company) where the Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant.

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13.         Financial and Business Information.

13.1       Quarterly Information. The Company will deliver to the Holder, as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Company, one copy of an unaudited consolidated balance sheet of the Company and its subsidiaries as at the end of such quarter, and the related unaudited consolidated statements of income, retained earnings and cash flow of the Company and its subsidiaries for such quarter and, in the case of the second and third quarters, for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year. Such financial statements shall be prepared by the Company in accordance with GAAP and accompanied by the certification of the Company’s chief executive officer or chief financial officer that such financial statements present fairly the consolidated financial position, results of operations and cash flow of the Company and its subsidiaries as at the end of such quarter and for such year-to-date period, as the case may be; provided, however, that the Company shall have no obligation to deliver such quarterly information under this Section 13.1 to the extent it is publicly available; and provided further, that if such information contains material non-public information, the Company shall so notify the Holder prior to delivery thereof and the Holder shall have the right to refuse delivery of such information.

13.2       Annual Information. The Company will deliver to the Holder as soon as available and in any event within 90 days after the end of each fiscal year of the Company, one copy of an audited consolidated balance sheet of the Company and its subsidiaries as at the end of such year, and audited consolidated statements of income, retained earnings and cash flow of the Company and its subsidiaries for such year; setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year; all prepared in accordance with GAAP, and which audited financial statements shall be accompanied by an opinion thereon of the independent certified public accountants regularly retained by the Company, or any other firm of independent certified public accountants of recognized national standing selected by the Company; provided, however, that the Company shall have no obligation to deliver such annual information under this Section 13.2 to the extent it is publicly available; and provided further, that if such information contains material non-public information, the Company shall so notify the Holder prior to delivery thereof and the Holder shall have the right to refuse delivery of such information.

13.3       Filings. The Company will file on or before the required date all regular or periodic reports (pursuant to the Exchange Act) with the Commission and will deliver to Holder promptly upon their becoming available one copy of each report, notice or proxy statement sent by the Company to its stockholders generally.

14.         Limitation of Liability. No provision hereof, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of the Holder for the purchase price of any Common Stock, whether such liability is asserted by the Company or by creditors of the Company.

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15.         Miscellaneous.

15.1       Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of the Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies. If the Company fails to make, when due, any payments provided for hereunder, or fails to comply with any other provision of this Warrant, the Company shall pay to the Holder such amounts as shall be sufficient to cover any third party costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

15.2       Notice Generally. All notices, requests, demands or other communications provided for herein shall be in writing and shall be given in the manner and to the addresses set forth in the Purchase Agreement.

15.3       Successors and Assigns. Subject to compliance with the provisions of Section 3.1, this Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and assigns of the Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant, and shall be enforceable by any such Holder.

15.4       Amendment. This Warrant may be modified or amended or the provisions of this Warrant waived with the written consent of both the Company and the Holder.

15.5       Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be modified to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant.

15.6       Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

15.7       Governing Law. This Warrant and the transactions contemplated hereby shall be deemed to be consummated in the State of New York and shall be governed by and interpreted in accordance with the local laws of the State of New York without regard to the provisions thereof relating to conflicts of laws. The Company hereby irrevocably consents to the exclusive jurisdiction of the State and Federal courts located in New York City, New York in connection with any action or proceeding arising out of or relating to this Warrant. In any such litigation the Company agrees that the service thereof may be made by certified or registered mail directed to the Company pursuant to Section 15.2.

[Signature Page Follows]

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IN WITNESS WHEREOF, Avatech Solutions, Inc. has caused this Warrant to be executed by its duly authorized officer and attested by its Secretary.

Dated:  August 17, 2010

ATTEST:	AVATECH SOLUTIONS, INC.
	By:
Lawrence Rychlak, Secretary		George Davis, Chief Executive Officer

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EXHIBIT A

SUBSCRIPTION FORM

[To be executed only upon exercise of Warrant]

Avatech Solutions, Inc.

10715 Red Run Blvd., Suite 101

Owings Mills, MD 21117

Attention: Chief Executive Officer

Facsimile No.: (410) 753-1591

This undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant (“Warrant”) for, and to purchase thereunder shares of Common Stock (“Warrant Shares”) provided for therein, and requests that certificates for the Warrant Shares be issued as follows:

Name

Address

and, if the number of Warrant Shares shall not be all the Warrant Shares purchasable upon exercise of the Warrant, that a new Warrant for the balance of the Warrant Shares.

In lieu of delivering physical certificates representing the Warrant Shares purchasable upon exercise of this Warrant, provided the Company’s transfer agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder, the Company shall use its best efforts to cause its transfer agent to electronically transmit the Warrant Shares issuable upon conversion or exercise to the undersigned, by crediting the account of the undersigned’s prime broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

To the extent the undersigned intends to sell the Warrant Shares issued to the undersigned upon exercise of this Warrant pursuant to a registration statement filed with the Securities and Exchange Commission, the undersigned agrees to comply with all applicable prospectus delivery requirements under the Securities Act with respect to such sale.

Dated:	Signature:
	Name (please print)
	Address

EXHIBIT B

ASSIGNMENT FORM

FOR VALUE RECEIVED the undersigned registered owner of this Warrant for the purchase of shares of common stock of Avatech Solutions, Inc. hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of shares of common stock set forth below:

(Name and Address of Assignee

(Number of Shares of Common Stock)

and does hereby irrevocably constitute and appoint attorney-in-fact to register such transfer on the books of the Company, maintained for the purpose, with full power of substitution in the premises.

Dated:

(Print Name and Title)

(Signature)

(Witness)

NOTICE: The signature on this assignment must correspond with the name as written upon the face of the Warrant in every particular, without alteration or enlargement or any change whatsoever.

EX-9.1

Exhibit 9.1

STOCKHOLDERS’ AGREEMENT

This Stockholders’ Agreement (this “Agreement”), dated as of August 17, 2010, is made by and among Avatech Solutions, Inc., a Delaware corporation (the “Company”), RWWI Holdings LLC, a Delaware limited liability company (the “Designator”), and the holders identified on Annex I (together with their respective successors and assigns, the “Holders”; the Holders are each individually referred to herein as a “Holder”).

WHEREAS, the Company, ASRW Acquisition Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“Merger Sub”), Rand Worldwide, Inc. (“Merger Partner”), a Delaware corporation, and the Designator entered into an Agreement and Plan of Merger, dated as of August 17, 2010 (the “Merger Agreement”) pursuant to which Merger Sub will merge with and into Merger Partner, and Merger Partner will be the surviving entity (the “Merger”).

WHEREAS, upon the Effective Time and thereafter, Section 5.4 of the Merger Agreement contemplates certain director nomination rights with respect to the Company’s Board of Directors (the “Company Board”).

NOW, THEREFORE, in consideration of the mutual promises, representations, warranties and covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, the Designator and the Holders agree as follows.  Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Merger Agreement.

ARTICLE 1

BOARD OF DIRECTORS

1.1         Board of Directors Designation Rights; Voting Agreement.

(a)          During the period beginning at the Effective Time and ending on the date on which the Designator ceases to own at least twenty-five percent (25%) of the Merger Shares (the “Designation Period”):

(i)           the Company shall maintain a Board of Directors consisting of no more than six (6) individuals.

(ii)          The Designator shall have the right to submit to the Company Board for consideration as a director three (3) director nominees (each such person a “Director Nominee”), and the Company Board shall nominate for election and recommend that the Company’s stockholders vote to elect each of the Director Nominees to serve as a director (upon such election, or appointment pursuant to the next sentence, a “Designated Director”) of the Company until the Company’s next Annual Meeting of Stockholders.  The Company Board shall fill any vacancies that may arise upon the resignation, removal, death or disability of any Designated Director with a new director designated by the Designator.  The initial Director Nominees shall be Richard Charpie, Suzanne MacCormack and Charles D. Yie.

(iii)         The Company Board shall nominate for election and recommend that the Company’s stockholders vote to elect the Company’s Chief Executive Officer to serve as a director (upon such election, the “CEO Director”) of the Company until the Company’s next Annual Meeting of Stockholders. The initial CEO Director shall be Marc L. Dulude.

(iv)         The Company shall provide at least forty-five (45) days’ prior written notice of all intended mailings of notices to the Company’s stockholders for a meeting at which directors are to be elected (or an action by written consent pursuant to which directors are to be elected) to the Designator, and the Designator shall notify the Company in writing, at least thirty (30) days prior to such mailing, of the person(s) so designated as nominees for election as directors in accordance with this Section 1.1(a).  The Designator shall use reasonable best efforts to cause the persons so designated to provide the Company with all information about such person required to be disclosed in the Company’s notice to stockholders, including, without limitation, the information required by Schedule 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Director Information”), to the Company at least twenty (20) days prior to such mailing.  If the Designator shall fail to give notice to the Company as provided above, then the Company Board shall nominate the incumbent Designated Director(s).  If any designated person shall fail to timely provide the Company with his or her Director Information, then the Company Board shall nominate an incumbent Designated Director in lieu of such designated person, except where such failure to timely provide Director Information does not prejudice the Company’s ability to provide a timely notice of a meeting at which directors are to be elected that complies, in all material respects, with applicable Legal Requirements.

(v)          Each Holder agrees to vote, and cause each of its Affiliates to vote, all of his, her or its securities entitled to vote on the election of the Company’s directors (the “Voting Securities”) from time to time and at all times as follows:  (A) for the election to the Company Board of each person nominated as a director of the Company pursuant to this Section 1.1(a); (B) against the removal of any director elected pursuant to this Section 1.1(a) except for cause unless such removal is directed or approved by the Designator; (C) for the removal of any director elected pursuant to this Section 1.1(a) if such removal is directed or approved by the Designator; and (D) for the election of a nominee designated to fill any vacancy created by the resignation, removal, death or disability of a Designated Director or the CEO Director pursuant to this Section 1.1(a).  All Holders agree to execute, and to cause their Affiliates to execute, any written consents required to effectuate the obligations of this Agreement.

(vi)         The Company shall take such action as is necessary to convene meetings of the Company Board and, if applicable, meetings of the Company’s stockholders for the appointment and election of the directors (or to act by written consent) in order to elect the Designated Directors and the CEO Director in accordance with this Section 1.1(a).

(b)          During the period beginning at the Effective Time and ending on the earlier of the expiration of the Designation Period and the date immediately preceding the date of the second (2nd) Annual Meeting of Stockholders of the Company following the Effective Time (the “Continuing Director Period”):

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(i)           At the first Annual Meeting of Stockholders of the Company following the Effective Time, the Company Board shall nominate for election and recommend that the Company’s stockholders vote to elect two (2) individuals, each of whom must have been serving on the Company Board immediately prior to the Effective Time (upon election, or appointment pursuant to the next sentence, a “Continuing Director”) to serve as directors of the Company until the Company’s next Annual Meeting of Stockholders.  The Company Board shall fill any vacancy that may arise upon the resignation, removal, death or disability of any Continuing Director with a new director who was serving on the Company Board immediately prior to the Effective Time.  In the event that no individual who was serving on the Company Board immediately prior to the Effective Time is available or willing to serve as a director of the Company, then the identity of the nominee or new director, as the case may be, shall be at the discretion of the Company Board provided that any such nominee or new director shall not be an “affiliate” of the Designator or Merger Partner (other than in connection with such proposed directorship) as that term is defined in Rule 405 of the Securities Act of 1933, as amended, and upon election or appointment, as the case may be, such individual shall be considered a “Continuing Director.”

(ii)           The Designator agrees to vote, and cause each of its Affiliates to vote, all of his, her or its Voting Securities from time to time and at all times as follows:  (A) for the election to the Company Board of each person nominated as a director of the Company pursuant to this Section 1.1(b); (B) against the removal of any director elected pursuant to this Section 1.1(b) except for cause unless such removal is directed or approved by the remaining Continuing Director, if any; (C) for the removal of any director elected pursuant to this Section 1.1(b) if such removal is directed or approved by the remaining Continuing Director; and (D) for the election of a nominee designated to fill any vacancy created by the resignation, removal, death or disability of a Continuing Director pursuant to the provisions of this Section 1.1(b). For the avoidance of doubt, the Designator’s obligations under this Section 1.1(b) shall not apply to any vote or proxy relating to the election of directors at the second (2nd) or any subsequent Annual Meeting of Stockholders of the Company following the Effective Time. The Designator agrees to execute, and to cause its Affiliates to execute, any written consents required to effectuate the obligations of this Agreement.

(c)           The Company hereby represents and warrants that as of the date hereof the transactions contemplated hereby are not inconsistent with the Company’s Certificate of Incorporation or Bylaws and agrees that until such time as the obligations under this Section 1.1 have expired, the Company will not take any action or amend its Certificate of Incorporation or Bylawsin a manner inconsistent with or in derogation of this Agreement.

(d)           Each Holder hereby grants, and shall cause its Affiliates to grant, to the Secretary of the Company, in the event that such Holder fails to vote, or fails to cause any of its Affiliates to vote, its Voting Securities as required by this Agreement a proxy coupled with an interest in all Voting Securities beneficially owned by such Holder or such Affiliates, as applicable, to vote such Voting Securities in accordance with this Section 1.1, which proxy is irrevocable until the expiration of the Designation Period.

(e)           The Designator hereby grants, and shall cause its Affiliates to grant, to the Secretary of the Company, in the event that the Designator fails to vote, or fails to cause any of its Affiliates to vote, its Voting Securities as required by this Agreement, a proxy coupled with an interest in all Voting Securities beneficially owned by the Designator or such Affiliates, as applicable, to vote such Voting Securities in accordance with this Section 1.1, which proxy is irrevocable until the expiration of the Continuing Director Period.

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ARTICLE 2

MISCELLANEOUS

2.1         Expenses.

Except as otherwise provided herein, each of the parties hereto will pay its own expenses incurred by or on its behalf in connection with this Agreement or any transaction contemplated by this Agreement, whether or not such transaction shall be consummated, including without limitation all fees of its respective legal counsel and accountants.

2.2         Notices.

All notices, requests, demands, consents or waivers and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or by fax (with immediate confirmation), one (1) business day after being sent if by nationally recognized overnight courier or if mailed, then four (4) days after being sent by certified or registered mail, return receipt requested with postage prepaid:

If to the Holders, to the address set forth in the stock records of the Company.

If to the Designator:

RWWI Holdings LLC:

c/o Ampersand Ventures

55 William St., Ste. 240

Wellesley, MA 02481

Facsimile: (781) 239-0824

Attention: J. David Jacobs, Esq.

With a copy to:

Edwards Angell Palmer & Dodge LLP

111 Huntington Avenue

Boston, MA 02199-7613

Facsimile:  (617) 227-4420

Attention:  James T. Barrett, Esq.

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If to the Company:

Avatech Solutions, Inc.

10715 Red Run Boulevard, Suite 101

Owings Mills, MD 21117

Telephone: (410) 753-1525

Facsimile: (410) 753-1591

Attention: Corporate Secretary

With a copy to:

Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC

The Garrett Building

233 East Redwood Street

Baltimore, Maryland 21202-3332

Telephone: (410) 576-4000

Facsimile: (410) 576-4196

Attention: Abba David Poliakoff, Esq.

Andrew D. Bulgin, Esq.

or, in each case, to such other person or address as any party shall furnish to the other parties in writing.

2.3         Binding; No Assignment.

This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties, except by operation of law and except that the Company may assign all or part of this Agreement and its rights hereunder (a) to an Affiliate of the Company or (b) from and after the Closing to a person, not a party to this Agreement, who acquires substantially all of the assets of the Company and who assumes all of the obligations of the Company hereunder, provided in each such case that no such assignment shall release the Company from its duties and obligations hereunder.

2.4         Severability.

If in any jurisdiction, any provision of this Agreement or its application to any party or circumstance is restricted, prohibited or unenforceable, such provision shall, as to such jurisdiction, be ineffective only to the extent of such restriction, prohibition or unenforceability without invalidating the remaining provisions hereof and without affecting the validity or enforceability of such provision in any other jurisdiction or its application to other parties or circumstances.  In addition, if any one or more of the provisions contained in this Agreement shall for any reason in any jurisdiction be held to be excessively broad as to time, duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable Legal Requirements of such jurisdiction as it shall then appear.

5

2.5         Governing Law; Consent to Jurisdiction and Venue.

The parties acknowledge and agree that this Agreement shall be governed by the laws of the State of Delaware as to all matters including, but not limited to, matters of validity, construction, effect, performance and liability, without consideration of conflicts of laws provisions contained therein and that the courts of the State of Delaware shall have exclusive jurisdiction of all disputes with respect to this Agreement, including without limitation, any dispute relating to the construction or interpretation of the rights and obligations of any party, which is not resolved through discussion between the parties.  Each party hereto hereby irrevocably and unconditionally submits to the non-exclusive jurisdiction of any Delaware State or Federal court sitting in New Castle County in any action or proceeding arising out of or relating to this Agreement, or any transaction contemplated hereby.  Each party hereto hereby irrevocably waives, to the fullest extent they may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding, and also irrevocably and unconditionally consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process by certified mail to his, her or its address specified in Section 2.2.  Each party hereto further irrevocably and unconditionally agrees that a final judgment in any such action or proceeding (after exhaustion of all appeals or expiration of the time for appeal) shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Legal Requirements.

2.6         Waiver of Jury Trial.

EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

2.7         Counterparts.

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

2.8         Headings.

The title of this Agreement and the headings of the Sections and Articles of this Agreement are for reference purposes only and shall not be used in construing or interpreting this Agreement.

2.9         Entire Agreement; Amendment; Waiver.

This Agreement and any documents delivered pursuant to the terms hereof, set forth the entire agreement and understanding of the parties hereto in respect of the subject matter hereof, and supersedes all prior agreements, promises, covenants, arrangements, representations or warranties, whether oral or written, by any party hereto or any officer, director, employee or representative of any party hereto.  No modification or waiver of any provision of this Agreement shall be valid unless it is in writing and signed by the party to be charged therewith, provided, however, that the consent of the Holders comprising two-thirds of the shares of the Company’s Common Stock then held by all Holders shall be required to amend any provision of the Agreement impacting the rights of the Holders.The waiver or breach of any term or condition of this Agreement shall not be deemed to constitute a waiver of any other breach of the same or any other term or condition.

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2.10       Third Parties.

Except as specifically set forth or referred to herein, nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or corporation other than the parties hereto and their respective successors or assigns any rights or remedies under or by reason of this Agreement.

2.11       Gender; Tense, Etc.

Where the context or construction requires, all words applied in the plural shall be deemed to have been used in the singular, and vice versa; the masculine shall include the feminine and neuter, and vice versa; and the present tense shall include the past and future tense, and vice versa.

[Remainder of this page left blank intentionally; Signature pages follow]

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IN WITNESS WHEREOF, each of the undersigned has duly executed this Stockholders’ Agreement as of the date first written above.

AVATECH SOLUTIONS, INC.
By:	/s/ Lawrence Rychlak
Name:	Lawrence Rychlak
Title:	President and Chief Financial Officer
RWWI HOLDINGS LLC
By:	AMP-06 Management Company
	Limited Partnership
By:	AMP-06 MC LLC, its General Partner
By:	/s/ Richard A. Charpie
Name:	Richard A. Charpie
Title:	Principal Managing Member

ANNEX I

HOLDERS:
/s/ Garnett Y. Clark, Jr.		/s/ George W. Cox
Garnett Y. Clark, Jr.		George W. Cox
/s/ George M. Davis		/s/ Eugene J. Fischer
George M. Davis		Eugene J. Fischer
/s/ Aris Melissaratos		/s/ Robert J. Post
Aris Melissaratos		Robert J. Post
/s/ David C. Reymann		/s/ Lawrence Rychlak
David C. Reymann		Lawrence Rychlak
/s/ Thom Waye
Thom Waye
SIGMA OPPORTUNITY FUND, LLC		CAPSTONE VENTURES SBIC, L.P.
By:	Sigma Capital Advisors, LLC,	By:	/s/ Eugene J. Fischer
	as Managing Member		Eugene J. Fischer, President and
			General Partner
By:	/s/ Thom Waye
	Thom Waye, Managing Member

EX-10.1

Exhibit 10.1

FORM OF INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (the “Agreement”) is made and entered into as of August 17, 2010 by and between Avatech Solutions, Inc., a Delaware corporation (the “Company”), and [Director/Officer] (“Indemnitee”).

WITNESSETH THAT:

WHEREAS, highly competent persons have become more reluctant to serve corporations as directors, officers or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities.  Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions.  At the same time, directors, officers, and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself.  The bylaws of the Company requires indemnification of the officers and directors of the Company.  Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (“DGCL”).  The bylaws and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the Board, officers and other persons with respect to indemnification;

WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons;

WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company's stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons and certain affiliates of such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;

WHEREAS, this Agreement is a supplement to and in furtherance of the certificate of incorporation and the bylaws of the Company and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and

WHEREAS, Indemnitee does not regard the protection available under the Company's certificate of incorporation, bylaws and insurance as adequate in the present circumstances, and may not be willing to serve as a director without adequate protection, and the Company desires Indemnitee to serve in such capacity.  Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that Indemnitee and, under certain circumstances, investment funds affiliated with Indemnitee be so indemnified.

NOW, THEREFORE, in consideration of Indemnitee’s agreement to serve as a director after the date hereof, the parties hereto agree as follows:

1.          Indemnity of Indemnitee.  The Company hereby agrees to hold harmless and indemnify Indemnitee to the fullest extent permitted by law, as such may be amended from time to time.  In furtherance of the foregoing indemnification, and without limiting the generality thereof:

(a)           Proceedings Other Than Proceedings by or in the Right of the Company.  Indemnitee shall be entitled to the rights of indemnification provided in this Section l(a) if, by reason of Indemnitee’s Corporate Status (as hereinafter defined), the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding (as hereinafter defined) other than a Proceeding by or in the right of the Company.  Pursuant to this Section 1(a), Indemnitee shall be indemnified against all Expenses (as hereinafter defined), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee, or on Indemnitee’s behalf, in connection with such Proceeding or any claim, issue or matter therein, if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal Proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful.

(b)          Proceedings by or in the Right of the Company.  Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(b) if, by reason of Indemnitee’s Corporate Status, the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right of the Company.  Pursuant to this Section 1(b), Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by the Indemnitee, or on the Indemnitee’s behalf, in connection with such Proceeding if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company; provided, however, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company with respect to the matter claimed for indemnification unless and to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine that such indemnification may be made.

(c)          Indemnification for Expenses of a Party Who is Successful on the Merits or Otherwise.  Notwithstanding and in addition to any other provision of this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, Indemnitee shall be indemnified to the maximum extent permitted by applicable law, as such may be amended from time to time, against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.  If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with each successfully resolved claim, issue or matter.  For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

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(d)          Indemnification of Appointing Stockholders.   If (i) Indemnitee is or was affiliated with one or more investment or venture capital funds that have invested directly or indirectly in the Company (each, an “Appointing Stockholder” and collectively, the “Appointing Stockholders”), including, without limitation, Ampersand 2001 Companion Fund Limited Partnership, Ampersand 2001 Limited Partnership, Ampersand 2006 Limited Partnership and/or Capstone Ventures SBIC, L.P., and (ii) any Appointing Stockholder is, or is threatened to be made, a party to or a participant in any Proceeding, and (iii) such Appointing Stockholder’s involvement in the Proceeding results from any claim based on the Indemnitee’s service to the Company (or one or more of the Company’s predecessors, subsidiaries or acquired companies) as a director or other fiduciary of the Company (or one or more of the Company’s predecessors, subsidiaries or acquired companies), the Appointing Stockholder will be entitled to indemnification hereunder for Expenses to the same extent as Indemnitee, and the terms of this Agreement as they relate to procedures for indemnification of Indemnitee and advancement of Expenses shall apply to any such indemnification of Appointing Stockholder.  The Company and Indemnitee agree that the Appointing Stockholders are express third party beneficiaries of the terms of this Section 1(d).

2.          Additional Indemnity.  In addition to, and without regard to any limitations on, the indemnification provided for in Section 1 of this Agreement, the Company shall and hereby does indemnify and hold harmless Indemnitee against all Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf if, by reason of Indemnitee’s Corporate Status, he is, or is threatened to be made, a party to or participant in any Proceeding (including, without limitation, a Proceeding by or in the right of the Company), including, without limitation, all liability arising out of the negligence or active or passive wrongdoing of Indemnitee.  The only limitation that shall exist upon the Company’s obligations pursuant to this Agreement shall be that the Company shall not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the presumptions, set forth in Sections 6 and 7 of this Agreement) to be unlawful.

3.           Contribution.

(a)          Whether or not the indemnification provided in Sections 1 and 2 of this Agreement is available, in respect of any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall pay, in the first instance, the entire amount of any judgment or settlement of such action, suit or proceeding without requiring Indemnitee to contribute to such payment and the Company hereby waives and relinquishes any right of contribution it may have against Indemnitee.  The Company shall not enter into any settlement of any action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.

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(b)          Without diminishing or impairing the obligations of the Company set forth in the preceding subparagraph, if, for any reason, Indemnitee shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall contribute to the amount of Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company and all officers, directors or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, from the events or transaction from which such action, suit or proceeding arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, in connection with the events or transaction that resulted in such Expenses, judgments, fines or settlement amounts, as well as any other equitable considerations which applicable law may require to be considered.  The relative fault of the Company and all officers, directors or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary and the degree to which their conduct is active or passive.

(c)          The Company hereby agrees to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by officers, directors or employees of the Company, other than Indemnitee, who may be jointly liable with Indemnitee.

(d)           To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

4.          Indemnification for Expenses of a Witness or in Response to a Subpoena.  Notwithstanding any other provision of this Agreement, to the extent that (i) Indemnitee, by reason of Indemnitee’s Corporate Status, is a witness, or receives a subpoena, in any Proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified against all Expenses paid or incurred by Indemnitee in connection therewith and in the manner set forth in this Agreement, and (ii) any Appointing Stockholder, by reason of its affiliation with an Indemnitee, is a witness, or receives a subpoena, in any proceeding involving the Company to which the Appointing Stockholder is not a party, the Appointing Stockholder shall be indemnified against all Expenses paid or incurred by it in connection therewith and in the manner set forth in this Agreement.

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5.          Advancement of Expenses.  Notwithstanding any other provision of this Agreement, the Company shall advance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee’s Corporate Status within thirty (30) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding.  Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses.  Any advances and undertakings to repay pursuant to this Section 5 shall be unsecured and interest free and made without regard to Indemnitee’s ability to repay such advances.

6.          Procedures and Presumptions for Determination of Entitlement to Indemnification.  It is the intent of this Agreement to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under the DGCL and public policy of the State of Delaware.  Accordingly, the parties agree that the following procedures and presumptions shall apply in the event of any question as to whether Indemnitee is entitled to indemnification under this Agreement:

(a)          To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification.  The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification.

(b)          Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 6(a) of this Agreement, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case by one of the following four methods, which shall be at the election of the Board:  (i) by a majority vote of the Disinterested Directors (as hereinafter defined), even though less than a quorum, (ii) by a majority vote of a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum, or (iii) if there are no Disinterested Directors or if the Disinterested Directors so direct, by Independent Counsel (as hereinafter defined) in a written opinion to the Board, a copy of which shall be delivered to the Indemnitee.

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(c)          If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(b) of this Agreement, the Independent Counsel shall be selected as provided in this Section 6(c).  The Independent Counsel shall be selected by the Board.  Indemnitee may, within 10 days after such written notice of selection shall have been given, deliver to the Company a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in this Agreement, and the objection shall set forth with particularity the factual basis of such assertion.  Absent a proper and timely objection, the person so selected shall act as Independent Counsel.  If a reasonable written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit.  If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 6(a) of this Agreement, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by the Indemnitee to the Company’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 6(b) of this Agreement.  The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 6(b) of this Agreement, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 6(c), regardless of the manner in which such Independent Counsel was selected or appointed.

(d)          In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement.  Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.  Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(e)          Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on: (i) the records or books of account of the Enterprise (as hereinafter defined) (including, without limitation, financial statements); (ii) information supplied to Indemnitee by the officers of the Enterprise in the course of their duties; (iii) the advice of legal counsel for the Enterprise: or (iv) information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise.  In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.  Whether or not the foregoing provisions of this Section 6(e) are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company.  Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

(f)          If the person, persons or entity empowered or selected under this Section 6 to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making such determination with respect to entitlement to indemnification in good faith requires such additional time to obtain or evaluate documentation and/or information relating thereto.

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(g)          Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination.  Any Independent Counsel or member of the Board of the Company shall act reasonably and in good faith in making a determination regarding the Indemnitee’s entitlement to indemnification under this Agreement.  Any Expenses incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

(h)          The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption and uncertainty.  In the event that any action, claim or proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim or proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the merits or otherwise in such action, suit or proceeding.  Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

(i)           The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

7.           Remedies of Indemnitee.

(a)          In the event that (i) a determination is made pursuant to Section 6 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5 of this Agreement, (iii) no determination of entitlement to indemnification is made pursuant to Section 6(b) of this Agreement within ninety (90) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to this Agreement within ten (10) days after receipt by the Company of a written request therefor or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 6 of this Agreement, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of Indemnitee’s entitlement to such indemnification.  Indemnitee shall commence such proceeding seeking adjudication within one (1) year following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 7(a).  The Company shall not oppose Indemnitee’s right to seek any such adjudication.

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(b)          In the event that a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 7 shall be conducted in all respects as a de novo trial on the merits, and Indemnitee shall not be prejudiced by reason of the adverse determination under Section 6(b) of this Agreement.

(c)          If a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 7, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s misstatement not materially misleading in connection with the application for indemnification, or (ii) a prohibition of such indemnification under applicable law.

(d)          In the event that Indemnitee, pursuant to this Section 7, seeks a judicial adjudication of Indemnitee’s rights under, or to recover damages for breach of, this Agreement, or to recover under any directors’ and officers’ liability insurance policies maintained by the Company, the Company shall pay on Indemnitee’s behalf, in advance, any and all expenses (of the types described in the definition of Expenses in this Agreement) actually and reasonably incurred by Indemnitee in such judicial adjudication, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of expenses or insurance recovery.

(e)          The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 7 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Company is bound by all the provisions of this Agreement.  The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefore) advance, to the extent not prohibited by law, such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advance of Expenses from the Company under this Agreement or under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of Expenses or insurance recovery, as the case may be.

(f)          Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

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8.           Non-Exclusivity; Survival of Rights; Insurance; Subrogation.

(a)          The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the certificate of incorporation and the bylaws of the Company, any agreement, a vote of stockholders, a resolution of the Board or otherwise.  No amendment, alteration or repeal of this Agreement or of any provision of this Agreement shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in Indemnitee’s Corporate Status prior to such amendment, alteration or repeal.  To the extent that a change in the DGCL, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the certificate of incorporation, the bylaws of the Company and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.  No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b)          To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person serves at the request of the Company, the Company shall obtain coverage for Indemnitee under such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any director, officer, employee, agent or fiduciary under such policy or policies.  If, at the time of the receipt of a notice of a claim pursuant to the terms of this Agreement, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies.  The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

(c)          The Company hereby acknowledges that Indemnitee may have certain rights to indemnification, advancement of expenses and/or insurance provided by one or more of the Appointing Stockholders (collectively, the “Fund Indemnitors”).  The Company hereby agrees that it: (i) is the indemnitor of first resort (i.e., its obligations to Indemnitee are primary and any obligation of the Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Indemnitee are secondary); (ii) shall be required to advance the full amount of Expenses incurred by Indemnitee and shall be liable for the full amount of all Expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of this Agreement and the certificate of incorporation or bylaws of the Company (or any other agreement between the Company and Indemnitee), without regard to any rights Indemnitee may have against the Fund Indemnitors; and (iii) irrevocably waives, relinquishes and releases the Fund Indemnitors from any and all claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof.  The Company further agrees that no advancement or payment by the Fund Indemnitors on behalf of Indemnitee with respect to any claim for which Indemnitee has sought indemnification from the Company shall affect the foregoing and that the Fund Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company.  The Company and Indemnitee agree that the Fund Indemnitors are express third party beneficiaries of this Section 8(c).

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(d)          Except as provided in paragraph (c) above, in the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee (other than against the Fund Indemnitors), who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(e)          Except as provided in paragraph (c) above, the Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

(f)          Except as provided in paragraph (c) above, the Company's obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, an officer, an employee, an agent or a fiduciary of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise.

9.          Exception to Right of Indemnification. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:

(a)          for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision, provided, that the foregoing shall not affect the rights of Indemnitee or the Fund Indemnitors set forth in Section 8(c) above; or

(b)          for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of Company securities pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or common law; or

(c)          subject to Section 7(d), in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee (including, without limitation, any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees), unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

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10.        Duration of Agreement.  All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is a director of the Company (or is or was serving at the request of the Company as a director, an officer, an employee, an agent or a fiduciary of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter for (i) an additional three (3) years or (ii) so long as Indemnitee or any Appointing Stockholder shall be subject to any Proceeding (or any proceeding commenced under Section 7 of this Agreement) in respect of which indemnification can be provided under this Agreement by reason of Indemnitee’s Corporate Status, whether or not Indemnitee is acting or serving in any such capacity at the time any liability or Expense is incurred for which indemnification can be provided under this Agreement, whichever such additional term is longer.  This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including, without limitation, any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives.

11.        Security.  To the extent requested by Indemnitee and approved by the Board, the Company may at any time and from time to time provide security to Indemnitee for the Company’s obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral.  Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of the Indemnitee.

12.         Enforcement.

(a)          The Company expressly confirms and agrees that it has entered into this Agreement and assumes the obligations imposed on it hereby in order to induce Indemnitee to serve as a director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director and/or an officer of the Company.

(b)          This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter of this Agreement and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter of this Agreement.

(c)          The Company shall not seek from a court, or agree to, a "bar order" which would have the effect of prohibiting or limiting the Indemnitee's rights to receive advancement of expenses under this Agreement.

13.         Definitions.  For purposes of this Agreement:

(a)          “Corporate Status” means the status of a person who is or was a director or an officer of the Company, or is or was a director, an officer, an employee, an agent or a fiduciary of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving at the express written request of the Company.

(b)          “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(c)          “Enterprise” means the Company and any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that Indemnitee is or was serving at the express written request of the Company as a director, an officer, an employee, an agent or a fiduciary.

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(d)          “Expenses” means all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating, or being or preparing to be a witness in a Proceeding.  Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding, including, without limitation, the premium, security for, and other costs relating to any cost bond, supersede as bond, or other appeal bond or its equivalent.  Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

(e)          “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent:  (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.  Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.  The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

(f)          “Proceeding” means any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of the fact that Indemnitee is or was a director or an officer of the Company, by reason of any action taken by Indemnitee or of any inaction on Indemnitee’s part while acting as a director or an officer of the Company, or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, an officer, an employee, an agent or a fiduciary of another corporation, partnership, joint venture, trust or other Enterprise; in each case whether or not Indemnitee is acting or serving in any such capacity at the time any liability or Expense is incurred for which indemnification can be provided under this Agreement; but excluding any such proceeding initiated by an Indemnitee pursuant to Section 7 of this Agreement to enforce Indemnitee’s rights under this Agreement.

14.         Severability.  The invalidity or unenforceability of any provision of this Agreement shall in no way affect the validity or enforceability of any other provision.  Further, the invalidity or unenforceability of any provision hereof as to either Indemitee or Appointing Stockholder shall in no way affect the validity or enforceability of any provision hereof as to the other.  Without limiting the generality of the foregoing, this Agreement is intended to confer upon Indemnitee and the Appointing Stockholders indemnification rights to the fullest extent permitted by applicable laws.  In the event any provision of this Agreement conflicts with any applicable law, such provision shall be deemed modified, consistent with the aforementioned intent, to the extent necessary to resolve such conflict.

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15.        Modification and Waiver.  No supplement, modification, termination or amendment of this Agreement shall be binding unless executed in writing by all of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement (whether or not similar) nor shall such waiver constitute a continuing waiver.

16.        Notice by Indemnitee or Appointing Stockholder.  Indemnitee agrees, and agrees to cause its affiliated Appointing Stockholder, promptly to notify the Company in writing upon being served with or otherwise receiving any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder.  The failure to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee or any Appointing Stockholder under this Agreement or otherwise unless and only to the extent that such failure or delay materially prejudices the Company.

17.        Notices.  All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given:  (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  All communications shall be sent:

(a)          To Indemnitee at his or her address set forth on the signature page hereto.

(b) To the Company at:

Avatech Solutions, Inc.

10715 Red Run Boulevard, Suite 101

Owings Mills, MD 21117

Attention: Corporate Secretary

or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

18.        Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement.  This Agreement may also be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

19.        Headings.  The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

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20.        Governing Law and Consent to Jurisdiction.  This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. The parties hereto hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “Delaware Court”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, irrevocably The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801 as its agent in the State of Delaware as such party’s agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.  The Company shall use its reasonable best efforts to ensure that The Corporation Trust Company maintains a current mail and e-mail address for Indemnitee so it can promptly notify the Indemnitee of any action it undertakes on behalf of the Indemnitee under (iii) above.  The Company shall bear the cost of engaging The Corporation Trust Company to act as agent for service of process for Indemnitee and any related costs or expenses.

[Remainder of page intentionally left blank; signature page follows.]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written.

COMPANY

AVATECH SOLUTIONS, INC.

By:

Name:

Title:

INDEMNITEE

[________]

Address:

[________]

[Signature page to Director Indemnification Agreement]

EX-10.2

Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT

BY AND AMONG

AVATECH SOLUTIONS, INC.

AND

RWWI HOLDINGS LLC

Dated as of August 17, 2010

TABLE OF CONTENTS

		Page
SECTION 1.	CERTAIN DEFINITIONS	1
SECTION 2.	DEMAND REGISTRATION	4
SECTION 3.	PIGGYBACK EVENTS	6
SECTION 4.	SHELF REGISTRATION	7
SECTION 5.	SUSPENSION PERIODS	8
SECTION 6.	REGISTRATION PROCEDURES	8
SECTION 7.	REGISTRATION EXPENSES	13
SECTION 8.	INDEMNIFICATION	13
SECTION 9.	SECURITIES ACT RESTRICTIONS	15
SECTION 10.	TRANSFERS OF RIGHTS	15
SECTION 11.	MISCELLANEOUS	15
ANNEX A – Plan of Distribution		A-1
ANNEX B – Selling Securityholder Notice and Questionnaire		B-1

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”), is made and entered into as of August 17, 2010, by and between Avatech Solutions, Inc., a Delaware corporation (the “Company”), and RWWI Holdings LLC, a Delaware limited liability company (the “Investor”).

WHEREAS, on August 17, 2010, the Company, a wholly owned subsidiary of the Company (“Merger Sub”), Rand Worldwide, Inc. (“Merger Partner”) and the Investor entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which upon consummation Merger Partner shall merge (the “Merger”) with Merger Sub and be the surviving corporation, and the Company shall issue shares of its Common Stock, par value  $0.01 per share (the “Common Shares”) as the merger consideration to the Investor (the “Merger Shares”),

WHEREAS, a condition to the consummation of the Merger is that the Company concurrently enter into this Agreement with the Investor with respect to registration rights,

WHEREAS, on August 17, 2010, the Merger was consummated and the Company issued an aggregate of 34,232,682 Merger Shares to the Investor, and, as of the date hereof, the Company and the Investor desire to enter into this Agreement,

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valid consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:

Section 1.             Certain Definitions.

In addition to the terms defined elsewhere in this Agreement, the following terms shall have the following meanings:

“Affiliate” of any Person means any other Person which directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person.  The term “control” (including the terms “controlling,” “controlled” and “under common control with”) as used with respect to any Person means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“Agreement” means this Registration Rights Agreement, including all amendments, modifications and supplements and any exhibits or schedules to any of the foregoing, and shall refer to this Registration Rights Agreement as the same may be in effect at the time such reference becomes operative.

“beneficially own” means, with respect to any Person, securities of which such Person or any of such Person’s Affiliates, directly or indirectly, has “beneficial ownership” as determined pursuant to Rule 13d-3 and Rule 13d-5 of the Exchange Act, including securities beneficially owned by others with whom such Person or any of its Affiliates has agreed to act together for the purpose of acquiring, holding, voting or disposing of such securities; provided that a Person shall not be deemed to “beneficially own” (i) securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person’s Affiliates until such tendered securities are accepted for payment, purchase or exchange, or (ii) any security as a result of an oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding: (a) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the Exchange Act, and (b) is not also then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report).  Without limiting the foregoing, a Person shall be deemed to be the beneficial owner of all Registrable Shares owned of record by any majority-owned subsidiary of such Person.

“Closing Date” has the meaning set forth in the Merger Agreement.

“Common Shares” has the meaning set forth in the first Recital hereto.

“Company” has the meaning set forth in the introductory paragraph.

“Demand Registration” has the meaning set forth in Section 2(a).

“Demand Registration Statement” has the meaning set forth in Section 2(a).

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

“Form S-3 means a registration statement on Form S-3 under the Securities Act or such successor forms thereto permitting registration of securities under the Securities Act.

“Governmental Entity” means any national, federal, state, municipal, local, territorial, foreign or other government or any department, commission, board, bureau, agency, regulatory authority or instrumentality thereof, or any court, judicial, administrative or arbitral body or public or private tribunal.

“Investor” has the meaning set forth in the introductory paragraph.

“Investor’s Counsel” has the meaning set forth in Section 6(a)(i).

“Merger Shares” has the meaning set forth in the first Recital hereto.

“Minimum Amount” means Three Million Dollars ($3,000,000).

“Person” means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, incorporated organization, association, corporation, institution, public benefit corporation, Governmental Entity or any other entity.

“Piggyback Event” has the meaning set forth in Section 3(a).

“Prospectus” means the prospectus or prospectuses (whether preliminary or final) included in any Registration Statement and relating to Registrable Shares, as amended or supplemented and including all material incorporated by reference in such prospectus or prospectuses.

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“Registrable Shares” means, at any time, (i) the Merger Shares held of record by the Investor at such time and (ii) any securities issued by the Company after the date hereof in respect of the Shares referred to in clause (i) by way of a share dividend or share split or other distribution thereon or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, but excluding all such Common Shares and such other securities held by the Investor at a time when such securities are eligible for resale by the Investor pursuant to Rule 144 under the Securities Act without limitation thereunder on volume or manner of sale.

“Registration Expenses” has the meaning set forth in Section 7(a).

“Registration Statement” means any registration statement of the Company which covers any of the Registrable Shares pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all documents incorporated by reference in such Registration Statement.

“SEC” means the Securities and Exchange Commission or any successor agency.

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

“Shares” means any of the Common Shares.  If at any time Registrable Shares include securities of the Company other than Common Shares, then, when referring to Shares other than Registrable Shares, “Shares” shall include the class or classes of such other securities of the Company.

“Shelf Registration” has the meaning set forth in Section 4(a).

“Shelf Registration Statement” has the meaning set forth in Section 4(a).

“Shelf Takedown” has the meaning set forth in Section 3(a).

“Suspension Period” has the meaning set forth in Section 5.

“Termination Date” means the first date on which the Investor no longer owns any Registrable Shares.

“underwritten offering” means a registered offering in which securities of the Company are sold to one or more underwriters on a firm-commitment basis for reoffering to the public, and “underwritten Shelf Takedown” means an underwritten offering effected pursuant to a Shelf Registration.

In addition to the above definitions, unless the context requires otherwise:

(i)           any reference to any statute, regulation, rule or form as of any time shall mean such statute, regulation, rule or form as amended or modified and shall also include any successor statute, regulation, rule or form from time to time;

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(ii)          “including” shall be construed as inclusive without limitation, in each case notwithstanding the absence of any express statement to such effect, or the presence of such express statement in some contexts and not in others;

(iii)         references to “Section” are references to Sections of this Agreement;

(iv)         words such as “herein”, “hereof”, “hereinafter” and “hereby” when used in this Agreement refer to this Agreement as a whole;

(v)          references to “business day” mean a business day in The City of Boston, Massachusetts; and

(vi)         references to “dollars” and “$” mean U.S. dollars.

Section 2.             Demand Registration.

(a)          Right to Request Registration.  The following demand registration rights will apply only if the Company fails to provide the resale registration rights set forth in Section 4, as follows:  Subject to the provisions hereof and until the Termination Date, if the Company has not filed, caused to be declared effective, and maintained the effectiveness of a Shelf Registration Statement, then the Investor may request in writing registration for resale under the Securities Act of all or part of its Registrable Shares (a “Demand Registration”); provided, however, that (based on the then-current market prices) the Company shall have no obligations under this Section 2(a) unless the number of Registrable Shares included in the Demand Registration would, if fully sold, reasonably be expected to yield gross proceeds of at least the Minimum Amount.  Subject to Section 2(d) and Section 5 below, the Company shall use reasonable best efforts (i) to file a Registration Statement registering for resale such number of Registrable Shares as requested to be so registered pursuant to this Section 2(a) (a “Demand Registration Statement”) within twenty (20) days after the Investor’s request therefor if such registration is to be effected using a Form S-3 and within forty (40) days after the Investor’s request therefor in all other cases and (ii) to use reasonable best efforts to cause such Demand Registration Statement to be declared effective by the SEC as soon thereafter as is practicable.

(b)          Number of Demand Registrations.  Subject to the limitations of Sections 2(a) and 2(d) below, until the Termination Date the Investor shall be entitled to request, in the aggregate, three (3) Demand Registrations under this Agreement but in no event more than one (1) Demand Registration in any rolling period of 180 days.  A Registration Statement shall count as a permitted Demand Registration only if and when it has become effective and the Investor is able to register and sell the Registrable Shares requested to be included in such registration under such Registration Statement.

(c)          Priority on Demand Registrations.  The Company shall not include Shares or other securities of the Company other than Registrable Shares in a Demand Registration.

(d)          Restrictions on Demand Registrations.  Notwithstanding anything to the contrary contained in this Section 2, the Company shall not be obligated to proceed with a Demand Registration if the offering to be effected pursuant to such registration can be effected at that time pursuant to a then currently effective Shelf Registration previously filed by the Company in accordance with Section 4.

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(e)          Underwritten Offerings.  At the request of the Investor, the Company shall use reasonable best efforts to cause a Demend Registration to be an underwritten offering, but only if (i) the number of Registrable Shares to be sold in the offering would reasonably be expected to yield gross proceeds of at least the Minimum Amount (based on then-current market prices), and (ii) the request is made more than sixty (60) days after the Investor has sold Shares in another underwritten registered offering pursuant to Section 2 or Section 4 hereof.  If any of the Registrable Shares covered by a Demand Registration are to be sold in an underwritten offering, then the Investor shall have the right to select the managing underwriter or underwriters to lead the offering, subject to the Company’s consent, not to be unreasonably withheld, conditioned or delayed.

(f)          Effective Period of Demand Registrations.  Upon the date of effectiveness of any Demand Registration for an underwritten offering (the “Effective Date”) and if such offering is priced promptly on or after the Effective Date, the Company shall use reasonable best efforts to keep such Demand Registration Statement effective for a period (the “Effective Period”) equal to the lesser of (i) one hundred twenty (120) days from the Effective Date or (ii) that number of days between the Effective Date and the date on which all of the Registrable Shares covered by such Demand Registration have been sold by the Investor pursuant to such Demand Registration.  If the Company withdraws any Demand Registration pursuant to Section 5 before the expiration of the Effective Period and before all of the Registrable Shares covered by such Demand Registration have been sold pursuant thereto, then the Investor shall be entitled to a replacement Demand Registration which shall be subject to all of the provisions of this Agreement.  A Demand Registration shall not count against the limit on the number of such registrations set forth in Section 2(b) if (i) after the applicable Registration Statement has become effective, such Registration Statement or the related offer, sale or distribution of Registrable Shares thereunder becomes the subject of any stop order, injunction or other order or restriction imposed by the SEC or any other governmental agency or court for any reason not directly attributable to the Investor or its Affiliates (other than the Company and its controlled Affiliates) and such interference is not thereafter eliminated so as to permit the completion of the contemplated distribution of Registrable Shares or (ii) in the case of an underwritten offering, the conditions specified in the related underwriting agreement, if any, are not satisfied or waived for any reason not directly attributable to the Investor or its Affiliates (other than the Company and its controlled Affiliates), and as a result of any such circumstances described in clause (i) or (ii), less than all of the Registrable Shares covered by the Registration Statement are sold by the Investor pursuant to such Registration Statement.

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Section 3.             Piggyback Events.

(a)          Right to Piggyback.  Whenever prior to the Termination Date the Company proposes (i) to register any Shares under the Securities Act (other than on a registration statement on Form S-8, F-8, S-4 or F-4), whether for its own account or for the account of one or more holders of Shares, and the form of registration statement to be used may be used for any registration of Registrable Shares or (ii) to sell Shares that have already been registered “off the shelf” by means of a prospectus supplement (a “Shelf Takedown”) (each a “Piggyback Event”), the Company shall give prompt written notice to the Investor of its intention to effect such a registration and/or Shelf Takedown and, subject to Sections 3(b) and 3(c), shall include in such registration statement and in any offering of Shares to be made pursuant to that registration statement and/or Shelf Takedown all Registrable Shares with respect to which the Company has received a written request for inclusion therein from the Investor within twenty (20) days after the Investor’s receipt of the Company’s notice (provided that only Registrable Shares of the same class or classes as the Shares being registered and/or taken-down may be included).  The Company shall have no obligation to proceed with any Piggyback Event and may abandon, terminate and/or withdraw such registration and/or Shelf Takedown for any reason at any time prior to the pricing thereof.  If the Company proposes to register an offering of any Shares for cash by the Company or for the account of any Person other than the Investor in an underwritten offering pursuant to a registration statement under the Securities Act (other than on a registration statement on Form S-8, F-8, S-4 or F-4), such offering shall be treated as a primary or secondary underwritten offering pursuant to a Piggyback Event.

(b)          Priority on Primary Piggyback Events.  If a Piggyback Event is initiated as a primary underwritten offering on behalf of the Company and the managing underwriter(s) advise the Company and the Investor that in their opinion the number of Shares proposed to be included in such offering exceeds the number of Shares (of any class) which can be sold in such offering without materially delaying or jeopardizing the success of the offering (including the price per share of the Shares proposed to be sold in such offering), the Company shall include in such registration and offering (i) first, the number of Shares that the Company proposes to sell and (ii) second, the number of Shares requested to be included therein by the Investor; provided that the number of Registrable Shares permitted to be included therein shall in any event be at least 50% of the total securities included therein.

(c)          Priority on Secondary Registrations.  If a Piggyback Event is initiated as an underwritten registration on behalf of a holder of Shares, and the managing underwriter(s) advise the Company that in their opinion the number of Shares proposed to be included in such registration exceeds the number of Shares (of any class) (the “Secondary Maximum Number of Shares”) which can be sold in such offering without materially delaying or jeopardizing the success of the offering (including the price per share of the Shares to be sold in such offering), then the Company shall include in such registration (i) first, the number of Shares requested to be included therein by holder(s) requesting such registration, (ii) second, the number of Shares requested to be included therein by the Investor, and (iii) third, the number of Shares that the Company proposes to sell; provided that the number of Registrable Shares permitted to be included therein shall in any event be at least 50% of the total securities included therein.

(d)          Selection of Underwriters.  If any Piggyback Event is a primary or secondary underwritten offering, the Company (or if the Person or Persons initiating the Piggyback Event in the context of a secondary underwritten offering have such right, such Person(s)) shall have the right to select the managing underwriter or underwriters to administer any such offering.

(e)          Basis of Participations.  The Investor may not sell Registrable Shares in any offering on account of a Piggyback Event unless it (a) agrees to sell such Shares on the basis provided in the underwriting or other distribution arrangements approved by the Company and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements, lockups and other documents reasonably required of other participants under the terms of such arrangements.

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Section 4.             Shelf Registration.

(a)          Shelf Registration.  The Company shall (i) file with the SEC a Registration Statement on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Shares on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith (it being understood by the parties hereto that at the date of this Agreement, the Company is not eligible to register for resale the Registrable Shares on Form S-3)), with a “Plan of Distribution” substantially in the form set forth as Annex A (a “Shelf Registration Statement”), for a public offering of all or such portion of the Registrable Shares designated by any Investor pursuant to Rule 415 promulgated under the Securities Act or otherwise (a “Shelf Registration”) as soon as is practicable, but no later than seventy-five (75) calendar days from the Closing Date and (ii) use reasonable best efforts to cause such Shelf Registration Statement to be declared effective as soon as is practicable following the Closing Date and to thereafter remain effective.  The Shelf Registration Statement shall only include Registrable Shares.  Subject to Section 5 hereof and any applicable Lock-up Agreement, the Investor shall be entitled to sell its Registrable Shares at any time and in any amount in accordance with any of the sale methods set forth in the “Plan of Distribution” section. However, in the case of a Shelf Takedown from the Shelf Registration Statement (an “Investor Shelf Takedown”), the provisions of Section 4(b), (c) and (d) shall govern, as applicable.

(b)          Right to Effect Shelf Takedowns.  The Investor shall be entitled, at any time and from time to time when a Shelf Registration Statement is effective to sell such Registrable Shares as are then registered pursuant to an Investor Shelf Takedown, but only upon not less than two (2) business days’ prior written notice to the Company, during which period the Company shall be entitled to implement a Suspension Period to the extent then permitted pursuant to Section 5.  The Investor shall give the Company prompt written notice of the consummation of each Investor Shelf Takedown (whether or not underwritten).  For the avoidance of doubt, the parties agree that an Investor Shelf Takedown is a non-exclusive means to effectuate the offer and sale of Registrable Shares under the Shelf Registration Statement.  Subject to Section 5 hereof, the Investor shall have the benefit of all the selling means permitted in the Shelf Registration Statement “Plan of Distribution,” including those that do not constitute Investor Shelf Takedowns (and therefore are not subject to Sections 4(b) and (c) hereof) because they are offerings that do not require the filing of a prospectus supplement based on the existing disclosure in the “Plan of Distribution”, such as ordinary brokerage transactions in the open market (the foregoing being only an example).

(c)          Underwritten Shelf Takedowns.  The Investor shall be entitled to, in the aggregate, six (6) underwritten Investor Shelf Takedown(s) under this Agreement, but only if (i) the number of Registrable Shares to be sold in the offering would reasonably be expected to yield gross proceeds to the Investor of at least the Minimum Amount (based on then-current market prices), and (ii) without the Company’s consent, such consent not to be unreasonably withheld, conditioned or delayed, the request is made more than sixty (60) days after the Investor has sold Shares in another underwritten registered offering pursuant to Section 2 or Section 4 hereof.  For the avoidance of doubt, the if the Company uses reasonable best efforts to cause an offering to be underwritten, the Company shall not be in breach of this Section 4(c) because of its inability to cause such offering to be underwritten.

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(d)          Selection of Underwriters.  In connection with an underwritten Investor Shelf Takedown, the Investor shall have the right to select the managing underwriter or underwriters to lead the offering, subject to the Company’s consent, not to be unreasonably withheld.

(e)          Effective Period of Shelf Registrations.  Subject to Section 5 of this Agreement, the Company shall use reasonable best efforts to keep any Shelf Registration Statement continuously effective until the Termination Date.

Section 5.             Suspension Periods

(a)          Suspension Periods.  The Company may delay the filing or effectiveness of, or by written notice to the Investor suspend the use of, a Registration Statement in conjunction with a Demand Registration or a Shelf Registration (and, if reasonably required, withdraw any registration statement that has been filed), but in each such case only if the board of directors of the Company determines in good faith that (x) such delay would enable the Company to avoid disclosure of material information, the disclosure of which at that time would be materially adverse to the Company’s best interests (including by materially interfering with, or jeopardizing the success of, any pending or proposed material acquisition, disposition or reorganization) or (y) obtaining any financial statements (including required consents) required to be included in any such Registration Statement would be impracticable.  Any period during which the Company has delayed a filing, an effective date or the use of a Registration Statement pursuant to this Section 5 is herein called a “Suspension Period”.  In no event shall there be more than four (4) Suspension Periods during any rolling period of three hundred sixty five (365) days, and the number of days covered by any one Suspension Period shall not exceed thirty (30) days, and the number of days covered by all Suspension Periods shall not exceed seventy-five (75) days in the aggregate during any rolling period of three hundred sixty five (365) days.  If pursuant to this Section 5 the Company delays or withdraws a Demand Registration or underwritten Investor Shelf Takedown requested by the Investor, the Investor shall be entitled to withdraw such request and, if it does so, such request shall not count against the limitation on the number of such registrations set forth in Section 2 or Section 4.  The Company shall provide prompt written notice to the Investor of the commencement and termination of any Suspension Period (and any withdrawal of a registration statement pursuant to this Section 5), but shall not be obligated under this Agreement to disclose the reasons therefor.  The Investor shall keep the existence of each Suspension Period confidential.

Section 6.             Registration Procedures.

(a)          In connection with the Shelf Registration provided for in Section 4 and otherwise whenever the Investor requests that any Registrable Shares be registered pursuant to this Agreement, the Company shall use reasonable best efforts to effect, as soon as practical as provided herein, the registration and the sale of such Registrable Shares in accordance with the intended methods of disposition thereof, and, pursuant thereto, the Company shall, as soon as is practicable as provided herein:

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(i)           subject to the other provisions of this Agreement, use reasonable best efforts to prepare and file with the SEC a Registration Statement with respect to such Registrable Shares and cause such Registration Statement to become effective (unless it is automatically effective upon filing); and before filing a Registration Statement or Prospectus or any amendments or supplements thereto, furnish to the Investor and the underwriters or other distributors, if any, identified by the Investor copies of all such documents proposed to be filed, including documents incorporated by reference in the Prospectus and one set of the exhibits incorporated by reference, and the Investor and a single counsel selected by the Investor (“Investor’s Counsel”) shall have a reasonable opportunity to review and comment on the Registration Statement and each such Prospectus (and each amendment or supplement thereto) before it is filed with the SEC, and the Investor shall have the opportunity to object to any information pertaining to the Investor that is contained therein and the Company will make the corrections reasonably requested by the Investor with respect to such information prior to filing any Registration Statement or Prospectus or any amendment or supplement thereto;

(ii)          use reasonable best efforts to prepare and file with the SEC such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to comply with the applicable requirements of the Securities Act and to keep such Registration Statement effective for the relevant period required hereunder, but no longer than is necessary to complete the distribution of the Shares covered by such Registration Statement, and to comply with the applicable requirements of the Securities Act with respect to the disposition of all the Shares covered by such Registration Statement during such period in accordance with the intended methods of disposition set forth in such Registration Statement;

(iii)         use reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement, or the lifting of any suspension of the qualification or exemption from qualification of any Registrable Shares for sale in any jurisdiction in the United States;

(iv)         furnish to the Investor and each managing underwriter, if any, without charge, conformed copies of each Registration Statement and amendment thereto and copies of each supplement thereto promptly after they are filed with the SEC (but only one set of exhibits thereto need be provided); and deliver, without charge, such number of copies of the preliminary and final Prospectus and any supplement thereto as the Investor may reasonably request in order to facilitate the disposition of the Registrable Shares of the Investor covered by such Registration Statement in conformity with the requirements of the Securities Act;

(v)          use reasonable best efforts to register or qualify such Registrable Shares under such other securities or blue sky laws of such U.S. jurisdictions as the Investor reasonably requests and continue such registration or qualification in effect in such jurisdictions for as long as the applicable Registration Statement may be required to be kept effective under this Agreement (provided that the Company will not be required to (I) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph (v), (II) subject itself to taxation in any such jurisdiction or (III) consent to general service of process in any such jurisdiction);

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(vi)         notify the Investor and each distributor of such Registrable Shares identified by the Investor, at any time when a Prospectus relating thereto would be required under the Securities Act to be delivered by such distributor, of the occurrence of any event as a result of which the Prospectus included in such Registration Statement contains an untrue statement of a material fact or omits a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and, at the request of the Investor, the Company shall use reasonable best efforts to prepare, as soon as is practicable, a supplement or amendment to such Prospectus so that, as thereafter delivered to any prospective purchasers of such Registrable Shares, such Prospectus shall not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;

(vii)        in the case of an underwritten offering in which the Investor participates pursuant to a Demand Registration, Piggyback Event or a Shelf Registration, enter into an underwriting agreement containing such provisions (including provisions for indemnification, lockups, opinions of counsel and comfort letters) as are customary and reasonable for an offering of such kind, and take all such other customary and reasonable actions as the managing underwriters of such offering may request in order to facilitate the disposition of such Registrable Shares (including making members of senior management of the Company available at reasonable times and places to participate in “road-shows” and investor calls, provided that any reasonable travel and accommodation expenses in connection with any such road shows shall be borne by the Investor);

(viii)       in the case of an underwritten offering in which the Investor participates pursuant to a Demand Registration, Piggyback Event or a Shelf Registration, and to the extent not prohibited by applicable law or pre-existing applicable contractual restrictions, (A) make reasonably available, for inspection by the Investor, Investor’s Counsel, the managing underwriter(s) of such offering and counsel and accountants acting for such managing underwriter(s), pertinent corporate documents and financial and other records of the Company and its subsidiaries and controlled Affiliates, (B) use reasonable best efforts to cause the Company’s officers and employees to supply information reasonably requested by the Investor or such managing underwriter(s) or attorney in connection with such offering, (C) use reasonable best efforts to cause the Company’s independent registered public accounting firm to make itself available for any such managing underwriter’s due diligence and to cause such accounting firm to provide customary “cold comfort” letters to such underwriters in connection therewith, and (D) use reasonable best efforts to cause the Company’s counsel to furnish customary legal opinions to such underwriters in connection therewith; provided, however, that such records and other information shall be subject to such confidential treatment as is customary for underwriters’ due diligence reviews;

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(ix)         use reasonable best efforts to cause all such Registrable Shares to be listed on each securities exchange (if any) on which securities of the same class issued by the Company are then listed;

(x)          provide a transfer agent and registrar for all such Registrable Shares not later than the effective date of such Registration Statement and, a reasonable time before any proposed sale of Registrable Shares pursuant to a Registration Statement, provide the transfer agent with printed certificates for the Registrable Shares to be sold, subject to the provisions of Section 11;

(xi)         in the case of an underwritten offering, make generally available to its stockholders a consolidated earnings statement (which need not be audited) for a period of twelve (12) months beginning after the effective date of the Registration Statement as soon as reasonably practicable after the end of such period, which earnings statement shall satisfy the requirements of an earnings statement under Section 11(a) of the Securities Act and Rule 158 thereunder; and

(xii)        promptly notify the Investor and the managing underwriter(s) of any underwritten offering, if any:

(1)          when the Registration Statement, any pre-effective amendment, the Prospectus or any Prospectus supplement or any post-effective amendment to the Registration Statement has been filed and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective;

(2)          of any request by the SEC for amendments or supplements to the Registration Statement or the Prospectus or for any additional information regarding the Investor;

(3)          of the notification to the Company by the SEC of its initiation of any proceeding with respect to the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement; and

(4)          of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Shares for sale under the applicable securities or blue sky laws of any jurisdiction; and keep Investor’s Counsel reasonably apprised as to the intention and progress of the Company with respect to any Registration Statement hereunder.

For the avoidance of doubt, the provisions of clauses (vii), (viii) and (xi) of this Section 7(a) shall apply only if (based on market prices at the time the offering is requested by the Investor) the number of Registrable Shares to be sold in the offering would reasonably be expected to yield gross proceeds to the Investor of at least the Minimum Amount.

(b)          No Registration Statement (including any amendments thereto) and no Prospectus (including any supplements thereto) shall contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except for any untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact made in reliance on and in conformity with written information furnished to the Company by or on behalf of the Investor or any underwriter or other distributor specifically for use therein.

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(c)          Until the Termination Date, the Company shall use reasonable best efforts to file all reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder, all to the extent required to enable the Investor to be eligible to sell Registrable Shares (if any) pursuant to Rule 144 under the Securities Act.

(d)          The Company may require the Investor and each distributor of Registrable Shares as to which any registration is being effected to furnish to the Company any other information regarding such Person and the distribution of such securities as the Company may from time to time reasonably request.

(e)           Subject to the limitations on the Company’s ability to delay the use or effectiveness of a Registration Statement as provided by the Suspension Periods set forth in Section 5(a), the Investor agrees by having its Shares treated as Registrable Shares hereunder that, upon being advised in writing by the Company of the occurrence of an event pursuant to Section 6(a)(vi) when the Company is entitled to do so pursuant to Section 5, the Investor will immediately discontinue (and direct any other Persons making offers and sales of Registrable Shares to immediately discontinue) offers and sales of Registrable Shares pursuant to any Registration Statement (other than those pursuant to a plan that is in effect and that complies with Rule 10b5-1 of the Exchange Act) until it is advised in writing by the Company that the use of the Prospectus may be resumed and is furnished with a supplemented or amended Prospectus as contemplated by Section 6(a)(vi), and, if so directed by the Company, the Investor will deliver to the Company all copies, other than permanent file copies then in the Investor’s possession, of the Prospectus covering such Registrable Shares current at the time of receipt of such notice.

(f)          The Company may prepare and deliver an issuer free-writing prospectus (as such term is defined in Rule 405 under the Securities Act) in lieu of any supplement to a prospectus, and references herein to any “supplement” to a Prospectus shall include any such issuer free-writing prospectus.  No seller of Registrable Shares may use a free-writing prospectus to offer or sell any such shares without the Company’s prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed).

(g)          It is further understood and agreed that the Company shall not have any obligations under this Section 6 at any time on or after the Termination Date, unless an underwritten offering in which the Investor participates has been priced but not completed prior to the Termination Date, in which event the Company’s obligations under this Section 6 shall continue with respect to such offering until it is completed.

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Section 7.             Registration Expenses.

(a)          All expenses incident to the Company’s performance of or compliance with this Agreement, including all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, Financial Industry Regulatory Authority fees, listing application fees, printing expenses, transfer agent’s and registrar’s fees, cost of distributing Prospectuses in preliminary and final form as well as any supplements thereto, and fees and disbursements of counsel for the Company and all independent registered public accounting firm and other Persons retained by the Company, together with the reasonable documented fees and expenses of the Investor’s Counsel (all such expenses being herein called “Registration Expenses”) (but not including any underwriting discounts or commissions attributable to the sale of Registrable Shares), shall be borne by the Company.  The Investor shall bear the cost of all underwriting discounts and commissions associated with any sale of Registrable Shares.

(b)          The obligation of the Company to bear the expenses described in Section 7(a) shall apply irrespective of whether a registration, once properly demanded or requested, becomes effective or is withdrawn or suspended, unless the Investor elects to pay the Registration Expenses, in which event such registration shall not count against the limit on the number of registrations set forth in Section 2(b).

Section 8.             Indemnification.

(a)          The Company shall indemnify, to the fullest extent permitted by law, the Investor and each Person who controls the Investor (within the meaning of the Securities Act) against all losses, claims, damages, liabilities, judgments, costs (including reasonable costs of investigation) and expenses (including reasonable attorneys’ fees) arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus or any amendment thereof or supplement thereto or arising out of or based upon any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are made in reliance and in conformity with information furnished in writing to the Company by or on behalf of the Investor or to the Company by or on behalf of any participating underwriter, in each case expressly for use therein.  In connection with an underwritten offering in which the Investor participates conducted pursuant to a registration effected hereunder, the Company shall indemnify each participating underwriter and each Person who controls such underwriter (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Investor.

(b)          In connection with any Registration Statement in which the Investor is participating, the Investor shall furnish to the Company in writing such information as the Company reasonably requests for use in connection with any such Registration Statement or Prospectus, or amendment or supplement thereto, and shall indemnify to the fullest extent permitted by law the Company, its officers and directors and each Person who controls the Company (within the meaning of the Securities Act), against all losses, claims, damages, liabilities, judgments, costs (including reasonable costs of investigation) and expenses (including reasonable attorneys’ fees) arising out of or based upon any untrue or alleged untrue statement of material fact contained in the Registration Statement or Prospectus, or any amendment or supplement thereto, or arising out of or based upon any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that the same are made in reliance and in conformity with information furnished in writing to the Company by or on behalf of the Investor expressly for use therein.  In connection with an underwritten offering conducted pursuant to a registration effected hereunder, the Investor shall indemnify each participating underwriter and each Person who controls such underwriter (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Company.

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(c)          Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying Person of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying Person to assume the defense of such claim with counsel reasonably satisfactory to the indemnified Person.  Failure so to notify the indemnifying Person shall not relieve it from any liability that it may have to an indemnified Person except to the extent that the indemnifying Person is materially and adversely prejudiced thereby.  The indemnifying Person shall not be subject to any liability for any settlement made by the indemnified Person without its consent (but such consent will not be unreasonably withheld).  An indemnifying Person who is entitled to, and elects to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel (in addition to one local counsel) for all Persons indemnified (hereunder or otherwise) by such indemnifying Person with respect to such claim (and all other claims arising out of the same circumstances), unless in the reasonable judgment of any indemnified Person there may be one or more legal or equitable defenses available to such indemnified Person which are in addition to or may conflict with those available to another indemnified Person with respect to such claim, in which case each such indemnified Person shall be entitled to use separate counsel.  The indemnifying Person shall not consent to the entry of any judgment or enter into or agree to any settlement relating to a claim or action for which any indemnified Person would be entitled to indemnification by any indemnified Person hereunder unless such judgment or settlement imposes no ongoing obligations on any such indemnified Person and includes as an unconditional term the giving, by all relevant claimants and plaintiffs to such indemnified Person, a release, reasonably satisfactory in form and substance to such indemnified Person, from all liabilities in respect of such claim or action for which such indemnified Person would be entitled to such indemnification.  The indemnifying Person shall not be liable hereunder for any amount paid or payable or incurred pursuant to or in connection with any judgment entered or settlement effected with the consent of an indemnified Person unless the indemnifying Person has also consented to such judgment or settlement.

(d)          The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified Person or any officer, director or controlling Person of such indemnified Person and shall survive the transfer of securities and the Termination Date but only with respect to offers and sales of Registrable Shares made before the Termination Date or during the period following the Termination Date referred to in Section 6(g).

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(e)          If the indemnification provided for in or pursuant to this Section 8 is due in accordance with the terms hereof, but is held by a court to be unavailable or unenforceable in respect of any losses, claims, damages, liabilities or expenses referred to herein, then each applicable indemnifying Person, in lieu of indemnifying such indemnified Person, shall contribute to the amount paid or payable by such indemnified Person as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying Person on the one hand and of the indemnified Person on the other in connection with the statements or omissions which result in such losses, claims, damages, liabilities or expenses as well as any other relevant equitable considerations.  The relative fault of the indemnifying Person, on the one hand, and of the indemnified Person, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying Person or by the indemnified Person, and by such Person’s relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  In no event shall the liability of the indemnifying Person be greater in amount than the amount for which such indemnifying Person would have been obligated to pay by way of indemnification if the indemnification provided for under Section 8(a) or 8(b) hereof had been available under the circumstances.

Section 9.             Securities Act Restrictions.

(a)          The Investor agrees that all certificates or other instruments representing the Merger Shares will bear a legend substantially to the following effect:

THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.

(b)          Upon the reasonable request of the Investor, at a time when such legend is no longer required under the Securities Act and applicable state laws, the Company shall promptly cause the legend to be removed from any certificate for any Merger Shares to be Transferred by the Investor upon the receipt by the Company of an opinion of counsel, certification and/or other information reasonably satisfactory to the Company.  The Investor acknowledges that the Merger Shares have not been registered under the Securities Act or under any state securities laws and agrees that it will not sell or otherwise dispose of any of the Merger Shares, except in compliance with the registration requirements or exemption provisions of the Securities Act and any other applicable securities laws.

Section 10.           Miscellaneous.

(a)          Notices.  Except as otherwise provided herein, all notices, requests, consents and other communications required or permitted hereunder shall be in writing and shall be hand delivered, mailed (postage prepaid) by registered or certified mail or sent by e-mail or facsimile transmission (with telephone confirmation promptly thereafter),

If to Investor:

RWWI Holdings LLC

c/o Ampersand Ventures

55 William St., Ste. 240

Wellesley, MA 02481

Attention: J. David Jacobs, Esq.

Fax:  (781) 239-0824

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With a copy to:

Edwards Angell Palmer & Dodge LLP

111 Huntington Avenue

Boston, MA 02199-7613

Attention:  James T. Barrett, Esq.

Fax:  (617) 227-4420

If to the Company:

Avatech Solutions, Inc.

10715 Red Run Boulevard, Suite 101

Owings Mills, MD 21117

Attention:  Lawrence Rychlak

Fax:  (410) 753-1591

With a copy to:

Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC

The Garrett Building

233 East Redwood Street

Baltimore, Maryland  21202-3332

Attention:  Abba David Poliakoff, Esq.

    Andrew D. Bulgin, Esq.

Fax:  (410) 576-4196

or at such other address as any such party hereto may specify by written notice to the others, and, except as otherwise provided herein, each such notice, request, consent and other communication shall for all purposes of the Agreement be treated as being effective or having been given when delivered personally or by mail or, in the case of e-mail or facsimile delivery, upon receipt of e-mail or facsimile confirmation of delivery and telephonic confirmation.

(b)          No Waivers.  No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

(c)          Successors and Assigns.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, it being understood that there are no intended third-party beneficiaries hereof.

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(d)          Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflict of law principles that would result in the application of any law other than the law of the State of Delaware.

(e)          Jurisdiction.  Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby must be brought in any federal or state court located in the non-exclusive jurisdiction of any Delaware State or Federal court sitting in New Castle County, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum.  Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 13(a) shall be deemed effective service of process on such party.

(f)           Waiver of Jury Trial.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

(g)          Counterparts; Effectiveness.  This Agreement may be executed in any number of counterparts (including by e-mail or facsimile) and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document.  All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument.  This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto.

(h)          Entire Agreement.  This Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes and replaces all other prior agreements, written or oral, among the parties hereto with respect to the subject matter hereof.

(i)           Captions.  The headings and other captions in this Agreement are for convenience and reference only and shall not be used in interpreting, construing or enforcing any provision of this Agreement.

(j)           Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

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(k)          Amendments.

(i)           The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given without the prior written consent of the Company and the Investor.

(ii)          The Company has not entered into, and will not, from and after the date hereof, enter into, any agreements or arrangements that grant to any other holders of its securities any rights that violate or conflict with this Agreement or impede the Company’s ability to fulfill and comply with its obligations set forth herein.

(l)           Lock-Up.  The Investor shall, in connection with any underwritten offering of the Company’s securities, in each case, in which the Investor is selling Registrable Shares pursuant to its rights under Section 3, upon the request of the Company or the managing underwriter(s), agree in writing not to effect any sale, disposition or distribution of any Registrable Shares (other than those included in such offering) without the prior written consent of the Company or such managing underwriter(s), as the case may be, for such period of time prior to and/or following the completion of the sale of the Company’s securities in such underwritten offering as the Company or the managing underwriter(s) may specify; provided, however, that all executive officers and directors of the Company shall also have agreed not to effect any sale, disposition or distribution of any such securities under the circumstances and pursuant to the terms set forth in this Section 10(l).

(m)         Limitations on Subsequent Registration Rights.  From and after the date of this Agreement, the Company shall not, without the prior written consent of the Investor, enter into any agreement with any holder or prospective holder of any securities of the Company that (i) would allow such holder or prospective holder (i) to include such securities in any registration unless, under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the number of the Registrable Securities of the Holders that are included or (ii) allow such holder or prospective holder to initiate a demand for registration of any securities held by such holder or prospective holder.

[Execution Page Follows]

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IN WITNESS WHEREOF, this Registration Rights Agreement has been duly executed by each of the parties hereto as of the date first written above.

COMPANY:
AVATECH SOLUTIONS, INC.
By:	/s/ Lawrence Rychlak
Name:	Lawrence Rychlak
Title:	President and Chief Financial Officer
INVESTOR:
RWWI HOLDINGS LLC
By:	Ampersand 2006 Limited Partnership, its
	Manager
By:	AMP-06 Management Company Limited
	Partnership, its General Partner
By:	AMP-06 MC LLC, its General Partner
By:	/s/ Richard A. Charpie
	Richard A. Charpie
	Principal Managing Member

[Signature Page to Registration Rights Agreement]

Annex A

PLAN OF DISTRIBUTION

Each selling stockholder, and any of their pledgees, assignees and successors-in-interest (the “Selling Stockholders”) may from time to time offer and sell, separately or together, some or all of the shares of Common Stock covered by this Registration Rights Agreement. Registration of shares of common stock covered by the Registration Rights Agreement does not mean, however, that those shares necessarily will be offered or sold.

The Company will not receive any proceeds from the sale of the common shares by the Selling Stockholders.

The Selling Stockholder may sell shares in one or more of the following ways (or in any combination) from time to time:

· through underwriters or dealers;

· directly to one or more purchasers;

· through agents; or

· through any other methods described in a prospectus supplement.

Neither the Company nor the Selling Stockholders have entered into any agreements, understandings or arrangements with any underwriters or dealers regarding the sale of shares covered by the Registration Rights Agreement.  At any time a particular offer of the shares covered by the Registration Rights Agreement is made, a revised prospectus or prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares of common stock covered by the Registration Rights Agreement being offered and the terms of the offering, including the name or names of any underwriters, dealers or agents. In addition, to the extent required, any discounts, commissions, concessions and other items constituting underwriters’ or agents’ compensation, as well as any discounts, commissions or concessions allowed or re-allowed or paid to dealers, will be set forth in such revised prospectus or prospectus supplement. Any such required prospectus or prospectus supplement, and, if necessary, a post-effective amendment to any registration statement, will be filed with the SEC to reflect the disclosure of additional information with respect to the distribution of the Common Shares covered by the Registration Rights Agreement.

The shares may also be sold in one or more of the following transactions, or in any transactions described in a prospectus or prospectus supplement:

· block transactions in which a broker-dealer may sell all or a portion of the shares as agent but may position and resell all or a portion of the block as principal to facilitate the transaction;

· purchase by a broker-dealer as principal and resale by the broker-dealer for its own account;

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· ordinary brokerage transactions and transactions in which a broker-dealer solicits purchasers;

· sales “at the market” to or through a market maker or into an existing trading market, on an exchange or otherwise;

· through the writing of options; or

· sales in other ways not involving market makers or established trading markets, including direct sales to purchasers.

The shares that the Selling Stockholder sell by any of the methods described above may be sold to the public, in one or more transactions, either:

· at a fixed public offering price or prices, which may be changed;

· at market prices prevailing at the time of sale;

· at prices related to prevailing market prices;

· at varied prices determined at the time of sale; or

· at negotiated prices.

Underwriters and agents may be entitled under agreements entered into with the Selling Stockholders to indemnification by the Company and/or the Selling Stockholders against certain civil liabilities, including liabilities under the Securities Act, or to contribution with respect to payments which the underwriters or agents may be required to make. Underwriters and agents may engage in transactions with, or perform services for, the Company, the Company’s affiliates, the Selling Stockholders and their affiliates in the ordinary course of business.

The Selling Stockholders may also sell shares under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), if available, rather than under this prospectus.

Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales.  Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.

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

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The Selling Stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the Common Stock. In no event shall any broker-dealer receive fees, commissions and markups which, in the aggregate, would exceed eight percent (8%).

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

Because Selling Stockholders may be deemed to be “underwriters” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act including Rule 172 thereunder. There is no underwriter or coordinating broker acting in connection with the proposed sale of the resale shares by the Selling Stockholders.

The Company has agreed to keep this prospectus effective until the earlier of (i) the date on which the shares may be resold by the Selling Stockholders without registration by reason of Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale shares may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the common stock by the Selling Stockholders or any other person. The Company will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

* * *

A-3

Annex B

AVATECH SOLUTIONS, INC.

Selling Securityholder Notice and Questionnaire

The undersigned beneficial owner of common stock (the “Registrable Securities”) of Avatech Solutions, Inc., a Delaware corporation (the “Company”), understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “SEC”) a registration statement (the “Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement (the “Registration Rights Agreement”) to which this document is annexed. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.

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

NOTICE

The undersigned beneficial owner (the “Selling Securityholder”) of Registrable Securities hereby elects to include the Registrable Securities owned by it in the Registration Statement.

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

QUESTIONNAIRE

1. Name.

(a)          Full Legal Name of Selling Securityholder

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

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

2. Address for Notices to Selling Securityholder:

Telephone: 

Fax: 

Contact Person: 

3. Broker-Dealer Status:

(a)          Are you a broker-dealer?

Yes   ¨                      No   ¨

(b)          If “yes” to Section 3(a), did you receive your Registrable Securities as compensation for investment banking services to the Company.

Yes   ¨                      No   ¨

Note: If “no” to Section 3(b), the SEC’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

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

Yes   ¨                      No   ¨

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

Yes   ¨                      No   ¨

Note: If “no” to Section 3(d), the SEC’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

4. Beneficial Ownership of Securities of the Company Owned by the Selling Securityholder.

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Except as set forth below in this Item 4, the undersigned is not the beneficial or registered owner of any securities of the Company other than the securities issuable pursuant to the Purchase Agreement.

(a)           Type and Amount of other securities beneficially owned by the Selling Securityholder:

5. Relationships with the Company:

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

State any exceptions here:

The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Registration Statement remains effective.

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 5 and the inclusion of such information in the Registration Statement and the related prospectus and any amendments or supplements thereto. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus.

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

Dated:	Beneficial Owner:
	By:
		Name:
		Title:

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

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EX-10.3

Exhibit 10.3

FIFTH

MODIFICATION AGREEMENT

THIS FIFTH MODIFICATION AGREEMENT (“AGREEMENT”) is made as of August 17, 2010, by and among AVATECH SOLUTIONS, INC., a Delaware corporation (“AVATECH”), and AVATECH SOLUTIONS SUBSIDIARY, INC., a Delaware corporation, jointly and severally (“AVATECH SUBSIDIARY”), and PNC BANK, NATIONAL ASSOCIATION, successor by merger to Mercantile-Safe Deposit and Trust Company (“LENDER”).  AVATECH and AVATECH SUBSIDIARY are collectively referred to herein as the “BORROWERS”.

RECITALS

In accordance with the terms and conditions set forth in a Loan and Security Agreement dated as of January 27, 2006 between the BORROWERS and the LENDER (“ORIGINAL LOAN AGREEMENT”), the LENDER extended to the BORROWERS a revolving line of credit in the maximum principal amount outstanding at any one time of Five Million Dollars ($5,000,000.00) (the “LOAN”).  Pursuant to the ORIGINAL LOAN AGREEMENT, the BORROWERS’ obligations to the LENDER are secured by all of the BORROWERS’ tangible and intangible assets.

Pursuant to a Modification Agreement dated as of May 30, 2006 (the “FIRST MODIFICATION”), the LENDER extended to the BORROWERS a short term bridge loan, in the amount of Six Million Five Hundred Thousand ($6,500,000.00) (“BRIDGE LOAN”), and the terms of the ORIGINAL LOAN AGREEMENT were modified in certain respects.  All sums due in connection with the BRIDGE LOAN have been repaid by the BORROWERS.

Pursuant to a Second Modification Agreement dated as of December 31, 2006, a Third Modification Agreement dated as of December 31, 2008, and a Fourth Modification Agreement dated as of December 31, 2009 (collectively with the ORIGINAL LOAN AGREEMENT and the FIRST MODIFICATION, the “LOAN AGREEMENT”), the terms of the ORIGINAL LOAN AGREEMENT were modified in certain additional respects.

The BORROWERS have requested that the LENDER consent to the creation by AVATECH of a new subsidiary, and the entry by such subsidiary into a merger transaction with Rand Worldwide, Inc. (“RAND”), which merger transaction will also result in a CHANGE IN CONTROL, as that term is defined in the LOAN AGREEMENT.  The LENDER has agreed to the BORROWERS’ request, but only in accordance with the terms and conditions set forth herein.  As used herein, the term “LOAN DOCUMENTS” shall collectively mean the LOAN AGREEMENT and all other documents and agreements evidencing or securing the LOAN.  Unless otherwise defined herein, any terms appearing in all capital letters in this AGREEMENT shall have the respective meanings ascribed to such terms in the LOAN AGREEMENT.

NOW, THEREFORE, in consideration of the foregoing premises, the terms and conditions set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.        Representations And Warranties Of Borrowers.  To induce the LENDER to enter into this AGREEMENT and to provide the BORROWERS with the accommodations described herein, the BORROWERS make the representations and warranties set forth below and acknowledge the LENDER’S justifiable right to rely upon these representations and warranties.

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a.         No Litigation.  There is no action, suit, investigation, or proceeding pending against either of the BORROWERS or any other assets of either of the BORROWERS, except for those proceedings previously disclosed to the LENDER in writing.

b.         Organization; Good Standing; Authorization.  Each of the BORROWERS: (a) has the power to enter into this AGREEMENT and all other documents, and agreements required to be executed pursuant to this AGREEMENT, and has the power to perform all of its obligations hereunder and thereunder; (b) has duly authorized the entry into and performance of this AGREEMENT and all other documents and agreements required to be executed by such BORROWER; and (c) is in good standing in the state of its incorporation or organization, as applicable, and is in good standing and qualified as a foreign corporation or limited liability company, as applicable, in all other states in which such qualification is required.

c.         Valid, Binding And Enforceable.  This AGREEMENT and all of the other documents and agreements executed pursuant to this AGREEMENT are the valid and binding obligations of the BORROWERS and are fully enforceable against each of the BORROWERS in accordance with their terms.

d.         Subsidiaries.  AVATECH SOLUTIONS SUBSIDIARY, INC. is a wholly-owned subsidiary of AVATECH SOLUTIONS, INC.  Except as described in Section 2 below, the BORROWERS have no other subsidiaries.

2.        Consent to Creation of Subsidiary and Merger Transaction.  Subject to the satisfaction by the BORROWERS of the conditions set forth in this AGREEMENT, the LENDER consents to the creation of ASRW ACQUISTION SUB, INC., a Delaware corporation (“MERGER SUB”), as a wholly-owned subsidiary of AVATECH.  Pursuant to Section 6.1 and 6.8 of the LOAN AGREEMENT, the LENDER consents to the entry by AVATECH and MERGER SUB into the transactions described in that certain Agreement and Plan of Merger dated as of August 17, 2010 (“MERGER AGREEMENT”) by and between AVATECH, MERGER SUB, RAND WORLDWIDE, INC., a Delaware corporation (“MERGER PARTNER”), and RWWI HOLDINGS LLC, a Delaware limited liability company and the sole stockholder of MERGER PARTNER (“DESIGNATOR”).  In accordance with the terms of the MERGER AGREEMENT, AVATECH and MERGER PARTNER intend to enter into a business combination transaction pursuant to which: (a) MERGER SUB will merge with and into MERGER PARTNER (the “MERGER”); (b) the separate existence of MERGER SUB shall cease and MERGER PARTNER shall continue as the surviving corporation in the MERGER, as a result of which MERGER PARTNER will become a wholly-owned subsidiary of AVATECH.  In addition, pursuant to 7.16 of the LOAN AGREEMENT, the LENDER consents to the CHANGE OF CONTROL which will result from the consummation of the transactions described in the MERGER AGREEMENT, pursuant to which AVATECH will acquire one hundred percent (100%) of the issued and outstanding shares of MERGER PARTNER, in exchange for which the DESIGNATOR shall receive shares in AVATECH in an amount not to exceed sixty-seven (67%) of the issued and outstanding shares of AVATECH.

3.        Amendments To Loan Agreement. The LOAN AGREEMENT is hereby modified and amended as follows:

a.         Amendments to Definitions.  The definitions set forth in Article 1 of the LOAN AGREEMENT are hereby modified as follows:

i.         The definition of “LOAN DOCUMENTS” contained in Section 1.66 of the LOAN AGREEMENT shall also include, without limitation, this AGREEMENT.

ii.         The following definitions are added to Article 1:

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Section 1.95.  Merger Partner.  The term “MERGER PARTNER” means RAND WORLDWIDE, INC., a Delaware corporation.

Section 1.96.  Rand PNC Loan.  The term “RAND PNC LOAN” means, collectively, those credit accommodations owed to the LENDER, as agent, by MERGER PARTNER.

b.         Extension of Maturity Date.  The definition of “MATURITY DATE” contained in Section 1.70 of the LOAN AGREEMENT is modified by replacing the existing provision with the following:

Section 1.70.  Maturity Date.  The term “MATURITY DATE” means the earlier of (i) that date which is one hundred twenty (120) days after the effective date of the MERGER and (ii) December 31, 2010, as such date may be extended by written agreement of the LENDER

c.         Separate Operations.  The following additional provision is added to Article 5 of the LOAN AGREEMENT:

Section 5.24.  Separate Operations.  Subject to the immediately following sentence, the BORROWERS shall at all times maintain MERGER PARTNER as a separate legal entity, which shall constitute a wholly-owned SUBSIDIARY of AVATECH.  Until such time as the BORROWERS and MERGER PARTNER have established a single credit facility consolidating the LOAN and the RAND PNC LOAN, the BORROWERS and MERGER PARTNER shall:  (a) maintain separate books and records and bank accounts, including separate accounts receivable and accounts payable records; (b) prepare separate financial statements; (c) maintain their respective assets in such a manner that it is not costly or difficult to segregate, identify or ascertain such assets; (d) allocate and charge fairly and reasonably any shared employee or overhead costs; (e) not extend any intercompany loans, advances, transfers, capital transactions or similar transactions; and (f) not commingle their respective assets or funds.

d.         Changes to Management.  The following additional provision is added to Article 6 of the LOAN AGREEMENT:

Section 6.15.  No Changes To Management.  The BORROWERS shall not have any changes to the individuals holding key management positions with the BORROWERS immediately after the effective time of the Merger, including without limitation Chairman, Chief Executive Officer, President and Chief Financial Officer; provided however, that the LENDER acknowledges that upon the effective time of the merger of ASRW Acquisition Sub, Inc. into MERGER PARTNER, George Davis’ role as Chief Executive Officer will terminate.

e.         Cross-Default.  Section 7.5 of the LOAN AGREEMENT is modified by replacing the existing provision with the following:

Section 7.5.  Cross-Default.  A breach of or default under the terms, covenants, or conditions of any agreement, loan, guaranty, or other transaction of any or all of the BORROWERS or any GUARANTOR with the LENDER or with any other lender, or a breach of or default under the terms, covenants, or conditions of any agreement, loan, guaranty, or other transaction of MERGER PARTNER with the LENDER or with any other lender.

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f.         Financial Covenants.  Until such time as the BORROWERS and MERGER PARTNER have established a single credit facility consolidating the LOAN and the RAND PNC LOAN, the financial covenants contained in the LOAN AGREEMENT shall apply only to the BORROWERS, exclusive of the operations of MERGER PARTNER, and the BORROWERS shall continue to provide financial information to the LENDER with respect to the financial matters of the BORROWERS only, exclusive of the operations of MERGER PARTNER.

4.         No Novation; No Refinance; No Adverse Effect On Liens.  The parties hereto do not intend that a novation of the LOAN or any of the LOAN DOCUMENTS shall be created or effected because of the modification of the LOAN AGREEMENT, as described herein.  The parties hereto do not intend that the execution of this AGREEMENT, and the amendments and modifications to be made to the LOAN AGREEMENT, as described herein, shall: (a) constitute a refinance of the LOAN; or (b) affect or impair the validity, enforceability, or priority of any of the liens or security interests imposed by or granted in the LOAN DOCUMENTS.

5.         Other Terms; Confirmation Of Obligations.  Other than the foregoing, all other terms and conditions of the LOAN DOCUMENTS shall remain in full force and effect and are incorporated herein by reference.  The BORROWERS acknowledge, ratify and confirm their respective obligations under the LOAN DOCUMENTS and further acknowledge and confirm that the BORROWERS are and shall remain absolutely and unconditionally obligated to pay the LENDER all present and future indebtedness that is owed to the LENDER under the LOAN DOCUMENTS, as modified hereby, in the manner provided therein, notwithstanding the LENDER’S execution of this AGREEMENT and any documents to be executed pursuant to this AGREEMENT, and notwithstanding the various agreements the LENDER has set forth herein and therein.

6.         Security.  The BORROWERS’ obligations under the LOAN DOCUMENTS, as modified hereby, shall continue to be secured by all of the liens, assignments, and security interests provided in the LOAN DOCUMENTS.

7.         Miscellaneous.

a.         Incorporation.  The terms and conditions of the LOAN DOCUMENTS are incorporated herein by reference and made a part hereof as if fully set forth herein.  In the event of any inconsistencies between the terms and conditions of this AGREEMENT and any of the terms and conditions of the other LOAN DOCUMENTS (except as to the specific modifications contained herein), the LENDER shall determine, in its sole discretion, which of the terms and conditions shall control.

b.         Integration.  This AGREEMENT, the LOAN DOCUMENTS (as modified), and any other documents executed pursuant to or in connection with this AGREEMENT, if any, constitute the entire agreement between the LENDER and the BORROWERS with respect to the subject matter hereof, and any term or condition not expressed therein does not constitute a part of the agreement of the LENDER and the BORROWERS with respect to such subject matter.

c.         Severability.  If any provision or part of any provision of this AGREEMENT shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this AGREEMENT and this AGREEMENT shall be construed as if such invalid, illegal or unenforceable provision or part thereof had never been contained herein, but only to the extent of its invalidity, illegality, or unenforceability.

d.         Number, Gender, And Captions.  As used herein, the singular shall include the plural and the plural may refer to only the singular.  The use of any gender shall be applicable to all genders.  The captions contained herein are for purposes of convenience only and are not a part of this AGREEMENT.

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e.         Further Assurances.  As part of this AGREEMENT, and in consideration for the agreements of the LENDER as set forth therein, each BORROWER agrees to execute and deliver to the LENDER such other and further documents as may, from time to time, in the sole opinion of the LENDER and the LENDER’S counsel, be necessary or appropriate to carry out the terms and conditions of this AGREEMENT and the LOAN DOCUMENTS.  If either BORROWER fails to execute any such documents within ten (10) days of being requested to do so by the LENDER, such BORROWER hereby appoints the LENDER or any officer of the LENDER as the attorney in fact for such BORROWER for purposes of executing such documents in the name, place and stead of such BORROWER, which power of attorney shall be considered as coupled with an interest and irrevocable.

f.         Waivers.  No failure or delay by the LENDER in the exercise or enforcement of any of its rights under any LOAN DOCUMENT shall be a waiver of such right or remedy, nor shall a single or partial exercise or enforcement thereof preclude any other or further exercise or enforcement thereof or the exercise or enforcement of any other right or remedy.  The LENDER may at any time or from time to time waive all or any rights under this AGREEMENT or any of the LOAN DOCUMENTS, but any such waiver must be specific and in writing and no such waiver shall constitute, unless specifically so expressed by the LENDER in writing, a future waiver of performance or exact performance by either BORROWER.  No notice to or demand upon either BORROWER in any instance shall entitle such BORROWER (or the other BORROWER) to any other or further notice or demand in the same, similar or other circumstance.

g.         Choice Of Law.  The laws of the State of Maryland (excluding, however, conflict of law principles) shall govern and be applied to determine all issues relating to this AGREEMENT and the rights and obligations of the parties hereto, including the validity, construction, interpretation, and enforceability of this AGREEMENT and its various provisions and the consequences and legal effect of all transactions and events which resulted in the execution of this AGREEMENT or which occurred or were to occur as a direct or indirect result of this AGREEMENT having been executed.

h.         Consent To Jurisdiction; Agreement As To Venue.  Each BORROWER irrevocably consents to the non-exclusive jurisdiction of the courts of the State of Maryland and of the United States District Court For The District Of Maryland, if a basis for federal jurisdiction exists.  Each BORROWER agrees that venue shall be proper in any circuit court of the State of Maryland selected by the LENDER or in the United States District Court For The District Of Maryland if a basis for federal jurisdiction exists and waive any right to object to the maintenance of a suit in any of the state or federal courts of the State of Maryland on the basis of improper venue or of inconvenience of forum.

i.         Binding Effect; No Oral Modification.  This AGREEMENT shall be binding upon and shall inure to the benefit of the parties and their respective personal representatives, successors and assigns.  This AGREEMENT may not be altered, modified or amended unless such alteration, modification or amendment is in writing and executed by the LENDER.

j.         Time.  Time is of the essence with respect to all of the obligations of the BORROWERS under this AGREEMENT and the LOAN DOCUMENTS.

k.         Costs Of Transaction.  All costs of the transactions contemplated by this AGREEMENT, including without limitation all of attorneys’ fees and expenses incurred by the LENDER, shall be paid by the BORROWER, regardless of whether such costs are incurred before or after the execution and delivery of this AGREEMENT.

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8.         Release; Waiver.  As part of the agreements set forth herein, and in consideration of the same, each BORROWER hereby releases the LENDER and all of the LENDER’S past, present and future directors, officers, employees, agents and attorneys from any and all claims, causes of action, suits and damages (including claims for attorneys’ fees) which either of the BORROWERS, jointly or severally or otherwise, ever had or now have against the LENDER or any of the LENDER’S past, present and future directors, officers, employees, agents or attorneys.  Without limiting the generality of the foregoing, each BORROWER acknowledges and agrees that there exists no offset or defense to the obligations of any BORROWER as stated in the LOAN DOCUMENTS.

9.         Waiver Of Jury Trial.  The parties hereto agree that any suit, action, or proceeding, whether claim or counterclaim, brought or instituted by any party to this AGREEMENT, or any of their successors or assigns, on or with respect to this AGREEMENT or any LOAN DOCUMENT or which in any way relates, directly or indirectly, to the obligations of the BORROWERS to the LENDER under this AGREEMENT or any LOAN DOCUMENT, or the dealings of the parties with respect thereto, shall be tried only by a court and not by a jury.  THE PARTIES EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDINGS.  The parties acknowledge and agree that this provision is a specific and material aspect of the agreement between the parties and that the parties would not enter into this AGREEMENT if this provision were not contained herein.

[SIGNATURES BEGIN ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, the parties have executed this AGREEMENT as of the date first above

written with the specific intention of creating a document under seal.

WITNESS/ATTEST:	BORROWERS:
	AVATECH SOLUTIONS, INC.,
	A Delaware Corporation
/s/	By:	/s/ Lawrence Rychlak	(SEAL)
		Lawrence Rychlak,
		President and Chief Financial Officer
	AVATECH SOLUTIONS SUBSIDIARY, INC.,
	A Delaware Corporation
/s/	By:	/s/ Lawrence Rychlak	(SEAL)
		Lawrence Rychlak,
		President and Chief Financial Officer
	LENDER:
	PNC BANK, NATIONAL ASSOCIATION
/s/	By:	/s/ Stephen D. Palmer	(SEAL)
		Stephen D. Palmer, Senior Vice President

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EX-10.4

Exhibit 10.4

AVATECH SOLUTIONS, INC.

FIRST AMENDMENT TO STOCK OPTION

OPTIONEE:
NUMBER OF SHARES:
EXERCISE PRICE:	$
EXPIRATION DATE:
GRANT DATE:

THIS FIRST AMENDMENT TO STOCK OPTION (this “First Amendment”) is entered into on this 17th day of August, 2010 by and between AVATECH SOLUTIONS, INC., a Delaware corporation, and the Optionee named above.  Capitalized terms used but not defined herein shall have the meanings given such terms in the Company’s 2002 Stock Option Plan (the “Plan”) and the Option (as defined below).

1.           Amendment.  Pursuant to a Stock Option (the “Option”) dated as of the Grant Date stated above, the Optionee was granted an option to purchase the number of shares of the Company’s common stock stated above, par value $.01 per share, at the exercise price per share stated above, which the Board has determined to be the fair market value of the Common Stock as of the Grant Date.  The parties desire to amend Section 2.3 by deleting it in its entirety and substituting the following in lieu thereof:

2.3.          Termination.

2.3.1        Removal; Voluntary Termination.  In the event that (i) the Optionee is removed from the Board or (ii) the Optionee’s service with the Board otherwise terminates, other than as a result of the Optionee’s death or in connection with a Change in Control, then all of Optionee’s rights under this Option shall terminate effective as of the date his service is terminated.

2.3.2        Termination in Connection with a Change in Control.  In the event that the Optionee resigns or his service is otherwise terminated in connection with a Change in Control, then the Optionee shall be entitled to Exercise this Option to the same extent that it would have been exercisable on the effective date of the termination of his or her service for a period of one (1) year thereafter (but in no event later than the Expiration Date).

2.           Miscellaneous.  The parties agree that this First Amendment shall be construed, interpreted, and enforced in accordance with the laws of the State of Delaware without reference to the rules governing conflict of laws.  This First Amendment shall also be construed consistent with the Plan.  In the event of any conflict between the provisions of the Plan and this First Amendment, the provisions of the Plan shall control.  This First Amendment may be executed in one or more counterparts, each of which constitutes a duplicate original.

In witness whereof, the parties have caused this First Amendment to be signed under seal as of the date first above written.

OPTIONEE:		AVATECH SOLUTIONS, INC.
	(seal)	By:		(seal)
			Lawrence Rychlak, President
			Chief Financial Officer

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EX-10.5

Exhibit 10.5

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is entered into as of April 1, 2009 (the “Effective Date”) between Rand Technologies of Michigan, Inc., a Michigan corporation with its principal executive offices at One Lahser Center, Suite 225, 26400 Lahser Road, Southfield, MI 48033 (the “Company”), and Marc L. Dulude of 4 Rowan Field Road, Wayland, MA  01778 (“Executive”).

WHEREAS, the Company desires to employ and retain Executive in a senior executive capacity and to enter into an agreement embodying the terms of such employment;

WHEREAS, Executive desires to accept such employment and enter into such an agreement; and

WHEREAS, Rand Worldwide, Inc. (“RWW”), the parent of the Company’s parent, plans to combine with Avatech Solutions, Inc. (“Avatech”) through a reverse merger to be consummated as of August 17, 2010 (the “Transaction Date”), resulting in Avatech as the top tier parent of RWW, the Company and their various subsidiaries (the “Avatech Entities”);

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Company and Executive (the “Parties”), the Parties hereby agree as follows:

1.           Term of Employment.  The Company hereby agrees to employ Executive, and Executive hereby accepts such employment with the Company, on an at-will basis and upon the terms and subject to the conditions set forth in this Agreement, for a period commencing on the Effective Date and continuing until the earlier of (a) when and if terminated in accordance with the provisions of Section 5 and (b) December 31, 2010 (the “Employment Term”).

2.           Title; Duties.  During the Employment Term until the Transaction Date, Executive shall serve as President, Chief Executive Officer and Chairman of the Board of Directors of RWW, reporting to that Board.  During the Employment Term and commencing on the Transaction Date, Executive shall serve as Chief Executive Officer and member of the Board of Directors of Avatech, reporting to that Board.  References to “Board” herein are either to the RWW Board or Avatech Board, as the case may be depending on the relevant date, pursuant to the immediately preceding sentence.  Executive hereby agrees to undertake the duties and responsibilities inherent in such position and such other duties and responsibilities consistent with such position as the Board shall from time to time reasonably assign to Executive, including but not limited to prior to the Transaction Date those for or on behalf of RWW, the Company and/or any of either of their subsidiaries or affiliates (each such entity, a “Rand Entity”), and subsequent thereto those for or on behalf of any Avatech Entity.  Executive further agrees to devote Executive’s working time and attention on a substantially full time basis to such duties during the Employment Term; provided, however, that the Executive will remain as a venture partner of Ampersand Ventures Management Trust or its affiliates or successors (“Ampersand”); remain as a General Partner of certain of the Ampersand investment funds; and continue to represent Ampersand as a member of the board of directors of three Ampersand portfolio companies other than RWW or Avatech, as the case may be, on which Executive currently serves as a Director.  Executive acknowledges that the Board is concerned about the allocation of Executive’s time to the performance of duties unrelated to Rand Entities or Avatech Entities, as the case may be, during the Employment Term.  In the event Executive desires to serve on the board of any other entity, Executive will discuss these alternatives with the Board in advance.  Executive’s primary work location will be in the greater Boston, MA area, with travel as required by the position.

3.           No Conflicting Commitments.  During the Employment Term, Executive shall devote substantially all of Executive’s business time and efforts to the performance of Executive’s duties hereunder, except as set forth in Section 2.  Executive will not enter into any consulting or other agreement which, in the opinion of the Board, conflicts with the interests of any Rand Entity or Avatech Entity, as the case may be, or which might impair the performance of Executive’s duties consistent with the terms herein.

4.           Compensation and Benefits.

4.1            Base Salary and Bonus.  During the Employment Term, the Company shall pay Executive for Executive’s services hereunder a base salary at the initial annual rate of $275,000, payable in regular installments in accordance with the Company’s usual payment practices and subject to annual review and adjustment by the Board.  Such amount (as it may be adjusted from time to time in accordance with this Section 4.1) shall be referred to herein as the “Base Salary.”  Executive shall also be eligible to receive a discretionary annual cash bonus based on a target amount (either as a percentage or a fixed dollar amount) established and evaluated by the Board and based on RWW or Avatech (as the case may be) and individual performance.  Executive’s bonus target for his first year of service ending on October 31, 2009 is $125,000, which amount shall be paid, if approved by the Board, on a pro rata basis for the year ended October 31, 2009 based on actual months of employment by Rand.  Executive shall also be eligible to participate in any and all other bonus plans and packages that are made available to the Company’s executives, on a basis consistent with Executive’s position and then-current Base Salary and in accordance with the policies and practices of the Company and the Board.

4.2.           Executive Benefits.  During the Employment Term and subject to any contributions therefor generally required of senior executives of the Company, Executive shall be entitled to receive such employee benefits (including fringe benefits, retirement plan participation, and life, health, dental, accident and short and long term disability insurance) which the Company may, in its sole and absolute discretion, make available generally to its senior executives or personnel similarly situated; provided, however, that it is hereby acknowledged and agreed that any such employee benefit plans may be altered, modified or terminated by the Company at any time in its sole discretion without recourse by Executive.

4.3.           Paid Time Off.  Executive shall be entitled to four weeks (20 working days) of paid time off (“PTO”) per annum during the Employment Term, to be taken at such time or times as shall be mutually convenient for the Company and Executive and in accordance with Company policies and practices.  Unused PTO shall be allocated pursuant to the Company’s existing policies and practices, including but not limited to the policy that no more than one week of unused PTO may be carried forward from one year to the next.

4.4.           Business Expenses and Perquisites.  Upon delivery of adequate documentation of expenses incurred in accordance with the policies and practices of the Company, Executive shall be entitled to reimbursement by the Company during the Employment Term for reasonable travel, entertainment and other business expenses incurred by Executive in the performance of Executive’s duties hereunder in accordance with such policies as the Company may from time to time have in effect.

4.5.           Stock Option Grant.  As further compensation for Executive’s services hereunder and as consideration for this Agreement, the Company shall grant to Executive, on the Effective Date, a stock option (the “Execution Stock Option”) to purchase 528,500 shares of RWW’s Common Stock, $0.01 par value per share (the “Common Stock”), pursuant to the RWW’s Amended and Restated 2007 Equity Incentive Plan (the “Plan”) and in accordance with the terms, and subject to a vesting schedule pursuant to which twenty-five percent of the shares shall vest annually commencing on the first anniversary of the Effective Date, and other conditions, set forth in the form of Option Certificate (attached hereto as Exhibit A). Subject to the discretion of the Board, the Company may grant to Executive from time to time other stock options to purchase additional shares of Common Stock, also pursuant to the Plan and such other terms and conditions set forth at the time of such grant (the Execution Stock Option and such other stock options, collectively, the “Stock Options”). The exercise price of each of the Stock Options is the fair market value of the RWW Common Stock as of the date of the grant of each such Option, as determined by the Board.

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4.6.           Taxes.  All of Executive’s compensation, including, but not limited to the Base Salary, shall be subject to withholding for all federal, state, provincial and local employment-related taxes, including income, social security, and similar taxes.

5.           Termination.

5.1.           Without Cause by the Company.  The Company may terminate Executive’s employment hereunder at any time without Cause (as defined in Section 5.4) to be effective immediately upon delivery of notice thereof.  The effective date of Executive’s termination shall be referred to herein as the “Termination Date.”  If Executive’s employment is terminated by the Company pursuant to this Section 5.1 on or before December 31, 2010, the Company shall pay Executive all amounts owed to Executive for work performed prior to the Termination Date (including any bonus granted but not yet paid), the cash value of any accrued but unused PTO as of the Termination Date, plus the following amounts and consideration, subject to standard payroll scheduling, deductions and withholdings (the “Severance Package”), provided Executive satisfies the conditions set forth at the end of this paragraph (the “Severance Conditions”):  the Company costs associated with continuing the benefits which Executive is entitled to receive pursuant to Section 4.2 of this Agreement at the level in effect as of the Termination Date (subject to any employee contribution requirements applicable to Executive on the Termination Date) through the 12 month period following the Termination Date.  The payment to Executive of any benefits or consideration other than the foregoing following the termination of Executive’s employment pursuant to this Section 5.1 shall be determined by the Board in its sole discretion in accordance with the policies and practices of the Company and applicable laws.    The parties agree that the Executive shall not be eligible for the Severance Package unless and until 28 days (including a 7 day revocation period) after Executive has first satisfied and continues to satisfy the Severance Conditions, as follows: (a) full compliance with the Employee Confidentiality, Assignment of Inventions, Non-Competition and Non-Solicitation Agreement attached hereto as Exhibit B (the “NDA”); (b) compliance with Executive’s obligations under this Agreement; and (c) execution of a waiver and release of claims in favor of RWW and the Company prior to the Transaction Date, and subsequent thereto in favor of Avatech and the Avatech Entities, related to Executive’s employment with the Company substantially in the form set forth in Exhibit C attached hereto.

5.2.           Deemed Termination.  For purposes of Section 5.1, a “termination without Cause” shall be deemed to occur, and Executive shall be entitled to the Severance Package, in the event any of the following occurs within 12 months (but on or before December 31, 2010) following a Change of Control (as defined in Section 5.3), Executive provides to the Company Notice of Termination (as defined in Section 5.7) within thirty (30) days thereafter and the Company has not taken action to remedy the event within thirty (30) days of receipt of such notice:  (a) the Company substantially reduces or diminishes Executive’s duties and responsibilities without Cause; (b) the Company reduces Executive’s Base Salary (other than in connection with a proportional reduction of the base salaries of a majority of the executive employees of the Company); or (c) the Company permanently relocates Executive without Executive’s written consent to another primary office, unless Executive’s primary office following such relocation is within fifty (50) miles of Executive’s primary office immediately before the relocation or Executive’s permanent residence immediately before the date of the relocation.

5.3           Accelerated Vesting.  In the event that the Company terminates or is deemed to terminate Executive’s employment pursuant to Section 5.1 or Section 5.2 within twelve months (but on or before December 31, 2010) following a Change of Control, in addition to the Severance Package, 100% of any Stock Options held as of the Termination Date that are unvested shall become immediately vested and exercisable as to all option shares without regard to the vesting schedule set forth on the applicable Option Certificate.  In the event that the Company terminates or is deemed to terminate Executive’s employment pursuant to Section 5.1 or Section 5.2, or pursuant to Section 5.5, not within one year (but on or before December 31, 2010) following a Change of Control, in addition to the Severance Package, 25% of any Stock Options granted pursuant to Section 4.5 and held as of the Termination Date shall become immediately vested and exercisable as to all option shares without regard to the vesting schedule set forth on the applicable Option Certificate.    For purposes of this Agreement, any one of the following events shall be considered a “Change of Control” of the Company:

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   (a)  the acquisition by any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934) of any amount of the Company’s Common Stock and other equity securities so that such person holds or controls fifty percent (50%) or more of the Company’s Common Stock and other equity securities;

   (b)  the merger or consolidation of the Company with or into any other entity in which the holders of the Company’s outstanding shares of capital stock immediately before such merger or consolidation do not, immediately after such merger or consolidation, retain capital stock representing a majority of the voting power of the surviving entity of such merger or consolidation; or

   (c)  a sale of all or substantially all of the assets of the Company to a third party.

5.4.           For Cause by the Company.  Notwithstanding any other provision of this Agreement, Executive’s employment hereunder may be terminated by the Company at any time for Cause.  For purposes of this Agreement, “Cause” shall mean:  (i) Executive’s arbitrary, unreasonable, or willful failure to follow the reasonable instructions of the Board or otherwise perform Executive’s duties hereunder (other than as a result of a Disability (as defined in Section 5.5)) for five (5) days after a written demand for performance is delivered to Executive on behalf of the Company which demand specifically identifies the manner in which the Company alleges that Executive has not substantially followed such instructions or otherwise performed Executive’s duties; (ii) Executive’s gross negligence or willful misconduct in the performance of Executive’s duties under this Agreement; (iii) other behavior that is materially injurious to any Rand Entity or Avatech Entity, as the case may be (whether from a monetary perspective or otherwise), including without limitation, substance abuse; (iv) Executive’s willful commission of an act constituting fraud, embezzlement, breach of any fiduciary duty owed to any Rand Entity or Avatech Entity, as the case may be, or its stockholders or other material dishonesty with respect to any Rand Entity or Avatech Entity, as the case may be; (v) Executive’s conviction of, or the filing of a plea of nolo contendere or its equivalent with respect to, a felony or any other crime involving dishonesty or moral turpitude; or (vi) Executive’s material breach of Executive’s obligations under this Agreement or under the NDA.  If Executive’s employment is terminated by the Company for Cause, the Company shall pay Executive all amounts owed to Executive for work performed prior to the Termination Date, plus the cash value of any accrued but unused PTO, as of the Termination Date.  The payment to Executive of any other benefits following the termination of Executive’s employment pursuant to this Section 5.4 shall be determined by the Board in its sole discretion in accordance with the policies and practices of the Company and applicable laws.

5.5.           Disability and Death.  Subject to the requirements of the Americans with Disabilities Act and any other applicable laws, Executive’s employment hereunder may be terminated by the Company at any time in the event of the Disability of Executive.  For purposes of this Agreement, “Disability” shall mean the inability of Executive to perform substantially Executive’s duties hereunder due to physical or mental disablement which continues for a period of four (4) consecutive months during the Employment Term, as determined by an independent qualified physician mutually acceptable to the Company and Executive (or Executive’s personal representative).  If Executive’s employment is terminated by the Company for Disability or death, the Company shall pay Executive (or Executive’s estate or legal representative) all amounts owed to Executive for work performed prior to the Termination Date, the cash value of any accrued but unused PTO, as of the Termination Date, plus the Severance Package, except that the Severance Package shall be reduced by the amount of Base Salary, salary continuation (short-term disability), and cash disability benefits (long-term disability) paid to Executive for the corresponding period under the Company's employee benefit plans as then in effect.  The payment to Executive of any benefits other than as described in the immediately preceding sentence following the termination of Executive's employment pursuant to this Section 5.5 shall be determined by the Board in its sole discretion in accordance with the policies and practices of the Company and applicable laws.

 

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5.6.           Termination by Executive. Executive’s employment hereunder may be terminated by Executive at any time upon not less than ninety (90) days prior written notice from Executive to the Company.  Executive agrees that such notice period is reasonable and necessary in light of the duties assumed by Executive pursuant to this Agreement and fair in light of the consideration Executive is receiving pursuant to this Agreement.  If Executive terminates Executive’s employment with the Company pursuant to this Section 5.6, the Company shall pay Executive only all amounts owed to Executive for work performed prior to the Termination Date, plus the cash value of any accrued but unused PTO as of the Termination Date.

5.7.           Notice of Termination.  Any termination of employment by the Company or by Executive shall be communicated by written Notice of Termination to the other Party in accordance with Section 9 hereof.  For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated.

5.8.           Survival.  The provisions of Section 5 shall survive the termination of this Agreement.

6.           Confidentiality Agreement.  In connection with this Agreement, Executive has executed the NDA which is incorporated herein by reference and made a part of this Agreement.

7.           Return of Property.  Executive agrees that upon termination of Executive’s employment hereunder, Executive shall return immediately to the Company any proprietary materials, any materials containing Confidential Information (as defined in the NDA) and any other Rand Entity or Avatech Entity, as the case may be, property then in Executive’s possession or under Executive’s control, including, without limitation all notes, drawings, lists, memoranda, magnetic disks or tapes, or other recording media containing such Confidential Information, whether alone or together with non-confidential information, all documents, reports, files, memoranda, records, software, credit cards, door and file keys, telephones, PDAs, computers, computer access codes, disks and instructional manuals, or any other physical property that Executive received, prepared, or helped prepare in connection with Executive’s employment under this Agreement. Upon termination, Executive shall not retain any copies, duplicates, reproductions, or excerpts of Confidential Information, nor shall Executive show or give any of the above to any third party.   Executive further agrees that Executive shall not retain or use for Executive’s account at any time any trade name, trademark, service mark, logo or other proprietary business designation used or owned in connection with the business of any Rand Entity or Avatech Entity, as the case may be.

8.           Specific Performance.  Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Section 6 or the NDA would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to seek, equitable relief in the form of specific performance, temporary restraining orders, temporary or permanent injunctions or any other equitable remedy which may then be available.

9.           Notices.  Any notice hereunder by either Party to the other shall be given in writing by personal delivery, facsimile, overnight courier or certified mail, return receipt requested, addressed, if to the Company, to the attention of the Board with a copy to the General Counsel of Ampersand Ventures at 55 William Street, Suite 240, Wellesley, MA 02481 or to such other address as the Company may designate in writing at any time or from time to time to Executive, and if to Executive, to Executive’s most recent address on file with the Company.  Notice shall be deemed given, if by personal delivery or by overnight courier, on the date of such delivery or, if by facsimile, on the business day following receipt of delivery confirmation or, if by certified mail, on the date shown on the applicable return receipt.

 

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10.           Assignment.  This Agreement may not be assigned by either Party without the prior written consent of the other Party, provided however that the Company may assign this Agreement without Executive’s consent in the event of a Change of Control.

11.           Entire Agreement.  The NDA and this Agreement constitute the entire agreement between the Parties with respect to the subject matter hereof and there have been no oral or other agreements of any kind whatsoever as a condition precedent or inducement to the signing of this Agreement or otherwise concerning this Agreement or the subject matter hereof.  To the extent there is any conflict between this Agreement and the NDA, this Agreement shall prevail.

12.           Expenses.  The Parties shall each pay their own respective expenses incident to the enforcement or interpretation of, or dispute resolution with respect to, this Agreement, including all fees and expenses of their counsel for all activities of such counsel undertaken pursuant to this Agreement.

13.           Governing Law.  In light of the domicile of RWW and the issuance of the Stock Options for RWW Common Stock, this Agreement (including any claim or controversy arising out of or relating to this Agreement) shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflict of law principles that would result in the application of any law other than the laws of the State of Delaware.

14.           Submission to Jurisdiction; Waiver.  Each party irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement or for recognition and enforcement of any judgment in respect hereof or thereof brought by another party hereto or its successors or assigns may be brought and determined in the courts of the Commonwealth of Massachusetts, in Boston, Massachusetts (or, if appropriate, a federal court located within Boston, Massachusetts), and each party hereby irrevocably submits with regard to any action or proceeding for itself and in respect to its property, generally and unconditionally, to the exclusive jurisdiction of the aforesaid courts.  Each party hereto hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement, (a) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason other than the failure to lawfully serve process, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and (c) to the fullest extent permitted by applicable law, that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper and (iii) this Agreement, or the subject matter hereof or thereof, may not be enforced in or by such courts.

15.           Waiver Of Jury Trial.  EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

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16.           Waivers and Further Agreements.  Any waiver of any terms or conditions of this Agreement shall not operate as a waiver of any other breach of such terms or conditions or any other term or condition, nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision hereof; provided, however, that no such written waiver, unless it, by its own terms, explicitly provides to the contrary, shall be construed to effect a continuing waiver of the provision being waived and no such waiver in any instance shall constitute a waiver in any other instance or for any other purpose or impair the right of the Party against whom such waiver is claimed in all other instances or for all other purposes to require full compliance with such provision.  Each of the Parties agrees to execute all such further instruments and documents and to take all such further action as the other Party may reasonably require in order to effectuate the terms and purposes of this Agreement.

17.           Amendments.  This Agreement may not be amended, nor shall any waiver, change, modification, consent or discharge be effected except by an instrument in writing executed by both Parties.

18.           Severability.  If any provision of this Agreement shall be held or deemed to be, or shall in fact be, invalid, inoperative or unenforceable as applied to any particular case in any jurisdiction or jurisdictions, or in all jurisdictions or in all cases, because of the conflict of any provision with any constitution or statute or rule of public policy or for any other reason, such circumstance shall not have the effect of rendering the provision or provisions in question invalid, inoperative or unenforceable in any other jurisdiction or in any other case or circumstance or of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to the extent that such other provisions are not themselves actually in conflict with such constitution, statute or rule of public policy, but this Agreement shall be reformed and construed in any such jurisdiction or case as if such invalid, inoperative or unenforceable provision had never been contained herein and such provision reformed so that it would be valid, operative and enforceable to the maximum extent permitted in such jurisdiction or in such case.

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

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

21.           Legal Advice.  In executing this Agreement, Executive acknowledges that the Company has notified Executive of Executive’s right to review this Agreement with counsel, and Executive has received, if Executive so chose, legal advice concerning this Agreement.

22.           409A.  This Agreement is intended to be exempt from Section 409A of the Internal Revenue Code, as amended (the "Code"), and any regulations and Treasury guidance promulgated thereunder.  If, however, the Company determines in good faith that any provision of this Agreement would cause this Agreement to be subject to Section 409A such that Executive will incur an additional tax, penalty, or interest under Section 409A of the Code, then the Company and the Executive shall use reasonable best efforts to reform such provision, if possible, in a mutually agreeable fashion to maintain to the maximum extent practicable the original intent of the applicable provision without violating the provisions of Section 409A of the Code or causing the imposition of such additional tax, penalty, or interest under Section 409A of the Code.

IN WITNESS WHEREOF, the Parties have executed or caused to be executed this Agreement as of the Effective Date.

MARC L. DULUDE	RAND TECHNOLOGIES OF MICHIGAN, INC.
By:/s/ Marc L. Dulude	By:	/s/ Gregory W. Magoon
	Name:	Gregory W. Magoon
	Title:	Director

 

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Exhibit A

OPTION CERTIFICATE

Incentive Stock Option

_________ Shares

Rand Worldwide Inc.

Amended and Restated 2007 Equity Incentive Plan

Incentive Stock Option Certificate

Rand Worldwide, Inc., a Delaware corporation (the “Company”), hereby grants to the person named below (the “Optionee”) an option to purchase shares of common stock, at a FMV of $_____, of the Company (the “Option”) under and subject to the Company’s Amended and Restated 2007 Equity Incentive Plan (the “Plan”) exercisable on the following terms and conditions and those set forth on the reverse side of this certificate:

Name of Optionee:	_____________
Address:	___________________
	____________________
Social Security No.:	____________________________
Number of Shares:	_______
Option Price:	$_______
Date of Grant:	April 1, 2009
Initial Vesting Date:	April 1, 2009
Exercisability Schedule:	to vest and become exercisable as to 25% of the original grant amount upon each of the next four (4) anniversaries of the Initial Vesting Date, provided that the Optionee remains employed with the Company as of each such vesting date Notwithstanding the foregoing, the vesting and exercisability of this Option may accelerate in certain circumstances as set forth in that certain Employment Agreement between the Optionee and Rand Technologies of Michigan, Inc. with an effective date of April 1, 2009, the terms and conditions of which relating to the acceleration or exercisability of stock options shall be deemed to be incorporated into and a part of this Option Certificate.
Expiration Date:	April 1, 2019

This Option is intended to be treated as an Incentive Stock Option under section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).

By acceptance of this Option, the Optionee agrees to the terms and conditions set forth in this Agreement and in the Plan.

OPTIONEE	RAND WORLDWIDE, INC.
	By:
	Title: Director

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Incentive Stock Option Terms and Conditions

1.  Plan Incorporated by Reference.  This Option is issued pursuant to the terms of the Plan and may be amended as provided in the Plan.  Capitalized terms used and not otherwise defined in this certificate have the meanings given to them in the Plan.  This certificate does not set forth all of the terms and conditions of the Plan, which are incorporated herein by reference.  The Board of Directors or a Committee thereof (the “Administrator”) administers the Plan and its determinations regarding the interpretation and operation of the Plan are final and binding.  Copies of the Plan may be obtained upon request without charge from the Company.

2.  Option Price.  The price to be paid for each share of Stock issued upon exercise of the whole or any part of this Option is the Option Price set forth on the face of this certificate.

3.  Exercisability Schedule.  This Option may be exercised at any time and from time to time for the number of shares and in accordance with the exercisability schedule set forth on the face of this certificate, but only for the purchase of whole shares.  This Option may not be exercised as to any shares after the Expiration Date.

4.  Method of Exercise.  To exercise this Option, the Optionee shall deliver (a) written notice of exercise in the form attached as Exhibit A hereto, to the Company specifying the number of shares with respect to which the Option is being exercised, (b) payment of the Option Price for such shares in cash, by certified check, delivery of a promissory note in a form satisfactory to the Administrator or in such other form, including shares of Common Stock of the Company valued at their Fair Market Value on the date of delivery, as the Administrator may approve, (c) a signed copy of the Adoption Agreement to the Amended and Restated Voting Agreement dated as of October 31, 2007 by and among the Company and the stockholders named therein, as amended from time to time, and (d) a signed copy of the Adoption Agreement to the Right of First Refusal and Co-Sale Agreement dated as of October 31, 2007 by and among the Company and the stockholders named therein, as amended from time to time.  Promptly following the delivery of such notice of exercise, payment and Instruments of Accession, the Company will deliver to the Optionee a certificate representing the number of shares with respect to which the Option is being exercised.

5.  Rights as a Stockholder or Employee.  The Optionee shall not earn the right to exercise or obtain the value of any portion of this Option except as provided in the exercisability schedule and until such time as all the conditions set forth herein and in the Plan that are required to be met in order to exercise this Option have been fully satisfied.  No portion of this Option shall be deemed compensation for past services before it has become exercisable in accordance with the exercisability schedule.  The Optionee shall not have any rights in respect of shares as to which the Option shall not have been exercised and payment made as provided above.  The Optionee shall not have any rights to continued employment by the Company or its affiliates by virtue of the grant of this Option.

6.  Recapitalization, Mergers, Etc.  As provided in and subject to the Plan, in the event of a merger, recapitalization or other corporate transaction involving the Company, the Administrator may in its discretion take certain actions affecting the Option and the Optionee’s rights hereunder, including without limitation adjusting the number and kind of securities subject to the Option and the exercise price hereunder, providing for another entity to assume the Option, making provision for a cash payment, and terminating the Option.

7.  Option Not Transferable.  This Option is not transferable by the Optionee otherwise than by will or the laws of descent and distribution, and is exercisable, during the Optionee’s lifetime, only by the Optionee.

8.  Exercise of Option After Termination of Employment.  If the Optionee’s employment with (a) the Company, (b) an Affiliate, or (c) a corporation (or parent or subsidiary corporation of such corporation) issuing or assuming a stock option in a transaction to which section 424(a) of the Code applies, is terminated for any reason other than by disability (within the meaning of section 22(e)(3) of the Code) or death, the Optionee may exercise only the rights that were available to the Optionee at the time of such termination and only within three months from the date of termination.  If the Optionee’s employment is terminated as a result of disability, such rights may be exercised only within twelve months from the date of termination.  Upon the death of the Optionee, his or her designated beneficiary or legal representative shall have the right, at any time within twelve months after the date of death, to exercise in whole or in part any rights that were available to the Optionee at the time of death.  Notwithstanding the foregoing, no rights under this Option may be exercised after the Expiration Date.

9.  Compliance with Securities Laws.  It shall be a condition to the Optionee’s right to purchase shares of Stock hereunder that the Company may, in its discretion, require (a) that the shares of Stock reserved for issue upon the exercise of this Option shall have been duly listed, upon official notice of issuance, upon any national securities exchange or automated quotation system on which the Company’s Stock may then be listed or quoted, (b) that either (i) a registration statement under the Securities Act of 1933 with respect to the shares shall be in effect, or (ii) in the opinion of counsel for the Company, the proposed purchase shall be exempt from registration under that Act and the Optionee shall have made such undertakings and agreements with the Company as the Company may reasonably require, and (c) that such other steps, if any, as counsel for the Company shall consider necessary to comply with any law applicable to the issue of such shares by the Company shall have been taken by the Company or the Optionee, or both.  The certificates representing the shares purchased under this Option may contain such legends as counsel for the Company shall consider necessary to comply with any applicable law.

10.Optionee’s Tax Treatment.  This Option is intended to be treated as an incentive stock option under section 422 of the Code.  However, incentive stock option treatment requires compliance with a variety of factors, and the Company can give no assurance that the Option will, in fact, be treated as an incentive stock option.

11.Payment of Taxes.  The Optionee shall pay to the Company, or make provision satisfactory to the Company or affiliates, as applicable, for payment of, any taxes or other amounts required by law to be withheld with respect to the grant, exercise or disposition of this Option.  The Administrator may, in its discretion, require any other Federal, state  or provincial taxes imposed on the sale of the shares to be paid by the Optionee.  In the Administrator’s discretion, such tax obligations may be paid in whole or in part in shares of Stock, including shares retained from the exercise of this Option, valued at their Fair Market Value on the date of delivery.  The Company and its affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Optionee.

12.  Notice of Sale of Shares Required.  The Optionee agrees to notify the Company in writing within 30 days of the disposition of any shares purchased upon exercise of this Option if such disposition occurs within two years of the date of the grant of this Option or within one year after such purchase.

Approved October 31, 2007

9

Exhibit B

EMPLOYEE CONFIDENTIALITY, ASSIGNMENT OF INVENTIONS, NON-

COMPETITION AND NON-SOLICITATION AGREEMENT

In consideration of my employment by Rand Technologies of Michigan, Inc., a Michigan corporation, or any of its predecessors, successors, subsidiaries or affiliates, including without limitation Rand Worldwide Inc. (“RWW”), Avatech Solutions, Inc. (“Avatech”), RWW’s and Avatech’s subsidiaries and affiliates (collectively, the “Company”), and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, I agree as follows:

Confidentiality

I understand that the Company continually obtains and develops valuable proprietary and confidential information concerning its business, business relationships and financial affairs (the “Confidential Information”) which may become known to me in connection with my employment.

I acknowledge that all Confidential Information, whether or not in writing and whether or not labeled or identified as confidential or proprietary, is and shall remain the exclusive property of the Company or the third party providing such Confidential Information to myself or the Company.  By way of illustration, but not limitation, Confidential Information may include Inventions (as defined below), trade secrets, technical information, know-how, research and development activities of the Company, product, service and marketing plans, business plans, budgets and unpublished financial statements, licenses, prices and costs, customer and supplier information and information disclosed to the Company or to me by third parties of a proprietary or confidential nature or under an obligation of confidence.  Confidential Information is contained in various media, including without limitation, patent applications, computer programs in object and/or source code, flow charts and other program documentation, manuals, plans, drawings, designs, technical specifications, laboratory notebooks, supplier and customer lists, internal financial data and other documents and records of the Company.

I agree that I shall not, during the term of my employment and thereafter, publish, disclose or otherwise make available to any third party, other than employees of the Company, any Confidential Information except as expressly authorized in writing by the Company. I agree that I shall use such Confidential Information only in the performance of my duties for the Company and in accordance with any Company policies with respect to the protection of Confidential Information.

I agree to exercise all reasonable precautions to protect the integrity and confidentiality of Confidential Information in my possession and not to remove any materials containing Confidential Information from the Company’s premises except to the extent necessary to my employment.  Upon the termination of my employment, or at any time upon the Company’s request, I shall return immediately to the Company any and all materials containing any Confidential Information then in my possession or under my control.

10

Confidential Information shall not include information which (a) is or becomes generally known within the Company’s industry through no fault of mine; (b) was known to me at the time it was disclosed as evidenced by my written records at the time of disclosure; (c) is lawfully and in good faith made available to me by a third party who did not derive it from the Company and who imposes no obligation of confidence on me; or (d) is required to be disclosed by a governmental authority or by order of a court of competent jurisdiction, provided that such disclosure is subject to all applicable governmental or judicial protection available for like material and reasonable advance notice is given to the Company.

Assignment of Inventions

I agree promptly to disclose to the Company any and all ideas, concepts, discoveries, inventions, developments, original works of authorship, software programs, software and systems documentation, trade secrets, technical data, know-how that are conceived, devised, invented, developed or reduced to practice or tangible medium by me, under my direction or jointly with others during any period that I am employed or engaged by the Company, whether or not during normal working hours or on the premises of the Company, which relate, directly or indirectly to the Business of the Company and arise out of my employment with the Company (hereinafter “Inventions”).  "Business" shall mean the business (including activities planned and budgeted but not yet implemented) of the Company at any time during my employment; the Business of the Company shall initially be the sale of design software and related services, as such business may evolve from time to time following the date hereof.

I hereby irrevocably assign to the Company all of my right, title and interest to the Inventions and any and all related patent rights, copyrights and applications and registrations therefor.  During and after my employment, I shall cooperate with the Company, at the Company’s expense, in obtaining proprietary protection for the Inventions and I shall execute all documents which the Company shall reasonably request in order to perfect the Company’s rights in the Inventions.  I hereby appoint the Company my attorney to execute and deliver any such documents on my behalf in the event I should fail or refuse to do so within a reasonable period following the Company’s request.  I understand that, to the extent this Agreement shall be construed in accordance with the laws of any state which limits the assignability to the Company of certain employee inventions, this Agreement shall be interpreted not to apply to any such invention which a court rules or the Company agrees is subject to such state limitation.

I acknowledge that all original works of authorship made by me within the scope of my employment which are protectible by copyright are intended to be “works made for hire”, as that term is defined in Section 101 of the United States Copyright Act of 1976 (the “Act”), and shall be the property of the Company and the Company shall be the sole author within the meaning of the Act.  If the copyright to any such copyrightable work shall not be the property of the Company by operation of law, I will, without further consideration, irrevocably assign to the Company all of my right, title and interest in such copyrightable work and will cooperate with the Company and its designees, at the Company’s expense, to secure, maintain and defend for the Company’s benefit copyrights and any extensions and renewals thereof on any and all such work.  I hereby waive all claims to moral rights in any such copyrightable works.

I further represent that the attached Schedule A contains a complete list of all inventions made, conceived or first reduced to practice by me, under my direction or jointly with others prior to my employment with the Company (“Prior Inventions”) and which are not assigned to the Company hereunder. If there is no such Schedule A attached hereto or no inventions listed therein, I represent that there are no such Prior Inventions.

 

11

I acknowledge and agree that the assignments above and other rights granted to the Company herein are irrevocable and that my sole remedy in the event of any claim for breach of this or any other Agreement by the Company shall be an action for money damages.  In no event shall I have any right to revoke or rescind the assignments set forth above and I hereby covenant and agree not to challenge, directly or indirectly, the Company’s sole and exclusive ownership of the Inventions and copyrightable works assigned to Company hereunder.

Non-Competition

I hereby agree to undertake certain non-competition obligations in consideration for my employment by the Company going forward.  I agree that while I am employed by the Company and for a period ending 12 months after any termination or cessation of such employment (the “Non-Interference Period”), I shall not, without the Company’s prior written consent, directly or indirectly, as a principal, employee, consultant, partner, or stockholder of, or in any other capacity with, any business enterprise (other than in my capacity as a holder of not more than 1% of the combined voting power of the outstanding stock of a publicly held company or as a holder of not more than 5% of the combined voting power of the outstanding stock or equity interests of a privately held entity and its affiliates) anywhere in the world where the Company conducts its Business (a) engage in any activity that competes, directly or indirectly with the Business of the Company, (b) conduct a business of the type or character engaged in or, to my knowledge, planned and budgeted to be engaged in by the Company at the time of termination or cessation of my employment or (c) develop products or services competitive with those offered or, to my knowledge, planned and budgeted to be offered by the Company.

General non-solicitation

I agree that while I am employed by the Company and during the Non-Interference Period, I shall not solicit, divert or take away, or attempt to divert or take away, the business or patronage of any of the clients, customers or accounts, of the Company which were contacted, solicited or served by me or others at the Company while I was employed by the Company.

Non-solicitation of Employees

I agree that while I am employed by the Company and during the Non-Interference Period, I shall not directly or indirectly recruit, solicit or hire any employee of the Company, or induce or attempt to induce any employee of the Company to discontinue his or her employment relationship with the Company.

 

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Notice of Subsequent Employment

I shall, during the Non-Interference Period, notify the Company of any change of address, and of any subsequent employment (stating the name and address of the employer and the nature of the position) or any other business activity.  I hereby authorize the Company to disclose to any subsequent employer the terms of this Agreement and any other information related to my employment by the Company as may be permitted by applicable law.

Other Agreements

I hereby represent to the Company that, except as identified on Schedule B, I am not bound by any agreement or any other previous or existing business relationship which conflicts with or prevents the full performance of my duties and obligations to the Company (including my duties and obligations under this or any other agreement with the Company) during my employment.

I understand that the Company is neither requesting, nor does it desire to acquire, from me any trade secrets, know-how or confidential business information I may have acquired from others.  Therefore, I covenant, represent and warrant that during my employment with the Company, I will not use or disclose any proprietary information or trade secrets of any former employer, or any other person or entity with whom I have an agreement or to whom I owe a duty to keep such information in confidence.  Those persons or entities with whom I have such agreements or to whom I owe such a duty are identified on Schedule B.  Additionally, to the extent that I am bound by any agreements with any of my former employers not to solicit customers or employees of any former employers for a period of time, I agree, represent and warrant that I will honor such agreements.

General

This Agreement may not be assigned by either party except that the Company may assign this Agreement in connection with the merger, consolidation or sale of all or substantially all of its business or assets.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and other legal representatives and, to the extent that any assignment hereof is permitted hereunder, their assignees.

This Agreement supersedes all prior agreements, written or oral, with respect to the subject matter of this Agreement.  This Agreement may be changed only by a written instrument signed by both parties hereto.

In the event that any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, and all other provisions shall remain in full force and effect.  If any of the provisions of this Agreement is held to be excessively broad, it shall be reformed and construed by limiting and reducing it so as to be enforceable to the maximum extent permitted by law.  I agree that should I violate any obligation imposed on me in this Agreement, I shall continue to be bound by the obligation until a period equal to the term of such obligation has expired without violation of such obligation.

 

13

No delay or omission by the Company in exercising any right under this Agreement will operate as a waiver of that or any other right.  A waiver or consent given by the Company on any occasion if effective only in that instance and will not be construed as a bar to or waiver of any right on any other occasion.

I acknowledge that the restrictions contained in this Agreement are necessary for the protection of the business and goodwill of the Company and are reasonable for such purpose.  I understand further that my agreement to the restrictions outlined in this Agreement was a key inducement to my employment by the Company.  I agree that any breach of this Agreement by me will cause irreparable damage to the Company and that in the event of such breach, the Company shall be entitled, in addition to monetary damages and to any other remedies available to the Company under this Agreement and at law, to seek, and I will not oppose or object to the granting of, equitable relief, including injunctive relief, and to payment by myself of all costs incurred by the Company in enforcing the provisions of this Agreement, including reasonable attorneys’ fees.  I agree that should I violate any obligation imposed on me in this Agreement, I shall continue to be bound by the obligation until a period equal to the term of such obligation has expired without violation of such obligation.

This Agreement shall be construed as a sealed instrument and, in light of the domicile of RWW and the issuance of the Stock Options for RWW Common Stock, shall in all events and for all purposes be governed by, and construed in accordance with, the laws of the State of Delaware without regard to any choice of law principle that would dictate the application of the laws of another jurisdiction.  Any action, suit or other legal proceeding which I may commence to resolve arising under or relating to any provision of this Agreement shall be commenced only in a court of the Commonwealth of Massachusetts, in Boston, Massachusetts (or, if appropriate, a federal court located within Boston, Massachusetts), and I hereby consent to the jurisdiction and venue of such court with respect to any action, suit or proceeding commenced in such court by the Company.

I HAVE READ ALL OF THE PROVISIONS OF THIS AGREEMENT AND I UNDERSTAND, AND AGREE TO, EACH OF SUCH PROVISIONS.

Date	(Signature)
	Print Name:

Acknowledged and

agreed to:

RAND TECHNOLOGIES OF MICHIGAN, INC.

By:

Name:

Title:

 

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SCHEDULE A

PRIOR INVENTIONS

The following is a complete list of all Prior Inventions

______ Additional Sheets Attached

If I am claiming any Prior Inventions above, I agree that, if in the course of my employment with the Company, I incorporate into a Company product, process or machine a Prior Invention owned by me or in which I have an interest, the Company shall automatically be granted and shall have a non-exclusive, royalty-free, irrevocable, transferable, perpetual world-wide license to make, have made, modify, use and sell such Prior Invention as part of, or in connection with, such product, process or machine.

 

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SCHEDULE B

PRIOR COMMITMENTS

16

Exhibit C

Form of Release

[DATE]

Boards of Directors

Rand Technologies of Michigan, Inc.

Rand Worldwide, Inc.

Avatech Solutions, Inc. (collectively, the “Company”)

Except as set forth in the Employment Agreement by and between myself and the Company dated as of April 1, 2009 (the “Employment Agreement”), I am entitled to no severance or termination payment or benefits.  I have been notified of my right to review this release with counsel, and I have received, if I so chose, legal advice concerning this release.

General Release.  In consideration of the benefits and consideration set forth in the Employment Agreement by and between myself (“Employee”) and the Company, the sufficiency of which is acknowledged by Employee, Employee for herself, and for executors, heirs, administrators, assigns, and anyone else claiming by, through or under Employee, irrevocably and unconditionally, releases, remises and forever discharges the Company, its subsidiaries, and its and their present and former agents, servants, employees, officers, directors, stockholders, successors and assigns (collectively, the “Releasees”) from, and with respect to, any and all debts, demands, actions, complaints, charges, causes of action, suits, covenants, contracts, wages, bonuses, damages and any and all claims, demands, liabilities and expenses (including attorneys’ fees and costs) whatsoever of any name or nature both in law and in equity (collectively “Claims”) which Employee now has or ever had and thereafter, have or assert against the Company or any of the Releasees, for or by reason of any matter, cause or thing whatsoever which has happened, developed or occurred on or before the date hereof, except for claims for severance under the Employment Agreement, including, without in any way limiting the generality of the foregoing any Claim that Employee might otherwise have: (i) for tort or contract, or relating to salary, wages, bonuses, severance, commissions, stock, and stock options, the breach of any oral or written contract or promise, misrepresentation, defamation, and interference with prospective economic advantage, interference with contract, intentional and negligent infliction of emotional distress, negligence, breach of the covenant of good faith and fair dealing, medical, disability or other leave; (ii) arising out of, based on, or connected with Employee’semployment, including terms and conditions of employment, by the Company and the termination of that employment, including but not limited to claims arising under Section 806 of the Sarbanes-Oxley Act of 2002, and any other claims alleging retaliation of any nature; (iii) under M.G.L. c.93A or in any way related to stock options vesting or exercise, for alleged securities violations; or (iv) for unlawful employment discrimination of any kind, including discrimination due to age, sex, disability or handicap, including failure to offer reasonable accommodations, race, color, religion, pregnancy, sexual orientation, national origin, or sexual or other unlawful harassment arising under or based on the Ontario Human Rights Code, Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967 (“ADEA”), as amended, the Americans with Disabilities Act (“ADA”), the Equal Pay Act of 1963, the Fair Labor Standards Act of 1938, the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Family and Medical Leave Act, the Massachusetts Fair Employment Practices Act, the Massachusetts Civil Rights Act, the Massachusetts Equal Rights Law, the Massachusetts or the United States Constitution, including any right of privacy thereunder, and any other state, provincial or federal equal employment opportunity or anti-discrimination law, policy, order, regulation or guidelines affecting or relating to Claims or rights of employees.  Employee further agrees not to institute any Claim to challenge the validity of this Letter or the circumstances surrounding its execution.  This is a general release, including a waiver for any Claims of age discrimination under federal and state statutes, such as the ADEA, the Ontario Human Rights Code or any other applicable anti-discrimination statute.

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Covenant Not to Sue.  Employee represents and warrants that Employeehas not filed any Claims against the Company or any of the Releasees with any local, state or federal court or administrative agency.  Employee agrees and covenants not to sue or bring any Claims against the Company or any of the Releasees with respect to any matters arising out of or relating to Employee’semployment with the Company or separation from the Company, or any Claims that as a matter of law cannot be released, such as under workers’ compensation, for unemployment benefits or any Claims related to the Company’s future involvement with, if any, Employee’s retirement plans with the Company.  Except as set forth herein, in the event that Employee on Employee’sbehalf institutes any such action, that Claim shall be dismissed upon presentation of this Letter and Employeeshall reimburse the Company for all legal fees and expenses incurred in defending such Claim and obtaining its dismissal.

Exclusion.  Nothing in this Letter shall preclude Employee from filing a charge or complaint, including a challenge to the validity of this Letter, with the Equal Employment Opportunity Commission, the Massachusetts Commission Against Discrimination or any other state or provincial anti-discrimination agency or from participating or cooperating in any investigation or proceeding conducted by any of such agencies.  In the event that a charge or complaint is filed with any administrative agency by Employee or in the event of an authorized investigation, charge or lawsuit filed by any administrative agency, Employee expressly waives and shall not accept any monetary award or damages, costs or attorneys’ fees of any sort therefrom against the Company or any of the Releasees.

Waiting Period.  Employee understands that Employee has a period of up to 21 days to consider this Release and that Employee has been advised to speak with an attorney.  Employee agrees this Release is written in a manner that Employee understands what Employee is releasing.  Employee understands that this release must be signed no later than ______________ in order for Employee to be entitled to the benefits given under it.  Employee agrees that upon signing the release Employee becomes bound by its terms unless Employee revokes the release.  Employee understands Employee may revoke the release within seven days after signing it; and that unless Employee so revokes it, the release will be fully effective seven days after Employee has signed it.  Once the release is fully effective, the severance pay will be forwarded by U.S. mail according to the schedule in the terms of the Employment Agreement.

Yours truly,

__________

18

EX-10.6

Exhibit 10.6

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement (this “Agreement”) is made and entered into as of the 17th day of August, 2010 (the “Effective Date”) by and between Lawrence Rychlak (the “Executive”) and Avatech Solutions, Inc., a Delaware corporation (“Avatech”).

WHEREAS, Executive currently serves as the President and Chief Financial Officer of Avatech, which service is evidenced by an Employment Agreement dated as of May 26, 2006 (the “Original Agreement”).

WHEREAS, Avatech and Executive desire to amend and restate the terms of the Original Agreement, including amendments to correct certain provisions relating to the payment of amounts of deferred compensation subject to Section 409A of the Internal Revenue Code (the “Code”) in accordance with Internal Revenue Service Notice 2010-6.

NOW, THEREFORE, in consideration of the mutual covenants of the parties contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Avatech and Executive agree as follows:

1.           Employment and Duties. From and after the Effective Date, Executive shall continue to serve as the President and Chief Financial Officer of Avatech.  Executive shall perform such duties as may be assigned to him from time to time by the Chief Executive Officer of Avatech, and shall report directly to the Chief Executive Officer. Executive shall use his best efforts on a full time basis in the performance of his duties on behalf of Avatech.

2.           Compensation and Benefits.

2.1           Salary.  Executive’s base annual salary (“Base Salary”) shall be $235,000, payable in accordance with Avatech’s customary payroll policies in force at the time of payment.

2.2           Incentive Compensation and Bonuses.  Prior to the end of each of Avatech’s fiscal years, its management will recommend to the Compensation Committee of the Board of Directors whether to pay to Executive additional compensation, and the Compensation Committee shall determine if additional compensation shall be paid to Executive, and if so, in what amounts.  Such a determination by the Compensation Committee shall be made in conjunction with its consideration of an overall incentive compensation plan for senior management of Avatech.  The Compensation Committee may pay to Executive any or all of the following:  (a) incentive compensation based on Executive’s achievement of specific goals or objectives developed by the Compensation Committee, in an annual amount up to $50,000; (b) a bonus based upon outstanding performance by the Executive; and (c) options to purchase Avatech’s common stock under its equity compensation plans from time to time in effect, or otherwise.

2.3           Annual Review.  Commencing with the beginning of the fiscal year of Avatech beginning July 1, 2010, and on each July 1st thereafter, the Board shall conduct an annual performance review of Executive and, at that time, consider increases in Executive’s base compensation.

2.4           Benefits.  Executive shall be entitled to participate in Avatech’s standard benefits provided to other management level employees of Avatech, as established or modified by Avatech from time to time, including but not limited to life insurance, health insurance, and dental insurance, to the extent not provided to Executive from another business or corporation.

2.5           Vacation.  Executive shall be entitled to four calendar weeks of vacation during each fiscal year of Avatech, which vacation weeks shall not accrue if they are not used.

2.6           Business Expenses.  Pursuant to Avatech’s customary policies in force at the time of payment, Executive shall be promptly reimbursed, against presentation of vouchers or receipts, for all authorized expenses properly incurred by him in the performance of his duties hereunder.

3.           Term and Termination.

3.1           Term. This Agreement shall have a term beginning on the Effective Date and ending on the date of a Termination for Cause (as defined in Section 3.2) or the date of a Termination Other than for Cause (as defined and described in Section 3.3), whichever shall first occur.

3.2           Termination for Cause.  Executive shall be entitled to payment of his Base Salary earned, accrued bonus earned (if any), and benefits existing at the time of termination of his employment if such termination is a Termination for Cause.  “Termination for Cause” means one or more of (a) the termination of employment by Executive that does not constitute a “Termination Other Than for Cause” (as defined in Section 3.3); (b) death of Executive; (c) Executive having been unable to render services required of him hereunder for a consecutive period of six months or for any period in the aggregate of six months in any 12-month period because of a serious and continuing health impairment, which impairment will most likely result in Executive’s continued inability to render the services required of him hereunder; (d) Executive’s misappropriation of corporate funds; (e) Executive’s conviction of a felony; (f) Executive’s conviction of any crime involving theft, dishonesty, or more turpitude; (g) Executive’s failure to devote substantially his full business time and attention to Avatech as provided in Section 1 hereof; (h) Executive’s willful violation of directions of the Board of Directors of Avatech which are consistent with Executive’s duties as President and Chief Financial Officer; (i) falsification of any material representation made by Executive to Avatech; (j) verifiable evidence that Executive has engaged in sexual harassment of a nature that could give rise to liability on the part of Avatech; and (k) the commission by Executive of a material breach of the terms of this Agreement; provided, however, that any condition or occurrence specified in items (c), (d), (g), (h), (i), (j) or (k) of this Section 3.2 shall be deemed to exist only upon a finding by a majority vote of the entire Board of Directors of Avatech (and not merely a committee thereof), after at least 10 days’ written notice to Executive specifying the condition or occurrence proposed to be claimed and after an opportunity for Executive to be heard at a meeting of such Board of Directors.

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3.3           Termination Other Than for Cause.  If (a) Avatech terminates Executive’s employment and such termination is not a Termination for Cause or (b) Executive terminates his employment for “Good Reason” (as defined in Section 3.5), such termination shall constitute a “Termination Other Than for Cause” and, subject to Section 3.7, Executive shall be entitled to payment of his Base Salary and other benefits existing at the time of such termination (a) in the event such termination occurs at any time prior to June 30, 2011, for a period of 24 months thereafter, or (b) in the event such termination occurs at any time on or after June 30, 2011 but before June 30, 2012, for a period of months equal to 12 plus the number of full months remaining before July 1, 2012, or (c) in the event such termination occurs at any time on or after June 30, 2012, for a period of 12 months thereafter, with all such payments to be made periodically pursuant to Avatech’s policies in force at the time of payment, provided, however, that Avatech shall not be obligated to continue any benefit if the plan or policy under which such benefit is provided limits the provision of the benefit to full-time employees of Avatech, or if the validity of the plan or policy would be adversely impacted by the continuation of the benefit, and further provided that Executive satisfies the conditions set forth in the next sentence.  The parties agree that Executive shall not be eligible for the payments set forth in this Section 3.3 unless and until Executive has first satisfied the following conditions: (i) compliance through the date of execution of the Release (defined below) with Executive’s obligations under this Agreement; and (ii) execution and delivery on or before the 21st day after the date of termination of a waiver and release of claims in favor of Avatech related to Executive’s employment with Avatech substantially in the form set forth in Exhibit A attached hereto (the “Release”).  Subject to the satisfaction of the foregoing conditions, such payments shall commence on the 28th day following the date of termination (assuming no revocation of the Release).  Avatech shall be entitled to terminate payments under this Section 3.3 in the event Executive fails to continue to comply with his obligations under this Agreement and the Release.  For purposes of clarity, notwithstanding that Executive may have more than one basis for a Termination Other Than for Cause (e.g., under Section 3.4 and 3.5), Executive shall be entitled to only one set of payments, as set forth in this Section 3.3.

3.4           Change in Control.  If, upon a Change in Control not involving RAND Worldwide, Inc., Executive elects to resign, such resignation shall be treated as a Termination Other Than for Cause, as if the termination occurred on or after June 30, 2012, under Section 3.3(c).  As used in this Agreement, “Change in Control” shall mean (a) a dissolution or liquidation of Avatech; (b) a merger of consolidation in which Avatech is not the surviving corporation or the party to the merger or consolidation whose shareholders do not own 50% or more of the voting stock of the resulting corporation; or (c) the acquisition of more than 50% of the outstanding voting stock of Avatech by any person, or group of persons acting in concert, in a single transaction or series of transactions.

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3.5           Good Reason.  For purposes of this Agreement, the term “Good Reason” shall mean the occurrence or existence of one or more of the following conditions, without the consent of Executive:  (a) a material diminution in Executive’s Base Salary, except any diminution made pursuant to a broad-based, executive-wide salary reduction program adopted by the Board of Directors shall not be deemed “material”; (b) a material diminution in Executive’s authority, duties, or responsibilities with Avatech without any of the causes set forth in Section 3.2(b) through (k); (c) a material change in the permanent geographic location at which Executive must perform his services hereunder by more than 25 miles; (d) any other action or inaction that constitutes a material breach by Avatech of this Agreement; provided, however, that there shall not be Good Reason unless the Executive has first given written notice to Avatech specifying in reasonable detail the circumstances which Executive believes gives rise to Good Reason within 30 days of the initial existence of the Good Reason and Avatech shall have failed to remedy such Good Reason within 30 days of its receipt of such notice (the “Remediation Period”).  Avatech shall notify Executive within 15 days of receipt of the notice whether it agrees or disagrees with Executive’s determination that the event specified in the notice constitutes Good Reason and whether it will exercise, or waive, its right to remedy the condition within the Remediation Period.  If Avatech waives its right to remedy the condition, or if Avatech attempts to remedy the condition but Executive notifies Avatech in writing within seven days of the close of the Remediation Period (including any extension of the Remediation Period that the parties may agree to in writing) that the remediation is not satisfactory, then Executive may terminate his employment for Good Reason as of the date of such notice (or such later date as the Executive and Avatech may mutually agree in writing) so long as Good Reason, as defined herein, continues to exist; provided, however, that Executive’s termination of employment under this Section 3.5 shall in no event take place later than six months following the initial existence of the circumstances giving rise to Good Reason.

3.6           Meaning of Termination.  For purposes of this Agreement, the term “termination of employment” and words of similar import mean, for purposes of any payments under this Agreement that are payments of deferred compensation subject to 409A of the Code, the Executive’s “separation from service” as defined in Section 409A of the Code.

3.7           Compliance with Section 409A of the Code.  If a payment obligation under this Agreement arises on account of Executive’s termination of employment while Executive is a “specified employee” (as defined under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and determined in good faith by Avatech), any payment of “deferred compensation” (as defined in Treasury Regulation Section 1.409A-1(b)(1), after giving effect to the exemptions in Treasury Regulation Sections 1.409A-1(b)(3) through (b)(12)) that is scheduled to be paid within six (6) months after such termination of employment shall accrue with interest and be paid together with the accrued interest within 15 days after the later of:  (a) the end of the six-month period beginning on the date of such termination of employment; or (b) the date that is 18 months after the Effective Date.  In the event of the death of Executive prior to the date payments are required to commence in accordance with the previous sentence, payment, with accrued interest, shall be made in a lump sum within 15 days after the appointment of the personal representative or executor of Executive’s estate following his death.  For purposes of this section, interest shall accrue at the prime rate of interest published in the northeast edition of The Wall Street Journal on the date of Executive’s termination of employment.

4.           Withholding of Taxes.  All compensation and benefits payable to Executive pursuant to this Agreement shall be subject to all applicable tax withholding requirements.

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5.           Confidential Information.

5.3           Definition of Confidential Information.  For purposes of this Agreement, the term “Confidential Information” means that secret, proprietary information of Avatech not otherwise publicly disclosed (whether or not discovered or developed by Executive) and known by Executive as a consequence of Executive’s employment with Avatech or as a consequence of Executive’s position as a director of Avatech. Without limiting the generality of the foregoing, such proprietary information shall include information not generally known in the industry or related industries which concerns customer lists; computer programs and routines; the identity of specialized consultants and contractors and confidential information developed by them for Avatech; operating and other cost data, including information regarding salaries and benefits of employees; cost and pricing data; acquisition, expansion, marketing, financial, strategic, and other business plans; Avatech manuals, files, records, memoranda, plans, drawings and designs, specifications and computer programs and records; and all information that is a “trade secret” as defined in the Uniform Trade Secrets Act.

5.4           Confidential Information.  During Executive’s employment with Avatech, Executive shall have access to and become familiar with Confidential Information of Avatech. Executive acknowledges that such Confidential Information is owned and shall continue to be owned solely by Avatech. During the term of Executive’s employment with Avatech and after termination of such employment for any reason, Executive shall not use or divulge Confidential Information to any person or entity other than Avatech, or persons to whom Avatech has given its written consent, unless such information has become publicly available and is not longer Confidential Information.

5.5           Return of Documents.  Upon termination of Executive’s employment with Avatech for any reason, all procedural manuals, guides, specifications, plans, drawings, designs, records, lists, notebooks, software, diskettes, customer lists, pricing documentation and other property which is or contains Confidential Information, including all copies thereof, in the possession or control of Executive, whether prepared by Executive or others, shall be forthwith delivered by Executive to Avatech.

6.           Covenants Not to Compete.

6.3           Restrictive Covenant.  Avatech and Executive agree and acknowledge that Avatech has legitimate business interests to support the restrictive covenants set forth hereinafter, including, but not limited to, trade secrets, Confidential Information that otherwise does not qualify as trade secrets, and Executive’s substantial relationships with prospective or existing customers. Executive covenants and agrees that during Executive’s employment with Avatech and for a period of one year following Executive’s cessation of employment for any reason, Executive shall not in any manner start or join any business which, as of or after the date of this Agreement, enters into a line of business or is engaged in a line of business that is a line of business conducted by Avatech.  This Section 5.1 shall prevent Executive, directly or indirectly, on Executive’s own behalf or as an executive, officer, employee, agent, director, partner, consultant, lender, or advisor, from forming, owning, joining, controlling, financing, or otherwise participating in the ownership or management of or being otherwise affiliated with any person or entity engaged in the type of business prohibited by this Section. Executive shall not permit any person or entity (other than Avatech) of which Executive is a shareholder, partner or director, or in which Executive has an ownership interest, to engage in any type of business prohibited by this Section. Notwithstanding any other provision herein to the contrary, the parties agree that Executive may invest Executive’s personal, private assets as a passive investor in not more than one percent of the total outstanding shares of any publicly traded company engaged in a competing business, so long as Executive does not participate in the management or operations of such company.

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6.4           Solicitation of Employees.  During the one-year period following Executive’s cessation of employment for any reason, Executive shall not, without the prior written approval of the Chairman of the Board of Directors of Avatech, directly or indirectly solicit, raid, entice, or induce any person who is, or was at any time within six months prior to such cessation, an employee of Avatech, to become employed by any other person, firm, or corporation in any business which is in any manner in competition with Avatech.  Furthermore, Executive shall inform Avatech in writing if any other person employed by Avatech contacts Executive for the purpose of seeking employment during such one year period.

6.5           New Developments.  Executive agrees that, with respect to his work for Avatech, any developments made by Executive or under Executive’s direction in connection with the work of Avatech shall be the sole and absolute property of Avatech, and that any and all copyrights, patent rights, and other proprietary rights therein shall belong to Avatech. Executive shall cooperate with Avatech and execute any documents prepared by Avatech to secure or protect any such rights.

7.           Representations of Executive.  Executive hereby represents and warrants that he has the unrestricted right to accept employment with Avatech on the terms and conditions set forth herein and to execute and perform this Agreement without being in conflict with any other agreement, obligation or understanding with any third party. Executive represents that he is not bound by any agreement or by any other existing or previous business relationship which conflicts with, or may conflict with, the performance of his obligations hereunder, or prevent the full performance of his duties and obligations hereunder.

8.           Notices.  Any notice permitted or required to be given under this Agreement shall be sufficient if in writing and delivered personally or by certified mail, return receipt requested, if to Executive, to Mr. Lawrence Rychlak at his residence address as reflected in Avatech’s payroll records, and if to Avatech, to the attention of the Chairman of the Board at Avatech’s principal corporate office address.  A party may change his or its address for receipt of notices by complying with this Section.

9.           Entire Agreement.  This Agreement contains the entire understanding of the parties in respect of its subject matter and supersedes all prior agreements and understandings between the parties with respect to such subject matter.  Avatech and Executive agree to execute any and all amendments to this Agreement permitted under applicable law that Avatech’s legal counsel determines to be necessary to ensure compliance with the distribution provisions of Section 409A of the Code or to otherwise ensure that this Agreement complies with Section 409A of the Code.

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10.           Amendment; Waiver.  This Agreement may not be amended, supplemented, canceled or discharged except by a written instrument executed by the party affected thereby. No failure to exercise, and no delay in exercising, any right, power or privilege hereunder shall operate as a waiver thereof.  No waiver of any breach of any provision of this Agreement shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision.

11.           Binding Effect; Assignment. The rights and obligations set forth in this Agreement shall bind and inure to the benefit of any successor of Avatech by reorganization, merger or consolidation, or any assignee of all or substantially all of Avatech’s business and properties. Executive’s rights or obligations hereunder may not be assigned by Executive, except that upon Executive’s death, all rights to compensation hereunder shall pass to Executive’s executor or administrator.

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

13.           Governing Law: Interpretation.  This Agreement shall be construed in accordance with, and governed by, the laws of the State of Maryland and, to the extent it involves any United States statute, by the laws of the United States.  This Agreement is intended to comply with, or otherwise be exempt from, Section 409A of the Code and any regulations and Treasury guidance promulgated thereunder.  If Avatech determines in good faith that any provision of this Agreement would cause the Executive to incur an additional tax, penalty, or interest under Section 409A of the Code, then Avatech and the Executive shall use reasonable efforts to reform such provision, if possible, in a mutually agreeable fashion to maintain to the maximum extent practicable the original intent of the applicable provision without violating the provisions of Section 409A of the Code or causing the imposition of such additional tax, penalty, or interest under Section 409A of the Code.

14.           Further Assurances.  Each of the parties agrees to execute, acknowledge, deliver and perform, or caused to be executed, acknowledged, delivered and performed, at any time and from time to time, all such further acts, documents, transfers, conveyances, or assurances as may be necessary or appropriate to carry out the provisions or intent of this Agreement.

15.           Severability.  If any one or more of the terms, provisions, covenants, or restriction contained in this Agreement shall be determined by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

[SIGNATURES APPEAR ON NEXT PAGE]

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[SIGNATURE PAGE]

IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as of the day and year first above written.

AVATECH SOLUTIONS, INC.
By:	/s/ George Davis
Name:	George Davis
Title:	Chief Executive Officer
/s/ Lawrence Rychlak
Lawrence Rychlak

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Exhibit A

Form of Release

[DATE]

Board of Directors

Avatech Solutions, Inc. (the “Company”)

Except as set forth in the Amended and Restated Employment Agreement by and between myself and the Company dated as of August __, 2010 (the “Employment Agreement”), I am entitled to no severance or termination payment or benefits.  I have been notified of my right to review this letter release (this “Letter”) with counsel, and I have received, if I so chose, legal advice concerning this release.

General Release.  In consideration of the benefits and consideration set forth in the Employment Agreement by and between myself and the Company, the sufficiency of which is acknowledged by me, I for myself, and for executors, heirs, administrators, assigns, and anyone else claiming by, through or under me, irrevocably and unconditionally, release, remise and forever discharge the Company, its subsidiaries, and its and their present and former agents, servants, employees, officers, directors, stockholders, successors and assigns (collectively, the “Releasees”) from, and with respect to, any and all debts, demands, actions, complaints, charges, causes of action, suits, covenants, contracts, wages, bonuses, damages and any and all claims, demands, liabilities and expenses (including attorneys’ fees and costs) whatsoever of any name or nature both in law and in equity (collectively “Claims”) which I now have or ever had or may in the future have or assert against the Company or any of the Releasees, for or by reason of any matter, cause or thing whatsoever which has happened, developed or occurred on or before the date hereof (except for claims for severance under the Employment Agreement), including, without in any way limiting the generality of the foregoing any Claim that I might otherwise have: (i) for tort or contract, or relating to salary, wages, bonuses, severance, commissions, stock, and stock options, the breach of any oral or written contract or promise, misrepresentation, defamation, and interference with prospective economic advantage, interference with contract, intentional and negligent infliction of emotional distress, negligence, breach of the covenant of good faith and fair dealing, medical, disability or other leave; (ii) arising out of, based on, or connected with my employment, including terms and conditions of employment, by the Company and the termination of that employment, including but not limited to claims arising under Section 806 of the Sarbanes-Oxley Act of 2002, and any other claims alleging retaliation of any nature; (iii) in any way related to stock options vesting or exercise, for alleged securities violations; or (iv) for unlawful employment discrimination of any kind, including discrimination due to age, sex, disability or handicap, including failure to offer reasonable accommodations, race, color, religion, pregnancy, sexual orientation, national origin, or sexual or other unlawful harassment arising under or based on Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967 (“ADEA”), as amended, the Americans with Disabilities Act (“ADA”), the Equal Pay Act of 1963, the Fair Labor Standards Act of 1938, the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Family and Medical Leave Act, the United States Constitution, including any right of privacy thereunder, and any other state or federal equal employment opportunity or anti-discrimination law, policy, order, regulation or guidelines affecting or relating to Claims or rights of employees.  I further agree not to institute any Claim to challenge the validity of this Letter or the circumstances surrounding its execution.  This is a general release, including a waiver for any Claims of age discrimination under federal and state statutes, such as the ADEA.

Covenant Not to Sue.  I represent and warrant that I have not filed any Claims against the Company or any of the Releasees with any local, state or federal court or administrative agency.  I agree and covenant not to sue or bring any Claims against the Company or any of the Releasees with respect to any matters arising out of or relating to my employment with the Company or separation from the Company, or any Claims that as a matter of law cannot be released, such as under workers’ compensation, for unemployment benefits or any Claims related to the Company’s future involvement with, if any, my 401(k)/retirement plans with the Company.  Except as set forth herein, in the event that I institute any such action, that Claim shall be dismissed upon presentation of this Letter and I shall reimburse the Company for all legal fees and expenses incurred in defending such Claim and obtaining its dismissal.

Exclusion.  Nothing in this Letter shall preclude me from filing a charge or complaint, including a challenge to the validity of this Letter, with the Equal Employment Opportunity Commission, or any state anti-discrimination agency or from participating or cooperating in any investigation or proceeding conducted by any of such agencies.  In the event that a charge or complaint is filed with any administrative agency by me or on my behalf or in the event of an authorized investigation, charge or lawsuit filed by any administrative agency, I expressly waive and shall not accept any monetary award or damages, costs or attorneys’ fees of any sort arising therefrom against the Company or any of the Releasees.  I acknowledge and agree that my separation from employment with the Company in compliance with the terms of the Employment Agreement shall not serve as the basis for any claim or action (including, without limitation, any claim under ADEA).

Waiting Period.  I understand that I have a period of up to 21 days to consider this Letter and that I have been advised to speak with an attorney.  I agree this Letter is written in a manner that I understand what I am releasing.  I understand that this release must be signed no later than ______________ in order for me to be entitled to the benefits given under it.  I agree that upon signing this Letter, I become bound by its terms unless I revoke this Letter.  I understand I may revoke this Letter within seven days after signing it; and that unless I so revoke it, this Letter and the release herein will be fully effective seven days after I have signed it.  Once this Letter is fully effective, the severance pay will be made pursuant to the terms of the Employment Agreement.

Non-Disparagement.  I shall not knowingly make any statement, take any action, or conduct myself in any way that I have reason to believe may adversely affect the reputation of, or goodwill towards, the Company.  Nothing herein will limitmefrom responding or advocating a position in a legal proceeding, or as a matter of law, or as compelled by subpoena or legal process.

Yours truly,

Lawrence Rychlak

A-2

EX-16.1

Exhibit 16.1

August 17, 2010

Securities and Exchange Commission

100 F Street, N.E.

Washington, DC 20549

Commissioners:

We have read the statements made by Avatech Solutions, Inc. (copy attached), which we understand will be filed with the Securities and Exchange Commission, pursuant to Item 4.01 of Form 8-K, as part of the Form 8-K of Avatech Solutions, Inc. dated August 17, 2010.  We agree with the statements concerning our Firm in such Form 8-K.

Very truly yours,

PricewaterhouseCoopers LLP

EX-99.1

Exhibit 99.1

 

RAND WORLDWIDE, INC. AND AVATECH SOLUTIONS, INC. MERGE BUSINESS OPERATIONS

Combined Company is Autodesk’s Largest Global VAR

FRAMINGHAM, MA and OWINGS MILLS, MD – August 17, 2010 – Rand Worldwide, Inc. (Framingham, MA), a global leader in providing technology solutions to organizations with engineering design and information technology requirements, and Avatech Solutions, Inc. (Owings Mills, MD - OTCBB: AVSO), one of America's leading professional services companies for design and engineering technologies, today announced that the companies have been combined through a reverse merger. The combined company intends to change its name to Rand Worldwide, Inc. and will seek a new OTC Bulletin Board symbol.

As a result of the merger, the combined company has approximately 51,400,844 shares of common stock issued and outstanding, of which approximately 67% were issued to the former stockholders of Rand Worldwide, including its principal stockholders, funds managed by Ampersand, a private equity firm headquartered in Wellesley, Massachusetts. The combined company will have six directors on its board including the chief executive officer and several former board members of Rand Worldwide and Avatech.

The newly constituted board of directors has appointed Marc Dulude as the chief executive officer of the combined company, and Larry Rychlak as the president and chief financial officer. George Davis, formerlythe CEO of Avatech, will remain on the board of the combined company and Richard Charpie, a Managing General Partner of Ampersand, will assume the role of chairman. The combined company is the largest global value added reseller of Autodesk, Inc. (NASDAQ: ADSK) products in the world with sales and services capabilities that extend across the United States, Canada, Singapore, Malaysia, and Australia. With offices in 47 cities globally, the combined company is now in a position to further extend its premier training, support, and services throughout the engineering community with even broader reach. It will also continue to offer a wide range of software support services to users of products from PTC (NASDAQ: PMTC), Dassault Systèmes (Euronext Paris: #13065, DSY.PA), and Autonomy Corporation plc (LSE: AU or AU.L). The companies’ combined revenue from the last twelve months totaled approximately $82M.

“With little geographic overlap between the businesses today, the combination of Rand Worldwide and Avatech allows us to leverage the full range of selling and technical resources of each of the companies to enhance the service delivered to our clients," commented Dulude. “We believe that clients in all of the geographies we serve will reap the benefits of the very deep bench of technical service capabilities that will result from combining the two companies. Also, the ability to deliver the additional products and solutions that each company has to its respective customer bases represents an attractive cross selling opportunity.”

Rychlak added, "We see great opportunities to even further develop the operational excellence that has characterized each company. It is our intention to leverage the investments we have made in our people, systems and processes across a much larger set of selling operations. This combination represents an ideal opportunity for such leverage.”

Steve Blum, Autodesk’s senior vice president of Americas Sales said, “Autodesk has been very pleased with the performance of these two significant channel partners and we look forward to the increased capabilities available with this combination.” All Autodesk related services and sales activities for the two companies will be combined under the IMAGINiT Technologies brand worldwide.

Duff & Phelps, LLC served as an independent financial advisor to the Board of Directors of Avatech with respect to this transaction and provided an opinion as to the fairness of the transaction, from a financial point of view, to Avatech and its stockholders. Edwards Angell Palmer & Dodge LLP served as legal counsel to Rand Worldwide, Inc.. Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC served as legal counsel to Avatech Solutions, Inc.

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About Rand Worldwide and Avatech Solutions.

Rand Worldwide and Avatech Solutions have combined to form 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 combined company advances the way organizations design, develop, and manage building, infrastructure, and manufacturing projects. Fortune 500 and Engineering News Record's Top 100 companies work with the company 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 designs systems that accelerate innovation while improving quality and profitability. For more information see (www.rand.com) and (www.avatech.com).

Safe Harbor statement under the Private Securities Litigation Reform Act of 1995

This press release contains forward-looking statements intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements relate to, among other things, the expected benefits of the merger of Rand Worldwide and Avatech for stockholders of the combined company, the future growth and performance of the combined company and plans to change the name and trading symbol of the combined company. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth or implied by these forward looking statements. For example, management’s expectations could be affected by risks and uncertainties relating to: the risk that Rand Worldwide’s and Avatech’s’ businesses will not be integrated successfully; changes in the combined company’s competitive position or competitive actions by other companies; the ability of the combined company to generate sufficient cash flow in the short term to cover closing expenses and severance and transition costs and the ability of the combined company to manage growth. The Company undertakes no obligation to review or update any forward looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

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For further information, please contact:

Chantale Marchand

Rand Worldwide, Inc. / Avatech Solutions, Inc.

(508) 663-1411

cmarchand@rand.com

Rand Worldwide is a trademark or registered trademark of Rand IMAGINiT Technologies Inc. and/or Rand A Technology Corporation in the US and/or other countries.

Autodesk is a registered trademark or trademark of Autodesk, Inc., and/or its subsidiaries and/or affiliates in the USA and/or other countries.

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