Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT
 
BY AND AMONG
 
AVATECH SOLUTIONS, INC.
 
AND
 
RWWI HOLDINGS LLC
 

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Dated as of August 17, 2010
 

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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

 
 

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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.

 
 

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“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]

 
 

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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).
 
* * *

 
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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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