**Exhibit 10.3**

**PREFERRED STOCK PURCHASE AGREEMENT**

**AVATECH SOLUTIONS, INC.**

This Preferred Stock Purchase Agreement (this “**Agreement**”) is made and entered into as of the     day of                 , 2005, by and among Avatech Solutions, Inc., a Delaware corporation (the “**Company**”), and each of the persons and/or entitiesidentified on Schedule 1 hereto (the “**Purchasers**”). 

**RECITALS**

WHEREAS, the Company wishes to sell to the Purchasers shares of Series E Convertible Preferred Stock (the “**Shares**”),pursuant to the terms and conditions set forth below; and 

WHEREAS, the Purchasers wish to purchase the Shares on the termsand subject to the conditions set forth below; 

**AGREEMENT**

NOW THEREFORE, in consideration of the mutual covenants, agreements, conditions, representations, and warranties contained in thisAgreement, the Company and the Purchasers hereby agree as follows: 

**SECTION 1: PURCHASE AND SALE OF PREFERRED STOCK**

1.1. *Authorization of Shares*. On or after the Closing Date (as defined in Section 1.4), (a) the Company shall haveauthorized the issuance of the Shares to Purchasers, and (b) the Company shall have reserved the proper number of shares of Common Stock of the Company issuable upon conversion of the Shares (the “**Conversion Shares**”). TheShares shall have the rights, preferences, privileges and restrictions set forth in a certificate of designations filed with the Secretary of the State of Delaware, substantially in the form attached hereto as Exhibit A (the“**Designation**”). 

1.2. *Purchase and Sale*. Subject to the terms and conditions hereof, the Companyagrees to issue to each Purchaser that number of Shares set forth opposite each Purchaser’s name on Schedule 1. In exchange for the issuance of the Shares, each Purchaser agrees to purchase the Shares at a purchase price of $1,000, pershare of Series E Convertible Preferred Stock, for a total price as set forth opposite the Purchaser’s name on Schedule 1 (the “**Total Purchase Price**”). 

1.3. *Warrants*. Each Share shall be accompanied by a warrant to purchase Common Stock of the Company on the terms and conditionsset forth in the Warrant attached hereto as Exhibit B (the “**Warrants**”). On or after the Closing Date (as defined in Section 1.4), the Company shall have reserved the proper number of shares of Common Stock of the Companyissuable upon exercise of the Warrants (the “**Warrant Shares**”). 

1.4. *Closing*. The issuance of the Shares and Warrants under this Agreement (the“**Closing**”) shall take place at the time and place agreed on between the Purchaser and the Company (the “**Closing Date**”). At or as soon as practicable after the Closing, subject to the terms and conditions hereof, theCompany will deliver to each Purchaser a certificate representing the number of Shares set forth opposite that Purchaser’s name on Schedule 1, against delivery to the Company of this executed Agreement, and the Purchaser will deliver theTotal Purchase Price to the Company. 

1.5. *Covenants of the Company related to Conversion*. The Company agrees, at alltimes from the Closing Date until all of the Shares are converted into Conversion Shares, to reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the Conversion of the Shares intoConversion Shares, the number of shares of its common stock as are then required to effect the conversion of all outstanding Shares. 

1.6. *Covenants of the Company related to exercise of Warrants*. The Company agrees, at all times from the Closing Date until all ofthe Warrants are exercised or have expired, to reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the exercise of the Warrants, the number of shares of its common stock as arethen required to effect the exercise of all outstanding Warrants. 

**SECTION 2: REPRESENTATIONS AND WARRANTIES OF THE COMPANY**

The Company hereby represents and warrants to each Purchaser as follows: 

2.1. *Organization, Good Standing, and Qualification*. The Company is a corporation duly organized, validly existing and in goodstanding under the laws of the State of Delaware. The Company has all requisite corporate power and authority to own and operate its properties and assets, to execute and deliver this Agreement and to file the Designation (collectively, the“**Preferred Stock Agreement**”), to issue and sell the Shares and Warrants, to carry out the provisions of the Preferred Stock Agreement, and to carry on its business as presently conducted. The Company is duly qualified and isauthorized to do business and is in good standing in each jurisdiction in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary; except for those jurisdictions in which failure to do sowould not have a material adverse effect on the Company or its business. 

2.2. *Capitalization*. The authorized capitalstock of the Company, immediately prior to the Closing and prior to filing the Designation, consists of a total of 100,000,000 shares, of which: (a) 80,000,000 shares are Common Stock, of which             shares are issued and outstanding and              shares of which are reserved for future issuance upon theexercise of any stock options granted under the 1996, 1998, and 2002 Stock Option Plans, the Avatech Solutions, Inc. Employee Stock Purchase Plan and the Avatech Solutions, Inc. Restricted Stock Award Plan, and upon the exercise of outstandingwarrants; and (b) 1,297,537 are designated as Series D Convertible Preferred Stock, 1,297,537 of which are issued and outstanding. All issued and outstanding shares of the Company’s Common and Preferred Stock (x) have been dulyauthorized and validly issued, (y) are fully paid and nonassessable, and (z) were issued in compliance with all applicable state and federal laws concerning the issuance of securities. The

 

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Conversion Shares and the Warrant Shares have been duly and validly reserved for issuance. When issued in compliance with the provisions of this Agreement and the Designation, the ConversionShares and the Warrant Shares will be validly issued, fully paid and nonassessable, and will be free of any liens or encumbrances, *provided, however*, that the Conversion Shares and the Warrant Shares may be subject to restrictions on transferunder state and federal securities laws. 

2.3. *Authorization*. All corporate action on the part of the Company, itsofficers, directors, and stockholders necessary for the authorization of this Agreement and the Designation, the performance of all obligations of the Company thereunder, and the authorization, sale, issuance, and delivery of the Shares, Warrants,Conversion Shares, and Warrant Shares thereto have been taken or will be taken prior to the Closing. This Agreement, when executed and delivered, will be a valid and binding obligation of the Company, enforceable against the Company in accordancewith its terms, except as limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights, (b) general principles of equity that restrict theavailability of equitable remedies, and (c) applicable law related to the enforceability of the indemnification provisions set forth in Section 5 of this Agreement. The sale of the Shares and the subsequent conversion of the Shares intoConversion Shares and the sale of the Warrants and the Warrant Shares issuable on exercise of the Warrants are not and will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with.

2.4. *Proxy Statement and Annual Report.* The Company’s 2004 Annual Report on SEC Form 10-K and its Proxy Statementrelating to its 2004 Annual Meeting of Shareholders, along with the Company’s Quarterly Report for the period ending March 31, 2005 on SEC Form 10-Q, was provided to each Purchaser and are available at http://www.sec.gov. The AnnualReport, Quarterly Report, and Proxy Statement contain information regarding the current businesses of the Company and certain information regarding future plans of the Company. 

2.5. *Compliance With Other Instruments*. The Company is not in violation of or default under (a) any term of its certificateof incorporation or bylaws, (b) any judgment, decree, order, writ or, to the Company’s knowledge, or (c) any statute, rule or regulation applicable to the Company, which violation of or default under would materially and adverselyaffect the business, assets, liabilities, financial condition, operations or prospects of the Company. The execution, delivery, and performance of and compliance with the Preferred Stock Agreement and the issuance and sale of the Shares, Warrants,Conversion Shares, and Warrant Shares pursuant thereto will not, with or without the passage of time or giving of notice, result in any such material violation or be in conflict with or constitute a default under any such term or result in thecreation of any mortgage, pledge, lien, encumbrance, or charge upon any of the properties or assets of the Company or the suspension, revocation, impairment, forfeiture, or non-renewal of any permit license, authorization, or approval applicable tothe Company, its business or operations, or any of its assets or properties, provided that this representation and warranty shall not include any term or provision of any financing arrangement which shall be paid or discharged in full simultaneouslywith the Closing. 

2.6. *Litigation*. Except as set forth in the Annual Report, Quarterly Report, and Proxy Statement,there are no actions, suits, or legal, administrative, or other proceedings or 

 

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investigations pending or, to the Company’s knowledge, threatened before any court, agency, or other tribunal to which the Company is a party or against or affecting any of the property,assets, businesses, or financial condition of the Company. The Company is not in default with respect to any order, writ, injunction, or decree of any federal, state, local, or foreign court, department, agency, or instrumentality to which it is aparty. 

2.7. *Governmental Approvals: Third Party Consents*. Except for certain filings required by federal and statesecurities laws, all consents, approvals, or authorizations of, or registrations, qualifications, designations, declarations, or filings with, any federal or state governmental authority, and all consents, approvals, or authorizations of any thirdparty required in connection with the execution of the Preferred Stock Agreement and the performance of the transactions contemplated thereby (including the issuance and sale of the Shares, Warrants, Conversion Shares, and Warrant Shares) have beenobtained by the Company or shall be obtained prior to the Closing or shall be inapplicable as of the time of Closing by virtue of the simultaneous discharge of indebtedness of the Company. The Company has, or has rights to acquire, all licenses,permits, and other similar authority necessary for the conduct of its business as now being conducted by it, the lack of which could materially and adversely affect the operation or condition, financial or otherwise, of the Company, and it is not indefault in any material respect under any of such licenses, permits, or other similar authority. 

2.8. *Offering Valid*.Assuming the accuracy of the representations and warranties of Purchasers contained in Section 3 hereof, the offer, sale, and issuance of the Shares, Warrants, Conversion Shares, and Warrant Shares will be exempt from the registrationrequirements of the Securities Act of 1933 (the “**Securities Act**”) and will have been registered or qualified or are exempt from registration and qualification under the registration, permit, or qualification requirements of allapplicable state securities laws. 

2.9. *Disclosure*. All information relating to or concerning the Company and itssubsidiaries set forth in this Agreement or provided to the Purchasers in writing in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material factnecessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any information contained withinany of the foregoing related to future events, or the projected future financial performance of the Company, including any financial projections, or descriptions of potential strategic or business relationships between the Company and third parties.

2.10. *No Registered Offering*. Neither the Company, any of its affiliates, nor any person acting on its or theirbehalf, has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security under circumstances that would require registration of the Shares being offered hereby under the Securities Act. 

**SECTION 3: REPRESENTATIONS AND WARRANTIES OF PURCHASERS.**

Each Purchaser hereby represents and warrants to the Company as follows: 

3.1. *Requisite Power and Authority*. 

 

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(a) If the Purchaser is an individual, the Purchaser has all requisite power and authorityunder all application provisions of law to execute and deliver this Agreement and to carry out the provisions hereof. 

(b) Ifthe Purchaser is a corporation, limited liability company, or limited partnership, the Purchaser is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its formation and has all requisite limited liabilitycompany, partnership, or corporate power and authority to own its assets and operate its business. If the Purchaser is a corporation, limited liability company, or limited partnership, the Purchaser has all necessary corporate, limited liabilitycompany, or partnership power and authority under all applicable provisions of law to execute and deliver this Agreement and to carry out the provisions hereof. All action on Purchaser’s part required for the lawful execution and delivery ofthis Agreement has been or will be effectively taken prior to the Closing. 

(c) Upon its execution and delivery, thisAgreement will be a valid and binding obligation of Purchaser, enforceable in accordance with its terms, except as limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affectingenforcement of creditors’ rights, (b) general principles of equity that restrict the availability of equitable remedies and (c) applicable law related to the enforceability of the indemnification provisions set forth in Section 5of this Agreement. 

3.2. *Investment Representations*. Purchaser understands that the Shares have not been registeredunder the Securities Act. Purchaser also understands that the Shares, Warrants, Conversion Shares, and/or Warrant Shares are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part uponPurchaser’s representations contained in this Agreement. Each Purchaser, as to itself, hereby represents and warrants to the Company as follows: 

(a) *Acquisition for Own Account*. Purchaser is acquiring the Shares and Warrants for the Purchaser’s own account forinvestment purposes only, and not with a view towards their distribution. 

(b) *Accredited Investor*. Purchaserrepresents that it is an “accredited investor” within the meaning of Regulation D under the Securities Act. 

(c)*Company Information*. Purchaser has had an opportunity to ask questions of and receive answers from, directors, officers and management of the Company relating to the Company’s business, management and financial affairs and to the termsand conditions of this investment. Purchaser has had a chance to review the Annual Report, Quarterly Report, and Proxy Statement provided to the Purchaser. 

(d) *Rule 144*. Purchaser acknowledges and agrees that the Shares, Warrants, Conversion Shares, and/or Warrant Shares must be heldindefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Purchaser has been advised or is aware of the provisions of Rule 144 promulgated under the Securities Act, whichpermits limited resale of securities purchased in a private placement subject to the satisfaction of certain conditions, including, among other things: the availability of certain 

 

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current public information about the Company; the resale occurring not less than one year after a party has purchased and paid for the security to be sold; the sale being through an unsolicited“broker’s transaction” or in transactions directly with a market maker (as said term is defined under the Securities Act); and the number of securities being sold during any three-month period not exceeding specified limitations.

(e) *Residence*. The residence of Purchaser (if an individual), or the office or offices of Purchaser in which itsinvestment decision was made is located at the address or addresses of Purchaser as stated on the signature pages hereto. 

**SECTION 4:CONDITIONS TO CLOSING.**

4.1. *Conditions to Purchasers’ Obligations at the Closing*. Purchasers’ obligationsto accept the Shares at the Closing, are subject to the satisfaction, at or prior to the Closing, of the following conditions: 

(a) *Representations and Warranties True; Performance of Obligations*. The representations and warranties made by the Company inSection 2 hereof shall be true and correct in all material respects as of the Closing, with the same force and effect as if they had been made as of the applicable closing date, and the Company shall have performed all obligations andconditions herein required to be performed or observed by it on or prior to the Closing. 

(b) *Legal Investment*. On theClosing Date, the issuance of the Shares and Warrants and the proposed issuance of the Conversion Shares and Warrant Shares, shall be legally permitted by all laws and regulations to which Purchasers and the Company are subject. 

(c) *Consents, Permits, and Waivers*. The Company shall have obtained any and all consents, permits and waivers necessary orappropriate for consummation of the transactions contemplated by the Preferred Stock Agreement (except for such as may be properly obtained subsequent to the Closing. 

(d) *Filing of Designation*. The Designation shall have been filed with the Secretary of State of the State of Delaware. 

(e) *Corporate Documents*. The Company shall have delivered, to Purchasers or their counsel, copies of all corporate documents ofthe Company as Purchasers shall have reasonably requested. 

(f) *Reservation of Conversion Shares and Warrant Shares*.The Conversion Shares issuable upon conversion of the Shares and the Warrant Shares issuable on exercise of the Warrants shall have been duly authorized and reserved for issuance upon such conversion. 

(g) (g) *Proceedings and Documents*. All corporate and other proceedings in connection with the transactions contemplated atthe Closing and all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to Purchasers and their counsel, and Purchasers and their counsel shall have received all such counterpart originalsor certified or other copies of such documents as they may reasonably request. 

 

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4.2. *Conditions to Obligations of the Company at Closing*. The Company’sobligation to issue the Shares at the Closing, is subject to the satisfaction, on or prior to the Closing, of the following conditions: 

(a) *Representations and Warranties True; Performance of Obligations*. The representations and warranties made by Purchasers inSection 3 hereof shall be true and correct in all material respects at the Closing, with the same force and effect as if they had been made on and as of the Closing Date, and Purchasers shall have performed all obligations and conditions hereinrequired to be performed or observed by Purchasers on or prior to the Closing. 

(b) *Filing of Designation*. TheDesignation shall have been filed with the Secretary of State of the State of Delaware. 

(c) *Consents, Permits, andWaivers*. The Company shall have obtained any and all consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by the Preferred Stock Agreement (except for such as may be properly obtainedsubsequent to the Closing). 

**SECTION 5: COVENANTS OF THE PARTIES FOR THE REGISTRATION PERIOD.**

5.1. *Covenants of the Company to Register the Conversion Shares and Warrant Shares*. 

(a) The Company shall file with the SEC, on or prior to the date which is one hundred eighty (180) days after the Closing aregistration statement to effect a registration (the “**New Registration Statement**”) of all of the shares covering the resale of the Registrable Securities (as defined below). The New Registration Statement (and each amendment orsupplement thereto and each request for acceleration of effectiveness thereof) shall be provided to (and subject to the review by) the Purchasers and a single firm of counsel designated by the Purchasers (the “**Purchasers’Counsel**”) at least five business days prior to its filing or other submission in the case of the New Registration Statement, and at least two business days prior to its filing (or such lesser time as may be necessary) in the case of eachamendment or supplement thereto. 

(b) “**Registrable Securities**” means the Conversion Shares, Warrant Shares,and any shares of capital stock issued or issuable, from time to time (with any adjustments), as a distribution or in exchange for or otherwise with respect to the foregoing; provided, however, that Registrable Securities shall not include any suchRegistrable Securities that (i) have previously been registered pursuant to the Securities Act, (ii) are eligible for public resale under Rule 144(k) under the Securities Act, or (iii) are eligible for public resale under theSecurities Act pursuant to an exemption from registration under the Securities Act. 

(c) The Purchasers may offer and sell theRegistrable Securities pursuant to the New Registration Statement in an underwritten offering. In any such underwritten offering, the Purchasers who hold a majority in interest of the Registrable Securities subject to such underwritten offering,shall have the right to select the Purchasers’ Counsel and an investment banker or bankers and manager or managers to administer the offering, which investment banker or bankers or manager or managers shall be reasonably satisfactory to theCompany. In the event 

 

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that any Purchasers elect not to participate in such underwritten offering, the New Registration Statement covering all of the Registrable Securities shall contain appropriate plans ofdistribution reasonably satisfactory to the Purchasers participating in such underwritten offering and the Purchasers electing not to participate in such underwritten offering (including, without limitation, the ability of nonparticipatingPurchasers to sell from time to time and at any time during the effectiveness of such New Registration Statement). 

(d) Inconnection with the registration of the Registrable Securities, the Company has the following obligations: 

(i) The Companywill prepare and file with the SEC, on or before 180 days following the Closing, the New Registration Statement, and will use its best efforts to cause such New Registration Statement to become effective as soon as practicable after such filing. TheCompany will keep such New Registration Statement effective pursuant to Rule 415 at all times until the earlier of (A) the date on which all of the Registrable Securities (in the reasonable opinion of counsel to the Purchasers) may beimmediately sold to the public without registration or restriction pursuant to Rule 144(k) under the Securities Act and (B) such time as all the Registrable Securities have been sold (the “**Registration Period**”). 

(ii) The Company will prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the NewRegistration Statement and the prospectus used in connection with the New Registration Statement as may be necessary to keep the New Registration Statement effective at all times during the Registration Period and, during such period, will complywith the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by the New Registration Statement until such time as all of such Registrable Securities have been disposed of inaccordance with the intended methods of disposition by the seller or sellers thereof as set forth in the New Registration Statement. 

(iii) The Company will furnish to each Purchaser whose Registrable Securities are included in the New Registration Statement and toPurchasers’ Counsel promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company, one copy of the New Registration Statement and any amendments thereto, each preliminary prospectus and prospectusand each amendment or supplement thereto. At the request of any Purchaser, the Company will provide to that Purchaser (A) a copy of each letter written by or on behalf of the Company to the SEC or the staff of the SEC no later than the date ofsubmission of such letter (including, without limitation, any request to accelerate the effectiveness of any New Registration Statement or amendments thereto), and, promptly upon receipt, each item of correspondence from the SEC or the staff of theSEC, in each case relating to the New Registration Statement (other than any portion, if any, thereof which contains information for which the Company has sought confidential treatment), and the Company will cooperate with each Purchaser in makingall reasonable modifications requested by such Purchaser or Purchasers’ Counsel to any portion of any letter or other correspondence from the Company to the SEC that addresses the transactions contemplated by this Agreement, (B) on or assoon as practicable after the date the New Registration Statement (or any amendments to the New Registration Statement) becomes effective (the “**New Registration Effective Date**”), a notice stating that the New Registration Statementor amendment has been declared effective, 

 

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and (C) such number of copies of a prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as such Purchaser may reasonablyrequest in order to facilitate the disposition of the Registrable Securities owned by such Purchaser. 

(iv) The Company willuse its best efforts to (A) register and qualify the Registrable Securities covered by the New Registration Statement under the securities or “blue sky” laws of those jurisdictions in the United States as each Purchaser who holdsRegistrable Securities being offered reasonably requests, (B) prepare and file in those jurisdictions any amendments (including post-effective amendments) and supplements to the registrations or qualifications as may be necessary to maintainthe effectiveness of the registrations or qualifications during the Registration Period, (C) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period,and (D) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in the requested jurisdictions; provided, however, that the Company will not be required in connection herewith or as a conditionthereto to (V) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 5.1(d)(iv), (W) subject itself to general taxation in any such jurisdiction, (X) file a generalconsent to service of process in any such jurisdiction, (Y) provide any undertakings that cause the Company undue expense or burden, or (Z) make any change in its certificate of incorporation or bylaws, which in each case the board ofdirectors of the Company determines to be contrary to the best interests of the Company and its stockholders. 

(v) In theevent that the Purchasers who hold a majority in interest of the Registrable Securities being offered in an offering select underwriters for the offering, the Company shall enter into and perform its obligations under an underwriting agreement, inusual and customary form, including, without limitation, customary indemnification and contribution obligations, with the underwriters of such offering. 

(vi) As promptly as practicable after becoming aware of such event, the Company will notify each Purchaser by telephone or facsimile ofthe happening of any event of which the Company has knowledge and as a result of which the prospectus included in the New Registration Statement, as then in effect, includes an untrue statement or omission of a material fact required to be statedtherein or necessary to make the statements therein not misleading and will use its best efforts promptly to prepare a supplement or amendment to the New Registration Statement to correct the untrue statement or omission and deliver the number ofcopies of any supplement or amendment to each Purchaser as the Purchaser may reasonably request. 

(vii) The Company will useits best efforts to prevent the issuance of any stop order or other suspension of effectiveness of the New Registration Statement and, if such an order is issued, to obtain the withdrawal of the order at the earliest practicable date (including ineach case by amending or supplementing such New Registration Statement) and to notify each Purchaser who holds Registrable Securities being sold (or, in the event of an underwritten offering, the managing underwriters) of the issuance of the orderand its resolution (and if the New Registration Statement is supplemented or amended, deliver such number of copies of any supplement or amendment to each Purchaser as the Purchaser may reasonably request). 

 

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(viii) In the event of an underwritten offering, at the request of any Purchaser whoseRegistrable Securities are included in the Registration Statement, the Company shall furnish, on the New Registration Effective Date (A) an opinion, dated as of the New Registration Effective Date, from counsel representing the Company,addressed to the Purchaser in the form delivered to the underwriters, if any opinion is delivered to the underwriters and (B) a letter, dated as of the New Registration Effective Date, from the Company’s independent certified publicaccountants in the form delivered to the underwriters, if any such “Comfort Letter” is delivered to the underwriters. 

(ix) The Company will provide a transfer agent and registrar, which may be a single entity, for the Registrable Securities not laterthan the New Registration Effective Date. 

(x) The Company will cooperate with the Purchasers who hold Registrable Securitiesbeing offered and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing the Registrable Securities to be offered pursuant to the NewRegistration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the managing underwriter or underwriters, if any, or the Purchasers may reasonably request and registered in such names as themanaging underwriter or underwriters, if any, or the Purchasers may request, and, within three (3) business days after the New Registration Effective Date, the Company shall deliver, and shall cause legal counsel selected by the Company todeliver, to the transfer agent for the Registrable Securities (with copies to the Purchasers whose Registrable Securities are included in such New Registration Statement) an opinion of such counsel that such Registrable Securities have beenregistered under the Securities Act and that the restrictive legends on the certificates representing such Registrable Securities may be removed. 

(xi) At the request of Purchasers who hold a majority-in-interest of the Registrable Securities, the Company will prepare and file withthe SEC any amendments (including post-effective amendments) and supplements to the New Registration Statement and the prospectus used in connection with the New Registration Statement as are necessary to change the plan of distribution set forth inthe New Registration Statement. 

(xii) The Company will comply with all applicable laws related to the New RegistrationStatement and the offer and sale of securities and all applicable rules and regulations of governmental authorities in connection therewith (including without limitation the Securities Act and the Exchange Act, and the rules and regulationspromulgated by the SEC). 

(e) All reasonable expenses incurred by the Company or the Purchasers in connection withregistrations, filings or qualifications pursuant to this Section 5 (excluding brokers’ fees, underwriting discounts and commissions, and similar selling expenses), including, without limitation, all registration, listing andqualifications fees, printers and accounting fees, the fees and disbursements of counsel for the Company, and the fees and disbursements of Purchasers’ Counsel, not in excess of $15,000, shall be borne by the Company. 

5.2. *Covenants of The Purchasers Related to Registration*. In connection with the registration of the Registrable Securities, thePurchasers shall have the following obligations. 

 

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(a) The obligation of the Company under this Agreement to complete the registration of theRegistrable Securities of a particular Purchaser is expressly conditioned on (i) the provision by the Purchaser to the Company of all information regarding itself, the Registrable Securities held by it, and the intended method of disposition ofthe Registrable Securities held by it as are reasonably required to effect the registration of such Registrable Securities and (ii) the execution by the Purchaser of all documents in connection with the registration as the Company mayreasonably request. At least five (5) business days before the first anticipated filing date of the New Registration Statement the Company will notify each Purchaser of any information the Company requires from each such Purchaser. 

(b) Each Purchaser, by the Purchaser’s acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonablyrequested by the Company in connection with the preparation and filing of the New Registration Statement, unless the Purchaser has notified the Company in writing of such Purchaser’s election to exclude all of the Purchaser’s RegistrableSecurities from the New Registration Statement. 

(c) In the event that Purchasers holding a majority in interest of theRegistrable Securities being offered determine to engage the services of an underwriter, each Purchaser agrees to enter into and perform such Purchaser’s obligations under an underwriting agreement, in usual and customary form, including,without limitation, indemnification and contribution obligations, with the underwriter(s) of such offering and the Company, and take such other actions as are reasonably required in order to expedite or facilitate the disposition of the RegistrableSecurities, unless such Purchaser has notified the Company in writing of the Purchaser’s election not to participate in such underwritten distribution. 

(d) A Purchaser may not participate in any underwritten distribution under this Agreement unless the Purchaser (i) agrees to sellthe Purchaser’s Registrable Securities on the basis provided in any underwriting arrangements in usual and customary form entered into by Company, (ii) completes and executes all questionnaires, powers of attorney, indemnities,underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements, and (iii) agrees to pay its pro rata share of all underwriting discounts and commissions and any expenses in excess of thosepayable by the Company pursuant to Section 5.1(d). 

5.3. *Mutual Indemnification Related to Registration*.

(a) *Indemnification by the Company*. In the event of any registration of Registrable Securities under the SecuritiesAct pursuant to this Agreement, to the full extent permitted by law, the Company agrees to indemnify each Purchaser, its affiliates, and their officers, directors, trustees, partners, employees, advisors and agents (including brokers or dealersacting on their behalf), and each person who controls the Purchaser (within the meaning of the Securities Act and the Exchange Act) against all losses, claims, damages, liabilities and expenses caused by (i) any violation by the Company of theSecurities Act, the Securities Exchange Act of 1934 (the “**Exchange Act**”), any state securities or blue sky laws or any rule or regulation thereunder or (ii) any untrue or allegedly untrue statement of material fact contained inany registration statement under which such Registrable Securities were registered under the Securities Act, any prospectus or preliminary prospectus contained therein or any omission or 

 

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alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which such statements weremade, provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon (i) an untrue or allegedly untrue statement or omission oralleged omission resulted from information that the Purchaser furnished in writing to the Company expressly for use therein or (ii) an untrue statement or alleged untrue statement or omission or alleged omission that was contained in apreliminary prospectus and corrected in a final prospectus, and such seller failed to deliver a copy of the final prospectus, which was provided to seller in a timely manner and in accordance with the delivery requirements of the Securities Act. Inconnection with a firm or best efforts underwritten offering, to the extent customarily required by the managing underwriter, the Company will indemnify the underwriters, their officers and directors and each person who controls the underwriters(within the meaning of the Securities Act and the Exchange Act), to the extent customary in such agreements. 

(b)*Indemnification by Purchasers*. In connection with any registration statement, each participating Purchaser will furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection withany registration statement or prospectus and each Purchaser agrees to indemnify, to the extent permitted by law, the Company, its directors, officers, trustees, partners, employees, advisors and agents (including brokers or dealers acting on theirbehalf), and each person who controls the Company (within the meaning of the Securities Act and the Exchange Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or allegedly untrue statement of a materialfact or any omission or alleged omission to state a material fact required to be stated in the registration statement or prospectus or any amendment thereof or supplement thereto necessary to make the statements therein not misleading in light ofthe circumstances under which such statements were made, but only to the extent that the untrue or allegedly untrue statement or omission or alleged omission is contained in or omitted from any information or affidavit the Purchaser furnished inwriting to the Company expressly for use therein and only in an amount not exceeding the net proceeds received by the Purchaser with respect to securities sold pursuant to such registration statement. In connection with a firm or best effortsunderwritten offering, to the extent customarily required by the managing underwriter, each participating Purchaser will indemnify the underwriters, their officers and directors and each person who controls the underwriters (within the meaning ofthe Securities Act and the Exchange Act), to the extent customary in such agreements. 

(c) *Indemnification Proceedings*.Any person entitled to indemnification under this Agreement will (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) unless in the indemnified party’s reasonablejudgment a conflict of interest may exist between the indemnified and indemnifying parties with respect to the claim, permit the indemnifying party to assume the defense of the claim with counsel reasonably satisfactory to the indemnified party. Ifthe indemnifying party does not assume the defense, the indemnifying party will not be liable for any settlement made without its consent (but that consent may not be unreasonably withheld). No indemnifying party will consent to entry of anyjudgment or will enter into any settlement without the consent of the indemnified party (i) that does not include as an unconditional term thereof the claimant’s or plaintiff’s release of the indemnified party from all liabilityconcerning the claim or litigation or (ii) that 

 

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contains any admission of guilt on the part of any indemnified party. An indemnifying party who is not entitled to or elects not to assume the defense of a claim will not be under an obligationto pay the fees and expenses of more than one counsel in each applicable jurisdiction for all parties indemnified by the indemnifying party with respect to the claim, unless in the reasonable judgment of any indemnified party a conflict of interestmay exist between the indemnified party and any other indemnified party with respect to the claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of no more than one additional counsel for the indemnifiedparties. 

(d) *Contribution*. If the indemnification provided for in Section 5.3(a) or 5.3(b) is unavailable to anindemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, (the “**Unindemnified Losses**”) then each party responsible for indemnification under Section 5.3(a) or 5.3(b) shallcontribute to the amount paid or payable by the indemnified party as a result of any Unindemnified Losses in the proportion appropriate to reflect the relative fault of the Company and the participating Purchasers in connection with the statementsor omissions that resulted in the Unindemnified Losses, as well as any other relevant equitable considerations. The relative fault of the Company and the participating Purchasers will be determined by reference to, among other things, whether theuntrue 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 Company or by the participating Purchasers and the parties’ relative intent, knowledge,and opportunity to correct the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact. 

The parties to this Agreement agree that it would not be just and equitable if contribution pursuant this Section 5.3(d) weredetermined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding anything to the contrary in this Agreement, noPurchaser contributing pursuant to this Section 5.3(d) will be required to contribute any amount in excess of the lesser of (i) the net proceeds of the offering (before deducting expenses, if any) received by that Purchaser, less theamount of any damages that the Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission and (ii) the proportion of the total losses, claims, damages, liabilities orexpenses indemnified against equal to the proportion of the total amount of securities sold under such registration statement sold by the participating Purchaser. Notwithstanding any other provision of this Agreement, no person guilty of fraudulentmisrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 

**SECTION 6. MISCELLANEOUS.**

6.1. *Governing Law*. This Agreement shall be governed by the laws of the State of Maryland as such laws are applied to agreementsbetween Maryland residents entered into and performed entirely in Maryland, without reference to the law of conflicts, except that the Delaware General Corporation Law will govern as to matters of corporate law. 

6.2. *Successors and Assigns*. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of,and be binding upon, the successors, assigns, heirs, 

 

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executors and administrators of the parties hereto and shall inure to the benefit of and be enforceable by each person who shall be a holder of the Shares from time to time. 

6.3. *Entire Agreement*. This Agreement, the Designation, Exhibits, Schedules and the other documents delivered pursuant heretoconstitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except asspecifically set forth herein and therein. 

6.4. *Severability*. In case any provision of this Agreement shall beinvalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 

6.5. *Amendment*. This Agreement may be amended or modified only upon the written consent of the Company, and the holdersrepresenting at least a majority of the Shares (treated as if converted and including any Conversion Shares into which the Shares have been converted, and also including those Warrant Shares which have been issued on due exercise of the applicableWarrants), except that Schedule 1 of this Agreement may be amended prior to the Closing Date to add or remove a Purchaser or change the number of Shares purchased by a Purchaser with the written consent of the Company and the affectedPurchaser(s). 

6.6 *Delays or Omissions*. The failure of any party to exercise any right or remedy under this Agreementor otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof. It is further agreed that any waiver of any provisions or conditions of this Agreement must be in writing and shall be effective only to theextent specifically set forth in such writing. 

6.7 *Notices*. All notices required or permitted hereunder shall be inwriting and shall be deemed effectively given upon the earlier of receipt or (a) the day sent by confirmed facsimile if sent during normal business hours of the recipient, and if not, then on the next business day, (b) three business daysafter having been sent by registered or certified mail, return receipt requested, postage prepaid, or (c) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.All communications shall be sent to the Company at its principal place of business and to Purchasers at the addresses set forth on the signature pages hereto or at such other address as the Company or Purchaser may designate by ten days advancewritten notice to the other parties hereto pursuant to this Section 6.7. 

6.8. *Titles and Subtitles*. The titles ofthe sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 

6.9. *Counterparts*. This Agreement may be delivered via facsimile and may be executed in any number of counterparts, each of whichshall be an original, but all of which together shall constitute one instrument. 

6.10. *Pronouns*. All pronounscontained herein, and any variations thereof, shall be deemed to refer to the masculine, feminine or neutral, singular or plural, as the identity of the parties hereto may require. 

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date abovefirst written. 

 
COMPANY:  PURCHASER:AVATECH SOLUTIONS, INC.  By:      
Donald R. “Scotty” Walsh

Chief Executive Officer
  Signature       Name and Title:  Address of Purchaser:            
 

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**SCHEDULE 1**

 
   
**Purchaser**
           
**Shares**
           
**Purchase**

**Price**

1.    
  
                                                                     
                                                                                                                                                          
2.
  
                                                                     
                                                                                                                                                          
3.
  
                                                                     
                                                                                                                                                          
4.
  
                                                                     
                                                                                                                                                          
5.
  
                                                                     
                                                                                                                                                          
6.
  
                                                                     
                                                                                                                                                          
7.
  
                                                                     
                                                                                                                                                            **TOTAL:**