Document:

EXHIBIT 10.57

 Exhibit 10.57 
 CERTIFICATE OF DESIGNATION OF THE POWERS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF PREFERRED STOCK AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF 
 of 
 SERIES F 10% CUMULATIVE
CONVERTIBLE PREFERRED STOCK 
 of 
 AVATECH SOLUTIONS, INC. 
 AVATECH SOLUTIONS, INC., a Delaware corporation (the
“CORPORATION”), pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware, does hereby make this Certificate of Designations and does hereby state and certify that pursuant to the authority
expressly vested in the Board of Directors of the Corporation by the Certificate of Incorporation of the Corporation, the Board of Directors duly adopted the following resolutions, which resolutions remain in full force and effect as of the date
hereof: 
 RESOLVED, that, pursuant to Article SIXTH of the Certificate of Incorporation of the Corporation, as amended to date, the Board of Directors
hereby authorizes the issuance of, and fixes the designation and preferences and relative, participating, optional and other special rights, and qualifications, limitations and restrictions, of a series of preferred stock of the Corporation
consisting of 5,500 shares, par value $0.01 per share, to be designated “Series F Cumulative Convertible Preferred Stock.” 
 RESOLVED, that
all shares of Series F Cumulative Convertible Preferred Stock shall rank equally in all respects and shall be subject to the following terms and provisions: 
 THERE IS HEREBY CREATED OUT OF THE AUTHORIZED AND UNISSUED SHARES OF THE PREFERRED STOCK OF THE CORPORATION A SERIES OF PREFERRED STOCK DESIGNATED AS THE “SERIES F CUMULATIVE CONVERTIBLE PREFERRED STOCK,”
WHICH IS HEREINAFTER REFERRED TO AS THE “CONVERTIBLE PREFERRED STOCK.” THE NUMBER OF SHARES CONSTITUTING SUCH SERIES SHALL BE 5,500. 
 1. Dividends. The holders of the Convertible Preferred Stock shall be entitled to receive, when, if and as declared by the Corporation’s Board of Directors, out of funds legally available therefor, cumulative dividends payable
as set forth in this Section 1. 
 (a) Dividends on the Convertible Preferred Stock shall accrue and shall be cumulative and accumulate
from the date of issuance of the shares of Convertible Preferred Stock (the “Date of Original Issue”), whether or not earned or declared by the Board of Directors of the Corporation, until paid. The Corporation shall declare and pay
dividends on the Convertible Preferred Stock, in either cash or in shares of the Corporation’s Common Stock (the “Common Stock”) at the Corporation’s option and subject to the terms set forth herein, as set forth below, in
arrears, on April 1 and October 1 of each year (each, a “Dividend Payment Date”), commencing on October 1, 2006 (the “Initial Dividend Payment Date”), except that if such Dividend Payment Date is not a business
day, then the Dividend Payment Date will be the immediately preceding business day. If the Corporation elects to pay the dividend in shares of Common Stock, the Corporation shall set aside a sufficient number of shares of Common Stock for the
payment of such declared dividends and shall deliver certificates representing such shares of Common Stock to the holders of shares of Convertible Preferred Stock as of the record date for such dividend in payment of such declared dividends within
three business days after such Dividend Payment Date. Each such dividend declared by the Board of Directors on the Convertible Preferred Stock shall be paid to the holders of record of shares of the Convertible Preferred Stock as they appear on the
stock register of the Corporation on the record date which shall be the business day next preceding a Dividend Payment Date. Dividends in arrears for any past dividend period may be declared by the Board of Directors of the Corporation and paid on
shares of the Convertible Preferred Stock on any date fixed by the Board of Directors of the Corporation, whether or not a regular Dividend Payment Date, to holders of record of shares of the Convertible Preferred Stock as they appear on the
Corporation’s stock register on the record date. The record date, which shall not be greater than 5 days before such Dividend Payment Date, shall be fixed by the Board of Directors of the Corporation. Any dividend payment made on shares of the
Convertible Preferred Stock shall first be credited against the dividends accumulated with respect to the earliest dividend period for which dividends have not been paid. 

 (b) The dividend rate (the “Dividend Rate”) on each share of Convertible Preferred Stock shall
be 10% per share per annum on $1,000 (the Liquidation Preference (as hereinafter defined) of each such share) for the period from the Date of Original Issue until the Initial Dividend Payment Date and, for each dividend period thereafter, which
shall commence on the last day of the preceding dividend period and shall end on the next Dividend Payment Date, shall be at the Dividend Rate (as adjusted from time to time as hereinafter provided) on such Liquidation Preference. Notwithstanding
the foregoing, if at any time a Breach Event (as defined below) occurs, then the Dividend Rate shall be 18% per share per annum for each dividend period or part thereof in which a Breach Event has occurred or is outstanding. The amount of
dividends per share of the Convertible Preferred Stock payable for each dividend period or part thereof (the “Dividend Value”) shall be computed by multiplying the Dividend Rate for such dividend period by a fraction the numerator of which
shall be the number of days in the dividend period or part thereof on which such share was outstanding and the denominator of which shall be 365 and multiplying the result by the Liquidation Preference. If a dividend is to be paid in Common Stock,
the Common Stock shall be valued at 95% of the Current Market Price (as hereinafter defined) as of such Dividend Payment Date. In furtherance thereof, the Corporation shall reserve out of the authorized but unissued shares of Common Stock, solely
for issuance in respect of the payment of dividends as herein described, a sufficient number of shares of Common Stock to pay such dividends, when, if and as declared by the Board of Directors of the Corporation. 
 “Current Market Price” means, in respect of any share of Common Stock on any date herein specified: 
 (1) if there shall not then be a public market for the Common Stock, the higher of (a) the book value per share of Common Stock at
such date, and (b) the Appraised Value (as hereinafter defined) per share of Common Stock at such date, or 
 (2) if
there shall then be a public market for the Common Stock, the average of the daily market prices for the five (5) consecutive trading days immediately before such date. The daily market price for each such trading day shall be (i) the VWAP
(as defined below) on such day on the principal stock exchange on which such Common Stock is then listed or admitted to trading, or quoted, as applicable, (ii) if no sale takes place on such day on any such exchange, the last reported closing
bid price on such day as officially quoted on any such exchange, (iii) if the Common Stock is not then listed or admitted to trading on any stock exchange, the last reported closing bid price on such day in the over-the-counter market, as
furnished by the National Association of Securities Dealers Automatic Quotation System or the National Quotation Bureau, Inc., (iv) if neither such corporation at the time is engaged in the business of reporting such prices, as furnished by any
similar firm then engaged in such business, or (v) if there is no such firm, as furnished by any member of the National Association of Securities Dealers, Inc. (the “NASD”) selected mutually by holders of a majority of the Convertible
Preferred Stock and the Corporation or, if they cannot agree upon such selection, as selected by two such members of the NASD, one of which shall be selected by holders of a majority of the Convertible Preferred Stock and one of which shall be
selected by the Corporation (as applicable, the “Daily Market Price”). 
 “VWAP” shall mean the daily
dollar volume-weighted average sale price for the Common Stock on the principal exchange or market on which the Common Stock is then listed or admitted to trading on any particular trading day during the period beginning at 9:30 a.m., New York City
Time (or such other time as such exchange or market publicly announces is the official open of trading), and ending at 4:00 p.m., New York City Time (or such other time as such exchange or market publicly announces is the official close of trading),
as reported by Bloomberg through its “Volume at Price” functions. All such determinations of VWAP shall be appropriately and equitably adjusted in accordance with the provisions set forth herein for any stock dividend, stock split, stock
combination or other similar transaction occurring during any pricing period or any period utilizing VWAPs in calculations hereunder. 
 “Appraised Value” means, in respect of any share of Common Stock on any date herein specified, the fair saleable value of such share of Common Stock (determined without giving effect to the discount for (i) a minority
interest or (ii) any lack of liquidity of the Common Stock or to the fact that the Corporation may have no class of equity registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the last day of
the most recent fiscal month end prior to such date specified, based on the value of the Corporation 

 
(assuming the conversion and exercise of all of the Corporation’s authorized and issued capital stock), as determined by a nationally recognized
investment banking firm selected by the Corporation’s Board of Directors and having no prior relationship with the Corporation, and reasonably acceptable to not less than a majority in interest of the holders of the Preferred Stock then
outstanding. 
 “Breach Event” means either: 
 (i) Any breach of any warranty or representation of the Corporation as of the date made in the Preferred Stock Purchase Agreement (as
defined below) or any agreement delivered therewith which breach, or the facts and circumstances concerning such breach, has or is reasonably likely to have a Material Adverse Effect (as defined in the Preferred Stock Purchase Agreement); or

 (ii) Any breach by the Corporation of any material covenant or obligation under the Preferred Stock Purchase Agreement or
any agreement delivered therewith (including without limitation this Certificate of Designation and the Related Agreements, as defined in the Preferred Stock Purchase Agreement), and which breach, if capable of being cured, has not been cured within
ten (10) days after notice of such breach has been given by the holders of a majority of Preferred Stock to the Corporation (the “Breach Cure Period”). 
 (c) Except as hereinafter provided, no dividends shall be declared or paid or set apart for payment on the shares of Common Stock or any other class or series of capital stock of the Corporation for any dividend
period unless full cumulative dividends have been or contemporaneously are declared and paid on the Convertible Preferred Stock through the most recent Dividend Payment Date. If full cumulative dividends have not been paid on shares of the
Convertible Preferred Stock, all dividends declared on shares of the Convertible Preferred Stock shall be paid pro rata to the holders of outstanding shares of the Convertible Preferred Stock. 
 (d) Dividends on the Convertible Preferred Stock may be paid even if, after giving effect thereto, the Corporation’s total assets would be less than
the sum of its total liabilities, plus the amount that would be needed, if the Corporation were to be dissolved at the time of such distribution, to satisfy the preferential rights upon dissolution of stockholders, if any, whose preferential rights
are superior to those receiving the distribution. 
 (e) The holders of the Convertible Preferred Stock shall each be entitled to receive
dividends, on a pari passu basis with the holders of shares of Common Stock, out of any assets legally available therefor, with the amount of such dividends to be distributed to the holders of Convertible Preferred Stock computed on the basis of the
number of shares of Common Stock which would be held by such holder if, immediately prior to the declaration of the dividend, all of the shares of Convertible Preferred Stock had been converted into shares of Common Stock at the then current
Conversion Value (as hereinafter defined). 
 (f) Limitation on Stock
Dividends. Notwithstanding anything to the contrary contained herein, the Corporation may not pay dividends hereunder in shares of Common Stock (and must deliver cash in respect thereof)
unless as of the Dividend Payment Date (i) the resale of all Registrable Securities (as defined in the Investor Rights Agreement entered into pursuant to the Preferred Stock Purchase Agreement, the “Investor Rights Agreement”) is
covered by an effective registration statement in accordance with the terms of the Investor Rights Agreement which registration statement is not subject to any suspension or stop orders; (ii) the resale of such Registrable Securities may be
effected pursuant to a current and deliverable prospectus that is not subject at the time to any blackout or similar circumstance; (iii) such Registrable Securities are listed, or approved for listing prior to issuance, on the Nasdaq Stock
Market, the New York Stock Exchange, the American Stock Exchange or the OTC Bulletin Board, and are not subject to any trading suspension (nor shall trading generally have been suspended on such exchange or market), and the Corporation shall not
have been notified of any pending or threatened proceeding or other action to delist or suspend the Common Stock on any of such markets on which the Common Stock is then traded or listed; (iv) the requisite number of shares of Common Stock
shall have been duly authorized and reserved for issuance as required by the terms of the Preferred Stock Purchase Agreement and this Certificate of Designation; (v) the Current Market Price is not less than $0.65 (as appropriately and
equitably adjusted for stock splits, stock dividends and similar events); (vi) none of the Corporation or any direct or indirect subsidiary of the Corporation shall be subject to any bankruptcy, insolvency or similar proceeding; (vii) the
Corporation has paid all prior dividend payments when due hereunder; (viii) such issuance would not cause the issuance limitations contained in Section 5(h)(ii) below to be violated; and (ix) the Corporation has delivered to all

 
holders of Convertible Preferred Stock written notice of its election to pay such dividend in Common Stock at least five (5) but no more than thirty
(30) trading days prior to the applicable Dividend Payment Date. All holders of Convertible Preferred Stock shall be treated proportionately with respect to payment of dividends in cash or Common Stock. Notwithstanding anything to the contrary
contained herein, the Corporation may not pay dividends hereunder in shares of Common Stock to the extent, and only to the extent, that such issuance would otherwise cause the ownership limitation contained in Section 5(h)(i) below to be
violated, in which case the Corporation shall issue such number of shares of Common Stock as of the applicable Dividend Payment Date as is possible without otherwise violating the ownership limitation contained in Section 5(h)(i), and the
remaining number of shares of Common Stock shall be issued at such time and from time to time as such issuance(s) would no longer otherwise cause such violation of the ownership limitation contained in Section 5(h)(i). 
 2. Voting Rights. Except as otherwise provided herein or by law, the holders of the Convertible Preferred Stock shall have full voting rights and
powers, subject to the Beneficial Ownership Cap as defined in Section 5(h), equal to the voting rights and powers of holders of Common Stock and shall be entitled to notice of any stockholders meeting in accordance with the Bylaws of the
Corporation, and shall be entitled to vote, with respect to any question upon which holders of Common Stock have the right to vote, including, without limitation, the right to vote for the election of directors, voting together with the holders of
Common Stock as one class. To the extent permitted under the applicable rules of the applicable exchange or market on which the Common Stock is listed or quoted, each holder of shares of Convertible Preferred Stock shall be entitled to the number of
votes equal to the number of shares of Common Stock into which such shares of Convertible Preferred Stock could be converted on the record date for the taking of a vote, subject to the Beneficial Ownership Cap limitations set forth in
Section 5(h), or, if no record date is established, at the day prior to the date such vote is taken or any written consent of stockholders is first executed. Fractional votes shall not, however, be permitted and any fractional voting rights
resulting from the above formula (after aggregating all shares into which shares of Convertible Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward). 
 3. Rights on Liquidation; Rank. 
 (a)
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation (any such event being hereinafter referred to as a “Liquidation”), before any distribution of assets of the Corporation shall be made to
or set apart for the holders of Common Stock, the holders of Convertible Preferred Stock shall be entitled to receive payment out of such assets of the Corporation in an amount equal to $1,000 per share of Convertible Preferred Stock (such
applicable amount being referred to as the “Liquidation Preference” for the Convertible Preferred Stock), plus any accumulated and unpaid dividends thereon (whether or not earned or declared) on the Convertible Preferred Stock. If the
assets of the Corporation available for distribution to the holders of Convertible Preferred Stock shall not be sufficient to make in full the payment herein required, such assets shall be distributed pro-rata among the holders of Convertible
Preferred Stock based on the aggregate Liquidation Preferences of the shares of Convertible Preferred Stock held by each such holder. 
 (b)
If the assets of the Corporation available for distribution to stockholders exceed the aggregate amount of the Liquidation Preferences payable with respect to all shares of Convertible Preferred Stock then outstanding, then, after the payment
required by paragraph 3(a) above shall have been made or irrevocably set aside, the holders of Common Stock shall be entitled to receive with respect to each share of Common Stock payment of a pro rata portion of such assets based on the aggregate
number of shares of Common Stock held by each such holder. The holders of the Convertible Preferred Stock shall participate in such a distribution on a pro-rata basis with the holders of the Common Stock, with the amount distributable to the holders
of Convertible Preferred Stock to be computed on the basis of the number of shares of Common Stock which would be held by them if immediately prior to the Liquidation all of the outstanding shares of Convertible Preferred Stock had been converted
into shares of Common Stock at the then current Conversion Value. 
 (c) A Change of Control (as defined below) of the Corporation shall not
be deemed a Liquidation, but shall instead be governed by the terms of Section 7 below. 
 (d) The Convertible Preferred Stock shall,
with respect to dividend rights, redemption rights, rights on liquidation, winding-up and dissolution and all other rights in any manner, whether voluntary or involuntary, rank (i) senior to all classes and series of Common Stock and
(ii) pari passu with the existing Preferred Stock (including without limitation the Series D Convertible Preferred Stock and Series E Convertible Preferred 

 
Stock). So long as any shares of Convertible Preferred Stock are outstanding, the Corporation shall not issue or reissue any shares of existing authorized
classes or series of Preferred Stock (including without limitation the Series D Convertible Preferred Stock or Series E Convertible Preferred Stock). 
 4. Actions Requiring the Consent of Holders of Preferred Stock. As long as any shares of Convertible Preferred Stock are outstanding, the consent of the holders of at least 75% of the shares of Convertible
Preferred Stock at the time outstanding, given in accordance with the Articles of Incorporation and Bylaws of the Corporation, as amended, shall be necessary for effecting or validating any of the following transactions or acts: 
 (a) Any amendment, alteration or repeal of any of the provisions of this Certificate of Designation (whether by merger, consolidation or otherwise);

 (b) Any amendment, alteration or repeal of the Certificate of Incorporation of the Corporation that will adversely affect the rights of the
holders of the Convertible Preferred Stock (whether by merger, consolidation or otherwise); 
 (c) The authorization or creation by the
Corporation of, or the increase in the number of authorized shares of, any stock of any class, or any security convertible into stock of any class, or the authorization or creation of any new class of preferred stock (or any action which would
result in another series of preferred stock), ranking in terms of liquidation preference, conversion rights, redemption rights or dividend rights, senior to the Convertible Preferred Stock in any manner; 
 (d) The redemption, purchase or other acquisition, directly or indirectly, of any shares of capital stock of the Corporation or any of its subsidiaries or
any option, warrant or other right to purchase or acquire any such shares, or any other security, other than (A) the redemption of Preferred Stock pursuant to the terms hereof, or (B) the repayment or prepayment of any indebtedness in the
ordinary course of business; and 
 (e) The declaration or payment of any dividend or other distribution (whether in cash, stock or other
property) with respect to the capital stock of the Corporation or any subsidiary, other than a dividend or other distribution pursuant to the terms of the Preferred Stock. 
 5. Conversion. 
 (a) Right to
Convert. Subject to the limitation set forth in Section 5(h) hereof, the holder of any share or shares of Convertible Preferred Stock shall have the right at any time and from time to time, at such holder’s option, to convert all or
any lesser portion of such holder’s shares of Convertible Preferred Stock into such number of duly authorized, validly issued, fully paid and non-assessable shares of Common Stock, free and clear of all encumbrances, restrictions and legends
(provided a Registration Statement is declared effective), as is determined by dividing (i) the aggregate Liquidation Preference of the shares of Convertible Preferred Stock to be converted plus accrued and unpaid dividends thereon by
(ii) the Conversion Value (as defined below) then in effect for such Convertible Preferred Stock. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of any Convertible Preferred Stock. With respect
to any fraction of a share of Common Stock called for upon any conversion, the Corporation shall pay to the holder an amount in cash equal to such fraction multiplied by the Current Market Price per share of the Common Stock. 
 (b) Forced Conversion. Subject to the terms hereof, if at any time the Current Market Price is greater than 250% of the Conversion Value for
any twenty (20) consecutive trading days (a “Pricing Period”), then the Corporation shall have the right to compel each holder of Convertible Preferred Stock to convert any or all of the Convertible Preferred Stock then held by such
holder by delivering a written notice (“Forced Conversion Notice”) to each such Holder; provided that (1) such Forced Conversion Notice must specify the number of shares of Convertible Preferred Stock to be converted by
such holder and the date by which such holder must have completed conversion(s) of Convertible Preferred Stock aggregating to such amount (“Forced Conversion Date”), which date shall be at least 10 trading days after such holder’s
receipt of such Forced Conversion Notice (a “Notice Period”), (2) the Corporation may deliver such Forced Conversion Notice(s) hereunder only within five (5) trading days following the occurrence of such Pricing Period and not
prior to the completion of such Pricing Period, and (3) all holders of Convertible Preferred Stock shall be treated proportionately with respect to the Corporation’s election to force conversion hereunder. Such forced conversion shall be
subject to and governed by all the provisions relating to 

 
voluntary conversion of Convertible Preferred Stock contained herein. Notwithstanding anything contained herein, the Corporation shall not be entitled to
exercise any forced conversion right set forth in this subsection 5(b) unless at all times during the applicable Pricing Period and Notice Period (i) the resale of all Registrable Securities (as defined in the Investor Rights Agreement) is
covered by an effective registration statement in accordance with the terms of the Investor Rights Agreement which registration statement is not subject to any suspension or stop orders; (ii) the resale of such Registrable Securities may be
effected pursuant to a current and deliverable prospectus that is not subject at the time to any blackout or similar circumstance; (iii) such Registrable Securities are listed, or approved for listing prior to issuance, on the Nasdaq Stock
Market, the New York Stock Exchange, the American Stock Exchange or the OTC Bulletin Board, and are not subject to any trading suspension (nor shall trading generally have been suspended on such exchange or market), and the Corporation shall not
have been notified of any pending or threatened proceeding or other action to delist or suspend the Common Stock on any of such markets on which the Common Stock is then traded or listed; (iv) the requisite number of shares of Common Stock has
been duly authorized and reserved for issuance as required by the terms of the Preferred Stock Purchase Agreement; (v) the closing bid price per share of Common Stock on the Principal Market is greater than $0.65; (vi) none of the
Corporation or any direct or indirect subsidiary of the Corporation shall be subject to any bankruptcy, insolvency or similar proceeding; (vii) the Corporation has paid all prior dividend payments due hereunder; and (viii) such issuance
would not cause the ownership or share issuance limitations contained in Section 5(h) below to be violated, provided that to the extent the Corporation is unable to exercise its forced conversion right hereunder due to such limitation contained
in Section 5(h)(i) below being applicable to any holder, such holder shall use reasonable efforts to reduce its ownership of shares of Common Stock over a reasonable period in order to permit such forced conversion. 
 (c) Mechanics of Conversion. 
 (i) The right of conversion hereunder (other than pursuant to a quarterly purchase requested by a holder of Preferred Shares pursuant to Section 5(d) below) shall be exercised by the holder of shares of Convertible Preferred Stock by
delivering to the Corporation a conversion notice in the form attached hereto as Exhibit A (the “Conversion Notice”), appropriately completed and duly signed and specifying the number of shares of Convertible Preferred Stock that
the holder elects to convert (the “Converting Shares”) into shares of Common Stock. Promptly after the receipt of the Conversion Notice, the Corporation shall issue and deliver or transmit, or cause to be delivered or transmitted, to the
holder of the Converting Shares or such holder’s nominee, such number of shares of Common Stock issuable upon the conversion of such Converting Shares. Such conversion shall be deemed to have been effected as of the close of business on the
date of receipt by the Corporation of the Conversion Notice (the “Conversion Date”), and the person or persons entitled to receive the shares of Common Stock issuable upon conversion shall be treated for all purposes as the holder or
holders of record of such shares of Common Stock as of the close of business on the Conversion Date. 
 (II) THE
CORPORATION SHALL EFFECT SUCH ISSUANCE OF COMMON STOCK (AND CERTIFICATES FOR UNCONVERTED PREFERRED STOCK) WITHIN THREE (3) TRADING DAYS OF THE CONVERSION DATE AND SHALL ELECTRONICALLY TRANSMIT THE COMMON STOCK ISSUABLE UPON CONVERSION TO THE
HOLDER, OR COMMON STOCK IN PAYMENT OF DIVIDENDS HEREUNDER, BY CREDITING THE ACCOUNT OF THE HOLDER’S PRIME BROKER WITH DEPOSITORY TRUST COMPANY (“DTC”) THROUGH ITS DEPOSIT WITHDRAWAL AGENT COMMISSION (“DWAC”) SYSTEM USING THE
FAST AUTOMATED SECURITIES TRANSFER (“FAST”) PROGRAM. THE PARTIES AGREE TO COORDINATE WITH DTC TO ACCOMPLISH THIS OBJECTIVE. IF SUCH COMMON SHARES ARE NOT RECEIVED BY THE HOLDER WITHIN FIVE (5) TRADING DAYS OF THE CONVERSION NOTICE,
THEN THE HOLDER WILL BE ENTITLED TO REVOKE AND WITHDRAW ITS CONVERSION NOTICE, IN WHOLE OR IN PART, AT ANY TIME PRIOR TO ITS RECEIPT OF THOSE COMMON SHARES. IN LIEU OF SUCH ELECTRONIC DELIVERY THROUGH DWAC, THE CORPORATION SHALL DELIVER PHYSICAL
CERTIFICATES REPRESENTING THE COMMON STOCK ISSUABLE UPON CONVERSION OF CONVERTING SHARES TO THE EXTENT REQUESTED BY THE HOLDER OR REQUIRED BY LAW. THE TIME PERIODS FOR DELIVERY OF PHYSICAL CERTIFICATES EVIDENCING THE CONVERTING SHARES, OR COMMON
STOCK IN PAYMENT OF DIVIDENDS HEREUNDER, ARE THE 

 
SAME AS THOSE DESCRIBED ABOVE. THE PERSON OR PERSONS ENTITLED TO RECEIVE THE COMMON STOCK ISSUABLE UPON SUCH CONVERSION SHALL BE TREATED FOR ALL PURPOSES
AS THE RECORD HOLDER OR HOLDERS OF SUCH COMMON SHARES AT THE CLOSE OF BUSINESS ON THE CONVERSION DATE. IF THE CONVERSION HAS NOT BEEN RESCINDED IN ACCORDANCE WITH THIS PARAGRAPH AND THE CORPORATION FAILS TO DELIVER TO THE HOLDER SUCH CERTIFICATE OR
CERTIFICATES OR SHARES THROUGH DTC PURSUANT TO THIS SECTION 5 (FREE OF ANY RESTRICTIONS ON TRANSFER OR LEGENDS, IF SUCH SHARES HAVE BEEN REGISTERED) IN ACCORDANCE HEREWITH, PRIOR TO THE SEVENTH TRADING DAY AFTER THE CONVERSION DATE (ASSUMING
TIMELY SURRENDER OF THE CONVERTIBLE PREFERRED STOCK CERTIFICATES), THE CORPORATION SHALL PAY TO SUCH HOLDER, IN CASH, ON A PER DIEM BASIS, AN AMOUNT EQUAL TO 1.5% OF THE LIQUIDATION PREFERENCE OF ALL PREFERRED STOCK HELD BY SUCH HOLDER PER MONTH
UNTIL SUCH DELIVERY TAKES PLACE. 
 The Corporation’s obligation to issue Common Stock upon conversion of Preferred
Stock shall be absolute, is independent of any covenant of any holder of Preferred Stock, and shall not be subject to: (i) any offset or defense; or (ii) any claims against the holders of Preferred Stock whether pursuant to this
Certificate of Designation, that certain Preferred Stock and Warrant Purchase Agreement entered into among the Corporation and the purchasers of the Preferred Stock on the Date of Original Issue (the “Preferred Stock Purchase Agreement”),
the Investor Rights Agreement, the Warrants or otherwise. 
 (iii) Book-Entry. Notwithstanding anything to the contrary
set forth herein, upon conversion of any shares of Convertible Preferred Stock in accordance with the terms hereof, the holder thereof shall not be required to physically surrender such holder’s certificates for Convertible Preferred Stock to
the Corporation unless such holder is converting all of the Convertible Preferred Stock then held by such holder. The holders of Convertible Preferred Stock and the Corporation shall maintain records showing the number of shares of Convertible
Preferred Stock so converted hereunder, the number of shares of Common Stock received upon conversion and the dates of such conversions, or shall use such other method, reasonably satisfactory to the holders and the Corporation, so as not to require
physical surrender of certificates for Convertible Preferred Stock upon each such conversion. 
 (d) Quarterly Purchase Right.

 (i) Each holder of shares of Convertible Preferred Stock shall have the option, upon at least twenty (20) days but
no more than sixty (60) days prior written notice to the Corporation (“Election Notice”), to require the Corporation to purchase all or part of such holder’s Quarterly Shares (as defined below) on July 1, 2008 and on the
first business day of each calendar quarter thereafter (each a “Quarterly Purchase Date”) pursuant to the terms of this Section 5(d). The Corporation shall, at least forty (40) days but no more than sixty (60) days prior to
each Quarterly Purchase Date, deliver to each holder of shares of Convertible Preferred Stock a written notice reminding such holder of such right to compel such purchase pursuant to this Section 5(d) pursuant to an Election Notice. If the
Corporation fails to deliver such reminder notice to any holder, then such holder shall have the right to exercise such option at any time on or prior to the applicable Quarterly Purchase Date. 
 (ii) Subject to the terms hereof, on each Quarterly Purchase Date the Corporation shall purchase, from each holder of Convertible
Preferred Stock submitting an Election Notice with respect to such Quarterly Purchase Date, such number of shares of Convertible Preferred Stock (“Quarterly Shares”) equal to 12.5% of the aggregate number of shares of Preferred Stock
purchased by such holder pursuant to the Preferred Stock Purchase Agreement, rounded to the nearest whole number of Convertible Preferred Shares; provided, however, that if such holder has converted any shares of
Convertible Preferred Stock prior to such Quarterly Purchase Date, then such shares previously converted shall be applied against and reduce such holder’s current Quarterly Shares, share for share, to the extent such shares previously converted
have not previously been applied against a prior number of Quarterly Shares, except to the extent such holder has delivered a written notice to the Corporation, at least five (5) days prior to such Quarterly Purchase Date, electing not to have
all or part of such previously converted shares so applied. For purposes hereof, in the event of any transfers of shares of Preferred Stock, the terms of this Section shall apply 

 
to each transferee the same as if they were the original holder of such shares, and if any single holder transfers shares of Convertible Preferred Stock
in part or to multiple transferees, such holder and transferee(s) shall be treated on a pro rata basis. 
 (iii) The
Corporation shall purchase such Quarterly Shares under this Section 5(d) either in cash or shares of Common Stock at its option, provided that (1) all holders submitting an Election Notice with respect to a Quarterly Purchase Date shall be
treated proportionately the same with respect to the Corporation’s election to purchase such Quarterly Shares for cash or shares of Common Stock, and (2) any such purchase for shares of Common Stock shall constitute a conversion of such
Quarterly Shares being purchased for stock for all purposes under this Certificate of Designation and all terms relating to such conversion shall be subject to and governed by all the provisions relating to voluntary conversion of Convertible
Preferred Stock contained herein (except that no Conversion Notice is required to be delivered, only an Election Notice, and the price used for such conversion shall be the Quarterly Purchase Price). In the event the Corporation elects to purchase
such Quarterly Shares for shares of Common Stock, each holder of any share or shares of Convertible Preferred Stock being purchased pursuant to this subsection shall receive upon such purchase, within three trading days following the applicable
quarter end, such number of duly authorized, validly issued, fully paid and non-assessable shares of Common Stock, free and clear of all encumbrances, restrictions and legends, as is determined by dividing (i) the aggregate Liquidation
Preference of the shares of Convertible Preferred Stock being purchased plus accrued and unpaid dividends thereon by (ii) the Quarterly Purchase Price (as defined below) then in effect for such Convertible Preferred Stock. No fractional shares
or scrip representing fractional shares of Common Stock shall be issued upon the purchase of any Convertible Preferred Stock. With respect to any fraction of a share of Common Stock called for upon any purchase, the Corporation shall pay to the
holder an amount in cash equal to such fraction multiplied by the Current Market Price per share of the Common Stock. Subject to the terms hereof, the Corporation shall purchase for stock such Quarterly Shares under this subsection(d) unless it
provides at least fifteen (15) trading days prior written notice, electing to purchase such Quarterly Shares for cash instead, to all holders of Preferred Stock submitting an Election Notice. If the Corporation elects to purchase such Quarterly
Shares for cash, the Corporation shall purchase such shares for cash on the Quarterly Purchase Date for a purchase price equal to the Liquidation Preference of the shares of Convertible Preferred Stock being purchased plus accrued and unpaid
dividends thereon. Notwithstanding anything to the contrary contained herein, the Corporation may not purchase Quarterly Shares for stock (and must purchase such Quarterly Shares for cash instead) unless as of the applicable Quarterly Purchase Date
(i) the resale of all Registrable Securities (as defined in the Investor Rights Agreement) (including without limitation the shares of Common Stock issued upon such purchase) is covered by an effective registration statement in accordance with
the terms of the Investor Rights Agreement which registration statement is not subject to any suspension or stop orders; (ii) the resale of such Registrable Securities may be effected pursuant to a current and deliverable prospectus that is not
subject at the time to any blackout or similar circumstance; (iii) such Registrable Securities are listed, or approved for listing prior to issuance, on the Nasdaq Stock Market, the New York Stock Exchange, the American Stock Exchange or the
OTC Bulletin Board, and are not subject to any trading suspension (nor shall trading generally have been suspended on such exchange or market), and the Corporation shall not have been notified of any pending or threatened proceeding or other action
to delist or suspend the Common Stock on any of such markets on which the Common Stock is then traded or listed; (iv) the requisite number of shares of Common Stock shall have been duly authorized and reserved for issuance as required by the
terms of the Preferred Stock Purchase Agreement (as defined below) and this Certificate of Designation; (v) the closing bid price per share of Common Stock on the Principal Market for each of the ten (10) trading days immediately preceding
the applicable Quarterly Purchase Date shall be greater than $0.65; (vi) none of the Corporation or any direct or indirect subsidiary of the Corporation shall be subject to any bankruptcy, insolvency or similar proceeding; (vii) the
Corporation has paid all prior dividend payments when due hereunder; and (viii) such issuance would not cause the share issuance limitations contained in Section 5(h)(ii) below to be violated. Notwithstanding anything to the contrary
contained herein, the Corporation may not purchase Quarterly Shares for stock as of the applicable Quarterly Purchase Date to the extent, and only to the extent, that such issuance would otherwise cause the ownership limitation contained in
Section 5(h)(i) below to be violated, in which case the Corporation shall purchase such number of Quarterly Shares for stock as of the applicable Quarterly Purchase Date as is possible without otherwise violating the ownership limitation

 
contained in Section 5(h)(i), and the remaining Quarterly Shares shall be purchased for stock in accordance with the terms hereof at such time and
from time to time as such purchase(s) would no longer otherwise cause such violation of the ownership limitation contained in Section 5(h)(i). 
 (iv) Such shares issuable upon conversion under this subsection 5(d) shall be issued and delivered within three (3) trading days following each Quarterly Purchase Date (as may be and only to the extent
deferred pursuant to the last sentence of subsection (iii) above). If any holder does not receive the requisite number of shares of Common Stock in the form required above within such three Trading Day period, the Holder shall have the option
of either (a) requiring the Corporation to issue and deliver all or a portion of such shares or (b) canceling such election (whether by the Corporation or Holder) to convert the Quarterly Shares into Common Stock (in whole or in part), in
which case the Corporation shall immediately redeem such Quarterly Shares and pay in cash the applicable redemption price hereunder on such portion as the holder specifies is to be paid in cash instead of Common Stock. If the Corporation fails to
timely effect any cash redemption as provided herein, then the Corporation shall redeem such Quarterly Shares at a redemption price equal to 120% of the Liquidation Preference of such Quarterly Shares being redeemed plus accrued and unpaid dividends
thereon. 
 (e) Conversion Prices. 
 (i) The initial Conversion Value for the Convertible Preferred Stock shall be $2.00 per share of Common Stock, such value to be subject to adjustment in accordance with the provisions of this Section 5. Such
conversion value in effect from time to time, as adjusted pursuant to this Section 5, is referred to herein as a “Conversion Value.” All of the remaining provisions of this Section 5 shall apply separately to each Conversion
Value in effect from time to time with respect to Convertible Preferred Stock. 
 (ii) The “Quarterly Purchase
Price” shall equal the lesser of (A) the Conversion Value as of date on which such Quarterly Purchase Price is being determined, and (B) 92.5% of the average of the VWAPs for the ten (10) trading days immediately preceding the
applicable Quarterly Purchase Date. 
 (f) Stock Dividends, Subdivisions and Combinations. If at any time while the Preferred Stock is
outstanding, the Corporation shall: 
 (i) cause the holders of its Common Stock to be entitled to receive a dividend payable
in, or other distribution of, additional shares of Common Stock, 
 (ii) subdivide its outstanding shares of Common Stock into
a larger number of shares of Common Stock, or 
 (iii) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock, 
 then in each such case the Conversion Value shall be multiplied by a fraction of which the numerator shall be the number of shares
of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause
(i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clauses (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that a Conversion Value or Quarterly Purchase Price is
calculated hereunder, then the calculation of such Conversion Value or Quarterly Purchase Price shall be adjusted appropriately to reflect such event. 
 (g) Certain Other Distributions. If at any time while the Convertible Preferred Stock is outstanding the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of: 
 (i) cash, 

 (ii) any evidences of its indebtedness, any shares of stock of any class or any other
securities or property or assets of any nature whatsoever (other than cash or additional shares of Common Stock as provided in Section 5(f) hereof), or 
 (iii) any warrants or other rights to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any
other securities or property or assets of any nature whatsoever (in each case set forth in subparagraphs 5(g)(i), 5(g)(ii) and 5(g)(iii) hereof, the “Distributed Property”), 
 then upon any conversion of Convertible Preferred Stock that occurs after such record date, the holder of Preferred Stock shall be entitled to receive, in addition to the Conversion Shares otherwise issuable upon such
conversion, the Distributed Property that such holder would have been entitled to receive in respect of such number of Conversion Shares had the holder been the record holder of such Conversion Shares as of such record date. Such distribution shall
be made whenever any such conversion is made. In the event that the Distributed Property consists of property other than cash, then the fair value of such Distributed Property shall be as determined in good faith by the Board of Directors of the
Corporation and set forth in reasonable detail in a written valuation report (the “Valuation Report”) prepared by the Board of Directors. The Corporation shall give written notice of such determination and a copy of the Valuation Report to
all holders of Convertible Preferred Stock, and if the holders of a majority of the outstanding Preferred Stock object to such determination within twenty (20) business days following the date such notice is given to all of the holders of
Convertible Preferred Stock, the Corporation shall submit such valuation to an investment banking firm of recognized national standing selected by not less than a majority of the holders of the Convertible Preferred Stock and acceptable to the
Corporation in its reasonable discretion, whose opinion shall be binding upon the Corporation and the Preferred Stockholders. A reclassification of the Common Stock (other than a change in par value, or from par value to no par value or from no par
value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Corporation to the holders of its Common Stock of such shares of such other class of stock within the meaning of this
Section 5(g) and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may
be, of the outstanding shares of Common Stock within the meaning of Section 5(f). 
 (h) Blocking Provisions. 
 (i) Except as provided otherwise in this Section 5(h)(i), the number of Conversion Shares that may be acquired by any holder, and the
number of shares of Convertible Preferred Stock that shall be entitled to voting rights under Section 2 hereof, shall be limited to the extent necessary to insure that, following such conversion (or deemed conversion for voting purposes), the
number of shares of Common Stock then beneficially owned by such holder and its Affiliates and any other persons or entities whose beneficial ownership of Common Stock would be aggregated with the holder’s for purposes of Section 13(d) of
the Exchange Act (including shares held by any “group” of which the holder is a member, but excluding shares beneficially owned by virtue of the ownership of securities or rights to acquire securities that have limitations on the right to
convert, exercise or purchase similar to the limitation set forth herein), does not exceed 9.9% of the total number of shares of Common Stock of the Corporation then issued and outstanding (the “Beneficial Ownership Cap”). For purposes
hereof, “group” has the meaning set forth in Section 13(d) of the Exchange Act and applicable regulations of the Securities and Exchange Commission, and the percentage held by the holder shall be determined in a manner consistent with
the provisions of Section 13(d) of the Exchange Act. As used herein, the term “Affiliate” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act. With respect to a holder of Preferred Stock, any investment fund or managed account that is managed on a discretionary basis by the
same investment manager as such holder will be deemed to be an Affiliate of such holder. Each delivery of a Conversion Notice by a holder of Preferred Stock will constitute a representation by such Holder that it has evaluated the limitation set
forth in this paragraph and determined, subject to the accuracy of information filed under the Securities Act and the Exchange Act by the Corporation with respect to the outstanding Common Stock of the Corporation, that the issuance of the full
number of shares of Common Stock requested in such Conversion Notice is permitted under this paragraph. This paragraph shall be construed and administered in such manner as shall be consistent with the intent of the first sentence of this paragraph.
Any provision hereof which would require a result that is not consistent with such intent shall be deemed severed herefrom and of no force or effect with respect to the conversion contemplated by a particular Conversion Notice. 

 (ii) In the event the Corporation is prohibited from issuing shares of Common Stock as a
result of any restrictions or prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization, the Corporation shall as soon as possible seek the approval of its
stockholders and take such other action to authorize the issuance of the full number of shares of Common Stock issuable upon the full conversion of the then outstanding shares of Convertible Preferred Stock, but in any event the Board of Directors
shall call a special meeting of the stockholders of the Corporation in the manner set forth in the By-laws of the Corporation to be held within ninety (90) days following the inception of such occurrence, which inception shall occur at such
time as the Corporation is not able to honor the full exercise of all outstanding Warrants (as defined in the Preferred Stock Purchase Agreement) and the full conversion of all outstanding shares of Convertible Preferred Stock, without regard to any
cap limitations or issuance restrictions, due to such law, rule or regulation, whether or not any such conversion or exercise is actually attempted. For clarification purposes, shares of Common Stock otherwise reserved for issuance upon exercise of
unexercised Warrants shall be utilized for conversion hereunder to the extent necessary to avoid any issuance in excess of the maximum permissible amount of shares permitted to be issued under the rules and regulations of the Nasdaq Stock Market (or
any other principal securities exchange, market, interdealer quotation system or other self-regulatory organization) as they apply to the Corporation. 
 (iii) Notwithstanding the foregoing provisions of Section 5(h), any holder of Preferred Stock shall have the right prior to the Date of Original Issue upon written notice to the Corporation, or after the Date of
Original Issue upon 61 days prior written notice to the Corporation, to choose not to be governed by the Beneficial Ownership Cap provided herein. 
 (i) Common Stock Reserved. The Corporation shall at all times reserve and keep available out of its authorized but unissued Common Stock, solely for issuance upon the conversion of shares of Convertible Preferred Stock as herein
provided, such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all the shares of Convertible Preferred Stock at the time outstanding (without regard to any ownership limitations provided in
Section 5(h)). 
 (j) Securities Issuances. In the event that the Corporation or any of its subsidiaries (A) issues or sells
any Common Stock or convertible securities, warrants, options or other rights to subscribe for or to purchase or exchange for, shares of Common Stock (“Convertible Securities”) or (B) directly or indirectly effectively reduces the
conversion, exercise or exchange price for any Convertible Securities which are currently outstanding, at or to an effective Per Share Selling Price (as defined below) which is less than the greater of (I) the closing sale price per share of
the Common Stock on the principal market on which the Common Stock is traded the Trading Day next preceding such issue or sale or, in the case of issuances to holders of its Common Stock, the date fixed for the determination of stockholders entitled
to receive such warrants, rights, or options (“Fair Market Price”), or (II) the Conversion Value, then in each such case the Conversion Value in effect immediately prior to such issue or sale or record date, as applicable, shall be
automatically reduced effective concurrently with such issue or sale to an amount determined by multiplying the Conversion Value then in effect by a fraction, (x) the numerator of which shall be the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such issue or sale, plus (2) the number of shares of Common Stock which the aggregate consideration received by the Corporation for such additional shares would purchase at such Fair Market Price or
Conversion Value, as the case may be, and (y) the denominator of which shall be the number of shares of Common Stock of the Corporation outstanding immediately after such issue or sale. The foregoing provision shall not apply to any issuances
or sales of Common Stock or Convertible Securities (i) pursuant to any Convertible Securities currently outstanding on the date hereof in accordance with the terms of such Convertible Securities in effect on the date hereof, or (ii) to any
officer, director or employee of the Corporation pursuant to a bona fide option or equity incentive plan duly adopted by the Corporation (including without limitation an employee stock purchase plan). The Corporation shall give to the each holder of
Convertible Preferred Stock written notice of any such sale of Common Stock within 24 hours of the closing of any such sale and shall within such 24 hour period issue a press release announcing such sale if such sale is a material event for, or
otherwise material to, the Corporation. 
 For the purposes of the foregoing adjustments, in the case of the issuance of any Convertible
Securities, the maximum number of shares of Common Stock issuable upon exercise, exchange or conversion of such Convertible Securities shall be deemed to be outstanding, provided that no further adjustment shall be made upon the actual issuance of
Common Stock upon exercise, exchange or conversion of such Convertible Securities. 

 For purposes of this Section 5(j), if an event occurs that triggers more than one of the above
adjustment provisions, then only one adjustment shall be made and the calculation method which yields the greatest downward adjustment in the Conversion Value shall be used. 
 “Per Share Selling Price” shall include the amount actually paid by third parties for each share of Common Stock in a sale or issuance by the
Corporation. In the event a fee is paid by the Corporation in connection with such transaction directly or indirectly to such third party or its affiliates, any such fee shall be deducted from the selling price pro rata to all shares sold in the
transaction to arrive at the Per Share Selling Price. A sale of shares of Common Stock shall include the sale or issuance of Convertible Securities, and in such circumstances the Per Share Selling Price of the Common Stock covered thereby shall also
include the exercise, exchange or conversion price thereof (in addition to the consideration received by the Corporation upon such sale or issuance less the fee amount as provided above). In case of any such security issued in a transaction in which
the purchase price or the conversion, exchange or exercise price is directly or indirectly subject to adjustment or reset based on a future date, future trading prices of the Common Stock, specified or contingent events directly or indirectly
related to the business of the Corporation or the market for the Common Stock, or otherwise (but excluding standard stock split anti-dilution provisions or weighted-average anti-dilution provisions similar to that set forth herein, provided that any
actual reduction of such price under any such security pursuant to such weighted-average anti-dilution provision shall be included and cause a adjustment hereunder), the Per Share Selling Price shall be deemed to be the lowest conversion, exchange,
exercise or reset price at which such securities are converted, exchanged, exercised or reset or might have been converted, exchanged, exercised or reset, or the lowest adjustment, as the case may be, over the life of such securities. If shares are
issued for a consideration other than cash, the Per Share Selling Price shall be the fair value of such consideration as determined in good faith by independent certified public accountants mutually acceptable to the Corporation and the Holder. In
the event the Corporation directly or indirectly effectively reduces the conversion, exercise or exchange price for any Convertible Securities which are currently outstanding, then the Per Share Selling Price shall equal such effectively reduced
conversion, exercise or exchange price. 
 (k) Registration Default. In addition to any other adjustment provided
hereunder, following any Event under, and as defined in, the Investor Rights Agreement, the Conversion Value then in effect shall be automatically reduced by 2.5% upon the occurrence of such Event and an additional 2.5% for each calendar month (or
part thereof) thereafter until the applicable Event has been cured. 
 6. Other Provisions Applicable to Adjustments. The
following provisions shall be applicable to the making of adjustments of the number of shares of Common Stock into which the Convertible Preferred Stock is convertible and the current Conversion Value provided for in Section 5: 
 (a) When Adjustments to Be Made. The adjustments required by Section 5 shall be made whenever and as often as any specified event requiring an
adjustment shall occur, except that any adjustment to the Conversion Value that would otherwise be required may be postponed (except in the case of a subdivision or combination of shares of the Common Stock, as provided for in Section 5(f)) up
to, but not beyond the Conversion Date if such adjustment either by itself or with other adjustments not previously made adds or subtracts less than 1% of the shares of Common Stock into which the Convertible Preferred Stock is convertible
immediately prior to the making of such adjustment. Any adjustment representing a change of less than such minimum amount (except as aforesaid) which is postponed shall be carried forward and made as soon as such adjustment, together with other
adjustments required by Section 5 and not previously made, would result in a minimum adjustment or on the Conversion Date. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the
date of its occurrence. 
 (b) Fractional Interests. In computing adjustments under Section 5, fractional interests in Common
Stock shall be taken into account to the nearest 1/100th of a share. 
 (c) When Adjustment Not Required. If the Corporation
undertakes a transaction contemplated under Section 5(g) and as a result takes a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights or other
benefits contemplated under Section 5(g) and shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights or other benefits
contemplated under Section 5(g), then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. 

 (d) Escrow of Stock. If after any property becomes distributable pursuant to Section 5 by
reason of the taking of any record of the holders of Common Stock, but prior to the occurrence of the event for which such record is taken, a holder of the Convertible Preferred Stock either converts the Convertible Preferred Stock or there is a
mandatory conversion during such period or such holder is unable to convert shares pursuant to Section 5(h), such holder of Convertible Preferred Stock shall continue to be entitled to receive any shares of Common Stock issuable upon conversion
under Section 5 by reason of such adjustment (as if such Preferred Stock were not yet converted) and such shares or other property shall be held in escrow for the holder of the Convertible Preferred Stock by the Corporation to be issued to
holder of the Convertible Preferred Stock upon and to the extent that the event actually takes place. Notwithstanding any other provision to the contrary herein, if the event for which such record was taken fails to occur or is rescinded, then such
escrowed shares shall be canceled by the Corporation and escrowed property returned to the Corporation. 
 7. Merger, Consolidation or
Disposition of Assets. 
 (a) If, after the Date of Original Issue and while the Preferred Stock is outstanding, there occurs: (i) an
acquisition by an individual or legal entity or group (as set forth in Section 13(d) of the Exchange Act) of more than one-half of the voting rights or equity interests in the Corporation and such acquisition is approved by the
Corporation’s Board of Directors; or (ii) a merger or consolidation of the Corporation or a sale, transfer or other disposition of all or substantially all the Corporation’s property, assets or business to another corporation where
the holders of the Corporation’s voting securities prior to such transaction fail to continue to hold at least 50% of the voting power of the Corporation and such transaction is approved by the Corporation’s Board of Directors (each, a
“Change of Control”), then the successor or acquiring corporation (if other than the Corporation) shall expressly assume the due and punctual observance and performance of each and every covenant and condition contained in this Certificate
of Designation to be performed and observed by the Corporation and all the obligations and liabilities hereunder, with such modifications and adjustments as equitable and appropriate in order to place the holders of Convertible Preferred Stock in
the equivalent economic position as prior to such Change in Control. 
 (b) In case of any such Change of Control, each holder of Convertible
Preferred Stock shall have the right thereafter to, at its option, (A) convert any or all of the Preferred Shares held by such holder into shares of common stock of the successor or acquiring corporation, and the holder shall be entitled upon
such event to receive such amount of securities, cash or property as the shares of the Common Stock of the Corporation into which such holder’s Convertible Preferred Stock could have been converted immediately prior to such Change of Control
would have been entitled if such conversion were effected immediately prior to Change of Control, subject to such further applicable adjustments set forth in this Certificate of Designation, or (B) require the Corporation or its successor to
redeem such holder’s Preferred Stock, in whole or in part, at a redemption price equal to 100% of the Liquidation Preference of such Preferred Shares being redeemed. 
 (c) In case of any such Change of Control, without in any way limiting the terms and conditions of the Investor Rights Agreement, the Company agrees to use its best efforts to minimize the length of any Blackout
Period (as defined in the Investor Rights Agreement) associated with such Change of Control. 
 (d) The foregoing provisions of this
Section 7 shall similarly apply to successive Change of Control transactions. The provisions of this Section 7 shall be inapplicable in the event that the Preferred Stock is subject to mandatory conversion under Section 5 or
redemption under Section 13. 
 8. Other Action Affecting Common Stock. In case at any time or from time to time the Corporation
shall take any action in respect of its Common Stock, other than the payment of dividends permitted by Section 5 or any other action described in Section 5, then, unless such action will not have a materially adverse effect upon the rights
of the holder of Convertible Preferred Stock, the number of shares of Common Stock or other stock into which the Convertible Preferred Stock is convertible exercisable and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances. 
 9. Certain Limitations. Notwithstanding anything herein to the contrary, the Corporation agrees not
to enter into any transaction which, by reason of any adjustment hereunder, would cause the current Conversion Value to be less than the par value per share of Common Stock. 

 10. Participation Rights. 
 (a) Subject to the terms and conditions specified in this Section 10, at any time while the Convertible Preferred Stock is outstanding, the holders
of shares of Convertible Preferred Stock shall have a right to participate with respect to the issuance or possible issuance by the Corporation in a capital raising transaction of any future equity or equity-linked securities or debt which is
convertible into equity or in which there is an equity component (as the case may be, “Additional Securities”) on the same terms and conditions as offered by the Corporation to the other purchasers of such Additional Securities, except for
issuances pursuant to the Additional Purchase Right (as defined in the Preferred Stock Purchase Agreement). Each time the Corporation proposes to offer any Additional Securities, the Corporation shall make an offering of such Additional Securities
to each holder of shares of Convertible Preferred Stock in accordance with the following provisions: 
 (i) The Corporation
shall deliver a notice (the “Issuance Notice”) to the holders of shares of Convertible Preferred Stock stating (a) its bona fide intention to offer such Additional Securities, (b) the number of such Additional Securities to be
offered, (c) the price and terms, if any, upon which it proposes to offer such Additional Securities, and (d) the anticipated closing date of the sale of such Additional Securities. 
 (ii) By written notification received by the Corporation, within ten (10) days after giving of the Issuance Notice, each holder of
shares of Convertible Preferred Stock may elect to purchase or obtain, at the price and on the terms specified in the Issuance Notice, up to that number of such Additional Securities which equals such holder’s Participation Amount for the same
consideration and on the same terms and conditions as such third-party sale, where the “Participation Amount” for each holder shall equal (a) 50% of the aggregate amount of such Additional Securities issued or to be issued to
investors in such offering prior to the exercise of the participation rights contemplated by this Section 10 (such aggregate amount, the “Subsequent Offering Amount”), multiplied by (b) a fraction, the numerator of which equals
the number of shares of Preferred Stock then held by such holder and the denominator of which equals the aggregate number of shares of Convertible Preferred Stock purchased by all Purchasers pursuant to the Preferred Stock Purchase Agreement. The
Corporation shall promptly, in writing, inform each holder of shares of Convertible Preferred Stock which elects to purchase all of the Additional Shares available to it (“Fully-Exercising Holder”) of any other holder’s failure to do
likewise. During the five-day period commencing after such information is given, each Fully-Exercising Holder shall be entitled to obtain that portion of the Additional Securities for which the holders of shares of Convertible Preferred Stock were
entitled to subscribe but which were not subscribed for by such holders which is equal to the proportion that the number of shares of Convertible Preferred Stock held by such Fully-Exercising Holder bears to the total number of shares of Common
Stock held by all Fully-Exercising Holders who wish to purchase some of the unsubscribed shares. 
 (iii) The Corporation may,
during the 75-day period following the expiration of the 10-day and 5-day periods referenced in Section 10(a)(ii) above, offer up to the Subsequent Offering Amount of such Additional Securities to any person or persons at a price not less than,
and upon terms no more favorable to the offeree than, those specified in the Issuance Notice. If the Corporation does not consummate the sale of such Additional Securities within such period, the right provided hereunder shall be deemed to be
revived and such Additional Securities shall not be offered or sold unless the Participation Amount is again first reoffered to the holders of shares of Convertible Preferred Stock in accordance herewith. 
 (b) Notwithstanding anything contained herein, no holder of Convertible Preferred Stock shall have the right to purchase Additional Securities hereunder
to the extent same would cause such holder to exceed the Beneficial Ownership Cap. 
 11. Certificate as to Adjustments. Upon the
occurrence of each adjustment or readjustment of the Conversion Value, the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Convertible
Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Convertible

 
Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Value at the time in effect for the Convertible Preferred Stock and (iii) the number of shares of Common Stock and the amount, if any, or other property which at the time would be received upon the conversion of Convertible Preferred
Stock owned by such holder (without regard to the ownership limitations set forth in Section 5(h)). 
 12. Notices of Record
Date. In the event of any fixing by the Corporation of a record date for the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other
distribution, any shares of Common Stock or other securities, or any right to subscribe for, purchase or otherwise acquire, or any option for the purchase of, any shares of stock of any class or any other securities or property, or to receive any
other right, the Corporation shall mail to each holder of Convertible Preferred Stock at least twenty (20) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such
dividend, distribution or rights, and the amount and character of such dividend, distribution or right. 
 13. Redemption. 

(a) Redemption Triggering Event. If a Redemption Triggering Event (as defined below) has occurred, and a holder has so elected, the Corporation
shall redeem the Convertible Preferred Stock of any holder who gives a Demand for Redemption (as defined below). The Corporation shall, promptly thereafter, redeem the shares of Convertible Preferred Stock as set forth in the Demand for Redemption.
The Corporation shall effect such redemption on the Redemption Date by paying in cash for each such share to be redeemed an amount equal to the greater of (i) the Redemption Price (as defined below) or (ii) the total number of shares of
Common Stock into which such Convertible Preferred Stock is convertible multiplied by the Current Market Price at the time of the Redemption Triggering Event. “Redemption Triggering Event” means the Corporation’s failure or refusal to
convert or redeem any shares of Convertible Preferred Stock in accordance with the terms hereof, or the providing of written notice to such effect. 
 (b) Demand for Redemption. A holder desiring to elect a redemption as herein provided shall deliver a notice (the “Demand for Redemption”) to the Corporation while such Redemption Triggering Event continues specifying the
following: 
 (i) The approximate date and nature of the Redemption Triggering Event; 
 (ii) The number of shares of Convertible Preferred Stock to be redeemed; and 
 (iii) The address to which the payment of the Redemption Price shall be delivered, or, at the election of the holder, wire instructions
with respect to the account to which payment of the Redemption Price shall be required. 
 A holder may deliver the certificates evidencing
the Convertible Preferred Stock to be redeemed with the Demand for Redemption or under separate cover. Payment of the Redemption Price shall be made not later than two (2) business days after the date on which each of the following conditions
has been satisfied: (i) a holder has delivered a Demand for Redemption and the certificates evidencing the shares of Convertible Preferred Stock to be redeemed; and (ii) the Breach Cure Period has expired. 
 (c) Status of Redeemed or Purchased Shares. Any shares of the Convertible Preferred Stock at any time purchased, redeemed or otherwise acquired by
the Corporation shall not be reissued and shall be retired. 
 14. Stock Transfer Taxes. The issue of stock certificates upon
conversion of the Convertible Preferred Stock shall be made without charge to the converting holder for any tax in respect of such issue; provided, however, that the Corporation shall be entitled to withhold any applicable withholding taxes with
respect to such issue, if any. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares in any name other than that of the holder of any of the
Convertible Preferred Stock converted, and the Corporation shall not be required to issue or deliver any such stock certificate unless and until the person or persons requesting the issue thereof shall have paid to the Corporation the amount of such
tax or shall have established to the satisfaction of the Corporation that such tax has been paid. 

 15. Notices. Any and all notices or other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior
to 5:00 p.m. (New York City time) on a business day, (b) the next business day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a
business day or later than 5:00 p.m. (New York City time) on any business day, (c) the business day following the date of mailing, if sent by U.S. nationally recognized overnight courier service such as Federal Express, or (d) actual
receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: (i) if to the Corporation, to Avatech Solutions, Inc., 10715 Red Run Blvd., Suite 101, Owings Mills, MD
21117, facsimile: (410) 753-1591, Attention: General Counsel, or (ii) if to a holder of Preferred Stock, to the address or facsimile number appearing on the Corporation’s stockholder records or, in either case, to such other address
or facsimile number as the Corporation or a holder of Preferred Stock may provide to the other in accordance with this Section. 
 16.
Stock Transfer Taxes. The issue of stock certificates upon conversion of the Convertible Preferred Stock shall be made without charge to the converting holder for any tax in respect of such issue; provided, however, that the Corporation shall
be entitled to withhold any applicable withholding taxes with respect to such issue, if any. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares
in any name other than that of the holder of any of the Convertible Preferred Stock converted, and the Corporation shall not be required to issue or deliver any such stock certificate unless and until the person or persons requesting the issue
thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid. 
 17. ATTORNEYS’ FEES. IN CONNECTION WITH ENFORCEMENT BY A HOLDER OF CONVERTIBLE PREFERRED STOCK OF ANY OBLIGATION OF THE CORPORATION HEREUNDER, THE PREVAILING PARTY SHALL BE ENTITLED TO RECOVERY OF
REASONABLE ATTORNEYS’ FEES AND EXPENSES INCURRED. 
 18. Specific Enforcement. The Corporation agrees that
irreparable damage would occur in the event that any of the provisions of this Certificate of Designation were not performed in accordance with their specific terms or were otherwise breached. Each holder of Convertible Preferred Stock and each
permitted assignee shall have all rights and remedies set forth in this Certificate of Designation and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such
holders have under any law. Any person having any rights under any provision of this Certificate of Designation shall be entitled to enforce such rights specifically or pursue other injunctive relief or other equitable remedies (without posting a
bond or other security), to recover damages by reason of any breach of any provision of this Certificate of Designation and to exercise all other rights granted by law. Each holder of Convertible Preferred Stock and each permitted assignee without
prejudice may withdraw, revoke or suspend its pursuit of any remedy at any time prior to its complete recovery as a result of such remedy. 
 19. SEVERABILITY OF PROVISIONS. IF ANY RIGHT, PREFERENCE OR LIMITATION OF THE CONVERTIBLE PREFERRED STOCK SET FORTH IN THIS CERTIFICATE OF DESIGNATION (AS THIS CERTIFICATE OF DESIGNATION MAY BE AMENDED FROM TIME TO TIME) IS
INVALID, UNLAWFUL OR INCAPABLE OF BEING ENFORCED BY REASON OF ANY RULE OR LAW OR PUBLIC POLICY, ALL OTHER RIGHTS, PREFERENCES AND LIMITATIONS SET FORTH IN THIS CERTIFICATE OF DESIGNATION, WHICH CAN BE GIVEN EFFECT WITHOUT THE INVALID, UNLAWFUL OR
UNENFORCEABLE RIGHT, PREFERENCE OR LIMITATION SHALL NEVERTHELESS REMAIN IN FULL FORCE AND EFFECT, AND NO RIGHT, PREFERENCE OR LIMITATION HEREIN SET FORTH BE DEEMED DEPENDENT UPON ANY SUCH OTHER RIGHT, PREFERENCE OR LIMITATION UNLESS SO EXPRESSED
HEREIN. 
 [Signature page follows] 

 IN WITNESS WHEREOF, the undersigned have executed this designation on behalf of the Corporation and
affixed the corporate seal hereto this 9th day of June, 2006. 
  

			
	AVATECH SOLUTIONS, INC.
		
	By:	 	  

	Name:	 	
	Title:EXHIBIT 10.58

 Exhibit 10.58 
  

 PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT 
 by and among 
 Avatech Solutions, Inc., as Issuer and Seller 
 and 
 the Purchasers named herein, as
Purchasers 
 with respect to Seller’s 
 Series F 10% Cumulative Convertible Preferred Stock 
 and Warrants to Purchase Common Stock 
 June 12, 2006 
  

 Table of Exhibits and Schedules 
  

			
	Exhibit A	  	Form of Certificate of Designation of the Series F 10% Cumulative Convertible Preferred Stock
		
	Exhibit B	  	Form of Warrant
		
	Exhibit C	  	Form of Investor Rights Agreement
		
	Exhibit D	  	Form of Opinion of Seller’s Counsel
		
	Schedule 1	  	 Purchasers and Shares of Preferred Stock and Warrants Purchased

		
	Schedule 3.10	  	 Litigation

		
	Schedule 3.11	  	 Absence of Certain Changes

		
	Schedule 3.15	  	 Intellectual Property

		
	Schedule 3.17	  	 Preemptive Rights

		
	Schedule 3.19	  	 Subsidiaries and Investments

		
	Schedule 3.20	  	 Capitalization

		
	Schedule 3.21	  	 Options, Warrants, Rights

		
	Schedule 3.22	  	 Employees, Employment Agreements and Employee Benefit Plans

 PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT 
 This PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (the “Agreement”) is dated as of June 12, 2006, by and among Avatech Solutions, Inc.,
a Delaware corporation (the “Seller”), and each of the persons listed on Schedule 1 hereto (each is individually referred to as a “Purchaser” and collectively, the “Purchasers”). 
 W I T N E S S E T H: 
 WHEREAS, each of the
Purchasers is willing to purchase from the Seller, and the Seller desires to sell to the Purchasers, up to an aggregate of 4,000 shares of its Series F 10% Cumulative Convertible Preferred Stock, $1,000 liquidation preference per share, par value
$0.01 per share (the “Preferred Stock”), and Common Stock Purchase Warrants (the “Warrants”) entitling the holders thereof to purchase shares of the Seller’s common stock, $0.01 par value (the “Common Stock”), for
an aggregate purchase price of up to $4,000,000, as more fully set forth herein. 
 NOW THEREFORE, in consideration of the mutual promises
and representations, warranties, covenants and agreements set forth herein, the parties hereto, intending to be legally bound, hereby agree as follows: 
 ARTICLE I - PURCHASE AND SALE 
 1.1 Purchase and Sale. 
 CLOSING. SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THIS AGREEMENT, AT THE CLOSING OF THE TRANSACTIONS CONTEMPLATED UNDER THIS AGREEMENT
(THE “CLOSING”), EACH PURCHASER SHALL PURCHASE, SEVERALLY AND NOT JOINTLY, AND THE SELLER SHALL ISSUE AND SELL, TO EACH PURCHASER, SUCH NUMBER OF PREFERRED SHARES AND WARRANTS SET FORTH OPPOSITE SUCH PURCHASER’S NAME ON SCHEDULE
1 HERETO THE CLOSING SHALL OCCUR AS PROMPTLY AS PRACTICABLE, BUT NO LATER THAN FIVE (5) BUSINESS DAYS, FOLLOWING SATISFACTION OR WAIVER OF THE CONDITIONS SET FORTH IN SECTIONS 6.1 AND 6.2, AT THE OFFICES OF PETER J. WEISMAN, P.C., 335
MADISON AVENUE, SUITE 1702, NEW YORK, NY 10017, OR ON SUCH OTHER DATE AND AT SUCH OTHER LOCATION AS THE SELLER AND PURCHASERS SHALL MUTUALLY AGREE. 
 PURCHASE PRICE. THE PURCHASE PRICE (THE “PURCHASE PRICE”) TO BE PAID BY EACH PURCHASER TO THE SELLER TO ACQUIRE THE PREFERRED STOCK AND THE APPLICABLE WARRANTS AT THE CLOSING SHALL BE EQUAL TO THE
TOTAL AMOUNT SET FORTH ON SCHEDULE 1 HERETO OPPOSITE SUCH PURCHASER’S NAME AS THE PURCHASE PRICE FOR SUCH PURCHASER. 
 WARRANTS. THE TOTAL NUMBER OF WARRANTS ON SCHEDULE 1 SHALL EQUAL 40% OF THE PURCHASE PRICE DIVIDED BY THE CONVERSION VALUE (AS DEFINED IN THE CERTIFICATE OF DESIGNATION). 
 DEFINITIONS. THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE PREFERRED STOCK (INCLUDING WITHOUT LIMITATION IN PAYMENT UPON PURCHASE
OR REDEMPTION THEREOF) OR UPON PAYMENT OF DIVIDENDS ON THE PREFERRED STOCK ARE REFERRED TO HEREIN AS THE “CONVERSION SHARES,” AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE WARRANTS ARE REFERRED TO HEREIN AS THE “WARRANT
SHARES.” THE DATE ON WHICH THE CLOSING OCCURS IS THE “CLOSING DATE”. 
 Terms of the Preferred Stock and Warrants. The
terms and provisions of the Preferred Stock are set forth in the form of Certificate of Designation of Series F 10% Cumulative Convertible Preferred Stock, attached hereto as Exhibit A (the “Certificate of Designation”). The terms and
provisions of the Warrants are more fully set forth in the form of Common Stock Purchase Warrant, attached hereto as Exhibit B. 
  

 1 

 ARTICLE II – TRANSFERS AND LEGENDS 
 2.1 TRANSFERS. EXCEPT AS REQUIRED BY FEDERAL SECURITIES LAWS AND THE SECURITIES LAW OF ANY STATE OR OTHER JURISDICTION WITHIN THE UNITED
STATES, THE PREFERRED STOCK, CONVERSION SHARES, WARRANTS AND WARRANT SHARES (COLLECTIVELY, THE “SECURITIES”) MAY BE TRANSFERRED, IN WHOLE OR IN PART, BY ANY OF THE PURCHASERS AT ANY TIME. IN THE CASE OF PREFERRED STOCK, SUCH TRANSFER MAY
BE EFFECTED BY DELIVERING WRITTEN TRANSFER INSTRUCTIONS TO THE SELLER, AND THE SELLER SHALL REFLECT SUCH TRANSFER ON ITS BOOKS AND RECORDS AND REISSUE CERTIFICATES EVIDENCING THE PREFERRED STOCK UPON SURRENDER OF CERTIFICATES EVIDENCING THE
PREFERRED STOCK BEING TRANSFERRED. ANY SUCH TRANSFER SHALL BE MADE BY A PURCHASER IN ACCORDANCE WITH APPLICABLE LAW. IN CONNECTION WITH ANY TRANSFER OF SECURITIES OTHER THAN PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR TO THE SELLER, THE SELLER MAY REQUIRE THE TRANSFEROR THEREOF TO FURNISH TO THE SELLER AN OPINION OF COUNSEL SELECTED BY THE TRANSFEROR, SUCH COUNSEL AND THE FORM AND SUBSTANCE OF WHICH OPINION
SHALL BE REASONABLY SATISFACTORY TO THE SELLER AND SELLER’S COUNSEL, TO THE EFFECT THAT SUCH TRANSFER DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT; PROVIDED, THAT IN THE CASE OF A TRANSFER OF CONVERSION SHARES AND/OR WARRANT SHARES
PURSUANT TO RULE 144 UNDER THE SECURITIES ACT, NO OPINION SHALL BE REQUIRED IF THE TRANSFEROR PROVIDES THE SELLER WITH A CUSTOMARY SELLER’S REPRESENTATION LETTER, AND IF SUCH SALE IS NOT PURSUANT TO SUBSECTION (K) OF RULE 144, A CUSTOMARY
BROKER’S REPRESENTATION LETTER AND FORM 144. NOTWITHSTANDING THE FOREGOING, THE SELLER HEREBY CONSENTS TO AND AGREES TO REGISTER ON THE BOOKS OF THE SELLER AND WITH ANY TRANSFER AGENT FOR THE SECURITIES OF THE SELLER, WITHOUT ANY SUCH LEGAL
OPINION, ANY TRANSFER OF SECURITIES BY A PURCHASER TO AN AFFILIATE OF SUCH PURCHASER, PROVIDED THAT THE TRANSFEREE CERTIFIES TO THE SELLER THAT IT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(A) UNDER THE SECURITIES ACT AND THAT IT
IS ACQUIRING THE SECURITIES SOLELY FOR INVESTMENT PURPOSES (SUBJECT TO THE QUALIFICATIONS HEREOF) AND NOT WITH A VIEW TO, OR FOR, RESALE, DISTRIBUTION OR FRACTIONALIZATION THEREOF IN WHOLE OR IN PART IN VIOLATION OF THE SECURITIES ACT. THE SELLER
SHALL REISSUE CERTIFICATES EVIDENCING THE SECURITIES UPON SURRENDER OF CERTIFICATES EVIDENCING THE SECURITIES BEING TRANSFERRED IN ACCORDANCE WITH THIS SECTION 2.1. IN CONNECTION WITH ANY TRANSFER OF PREFERRED STOCK OR WARRANTS AFTER THE
REGISTRATION STATEMENT (AS DEFINED IN THE INVESTOR RIGHTS AGREEMENT) IS DECLARED EFFECTIVE UNDER THE SECURITIES ACT, THE TRANSFEROR OF SUCH PREFERRED STOCK OR WARRANTS SHALL REIMBURSE THE SELLER FOR ITS REASONABLE OUT OF POCKET COSTS IN CONNECTION
WITH SUCH TRANSFER (INCLUDING WITHOUT LIMITATION THE REASONABLE ATTORNEYS FEES FOR PREPARING AND FILING A PROSPECTUS SUPPLEMENT WITH THE SEC AND/OR DELIVERING AN UPDATED OPINION LETTER TO THE SELLER’S TRANSFER AGENT). AN “AFFILIATE”
MEANS ANY PERSON (AS SUCH TERM IS DEFINED BELOW) THAT, DIRECTLY OR INDIRECTLY THROUGH ONE OR MORE INTERMEDIARIES, CONTROLS OR IS CONTROLLED BY OR IS UNDER COMMON CONTROL WITH A PERSON, AS SUCH TERMS ARE USED IN AND CONSTRUED UNDER RULE 144 UNDER THE
SECURITIES ACT. WITH RESPECT TO A PURCHASER, ANY INVESTMENT FUND OR MANAGED ACCOUNT THAT IS MANAGED ON A DISCRETIONARY BASIS BY THE SAME INVESTMENT MANAGER AS SUCH PURCHASER WILL BE DEEMED TO BE AN AFFILIATE OF SUCH PURCHASER. A “PERSON”
MEANS ANY INDIVIDUAL OR CORPORATION, PARTNERSHIP, TRUST, INCORPORATED OR UNINCORPORATED ASSOCIATION, JOINT VENTURE, LIMITED LIABILITY COMPANY, JOINT STOCK COMPANY, GOVERNMENT (OR AN AGENCY OR SUBDIVISION OF ANY THEREOF) OR OTHER ENTITY OF ANY KIND.

 2.2 Legends. The certificates representing the Securities, unless such Securities are registered under the Securities Act or
eligible for resale without registration pursuant to Rule 144(k) under the Securities Act, shall bear the following legends: 
 “THE SHARES REPRESENTED BY, OR ACQUIRABLE UPON CONVERSION OR EXERCISE OF 

  

 2 

 
SECURITIES EVIDENCED BY, THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT UNLESS, IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, SUCH REGISTRATION IS NOT REQUIRED.” 
 “THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN INVESTOR RIGHTS AGREEMENT DATED AS OF JUNE 12, 2006, AS AMENDED FROM TIME TO
TIME, AMONG THE COMPANY AND CERTAIN HOLDERS OF ITS OUTSTANDING SECURITIES. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY.” 
 ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE SELLER 
 The Seller represents and warrants to the Purchasers as follows: 
 3.1 Corporate Existence and Power;
Subsidiaries. The Seller and its Subsidiaries are corporations duly incorporated, validly existing and in good standing under the laws of the state in which they are incorporated, and have all corporate powers required to carry on their business
as now conducted. The Seller and its Subsidiaries are duly qualified to do business as a foreign corporation and are in good standing in each jurisdiction where the character of the property owned or leased by them or the nature of their activities
makes such qualification necessary, except for those jurisdictions where the failure to be so qualified would not have a Material Adverse Effect on the Seller or any of its Subsidiaries. For purposes of this Agreement, the term “Material
Adverse Effect” means, with respect to any person or entity, a material adverse effect on its and its Subsidiaries’ condition (financial or otherwise), business, properties, assets, liabilities (including contingent liabilities), results
of operations or current prospects, taken as a whole, on the transactions contemplated hereby or by the agreements and instruments to be entered into in connection herewith or therewith, or on the authority or ability of the Seller to perform its
obligations hereunder or under the Related Documents. True and complete copies of the Seller’s Certificate of Incorporation, as amended, and Bylaws, as amended, as currently in effect and as will be in effect on the Closing Date (collectively,
the “Articles and Bylaws”), have previously been provided to the Purchasers. For purposes of this Agreement, the term “Subsidiary” or “Subsidiaries” means, with respect to any entity, any corporation or other
organization of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are directly or indirectly owned by such entity or of which such
entity is a partner or is, directly or indirectly, the beneficial owner of 50% or more of any class of equity securities or equivalent profit participation interests, or is considered a “significant subsidiary” as defined in Rule 1-02(w)
of Regulation S-X promulgated by the Commission under the Exchange Act. The Seller has no Subsidiaries other than those listed on Schedule 3.1 hereto, each of which, unless otherwise indicated, is wholly-owned by the Seller. 
 3.2 Corporate Authorization. The execution, delivery and performance by the Seller of this Agreement, the Warrants, the Certificate of
Designation, the Investor Rights Agreement and each of the other documents executed pursuant to and in connection with this Agreement (collectively, the “Related Documents”), and the consummation of the transactions contemplated hereby and
thereby (including, but not limited to, the sale and delivery of the Preferred Stock and the Warrants, and the subsequent issuance of the Conversion Shares upon conversion of the Preferred Stock and the Warrant Shares upon exercise of the Warrants)
have been duly authorized, and no additional corporate or stockholder action is required for the approval of this Agreement. The Conversion Shares and the Warrant Shares have been duly reserved for issuance by the Seller. This Agreement and the
Related Documents have been or, to the extent contemplated hereby or by the Related Documents, will be duly executed and delivered and constitute the legal, valid and binding agreement of the Seller, enforceable against the Seller in accordance with
their terms, except as may be limited by bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting the enforcement of rights of creditors, and except as enforceability of its obligations
hereunder are subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 
 3.3 Charter, Bylaws and Corporate Records. The minute books of the Seller and its Subsidiaries contain complete and accurate records of all meetings and other corporate actions of the board of directors,

  

 3 

 
committees of the board of directors, incorporators and stockholders of the Seller and its Subsidiaries from October 1, 2002 to the date hereof. All
material corporate decisions and actions have been validly made or taken. All corporate books, including without limitation the share transfer register, comply with applicable laws and regulations and have been regularly updated. Such books fully
and correctly reflect all the decisions of the stockholders. 
 3.4 Governmental Authorization. Except as otherwise specifically
contemplated in this Agreement and the Related Documents, and except for: (i) the filings referenced in Sections 5.10 and 5.11; (ii) the filing of the Certificate of Designation; (iii) the filing of a Form D with respect to the
Preferred Stock and Warrants under Regulation D under the Securities Act, if required; (iv) the filing of the Registration Statement with the Commission; (v) the application(s) to each trading market for the listing of the Conversion
Shares and the Warrant Shares for trading thereon; and (vi) any filings required under state securities laws that are permitted to be made after the date hereof, the execution, delivery and performance by the Seller of this Agreement and the
Related Documents, and the consummation of the transactions contemplated hereby and thereby (including, but not limited to, the sale and delivery of the Preferred Stock and Warrants and the subsequent issuance of the Conversion Shares and Warrant
Shares upon conversion of the Preferred Stock or otherwise or exercise of the Warrants, as applicable) by the Seller require no action by or in respect of, or filing with, any governmental body, agency, official or authority. 
 3.5 Non-Contravention. The execution, delivery and performance by the Seller of this Agreement and the Related Documents, and the consummation by
the Seller of the transactions contemplated hereby and thereby (including the issuance of the Conversion Shares and Warrant Shares) do not and will not (a) contravene or conflict with the Articles (as amended by the Certificate of Designation)
and Bylaws of the Seller and its Subsidiaries or any material agreement to which the Seller is a party or by which it is bound; (b) contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to the Seller or its Subsidiaries; (c) constitute a default (or would constitute a default with notice or lapse of time or both) under or give rise to a right of termination, cancellation
or acceleration or loss of any benefit under any material agreement, contract or other instrument binding upon the Seller or its Subsidiaries or under any material license, franchise, permit or other similar authorization held by the Seller or its
Subsidiaries; or (d) result in the creation or imposition of any Lien (as defined below) on any asset of the Seller or its Subsidiaries. For purposes of this Agreement, the term “Lien” means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest, claim or encumbrance of any kind in respect of such asset. 
 3.6 SEC Documents. The Seller
is obligated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) to file reports pursuant to Sections 13 or 15(d) thereof (all such reports filed or required to be filed by the Seller, including all exhibits thereto
or incorporated therein by reference, and all documents filed by the Seller under the Securities Act hereinafter called the “SEC Documents”). The Seller has filed all reports or other documents required to be filed under the Exchange Act.
All SEC Documents filed by the Seller as of or for any period beginning on or after July 1, 2003, (i) were prepared in all material respects in accordance with the requirements of the Exchange Act and (ii) did not at the time they
were filed (or, if amended or superseded by a filing prior to the date hereof, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were made, not misleading. The Seller has previously delivered to the Purchaser a correct and complete copy of each report (including, without limitation, the most recent
Proxy Statement) which the Seller filed with the Securities and Exchange Commission (the “SEC” or the “Commission”) under the Exchange Act for any period ending on or after June 30, 2005 (the “Recent Reports”) to
the extent not available via EDGAR. None of the information about the Seller or any of its Subsidiaries which has been disclosed to the Purchasers herein or in the course of discussions and negotiations with respect hereto which is not disclosed in
the Recent Reports is or was required to be so disclosed, and no material non-public information has been disclosed to the Purchasers. To the extent that the Seller fails to so publicly disclose any such material non-public information prior to such
date, any Purchaser in possession of such information shall be permitted to publicly disclose such material non-public information (and such Purchaser agrees not to disclose such information prior to such date to any third party except (a) to
any representative agreeing not to disclose, (b) to the extent required pursuant to law or legal process, or (c) if such information is or becomes in the public domain other through disclosure by such Purchaser). The Seller agrees that it
shall not furnish any Purchaser any material non-public information concerning the Seller which it does not intend to disclose on or prior to such date. 
  

 4 

 3.7 Financial Statements. The financial statements of the Seller included in the SEC Documents
comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Seller and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. All material agreements to which the Seller and its Subsidiaries are a party or to which any of their respective
property or assets are subject that are required to be filed as Exhibits to the SEC Documents under Item 601 of Regulation S K are included as a part of, or specifically identified in, the SEC Documents. 
 3.8 Compliance with Law. The Seller and its Subsidiaries are in compliance and have conducted their business so as to comply with all laws, rules
and regulations, judgments, decrees or orders of any court, administrative agency, commission, regulatory authority or other governmental authority or instrumentality, domestic or foreign, applicable to their operations, the violation of which would
cause a Material Adverse Affect. There are no judgments or orders, injunctions, decrees, stipulations or awards (whether rendered by a court or administrative agency or by arbitration), including any such actions relating to affirmative action
claims or claims of discrimination, against the Seller or its Subsidiaries or against any of their properties or businesses. 
 3.9 No
Defaults. The Seller and its Subsidiaries are not, nor have they received notice that they would be with the passage of time, giving of notice, or both, (i) in violation of any provision of their Articles and Bylaws (ii) in default or
violation of any term, condition or provision of (A) any judgment, decree, order, injunction or stipulation applicable to the Seller or its Subsidiaries or (B) any material agreement, note, mortgage, indenture, contract, lease or
instrument, permit, concession, franchise or license to which the Seller or its Subsidiaries are a party or by which the Seller or its Subsidiaries or their properties or assets may be bound, and no circumstances exist which would entitle any party
to any material agreement, note, mortgage, indenture, contract, lease or instrument to which such Seller or its Subsidiaries are a party, to terminate such as a result of such Seller or its Subsidiaries, having failed to meet any material provision
thereof including, but not limited to, meeting any applicable milestone under any material agreement or contract. 
 3.10 Litigation.
Except as disclosed in the Recent Reports or on Schedule 3.10, there is no action, suit, proceeding, judgment, claim or investigation pending or, to the best knowledge of the Seller, threatened against the Seller and its Subsidiaries which
could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Seller or its Subsidiaries or which in any manner challenges or seeks to prevent, enjoin, alter or materially delay any of the transactions
contemplated hereby, and there is no basis for the assertion of any of the foregoing. 
 There are no claims or complaints existing or, to
the knowledge of the Seller or its Subsidiaries, threatened for product liability in respect of any product of the Seller or its Subsidiaries, and the Seller and its Subsidiaries are not aware of any basis for the assertion of any such claim.

 3.11 Absence of Certain Changes. Since June 30, 2005, the Seller has conducted its business only in the ordinary course and
there has not occurred, except as set forth in the Recent Reports or any exhibit thereto or incorporated by reference therein: 
 (a) Any
event that could reasonably be expected to have a Material Adverse Effect on the Seller or any of its Subsidiaries; 
 (b) Any amendments or
changes in the Articles or Bylaws of the Seller and its Subsidiaries, other than on account of the filing of the Certificate of Designation; 
 (c) Any damage, destruction or loss, whether or not covered by insurance, that would, individually or in the aggregate, have or would be reasonably likely to have, a Material Adverse Effect on the Seller and its Subsidiaries; 
  

 5 

 (d) Except as set forth on Schedule 3.11(d), any 
 (i) incurrence, assumption or guarantee by the Seller or its Subsidiaries of any debt for borrowed money other than for equipment leases;

 (ii) issuance or sale of any securities convertible into or exchangeable for securities of the Seller other than to
directors, employees and consultants pursuant to existing equity compensation or stock purchase plans of the Seller; 
 (iii)
issuance or sale of options or other rights to acquire from the Seller or its Subsidiaries, directly or indirectly, securities of the Seller or any securities convertible into or exchangeable for any such securities, other than options issued to
directors, employees and consultants in the ordinary course of business in accordance with past practice; 
 (iv) issuance or
sale of any stock, bond or other corporate security; 
 (v) discharge or satisfaction of any material Lien, other than current
liabilities incurred since June 30, 2005 in the ordinary course of business; 
 (vi) declaration or making any payment or
distribution to stockholders or purchase or redemption of any share of its capital stock or other security; 
 (vii) sale,
assignment or transfer of any of its intangible assets except in the ordinary course of business, or cancellation of any debt or claim except in the ordinary course of business; 
 (viii) waiver of any right of substantial value whether or not in the ordinary course of business; 
 (ix) material change in officer compensation except in the ordinary course of business and consistent with past practices; or 

(x) other commitment (contingent or otherwise) to do any of the foregoing. 
 (e) Any creation, sufferance or assumption by the Seller or any of its Subsidiaries of any Lien on any asset (other than Liens existing on the date
hereof or in connection with equipment leases and working capital lines of credit set forth on Schedule 3.11(e)) or any making of any loan, advance or capital contribution to or investment in any Person in an aggregate amount which exceeds
$25,000 outstanding at any time; 
 (f) Any entry into, amendment of, relinquishment, termination or non-renewal by the Seller or its
Subsidiaries of any material contract, license, lease, transaction, commitment or other right or obligation, other than in the ordinary course of business; or 
 (g) Any transfer or grant of a right with respect to the trademarks, trade names, service marks, trade secrets, copyrights or other intellectual property rights owned or licensed by the Seller or its Subsidiaries,
except as among the Seller and its Subsidiaries. 
 3.12 No Undisclosed Liabilities. Except as set forth in the Recent Reports, and
except for liabilities and obligations incurred in the ordinary course of business since June 30, 2005, as of the date hereof, (i) the Seller and its Subsidiaries do not have any material liabilities or obligations (absolute, accrued,
contingent or otherwise) which, and (ii) there has not been any aspect of the prior or current conduct of the business of the Seller or its Subsidiaries which may form the basis for any material claim by any third party which if asserted could
result in any such material liabilities or obligations which, are not fully reflected, reserved against or disclosed in the balance sheet of the Seller as at June 30, 2005. 
 3.13 Taxes. All tax returns and tax reports required to be filed with respect to the income, operations, business or assets of the Seller and its
Subsidiaries have been timely filed (or appropriate extensions have been obtained) with the appropriate governmental agencies in all jurisdictions in which such returns and reports are 

  

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required to be filed, and all of the foregoing as filed are correct and complete and, in all material respects, reflect accurately all liability for taxes of
the Seller and its Subsidiaries for the periods to which such returns relate, and all amounts shown as owing thereon have been paid. All income, profits, franchise, sales, use, value added, occupancy, property, excise, payroll, withholding, FICA,
FUTA and other taxes (including interest and penalties), if any, collectible or payable by the Seller and its Subsidiaries or relating to or chargeable against any of its material assets, revenues or income or relating to any employee, independent
contractor, creditor, stockholder or other third party through the Closing Date, will have been fully collected and paid by such date if due by such date or provided for by adequate reserves in the Financial Statements as of and for the periods
ended June 30, 2005 (other than taxes accruing after such date) and all similar items due through the Closing Date will have been fully paid by that date or provided for by adequate reserves, whether or not any such taxes were reported or
reflected in any tax returns or filings. No taxation authority has sought to audit the records of the Seller or any of its Subsidiaries for the purpose of verifying or disputing any tax returns, reports or related information and disclosures
provided to such taxation authority, or for the Seller’s or any of its Subsidiaries’ alleged failure to provide any such tax returns, reports or related information and disclosure. No material claims or deficiencies have been asserted
against or inquiries raised with the Seller or any of its Subsidiaries with respect to any taxes or other governmental charges or levies which have not been paid or otherwise satisfied, including claims that, or inquiries whether, the Seller or any
of its Subsidiaries has not filed a tax return that it was required to file, and, to the best of the Seller’s knowledge, there exists no reasonable basis for the making of any such claims or inquiries. Neither the Seller nor any of its
Subsidiaries has waived any restrictions on assessment or collection of taxes or consented to the extension of any statute of limitations relating to taxation. 
 3.14 Interests of Officers, Directors and Other Affiliates. The description of any interest held, directly or indirectly, by any officer, director or other Affiliate of Seller (other than the interests of the
Seller and its Subsidiaries in such assets) in any property, real or personal, tangible or intangible, used in or pertaining to Seller’s business, including any interest in the Intellectual Property (as defined in Section 3.15 hereof), as
set forth in the Recent Reports, is true and complete, and no officer, director or other Affiliate of the Seller has any interest in any property, real or personal, tangible or intangible, used in or pertaining to the Seller’s business,
including the Seller’s Intellectual Property, other than as set forth in the Recent Reports. 
 3.15 Intellectual Property. Other
than as set forth in the Recent Reports: 
 (a) the Seller or a Subsidiary thereof has the right to use or is the sole and exclusive owner of
all right, title and interest in and to all foreign and domestic patents, patent rights, trademarks, service marks, trade names, brands and copyrights (whether or not registered and, if applicable, including pending applications for registration)
owned, used or controlled by the Seller and its Subsidiaries (collectively, the “Rights”) and in and to each material invention, software, trade secret, technology, product, composition, formula, method of process used by the Seller or its
Subsidiaries (the Rights and such other items, the “Intellectual Property”), and, to the Seller’s knowledge, has the right to use the same, free and clear of any claim or conflict with the rights of others; 
 (b) no royalties or fees (license or otherwise) are payable by the Seller or its Subsidiaries to any Person by reason of the ownership or use of any of
the Intellectual Property except as set forth on Schedule 3.15; 
 (c) there have been no claims made against the Seller or its
Subsidiaries asserting the invalidity, abuse, misuse, or unenforceability of any of the Intellectual Property, and, to its knowledge, there are no reasonable grounds for any such claims; 
 (d) neither the Seller nor its Subsidiaries have made any claim of any violation or infringement by others of its rights in the Intellectual Property,
and to the best of the Seller’s knowledge, no reasonable grounds for such claims exist; and 
 (e) neither the Seller nor its
Subsidiaries have received notice that it is in conflict with or infringing upon the asserted rights of others in connection with the Intellectual Property. 
 3.16 Restrictions on Business Activities. Other than as set forth in the Recent Reports, there is no agreement, judgment, injunction, order or decree binding upon the Seller or its Subsidiaries which has or
could reasonably be expected to have the effect of prohibiting or materially impairing any business practice of the Seller or its Subsidiaries, any acquisition of property by the Seller or its Subsidiaries or the conduct of business by the Seller or
its Subsidiaries as currently conducted or as currently proposed to be conducted by the Seller. 
  

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 3.17 Preemptive Rights. Except as set forth in Schedule 3.17, none of the stockholders of
the Seller possess any preemptive rights in respect of the Preferred Shares, Warrants, Conversion Shares or Warrant Shares to be issued to the Purchasers in connection herewith or upon conversion of the Preferred Shares or exercise of the Warrants,
as applicable. 
 3.18 Insurance. The insurance policies providing insurance coverage to the Seller or its Subsidiaries including for
product liability are adequate for the business conducted by the Seller and its Subsidiaries (currently limited to the testing phase) and are sufficient for compliance by the Seller and its Subsidiaries with all requirements of law and all material
agreements to which the Seller or its Subsidiaries are a party or by which any of their assets are bound. All of such policies are in full force and effect and are valid and enforceable in accordance with their terms, and the Seller and its
Subsidiaries have complied with all material terms and conditions of such policies, including premium payments. None of the insurance carriers has indicated to the Seller or its Subsidiaries an intention to cancel any such policy. 
 3.19 Subsidiaries and Investments. Except as set forth in the Recent Reports or on Schedule 3.19, the Seller has no Subsidiaries or
Investments. For purposes of this Agreement, the term “Investments” shall mean, with respect to any Person, all advances, loans or extensions of credit to any other Person, all purchases or commitments to purchase any stock, bonds, notes,
debentures or other securities of any other Person, and any other investment in any other Person, including partnerships or joint ventures (whether by capital contribution or otherwise) or other similar arrangement (whether written or oral) with any
Person, including but not limited to arrangements in which (i) the Person shares profits and losses, (ii) any such other Person has the right to obligate or bind the Person to any third party, or (iii) the Person may be wholly or
partially liable for the debts or obligations of such partnership, joint venture or other arrangement. 
 3.20 Capitalization. The
authorized capital stock of the Seller consists of 80,000,000 shares of common stock, $0.01 par value per share, of which 12,509,607 shares are issued and outstanding as of the date hereof, and 20,000,000 shares of preferred stock, issuable in one
or more classes or series, with such relative rights and preferences as the Board of Directors may determine, none of which has been authorized for issuance other than 1,297,537 shares of Series D Convertible Preferred Stock, $0.01 par value per
share, 1,214,140 of which, immediately prior to the Closing, are outstanding, and other than the 1,200 shares of the Seller’s Series E Convertible Preferred Stock, 1,192 of which, immediately prior to the Closing, are outstanding, and other
than the shares of the Seller’s Series F 10% Cumulative Convertible Preferred Stock contemplated hereby and none of which, immediately prior to the Closing, are outstanding. All shares of the Seller’s issued and outstanding capital stock
have been duly authorized, are validly issued and outstanding, and are fully paid and nonassessable. No securities issued by the Seller from the date of its incorporation to the date hereof were issued in violation of any statutory or common law
preemptive rights. There are no dividends which have accrued or been declared but are unpaid on the capital stock of the Seller. All taxes required to be paid by Seller in connection with the issuance and any transfers of the Seller’s capital
stock have been paid. Except as set forth on Schedule 3.20, all permits or authorizations required to be obtained from or registrations required to be effected with any Person in connection with any and all issuances of securities of the
Seller from the date of the Seller’s incorporation to the date hereof have been obtained or effected, and all securities of the Seller have been issued and are held in accordance with the provisions of all applicable securities or other laws.

 3.21 Options, Warrants, Rights. Except as set forth in the Recent Reports or on Schedule 3.21, there are no outstanding
(a) securities, notes or instruments convertible into or exercisable for any of the capital stock or other equity interests of the Seller or its Subsidiaries; (b) options, warrants, subscriptions or other rights to acquire capital stock or
other equity interests of the Seller or its Subsidiaries; or (c) commitments, agreements or understandings of any kind, including employee benefit arrangements, relating to the issuance or repurchase by the Seller or its Subsidiaries of any
capital stock or other equity interests of the Seller or its Subsidiaries, any such securities or instruments convertible or exercisable for securities or any such options, warrants or rights. Other than the rights of the Purchasers under the
Preferred Stock and the Warrants and except as set forth on Schedule 3.21, neither the Seller nor the Subsidiaries have granted anti-dilution rights to any person or entity in connection with any outstanding option, warrant, subscription or
any other instrument convertible or exercisable for the securities of the Seller or any of its Subsidiaries. Other than the rights granted to the Purchasers under the Investor Rights Agreement and except as set forth on Schedule 3.21, there
are no outstanding rights which permit the holder thereof to cause the 

  

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Seller or the Subsidiaries to file a registration statement under the Securities Act or which permit the holder thereof to include securities of the Seller
or any of its Subsidiaries in a registration statement filed by the Seller or any of its Subsidiaries under the Securities Act, and there are no outstanding agreements or other commitments which otherwise relate to the registration of any securities
of the Seller or any of its Subsidiaries for sale or distribution in any jurisdiction. This issuance of the Preferred Stock and Warrants hereunder and/or the issuance of the Conversion Shares or Warrant Shares upon conversion of the Preferred Stock
or exercise of the Warrants will not cause any adjustment to the current conversion price under the Series D Convertible Preferred Stock or Series E Convertible Preferred Stock or to the exercise price under any outstanding warrants issued in
connection therewith. 
 3.22 Employees, Employment Agreements and Employee Benefit Plans. Except as set forth in the Recent Reports
or on Schedule 3.22, there are no employment, consulting, severance or indemnification arrangements, agreements, or understandings between the Seller and any officer or senior management of the Seller or its Subsidiaries (the “Employment
Agreements”). Except as set forth in the Recent Reports or on Schedule 3.22, no Employment Agreement provides for the acceleration or change in the award, grant, vesting or determination of options, warrants, rights, severance payments,
or other contingent obligations of any nature whatsoever of the Seller or its Subsidiaries in favor of any such parties in connection with the transactions contemplated by this Agreement. Except as disclosed in the Recent Reports or on Schedule
3.22, the terms of employment or engagement of all officers and senior management of the Seller and its Subsidiaries are such that their employment or engagement may be terminated upon not more than two weeks’ notice given at any time
without liability for payment of compensation or damages and the Seller and its Subsidiaries have not entered into any agreement or arrangement for the management of their business or any part thereof other than with their directors or employees.

 3.23 Absence of Certain Business Practices. Neither the Seller, nor any Affiliate of the Seller, nor to the knowledge of the
Seller, any agent or employee of the Seller, any other Person acting on behalf of or associated with the Seller, or any individual related to any of the foregoing Persons, acting alone or together, has: (a) received, directly or indirectly, any
rebates, payments, commissions, promotional allowances or any other economic benefits, regardless of their nature or type, from any customer, supplier, trading company, shipping company, governmental employee or other Person with whom the Seller has
done business directly or indirectly; or (b) directly or indirectly, given or agreed to give any gift or similar benefit to any customer, supplier, trading company, shipping company, governmental employee or other Person who is or may be in a
position to help or hinder the business of the Seller (or assist the Seller in connection with any actual or proposed transaction) which (i) may subject the Seller to any damage or penalty in any civil, criminal or governmental litigation or
proceeding, (ii) if not given in the past, may have had an adverse effect on the Seller or (iii) if not continued in the future, may adversely affect the assets, business, operations or prospects of the Seller or subject the Seller to suit
or penalty in any private or governmental litigation or proceeding. 
 3.24 Products and Services. To the knowledge of the Seller and
except as disclosed in the Recent Reports, there exists no set of facts (i) which could furnish a basis for the withdrawal, suspension or cancellation of any registration, license, permit or other governmental approval or consent of any
governmental or regulatory agency with respect to any product or service developed or provided by the Seller or its Subsidiaries, (ii) which could furnish a basis for the withdrawal, suspension or cancellation by order of any state, federal or
foreign court of law of any product or service, or (iii) which could have a Material Adverse Effect on the continued operation of any facility of the Seller or its Subsidiaries or which could otherwise cause the Seller or its Subsidiaries to
withdraw, suspend or cancel any such product or service from the market or to change the marketing classification of any such product or service. Each product or service provided by Seller or its Subsidiaries has been provided in accordance in all
material respects with the specifications under which such product or service normally is and has been provided and the provisions of all applicable laws or regulations. 
 3.25 Environmental Matters. None of the premises or any properties owned, occupied or leased by the Seller or its Subsidiaries (the “Premises”) has been used by the Seller or the Subsidiaries or, to
the Seller’s knowledge, by any other Person, to manufacture, treat, store, or dispose of any substance that has been designated to be a “hazardous substance” under applicable Environmental Laws (hereinafter defined) (“Hazardous
Substances”) in violation of any applicable Environmental Laws. To its knowledge, the Seller has not disposed of, discharged, emitted or released any Hazardous Substances which would require, under applicable Environmental Laws, remediation,
investigation or similar response activity. No Hazardous Substances are present as a result of the actions of the Seller or, to the Seller’s knowledge, any other Person, in, on or under the Premises which would give rise to any liability or
clean-up obligations of the Seller under applicable Environmental Laws. The Seller and, to the 

  

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Seller’s knowledge, any other Person for whose conduct it may be responsible pursuant to an agreement or by operation of law, are in compliance with all
laws, regulations and other federal, state or local governmental requirements, and all applicable judgments, orders, writs, notices, decrees, permits, licenses, approvals, consents or injunctions in effect on the date of this Agreement relating to
the generation, management, handling, transportation, treatment, disposal, storage, delivery, discharge, release or emission of any Hazardous Substance (the “Environmental Laws”). Neither the Seller nor, to the Seller’s knowledge, any
other Person for whose conduct it may be responsible pursuant to an agreement or by operation of law has received any written complaint, notice, order, or citation of any actual, threatened or alleged noncompliance with any of the Environmental
Laws, and there is no proceeding, suit or investigation pending or, to the Seller’s knowledge, threatened against the Seller or, to the Seller’s knowledge, any such Person with respect to any violation or alleged violation of the
Environmental Laws, and, to the knowledge of the Seller, there is no basis for the institution of any such proceeding, suit or investigation. 
 3.26 Licenses; Compliance Regulatory Requirements. Except as disclosed in the Recent Reports, the Seller holds all material authorizations, consents, approvals, franchises, licenses and permits required under applicable law or
regulation for the operation of the business of the Seller and its Subsidiaries as presently operated (the “Governmental Authorizations”). All the Governmental Authorizations have been duly issued or obtained and are in full force and
effect, and the Seller and its Subsidiaries are in material compliance with the terms of all the Governmental Authorizations. The Seller and its Subsidiaries have not engaged in any activity that, to their knowledge, would cause revocation or
suspension of any such Governmental Authorizations. The Seller has no knowledge of any facts which could reasonably be expected to cause the Seller to believe that the Governmental Authorizations will not be renewed by the appropriate governmental
authorities in the ordinary course. Neither the execution, delivery nor performance of this Agreement shall adversely affect the status of any of the Governmental Authorizations. 
 3.27 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement, based upon any arrangement made by or on behalf of the Seller, which would make any Purchaser liable for any fees or commissions. 
 3.28 Securities Laws. Neither the Seller nor its Subsidiaries nor any agent acting on behalf of the Seller or its Subsidiaries has taken or will
take any action which might cause this Agreement or the Preferred Stock or Warrants to violate the Securities Act or the Exchange Act or any rules or regulations promulgated thereunder, as in effect on the Closing Date. Assuming that all of the
representations and warranties of the Purchasers set forth in Article IV are true, all offers and sales of capital stock, securities and notes of the Seller were conducted and completed in compliance with the Securities Act. All shares of capital
stock and other securities issued by the Seller and its Subsidiaries prior to the date hereof have been issued in transactions that were either registered offerings or were exempt from the registration requirements under the Securities Act and all
applicable state securities or “blue sky” laws and in compliance with all applicable corporate laws. 
 3.29 Disclosure. No
representation or warranty made by the Seller in this Agreement, nor in any document, written information, financial statement, certificate, schedule or exhibit prepared and furnished by the Seller or the representatives of the Seller pursuant
hereto or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits to state a material fact necessary to make the statements or facts contained herein or therein not
misleading in light of the circumstances under which they were furnished. 
 3.30 Off-Balance Sheet Arrangements. There is no
transaction, arrangement or other relationship between the Seller and an unconsolidated or other off-balance sheet entity that is required to be disclosed by the Seller in its Exchange Act filings and is not so disclosed or that otherwise would be
reasonably expected to result in a Material Adverse Effect. There are no such transactions, arrangements or other relationships with the Seller that may create contingencies or liabilities that are not otherwise disclosed by the Seller in its
Exchange filings. 
 3.31 Application of Takeover Protections. The Seller and its Board of Directors have taken all necessary action,
if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Seller’s Certificate of
Incorporation (or similar charter documents) or the laws of its state of incorporation or any agreement to which the Seller is a party that is or could become applicable to the Purchasers as a result of the Purchasers and the Seller fulfilling their
obligations or exercising their rights under this Agreement and the Related Documents, including without limitation the Seller’s issuance of the Securities and the Purchasers’ ownership of the Securities. 
  

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 3.32 No Additional Agreements. The Seller does not have any agreement or understanding with any
Purchaser with respect to the transactions contemplated by this Agreement and the Related Documents other than as specified in this Agreement and the Related Documents. 
 3.33 Acknowledgment Regarding Purchasers’ Purchase of Seller Securities. The Seller acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser
with respect to this Agreement and the transactions contemplated hereby. The Seller further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Seller or any other Purchaser (or in any similar capacity) with respect
to this Agreement and the Related Documents and the transactions contemplated hereby and thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with this Agreement or the Related Documents or
the transactions contemplated hereby and thereby is merely incidental to such Purchaser’s purchase of the Securities. The Seller further represents to each Purchaser that the Seller’s decision to enter into this Agreement and the Related
Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Seller and its representatives. 
 3.34 Internal Accounting Controls. The Seller and each of its subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to
any differences. The Seller has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Seller and designed such disclosure controls and procedures to ensure that material information
relating to the Seller, including its subsidiaries, is made known to the certifying officers by others within those entities, particularly during the period in which the Seller’s Form 10-K or 10-Q, as the case may be, is being prepared.
The Seller’s certifying officers have evaluated the effectiveness of the Seller’s disclosure controls and procedures as of the end of the period covered by the Seller’s most recently filed periodic report under the Exchange Act (such
date, the “Evaluation Date”). The Seller presented in its most recently filed Form 10-K or Form 10-Q the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on
their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the Seller’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that has materially
affected, or is reasonably likely to materially affect, the Seller’s internal control over financial reporting. 
 3.35 Solvency.
Based on the financial condition of the Seller as of the Closing Date, (i) the Seller’s fair saleable value of its assets exceeds the amount that will be required to be paid on or in respect of the Seller’s existing debts and other
liabilities (including known contingent liabilities) as they mature; (ii) the Seller’s assets do not constitute unreasonably small capital to carry on its business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Seller, and projected capital requirements and capital availability thereof; and (iii) the current cash flow of the
Seller, together with the proceeds the Seller would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its debt when such amounts
are required to be paid. The Seller does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). 
 3.36 Title to Assets. The Seller and the Subsidiaries have good and marketable title in fee simple to all real property owned by them that is
material to their respective businesses and good and marketable title in all personal property owned by them that is material to their respective businesses, in each case free and clear of all Liens, except for (i) Liens as do not materially
affect the value of such property, do not materially interfere with the use made and proposed to be made of such property by the Seller and the Subsidiaries, (ii) Liens for taxes not yet due and payable and (iii) Liens which would not,
individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect. To the Seller’s knowledge, any real property and facilities held under lease by the Seller and the Subsidiaries are held by them under
valid, subsisting and enforceable leases of which the Seller and the Subsidiaries are in compliance except, in each case, as would not reasonably be expected to result in a Material Adverse Effect. 
  

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 3.37 Acquisition. The Seller has furnished to the Purchasers true and accurate copies, as amended
through the Closing Date, of (a) the letter of intent entered into by the Seller as of March 22, 2006 with Bruce White, Shelly White and others, pursuant to which the Seller will acquire all of the stock and equity interests of and in
Sterling Systems & Consulting, Inc., Sterling Systems – Indiana, L.L.C., Sterling Systems – Ohio, L.L.C., and Sterling Ohio Management, Inc. (the “Acquisition”), and (b) any and all definitive transaction documents
relating to the Acquisition. The Seller completed its due diligence on the Acquisition to its satisfaction, and the Acquisition has been consummated and publicly disclosed. 
 ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS 
 Each Purchaser, for
itself only, hereby severally and not jointly, represents and warrants to the Seller as follows: 
 4.1 Existence and Power. The
Purchaser is duly organized, validly existing and in good standing under the laws of the jurisdiction of such Purchaser’s organization. The Purchaser has all powers required to carry on such Purchaser’s business as now conducted.

 4.2 Authorization. The execution, delivery and performance by the Purchaser of this Agreement, the Related Documents to which such
Purchaser is a party, and the consummation by the Purchaser of the transactions contemplated hereby and thereby have been duly authorized, and no additional action is required for the approval of this Agreement or the Related Documents. This
Agreement and the Related Documents to which the Purchaser is a party have been or, to the extent contemplated hereby, will be duly executed and delivered and constitute valid and binding agreements of the Purchaser, enforceable against such
Purchaser in accordance with their terms, except as may be limited by bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting the enforcement of rights of creditors and except that
enforceability of their obligations thereunder are subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 
 4.3 Investment. The Purchaser is acquiring the securities described herein for its own account and not with a view to, or for sale in connection
with, any distribution thereof, nor with the intention of distributing or reselling the same, provided, however, that by making the representation herein, the Purchaser does not agree to hold any of the securities for any minimum or other specific
term and reserves the right to dispose of the securities at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act. The Purchaser is aware that none of the securities has been registered under
the Securities Act or under applicable state securities or blue sky laws. The Purchaser is an “Accredited Investor” as such term is defined in Rule 501 of Regulation D, as promulgated under the Securities Act (including without limitation,
if the Purchaser is an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 and a self-directed plan, then investment decisions are made solely by persons that are “Accredited Investors”).

 4.4 Reliance on Exemptions. The Purchaser understands that the Preferred Stock and Warrants are being offered and sold to such
Purchaser in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Seller is relying upon the truth and accuracy of, and such Purchaser’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of such Purchaser to acquire the securities. 
 4.5 Experience of the Purchaser. The Purchaser, either alone or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. The Purchaser is able to bear the
economic risk of an investment in the securities and, at the present time, is able to afford a complete loss of such investment. 
 4.6
General Solicitation. The Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the securities published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general solicitation or general advertisement. 
  

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 4.7 Residence. The Purchaser, if a U.S. investor, is a resident of the U.S. state indicated in the
address specified on such Purchaser’s signature page attached hereto. 
 ARTICLE V - COVENANTS OF THE SELLER AND PURCHASERS 

5.1 Insurance. The Seller and its Subsidiaries shall, from time to time upon the written request of the Purchasers, promptly furnish or cause
to be furnished to the Purchasers evidence, in form and substance reasonably satisfactory to the Purchasers, of the maintenance of all insurance maintained by it for loss or damage by fire and other hazards, damage or injury to persons and property,
including from product liability, and under workmen’s compensation laws. 
 5.2 Reporting Obligations. So long as any of the
Preferred Stock is outstanding, and so long as any portion of the Warrants has not been exercised and has not expired by its terms, the Seller shall furnish to the Purchasers, or any other persons who hold any of the Preferred Stock or Warrants
(provided that such subsequent holders give notice to the Seller that they hold Preferred Stock or Warrants and furnish their addresses) promptly upon their becoming available one copy of (A) each report, notice or proxy statement sent by the
Seller to its stockholders generally, and of each regular or periodic report (pursuant to the Exchange Act) and (B) any registration statement, prospectus or written communication pursuant to the Securities Act relating to the issuance or
registration of Conversion Shares and the Warrant Shares and filed by the Seller with the Commission or any securities market or exchange on which shares of Common Stock are listed; provided, however, that the Seller shall have no obligation to
deliver reports or schedules (pursuant to the Exchange Act) under this Section 5.2 to the extent such reports are publicly available via EDGAR. 
 The Purchasers are hereby authorized to deliver a copy of any financial statement or any other information relating to the business, operations or financial condition of the Seller which may have been furnished to the
Purchasers hereunder, to any regulatory body or agency having jurisdiction over the Purchasers or to any Person which shall, or shall have right or obligation to succeed to all or any part of the Purchasers’ interest in the Seller or this
Agreement. 
 5.3 Investigation. The representations, warranties, covenants and agreements set forth in this Agreement shall not be
affected or diminished in any way by any investigation (or failure to investigate) at any time by or on behalf of the party for whose benefit such representations, warranties, covenants and agreements were made. Without limiting the generality of
the foregoing, the inability or failure of the Purchasers to discover any breach, default or misrepresentation by the Seller under this Agreement or the Related Documents (including under any certificate furnished pursuant to this Agreement),
notwithstanding the exercise by the Purchasers or other holders of the Preferred Stock of their rights hereunder to conduct an investigation shall not in any way diminish any liability hereunder. 
 5.4 Further Assurances. The Seller shall, at its cost and expense, upon written request of the Purchasers, duly execute and deliver, or cause to
be duly executed and delivered, to the Purchasers such further instruments and do and cause to be done such further acts as may be necessary, advisable or proper, at the reasonable request of the Purchasers, to carry out more effectually the
provisions and purposes of this Agreement. The parties shall use their best efforts to timely satisfy each of the conditions described in Article VI of this Agreement. 
 5.5 Use of Proceeds. The Seller covenants and agrees that the proceeds of the aggregate Purchase Price shall be used by the Seller for the Acquisition and for working capital and general corporate purposes;
under no circumstances shall any portion of the proceeds be applied to: 
 (i) accelerated repayment of debt existing on the
date hereof; 
 (ii) the payment of dividends or other distributions on any capital stock of the Seller other than the
Preferred Stock; 
  

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 (iii) increased executive compensation or loans to officers, employees, stockholders or
directors, unless approved by a disinterested majority of the Board of Directors; 
 (iv) the purchase of debt or equity
securities of any person, including the Seller and its Subsidiaries, except in connection with investment of excess cash in high quality (A1/P1 or better) money market instruments having maturities of one year or less; or 
 (v) any expenditure not directly related to the business of the Seller. 
 5.6 Corporate Existence. So long as a Purchaser owns Preferred Stock, Warrants, Conversion Shares, or Warrant Shares, the Seller shall preserve
and maintain and cause its Subsidiaries to preserve and maintain their corporate existence and good standing in the jurisdiction of their incorporation and the rights, privileges and franchises of the Seller and its Subsidiaries (except, in each
case, in the event of a merger or consolidation in which the Seller or its Subsidiaries, as applicable, is not the surviving entity) in each case where failure to so preserve or maintain could have a Material Adverse Effect on the financial
condition, business or operations of the Seller and its Subsidiaries taken as a whole. 
 5.7 Licenses. The Seller shall, and shall
cause its Subsidiaries to, maintain at all times all material licenses or permits necessary to the conduct of its business and as required by any governmental agency or instrumentality thereof. 
 5.8 Taxes and Claims. The Seller and its Subsidiaries shall duly pay and discharge (a) all material taxes, assessments and governmental
charges upon or against the Seller or its properties or assets prior to the date on which penalties attach thereto, unless and to the extent that such taxes are being diligently contested in good faith and by appropriate proceedings, and appropriate
reserves therefor have been established, and (b) all material lawful claims, whether for labor, materials, supplies, services or anything else which might or could, if unpaid, become a lien or charge upon the properties or assets of the Seller
or its Subsidiaries unless and to the extent only that the same are being diligently contested in good faith and by appropriate proceedings and appropriate reserves therefor have been established. 
 5.9 Perform Covenants. The Seller shall (a) make full and timely payment of any and all payments on the Preferred Stock, and all other
obligations of the Seller to the Purchasers in connection therewith, whether now existing or hereafter arising, and (b) duly comply with all the terms and covenants contained herein and in each of the instruments and documents given to the
Purchasers in connection with or pursuant to this Agreement, all at the times and places and in the manner set forth herein or therein. 
 5.10 Additional Covenants. 
 (a) Except for transactions approved by a majority of the disinterested directors of the Board
of Directors, neither the Seller nor any of its Subsidiaries shall enter into any transaction with any director, officer, employee or holder of more than 5% of the outstanding capital stock of any class or series of capital stock of the Seller or
any of its Subsidiaries, member of the family of any such person, or any corporation, partnership, trust or other entity in which any such person, or member of the family of any such person, is a director, officer, trustee, partner or holder of more
than 5% of the outstanding capital stock thereof, with the exception of transactions which are consummated upon terms that are no less favorable than would be available if such transaction had been effected at arms-length, in the reasonable judgment
of the Board of Directors. 
 (b) The Seller shall timely prepare and file with the Securities and Exchange Commission the form of notice of
the sale of securities pursuant to the requirements of Regulation D, if required, regarding the sale of the Preferred Stock and Warrants under this Agreement. 
 (c) The Seller shall timely prepare and file such applications, consents to service of process (but not including a general consent to service of process) and similar documents and take such other steps and perform
such further acts as shall be required by the U.S. state securities law requirements of each jurisdiction where a Purchaser resides as indicated on Schedule 1 with respect to the sale of the Preferred Stock and Warrants under this Agreement.

  

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 (d) Neither the Seller nor any of its Affiliates, nor any Person acting on its or their behalf, shall
directly or indirectly make any offers or sales of any securities or solicit any offers to buy any securities under circumstances that would cause the loss of the 4(2) exemption under the Securities Act for the transactions contemplated hereby.
Subject to any consent or approval rights of the Purchasers hereunder, in the event the Seller contemplates an offering of its equity or debt securities within six months following the Closing Date, the Seller agrees that it shall notify the
Purchasers of such offering (without providing any material non-public information to any Purchaser without its prior approval). 
 5.11
Securities Laws Disclosure; Publicity. The Seller shall (i) on or promptly after the Closing Date, issue a press release acceptable to The Tail Wind Fund Ltd. disclosing the transactions contemplated hereby, and (ii) promptly after
the Closing Date, file with the Commission a Report on Form 8-K disclosing the transactions contemplated hereby. Except as provided in the preceding sentence, neither the Seller nor the Purchasers shall make any press release or other publicity
about the terms of this Agreement or the transactions contemplated hereby without the prior approval of the other unless otherwise required by law or the rules of the Commission. 
 5.12 Like Treatment of Purchasers and Holders. Neither the Seller nor any of its affiliates shall, directly or indirectly, pay or cause to be paid
any consideration (immediate or contingent), whether by way of interest, fee, payment for redemption, conversion or exercise of the Securities, or otherwise, to any Purchaser or holder of Securities, for or as an inducement to, or in connection with
the solicitation of, any consent, waiver or amendment to any terms or provisions of this Agreement or the Related Documents, unless such consideration is required to be paid to all Purchasers or holders of Securities bound by such consent, waiver or
amendment. The Seller shall not, directly or indirectly, redeem any Securities unless such offer of redemption is made pro rata to all Purchasers or holders of Securities, as the case may be, on identical terms. 
 5.13 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under this Agreement or any Related
Documents are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under any such agreement. Nothing contained herein or in
any Related Documents, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are
in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by such agreement. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the
rights arising out of this Agreement or out of the other Related Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser represents that it has been
represented by its own separate legal counsel in its review and negotiation of this Agreement and the Related Documents. For reasons of administrative convenience only, the Purchasers acknowledge and agree that they and their respective counsel have
chosen to communicate with the Seller through Peter J. Weisman, P.C., but Peter J. Weisman, P.C. does not represent any of the Purchasers in this transaction other than The Tail Wind Fund Ltd. (the “Lead Investor”). 
 5.14 Other Transactions. Until after the date which is three months following the date hereof, the Company shall not issue or sell or agree to issue
or sell any securities in a financing transaction which is a Variable Rate Transaction or otherwise provides the purchasers of such securities with more favorable terms (including without limitation with respect to the effective purchase price per
share, conversion, exercise or exchange price (whether before or after adjustment), term, coupon, warrant coverage or otherwise) than those contained in this Agreement and the Related Documents and the transactions contemplated hereby and thereby.
“Variable Rate Transaction” shall mean a transaction in which the Seller issues or sells, or agrees to issue or sell (a) any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to
receive additional shares of, Common Stock either (x) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the Common Stock at any time after the initial
issuance of such debt or equity securities, (y) with a fixed conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of
specified or contingent events directly or indirectly related to the business of the Seller or the market for the Common Stock (but excluding standard stock split anti-dilution provisions), or (z) under a warrant exercisable for a number of
shares based upon and/or varying with the trading prices of or quotations for the Common Stock at any time after the initial issuance of such warrant, or (b) any securities of the Seller pursuant to an “equity line” structure which
provides for the sale, from time to time, of securities of the Seller which are registered for resale pursuant to the Securities Act. 
  

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 5.15 Additional Purchase Right. The Lead Investor shall have the right (“Additional Purchase
Right”), upon ten (10) business days prior written notice to the Seller, to purchase up to an additional $1,500,000 in liquidation value of Series F 10% Cumulative Convertible Preferred Stock on the same terms and conditions as set forth
herein (including without limitation the same warrant coverage and pricing as provided herein). In the event the Lead Investor exercises such Additional Purchase Right, the parties shall enter into the same transaction documentation, mutatis
mutandis, as the documentation for the transactions contemplated hereby. The Seller may terminate this Additional Purchase Right at any time following the date which is one (1) year following the date the Registration Statement is
declared effective by the Commission, provided that the Seller shall provide fifteen (15) business days prior written notice of such termination to the Lead Investor, and the Lead Investor may exercise its Additional Purchase Right during such
15-business day notice period. The Seller shall reserve 1,500 shares of Preferred Stock for the Lead Investor in contemplation of the exercise of such Additional Purchase Right. 
 ARTICLE VI - CONDITIONS TO CLOSINGS 
 6.1 Conditions to Obligations of Purchasers to
Effect the Closing. The obligations of a Purchaser to effect the Closing and the transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to Closing, of each of the following conditions, any of which may be
waived, in writing, by a Purchaser: 
 (a) Representations and Warranties. The representations and warranties of the Seller set forth
in this Agreement shall be true and correct in all material respects (except for those qualified as to materiality or a Material Adverse Effect, which shall be true and correct in all respects) as of the date of this Agreement and as of the Closing
Date (except to the extent that such representation or warranty speaks of an earlier date, in which case such representation or warranty shall be true and correct in all material respects (or if qualified as to materiality or a Material Adverse
Effect, true and correct in all respects) as of such date) as though made on and as of the Closing Date. On or prior to the Closing Date the Seller shall deliver to each of the Purchasers a certificate of the Chief Executive Office and Chief
Financial Officer of the Seller to the effect that all of the representations and warranties of the Seller set forth in this Agreement are true and correct as of the Closing Date (including, to the extent necessary, updated disclosure schedules
which shall be reasonably acceptable to each Purchaser) and that the Seller has performed all of its obligations under this Agreement required to be performed prior to the Closing Date. 
 (b) Performance of Obligations of Seller. The Seller shall have performed in all material respects all agreements and covenants required to be
performed by it under this Agreement on or prior to the Closing Date. 
 (c) No Suspension of Trading. From the date hereof to the
Closing Date, trading in the Common Stock shall not have been suspended by the Commission (except for any suspension of trading of limited duration agreed to by the Seller, which suspension shall be terminated prior to Closing), and, at any time
prior to the Closing Date, trading in securities generally as reported by Bloomberg Financial Markets shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such
service, or on any trading market, nor shall a banking moratorium have been declared either by the United States or New York State authorities, nor shall there have occurred any material outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of each Purchaser, makes it impracticable or inadvisable to purchase the Preferred
Stock and Warrants at the Closing. 
 (d) Deliverables. The Seller shall deliver or cause to be delivered to each of the Purchasers
the following on or prior to the Closing Date: 
 1. (i) One or more certificates evidencing the aggregate number of
shares of the Preferred Stock, duly authorized, issued, fully paid and non-assessable, as is to be purchased at such Closing by such Purchaser, registered in the name of such Purchaser; and 
  

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 (ii) One or more certificates evidencing the Warrants, registered in the name of such
Purchaser, pursuant to which such Purchaser shall be entitled to purchase that number of shares of Common Stock as indicated in Schedule 1 besides such Purchaser’s name. 
 2. The Investor Rights Agreement, in the form attached hereto as Exhibit C (the “Investor Rights Agreement”), duly
executed by the Seller. 
 3. A legal opinion of counsel to the Seller (“Seller’s Counsel”), in the form
attached hereto as Exhibit D. 
 5. A certificate of the Secretary of the Seller (the “Secretary’s
Certificate”), in form and substance satisfactory to the Purchasers, certifying as follows as of the date of such Closing: 
 (i) that the Certificate of Designation authorizing the Preferred Stock has been duly filed in the office of the Delaware Secretary of State, and that attached to the Secretary’s Certificate is true and complete copy of the Certificate
of Incorporation of the Seller, as amended, including the Certificate of Designation; 
 (ii) that a true copy of the Bylaws
of the Seller, as amended to the Closing Date, is attached to the Secretary’s Certificate; 
 (iii) that attached thereto
are true and complete copies of the resolutions of the Board of Directors of the Seller authorizing the execution, delivery and performance of this Agreement and the Related Documents, instruments and certificates required to be executed by it in
connection herewith and approving the consummation of the transactions in the manner contemplated hereby including, but not limited to, the authorization and issuance of the Preferred Stock and Warrants; 
 (iv) the names and true signatures of the officers of the Seller signing this Agreement and all other documents to be delivered in
connection with this Agreement; 
 (v) such other matters as required by this Agreement; and 
 (vi) such other matters as the Purchasers may reasonably request. 
 6. A wire transfer representing the amount due for reasonable legal fees and other expenses set forth in Section 8.2 hereof (which
may be offset from the Purchase Price at the election of the applicable Purchaser). 
 7. Proof of due filing with the
Secretary of State of the State of Delaware of the Certificate of Designation authorizing the Preferred Stock. 
 8. Seller
shall have applied to each U.S. securities exchange, interdealer quotation system and other trading market where its Common Stock is currently listed or qualified for trading or quotation for the listing or qualification of the Conversion Shares and
the Warrant Shares for trading or quotation thereon in the time and manner required thereby. 
 9. Such other documents as the
Purchasers shall reasonably request. 
 (e) There shall have been no Material Adverse Effect with respect to the Seller. 
 6.2 Conditions to Obligations of the Seller to Effect the Closing. The obligations of the Seller to effect the Closing and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing of each of the following conditions, any of which may be waived, in writing, by the Seller: 
 (a) Representations and Warranties. The representations and warranties of each Purchaser set forth in 

  

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this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date (except to the extent that such
representation or warranty speaks of an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such date) as though made on and as of the Closing Date. 
 (b) Performance of Obligations of the Purchasers. Each of the Purchasers shall have performed in all material respects all agreements and
covenants required to be performed by it under this Agreement on or prior to the Closing Date. 
 (c) Deliverables. Each of the
Purchasers shall deliver or cause to be delivered to the Seller (i) upon receipt of the Seller’s items described in Section 6.1(d) above, payment of the portion of the Purchase Price set forth opposite each Purchaser’s name on
Schedule 1 applicable for such Closing, in cash by wire transfer of immediately available funds to an account designated in writing by Seller prior to the date hereof; (ii) an executed copy of the Investor Rights Agreement; and
(iii) such other documents as the Seller shall reasonably request. 
 ARTICLE VII – INDEMNIFICATION AND LIQUIDATED DAMAGES

 7.1 Survival of Representations. The representations and warranties of the Seller and the Purchasers contained in or made pursuant
to this Agreement shall survive the execution and delivery of this Agreement. The Seller’s and the Purchasers’ warranties and representations shall in no way be affected by any investigation of the subject matter thereof made by or on
behalf of the Seller or the Purchasers. 
 7.2 Indemnification. The Seller agrees to indemnify and hold harmless the Purchasers, their
Affiliates, each of their officers, directors, employees and agents and their respective successors and assigns, from and against any losses, damages, or expenses which are caused by or arise out of (i) any breach or default in the performance
by the Seller of any covenant or agreement made by the Seller in this Agreement or in any of the Related Documents; (ii) any breach of warranty or representation made by the Seller in this Agreement or in any of the Related Documents;
(iii) any and all third party actions, suits, proceedings, claims, demands, judgments, costs and expenses (including reasonable legal fees and expenses) incident to any of the foregoing; and (iv) any enforcement of this indemnification.

 7.3 Indemnity Procedure. The Seller is referred to herein as the “Indemnifying Party” and the other party or parties
claiming indemnity is referred to as the “Indemnified Party”. An Indemnified Party under this Agreement shall, with respect to claims asserted against such party by any third party, give written notice to the Indemnifying Party of any
liability which might give rise to a claim for indemnity under this Agreement within sixty (60) business days of the receipt of any written claim from any such third party, but not later than twenty (20) days prior to the date any answer
or responsive pleading is due, and with respect to other matters for which the Indemnified Party may seek indemnification, give prompt written notice to the Indemnifying Party of any liability which might give rise to a claim for indemnity;
provided, however, that any failure to give such notice will not waive any rights of the Indemnified Party except to the extent the rights of the Indemnifying Party are materially prejudiced. 
 The Indemnifying Party shall have the right, at its election, to take over the defense or settlement of such claim by giving written notice to the
Indemnified Party at least fifteen (15) days prior to the time when an answer or other responsive pleading or notice with respect thereto is required. If the Indemnifying Party makes such election, it may conduct the defense of such claim
through counsel of its choosing (subject to the Indemnified Party’s approval of such counsel, which approval shall not be unreasonably withheld), shall be solely responsible for the expenses of such defense and shall be bound by the results of
its defense or settlement of the claim. The Indemnifying Party shall not settle any such claim without prior notice to and consultation with the Indemnified Party, and no such settlement involving any equitable relief or which might have an adverse
effect on the Indemnified Party may be agreed to without the written consent of the Indemnified Party (which consent shall not be unreasonably withheld). So long as the Indemnifying Party is diligently contesting any such claim in good faith, the
Indemnified Party may pay or settle such claim only at its own expense and the Indemnifying Party will not be responsible for the fees of separate legal counsel to the Indemnified Party, unless the named parties to any proceeding include both
parties or representation of both parties by the same counsel would be inappropriate due to conflicts of interest or otherwise. If the Indemnifying Party does not make such election, or having made such election does not, in the reasonable opinion
of the Indemnified Party proceed diligently to defend such claim, then the Indemnified Party may (after written 

  

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notice to the Indemnifying Party), at the expense of the Indemnifying Party, elect to take over the defense of and proceed to handle such claim in its
discretion and the Indemnifying Party shall be bound by any defense or settlement that the Indemnified Party may make in good faith with respect to such claim. In connection therewith, the Indemnifying Party will fully cooperate with the Indemnified
Party should the Indemnified Party elect to take over the defense of any such claim. The parties agree to cooperate in defending such third party claims and the Indemnified Party shall provide such cooperation and such access to its books, records
and properties as the Indemnifying Party shall reasonably request with respect to any matter for which indemnification is sought hereunder; and the parties hereto agree to cooperate with each other in order to ensure the proper and adequate defense
thereof. 
 With regard to claims of third parties for which indemnification is payable hereunder, such indemnification shall be paid by the
Indemnifying Party upon the earlier to occur of: (i) the entry of a judgment against the Indemnified Party and the expiration of any applicable appeal period, or if earlier, five (5) days prior to the date that the judgment creditor has
the right to execute the judgment; (ii) the entry of an unappealable judgment or final appellate decision against the Indemnified Party; or (iii) a settlement of the claim. Notwithstanding the foregoing, the reasonable expenses of counsel
to the Indemnified Party shall be reimbursed on a current basis by the Indemnifying Party. With regard to other claims for which indemnification is payable hereunder, such indemnification shall be paid promptly by the Indemnifying Party upon demand
by the Indemnified Party. 
 7.4 Liquidated Damages. The Seller and the Purchasers agree that the Purchasers will suffer damages if a
Breach Event (as defined below) occurs or is ongoing. The Seller and the Purchasers further agree that it may not be feasible to ascertain the extent of such damages with precision. If a Breach Event (as defined below) occurs, then the Purchasers
may elect, as liquidated damages, and in addition to any other remedies legally available to such Purchasers, to require that the Seller shall pay to the Purchasers liquidated damages at a rate of 18% per annum of the aggregate Liquidation
Amount of such Purchasers’ outstanding Preferred Stock payable monthly in cash at the end of each month (or part thereof) in which the Breach Event is outstanding. 
 “Breach Event” means either: 
 (i) Any breach of any warranty or representation of the Seller as of the date made in this Agreement, any Related Agreement or any other agreement delivered herewith, which breach, or the facts and circumstances
concerning such breach, has or is reasonably likely to have a Material Adverse Effect; or 
 (ii) Any breach by the Seller of
any material covenant or obligation under this Agreement, any Related Agreement or any other agreement delivered herewith, and which breach, if capable of being cured, has not been cured within ten (10) days after notice of such breach has been
given by the holders of a majority of Preferred Stock to the Seller. 
 The Seller and the Purchasers have expressly negotiated this
Section 7.4, and have agreed that in light of the circumstances existing at the time of execution of this Agreement, the liquidated damages expressed herein represent a reasonable estimate of the harm likely to be suffered by the Purchasers
upon the occurrence of a Breach Event. 
 ARTICLE VIII - MISCELLANEOUS 
 8.1 Further Assurances. Each party agrees to cooperate fully with the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably requested by any other party to better evidence and reflect the transactions described herein and contemplated hereby and to carry into effect the intents and purposes of
this Agreement, and further agrees to take promptly, or cause to be taken, all actions, and to do promptly, or cause to be done, all things necessary, proper or advisable under applicable law to consummate and make effective the transactions
contemplated hereby, to obtain all necessary waivers, consents and approvals, to effect all necessary registrations and filings, and to remove any injunctions or other impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement for the purpose of securing to the parties hereto the benefits contemplated by this Agreement. 
  

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 8.2 Fees and Expenses. The parties hereto shall pay their own costs and expenses in connection
herewith, except that the Seller shall pay to Tail Wind Advisory and Management Ltd. a non-refundable sum equal to $40,000 as and for legal and due diligence expenses incurred in connection herewith, $15,000 of which amount has been previously paid.
The Seller shall pay all fees and expenses of any placement agents, finders and escrow agents in connection with the transactions contemplated by this Agreement pursuant to a separate agreement between such parties. 
 8.3 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and
shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 5:00 p.m. (New York City time) on a
business day, (b) the next business day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a business day or later than 5:00 p.m.
(New York City time) on any business day, (c) the business day following the date of mailing, if sent by U.S. nationally recognized overnight courier service such as Federal Express, or (d) actual receipt by the party to whom such notice
is required to be given. The address for such notices and communications shall be as follows: 
 If to the Purchasers at each Purchaser’s
address set forth under its name on Schedule 1 attached hereto, or with respect to the Seller, addressed to: 
 Avatech Solutions,
Inc. 
 10715 Red Run Blvd., Suite 101 
 Owings Mills, MD 21117 
 Attention: General Counsel 
 Facsimile No.: (410) 753-1591 
 or to such other address or addresses or facsimile number or numbers as any such party
may most recently have designated in writing to the other parties hereto by such notice. Copies of notices to any Purchaser shall be sent to the addresses, if any, listed on Schedule 1 attached hereto. 
 Unless otherwise stated above, such communications shall be effective when they are received by the addressee thereof in conformity with this Section.
Any party may change its address for such communications by giving notice thereof to the other parties in conformity with this Section. 
 8.4 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and enforced in accordance with the laws of the State of New York without reference to the
conflicts of laws principles thereof. 
 8.5 Jurisdiction and Venue. This Agreement shall be subject to the exclusive jurisdiction of
the Federal District Court, Southern District of New York and if such court does not have proper jurisdiction, the State Courts of New York County, New York. The parties to this Agreement agree that any breach of any term or condition of this
Agreement shall be deemed to be a breach occurring in the State of New York by virtue of a failure to perform an act required to be performed in the State of New York and irrevocably and expressly agree to submit to the jurisdiction of the Federal
District Court, Southern District of New York and if such court does not have proper jurisdiction, the State Courts of New York County, New York for the purpose of resolving any disputes among the parties relating to this Agreement or the
transactions contemplated hereby. The parties irrevocably waive, to the fullest extent permitted by law, any objection which they may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this
Agreement, or any judgment entered by any court in respect hereof brought in New York County, New York, and further irrevocably waive any claim that any suit, action or proceeding brought in Federal District Court, Southern District of New York and
if such court does not have proper jurisdiction, the State Courts of New York County, New York has been brought in an inconvenient forum. Each of the parties hereto consents to process being served in any such suit, action or proceeding, by mailing
a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section 8.5 shall affect or
limit any right to serve process in any other manner permitted by law. 
 8.6 Successors and Assigns. This Agreement is personal to
each of the parties and may not be 

  

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assigned without the written consent of the other parties; provided, however, that any of the Purchasers shall be permitted to assign this Agreement to any
Person to whom it assigns or transfers securities issued or issuable pursuant to this Agreement. Any assignee must be an “accredited investor” as defined in Rule 501(a) promulgated under the Securities Act. 
 8.7 Severability. If any provision of this Agreement, or the application thereof, shall for any reason or to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision to other persons or circumstances shall continue in full force and effect and in no way be affected, impaired or invalidated. 
 8.8 Entire Agreement. This Agreement and the other agreements and instruments referenced herein constitute the entire understanding and agreement
of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings. 
 8.9 Other
Remedies. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party shall be deemed cumulative with and not exclusive of any other remedy conferred hereby or by law, or in equity on such party, and the
exercise of any one remedy shall not preclude the exercise of any other. 
 8.10 Amendment and Waivers. Subject to Section 5.12,
any term or provision of this Agreement may be amended, and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a writing signed by the Seller
and the holders of at least 75% of the Preferred Stock then outstanding, and such waiver or amendment, as the case may be, shall be binding upon all Purchasers. The waiver by a party of any breach hereof or default in the performance hereof shall
not be deemed to constitute a waiver of any other default or any succeeding breach or default. This Agreement may not be amended or supplemented by any party hereto except pursuant to a written amendment executed by the Seller and the holders of at
least 75% of the Preferred Stock then outstanding. No amendment shall be effected to impact a holder of Preferred Stock in a disproportionately adverse fashion without the consent of such individual holder of Preferred Stock. 
 8.11. Termination. This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any
effect whatsoever on the obligations between the Seller and the other Purchasers, by written notice to the Seller, if the Closing has not been consummated on or before June 16, 2006; provided, however, that no such termination will affect the
right of any party to sue for any breach by the other party (or parties). 
 8.12 No Waiver. The failure of any party to enforce any
of the provisions hereof shall not be construed to be a waiver of the right of such party thereafter to enforce such provisions. 
 8.13
Construction of Agreement; Knowledge. For purposes of this Agreement, the term “knowledge,” when used in reference to a corporation means the knowledge of the directors and executive officers of such corporation (including, if
applicable, any person designated as a chief scientific, medical or technical officer) assuming such persons shall have made inquiry that is customary and appropriate under the circumstances to which reference is made, and when used in reference to
an individual means the knowledge of such individual assuming the individual shall have made inquiry that is customary and appropriate under the circumstances to which reference is made. 
 8.14 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original as against any party whose
signature appears thereon and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the
parties reflected hereon as signatories. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with
the same force and effect as if such facsimile signature page were an original thereof. 
 8.15 No Third Party Beneficiary. Nothing
expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any person other than the parties hereto and their respective heirs, personal representatives, legal representatives, successors and permitted assigns,
any rights or remedies under or by reason of this Agreement. 
 8.16 Waiver of Trial by Jury. THE PARTIES HERETO IRREVOCABLY WAIVE
TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 
 [Signature Page
Follows] 
  

 21 

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

  

			
	 SELLER:
  
 AVATECH SOLUTIONS, INC.

			
		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	

 PURCHASERS: 
 THE TAIL WIND FUND LTD. 

					
	By:	 	THE TAIL WIND ADVISORY & MANAGEMENT LTD.,
		 	as investment manager

  

					
		 	By:	 	  

		 		 	David Crook, CEO

  

			
	SOLOMON STRATEGIC HOLDINGS, INC.
		
	 By:
	 	  

		 	 Andrew P. Mackellar, Director

 [Avatech Solutions, Inc Preferred Stock and Warrant Purchase Agreement Signature Page ]

 Schedule 1 to Preferred Stock and Warrant Purchase Agreement dated as of June 12, 2006

 Purchasers and Shares of Preferred Stock and Warrants 
  

										
	 Name, Address, Fax Number and Email of Purchaser
	  	 Copies of Notices to
	  	Shares of
Preferred
Stock
Purchased	  	Common
Stock
Underlying
Warrants1	  	Purchase Price
	 The Tail Wind Fund Ltd.
 c/o Tail Wind
Advisory & Management Ltd.
 77 Long Acre
 London, WC2E
9LB, UK
 Fax: 011-44-207-468-7657
 Email:
dcrook@tailwindam.com
	  	 Peter J. Weisman, P.C.
 335 Madison Avenue

Suite 1702
 New York, NY 10017
 Fax: 212-317-8666
 Email: pweisman@pweisman.com
	  	3,700	  	740,000	  	$	3,700,000
					
	 Solomon Strategic Holdings, Inc.
 c/o Andrew P.
MacKellar
 Greenlands
 The Red Gap
 Castletown, IM9 1HB, British Isles
 Fax: +011 (44) 1624 824191

Email: mackellar_twi@manx.net
	  	 Peter J. Weisman, P.C.
 335 Madison Avenue

Suite 1702
 New York, NY 10017
 Fax: 212-317-8666
 Email: pweisman@pweisman.com
	  	300	  	60,000	  	$	300,000
		  		  	 	  	 	  	 	 
	 Totals:
	  		  	4,000	  	800,000	  	$	4,000,000
		  		  	 	  	 	  	 	 

	1	40% of Purchase Price divided by Conversion Value (as set forth in the Certificate of Designation) of $2.00.

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