Exhibit 10.1
AMENDED STOCK PURCHASE AGREEMENT
     This Amended STOCK PURCHASE AGREEMENT (this “Agreement”), is made and
entered into as of August 29, 2006, by and between VIRCO MFG. CORPORATION, a
Delaware corporation (the “Company”), and the purchasers listed on the signature
page of this Agreement (each a “Purchaser” and collectively the “Purchasers”).
     WHEREAS, the Company and the Purchasers entered into certain Stock Purchase
Agreements dated as of June 26, 2006 (the “Prior Agreements”) whereby the
Company agreed to issue and sell, and the Purchasers agreed to purchase and pay
for, an aggregate of 60,246 shares of the Company’s Common Stock, par value $.01
per share (the “Shares”); and
     WHEREAS, pricing for the Shares in the Prior Agreement was based upon a ten
(10) day measuring period that had been negotiated a few weeks prior to the date
of the Prior Agreement by third party investors; and
     WHEREAS, following discussions with the American Stock Exchange (the
“Amex”) in connection with the Company’s application to list the Shares on the
Amex, it was mutually agreed that the ten (10) day measuring period to calculate
the fair market value of the Shares was inappropriate and should relate instead
to the June 26, 2006 date of the Stock Purchase Agreements, rather than to the
date of the Company’s agreement with its third party investors; and
     WHEREAS, the Company and the Purchasers have mutually agreed to reprice the
Shares based upon the June 26, 2006 date of the Prior Agreement.
     NOW THEREFORE, the parties hereto agree that the Prior Agreements are
hereby cancelled and rescinded, and the entire continuing understanding and
agreement of the Company and the Purchasers with respect to sale and purchase of
the Shares is as set forth in this Stock Purchase Agreement.
1. AGREEMENT TO SELL AND PURCHASE THE SHARES
     1.1 PURCHASE AND SALE
     Subject to the terms and conditions of this Agreement, the Purchasers
hereby agree to purchase (severally and not jointly), and the Company hereby
agrees to sell and issue to the Purchasers, at the Closing (as defined below)
the respective number of Shares, as are set forth on Schedule A to this
Agreement, and each Purchaser agrees to purchase and pay for that number of the
Shares as is indicated next to his/her name on Schedule A.
     1.2. DELIVERIES AT CLOSING
     (a) Completion of the purchase and sale of the Shares (the “Closing”) shall
occur at the offices of Gibson, Dunn & Crutcher LLP, counsel to the Company, at
2029 Century Park East, 40th Floor, Los Angeles, California, at 11:00 a.m. local
time on September 31, 2006, or such other time and date as may be agreed by the
parties (the “Closing Date”).
     (b) At the Closing, the Company shall issue and deliver to each Purchaser a
stock certificate registered in the name of such Purchaser representing the
number of Shares purchased by such Purchaser as set forth on Schedule A hereto.
Each stock certificate shall bear an appropriate legend referring to the fact
that the Shares are being sold in reliance upon the exemption from registration
provided by Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”) and Rule 506 under the Securities Act, as applicable.

 

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     (c) At the Closing each Purchaser shall pay to the Company readily
available funds in the respective amount committed as set forth opposite his
name on Schedule A (collectively in the aggregate, the “Purchase Price”).
2. PURCHASE PRICE
     The Purchase Price for the Shares deliverable by the Company to the
Purchasers at Closing shall be $5.02 for each of the Shares purchased, which was
the average daily closing price for shares of the Company’s Common Stock on the
American Stock Exchange (“Amex”) during a ten (10) day measuring period prior to
the date of the Prior Agreement.
3. CONDITIONS TO CLOSING
     (a) The Company’s obligation to complete the sale of the Shares shall be
subject to its receipt on the Closing Date of funds in the full amount of the
Purchase Price in payment for the Shares.
     (b) The Purchasers’ obligation to pay for the Shares shall be subject to
their receipt of the following items on the Closing Date:
     (i) Stock certificates representing the Shares in form satisfactory to the
Purchasers;
     (ii) Warrant certificates in the form attached hereto as Schedule B (the
“Warrants”) representing the Purchasers’ right to acquire 25% of the number of
Shares being purchased on the Closing Date (the “Warrant Shares”) over a five
year period at an exercise price of $5.60 per share during the first three
(3) years following the Closing Date and of $6.06 per share during the fourth
(4th) and fifth (5th) years following the Closing Date; and
     (iii) Evidence of listing of the Shares on the Amex.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
     The Company hereby represents and warrants to the Purchasers as follows:
     4.1 ORGANIZATION, STANDING AND QUALIFICATION
     The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware. The
Company has the corporate power and authority to own, lease and operate its
properties and to conduct its business as currently conducted and to enter into
and perform its obligations under this Agreement. The Company is duly qualified
as a foreign corporation to transact business and is in good standing in any
other jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except where
the failure to so qualify would not, singly or in the aggregate, have a material
adverse effect on the financial condition or the earnings or assets of the
Company.
     4.2 DUE EXECUTION, DELIVERY AND PERFORMANCE
     (a) This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms.
     (b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated in this Agreement and the
fulfillment of the terms of this Agreement (i) have been duly authorized by all
necessary corporate action on the part of the Company; (ii) will not conflict
with or constitute a breach of, or default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company pursuant to, any contract, indenture, mortgage, loan agreement, note,
lease, sublease, voting agreement, voting trust or other agreement to which the
Company is a party or by which it may be bound, or to which any of the property
or assets of the Company is subject; (iii) will not trigger anti-dilution rights

 

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or other rights to acquire additional equity securities of the Company; and
(iv) will not result in any violation of the provisions of the certificate of
incorporation or bylaws of the Company or any applicable statute, law, rule,
regulation or order.
     4.3 ISSUANCE, SALE AND DELIVERY OF THE SHARES
     (a) The Shares have been duly authorized for issuance and sale pursuant to
this Agreement, and, when issued and delivered by the Company pursuant to this
Agreement against payment by the Purchasers of the Purchase Price, they will be
validly issued and fully paid and nonassessable and free and clear of all
pledges, liens and encumbrances.
     (b) Issuance of the Shares is not subject to preemptive or other similar
rights. No further approval or authority of the stockholders or the Board of
Directors of the Company will be required for the issuance and sale of the
Shares as contemplated in this Agreement.
     (c) Subject to the accuracy of the Purchasers’ representations and
warranties in Section 5 of this Agreement, the offer, sale, and issuance of the
Shares in conformity with the terms of this Agreement constitutes a transaction
exempt from the registration requirements of Section 5 of the Securities Act.
     4.4 CAPITALIZATION
     (a) The authorized capital stock of the Company consists of twenty five
million (25,000,000) shares of Common Stock and three million (3,000,000) shares
of Preferred Stock.
     (b) As of July 6, 2006, the issued and outstanding capital stock of the
Company consisted of fourteen million three hundred twenty two thousand fifty
one (14,322,051) shares of Common Stock. No shares of preferred stock are issued
and outstanding. The shares of issued and outstanding Common Stock of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable and have not been issued in violation of any preemptive or other
similar rights.
     (c) The Company has reserved, and has available for future issuance, an
aggregate of 686,559 shares of Common Stock under the Company’s stock option
plan (i) for issuance of shares upon the exercise of stock options granted or
available for future grant and (ii) for issuance of shares of restricted stock.
With the exception of the foregoing, there are no outstanding subscriptions,
options, warrants, convertible or exchangeable securities or other rights
granted by the Company to purchase shares of Common Stock or other securities of
the Company, and there are no commitments, plans or arrangements to issue any
shares of Common Stock or any security convertible into or exchangeable for
Common Stock.
     4.5 FINANCIAL STATEMENTS
     The January 31, 2006 financial statements of the Company filed with the
Securities and Exchange Commission (“SEC”) as part of the Company’s Form 10-K
dated April 13, 2006 present fairly the financial position of the Company as of
the dates indicated and the results of the Company’s operations for the periods
specified. These financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis and any
supporting schedules included with the financial statements present fairly the
information stated in the financial statements. The financial and statistical
data set forth in the Company’s Form 10-K referred to above were prepared on an
accounting basis consistent with such financial statements.
     4.6 NO MATERIAL CHANGE
     Since July 6, 2006,
     (a) there has been no material adverse change in the financial condition or
in the earnings or assets of the Company, whether or not arising in the ordinary
course of business;

 

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     (b) there have been no transactions entered into by the Company other than
those in the ordinary course of business which are material with respect to the
Company;
     (c) there has been no issuance of additional shares of the Company’s Common
Stock;
     (d) there has been no dividend or distribution of any kind declared, paid
or made by the Company on its Common Stock; and
     (e) the Company has incurred no material liabilities or material contingent
obligations.
     4.7 USE OF PROCEEDS
     The Company intends to use the proceeds from sale of the Shares for working
capital and other general corporate purposes.
     4.8 NO DEFAULTS
     The Company is not in violation of its certificate of incorporation or
bylaws or in material default in the performance or observance of any
obligation, agreement, covenant or condition contained in any material contract,
indenture, mortgage, loan agreement, note, lease, sublease, voting agreement,
voting trust, or other material agreement to which the Company is a party or by
which it may be bound, or to which any of the property or assets of the Company
is subject.
     4.9 NO ACTIONS
     There is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending, or, to the
knowledge of the Company, threatened, against the Company which, singly or in
the aggregate, would result in any material adverse change in the financial
condition or in the earnings or business prospects of the Company, or which,
singly or in the aggregate, might materially and adversely affect the properties
or assets of the Company or which might materially and adversely affect the
consummation of this Agreement, nor, to the best knowledge of the Company, is
there any reasonable basis therefor. The Company is not in default with respect
to any judgment, order or decree of any court or governmental agency or
instrumentality which, singly or in the aggregate, would have a material adverse
effect on the assets, properties or business of the Company.
     4.10 CONTRACTS
     All of the contracts filed with the SEC as part of the Company Documents
are in full force and effect on the date hereof, except for contracts the
termination or expiration of which would not, singly or in the aggregate, have a
material adverse effect on the business, properties or assets of the Company.
Neither the Company nor, to the best knowledge of the Company, any other party
is in material breach of or default under any such contracts. The Company is in
full compliance with all covenants, financial or otherwise, contained within its
loan agreements and the Company has not received any correspondence from any of
its lenders questioning or otherwise relating to the Company’s compliance with
any such covenants.
     4.11 ENVIRONMENTAL MATTERS
     Except as would not, singly or in the aggregate, reasonably be expected to
have a material adverse effect on the financial condition or the earnings or
assets of the Company,
     (a) the Company is in compliance with all applicable Environmental Laws (as
defined below);
     (b) the Company has all permits, authorizations and approvals required
under any applicable Environmental Laws and is in compliance with the
requirements of such permits authorizations and approvals; and

 

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     (c) there are no pending or, to the best knowledge of the Company,
threatened Environmental Claims (as defined below) against the Company.
     For purposes of this Agreement, the following terms shall have the
following meanings: “Environmental Law” means any United States (or other
applicable jurisdiction’s) Federal, state, local or municipal statute, law,
rule, regulation, ordinance, code, policy or rule of common law and any judicial
or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to the environment,
health, safety or any chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority. “Environmental
Claims” means any and all administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or violation,
investigations or proceedings relating in any way to any Environmental Law.
     4.12 LABOR MATTERS
     No labor dispute with the employees of the Company exists or, to the best
knowledge of the Company, is threatened. To the best knowledge of the Company,
no management level or other significant employee has indicated that he or she
intends to terminate his or her employment with the Company and the Company has
no plans to terminate any management level or other significant employee.
     4.13 PROPERTIES
     The Company has good and marketable title to its properties, free and clear
of any material security interests, mortgages, pledges, liens, charges,
encumbrances and claims of record, except for the lien on substantially all of
the assets and properties of the Company held by Wells Fargo Bank. The
properties of the Company are, in the aggregate, in good repair (reasonable wear
and tear excepted) and suitable for their respective uses. All real property
held under lease by the Company is held under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
conduct of the business of the Company. The Company owns or leases all such
properties as are necessary to its business or operations as now conducted.
     4.14 INTELLECTUAL PROPERTY
     (a) The Company owns or is licensed to use all patents, patent
applications, inventions, trademarks, trade names, applications for registration
of trademarks, service marks, service mark applications, copyrights, know-how,
manufacturing processes, formulae, trade secrets, licenses and rights in any
thereof and any other intangible property and assets that are material to the
business of the Company as now conducted and as proposed to be conducted (in
this Agreement called the “Proprietary Rights”).
     (b) The Company does not have any knowledge of, and the Company has not
given or received any notice of, any pending conflicts with or infringement of
the rights of others with respect to any Proprietary Rights or with respect to
any license of Proprietary Rights which are material to the business of the
Company.
     (c) No action, suit, arbitration, or legal, administrative or other
proceeding, or investigation is pending, or, to the best knowledge of the
Company, threatened, which involves any Proprietary Rights, nor, to the best
knowledge of the Company, is there any reasonable basis therefor.
     (d) The Company is not subject to any judgment, order, writ, injunction or
decree of any court or any Federal, state, local, foreign or other governmental
department, commission or board, domestic or foreign, or any arbitrator, and has
not entered into or is not a party to any contract which restricts or impairs
the use of any such Proprietary Rights in a manner which would have a material
adverse effect on the use of any of the Proprietary Rights.
     (e) The Company has not received written notice of any pending conflict
with or infringement upon any third-party proprietary rights.

 

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     (f) The Company has not entered into any consent, indemnification,
forbearance to sue or settlement agreement with respect to Proprietary Rights.
No claims have been asserted by any person with respect to the validity of the
Company’s ownership or right to use the Proprietary Rights and, to the best
knowledge of the Company, there is no reasonable basis for any such claim to be
successful.
     (g) The Company has complied, in all material respects, with its
obligations relating to the protection of the Proprietary Rights which are
material to the business of the Company pursuant to licenses.
     (h) To the best knowledge of the Company, no person is infringing on or
violating the Proprietary Rights.
     4.15 PERMITS
     The Company possesses and is operating in compliance with, all material
licenses, certificates, consents, approvals and permits from all state, federal,
foreign and other regulatory agencies or bodies necessary to conduct the
businesses now operated by it, and the Company has not received any notice of
proceedings relating to revocation or modification of any such permit or any
circumstance which would lead it to believe that such proceedings are reasonably
likely which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially and adversely affect the financial
condition or the earnings, assets or business prospects of the Company.
     4.16 TAXES
     The Company has filed all tax returns required to be filed, which returns
are true and correct in all material respects, and the Company is not in default
in the payment of any taxes, including penalties and interest, assessments and
fees, shown thereon due or otherwise assessed, other than those being contested
in good faith and for which adequate reserves have been provided or those
currently payable without interest which were payable pursuant to said returns
or any assessments with respect thereto.
     4.17 COMPLIANCE
     The Company has conducted, and is conducting, its business in compliance
with all applicable Federal, state, local and foreign statutes, laws, rules and
regulations, except where the failure to do so would not, singly or in the
aggregate, have a material adverse effect on the financial condition, earnings
or assets, of the Company.
     4.18 INSURANCE
     The Company maintains insurance of the type and in the amount that the
Company reasonably believes is adequate for its business, including, but not
limited to, insurance covering all real and personal property owned or leased by
the Company against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against by similarly situated companies, all of which
insurance is in full force and effect.
     4.19 GOVERNMENTAL/ REGULATORY CONSENTS
     No registration, authorization, approval, qualification or consent with or
required by any court or governmental/ regulatory authority or agency is
necessary in connection with the execution and delivery of this Agreement or the
offering, issuance or sale of the Shares under this Agreement, except for the
filings disclosed in this Agreement to be made with the SEC and the Amex.
     4.20 SECURITIES AND EXCHANGE COMMISSION FILINGS
     (a) The Company has timely filed with the SEC all documents required to be
filed by the Company under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”).

 

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     (b) The information contained in the following documents (the “Company
Documents”), is true and correct in all material respects as of their respective
filing dates and as of the date of this Agreement:

  (i)   the Company’s Annual Report on Form 10-K for the fiscal year ended
January 31, 2006; and     (ii)   the Company’s Proxy Statement for its 2006
Annual Meeting of Stockholders.

     (c) As of their respective filing dates, the Company Documents complied in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC thereunder, and none of the Company Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading.
     4.21 NO INTEGRATED OFFERING
     Neither the Company, nor any of its affiliates, nor any person acting on
its or their behalf, has directly or indirectly made any offers or sales in any
security or solicited any offers to buy any security under circumstances that
would require registration under the Securities Act of the issuance of the
Shares to the Purchasers. The issuance of the Shares to the Purchasers will not
be integrated with any other issuance of the Company’s securities (past, current
or future) for purposes of the Securities Act or any applicable rules of the
Amex. The Company will not make any offers or sales of any security that would
cause the offering of the Shares to be integrated with any other offering of
securities by the Company for purposes of any registration requirements under
the Securities Act or any applicable rules of the Amex.
     4.22 NO MANIPULATION OF STOCK
     The Company has not taken, and will not take, any action that might
reasonably be expected to cause or result in unlawful manipulation of the price
of the Common Stock to facilitate the sale of the Shares.
     4.23 RELATED PARTY TRANSACTIONS
     Except (a) as disclosed in the Company’s Form 10-K dated April 13, 2006,
and (b) as set forth in the Virtue Family Agreement, the Company does not have
any oral or written contracts, arrangements or other agreements with any
officer, director or 5% or greater stockholder of the Company or any affiliate
of any such person.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
     5.1 SECURITIES LAW REPRESENTATIONS AND WARRANTIES
     Each Purchaser represents, warrants and covenants to the Company as
follows:
     (a) Such Purchaser has a preexisting business relationship with the Company
and by reason of his business or financial experience has the capacity to
protect his own interests in connection with purchase of the Shares.
     (b) Such Purchaser is an “accredited investor” within the meaning of
Rule 501 of Regulation D promulgated under the Securities Act and is
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments in shares representing an investment
decision like that involved in the purchase of the Shares, including investments
in securities issued by the Company. Such Purchaser has requested, received,
reviewed and considered all information deems relevant in making an informed
decision to purchase the Shares.
     (c) Such Purchaser is acquiring the Shares for his own account for
investment only and, except as contemplated by this Agreement, has no present
intention of distributing any of the Shares nor any arrangement or

 

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understanding with any other persons regarding the distribution of such Shares
within the meaning of Section 2(11) of the Securities Act, other than as
contemplated in Section 7 of this Agreement.
     (d) Such Purchaser has, in connection with its decision to purchase the
Shares, relied solely upon the representations and warranties of the Company
contained in this Agreement, review of the Company Documents and his own due
diligence examination of the Company.
     (e) Such Purchaser acknowledges that an investment in the Shares is a
speculative investment and has a high degree of risk. Such Purchaser
acknowledges that he has had the opportunity to obtain and review all
information from the Company necessary to make a reasonably informed investment
decision and he has had all questions asked of the Company answered to his
reasonable satisfaction. Such Purchaser is able to bear the economic risk of an
investment in the Shares.
     5.2 DUE EXECUTION, DELIVERY AND PERFORMANCE
     This Agreement has been duly executed and delivered by such Purchaser and
constitutes a valid and binding obligation of such Purchaser, enforceable
against such Purchaser in accordance with its terms.
     5.3 RESALES OF SHARES
     (a) Such Purchaser will not make any sale of the Shares without satisfying
the requirements of the Securities Act and the Rules and Regulations, including,
in the event of any resale under the Registration Statement, the prospectus
delivery requirements under the Securities Act, and such Purchaser acknowledges
and agrees that such Shares are not transferable on the books of the Company
pursuant to a resale under the Registration Statement unless the stock
certificate submitted to the Company’s transfer agent evidencing the Shares is
accompanied by a certificate from such Purchaser to the effect that (i) the
Shares have been sold in accordance with the Registration Statement and (ii) the
requirement of delivering a current prospectus has been satisfied.
     (b) Such Purchaser will notify the Company promptly of the sale of any of
the Shares, other than sales pursuant to a Registration Statement contemplated
in Section 7 of this Agreement or sales upon termination of the transfer
restrictions pursuant to Section 7 of this Agreement.
6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
     Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchasers in this Agreement shall survive the execution of this Agreement,
the delivery to the Purchasers of the Shares being purchased and the payment
therefor.
7. EXPENSES
     Except as otherwise expressly provided in this Agreement, the Company and
the Purchasers shall each pay their own respective fees and expenses (including,
without limitation, the fees of any attorneys, accountants or others engaged by
such party) incurred in connection with the preparation, negotiation, execution
and performance of this Agreement and the transactions contemplated hereby
whether or not the transactions contemplated hereby are consummated.
8. ENTIRE AGREEMENT
     This Agreement constitutes the complete and exclusive statement of the
terms of the agreement between the Company and the Purchasers with respect to
sale and purchase of the Shares and supersedes all prior agreements,
understandings, promises, and arrangements, oral or written, between the parties
with respect to the subject matter hereof.

 

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9. NOTICES
     All notices, requests, consents and other communications under this
Agreement shall be in writing, shall be mailed by first-class registered or
certified airmail, confirmed facsimile or nationally recognized overnight
express courier postage prepaid, and shall be delivered as addressed as follows:
     (a) if to the Company, to:
Virco Mfg. Corporation
2027 Harpers Way
Torrance, CA 90501
Attn: Chief Executive Officer
or to such other person at such other place as the Company shall designate to
the Purchaser in writing; and
     (b) if to any Purchaser, at its address as set forth on the signature page
hereto, or at such other address or addresses as may have been furnished to the
Company in writing.
     Notice shall be deemed effectively given upon confirmation of receipt by
facsimile, one business day after deposit with such overnight courier or three
days after deposit of such registered or certified airmail with the U.S. Postal
Service, as applicable.
10. MODIFICATION; AMENDMENT
     This Agreement may not be modified or amended except pursuant to an
instrument in writing signed by the Company and the Purchasers.
11. HEADINGS
     The headings of the various sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be part of this
Agreement.
12. SEVERABILITY
     If any provision contained in this Agreement should be held to be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained in this Agreement shall not
in any way be affected or impaired thereby.
13. GOVERNING LAW
     This Agreement shall be governed by and construed in accordance with the
laws of the state of California and the federal law of the United States of
America.
14. COUNTERPARTS
     This Agreement is being executed in two or more counterparts, each of which
shall constitute an original, but all of which, when taken together, shall
constitute but one instrument, and shall become effective when one or more
counterparts have been signed by the party to this Agreement and delivered to
the other parties.
[Signature Page Follows]

 

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     IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be executed by their duly authorized representatives as of the day
and year first above written.

          VIRCO MFG. CORPORATION    
 
       
By:
  /s/ Robert E. Dose     
 
 
 
Robert E. Dose    
Its:
  Vice President Finance    

     
The “Purchasers”
   
 
   
/s/ Steve Presley 
   
 
Steve Presley
   
 
   
/s/ Ed Gyenes 
   
 
Ed Gyenes
   
 
   
/s/ Nick Wilson 
   
 
Nick Wilson
   
 
   
/s/ Scotty Bell 
   
 
Scotty Bell
   
 
   
/s/ Patty Quinones 
   
 
Patty Quinones
   
 
   
/s/ Eric Nordstrom 
   
 
Eric Nordstrom
   
 
   
/s/ Larry Maddox 
   
 
Larry Maddox
   
 
   
/s/ James Simms 
   
 
James Simms
   
 
   
/s/ Bassey Yau 
   
 
Bassey Yau
   
 
   
/s/ Robert Virtue 
   
 
Robert Virtue
   
 
   
/s/ Doug Virtue 
   
 
Doug Virtue
   
 
   
/s/ Evan Gruber 
   
 
Evan Gruber
   

 

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Schedule A

                      No. of Shares and   Share Purchase Name and Address of
Purchaser   Warrants Purchased   Price
Steve Presley
    996     $ 4,999.92  
 
               
                                             
    249          
 
               
                                             
               
 
               
Ed Gyenes
    929     $ 4,663.58  
 
               
                                             
    232          
 
               
                                             
               
 
               
Nick Wilson
    2,787     $ 13,990.74  
 
               
                                             
    697          
 
               
                                             
               
 
               
Scotty Bell
    1,992     $ 9,999.84  
 
               
                                             
    498          
 
               
                                             
               
 
               
Patty Quinones
    398     $ 1,997.96  
 
               
                                             
    100          
 
               
                                             
               

 

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Schedule A

                      No. of Shares and   Share Purchase Name and Address of
Purchaser   Warrants Purchased   Price
Eric Nordstrom
    7,968     $ 39,999.36  
 
               
                                             
    1,992          
 
               
                                             
               
 
               
Larry Maddox
    3,300     $ 16,566.00  
 
               
                                             
    825          
 
               
                                             
               
 
               
James Simms
    1,998     $ 10,029.96  
 
               
                                             
    500          
 
               
                                             
               
 
               
Bassey Yau
    4,000     $ 20,080.00  
 
               
                                             
    1,000          
 
               
                                             
               
 
               
Robert Virtue
    5,000     $ 25,100.00  
 
               
                                             
    1,250          
 
               
                                             
               
 
               
Doug Virtue
    8,576     $ 43,051.52  
 
               
                                             
    2,114          
 
               
                                             
               

 

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Schedule A

                      No. of Shares and   Share Purchase Name and Address of
Purchaser   Warrants Purchased   Price
Evan Gruber
    19,511     $ 97,945.22  
 
               
                                             
    4,878          
 
               
                                             
               

 

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Schedule B
FORM OF WARRANT AGREEMENT
     THIS WARRANT AND THE UNDERLYING COMMON STOCK MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
     This certifies that, for good and valuable consideration, receipt of which
is hereby acknowledged,
                                                             (the “Holder”) is
entitled to purchase, subject to the terms and conditions of this Warrant, from
Virco Mfg. Corporation, a Delaware corporation (the “Company”), an aggregate of
                                         (                    ) fully paid and
nonassessable shares of the common stock, $.01 par value per share (the “Common
Stock”), of the Company during the period commencing on the date of this Warrant
and ending at 5:00 p.m. California time five (5) years from such date (the
“Expiration Date”), at which time this Warrant will expire and become void
unless earlier terminated as provided herein. The shares of Common Stock of the
Company for which this Warrant is exercisable, as may be adjusted from time to
time pursuant to the terms hereof, are hereinafter referred to as the “Warrant
Shares”.
     1. Exercise Price. The exercise price for the Warrant Shares shall be $6.02
per share during the first three (3) years from the date of this Warrant and
$6.53 per share during the two (2) years preceding the Expiration Date. The
prevailing exercise price is subject to adjustment pursuant to the terms hereof
(such price, as adjusted from time to time, is hereinafter referred to as the
“Exercise Price”).
     2. Exercise and Payment. This Warrant may be exercised, in whole or in
part, from time to time by the Holder prior to the Expiration Date by surrender
to the Company, at the principal executive offices of the Company, of this
Warrant and the Notice of Exercise attached hereto duly completed and executed
by the Holder, together with payment in the amount obtained by multiplying the
Exercise Price then in effect by the number of Warrant Shares being purchased as
designated in the Notice of Exercise. In no event, however, shall this Warrant
be exercised with respect to less than 5,000 Warrant Shares (unless it is
exercised for a lesser number representing all of the remaining warrants owned
by the Holder). Payment shall be made in readily available, same day funds.
     3. Reservation of Shares. The Company shall at all times reserve for
issuance and delivery upon exercise of this Warrant such number of shares of its
Common Stock from time to time issuable as Warrant Shares. All such Warrant
Shares shall be duly authorized, and when issued upon such exercise, shall be
validly issued, fully paid and non-assessable, free and clear of all liens,
security interests, charges and other encumbrances or restrictions on sale and
free and clear of all preemptive rights.
     4. Delivery of Stock Certificates. Promptly following the exercise, in
whole or in part, of this Warrant, the Company shall issue in the name of, and
deliver to, the Holder a certificate or certificates for the number of fully
paid and nonassessable Warrant Shares which the Holder shall have requested and
paid for pursuant to the Notice of Exercise. If this Warrant is exercised in
part, the Company shall deliver to the Holder a new Warrant for the unexercised
portion of the Warrant Shares at the time of delivery of the stock certificate
or certificates evidencing the Warrant Shares.
     5. No Fractional Shares. No fractional Warrant Shares shall be issued upon
exercise of this Warrant. If upon any exercise of this Warrant a fraction of a
share results, the Company will pay the Holder the difference between the cash
value of the fractional share and the portion of the Exercise Price allocable to
the fractional share.
     6. Charges, Taxes and Expenses. The Company shall pay all transfer taxes or
other incidental charges, if any, in connection with the issuance of the Warrant
Shares to the Holder.
     7. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or

 

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Schedule B
destruction, of indemnity or security reasonably satisfactory to the Company,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company shall make and deliver a new replacement Warrant and dated as of such
cancellation, in lieu of this Warrant.
     8. Saturdays, Sundays, Holidays. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday or a Sunday or shall be a legal holiday, then such action
may be taken or such right may be exercised on the next succeeding weekday that
is not a legal holiday.
     9. Adjustment of Exercise Price and Number of Shares. The Exercise Price
and the number of Warrant Shares purchasable upon exercise of this Warrant shall
be subject to adjustment from time to time as follows:
          (a) Subdivisions, Combinations and Other Issuances. If the Company
shall at any time prior to the Expiration Date subdivide its shares of Common
Stock by split-up or otherwise, or combine its shares of Common Stock, then the
number of Warrant Shares as to which this Warrant is exercisable as of the date
of such subdivision, split-up or combination shall be proportionately increased
in the case of a subdivision, or proportionately decreased in the case of a
combination. Appropriate, corresponding adjustment shall also be made to the
Exercise Price so that the aggregate purchase price payable for the total number
of Warrant Shares purchasable under this Warrant as of such date remains the
same.
          (b) Stock Dividend. If at any time the Company declares a dividend or
other distribution on its Common Stock payable in Common Stock or Convertible
Securities without payment of any consideration by the then-existing
stockholders for the additional shares of Common Stock or the Convertible
Securities (including the additional shares of Common Stock issuable pursuant to
the terms thereof), then the number of Warrant Shares as to which this Warrant
may be exercised shall be increased as of the record date for determining which
holders of Common Stock shall be entitled to receive such dividend, in
proportion to the increase in the number of outstanding shares (and shares of
Common Stock issuable pursuant to the terms of the Convertible Securities) of
Common Stock as a result of such dividend, and the Exercise Price shall be
adjusted so that the aggregate amount payable for the purchase of all the
Warrant Shares issuable hereunder immediately after the record date (or on the
date of such distribution, if applicable) for such dividend shall equal the
aggregate amount so payable immediately before such record date. As used herein,
“Convertible Securities” means evidences of indebtedness, shares of stock or
other securities, which are convertible into, exchangeable for, with or without
payment of additional consideration, shares of Common Stock, either immediately
or upon the arrival of a specified date or the happening of a specified event or
both.
          (c) Other Distributions. If at any time after the date hereof the
Company distributes to its stockholders, other than as part of its dissolution
or liquidation or the winding up of its affairs, any shares of its Common Stock,
any evidence of indebtedness or any of its assets (other than cash, Common Stock
or Convertible Securities), then the Company may, at its option, either (i)
decrease the Exercise Price of this Warrant by an appropriate amount based upon
the value distributed on each share of Common Stock as determined in good faith
by the Company’s Board of Directors or (ii) provide by resolution of the
Company’s Board of Directors that on exercise of this Warrant, the Holder hereof
shall thereafter be entitled to receive, in addition to the Warrant Shares
otherwise receivable on exercise hereof, the number of shares or other
securities or property which would have been received had this Warrant at the
time been exercised.
          (d) Merger. If at any time after the date hereof there shall be a
merger or consolidation of the Company with or into another corporation when the
Company is not the surviving corporation, then the Holder shall thereafter be
entitled to receive upon exercise of this Warrant, during the period specified
herein and upon payment of the aggregate Exercise Price then in effect, the
number of shares or other securities or property of the successor corporation
resulting from such merger or consolidation, which would have been received by
the Holder for the Warrant Shares had this Warrant been exercised at such time.
          (e) Reclassification. If at any time after the date hereof there shall
be a change or reclassification of the securities as to which purchase rights
under this Warrant exist into the same or a different number of securities of
any other class or classes, then the Holder shall thereafter be entitled to
receive upon

 

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Schedule B
exercise of this Warrant, during the period specified herein and upon payment of
the Exercise Price then in effect, the number of shares or other securities or
property resulting from such change or reclassification, which would have been
received by Holder for the Warrant Shares had this Warrant been exercised at
such time.
     10. Notice of Adjustments; Notices. Whenever the Exercise Price or number
or kind of securities purchasable hereunder is adjusted pursuant to Section 9
hereof, the Company shall execute and deliver to the Holder a certificate
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated and
the Exercise Price and number of and kind of securities purchasable hereunder
after giving effect to such adjustment, and shall cause a copy of such
certificate to be mailed (by first class mail, postage prepaid) to the Holder.
     11. Rights As Stockholder; Notice to Holders. Nothing contained in this
Warrant shall be construed as conferring upon the Holder the right to vote or to
receive dividends or to consent or to receive notice as a stockholder in respect
of any meeting of stockholders for the election of directors of the Company or
of any other matter, or any rights whatsoever as stockholders of the Company.
The Company shall notify the Holder by registered mail if at any time prior to
the expiration or exercise in full of the Warrant, any of the following events
occur:
          (a) a dissolution, liquidation or winding up of the Company shall be
submitted to the stockholders of the Company for approval; or
          (b) a capital reorganization or reclassification of the Common Stock
(other than a subdivision or combination of the outstanding Common Stock and
other than a change in the par value of the Common Stock) or any consolidation
or merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and
that does not result in any reclassification or change of Common Stock
outstanding) or in the case of any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially as an entirety; or
          (c) a taking by the Company of a record of 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
right to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other rights.
This notice to Holder shall be given simultaneously with the giving of notice to
holders of Common Stock. Such notice shall specify the record date or the date
of closing the stock transfer books, as the case may be. Failure to provide such
notice will not affect the validity of any action taken in connection with such
dividend, distribution or subscription rights, or proposed merger,
consolidation, sale, conveyance, dissolution, liquidation or winding up.
     12. Restricted Securities. The Holder understands, confirms and
acknowledges that this Warrant and the Warrant Shares constitute “restricted
securities” under the federal securities laws inasmuch as they are, or will be,
acquired directly from the Company in transactions not involving a public
offering and accordingly may not, under applicable laws and regulations, be
resold or transferred without registration under the Securities Act of 1933, as
amended (the “1933 Act”) or availability of an applicable exemption from such
registration. The Holder further acknowledges that a securities legend
substantially similar to that on the first page hereof shall be placed on any
Warrant Shares issued to the Holder upon exercise of this Warrant.
     13. Certification of Investment Purpose. The Holder covenants and agrees
that at any time that this Warrant is exercised, in whole or in part, and as a
condition thereto, a written certification of investment intent shall be
delivered to the Company by the Holder.
     14. Disposition of Warrant and Warrant Shares; Transfer of Warrant. This
Warrant and any Warrant Shares purchased hereunder may not be sold, transferred,
assigned, pledged or hypothecated (any such action, a “Transfer”) by the Holder
except in compliance with this Agreement. The Company shall not be required
(i) to transfer on its books this Warrant or any Warrant Shares which have been
Transferred in violation of the provisions of this Agreement or (ii) to treat as
the owner of the Warrant or the Warrant Shares or otherwise to accord voting or

 

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Schedule B
dividend rights to any transferee to whom this Warrant or the Warrant Shares
have been Transferred in contravention of the terms of this Warrant. This
Warrant may be divided or combined, upon request to the Company by the Holder,
into a certificate or certificates representing the right to purchase the same
aggregate number of Warrant Shares. If at the time of a Transfer, a registration
statement is not in effect to register the Warrant Shares, the Company may
require the Holder to make such representations, and may place such legends on
certificates representing this Warrant, as may be reasonably required in the
opinion of counsel to the Company to permit a Transfer without such
registration.
     15. Miscellaneous.
          (a) Construction. Unless the context indicates otherwise, the term
“Holder” shall include any successor transferee or transferees of this Warrant,
and the term “Warrant” shall include any and all warrants outstanding pursuant
to this Agreement, including those evidenced by one or more instruments or
certificates issued upon division, exchange, substitution or transfer pursuant
to Section 14.
          (b) Restrictions. By receipt of this Warrant, the Holder is making the
same investment representations with respect to the acquisition of this Warrant
as the Holder is required to make upon the exercise of this Warrant and
acquisition of the Warrant Shares. The Company acknowledges that the Holder may
transfer some of these securities to accredited investors in valid private
placements exempt from the registration requirements of the 1933 Act, provided
that, if requested by the Company, the Holder shall furnish a legal opinion
concerning the Transfer in form and substance reasonably satisfactory to the
Company.
          (c) Notices. Unless otherwise provided, any notice required or
permitted under this Warrant shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or three
days following deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified (or
one (1) day following timely deposit with a reputable overnight courier with
next day delivery instructions), or upon confirmation of receipt by the sender
of any notice by facsimile transmission, at the address indicated below or at
such other address as such party may designate by ten days’ advance written
notice to the other party.

         
To Holder:
       
 
                                              
 
                                              
 
                                              
 
                                              
 
                                              
 
       
To the Company:
  Virco Mfg. Corporation    
 
  2027 Harper’s Way    
 
  Torrance, CA 90501    
 
  Attention: CEO    

          (d) Governing Law. This Warrant shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
          (e) Severability. If one or more provisions of this Warrant are held
to be unenforceable under applicable law, such provision shall be excluded from
this Warrant and the balance of the Warrant shall be interpreted as if such
provision were so excluded and the balance shall be enforceable in accordance
with its terms.
          (f) Entire Agreement. This Warrant constitutes the entire agreement
and understanding of the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, whether oral or written, between the parties hereto with respect
to the subject matter hereof.

 

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Schedule B
          (g) Binding Effect. This Warrant and the various rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
the Company and its successors and assigns, and Holder and its successors and
assigns.
          (h) Waiver; Consent. This Warrant may not be changed, amended,
terminated, augmented, rescinded or discharged (other than by performance), in
whole or in part, except by a writing executed by the parties hereto, and no
waiver of any of the provisions or conditions of this Warrant or any of the
rights of a party hereto shall be effective or binding unless such waiver shall
be in writing and signed by the party claimed to have given or consented
thereto.
          (i) Counterparts. This Warrant is being executed in two or more
counterparts, each of which shall constitute an original.
     IN WITNESS WHEREOF, the parties hereto have executed this Warrant effective
as of the date hereof.

                  THE COMPANY:    
 
                VIRCO MFG. CORPORATION    
 
           
 
  By:        
 
     
 
Robert E. Dose    
 
  Its:   Vice President Finance    
 
                THE HOLDER:    
 
                                                            
 
                DATED: August 29, 2006    

 

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Schedule B
NOTICE OF EXERCISE
To: VIRCO MFG. CORPORATION
     1. The undersigned hereby elects to purchase                      shares of
Common Stock, $.01 par value per Share (“Warrant Shares”) of Virco Mfg.
Corporation, a Delaware corporation (the “Company”) pursuant to the terms of the
attached Warrant, and tenders herewith payment of the exercise price pursuant to
the terms of the Warrant.
     2. Please issue certificates representing the Warrant Shares purchased
hereunder in the names and addresses and in the denominations indicated below.
     3. Please issue a new Warrant for the unexercised portion of the attached
Warrant, if any, in the name of the undersigned.
 
Issuee Information: