Exhibit 10.2
AMENDMENT NO. 1 TO
SECOND AMENDED AND RESTATED Credit AGREEMENT
     AMENDMENT NO. 1 dated as of July 31, 2008 (“Amendment”) between VIRCO MFG.
CORPORATION, a Delaware corporation (the “Borrower”), and WELLS FARGO BANK,
NATIONAL ASSOCIATION (the “Bank”), and amends the Second Amended and Restated
Credit Agreement dated as of March 12, 2008 (as amended, restated, supplemented
or otherwise modified, the “Credit Agreement”) between the Borrower and the
Bank. Terms defined in the Credit Agreement and not otherwise defined herein are
used herein as therein defined.
     WHEREAS, subject to the satisfaction of the conditions set forth herein,
the Borrower and the Bank have agreed to certain amendments to the Credit
Agreement.
     NOW, THEREFORE, in consideration of the mutual agreements herein contained
and other good and valuable consideration, the sufficiency and receipt of which
are hereby acknowledged, the parties hereto agree as follows:
     Section 1. Amendment to Section 1.1(a) of the Credit Agreement.
Section 1.1(a) of the Credit Agreement hereby is amended and restated in its
entirety as follows:
     (a) Line of Credit. During the Line of Credit Period, Bank hereby agrees,
subject to the terms and conditions of this Agreement, to make advances
(“Advances”) to Borrower from time to time in an aggregate principal amount at
any time outstanding not to exceed the lesser of (i) the Maximum Line of Credit
Amount minus the Letter of Credit Usage or (ii) the Borrowing Base minus the
Letter of Credit Usage (“Line of Credit”). The proceeds of all advances made
hereby shall be used to finance Borrower’s working capital requirements and for
other lawful purposes consistent with the provisions hereof. Borrower’s
obligation to repay advances under the Line of Credit shall be evidenced by a
promissory note substantially in the form of Exhibit A attached hereto (“Line of
Credit Note”), all terms of which are incorporated herein by this reference. In
connection with the foregoing, the amount, if any, by which the LC Usage Amount
at any time exceeds the lesser of the Maximum Line of Credit Amount or the
Borrowing Base, in either case, at such date shall be payable immediately by
Borrower to Bank.
     Section 2. Amendment to Section 1.1(b) of the Credit Agreement.
Section 1.1(b) of the Credit Agreement hereby is amended and restated in its
entirety as follows:
     (b) Letter of Credit Subfeature. As a subfeature under the Line of Credit,
Bank agrees from time to time during the term thereof to issue or cause an
affiliate to issue sight commercial or standby letters of credit for the account
of Borrower (each, a “Letter of Credit” and collectively, “Letters of Credit”);
provided however, Bank shall have no obligation to issue a Letter of Credit if
any of the following would result after giving effect to the requested Letter of
Credit: (i) the Letter of Credit Usage would exceed the Borrowing Base less the
then extant amount of outstanding Advances, or (ii) the Letter of Credit Usage
would exceed $10,000,000, or (iii) the Letter of Credit Usage would exceed the
Maximum Line of Credit Amount less the then extant amount of outstanding
Advances. The form and substance of each Letter of Credit shall be subject to
approval by Bank, in its sole discretion. Each commercial Letter of Credit shall
be issued for a term not to exceed one hundred eighty (180) days, as designated
by Borrower; provided, however, that no commercial Letter of Credit shall have
an expiration date subsequent to the Line of Credit Termination Date. Each
standby Letter of Credit shall be issued for a term not to exceed twelve
(12) months, as designated by Borrower; provided, however, that no standby
Letter of Credit shall have an expiration date subsequent to the Line of Credit
Termination Date. Each Letter of Credit shall be subject to the additional terms
and conditions of the Letter of Credit agreements, applications and any related
documents required by Bank in connection with the issuance thereof. Each drawing
paid under a Letter of Credit shall be deemed an Advance under the Line of
Credit and shall be repaid by Borrower in accordance with the terms and
conditions of this Agreement applicable to such advances; provided, however,
that if Advances under the Line of Credit are not available, for any reason, at
the time any drawing is paid, then Borrower shall immediately pay to Bank the
full amount drawn, together with interest thereon from the date such drawing is
paid to the date such amount is fully repaid by Borrower, at the rate of
interest applicable to advances under the Line of Credit. In such event Borrower
agrees that Bank, in its sole discretion, may debit any account maintained by
Borrower with Bank for the amount of any such drawing. All Prior Letters of
Credit which are outstanding as of the date hereof shall be deemed “Letters of
Credit” hereunder.

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     Section 3. Amendments to Section 1.2(f) of the Credit Agreement.
Section 1.2(f) of the Credit Agreement hereby is amended and restated in its
entirety as follows:
     (f) Collateral Audits; Appraisals.
     (i) Borrower shall pay to Bank its customary fees plus reasonable
out-of-pocket expenses for each financial or collateral analysis and examination
(i.e., audit) of Borrower and its Subsidiaries performed by personnel employed
by Bank (or the actual charges paid or incurred by Bank if it elects to employ
the services of one or more Persons to perform such audits); provided, however
that so long as no Event of Default has occurred and is continuing, Borrower
shall not be obligated to reimburse Bank the fees and costs of more than two (2)
audits in any fiscal year.
     (ii) Bank shall have the right to have the Inventory, Equipment and the
Real Property Collateral of the Borrower and its Subsidiaries appraised from
time to time by a qualified appraiser selected by Bank. Borrower shall pay to
Bank its customary fees plus reasonable out-of-pocket expenses for each
appraisal conducted by personnel employed by Bank (or the actual charges paid or
incurred by Bank if it elects to employ the services of one or more third
Persons to appraise the Inventory, Equipment and Real Property Collateral of
Borrower and its Subsidiaries).
     Section 4. Amendments to Article II of the Credit Agreement. Article II of
the Credit Agreement hereby is supplemented by adding the following
Sections 2.16 and 2.17 immediately following Section 2.15 appearing in
Article II:
          Section 2.16. Eligible Accounts.
     The Eligible Accounts are bona fide existing payment obligations of Account
Debtors created by the sale and delivery of Inventory or the rendition of
services to such Account Debtors in the ordinary course of Borrower’s business,
owed to Borrower without any known defenses, disputes, offsets, counterclaims,
or rights of return or cancellation. As to each Account that is identified by
Borrower as an Eligible Account in a Borrowing Base Certificate submitted to
Bank, such Account is not excluded as ineligible by virtue of one or more of the
defining criteria set forth in the definition of Eligible Accounts.
          Section 2.17. Eligible Inventory.
     All Eligible Inventory is of good and merchantable quality, free from known
defects. As to each item of Inventory that is identified by Borrower as Eligible
Inventory in a Borrowing Base Certificate submitted to Bank, such Inventory is
not excluded as ineligible by virtue of one or more of the defining criteria set
forth in the definition of Eligible Inventory.
     Section 5. Amendments to Section 4.3 of the Credit Agreement. Section 4.3
of the Credit Agreement hereby is amended by redesignating clause (g) thereof as
clause (k) and inserting the following clauses (g), (h), (i) and (j) immediately
following clause (f) thereof:
     (g) Account Debtor Information. Not later than 30 days after July 31 and
January 31 of each year, a detailed report setting forth a true and complete
list of all Account Debtors of Borrower and its Subsidiaries as of July 31 and
January 31, respectively, together with the address, phone number and name of
the primary relationship contact for each Account Debtor;
     (h) Borrowing Base Reports. Not later than the fifth Business Day following
the end of each month, a detailed calculation of the Borrowing Base (including
detail regarding those Accounts of Borrower that are not Eligible Accounts), in
the form of the Borrowing Base Certificate;
     (i) Weekly Reports. If the date of determination is between April 1 and
July 31, not later than Monday of each week for the week most recently ended:
     (i) an aging of the Accounts of Borrower, together with a reconciliation to
the detailed calculation of the Borrowing Base previously provided to Bank,

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     (ii) an aging, by vendor, of the accounts payable and any book overdraft of
Borrower and its Subsidiaries, and
     (iii) Inventory reports specifying the cost of the Inventory of Borrower
and its Subsidiaries, by category (i.e., by reference to whether such Inventory
is raw material, work-in-process, “assemble-to-ship” component or finished goods
Inventory), as adjusted to reflect the market value of such Inventory if lower
than the cost thereof, with additional detail showing additions to and deletions
therefrom;
     (j) Monthly Reports. If the date of determination is between August 1 and
March 31, not later than the 10th day of each month for the month most recently
ended:
     (i) an aging of the Accounts of Borrower, together with a reconciliation to
the detailed calculation of the Borrowing Base previously provided to Bank,
     (ii) an aging, by vendor, of the accounts payable and any book overdraft of
Borrower and its Subsidiaries, and
     (iii) Inventory reports specifying the cost of the Inventory of Borrower
and its Subsidiaries, by category (i.e., by reference to whether such Inventory
is raw material, work-in-process, “assemble-to-ship” component or finished goods
Inventory), as adjusted to reflect the market value of such Inventory if lower
than the cost thereof, with additional detail showing additions to and deletions
therefrom; and
     Section 6. Amendment to Section 5.11 of the Credit Agreement. Section 5.11
of the Credit Agreement hereby is amended and restated in its entirety as
follows:
          Section 5.11 Minimum Net Income.
          Permit Net Income as of the end of any fiscal year of the Borrower to
be less than $1.0.
     Section 7. Amendment to Section 5.13 of the Credit Agreement. Section 5.13
of the Credit Agreement hereby is amended and restated in its entirety as
follows:
          Section 5.13 Maximum Leverage Ratio.
     Permit the Consolidated Leverage Ratio, measured as of the end of each
fiscal quarter of each fiscal year, to be less than the required ratio set forth
in the following table for the corresponding period:

          Maximum Consolidated Applicable Fiscal Quarter   Leverage Ratio      
July 31, 2008   4.25 to 1.00       October 31, 2008   1.50 to 1.00      
January 31, 2009   1.75 to 1.00       Except as otherwise set forth in this
table, the
fiscal quarter ended
January 31 of each fiscal year   1.25 to 1.00

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          Maximum Consolidated Applicable Fiscal Quarter   Leverage Ratio      
Fiscal quarter ended
April 30 of each fiscal year   2.50 to 1.00       Except as otherwise set forth
in this table, the
fiscal quarter ended
July 31 of each fiscal year   3.50 to 1.00       Except as otherwise set forth
in this table, the
fiscal quarter ended
October 31 of each fiscal year   1.25 to 1.00

     Section 8. Amendments to Annex A to the Credit Agreement. (a) The following
definitions hereby are inserted in Annex A to the Credit Agreement in the proper
alphanumerical order:
     “Amendment No. 1” means Amendment No. 1 to Second Amended and Restated
Credit Agreement dated as of March 12, 2008 between the Borrower and the Bank.
     “Borrowing Base” means, as of any date of determination, the result of:
     (a) 80% of the amount of Eligible Accounts, less the amount, if any, of the
Dilution Reserve, plus
     (b) the lower of:
     (i) the Maximum Inventory Amount, and
     (ii) the sum of:
     (A) the Designated Finished Goods Advance Rate of the value of Eligible
Finished Goods Inventory, plus
     (B) the Designated ATS Advance Rate of the value of Eligible ATS Inventory,
plus
     (C) 50% of the value of Eligible Raw Material Inventory, minus
     (c) such reserves as the Bank, in the exercise of its reasonable credit
judgment, determines are necessary or appropriate, including, without
limitation, a $100,000 reserve for the payment of licensing royalties payable in
connection with the sale of inventory.
     “Borrowing Base Certificate” means a certificate substantially in the form
of Exhibit C delivered by the chief financial officer of Borrower to Bank.
     “Collateral Access Agreement” means a landlord waiver, bailee letter, or
acknowledgement agreement of any lessor, warehouseman, processor, consignee, or
other Person in possession of, having a Lien upon, or having rights or interests
in Borrower’s or its Subsidiaries’ books and records, Equipment or Inventory, in
each case, in form and substance satisfactory to Bank.

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     “Designated ATS Advance Rate” means, at any date, a percentage equal to
(a) if such date is on or after March 1 and on or before July 31 of each year,
50% and (b) at all other times, 20%.
     “Designated Finished Goods Advance Rate” means, at any date, a percentage
equal to (a) if such date is on or after March 1 and on or before July 31 of
each year, 60% and (b) at all other times, 50%.
     “Dilution” means, at any date, a percentage, based upon the experience of
the immediately prior 30 consecutive days, that is the result of dividing the
Dollar amount of (a) bad debt write-downs, discounts, advertising allowances,
credits, returns of merchandise, freight allowances, notes taken in lieu of
payment, miscellaneous credits and adjustments, or other dilutive items with
respect to Borrower’s Accounts during such period, by (b) Borrower’s gross
billings with respect to Accounts during such period.
     “Dilution Reserve” means, as of any date of determination, an amount
sufficient to reduce the advance rate against Eligible Accounts as follows:

      If Dilution is:   Then the Dilution Reserve is:       Less than 5.0%   - 0
- 5.0% or greater but less than 10.0%   An amount sufficient to reduce advance
rates by 5.0% 10.0% or greater but less than 15.0%   An amount sufficient to
reduce advance rates by 10.0% 15.0% or greater but less than 20.0%   An amount
sufficient to reduce advance rates by 15.0% 20.0% or greater but less than 25.0%
  An amount sufficient to reduce advance rates by 20.0% 25.0% or greater but
less than 30.0%   An amount sufficient to reduce advance rates by 25.0% For each
additional 5.0% increase in Dilution   An amount sufficient to reduce advance
rates by an
incremental 5.0%

     “Eligible Accounts” means those Accounts created by Borrower in the
ordinary course of its business, that arise out of Borrower’s sale of goods or
rendition of services, that comply with each of the representations and
warranties respecting Eligible Accounts made in the Loan Documents, and that are
not excluded as ineligible by virtue of one or more of the excluding criteria
set forth below; provided, however, that such criteria may be revised from time
to time by Bank in Bank’s discretion to address the results of any audit
performed by Bank from time to time after the Closing Date. In determining the
amount to be included, Eligible Accounts shall be calculated net of customer
deposits and unapplied cash and shall not give effect to any credits reflected
on Borrower’s agings that would otherwise reduce the amount of ineligible
Accounts. Eligible Accounts shall not include the following:
     (a) (i) with respect to Accounts due on or before the date that is 30 days
after the original invoice date thereof, Accounts that the Account Debtor has
failed to pay within 90 days of the original invoice date therefor or within
60 days of the due date thereof, or
          (ii) with respect to Accounts due on or after the date that is 31 days
after the original invoice date thereof, Accounts that the Account Debtor has
failed to pay within 120 days of the original invoice date therefor or within
30 days of the due date thereof; provided, however, that no Accounts shall
constitute Eligible Accounts hereunder if such Accounts are outstanding (or
provide terms of payment) more than 180 days after the original invoice thereof,
     (b) Accounts owed by an Account Debtor (or its Affiliates) where 20% or
more of all Accounts owed by that Account Debtor (or its Affiliates) are deemed
ineligible under clause (a) above,
     (c) Accounts with respect to which the Account Debtor is an Affiliate of
Borrower or an employee or agent of Borrower or any Affiliate of Borrower,
     (d) Accounts arising in a transaction wherein goods are placed on
consignment or are sold pursuant to a guaranteed sale, a sale or return, a sale
on approval, a bill and hold, a cash on delivery or any other terms by reason of
which the payment by the Account Debtor may be conditional,

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     (e) Accounts that are not payable in Dollars,
     (f) Accounts with respect to which the Account Debtor either (i) does not
maintain its chief executive office in the United States, or (ii) is not
organized under the laws of the United States or any state thereof, or (iii) is
the government of any foreign country or sovereign state, or of any state,
province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof, unless
(y) the Account is supported by an irrevocable letter of credit satisfactory to
Bank (as to form, substance, and issuer or domestic confirming bank) that has
been delivered to Bank and is directly drawable by Bank, or (z) the Account is
covered by credit insurance in form, substance, and amount, and by an insurer,
satisfactory to Bank,
     (g) Accounts with respect to which the Account Debtor is either the United
States or any department, agency, or instrumentality of the United States
(exclusive, however, of Accounts with respect to which Borrower has complied, to
the reasonable satisfaction of Bank, with the Assignment of Claims Act, 31 USC §
3727),
     (h) Accounts with respect to which the Account Debtor is a creditor of
Borrower, has or has asserted a right of setoff, has disputed its obligation to
pay all or any portion of the Account, or is the subject of litigation
(including any collection actions) undertaken by Borrower,
     (i) Accounts with respect to an Account Debtor whose total obligations
owing to Borrower exceed 20% (such percentage as applied to a particular Account
Debtor being subject to reduction by Bank in its discretion if the
creditworthiness of such Account Debtor deteriorates) of all Eligible Accounts,
to the extent of the obligations owing by such Account Debtor in excess of such
percentage; provided, however, that, in each case, the amount of Eligible
Accounts that are excluded because they exceed the foregoing percentage shall be
determined by Bank based on all of the otherwise Eligible Accounts prior to
giving effect to any eliminations based upon the foregoing concentration limit,
     (j) Accounts with respect to which the Account Debtor is subject to an
Insolvency Proceeding, is not Solvent, has gone out of business, or as to which
Borrower has received notice of an imminent Insolvency Proceeding or a material
impairment of the financial condition of such Account Debtor or as to which
Borrower has referred the Account Debtor to Borrower’s legal or collection
department (or a third Person providing such services),
     (k) Accounts with respect to which the Account Debtor is located in a state
or jurisdiction (e.g., New Jersey, Minnesota, and West Virginia) that requires,
as a condition to access to the courts of such jurisdiction, that a creditor
qualify to transact business, file a business activities report or other report
or form, or take one or more other actions, unless Borrower has so qualified,
filed such reports or forms, or taken such actions (and, in each case, paid any
required fees or other charges), except to the extent that Borrower may qualify
subsequently as a foreign entity authorized to transact business in such state
or jurisdiction and gain access to such courts, without incurring any cost or
penalty viewed by Bank to be significant in amount, and such later qualification
cures any access to such courts to enforce payment of such Account,
     (l) Accounts, the collection of which, Bank, in its discretion, believes to
be doubtful by reason of the Account Debtor’s financial condition,
     (m) Accounts that are not subject to a valid and perfected first priority
Lien in favor of Bank,
     (n) Accounts with respect to which (i) the goods giving rise to such
Account have not been shipped and billed to the Account Debtor, or (ii) the
services giving rise to such Account have not been performed and billed to the
Account Debtor,
     (o) Accounts that represent the right to receive progress payments or other
advance billings that are due prior to the completion of performance by Borrower
of the subject contract for goods or services, or
     (p) Accounts representing service, finance, late or collection charges, to
the extent of such service, finance, late or collection charges.

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     “Eligible ATS Inventory” means Inventory that qualifies as Eligible
Finished Goods Inventory except for the fact that such Inventory constitutes
“assemble-to-ship” (“ATS”) Inventory.
     “Eligible Finished Goods Inventory” means Inventory consisting of first
quality finished goods held for sale in the ordinary course of Borrower’s
business that complies with each of the representations and warranties
respecting Eligible Finished Goods Inventory made in the Loan Documents, and
that is not excluded as ineligible by virtue of the one or more of the excluding
criteria set forth below; provided, however, that such criteria may be revised
from time to time by Bank in Bank’s discretion to address the results of any
audit or appraisal performed by Bank from time to time after the Closing Date.
In determining the amount to be so included, Inventory shall be valued at the
lower of cost or market on a basis consistent with Borrower’s historical
accounting practices. An item of Inventory shall not be included in Eligible
Inventory if:
     (a) Borrower does not have good, valid, and marketable title thereto,
     (b) it is not located at one of the locations in the continental United
States set forth on Schedule E-1 or in transit from one such location to another
such location,
     (c) it is located on real property leased by Borrower or in a contract
warehouse, in each case, unless it is subject to a Collateral Access Agreement
(except if the leased real property is Borrower’s facility located at 2027
Harpers Way, Torrance, California, in which case no Collateral Access Agreement
shall be required) executed by the lessor or warehouseman, as the case may be,
and unless it is segregated or otherwise separately identifiable from goods of
others, if any, stored on the premises,
     (d) it is not subject to a valid and perfected first priority Lien in favor
of the Bank,
     (e) it consists of goods returned or rejected by Borrower’s customer,
     (f) it consists of goods that are obsolete or slow moving, restrictive or
custom items, work-in-process, raw materials, or goods that constitute spare
parts, packaging and shipping materials, supplies used or consumed in Borrower’s
business, bill and hold goods, defective or damaged goods, “seconds,” or
Inventory sold or acquired on consignment, or
     (g) it contains or bears any intellectual property rights licensed to
Borrower or any Subsidiary, unless Bank is reasonably satisfied that it may sell
or otherwise dispose of such Inventory without (i) infringing the rights of such
licensor, (ii) violating any contract with such licensor, or (iii) incurring any
liability with respect to payment of royalties other than royalties incurred
pursuant to sale of such Inventory under the current licensing agreement.
     “Eligible Inventory” means Eligible ATS Inventory, Eligible Finished Goods
Inventory or Eligible Raw Material Inventory.
     “Eligible Raw Material Inventory” means Inventory that qualifies as
Eligible Finished Goods Inventory except for the fact that such Inventory
constitutes raw materials.
     “First Amendment Effective Date” means the first date on which all
conditions set forth in Section 12 of Amendment No. 1 have been satisfied.
     “Maximum Inventory Amount” means, as of any date of determination, an
amount equal to (a) if such date is on or after March 1 and on or before June 30
of any calendar year, $30,000,000, (b) if such date is on or after July 1 and on
or before July 31 of any calendar year, $25,000,000 and (c) at all other times,
$15,000,000.
     (b) The following definition appearing in Annex A to the Credit Agreement
hereby is amended and restated in its entirety as follows:
     “Affiliate” means, as applied to any Person, any other Person who, directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such Person. For purposes of this

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definition, “control” means the possession, directly or indirectly through one
or more intermediaries, of the power to direct the management and policies of a
Person, whether through the ownership of stock, by contract, or otherwise;
provided, however, that, for purposes of the definition of Eligible Accounts and
Section 5.9 hereof: (a) any Person which owns directly or indirectly 10% or more
of the Stock having ordinary voting power for the election of directors or other
members of the governing body of a Person or 10% or more of the partnership or
other ownership interests of a Person (other than as a limited partner of such
Person) shall be deemed an Affiliate of such Person, (b) each director (or
comparable manager) of a Person shall be deemed to be an Affiliate of such
Person and (c) each partnership or joint venture in which a Person is a partner
or joint venturer shall be deemed an Affiliate of such Person.
     (c) The following definitions appearing in Annex A to the Credit Agreement
hereby are deleted from Annex A: Consolidated Current Assets; Consolidated
Current Liabilities; Consolidated Current Assets.
     Section 9. Supplements to Exhibits and Schedules. The Credit Agreement
hereby is supplemented to include Exhibit C attached hereto and Schedule E-1
attached hereto.
     Section 10. Consent to Amendments. Each Guarantor hereby acknowledges and
consents to this Amendment, and affirms and acknowledges that the Guaranty and
each other Loan Document to which it is a party remains in full force and effect
and that such Person remains obligated thereunder without defense, offset or
counterclaim of any kind whatsoever, as if such Guaranty or other Loan Document
were executed and delivered to the Bank on the date hereof.
     Section 11. Representations and Warranties. To induce the Bank to enter
into this Amendment, the Borrower represents and warrants to the Bank that:
     (a) Representations and Warranties in Credit Agreement. Each of the
representations and warranties of the Borrower and its Subsidiaries contained in
the Credit Agreement, the other Loan Documents or in any document or instrument
delivered pursuant to or in connection with the Credit Agreement (i) were true
and correct when made and (ii) after giving effect to this Amendment, continue
to be true and correct on the date hereof (except to the extent that such
representations and warranties relate expressly to an earlier date).
     (b) Authority. The execution and delivery by the Borrower of this Amendment
and the performance by the Borrower of its obligations under this Amendment
(i) are within its power and authority, (ii) have been duly authorized by all
necessary proceedings, (iii) do not and will not conflict with or result in any
breach or contravention or any provision of law, statute, rule or regulation to
which the Borrower is subject or any judgment, order, writ, injunction, license
or permit applicable to the Borrower so as to materially adversely affect the
assets, business or any activity of the Borrower, (iv) do not conflict with any
provision of the certificate of incorporation or bylaws of the Borrower or any
agreement or other instrument binding upon the Borrower, (v) do not and will not
require any waivers, consents or approvals by any of its creditors which have
not been obtained, or (vi) do not and will not require any approval which has
not been obtained.
     (c) Enforceability of Obligations. This Amendment and the Credit Agreement,
as amended hereby, constitute the legal, valid and binding obligations of the
Borrower enforceable against the Borrower in accordance with its terms, except
as enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the enforcement of
creditors’ rights and except to the extent that availability of the remedy of
specific performance or injunctive relief is subject to the discretion of the
court before which any proceeding therefor may be brought.
     (d) No Event of Default. No Event of Default or Default has occurred and is
continuing.
     Section 12. Conditions to Effectiveness. This Amendment shall become
effective on the date when the following conditions precedent have been
satisfied:
     (a) The Borrower, each Guarantor and the Bank shall have delivered an
executed counterpart of this Amendment.

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     (b) No Event of Default or Default shall have occurred and be continuing or
would result after giving effect to the transactions contemplated hereby.
     (c) The representations and warranties set forth in Section 5 hereof shall
be true and correct on the effective date of this Amendment.
     (d) No injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the consummation of the transactions
contemplated herein shall have been issued and remain in force by any
Governmental Authority against the Borrower, any Guarantor or the Bank.
     (e) The Borrower shall have paid all reasonable out-of-pocket costs and
expenses of the Bank, to the extent invoices therefor have been presented.
     (f) All other documents and legal matters in connection with the
transactions contemplated by this Amendment shall have been delivered or
executed or recorded and shall be in form and substance satisfactory to the
Bank.
     Section 13. Admissions and Acknowledgments. The Borrower and each Guarantor
expressly acknowledges and agrees with each of the following:
     (a) That such Person does not dispute the validity or enforceability of any
of the Loan Documents or any of their respective obligations under any of the
foregoing, or the validity, priority, enforceability, scope or extent of any
charge, Lien, security interest or any other encumbrance of the Bank in, on or
against any of the Collateral in any judicial, administrative or other
proceeding;
     (b) That such Person shall not challenge or dispute the validity of any of
its obligations under the Loan Documents to which it is party or any other
obligations incurred by such Person pursuant to the Loan Documents; and
     (c) That the Indebtedness evidenced by the Loan Documents is secured by
first priority, non-avoidable, perfected, valid and enforceable liens on and
security interests in the Collateral, subject only to Permitted Liens.
     Section 14. Reference to and Effect on Loan Documents.
     (a) Upon the effectiveness of this Amendment, on and after the date hereof,
each reference in the Credit Agreement to “this Agreement”, “hereunder”,
“hereof” or words of like import, and each reference in the other Loan Documents
to the Credit Agreement, shall mean and be a reference to the Credit Agreement
as amended hereby.
     (b) Except as expressly set forth herein, this Amendment shall not by
implication or otherwise limit, impair, constitute a waiver of, or otherwise
affect the rights and remedies of the Bank under the Credit Agreement or any
other Loan Document, and shall not alter, modify, amend or in any way affect any
of the terms, conditions, obligations, covenants or agreements contained in the
Credit Agreement or any other Loan Document, all of which are ratified and
affirmed in all respects and shall continue in full force and effect.
     (c) Nothing herein shall be deemed to entitle the Borrower or any Guarantor
to a waiver, amendment, modification or other change of any of the terms,
conditions, obligations, covenants or agreements contained in the Credit
Agreement or any other Loan Document in similar or difference circumstances.
     (d) This Amendment shall be a Loan Document for all purposes.
     Section 15. Benefits of Amendment. The terms and provisions of this
Amendment shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns to the extent contemplated by the
Credit Agreement.
     Section 16. Interpretation. The Article and Section headings used in this
Amendment are for convenience of reference only and shall not affect the
construction hereof.

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     Section 17. Execution in Counterparts. This Amendment may be executed in
any number of counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Amendment. Faxed
signatures of this Amendment shall be binding for all purposes.
     Section 18. Severability. If any provision of this Amendment shall be held
to be invalid, illegal or unenforceable under applicable law in any
jurisdiction, such provision shall be ineffective only to the extent of such
invalidity, illegality or unenforceability, which shall not affect any other
provisions hereof or the validity, legality and enforceability of such provision
in any other jurisdiction.
     Section 19. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California. The
arbitration provisions of Section 7.11 of the Credit Agreement are incorporated
herein by reference.
     Section 20. Expenses. The Borrower agrees to pay the reasonable
out-of-pocket expenses of the Bank, including but not limited to the reasonable
fees, charges and disbursements, including but not limited to the fees, charges
and disbursements of Gibson, Dunn & Crutcher LLP, special counsel for the Bank,
incurred in connection with the preparation, negotiation, execution and delivery
of this Amendment and any subsequent waiver, amendment or modification of the
Credit Agreement or any other Loan Document and the security arrangements in
connection herewith or therewith.
     Section 21. No Course of Dealing. The execution and delivery of this
Amendment shall not establish a course of dealing among the Bank, the Borrower
and the Guarantors or in any other way obligate the Bank to hereafter provide
any further amendments, waivers, or consents of any kind to the Borrower and the
Guarantors.
     Section 22. Arm’s Length Agreement. Each of the parties to this Amendment
agrees and acknowledges that this Amendment has been negotiated in good faith,
at arm’s length, and not by any means forbidden by law.
     Section 23. Entire Agreement. This Amendment together with all other
instruments, agreements, and certificates executed by the parties in connection
herewith or with reference thereto, embody the entire understanding and
agreement between the parties hereto and thereto with respect to the subject
matter hereof and thereof and supercede all prior agreements, understandings,
and inducements, whether express or implied, oral or written.
[Signature Pages Follow]

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     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered as of the date first set forth above.

            VIRCO MFG. CORPORATION,
as the Borrower
      By:   /s/ Robert E. Dose         Name:   Robert E. Dose        Title:  
Vice President — Finance, Secretary and Treasurer        VIRCO, INC.,
as a Guarantor
      By:   /s/ Robert E. Dose         Name:   Robert E. Dose        Title:  
Vice President — Finance, Secretary and
Treasurer        VIRCO MGMT. CORPORATION,
as a Guarantor
      By:   /s/ Robert E. Dose         Name:   Robert E. Dose        Title:  
Vice President — Finance, Secretary and
Treasurer        WELLS FARGO BANK, NATIONAL ASSOCIATION
      By:   /s/ Jeff Heisinger         Name:   Jeff Heisinger        Title:  
Vice President     

Signature Page to Amendment No. 1

Virco Mfg. Corporation