Exhibit 10.16

THE SHARES ISSUABLE UPON VESTING OF THIS AWARD WILL NOT BE RELEASED TO YOU UNTIL
ALL
APPLICABLE MONETARY OBLIGATIONS HAVE BEEN COLLECTED FROM YOU OR HAVE OTHERWISE
BEEN PROVIDED FOR.
VIRCO MFG. CORPORATION
RESTRICTED STOCK UNIT AWARD AGREEMENT
TO:     [Participant]
     To encourage your continued service as a director of Virco Mfg. Corporation
(the “Company”), you have been granted this restricted stock unit award (the
“Stock Units”) pursuant to the Company’s 1997 Stock Incentive Plan (the “Plan”).
The Stock Units represent the right to receive shares of Common Stock of the
Company (the “Shares,” and together with the Stock Unit, the “Award”) subject to
the fulfillment of the vesting conditions regarding the Stock Units set forth in
this agreement (this “Agreement”).
     The terms of the Award are as set forth in this Agreement and in the Plan.
The Plan is incorporated into this Agreement by reference, which means that this
Agreement is limited by and subject to the express terms and provisions of the
Plan. In the event of a conflict between the terms of this Agreement and the
terms of the Plan, the terms of the Plan will control. Capitalized terms that
are not defined in this Agreement have the meanings given to them in the Plan.
The most important terms of the Award are summarized as follows:
     1.     Award Date: January 13, 2006

     2.     Number of Stock Units Subject to this Award: [___]
     3.     Consideration for Shares Issuable Pursuant to this Award: $0.01 per
share (the “Per Share Consideration”)
     4.     Vesting Schedule: The Award will vest according to the following
schedule:

  (a)   Stock Unit: The Stock Units will be fully vested on July 5, 2006 (the
“Stock Unit Vest Date”) and you will at that time be entitled to receive the
Shares on the terms and conditions set forth in this Agreement.     (b)  
Shares: The transferability of the Shares will be subject to the conditions set
forth in this Agreement.

  5.   Conversion of Stock Units, Issuance of Shares, Vesting and Status as a
Stockholder.

  (a)   Conversion of Stock Units; Issuance of Shares. On the Stock Unit Vest
Date, one Share will be issuable for each Stock Unit, subject to the terms and
provisions of the Plan and this Agreement. Thereafter, the Company will transfer
such Shares to you upon payment by you of the Per Share Consideration
contemplated by Section 7(b). No fractional shares will be issued under this
Agreement.     (b)   Vesting of Stock Unit. Your Stock Units will be forfeitable
unless and

 

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      until otherwise vested pursuant to the terms of this Agreement. Subject to
your continued service as a member of the Board of Directors (the “Board”), the
Stock Units will become vested pursuant to the terms of Sections 4(a) and 6.    
(c)   Your Status as a Stockholder. Until the Stock Units are converted to
Shares pursuant to Section 5(a) hereof, you will have no rights as a stockholder
(including, without limitation, any voting or dividend rights with respect to
the Shares). Following the conversion of the Stock Units to Shares, you will be
recorded as a stockholder of the Company with respect to the Shares subject to
the Award and will have voting and dividend rights with respect to the Shares,
unless and until any such Shares are transferred back to the Company.

     6.     Termination of Directorship. Subject to Section 10(b), the Stock
Units will terminate automatically and be forfeited to the Company immediately
and without further notice if you resign or are voluntarily or involuntarily
terminated from the Company’s Board prior to the Stock Unit Vest Date. In case
of the involuntary termination of your directorship, the Award will
automatically terminate upon first notification to you of such termination,
unless the Committee determines otherwise. If your directorship is suspended
pending an investigation of whether you should be involuntarily terminated, all
of your rights under the Award likewise will be suspended during the period of
investigation. No Shares will be issued or issuable with respect to any portion
of the Stock Units that terminate unvested and are forfeited.
     7.     Per Share Consideration and Taxes.

  (a)   Generally. You are ultimately liable and responsible to pay the Per
Share Consideration for any Shares issuable under the Award and for all taxes
owed in connection with the Award, regardless of any action the Company takes
with respect to assisting you with meeting your tax obligations that arise in
connection with the Award. The Company does not make any representation or
undertaking regarding the treatment of any tax obligation in connection with the
grant or vesting of the Award or any subsequent sale of Shares issuable pursuant
to the Award. The Company does not commit and is under no obligation to
structure the Award to reduce or eliminate your tax liability.     (b)   Payment
of Per Share Consideration. You must arrange for the payment of the amount you
owe in connection with the conversion of the Stock Units to Shares (the
“Conversion Obligation”), which will be calculated by multiplying the Per Share
Consideration by the number of Stock Units awarded hereunder. To satisfy your
Conversion Obligation, you must deliver to the Company an amount the Company
determines is sufficient to satisfy the Conversion Obligation by (i) wire
transfer to such account as the Company may direct, (ii) delivery of a certified
or personal check payable to the Company, c/o the Company’s Chief Financial
Officer, 2027 Harpers Way, Torrance, CA 90501, or such other address as

 

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      the Company may from time to time direct, or (iii) such other means as the
Company may establish or permit, including the retention of Shares (as described
in Section 7(c) below).     (c)   Right to Retain Shares. The Company will not
issue Shares until you satisfy the Conversion Obligation. To the maximum extent
permitted by law, the Company has the right to retain without notice from Shares
issuable under the Stock Units or from other amounts payable to you, Shares or
cash having a value sufficient to satisfy the Conversion Obligation.     (d)  
Sale of Shares to the Company for Tax Purposes. The Company will determine in
good faith the amount of the domestic or foreign tax obligation resulting from
the vesting of the Stock Units on the Stock Unit Vest Date, whether national,
federal, state or local, including any social tax obligation (the “Tax
Obligation”). You may, up to and including the Stock Unit Vest Date, elect for
the Company to withhold a whole number of Shares issuable in respect of the
Stock Units as the Company determines to be appropriate to generate cash
proceeds sufficient for you to satisfy your Tax Obligation. The Company will
notify you ten business days prior to the Stock Unit Vest Date of your right to
make this election. The value of the Shares withheld by the Company pursuant to
this Section 7(d) will be calculated using the closing price recorded for the
Company’s Common Stock on the American Stock Exchange on the Stock Unit Vest
Date.

     8.     Registration. You will not be able to transfer or sell Shares issued
to you pursuant to the Award unless exemptions from registration under
applicable securities laws are available or such a registration statement is
made effective. You agree that any resale by you of the Shares issued pursuant
to the Award will comply in all respects with the requirements of all applicable
securities laws, rules and regulations.
     9.     Adjustments to Common Stock. If the Common Stock underlying this
Award is increased, decreased or exchanged for or converted into cash, property
or a different number or kind of shares or securities, or if cash, property or
shares or securities are distributed in respect of such outstanding Common
Stock, in either case as a result of a reorganization, merger, consolidation,
recapitalization, restructuring, reclassification, dividend (other than a
regular, quarterly cash dividend) or other distribution, stock split, reverse
stock split, spin-off or the like, or if substantially all of the property and
assets of the Company are sold, then, unless the terms of such transaction will
provide otherwise, the Company will make appropriate and proportionate
adjustments in the number and type of Shares that may be acquired pursuant to
this Award.
     10.     Accelerated Vesting. In the event of your death or a change in
control of the Company, this Award (whether Stock Units or Shares) in whole will
immediately vest.

 

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     11.     Transfer Restrictions. The Stock Units and the Shares, will not be
sold, assigned, transferred or pledged without the prior written consent of the
Company. If the Company consents to any such sale, assignment, transfer or
pledge, you will cause any proposed purchaser, assignee, transferee or pledgee
of any Shares to agree to take and hold such Shares subject to the provisions
and upon the conditions specified in this Agreement and the Plan to the extent
deemed appropriate by the Company.
     12.     Dividend Payments. In the event the Company declares a cash
dividend on shares of its Common Stock, such dividend will also be payable to
holders of the Shares, but shall not be payable with respect to the Stock Units,
unless the Company determines otherwise.
     13.     Limitation on Rights; No Right to Future Grants; Extraordinary
Item. By entering into this Agreement and accepting the Award, you acknowledge
that: (i) the Plan is discretionary and may be modified, suspended or terminated
by the Company at any time as provided in the Plan; (ii) the grant of the Award
is a one-time benefit and does not create any contractual or other right to
receive future grants of awards or benefits in lieu of awards; (iii) all
determinations with respect to any such future grants, including, but not
limited to, the times when awards will be granted, the number of shares subject
to each award, the award price, if any, and the time or times when each award
will be settled, will be at the sole discretion of the Committee; (iv) your
participation in the Plan is voluntary; (v) the value of the Award is an
extraordinary item which is outside the scope of any agreement you may have with
the Company, if any; (vi) the Award is not part of normal or expected
compensation for any purpose, including without limitation for calculating any
benefits, severance, resignation, termination, redundancy, end of service
payments, bonuses, long-service awards, pension or retirement benefits or
similar payments, and you will have no entitlement to compensation or damages as
a consequence of your forfeiture of any Unvested Shares of the Award or the
Stock Units prior to the Stock Unit Vest Date as a result of the termination of
your employment by the Company for any reason; (vii) the future value of the
Shares subject to the Award is unknown and cannot be predicted with certainty,
(viii) neither the Plan, the Award nor the issuance of the Shares confers upon
you any right to continued service as a director of the Company, nor do they
limit in any respect the right of the Company’s stockholders or the Company to
terminate your status as a director or other relationship with the Company at
any time and (ix) in the event that you are not a direct employee of Company,
the grant of the Award will not be interpreted to form an employment
relationship with the Company; and furthermore, the grant of the Award will not
be interpreted to form an employment contract with the Company.

 

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     14.     Execution of Award Agreement. Please acknowledge your acceptance of
the terms and conditions of the Award by signing the original of this Agreement
and returning it to the Company’s Chief Financial Officer. If you do not sign
and return this Agreement, the Company is not obligated to provide you any
benefit hereunder and may refuse to issue Shares to you under this Award.
     15.     Vesting Blackout Dates. If the Stock Unit Vest Date occurs on a
date that is the subject of a Company imposed trading blackout, the Stock Unit
Vest Date shall be delayed until, and shall occur on, the commencement of the
immediately succeeding Company approved trading window.

            Very truly yours,

VIRCO MFG. CORPORATION
      By:         Name:         Title:        

ACCEPTED BY:

       
 
 
Taxpayer I.D. Number
   
 
<<Participant>>   

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