Document:

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Exhibit 10.1

STOCK PURCHASE AGREEMENT

     This STOCK PURCHASE AGREEMENT (this “Agreement”), is made and entered into as of June 6, 2006,
by and between VIRCO MFG. CORPORATION, a Delaware corporation (the “Company”), and the purchasers
set forth below (each a “Purchaser” and collectively the “Purchasers”).

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, and the Company hereby agrees to sell and issue to the Purchasers, at the Closing (as
defined below) such number of Shares of the Company’s Common Stock, par value $.01 per share, as
will yield gross proceeds to the Company of Five Million Dollars ($5,000,000) (the “Shares”), with
each Purchaser purchasing that number of the Shares as is indicated next to its 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 3:00 p.m. local time on June 6, 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, or in such nominee name(s) as instructed by such
Purchaser in writing, representing the number of Shares purchased by such Purchaser, calculated as
set forth in Section 2 below, and bearing 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.

     (c) At the Closing the Purchasers shall pay to the Company readily available funds in an
aggregate amount of Five Million Dollars ($5,000,000) (the “Purchase Price”).

2. CALCULATION OF PER SHARE PURCHASE PRICE AND NUMBER OF SHARES

     The purchase price for the Shares deliverable by the Company to the Purchasers at Closing
shall be the lower of (a) five dollars ($5.00) per share and (b) the average daily closing price
for shares of the Company’s Common Stock on the American Stock Exchange (“Amex”) over the last ten
trading days prior to the date of Closing. The number of Shares deliverable at Closing shall be
calculated by dividing the Purchase Price by the applicable per share price from the preceding
sentence and shall be one million seventy two thousand forty-one (1,072,041) shares.

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 same-day 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) A stock certificate or certificates representing the Shares in form satisfactory to
the Purchasers;

     (ii) A warrant certificate in the form attached hereto as Exhibit A (the “Warrant”)
representing the Purchasers’ right to acquire 25% of the number of Shares being purchased on
the Closing Date (the “Warrant

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Shares”) over a five year period at an exercise price of 120% of the per share purchase
price hereunder during the first three (3) years following the Closing Date and at 130%
during the fourth (4th) and fifth (5th) years following the Closing Date; and

     (iii) A legal opinion in substantially the form attached hereto as Exhibit B.

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 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.

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     (b) As of May 31, 2006, the issued and outstanding capital stock of the Company consisted of
thirteen million one hundred thirty seven two hundred eighty eight (13,137,288) 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 February 1, 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;

     (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.

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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

     (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.

     Exhibit C attached to this Agreement contains a description of an environmental “superfund”
case in which the Company has been named as a “de minimus” defendant. This description is provided
for informational purposes, inasmuch as the Company has no information which would cause it to
believe that the lawsuit could have a material adverse affect on its financial condition.

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.

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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.

     (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.

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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”).

     (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.

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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 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 it deems relevant in making an informed decision to purchase the Shares.

     (b) Such Purchaser is acquiring the Shares in the ordinary course of its business and for its
own account (except that Wedbush Morgan Securities is acquiring, and will be holding as nominee,
its Shares for the account of not more than 30 of its customers) for investment only and, except as
contemplated by this Agreement, has no present intention of distributing any of the Shares nor any
arrangement or 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.

     (c) 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 its own due diligence examination of the Company.

     (d) Such Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the Shares except in compliance with the Securities Act and the rules and regulations
promulgated thereunder (the “Rules and Regulations”).

     (e) Such Purchaser 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
its purchase of the Shares. Such Purchaser will not, directly or indirectly, carry any short
position in the Company’s Common Stock prior to the closing Date and will not make arrangements
with any third party to carry any short position.

5.2 DUE EXECUTION, DELIVERY AND PERFORMANCE

     (a) 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.

     (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 have
been duly authorized by all necessary corporate or other action on the part of such Purchaser and
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 such Purchaser
pursuant to, any contract, indenture, mortgage, loan agreement, voting agreement, voting trust or
other instrument or agreement to which such Purchaser is a party or by which it is be bound, or to
which any of the property or assets of such

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Purchaser is subject, nor will such action result in any violation of the provisions of the
charter or bylaws of such Purchaser or, to the knowledge of such Purchaser, any applicable statute,
law, rule, regulation or order.

5.3 RESALES OF SHARES

     (a) Subject to the right of Wedbush Morgan Securities to transfer its Shares to no more than
30 of its customers (each of whom is an “accredited investor”), 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 separate officer’s 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 acknowledges that there may occasionally be times when the Company
determines, in good faith following consultation with its Board of Directors or a committee
thereof, that the use of the prospectus forming a part of the Registration Statement should be
suspended until such time as an amendment or supplement to the Registration Statement or the
Prospectus has been filed by the Company and any such amendment to the Registration Statement has
been declared effective by the SEC, or until such time as the Company has filed an appropriate
report with the SEC pursuant to the Exchange Act. Such Purchaser hereby covenants that it will not
sell any Shares pursuant to the Prospectus during the period commencing at the time at which the
Company gives the Purchasers written notice of the suspension of the use of the Prospectus and
ending at the time the Company gives the Purchasers written notice that the Purchasers may
thereafter effect sales pursuant to the Prospectus. The Company may, upon written notice to the
Purchasers, suspend the use of the Prospectus for up to thirty (30) days and not more than once in
any 365-day period based on the reasonable determination of the Company’s Board of Directors that
there is a significant business purpose for such determination, such as pending corporate
developments, public filings with the SEC or similar events. The Company shall in no event be
required to disclose the business purpose for which it has suspended the use of the Prospectus if
the Company determines in its good faith judgment that the business purpose should remain
confidential. In addition, the Company shall notify the Purchasers (i) of any request by the SEC
for an amendment or any supplement to such Registration Statement or any related prospectus, or any
other information request by any other governmental agency directly relating to the offering, and
(ii) of the issuance by the SEC of any stop order suspending the effectiveness of such Registration
Statement or of any order preventing or suspending the use of any related prospectus or the
initiation or threat of any proceeding for that purpose.

     (c) Such Purchaser will notify the Company promptly of the sale of any of its 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. FORM D FILING; REGISTRATION; COMPLIANCE WITH THE SECURITIES ACT; INDEMNIFICATION

7.1 FORM D FILING; REGISTRATION OF SHARES

     The Company shall:

     (a) file in a timely manner a Form D relating to the sale of the Shares under this Agreement
pursuant to the SEC’s Regulation D.

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     (b) as soon as practicable after the Closing Date, but in no event later than the thirtieth
(30th) day following the Closing Date, prepare and file with the SEC a Registration Statement on
Form S-3 (or, if the Company is ineligible to use Form S-3, then on Form S-1) relating to the sale
of the Shares and Warrant Shares by the Purchasers (and any transferees under Section 7.3) from
time to time on the Amex (the “Registration Statement”);

     (c) provide to the Purchasers (and any transferees under Section 7.3) any information required
to permit the sale of the Shares and Warrant Shares under Rule 144A of the Securities Act;

     (d) subject to receipt of necessary information from the Purchasers, use its best efforts to
cause the Commission to notify the Company of the SEC’s willingness to declare the Registration
Statement effective on or before ninety (90) days after the Closing Date;

     (e) notify the Purchasers (and any transferees under Section 7.3) promptly upon the
Registration Statement, and any post-effective amendment thereto, being declared effective by the
SEC;

     (f) prepare and file with the SEC such amendments and supplements to the Registration
Statement and the Prospectus and take such other action, if any, as may be necessary to keep the
Registration Statement effective until the earlier of (i) the date on which the Shares and Warrant
Shares may be resold by the Purchasers (and any transferees under Section 7.3) without registration
and without regard to any volume limitations by reason of Rule 144(k) under the Securities Act or
any other rule of similar effect or (ii) all of the Shares and Warrant Shares have been sold
pursuant to the Registration Statement or Rule 144 under the Securities Act or any other rule of
similar effect;

     (g) promptly furnish to the Purchasers (and any transferees under Section 7.3) with respect to
the Shares and Warrant Shares registered under the Registration Statement such reasonable number of
copies of the Prospectus, including any supplements to or amendments of the Prospectus, in order to
facilitate the public sale or other disposition of all or any of the Shares and Warrant Shares by
the Purchasers (and any transferees under Section 7.3);

     (h) during the period when copies of the Prospectus are required to be delivered under the
Securities Act or the Exchange Act, file all documents required to be filed with the Commission
pursuant to Section 13, 14 or 15 of the Exchange Act within the time periods required by the
Exchange Act and the rules and regulations promulgated thereunder;

     (i) file documents for Blue Sky clearance in any states requiring Blue Sky clearance;
provided, however, that the Company shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified or has not so consented;
and

     (j) bear all expenses for the procedures in paragraphs (a) through (i) of this Section 7.1 in
connection with registration of the Shares and Warrant Shares.

7.2 DELAY IN EFFECTIVENESS OF REGISTRATION STATEMENT

     In the event that the Registration Statement is not declared effective by the SEC on or before
one hundred and fifty (150) days from the Closing Date, the Company shall pay to the Purchasers (on
a pro rata basis) liquidated damages in an aggregate amount equal to $100,000 per month (prorated
on a daily basis) until the effective date of the Registration Statement. The Company shall have
the option to pay such liquidated damages (a) in cash or (b) in additional shares of its Common
Stock with an equivalent value based upon the closing price for the Common Stock on the Amex on the
day before delivery of such shares.

7.3 TRANSFER OF SHARES

     Each Purchaser agrees that it will not effect any disposition of the Shares or its right to
purchase the Shares that would constitute a “sale” within the meaning of the Securities Act, except
as contemplated in the Registration Statement referred to in Section 7.1 or as otherwise permitted
by law, and that it will promptly notify the Company of any changes in the information set forth in
the Registration Statement regarding the Purchasers (or any transferees) or its plan of
distribution. Notwithstanding any other provision of this Agreement to the contrary, the Company
agrees that the Purchasers may transfer any portion of the Shares and Warrant to one or more of any
Purchaser’s affiliates or customers,

9

 

provided each such transferee is an accredited investor and agrees to be bound by the terms
and conditions of this Agreement and Warrant (as applicable). The Company agrees to promptly, or
to promptly cause its transfer agent to, record any transfer made in accordance with the foregoing
sentence.

7.4 INDEMNIFICATION BY THE COMPANY

     The Company agrees to indemnify and hold harmless the Purchasers, each of their directors and
officers and the persons, if any, who control any Purchasers within the meaning of the Securities
Act, against any losses, claims, damages, liabilities or expenses, joint or several, to which the
Purchasers or such controlling persons may become subject, under the Securities Act, the Exchange
Act, or any other federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with the written consent
of the Company, which consent shall not be unreasonably withheld), insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of
or are based upon any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement, including the Prospectus, financial statements and schedules, and
all other documents filed as a part thereof, as amended at the time of effectiveness of the
Registration Statement, including any information deemed to be a part thereof as of the time of
effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to Rule 434, of the Rules and
Regulations, or the Prospectus, in the form first filed with the Commission pursuant to Rule 424(b)
of the Regulations, or filed as part of the Registration Statement at the time of effectiveness if
no Rule 424(b) filing is required (the “Prospectus”), or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state in any of them a material
fact required to be stated therein or necessary to make the statements in any of them, in light of
the circumstances under which they were made, not misleading, or arise out of or are based in whole
or in part on any inaccuracy in the representations and warranties of the Company contained in this
Agreement, or any failure of the Company to perform its obligations under this Agreement or under
applicable law, and will reimburse the Purchasers and each such controlling persons for any legal
and other expenses as such expenses are reasonably incurred by the Purchasers or such controlling
persons in connection with investigating, defending, settling, compromising or paying any such
loss, claim, damage, liability, expense or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon (i) an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, the Prospectus or any amendment or supplement
of the Registration Statement or Prospectus in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Purchasers expressly for use in the
Registration Statement or the Prospectus, or (ii) the failure of the Purchasers to comply with its
covenants and agreements contained this Agreement respecting resale of the Shares, or (iii) the
inaccuracy of any representations made by the Purchasers in this Agreement or (iv) any untrue
statement or omission of a material fact required to make such statement not misleading in any
Prospectus that is corrected in any subsequent Prospectus that was delivered to the Purchasers
before the pertinent offer and sale or sales by the Purchasers.

7.5 INDEMNIFICATION BY THE PURCHASER

     Each Purchaser agrees to indemnify and hold harmless the Company, each of its directors and
officers and the person, if any, who controls the Company within the meaning of the Securities Act,
against any losses, claims, damages, liabilities or expenses to which the Company, each of its
directors and officers or controlling person may become subject under the Securities Act, the
Exchange Act, or any other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is effected with the
written consent of such Purchasers, which consent shall not be unreasonably withheld) insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon (i) any failure on the part of such Purchaser to
comply with the covenants and agreements contained in Sections 5.2 or 7.3 of this Agreement
respecting the sale of the Shares or (ii) the inaccuracy of any representation made by such
Purchaser in this Agreement or (iii) any untrue or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any amendment or supplement to the
Registration Statement or Prospectus, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was made in the
Registration Statement, the Prospectus, or any amendment or supplement thereto, in reliance upon
and in conformity with written information furnished to the Company by or on behalf of such
Purchaser expressly for use therein; provided, however, that such Purchaser shall not be liable for
any such untrue or alleged untrue statement or omission or alleged omission of which such Purchaser
has delivered to the Company in writing a

10

 

correction before the occurrence of the transaction from which such loss was incurred, and
such Purchaser will reimburse the Company, each of its directors, each of its officers who signed
the Registration Statement or controlling person for any legal and other expense reasonably
incurred by the Company, each of its directors and officers or controlling person in connection
with investigating, defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action.

7.6 INDEMNIFICATION PROCEDURE

     (a) Promptly after receipt by an indemnified party under Section 7.4 or 7.5 of notice of the
threat or commencement of any action, such indemnified party will, if a claim in respect thereof is
to be made against an indemnifying party under Section 7.4 or 7.5, promptly notify the indemnifying
party in writing of the claim; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party for contribution or
otherwise under the indemnity agreement contained herein or to the extent it is not prejudiced as a
result of such failure.

     (b) In case any such action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with all other
indemnifying parties similarly notified, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be a conflict between the positions of the indemnifying party
and the indemnified party in conducting the defense of any such action or that there may be legal
defenses available to it or other indemnified parties that are different from or additional to
those available to the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise participate in the defense
of such action on behalf of such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party will not be liable
to such indemnified party under this Section 7.4 or 7.5 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense thereof unless:

     (i) the indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the preceding sentence (it
being understood, however, that the indemnifying party shall not be liable for the expenses
of more than one separate counsel, approved by such indemnifying party representing all of
the indemnified parties who are parties to such action) or

     (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable time after
notice of commencement of action, in each of which cases the reasonable fees and expenses of
counsel shall be at the expense of the indemnifying party.

     (c) Notwithstanding these indemnification provisions, no Purchaser shall be liable for any
indemnification obligation under this Agreement in excess of the amount of the “Difference” (as
that term is defined in Section 7.7 below) received by such Purchaser.

7.7 CONTRIBUTION

     If the indemnification provided for herein is required by its terms but is for any reason held
to be unavailable to or otherwise insufficient to hold harmless an indemnified party in respect to
any losses, claims, damages, liabilities or expenses referred to in this Agreement, then each
applicable indemnifying party shall contribute to the amount paid or payable by such indemnified
party as a result of any losses, claims, damages, liabilities or expenses referred to in this
Agreement

     (a) in such proportion as is appropriate to reflect the relative benefits received by the
Company and each Purchaser from the placement of the Shares; or

     (b) if the allocation provided by clause (a) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred to in clause (a)
above but the relative fault of the Company and

11

 

each Purchaser in connection with the statements or omissions or inaccuracies in the
representations and damages, liabilities or expenses, as well as any other relevant equitable
considerations.

     The respective relative benefits received by the Company on the one hand and each Purchaser on
the other shall be deemed to be in the same proportion as the amount paid by such Purchaser to the
Company pursuant to this Agreement for the Shares purchased by such Purchaser that were sold
pursuant to the Registration Statement bears to the difference (the “Difference”) between the
amount such Purchaser paid for the Shares that were sold pursuant to the Registration Statement and
the amount received by such Purchaser from such sale. The relative fault of the Company and each
Purchaser shall be determined by reference to, among other things, whether the untrue or alleged
statement of a material fact or the omission or alleged omission to state a material fact or the
inaccurate or the alleged inaccurate representation or warranty relates to information supplied by
the Company or by such Purchaser and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses referred to above shall
be deemed to include, subject to the limitations set forth herein, any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or defending any action
or claim. The provisions set forth herein with respect to the notice of the threat or commencement
of any threat or action shall apply if a claim for contribution is to be made under this Section
7.7; provided, however, that no additional notice shall be required with respect to any threat or
action for which notice has been given under Section 7.4 or 7.5 for purposes of indemnification.
The Company and the Purchasers agree that it would not be just and equitable if contribution
pursuant to this Section 7.7 were determined solely by pro rata allocation or by any other method
of allocation which does not take account of the equitable considerations referred to in this
paragraph. Notwithstanding the provisions of this Section 7.7, no Purchaser shall be required to
contribute any amount in excess of the amount by which the Difference exceeds the amount of any
damages that such Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.

7.8 INFORMATION AVAILABLE

     From the date of this Agreement through the date the Registration Statement covering the
resale of Shares owned by any Purchaser is no longer effective, the Company will furnish to such
Purchaser:

     (a) as soon as practicable after available (but in the case of the Company’s Annual Report to
Shareholders, within 90 days after the end of each fiscal year of the Company), one copy of

     (i) its Annual Report to Stockholders (which Annual Report shall contain financial
statements audited in accordance with generally accepted accounting principles by a national
firm of certified public accountants);

     (ii) if not included in substance in the Annual Report to Shareholders, its Annual
Report on Form 10-K;

     (iii) if not included in substance in its Quarterly Reports to Shareholders, its
quarterly reports on Form 10-Q; and

     (iv) a full copy of the particular Registration Statement covering the Shares (the
foregoing, in each case, excluding exhibits); and

     (v) upon the request of the Purchaser, a reasonable number of copies of the Prospectus
to supply to any other party requiring the Prospectus.

7.9 RULE 144 INFORMATION

     Until the earlier of (a) the date on which the Shares may be resold by each Purchaser without
registration and without regard to any volume limitations by reason of Rule 144(k) under the
Securities Act or any other rule of similar effect or (b) all of the Shares have been sold pursuant
to the Registration Statement or Rule 144 under the Securities Act or any

12

 

other rule of similar effect, the Company shall file all reports required to be filed by it
under the Securities Act, the Rules and Regulations and the Exchange Act and shall take such
further action to the extent required to enable the Purchasers to sell the Shares pursuant to Rule
144 under the Securities Act (as such rule may be amended from time to time).

8. AMERICAN STOCK EXCHANGE LISTING

     The Company shall promptly secure the listing of the Shares on the Amex and so long as the
Purchasers continue to own any of the Shares, the Company shall maintain such listing of the
Shares. The Company has taken no action designed to delist, or which is likely to have the effect
of delisting, its Common Stock from the Amex.

9. PARTICIPATION IN FUTURE FINANCING

     The Company acknowledges and agrees that the Purchasers shall have the right to participate
and purchase up to 50% of any equity financing (including any convertible debt, preferred stock or
similar financing) undertaken by the Company with third party investors within one hundred and
eighty (180) days following the Closing Date.

10. ADDITIONAL REGISTRATION RIGHTS

     (a) For so long as the Purchasers continue to own more than two hundred thousand (200,000) of
the Shares, the Company shall notify the Purchasers in writing at least fifteen (15) business days
prior to the filing of any registration statement under the Securities Act with respect to a
contemplated public offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the Company, but excluding
registration statements relating to employee benefit plans or with respect to corporate
reorganizations or other transactions under Rule 145 of the Securities Act) and will afford the
Purchasers an opportunity to include in such registration statement all or part of the Shares owned
at that time by the Purchasers, unless the Company is otherwise prohibited from doing so by
applicable law, rule or regulation. Within ten (10) business days after receipt of the
above-described notice from the Company, each Purchaser shall notify the Company in writing of the
number of Shares, if any, it elects to include in the registration statement.

     (b) If the registration statement for which the Company gives notice under this Section 10 is
for an underwritten offering, the Company shall so advise the Purchasers. In such event, the right
of each Purchaser to elect to have Shares included in a registration pursuant to this Section 10
shall be conditioned upon such Purchaser’s participation in the underwriting and the inclusion of
the Shares in the underwriting to the extent provided herein. In such event, such Purchaser shall
enter into an underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other provision of this
Agreement, if the underwriter determines in good faith that marketing factors require a limitation
of the number of shares to be offered for sale in the public offering, the number of Shares that
may be included in the offering by the Purchasers shall be reduced. No such reduction, however,
shall reduce the number of Shares offered by the Purchasers included in the registration below
twenty percent (20%) of the total amount of securities included in such registration, unless the
Company is required to do so by applicable law, rule or regulation. If any Purchaser disapproves
of the terms of any such underwriting, such Purchaser may elect to withdraw therefrom by written
notice to the Company and the underwriter, delivered at least five (5) business days prior to the
effective date of the registration statement.

     (c) The Company shall have the right to terminate or withdraw any registration of securities
initiated by it under this Section 10 prior to the effectiveness of the registration statement
whether or not any Purchaser has elected to include Shares in such registration.

     (d) All registration, legal and accounting expenses incurred in connection with any
registration statement pursuant to this Section 10 shall be borne by the Company. All underwriting
and selling expenses incurred in connection with any registration statement pursuant to this
Section 10 shall be borne pro rata by all parties selling securities through the registration
statement based upon the number of shares so registered.

13

 

11. 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. Upon
successful consummation of these transactions at the Closing, the Company will pay the reasonable,
out of pocket expenses incurred by the Purchasers up to a maximum of $50,000.

12. 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.

13. 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.

14. MODIFICATION; AMENDMENT

     This Agreement may not be modified or amended except pursuant to an instrument in writing
signed by the Company and the Purchasers.

15. 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.

16. 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.

14

 

17. 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.

18. 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.

     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:

	 	 	 	 
	 

	 	 	 	 
	 

	 	Robert A. Virtue	 	 
	Its:

	 	President, Chief Executive Officer
and Chairman	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	WEDBUSH, INC.	 	- as to commitment of $2.0 million
	1000 Wilshire Boulevard, Suite 830	 	 
	Los Angeles, CA 90017	 	 
	 
	 	 	 	 
	By:

	 	 	 	 
	 

	 	 	 	 
	 

	 	Eric D. Wedbush	 	 
	Its:

	 	President	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	WEDBUSH MORGAN SECURITIES, INC.	 	- as to commitment of $3.0 million
	1000 Wilshire Boulevard	 	 
	Los Angeles, CA 90017	 	 
	 
	 	 	 	 
	By:

	 	 	 	 
	 

	 	 	 	 
	 

	 	Edward W. Wedbush	 	 
	Its:

	 	President	 	 

15exv10w2

 

Exhibit 10.2

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, Wedbush, Inc., together with its designees (collectively, 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 one hundred seven thousand two hundred four
(107,204) 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 $5.60 per share
during the first three (3) years from the date of this Warrant and $6.06 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 20,000 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. 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
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

 

 

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 exercise of this Warrant, during the period specified herein
and upon payment of the Exercise Price then in effect, the number

2

 

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
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,

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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:     	 	Wedbush, Inc.

1000 Wilshire Blvd.

Suite 830

Los Angeles, CA 90017

Attention: President

			
	          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.

          (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.

4

 

          (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 A. Virtue 	 
	 	Its: 	President and CEO 	 
	 
	 	THE HOLDER:
 

WEDBUSH, INC.

 	 
	 	By:  	 
 	 
	 	 	Eric D. Wedbush 	 
	 	Its: 	President	 
	 
	 	DATED: June 6, 2006	 

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