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<SEC-DOCUMENT>0000950124-08-001425.txt : 20080324
<SEC-HEADER>0000950124-08-001425.hdr.sgml : 20080324
<ACCEPTANCE-DATETIME>20080324151041
ACCESSION NUMBER:		0000950124-08-001425
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20080318
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
ITEM INFORMATION:		Regulation FD Disclosure
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20080324
DATE AS OF CHANGE:		20080324

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			VIRCO MFG CORPORATION
		CENTRAL INDEX KEY:			0000751365
		STANDARD INDUSTRIAL CLASSIFICATION:	PUBLIC BUILDING AND RELATED FURNITURE [2531]
		IRS NUMBER:				951613718
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0131

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-08777
		FILM NUMBER:		08706881

	BUSINESS ADDRESS:	
		STREET 1:		2027 HARPERS WAY
		CITY:			TORRANCE
		STATE:			CA
		ZIP:			90501
		BUSINESS PHONE:		3105330474

	MAIL ADDRESS:	
		STREET 1:		P O BOX 44846
		CITY:			LOS ANGELES
		STATE:			CA
		ZIP:			90044
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>v39244e8vk.htm
<DESCRIPTION>FORM 8-K
<TEXT>
<HTML>
<HEAD>
<TITLE>Virco Mfg. Corporation</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 8-K</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><B>CURRENT REPORT<BR>
Pursuant to Section&nbsp;13 or 15(d) of The Securities Exchange Act of 1934</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">
Date of Report (Date of Earliest Event Reported): March&nbsp;18, 2008
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>VIRCO MFG. CORPORATION</B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Exact name of registrant as specified in its charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</B><BR>
(State or other jurisdiction of <BR>
incorporation)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>001-8777</B><BR>
(Commission File Number)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>95-1613718</B><BR>
(IRS Employer Identification No.)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>2027 Harpers Way <BR>
Torrance, California</B><BR>
(Address of principal executive offices)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><BR>
<B>90501</B><BR>
(Zip Code)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Registrant&#146;s telephone number, including area code: <B>(310) 533-0474</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">
Not Applicable<BR>
(Former name or former address, if changed since last report.)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt">Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-family: Wingdings">&#111;</FONT> Written communications pursuant to Rule&nbsp;425 under the Securities Act (17 CFR 230.425)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-family: Wingdings">&#111;</FONT> Soliciting material pursuant to Rule&nbsp;14a-12 under the Exchange Act (17 CFR 240.14a-12)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-family: Wingdings">&#111;</FONT> Pre-commencement communications pursuant to Rule&nbsp;14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-family: Wingdings">&#111;</FONT> Pre-commencement communications pursuant to Rule&nbsp;13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>







<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101">Item 1.01 Entry into a Material Definitive Agreement.
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102">Item&nbsp;2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#103">Item&nbsp;7.01 Regulation&nbsp;FD Disclosure</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#104">Item&nbsp;9.01 Financial Statements and Exhibits.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#105">SIGNATURES</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#106">EXHIBIT INDEX</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="v39244exv10w1.htm">EXHIBIT 10.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="v39244exv10w2.htm">EXHIBIT 10.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="v39244exv10w3.htm">EXHIBIT 10.3</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="v39244exv10w4.htm">EXHIBIT 10.4</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="v39244exv99w1.htm">EXHIBIT 99.1</A></FONT></TD></TR>
</TABLE>
</DIV>


<DIV align="left">
<!-- /TOC -->
</DIV>






<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">







<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;1.01</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>Entry into a Material Definitive Agreement.</B></TD>
</TR>
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective as of March&nbsp;18, 2008, Virco Mfg. Corporation (the &#147;Company&#148;) entered into the Second
Amended and Restated Credit Agreement (the &#147;Agreement&#148;), dated as of March&nbsp;12, 2008, with Wells
Fargo Bank, National Association (the &#147;Lender&#148;) and a related Revolving Line of Credit Note (the
&#147;Note&#148;), dated as of March&nbsp;12, 2008, in favor of the Lender. The Agreement provides the Company
with an increased secured revolving line of credit (the &#147;Revolving Credit&#148;) of up to $65,000,000,
with seasonal adjustments to the credit limit, and includes a sub-limit of up to $10,000,000 for
the issuance of letters of credit. The proceeds of the Revolving Credit are to be used to
refinance the Company&#146;s existing credit facility with the Lender and to provide for the working
capital needs and general corporate purposes of the Company. The Revolving Credit is secured by
the maintenance by the Lender of a first priority perfected security interest in certain of the
personal and real property of the Company and its subsidiaries, pursuant to (1)&nbsp;a Master
Reaffirmation Agreement (the &#147;Reaffirmation Agreement&#148;), dated as of March&nbsp;12, 2008, among the
Company, the Company&#146;s subsidiaries, and the Lender, and (2)&nbsp;an Amended and Restated Mortgage (the
&#147;Mortgage&#148;), dated as of March&nbsp;12, 2008, by the Company in favor of the Lender.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The foregoing description of each of the Agreement, the Note, the Reaffirmation Agreement and the
Mortgage is qualified in its entirety by reference to the agreements attached as Exhibits 10.1,
10.2, 10.3 and 10.4 and incorporated herein by reference. These agreements have been included to
provide investors with information regarding their terms and are not intended to provide any other
factual information about the Company.
</DIV>

<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;2.03</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet
Arrangement of a Registrant.</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The information provided in Item&nbsp;1.01 is incorporated herein by reference.
</DIV>

<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;7.01 Regulation&nbsp;FD Disclosure</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On March&nbsp;24, the Company issued a press release announcing the entry by the Company into the
Agreement. A copy of the press release is attached hereto as Exhibit&nbsp;99.1 and incorporated herein
by reference. The information in Item&nbsp;7.01 of this Current Report, including Exhibit&nbsp;99.1 hereto,
shall not be deemed &#147;filed&#148; for purposes of Section&nbsp;18 of the Securities Exchange Act of 1934, as
amended, and shall not be incorporated by reference into any registration statement or other
document pursuant to the Securities Act of 1933, as amended.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;9.01</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>Financial Statements and Exhibits.</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(d)&nbsp;The following exhibits are filed with this Form&nbsp;8-K:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="95%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Exhibit No.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Description</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amended and Restated Credit Agreement, dated as of March&nbsp;12, 2008 between Virco Mfg.
Corporation and Wells Fargo Bank, National Association</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Revolving Line of Credit Note, dated as of March&nbsp;12, 2008, by Virco Mfg. Corporation in favor
of Wells Fargo Bank, National Association</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Master Reaffirmation Agreement, dated as of March&nbsp;12, 2008, among Virco Mfg. Corporation,
Virco Mgmt. Corporation, Virco Inc. and Wells Fargo Bank, National Association</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Mortgage, dated as of March&nbsp;12, 2008, by Virco Mfg. Corporation in favor
of Wells Fargo Bank, National Association</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">99.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Press Release dated March&nbsp;24, 2008</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" valign="top"><b>VIRCO MFG. CORPORATION</B>
</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
</TR>


<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="center">(Registrant)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top">Date: March&nbsp;24, 2008</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="center">/s/ Robert A. Virtue</TD>
</TR>

<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="center">(Signature)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Robert A. Virtue</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer and<BR>
Chairman of the Board of Directors</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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<A name="106"></A>
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT INDEX</B>
</DIV>

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    <TD width="95%">&nbsp;</TD>
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<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amended and Restated Credit Agreement, dated as of March&nbsp;12, 2008 between Virco Mfg.
Corporation and Wells Fargo Bank, National Association</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Revolving Line of Credit Note, dated as of March&nbsp;12, 2008, by Virco Mfg. Corporation in favor
of Wells Fargo Bank, National Association</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Master Reaffirmation Agreement, dated as of March&nbsp;12, 2008, among Virco Mfg. Corporation,
Virco Mgmt. Corporation, Virco Inc. and Wells Fargo Bank, National Association</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Mortgage, dated as of March&nbsp;12, 2008, by Virco Mfg. Corporation in favor
of Wells Fargo Bank, National Association</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">99.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Press Release dated March&nbsp;24, 2008</TD>
</TR>
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<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
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<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>v39244exv10w1.htm
<DESCRIPTION>EXHIBIT 10.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 10.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT 10.1</B>
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXECUTION COPY</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">SECOND AMENDED AND RESTATED
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">CREDIT AGREEMENT

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Dated as of March&nbsp;12, 2008

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">between

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">VIRCO MFG. CORPORATION,

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">as Borrower,

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">and

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">WELLS FARGO BANK, NATIONAL ASSOCIATION,

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">as Bank

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Page</TD>
    <TD>&nbsp;</TD>
</TR>

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<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE I CREDIT TERMS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;1.1. Line Of Credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;1.2. Interest/Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;1.3. Collection Of Payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE II REPRESENTATIONS AND WARRANTIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;2.1. Legal Status</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;2.2. Authorization And Validity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;2.3. No Violation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;2.4. Litigation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;2.5. Correctness Of Financial Statement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;2.6. Income Tax Returns</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;2.7. No Subordination</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;2.8. Permits, Franchises</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;2.9. ERISA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;2.10. Other Obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;2.11. Environmental Matters</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;2.12. No Encumbrances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;2.13 Solvency</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;2.14. Indebtedness</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;2.15. Inactive Subsidiaries; Other Subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE III CONDITIONS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<tr style="font-size: 10pt"><td>&nbsp;</td></tr>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;3.1. Conditions Of Initial Extension Of Credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;3.2. Conditions Of Each Extension Of Credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
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</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->i<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Table of Contents</B>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 0pt"><B>(Continued)</B>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
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    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Page</TD>
    <TD>&nbsp;</TD>
</TR>

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<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE IV AFFIRMATIVE COVENANTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;4.1. Punctual Payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;4.2. Accounting Records</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;4.3. Financial Statements and Reports</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;4.4. Compliance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;4.5. Insurance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;4.6. Facilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;4.7. Taxes And Other Liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;4.8. Existence</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;4.9. Notice To Bank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;4.10. Right to Inspect</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE V NEGATIVE COVENANTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;5.1. Use Of Funds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;5.2. Capital Expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;5.3. Other Indebtedness</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;5.4. Liens</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;5.5. Merger, Consolidation, Transfer Of Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;5.6. Guaranties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;5.7. Loans, Advances, Investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;5.8. Dividends, Distributions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;5.9. Transactions with Affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;5.10. Annual Clean Down</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;5.11. Minimum Consolidated Current Ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
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<P align="center" style="font-size: 10pt"><!-- Folio -->ii<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Table of Contents</B>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 0pt"><B>(Continued)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Page</TD>
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</TR>

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    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;5.12. Minimum Consolidated Fixed Charge Coverage Ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;5.13. Maximum Leverage Ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;5.14. Inactive Subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;5.15. Licensing Agreements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE VI EVENTS OF DEFAULT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;6.1. Events of Default</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;6.2. Remedies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE VII MISCELLANEOUS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;7.1 No Waiver</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;7.2. Notices</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;7.3. Costs, Expenses And Attorneys&#146; Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;7.4. Successors, Assignment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;7.5. Entire Agreement; Amendment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;7.6. No Third Party Beneficiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;7.7. Time</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;7.8. Severability Of Provisions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;7.9. Counterparts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;7.10. Governing Law</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;7.11. Arbitration</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Section&nbsp;7.12. Restatement of Prior Credit Agreement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&nbsp;iii&nbsp;
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBITS AND SCHEDULES</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">EXHIBIT A
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FORM OF LINE OF CREDIT NOTE</TD>
</TR>

<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">EXHIBIT B
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FORM OF COMPLIANCE CERTIFICATE</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">SCHEDULE 2.11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ENVIRONMENTAL MATTERS</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SCHEDULE 5.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">EXISTING INDEBTEDNESS</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SCHEDULE R-1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">REAL PROPERTY COLLATERAL</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&nbsp;i&nbsp;
</DIV>



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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">SECOND AMENDED AND RESTATED CREDIT AGREEMENT
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of March&nbsp;12, 2008 (&#147;<U>Agreement</U>&#148;)
between VIRCO MFG. CORPORATION, a Delaware corporation (&#147;<U>Borrower</U>&#148;), and WELLS FARGO BANK,
NATIONAL ASSOCIATION (&#147;<U>Bank</U>&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>RECITALS</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;Bank and Borrower previously entered into that certain Amended and Restated Credit
Agreement dated as of January&nbsp;27, 2004 (as amended from time to time, the &#147;<U>Prior Credit
Agreement</U>&#148;), pursuant to which Bank extended to Borrower a line of credit, with a subfeature
for the issuance of letters of credit (the letters of credit issued thereunder and outstanding on
the date hereof, the &#147;<U>Prior Letters of Credit</U>&#148;), and made certain term loans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;Bank and Borrower wish to amend and restate the Prior Credit Agreement in its entirety with
this Agreement to evidence the extension to Borrower of the credit accommodations described below
on the terms and conditions contained herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;Terms used in this Agreement shall have the meanings set forth in <U>Annex A</U>, and, for
purposes of this Agreement and the other Loan Documents, the rules of construction set forth in
<U>Annex A</U> shall govern.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Bank and Borrower hereby agree as follows:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE I</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CREDIT TERMS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;1.1. <U>Line Of Credit</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<U>Line of Credit</U>. During the Line of Credit Period, Bank hereby agrees, subject to
the terms and conditions of this Agreement, to make advances (&#147;<U>Advances</U>&#148;) to Borrower from
time to time in an aggregate principal amount at any time outstanding not to exceed the Maximum
Line of Credit Amount <I>minus </I>the Letter of Credit Usage (&#147;<U>Line of Credit</U>&#148;). The proceeds of
all advances made hereby shall be used to finance Borrower&#146;s working capital requirements and for
other lawful purposes consistent with the provisions hereof. Borrower&#146;s obligation to repay
advances under the Line of Credit shall be evidenced by a promissory note substantially in the form
of <U>Exhibit&nbsp;A</U> attached hereto (&#147;<U>Line of Credit Note</U>&#148;), all terms of which are
incorporated herein by this reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<U>Letter of Credit Subfeature</U>. 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 &#147;<U>Letter of Credit</U>&#148; and
collectively, &#147;<U>Letters of Credit</U>&#148;); <I>provided however, </I>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)&nbsp;the Letter of Credit Usage would exceed $10,000,000, or (ii)&nbsp;the Letter of
Credit
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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)&nbsp;days, as designated by Borrower; <I>provided</I>, <I>however</I>, 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)&nbsp;months, as designated by Borrower; <I>provided, however</I>, 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; <I>provided, however, </I>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 &#147;Letters of Credit&#148;
hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;<U>Borrowing and Repayment</U>. Borrower may from time to time during the Line of Credit
Period borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all
of the limitations, terms and conditions contained herein or in the Line of Credit Note; <I>provided,
however</I>, that the total outstanding borrowings under the Line of Credit shall not at any time
exceed the maximum principal amount available thereunder, as set forth above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;1.2. <U>Interest/Fees</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp; <U>Interest</U>. The outstanding principal balance of the Line of Credit shall bear
interest at the rate of interest set forth in the Line of Credit Note.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<U>Computation and Payment</U>. Interest shall be computed on the basis of a 360-day
year, actual days elapsed. Interest shall be payable at the times and place set forth in each
promissory note or other instrument or document required hereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;<U>Unused Commitment Fee</U>. Borrower shall pay to Bank an unused commitment fee on the
15th day of the month immediately following each fiscal quarter end in an amount equal to 0.25% <I>per
annum </I>times the result of (i)&nbsp;the Maximum Line of Credit Amount, <I>less </I>(ii)&nbsp;the sum of (A)&nbsp;the
average daily balance of Advances that were outstanding during the immediately preceding quarter,
<I>plus </I>(B)&nbsp;the average daily balance of Letters of Credit outstanding during the immediately
preceding quarter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;<U>Standby Letter of Credit Fees</U>. Borrower shall pay to Bank (i)&nbsp;fees upon the
issuance of each standby Letter of Credit equal to 2.0% <I>per annum </I>(computed on the basis of a
360-day year, actual days elapsed) of the face amount thereof, and (ii)&nbsp;fees upon the payment or
negotiation of each drawing under any standby Letter of Credit and fees upon the occurrence of
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">any other activity with respect to any standby Letter of Credit (including without limitation,
the transfer, amendment or cancellation of any standby Letter of Credit) determined in accordance
with Bank&#146;s standard fees and charges then in effect for such activity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;<U>Commercial Letter of Credit Fees</U>. Borrower shall pay to Bank fees upon the
issuance of each commercial Letter of Credit, upon the payment or negotiation by Bank of each draft
under any commercial Letter of Credit and upon the occurrence of any other activity with respect to
any commercial Letter of Credit (including without limitation, the transfer, amendment or
cancellation of any commercial Letter of Credit) determined in accordance with Bank&#146;s standard fees
and charges then in effect for such activity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;<U>Collateral Audits; Appraisals</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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); <I>provided, however </I>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 one (1)&nbsp;audit in any fiscal year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Bank shall have the right to have the 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 Equipment and Real Property Collateral of Borrower and its
Subsidiaries).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;1.3. <U>Collection Of Payments</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrower authorizes Bank to collect all interest and fees due under the Line of Credit by
charging Borrower&#146;s deposit account number 4648-052785 with Bank, or any other deposit account
maintained by Borrower with Bank, for the full amount thereof. Should there be insufficient funds
in any such deposit account to pay all such sums when due, the full amount of such deficiency shall
be immediately due and payable by Borrower.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE II</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>REPRESENTATIONS AND WARRANTIES</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrower makes the following representations and warranties to Bank, which representations and
warranties shall survive the execution of this Agreement and shall continue in full force and
effect until the full and final payment, and satisfaction and discharge, of all obligations of
Borrower to Bank subject to this Agreement.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;2.1. <U>Legal Status</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrower and each of its Subsidiaries is a corporation, duly organized and existing and in
good standing under the laws of its jurisdiction of organization, and is qualified or licensed to
do business (and is in good standing as a foreign corporation, if applicable) in all jurisdictions
in which such qualification or licensing is required or in which the failure to so qualify or to be
so licensed could have a Material Adverse Change on Borrower or such Subsidiary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;2.2. <U>Authorization And Validity</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Agreement and each other Loan Document has been duly authorized, and upon its execution
and delivery in accordance with the provisions hereof will constitute a legal, valid and binding
obligation of Borrower or Guarantor, as the case may be, enforceable in accordance with their
respective terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;2.3. <U>No Violation</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The execution, delivery and performance by Borrower and each of its Subsidiaries of the Loan
Documents to which each is a party do not violate any provision of any law or regulation, or
contravene any provision of the Governing Documents of Borrower or such Subsidiary, or result in
any breach of or default under any contract, obligation, indenture or other instrument to which
Borrower or such Subsidiary is a party or by which Borrower or such Subsidiary may be bound.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;2.4. <U>Litigation</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no pending, or to the best of Borrower&#146;s knowledge threatened, actions, claims,
investigations, suits or proceedings by or before any Governmental Authority which could reasonably
be expect to have a Material Adverse Change.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;2.5. <U>Correctness Of Financial Statement</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial statements of Borrower dated December&nbsp;31, 2007, a true copy of which has been
delivered by Borrower to Bank prior to the date hereof, (a)&nbsp;is complete and correct and presents
fairly the financial condition of Borrower and its Subsidiaries, (b)&nbsp;discloses all liabilities of
Borrower and its Subsidiaries that are required to be reflected or reserved against under GAAP,
whether liquidated or unliquidated, fixed or contingent, and (c)&nbsp;has been prepared in accordance
with GAAP consistently applied. Since December&nbsp;31, 2007 there has been no Material Adverse Change
in the financial condition of Borrower, nor has Borrower or any of its Subsidiaries mortgaged,
pledged, granted a security interest in or otherwise encumbered any of its assets or properties
except in favor of Bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;2.6. <U>Income Tax Returns</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrower has filed all federal, national, state, provincial, municipal, and other tax returns
and reports, if any, which are required to be filed (or appropriate extensions have been timely
filed) and has paid all taxes due pursuant to such returns and reports or pursuant to any
assessment received by Borrower, except such taxes, if any, as are being contested in good faith
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and as to which adequate reserves have been provided in accordance with GAAP and as to which
no Lien, other than a Permitted Lien, exists. The charges, accruals and reserves on the books of
Borrower in respect of any taxes or other governmental charges are adequate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;2.7. <U>No Subordination</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There is no agreement, indenture, contract or instrument to which Borrower is a party or by
which Borrower may be bound that requires the subordination in right of payment of any of
Borrower&#146;s obligations subject to this Agreement to any other obligation of Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;2.8. <U>Permits, Franchises</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrower and each Subsidiary possesses, and will hereafter possess, all permits, consents,
approvals, franchises and licenses required and rights to all trademarks, trade names, patents, and
fictitious names, if any, necessary to enable it to conduct the business in which it is now engaged
in compliance with applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;2.9. <U>ERISA</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrower is in compliance in all material respects with all applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended or recodified from time to time
(&#147;<U>ERISA</U>&#148;); Borrower has not violated any provision of any defined employee pension benefit
plan (as defined in ERISA) maintained or contributed to by Borrower (each, a &#147;<U>Plan</U>&#148;); no
Reportable Event as defined in ERISA has occurred and is continuing with respect to any Plan
initiated by Borrower; Borrower has met its minimum funding requirements under ERISA with respect
to each Plan; and each Plan will be able to fulfill its benefit obligations as they come due in
accordance with the Plan documents and under generally accepted accounting principles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;2.10. <U>Other Obligations</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrower is not in default on any Indebtedness or any other material lease, commitment,
contract, instrument or obligation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;2.11. <U>Environmental Matters</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as set forth on <U>Schedule&nbsp;2.11</U>, Borrower is in compliance in all material
respects with all applicable federal or state environmental, hazardous waste, health and safety
statutes, and any rules or regulations adopted pursuant thereto, which govern or affect any of
Borrower&#146;s operations and/or properties, including without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act of 1976, and the
Federal Toxic Substances Control Act, as any of the same may be amended, modified or supplemented
from time to time. None of the operations of Borrower or its Subsidiaries is the subject of any
federal or state investigation evaluating whether any remedial action involving a material
expenditure is needed to respond to a release of any toxic or hazardous waste or substance into the
environment. Neither the Borrower nor any of its Subsidiaries has any material contingent
liability in connection with any release of any toxic or hazardous waste or substance into the
environment.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;2.12. <U>No Encumbrances</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrower and its Subsidiaries have good and indefeasible title to their personal property
assets and good and marketable title to their Real Property, in each case, free and clear of Liens
except for Permitted Liens.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;2.13 <U>Solvency</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrower and each of its Subsidiaries is Solvent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Section&nbsp;2.14. <u>Indebtedness.</u>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Immediately following the Closing Date Borrower has no Indebtedness outstanding other than the
Obligations and Indebtedness described on <U>Schedule&nbsp;5.3</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;2.15. <U>Inactive Subsidiaries; Other Subsidiaries</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of Delkay Plastics and Virtue of California,&nbsp;Inc. have no Indebtedness or other
liabilities, conduct no operations or business or own any assets or properties. Other than the
Guarantors, Delkay Plastics and Virtue of California,&nbsp;Inc., Borrower has no Subsidiaries.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE III</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CONDITIONS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;3.1. <U>Conditions Of Initial Extension Of Credit</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The obligation of Bank to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank&#146;s satisfaction of all of the following conditions:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<U>Approval of Bank Counsel</U>. All legal matters incidental to the extension of credit
by Bank shall be satisfactory to Bank&#146;s counsel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<U>Documentation</U>. Bank shall have received, in form and substance satisfactory to
Bank, each of the following, duly executed and delivered:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) This Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The Line of Credit Note.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Each of (A)&nbsp;a duly executed amendment (or amendment and restatement) to
the Mortgage delivered in connection with the Prior Credit Agreement signed by the
record owner of the Real Property Collateral, together with customary Mortgage
Related Documents relating thereto, in each case in form and substance acceptable to
the Bank and (B)&nbsp;either mortgage modification endorsements to, or date down
endorsements to (or re-dated title insurance policies which replace), the existing
title insurance policy issued in respect of the Real Property Collateral, in any
case issued by a nationally recognized title
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">insurance company reasonably acceptable to the Bank, insuring the Lien of the
Mortgage, as amended by the above referenced amendment, as a valid first priority
Lien on the Real Property Collateral described therein, free of any other Liens
except as permitted by the Loan Documents.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) The Reaffirmation Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Such other documents as Bank may require under any other Section of this
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;<U>Authorization; Governing Documents; and Good Standing of Borrower</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Bank shall have received a certificate from the Secretary of Borrower
attesting to the resolutions of Borrower&#146;s Board of Directors authorizing its
execution, delivery, and performance of this Agreement and the other Loan Documents
to which Borrower is a party and authorizing specific officers of Borrower to
execute the same;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Bank shall have received copies of Borrower&#146;s Governing Documents, as
amended, modified, or supplemented to the Closing Date, certified by the Secretary
of Borrower;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Bank shall have received a certificate of status with respect to
Borrower, dated within 10&nbsp;days of the Closing Date, such certificate to be issued by
the appropriate officer of the jurisdiction of organization of Borrower, which
certificate shall indicate that Borrower is in good standing in such jurisdiction;
and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Bank shall have received certificates of status with respect to Borrower,
each dated within 30&nbsp;days of the Closing Date, such certificates to be issued by the
appropriate officer of the jurisdictions (other than the jurisdiction of
organization of Borrower) in which its failure to be duly qualified or licensed
would constitute a Material Adverse Change, which certificates shall indicate that
Borrower is in good standing in such jurisdictions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;<U>Authorization; Governing Documents; and Good Standing of Each Guarantor</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Bank shall have received a certificate from the Secretary of each Guarantor
attesting to the resolutions of such Guarantor&#146;s board of directors authorizing its
execution, delivery, and performance of the Loan Documents to which such Guarantor
is a party and authorizing specific officers of such Guarantor to execute the same;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Bank shall have received copies of each Guarantor&#146;s Governing Documents,
as amended, modified, or supplemented to the Closing Date, certified by the
Secretary of such Guarantor;
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Bank shall have received a certificate of status with respect to each
Guarantor, dated within 10&nbsp;days of the Closing Date, such certificate to be issued
by the appropriate officer of the jurisdiction of organization of such Guarantor,
which certificate shall indicate that Guarantor is in good standing in such
jurisdiction; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Bank shall have received certificates of status with respect to each
Guarantor, each dated within 30&nbsp;days of the Closing Date, such certificates to be
issued by the appropriate officer of the jurisdictions (other than the jurisdiction
of organization of such Guarantor) in which its failure to be duly qualified or
licensed would constitute a Material Adverse Change, which certificates shall
indicate that such Guarantor is in good standing in such jurisdictions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;<U>Diligence</U>. Bank shall have completed its business, legal, and collateral due
diligence, including a collateral audit and review of Borrower&#146;s and its Subsidiaries&#146; books and
records and verification of Borrower&#146;s representations and warranties to Bank, the results of which
shall be satisfactory to Bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;<U>Appraisals</U>. Bank shall have received an appraisal of the Real Property
Collateral, the results of which shall be satisfactory to Bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;<U>Financial Condition</U>. There shall have been no Material Adverse Change, as
determined by Bank, in the financial condition or business of Borrower, nor any material decline,
as determined by Bank, in the market value of any Collateral required hereunder or a substantial or
material portion of the assets of Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;<U>Insurance</U>. Borrower shall have delivered to Bank evidence of insurance coverage
on all Borrower&#146;s property, in form, substance, amounts, covering risks and issued by companies
satisfactory to Bank, and where required by Bank, with loss payable endorsements in favor of Bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;3.2. <U>Conditions Of Each Extension Of Credit</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The obligation of Bank to make each extension of credit requested by Borrower hereunder shall
be subject to the fulfillment to Bank&#146;s satisfaction of each of the following conditions:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<U>Compliance</U>. The representations and warranties contained herein and in each of
the other Loan Documents shall be true on and as of the date of the signing of this Agreement and
on the date of each extension of credit by Bank pursuant hereto, with the same effect as though
such representations and warranties had been made on and as of each such date, and on each such
date, and no Default or Event of Default shall have occurred and be continuing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<U>Injunctions</U>. No injunction, writ, restraining order, or other order of any nature
restricting or prohibiting, directly or indirectly, the extending of such credit shall have been
issued and remain in force by any Governmental Authority against Borrower, Bank, or any of their
Affiliates.
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;<U>Documentation</U>. Bank shall have received all additional documents which may be
required in connection with such extension of credit.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE IV</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>AFFIRMATIVE COVENANTS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrower covenants that so long as Bank remains committed to extend credit to Borrower
pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of
Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of
all obligations of Borrower subject hereto, Borrower shall, and shall cause each of its
Subsidiaries to:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;4.1. <U>Punctual Payments</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Punctually pay all principal, interest, fees or other liabilities due under any of the Loan
Documents at the times and place and in the manner specified therein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;4.2. <U>Accounting Records</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maintain adequate books and records in accordance with generally accepted accounting
principles consistently applied.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;4.3. <U>Financial Statements and Reports</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provide to Bank all of the following, in form and detail satisfactory to Bank:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<U>Annual Financial Statements</U>. Not later than 90&nbsp;days after and as of the end of
each fiscal year (including the fiscal year ended January&nbsp;31, 2008) (i)&nbsp;audited financial
statements of Borrower, prepared by a certified public accountant acceptable to Bank and certified,
without any qualifications, by such accountants to have been prepared in accordance with GAAP; and,
if issued, a copy of such accountant&#146;s management letter (such audited financial statements to
include a consolidated balance sheet, consolidated statements of income, a statement of cash flows
and appropriate footnotes and supporting consolidating information); (ii)&nbsp;a certificate of such
accountants addressed to Bank stating that such accountants do not have knowledge of the existence
of any Default or Event of Default under Sections&nbsp;5.2, 5.10, 5.11, 5.12 or 5.13; and (iii)&nbsp;a
certificate of the chief financial officer of Borrower to the effect that (1)&nbsp;the financial
statements delivered thereby have been prepared in accordance with GAAP and fairly present in all
material respects the financial condition of Borrower and its Subsidiaries and (2)&nbsp;no Default or
Event of Default has occurred and is continuing (or, if a Default or Event of Default has occurred
and is continuing, describing such Default or Event of Default and what action Borrower has taken,
is taking, or proposes to take with respect thereto).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<U>Form&nbsp;10-K</U>. Not later than 90&nbsp;days after and as of the end of each fiscal year,
Borrower&#146;s Annual Report Form 10-K as filed with the Securities and Exchange Commission (the
delivery of which shall satisfy the requirement set forth in the preceding clause (a)(i), so long
as such filing includes a certification, without qualification, by Borrower&#146;s accountants that the
financial statements included in such filing have been prepared in accordance with GAAP);
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;<U>Monthly Financial Statements</U>. Not later than 45&nbsp;days after and as of the end of
each month, a financial statement of Borrower, prepared by Borrower, together with a certificate
signed by the chief financial officer of Borrower to the effect that the financial statements
delivered thereby have been prepared in accordance with GAAP (except for (i)&nbsp;the lack of footnotes,
(ii)&nbsp;quarterly accounting adjustments and (iii)&nbsp;being subject to year-end audit adjustments) and
fairly present in all material respects the financial condition of Borrower and its Subsidiaries
(such financial statements to include a consolidated balance sheet and consolidated statements of
income);
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;<U>Form&nbsp;10-Q</U>. Not later than 60&nbsp;days after and as of the end of each fiscal quarter,
Borrower&#146;s Quarterly Report Form 10-Q as filed with the Securities and Exchange Commission;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;<U>Projections</U>. Not later than 60&nbsp;days prior to end of each fiscal year, Borrower&#146;s
detailed monthly operating budget for the upcoming fiscal year (such budget to include a projected
balance sheet and statement of income);
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;<U>Public Reports</U>. If and when filed by Borrower, copies of each Form 8-K filed by
Borrower with the Securities and Exchange Commission and any other filings made by Borrower with
the Securities and Exchange Commission; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;<U>Supplemental Information</U>. from time to time such other information as Bank may
reasonably request.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;4.4. <U>Compliance</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preserve and maintain all licenses, permits, governmental approvals, rights, privileges and
franchises necessary for the conduct of its business; and comply with the provisions of all
documents pursuant to which Borrower or a Subsidiary is organized and/or which govern the continued
existence of Borrower or a Subsidiary and with the requirements of all laws, rules, regulations and
orders of any Governmental Authority applicable to Borrower, its Subsidiaries and/or their
businesses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;4.5. <U>Insurance</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maintain and keep in force insurance of the types and in amounts customarily carried in lines
of business similar to that of Borrower, including but not limited to fire, extended coverage,
public liability, flood, property damage and workers&#146; compensation, with all such insurance carried
with companies and in amounts satisfactory to Bank, and deliver to Bank from time to time at Bank&#146;s
request schedules setting forth all insurance then in effect. In addition, Borrower shall deliver
copies of all such policies to Bank with a satisfactory lender&#146;s loss payable endorsement naming
Bank as sole loss payee or additional insured, as appropriate. Each policy of insurance or
endorsement shall contain a clause requiring the insurer to give not less than 30&nbsp;days prior
written notice to Bank in the event of cancellation of the policy for any reason whatsoever. (Bank
acknowledges that Borrower has given it notice that Borrower&#146;s insurance policies in effect on the
Closing Date lapse on April&nbsp;1, 2008 and that Borrower is negotiating replacement coverage that it
expects to be in place on April&nbsp;1, 2008.)
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;4.6. <U>Facilities</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Keep all properties useful or necessary to the businesses of the Borrower and its Subsidiaries
in good repair and condition, and from time to time make necessary repairs, renewals and
replacements thereto so that such properties shall be fully and efficiently preserved and
maintained.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;4.7. <U>Taxes And Other Liabilities</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pay and discharge when due any and all indebtedness, obligations, assessments and taxes, both
real or personal, including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a)&nbsp;as Borrower may in good faith contest or as to
which a bona fide dispute may arise, and (b)&nbsp;for which Borrower has made provision, to Bank&#146;s
satisfaction, for eventual payment thereof in the event Borrower is obligated to make such payment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;4.8. <U>Existence</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At all times preserve and keep in full force and effect Borrower&#146;s and its Subsidiaries valid
existence and good standing and any rights and franchises material to their businesses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;4.9. <U>Notice To Bank</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Promptly give written notice to Bank in reasonable detail of: (a)&nbsp;the occurrence of any
Default or Event of Default; (b)&nbsp;any change in the name or the organizational structure of
Borrower; (c)&nbsp;the occurrence and nature of any Reportable Event or Prohibited Transaction, each as
defined in ERISA, or any funding deficiency with respect to any Plan; (d)&nbsp;any unscheduled
termination or cancellation of any insurance policy which Borrower is required to maintain, or any
uninsured or partially uninsured loss through liability or property damage, or through fire, theft
or any other cause affecting Borrower&#146;s property in excess of an aggregate of $500,000, (e)&nbsp;any
demand for payment in excess of an aggregate of $250,000 made of Borrower by any bonding company or
(f)&nbsp;any litigation pending or threatened against Borrower with a claim in excess of $500,000, to
the extent not covered by independent third party insurance as to which the insurer has admitted
coverage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;4.10. <U>Right to Inspect</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bank (through any of its officers, employees, or agents) shall have the right, from time to
time hereafter during regular business hours, to inspect, audit and examine Borrower&#146;s books and
records and to check, test, and appraise the Collateral in order to verify Borrower&#146;s financial
condition or the amount, quality, value, condition or, or any other matter relating to, the
Collateral.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE V</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>NEGATIVE COVENANTS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrower covenants that so long as Bank remains committed to extend credit to Borrower
pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of
Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of
all obligations of Borrower subject hereto, Borrower will not, and will cause each of its
Subsidiaries not to:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;5.1. <U>Use Of Funds</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Use any of the proceeds of any credit extended hereunder except for the purposes stated in
Article&nbsp;I hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;5.2. <U>Capital Expenditures</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Make any additional investment in fixed assets in excess of an aggregate of $7,000,000 during
any fiscal year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;5.3. <U>Other Indebtedness</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Create, incur, assume or permit to exist any Indebtedness, except
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Obligations;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Indebtedness outstanding on the Closing Date and set forth on <U>Schedule&nbsp;5.3</U>;
and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) $2,000,000 in aggregate principal amount of additional Capital Lease Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;5.4. <U>Liens</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Create, incur, assume, or suffer to exist, directly or indirectly, any Lien on or with respect
to any of its assets, of any kind, whether now owned or hereafter acquired, except (&#147;<U>Permitted
Liens</U>&#148;):
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Liens in favor of Bank;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Liens for unpaid taxes that either (i)&nbsp;are not yet delinquent or (ii)&nbsp;do not
constitute an Event of Default hereunder;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Liens arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course of an
Issuer&#146;s or Subsidiary&#146;s business and not in connection with the borrowing of money, and
which Liens either (i)&nbsp;are for sums not yet delinquent or (ii)&nbsp;are being
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->12<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">contested in good faith, and in any event do not secure liabilities greater than
$250,000 in the aggregate;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) with respect to any Real Property, easements, rights of way, and zoning
restrictions that do not materially interfere with or impair the use or operation thereof;
and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Liens securing the obligations described in Section&nbsp;5.3(c) or Section&nbsp;5.3(d).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;5.5. <U>Merger, Consolidation, Transfer Of Assets</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Merge into or consolidate with any other entity; make any substantial change in the nature of
the business of Borrower and its Subsidiaries as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity; nor sell, lease, transfer or otherwise dispose
of any assets of Borrower or any Subsidiary except:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) dispositions of Inventory in the ordinary course of business;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) disposition of obsolete or worn out Equipment in the ordinary course of business;
and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the use or transfer of money or cash equivalents in a manner that is not prohibited
by the terms of this Agreement or the other Loan Documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;5.6. <U>Guaranties</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Guarantee or become liable in any way as surety, endorser (other than as endorser of
negotiable instruments for deposit or collection in the ordinary course of business), accommodation
endorser or otherwise for any liabilities or obligations of any other Person, except in respect of
performance bonds, surety or appeal bonds, notary public bonds and bonds in support of Borrower&#146;s
prior self insurance program (such bonds, not to exceed $225,000 in aggregate principal amount), in
each case issued in the ordinary course of business consistent with past practice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;5.7. <U>Loans, Advances, Investments</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Make any loans or advances to or Investments in any Person, other than ordinary course travel
advances made by Borrower to its employees in an aggregate amount not to exceed $100,000 at any one
time outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;5.8. <U>Dividends, Distributions</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Make any distribution or declare or pay any dividends (in cash or other property, including
stock of Borrower) on, or purchase, acquire, redeem, or retire any of Borrower&#146;s stock, of any
class, whether now or hereafter outstanding (each, a &#147;<U>Restricted Payment</U>&#148;); <I>provided,
however</I>, that the Borrower may make Restricted Payments in an aggregate amount in any fiscal year
not to exceed $5,000,000 so long as (a)&nbsp;no Default or Event of Default has occurred and is
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">continuing or would result therefrom, (b)&nbsp;Borrower shall have delivered to Bank a Compliance
Certificate, duly executed by the chief financial officer of Borrower, demonstrating that Borrower
shall be in pro forma compliance with Sections&nbsp;5.11, 5.12 and 5.13 after giving effect to the
subject Restricted Payment, (c)&nbsp;the aggregate amount of the Restricted Payments comprised of
dividends or distributions by Borrower made in any fiscal year does not exceed $2,000,000, and
(d)&nbsp;immediately after giving effect to any such Restricted Payment, Availability is not less than
$5,000,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;5.9. <U>Transactions with Affiliates</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Directly or indirectly enter into or permit to exist any transaction with any Affiliate of
Borrower except for transactions that are in the ordinary course of Borrower&#146;s business, upon fair
and reasonable terms, that are fully disclosed to Bank, and that are no less favorable to Borrower
than would be obtained in an arm&#146;s length transaction with a non-Affiliate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;5.10. <U>Annual Clean Down</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Permit the LC Usage Amount to exceed $10,000,000 for a period of 30 consecutive days during
each fiscal year of Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;5.11. <U>Minimum Consolidated Current Ratio</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Permit the Consolidated Current Ratio to be less than the ratio set forth below for the
designated fiscal quarter end:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Minimum Consolidated</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Applicable Fiscal Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Current Ratio</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top">Fiscal quarter ended <BR>
January&nbsp;31 of each fiscal year
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1.50 to 1.00</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Fiscal quarter ended <BR>
April&nbsp;30 of each fiscal year
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1.25 to 1.00</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top">Fiscal quarter ended <BR>
July&nbsp;31 of each fiscal year
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1.25 to 1.00</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Fiscal quarter ended <BR>
October&nbsp;31 of each fiscal year
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1.50 to 1.00</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->14<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;5.12. <U>Minimum Consolidated Fixed Charge Coverage Ratio</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Permit the Consolidated Fixed Charge Coverage Ratio, measured as of the end of each fiscal
quarter of each fiscal year, to be less than 2.50 to 1.00.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;5.13. <U>Maximum Leverage Ratio</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Maximum Consolidated</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Applicable Fiscal Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Leverage Ratio</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top">Fiscal quarter ended <BR>
January&nbsp;31 of each fiscal year
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1.25 to 1.00</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Fiscal quarter ended <BR>
April&nbsp;30 of each fiscal year
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2.50 to 1.00</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top">Fiscal quarter ended <BR>
July&nbsp;31 of each fiscal year
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3.50 to 1.00</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Fiscal quarter ended <BR>
October&nbsp;31 of each fiscal year
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1.25 to 1.00</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;5.14. <U>Inactive Subsidiaries</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allow Delkay Plastics or Virtue of California, Inc. to incur any Indebtedness or other
liabilities, conduct any operations or business or own or acquire any asset or properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;5.15. <U>Licensing Agreements</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Enter into or assume any contract or agreement for the payment of licensing royalties in
excess of 6.0% of the sales price of the inventory related to the licensed right.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->15<!-- /Folio -->
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VI</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>EVENTS OF DEFAULT</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;6.1. <U>Events of Default</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The occurrence of any of the following shall constitute an &#147;<U>Event of Default</U>&#148; under
this Agreement:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Borrower shall fail to pay when due any principal, interest, fees or other amounts payable
under any of the Loan Documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Any financial statement or certificate furnished to Bank in connection with, or any
representation or warranty made by Borrower or any other party under this Agreement or any other
Loan Document shall prove to be incorrect, false or misleading in any material respect when
furnished or made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Any default in the performance of or compliance with any obligation, agreement or other
provision contained in Section&nbsp;4.1, 4.3, 4.4, 4.7, 4.8, 4.9(a) or Article&nbsp;V of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Any default in the performance of or compliance with any obligation, agreement or other
provision contained herein or in any other Loan Document (other than those referred to in
subsections (a), (b)&nbsp;and (c)&nbsp;above), and with respect to any such default which by its nature can
be cured, such default shall continue for a period of twenty (20)&nbsp;days from the earlier to occur of
(i)&nbsp;Borrower&#146;s knowledge of the occurrence of such default and (ii)&nbsp;the receipt of written notice
from Bank of any such default.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Any default in the payment or performance of any obligation, or any defined event of
default, under the terms of any contract or instrument (other than any of the Loan Documents)
pursuant to which Borrower or any Subsidiary has incurred any debt or other liability to any
Person, including Bank, in an aggregate amount of $50,000 or more.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;(i)&nbsp;The filing of a notice of judgment lien against Borrower or any Subsidiary; or
(ii)&nbsp;the recording of any abstract of judgment against Borrower or any Subsidiary in any county in
which Borrower or such Subsidiary has an interest in real property; or (iii)&nbsp;the service of a
notice of levy and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower or any Subsidiary; or (iv)&nbsp;the entry of a judgment, order, decree or arbitration
award against Borrower or any Subsidiary; or (v)&nbsp;Borrower or any of its Subsidiaries shall enter
into any agreement to settle or compromise any pending or threatened litigation, except in the case
of clauses (iv)&nbsp;and (v), (A)&nbsp;if the payment on such award, settlement or compromise represents an
obligation for the payment of money of less than $50,000 or (B)&nbsp;in the case of an award, settlement
or compromise that represents an obligation for the payment of money of $50,000 or more, such
award, settlement or compromise is covered by third party insurance as to which the insurer has
agreed in writing to make such payment on behalf of Borrower or such Subsidiary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;Borrower or any Guarantor shall become insolvent, or shall suffer or consent to or apply
for the appointment of a receiver, trustee, custodian or liquidator of itself or any of its
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->16<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">property, or shall generally fail to pay its debts as they become due, or shall make a general
assignment for the benefit of creditors; Borrower or any Guarantor shall file a voluntary petition
in bankruptcy, or seeking reorganization, in order to effect a plan or other arrangement with
creditors or any other relief under the Bankruptcy Code, or under any state or federal law granting
relief to debtors, whether now or hereafter in effect; or any involuntary petition or proceeding
pursuant to the Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors is filed or commenced against Borrower or
any Guarantor, or Borrower or any Guarantor shall file an answer admitting the jurisdiction of the
court and the material allegations of any involuntary petition, or Borrower or any Guarantor shall
be adjudicated a bankrupt, or an order for relief shall be entered against Borrower or any
Guarantor by any court of competent jurisdiction under the Bankruptcy Code or any other applicable
state or federal law relating to bankruptcy, reorganization or other relief for debtors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;There shall exist or occur any event or condition which Bank in good faith believes
impairs, or is substantially likely to impair, the prospect of payment or performance by Borrower
or any Guarantor of its obligations under any of the Loan Documents to which it is a party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;The dissolution or liquidation of Borrower or any Guarantor; or Borrower or any Guarantor,
or any of their respective directors, stockholders or members, shall take action seeking to effect
the dissolution or liquidation of Borrower or such Guarantor, as the case may be.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;A Change of Control shall occur.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;If any Loan Document that purports to create a Lien, shall, for any reason, fail or cease
to create a valid and perfected and, except to the extent permitted by the terms hereof or thereof,
first priority Lien on or security interest in the Collateral covered thereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;Any provision of any Loan Document shall at any time for any reason be declared to be null
and void, or the validity or enforceability thereof shall be contested by Borrower or any
Subsidiary, or a proceeding shall be commenced by Borrower or any Subsidiary, or by any
governmental authority having jurisdiction over Borrower or any Subsidiary, seeking to establish
the invalidity or unenforceability thereof, or Borrower or any Subsidiary shall deny that it has
any liability or obligation purported to be created under any Loan Document, or Borrower or any
Subsidiary shall challenge or contest in any action, suit or proceeding the perfection or priority
of any Lien granted to the Bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;If there shall occur any event or condition that has had or may reasonably be expected to
have a Material Adverse Change.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;If a notice of Lien, levy, or assessment is filed of record with respect to any of
Borrower&#146;s or any of its Subsidiaries&#146; assets by the United States, or any department, agency, or
instrumentality thereof, or by any state, county, municipal, or governmental agency, or if any
taxes or debts owing at any time hereafter to any one or more of such entities becomes a Lien,
whether choate or otherwise, upon any Borrower&#146;s or any of its Subsidiaries&#146; assets and the same is
not paid before such payment is delinquent, except in the case of a notice of lien, levy or
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->17<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">assessment filed by, or any taxes or debts owing to, any state, county or other local
governmental authority wherein the obligation owing to such governmental authority does not exceed
$25,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;6.2. <U>Remedies</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon the occurrence of any Event of Default: (a)&nbsp;all Obligations, any term thereof to the
contrary notwithstanding, shall at Bank&#146;s option, in the case of an Event of Default arising under
any clause of Section&nbsp;6.1 other than clauses (f)&nbsp;or (h), and, automatically without any action on
the part of Bank, in the case of an Event of Default under arising under clause (f)&nbsp;or (h)&nbsp;of
Section&nbsp;6.1, and without notice become immediately due and payable without presentment, demand,
protest or notice of dishonor, all of which are hereby expressly waived by Borrower; (b)&nbsp;the
obligation, if any, of Bank to extend any further credit under any of the Loan Documents shall
immediately cease and terminate; and (c)&nbsp;Bank shall have all rights, powers and remedies available
under each of the Loan Documents, or accorded by law, including without limitation the right to
resort to any or all security for any credit subject hereto and to exercise any or all of the
rights of a beneficiary or secured party pursuant to applicable law. All rights, powers and
remedies of Bank may be exercised at any time by Bank and from time to time after the occurrence of
an Event of Default, are cumulative and not exclusive, and shall be in addition to any other
rights, powers or remedies provided by law or equity.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VII</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>MISCELLANEOUS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;7.1 <U>No Waiver</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No delay, failure or discontinuance of Bank in exercising any right, power or remedy under any
of the Loan Documents shall affect or operate as a waiver of such right, power or remedy; nor shall
any single or partial exercise of any such right, power or remedy preclude, waive or otherwise
affect any other or further exercise thereof or the exercise of any other right, power or remedy.
Any waiver, permit, consent or approval of any kind by Bank of any breach of or default under any
of the Loan Documents must be in writing and shall be effective only to the extent set forth in
such writing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;7.2. <U>Notices</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All notices, requests and demands which any party is required or may desire to give to any
other party under any provision of this Agreement must be in writing delivered to each party at the
following address:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="73%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">BORROWER:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"> VIRCO MFG. CORPORATION</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2027 Harpers Way</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Torrance, California 90501</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attn: Robert E. Dose</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->18<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="73%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">BANK:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">WELLS FARGO BANK, NATIONAL ASSOCIATION</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">San Gabriel Valley Regional</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Commercial Banking Office</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1000 Lakes Drive, Suite&nbsp;250</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">West Covina, California 91790</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attention: Jeff Heisinger, Vice President</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">or to such other address as any party may designate by written notice to all other parties. Each
such notice, request and demand shall be deemed given or made as follows: (a)&nbsp;if sent by hand
delivery, upon delivery; (b)&nbsp;if sent by mail, upon the earlier of the date of receipt or three (3)
days after deposit in the U.S. mail, first class and postage prepaid; and (c)&nbsp;if sent by telecopy,
upon receipt.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;7.3. <U>Costs, Expenses And Attorneys&#146; Fees</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrower shall pay to Bank immediately upon demand the full amount of all payments, advances,
charges, costs and expenses, including reasonable attorneys&#146; fees (to include outside counsel fees
and all allocated costs of Bank&#146;s in-house counsel), expended or incurred by Bank in connection
with (a)&nbsp;the negotiation and preparation of this Agreement and the other Loan Documents, Bank&#146;s
continued administration hereof and thereof, and the preparation of any amendments and waivers
hereto and thereto, (b)&nbsp;the enforcement of Bank&#146;s rights and/or the collection of any amounts which
become due to Bank under any of the Loan Documents and (c)&nbsp;the prosecution or defense of any action
in any way related to any of the Loan Documents, including without limitation, any action for
declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any bankruptcy
proceeding (including without limitation, any adversary proceeding, contested matter or motion
brought by Bank or any other person) relating to Borrower or any other person or entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;7.4. <U>Successors, Assignment</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Agreement shall be binding upon and inure to the benefit of the heirs, executors,
administrators, legal representatives, successors and assigns of the parties; <I>provided however,</I>
that Borrower may not assign or transfer its interest hereunder without Bank&#146;s prior written
consent. Bank reserves the right to sell, assign, transfer, negotiate or grant participations in
all or any part of, or any interest in, Bank&#146;s rights and benefits under each of the Loan
Documents. In connection therewith, Bank may disclose all documents and information which Bank now
has or may hereafter acquire relating to any credit subject hereto, Borrower or its business, or
any collateral required hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;7.5. <U>Entire Agreement; Amendment</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Agreement and the other Loan Documents constitute the entire agreement between Borrower
and Bank with respect to each credit subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter hereof. This
Agreement may be amended or modified only in writing signed by each party hereto.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;7.6. <U>No Third Party Beneficiaries</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Agreement is made and entered into for the sole protection and benefit of the parties
hereto and their respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any other of the Loan Documents to which it is not a party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;7.7. <U>Time</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Time is of the essence of each and every provision of this Agreement and each other of the
Loan Documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;7.8. <U>Severability Of Provisions</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any provision of this Agreement shall be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;7.9. <U>Counterparts</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Agreement may be executed in any number of counterparts, each of which when executed and
delivered shall be deemed to be an original, and all of which when taken together shall constitute
one and the same Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;7.10. <U>Governing Law</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Agreement shall be governed by and construed in accordance with the laws of the State of
California.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;7.11. <U>Arbitration</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<U>Arbitration</U>. The parties hereto agree, upon demand by any party, to submit to
binding arbitration all claims, disputes and controversies between or among them (and their
respective employees, officers, directors, attorneys, and other agents), whether in tort, contract
or otherwise arising out of or relating to in any way (i)&nbsp;the loan and related Loan Documents which
are the subject of this Agreement and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation, inducement,
enforcement, default or termination; or (ii)&nbsp;requests for additional credit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<U>Governing Rules</U>. Any arbitration proceeding will (i)&nbsp;proceed in a location in
California selected by the American Arbitration Association (&#147;<U>AAA</U>&#148;); (ii)&nbsp;be governed by
the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting
choice of law provision in any of the documents between the parties; and (iii)&nbsp;be conducted by the
AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the
AAA&#146;s commercial dispute resolution procedures, unless the claim or counterclaim is at least
$1,000,000 exclusive of claimed interest, arbitration fees and costs in which case the arbitration
shall be conducted in accordance with the AAA&#146;s optional procedures for large, complex commercial
disputes (the commercial dispute resolution procedures or the optional
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">procedures for large, complex commercial disputes to be referred to, as applicable, as the
&#147;<U>Rules</U>&#148;). If there is any inconsistency between the terms hereof and the Rules, the terms
and procedures set forth herein shall control. Any party who fails or refuses to submit to
arbitration following a demand by any other party shall bear all costs and expenses incurred by
such other party in compelling arbitration of any dispute. Nothing contained herein shall be
deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C.
&#167;91 or any similar applicable state law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;<U>No Waiver of Provisional Remedies, Self-Help and Foreclosure</U>. The arbitration
requirement does not limit the right of any party to (i)&nbsp;foreclose against real or personal
property collateral; (ii)&nbsp;exercise self-help remedies relating to collateral or proceeds of
collateral such as setoff or repossession; or (iii)&nbsp;obtain provisional or ancillary remedies such
as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after
the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the
right or obligation of any party to submit any dispute to arbitration or reference hereunder,
including those arising from the exercise of the actions detailed in sections (i), (ii)&nbsp;and
(iii)&nbsp;of this paragraph.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;<U>Arbitrator Qualifications and Powers</U>. Any arbitration proceeding in which the
amount in controversy is $5,000,000 or less will be decided by a single arbitrator selected
according to the Rules, and who shall not render an award of greater than $5,000,000. Any dispute
in which the amount in controversy exceeds $5,000,000 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively participate in all
hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of
California or a neutral retired judge of the state or federal judiciary of California, in either
case with a minimum of ten years experience in the substantive law applicable to the subject matter
of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is
arbitratable and will give effect to the statutes of limitation in determining any claim. In any
arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the
arbitrator&#146;s discretion) any pre-hearing motions which are similar to motions to dismiss for
failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of California and may grant any remedy or relief
that a court of such state could order or grant within the scope hereof and such ancillary relief
as is necessary to make effective any award. The arbitrator shall also have the power to award
recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure,
the California Rules of Civil Procedure or other applicable law. Judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance
of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to submit the controversy
or claim to arbitration if any other party contests such action for judicial relief.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;<U>Discovery</U>. In any arbitration proceeding discovery will be permitted in
accordance with the Rules. All discovery shall be expressly limited to matters directly relevant
to the dispute being arbitrated and must be completed no later than 20&nbsp;days before the hearing date
and within 180&nbsp;days of the filing of the dispute with the AAA. Any requests for an extension of
the discovery periods, or any discovery disputes, will be subject to final
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">determination by the arbitrator upon a showing that the request for discovery is essential for
the party&#146;s presentation and that no alternative means for obtaining information is available.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;<U>Class&nbsp;Proceedings and Consolidations</U>. The resolution of any dispute arising
pursuant to the terms of this Agreement shall be determined by a separate arbitration proceeding
and such dispute shall not be consolidated with other disputes or included in any class proceeding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;<U>Payment Of Arbitration Costs And Fees</U>. The arbitrator shall award all costs and
expenses of the arbitration proceeding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;<U>Real Property Collateral; Judicial Reference</U>. Notwithstanding anything herein to
the contrary, no dispute shall be submitted to arbitration if the dispute concerns indebtedness
secured directly or indirectly, in whole or in part, by any real property unless (i)&nbsp;the holder of
the mortgage, lien or security interest specifically elects in writing to proceed with the
arbitration, or (ii)&nbsp;all parties to the arbitration waive any rights or benefits that might accrue
to them by virtue of the single action rule statute of California, thereby agreeing that all
indebtedness and obligations of the parties, and all mortgages, liens and security interests
securing such indebtedness and obligations, shall remain fully valid and enforceable. If any such
dispute is not submitted to arbitration, the dispute shall be referred to a referee in accordance
with California Code of Civil Procedure Section&nbsp;638 et seq., and this general reference agreement
is intended to be specifically enforceable in accordance with said Section&nbsp;638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the AAA&#146;s selection
procedures. Judgment upon the decision rendered by a referee shall be entered in the court in
which such proceeding was commenced in accordance with California Code of Civil Procedure Sections
644 and 645.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;<U>Miscellaneous</U>. To the maximum extent practicable, the AAA, the arbitrators and
the parties shall take all action required to conclude any arbitration proceeding within 180&nbsp;days
of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration
proceeding may disclose the existence, content or results thereof, except for disclosures of
information by a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties potentially
applies to a dispute, the arbitration provision most directly related to the Loan Documents or the
subject matter of the dispute shall control. This arbitration provision shall survive termination,
amendment or expiration of any of the Loan Documents or any relationship between the parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Section&nbsp;7.12. <U>Restatement of Prior Credit Agreement</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrower and Bank hereby agree that as of the Closing Date (i)&nbsp;the terms and provisions of the
Prior Credit Agreement shall be and hereby are amended, superceded and restated in their entirety
by the terms and provisions of this Agreement, (ii)&nbsp;Bank shall not have any obligations under the
Prior Credit Agreement, except to the extent that any such obligations may be restated in this
Agreement or in the other Loan Documents and (iii)&nbsp;the execution and delivery of this Agreement
shall not constitute or effect, or be deemed to constitute or effect, a novation, refinancing,
discharge, extinguishment or refunding of any of the Indebtedness outstanding
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->22<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">under the Prior Credit Agreement or that portion of such Indebtedness that remain outstanding
under this Agreement.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">&#091;Signature Page Follows&#093;

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->23<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day
and year first written above.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">VIRCO MFG. CORPORATION</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">WELLS FARGO BANK, NATIONAL</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">ASSOCIATION</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Robert E. Dose&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Jeff Heisinger&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Robert E. Dose
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Jeff Heisinger
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President &#150; Finance,
Secretary and
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Treasurer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
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</DIV>



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<DIV align="center" style="font-size: 10pt; margin-top: 18pt">ANNEX A<BR>
to CREDIT AGREEMENT
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">(DEFINITIONS)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capitalized terms used in the Loan Documents shall have (unless otherwise provided elsewhere
in the Loan Documents) the following respective meanings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Account</U>&#148; means an account (as that term is defined in the Code), and any and all
supporting obligations in respect thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Account Debtor</U>&#148; means any Person who is obligated under, with respect to, or on
account of, an Account, chattel paper, or a General Intangible.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>ACH Transactions</U>&#148; means any cash management or related services (including the
Automated Clearing House processing of electronic funds transfers through the direct Federal
Reserve Fedline system) provided by a Bank Product Provider for the account of Borrower or its
Subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Affiliate</U>&#148; 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 definition, &#147;control&#148; 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;
<I>provided, however, </I>that, for purposes of Section&nbsp;5.9 hereof: (a)&nbsp;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)&nbsp;each director (or comparable manager) of a Person shall be deemed to
be an Affiliate of such Person and (c)&nbsp;each partnership or joint venture in which a Person is a
partner or joint venturer shall be deemed an Affiliate of such Person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Availability</U>&#148; means, as of any date of determination, the amount that Borrower is
entitled to borrow as Advances under Section&nbsp;1.1(a) (after giving effect to all then outstanding
Advances and the then effective Letter of Credit Usage).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Bank Product</U>&#148; means any financial accommodation extended to Borrower or its
Subsidiaries by Bank including: (a)&nbsp;credit cards, (b)&nbsp;credit card processing services, (c)&nbsp;debit
cards, (d)&nbsp;purchase cards, (e)&nbsp;ACH Transactions, (f)&nbsp;cash management, including controlled
disbursement, accounts or services or (g)&nbsp;transactions under Hedge Agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Bank Product Agreements</U>&#148; means those agreements entered into from time to time by
Borrower or any of its Subsidiaries with Bank in connection with any Bank Products.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Bank Product Obligations</U>&#148; means all obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing by Borrower or its Subsidiaries to Bank
pursuant to or evidenced by the Bank Product Agreements and irrespective of whether for the payment
of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including all such amounts that Borrower or its Subsidiaries are obligated
to reimburse to Bank as a result of Bank purchasing participations from, or executing indemnities
or reimbursement obligations to, Bank with respect to the Bank Products provided by Bank to
Borrower or its Subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Bankruptcy Code</U>&#148; means title 11 of the United States Code, as in effect from time to
time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Borrower</U>&#148; has the meaning set forth in the preamble to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Business Day</U>&#148; means any day that is not a Saturday, Sunday, or other day on which
banks are authorized or required to close in the state of California, except that, if a
determination of a Business Day shall relate to a LIBOR rate loan, the term &#147;Business Day&#148; also
shall exclude any day on which banks are closed for dealings in Dollar deposits in the London
interbank market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Capital Lease</U>&#148; means a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Capitalized Lease Obligation</U>&#148; means that portion of the obligations under a Capital
Lease that is required to be capitalized in accordance with GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Cash Equivalents</U>&#148; means (a)&nbsp;marketable direct obligations issued or unconditionally
guaranteed by the United States or issued by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing within 1&nbsp;year from the date of acquisition
thereof, (b)&nbsp;marketable direct obligations issued by any state of the United States or any
political subdivision of any such state or any public instrumentality thereof maturing within 1
year from the date of acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard&nbsp;&#038; Poor&#146;s Rating Group (&#147;<U>S&#038;P</U>&#148;) or Moody&#146;s
Investor Service, Inc. (&#147;<U>Moody&#146;s</U>&#148;), (c)&nbsp;commercial paper maturing no more than 270&nbsp;days
from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1,
from S&#038;P or at least P-1 from Moody&#146;s, (d)&nbsp;certificates of deposit or bankers&#146; acceptances maturing
within 1&nbsp;year from the date of acquisition thereof issued by any bank organized under the laws of
the United States or any state thereof having at the date of acquisition thereof combined capital
and surplus of not less than $250,000,000, (e)&nbsp;demand Deposit Accounts maintained with any bank
organized under the laws of the United States or any state thereof so long as the amount maintained
with any individual bank is less than or equal to $100,000 and is insured by the Federal Deposit
Insurance Corporation and (f)&nbsp;Investments in money market funds substantially all of whose assets
are invested in the types of assets described in clauses (a)&nbsp;through (e)&nbsp;above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Change of Control</U>&#148; means that (a)&nbsp;any &#147;person&#148; or &#147;group&#148; (within the meaning of
Sections&nbsp;13(d) and 14(d) of the Securities and Exchange Act of 1934, as amended), other than
members of the Virtue family, becomes the beneficial owner (as defined in Rule&nbsp;13d-3 under
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">such Act), directly or indirectly, of 20% or more, of the capital stock of Borrower having the
right to vote for the election of members of the Board of Directors or (b)&nbsp;a majority of the
members of the Board of Directors do not constitute Continuing Directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Closing Date</U>&#148; means the date of the making of the initial Advance (or other extension
of credit) hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Code</U>&#148; means the California Uniform Commercial Code, as in effect from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Collateral</U>&#148; means all assets and interests in assets and proceeds thereof now owned
or hereafter acquired by Borrower, any Guarantor or any of their respective Subsidiaries in or upon
which a Lien is granted to Bank under any of the Loan Documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Compliance Certificate</U>&#148; means a certificate substantially in the form of
<U>Exhibit&nbsp;B</U> delivered by the chief financial officer of Borrower to Bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Consolidated Current Assets</U>&#148; means, as of any date of determination, the total assets
of Borrower and its Subsidiaries on a consolidated basis that may properly be classified as current
assets in conformity with GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Consolidated Current Liabilities</U>&#148; means, as of any date of determination, the total
liabilities of Borrower and its Subsidiaries on a consolidated basis that may properly be
classified as current liabilities in conformity with GAAP, including, without limitation, all
outstanding Obligations outstanding hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Consolidated Current Ratio</U>&#148; means, as of any date of determination, the ratio of (a)
Consolidated Current Assets at such date to (b)&nbsp;Consolidated Current Liabilities at such date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Consolidated EBITDA</U>&#148; means, with reference to any period, Net Income for such period
<I>plus </I>the sum of all amounts deducted in determining such Net Income in respect of (a)&nbsp;Interest
Expense for such period, (b)&nbsp;federal, state and local income taxes for such period and
(c)&nbsp;depreciation of fixed assets and amortization of intangible assets for such period; <I>minus </I>the
sum of (x)&nbsp;gains from sales of capital assets in such period, (y)&nbsp;any income or gain from
extraordinary items in such period and (z)&nbsp;income or gain from non-recurring items in such period,
in each case as determined in accordance with GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Consolidated Fixed Charge Coverage Ratio</U>&#148; means, as of any date of determination, the
ratio of (a)&nbsp;the result of (i)&nbsp;Consolidated EBITDA <I>minus </I>(ii)&nbsp;the aggregate amount of Restricted
Payments, in each case for the four consecutive fiscal quarters ended on or most recently to such
date to (b)&nbsp;the sum of (i)&nbsp;Interest Expense for the four consecutive fiscal quarters ended on or
most recently to such date <I>plus </I>(ii)&nbsp;the current portion of the long term Indebtedness of Borrower
and its Subsidiaries as of such date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Consolidated Leverage Ratio</U>&#148; means, as of any date of determination, the ratio of (a)
Total Funded Debt as of such date to (b)&nbsp;Consolidated EBITDA for the four consecutive fiscal
quarters ended on or most recently to such date.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Continuing Director</U>&#148; means (a)&nbsp;any member of the Board of Directors who was a
director (or comparable manager) of Borrower on the Closing Date, and (b)&nbsp; any individual who
becomes a member of the Board of Directors after the Closing Date if such individual was appointed
or nominated for election to the Board of Directors by a majority of the Continuing Directors, but
excluding any such individual originally proposed for election in opposition to the Board of
Directors in office at the Closing Date in an actual threatened election contest relating to the
election of the directors (or comparable managers) of Borrower and whose initial assumption of
office resulted from such contest or the settlement thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Default</U>&#148; means an event, condition, or default that, with the giving of notice, the
passage of time, or both, would be an Event of Default.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Dollars</U>&#148; or &#147;<U>$</U>&#148; means United States dollars.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Equipment</U>&#148; means equipment (as that term is defined in the Code) and includes
machinery, machine tools, motors, furniture, furnishings, fixtures, vehicles (including motor
vehicles), computer hardware, tools, parts, and goods (other than consumer goods, farm products, or
Inventory), wherever located, including all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Event of Default</U>&#148; has the meaning set forth in Section&nbsp;6.1.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>GAAP</U>&#148; means generally accepted accounting principles as in effect from time to time
in the United States, consistently applied.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Governing Documents</U>&#148; means, with respect to any Person, the certificate of formation,
articles of incorporation, by-laws, operating agreement, limited partnership agreement, partnership
agreement, joint venture agreement or other organizational documents of such Person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Governmental Authority</U>&#148; means any federal, state, local, or other governmental or
administrative body, instrumentality, department, or agency or any court, tribunal, administrative
hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Guarantied Obligations</U>&#148; means, at any date, all guaranties or similar contingent
obligations of Borrower and its Subsidiaries as of such date. The amount of any guaranty shall be
deemed to be the lower of (x)&nbsp;an amount equal to the stated or determinable amount of the primary
obligation in respect of which such guaranty is made and (y)&nbsp;the maximum amount for which Borrower
or its Subsidiary may be liable pursuant to the terms of the instrument embodying such guarantee,
unless such primary obligation and the maximum amount for which Borrower or such Subsidiary may be
liable are not stated or determinable, in which case the amount of such guaranty shall be
Borrower&#146;s or such Subsidiary&#146;s maximum reasonably anticipated liability in respect thereof as
determined by Borrower in good faith.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Guarantor</U>&#148; means each of Virco Inc., a Delaware corporation, Virco Mgmt. Corporation,
a Delaware corporation, and any other Person that at any time executes a Guaranty or any other
guaranty in favor of Bank with respect to the Obligations or whose assets, directly or indirectly,
are at any time pledged as security for the Obligations.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Guaranty</U>&#148; means each guaranty, executed and delivered by each Guarantor in favor of
Bank, in form and substance satisfactory to Bank, as the same may be amended, restated,
supplemented or otherwise modified from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Hedge Agreement</U>&#148; means any and all agreements or documents now existing or hereafter
entered into by Borrower or its Subsidiaries that provide for an interest rate, credit, commodity
or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross
currency rate swap, currency option, or any combination of, or option with respect to, these or
similar transactions, for the purpose of hedging Borrower&#146;s or its Subsidiaries&#146; exposure to
fluctuations in interest or exchange rates, loan, credit exchange, security or currency valuations
or commodity prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Indebtedness</U>&#148; means (a)&nbsp;all obligations for borrowed money, (b)&nbsp;all obligations
evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other
obligations in respect of letters of credit, bankers acceptances, interest rate swaps, or other
financial products, (c)&nbsp;all obligations as a lessee under Capital Leases, (d)&nbsp;all obligations or
liabilities of others secured by a Lien on any asset of a Person or its Subsidiaries, irrespective
of whether such obligation or liability is assumed, (e)&nbsp;all obligations to pay the deferred
purchase price of assets (other than trade payables incurred in the ordinary course of business and
repayable in accordance with customary trade practices), (f)&nbsp;all obligations owing under Hedge
Agreements and (g)&nbsp;any obligation guaranteeing or intended to guarantee (whether directly or
indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any
other Person that constitutes Indebtedness under any of clauses (a)&nbsp;through (f)&nbsp;above. The term
&#147;Indebtedness&#148; shall exclude any ordinary course insurance premium financing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Insolvency Proceeding</U>&#148; means any proceeding commenced by or against any Person under
any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency
law, assignments for the benefit of creditors, formal or informal moratoria, compositions,
extensions generally with creditors, receivership, or proceedings seeking reorganization,
arrangement, or other similar relief.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Interest Expense</U>&#148; means, with reference to any period, the aggregate of the interest
expense of Borrower and its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Inventory</U>&#148; means inventory (as that term is defined in the Code).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Investment</U>&#148; means, with respect to any Person, any investment by such Person in any
other Person (including Affiliates) in the form of loans, guarantees, advances, or capital
contributions (excluding (a)&nbsp;commission, travel, and similar advances to officers and employees of
such Person made in the ordinary course of business, and (b)&nbsp;bona fide Accounts arising in the
ordinary course of business consistent with past practices), purchases or other acquisitions of
Indebtedness, stock, or all or substantially all of the assets of such other Person (or of any
division or business line of such other Person), and any other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Investment Property</U>&#148; means investment property (as that term is defined in the Code),
and any and all supporting obligations in respect thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>LC Usage Amount</U>&#148; means, at any time, the sum of (a)&nbsp;the aggregate outstanding
principal amount of Advances on such date <I>plus </I>(b)&nbsp;the Letter of Credit Usage on such date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Letter of Credit Usage</U>&#148; means, at any date, the aggregate undrawn amount of all
outstanding Letters of Credit on such date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Lien</U>&#148; means any interest in an asset securing an obligation owed to, or a claim by,
any Person other than the owner of the asset, irrespective of whether (a)&nbsp;such interest is based on
the common law, statute, or contract, (b)&nbsp;such interest is recorded or perfected, and (c)&nbsp;such
interest is contingent upon the occurrence of some future event or events or the existence of some
future circumstance or circumstances. Without limiting the generality of the foregoing, the term
&#147;Lien&#148; includes the lien or security interest arising from a mortgage, deed of trust, encumbrance,
pledge, hypothecation, assignment, deposit arrangement, security agreement, conditional sale or
trust receipt, or from a lease, consignment, or bailment for security purposes and also includes
reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting Real Property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Line of Credit Period</U>&#148; means the period from and including the Closing Date to but
not including the Line of Credit Termination Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Line of Credit Termination Date</U>&#148; means February&nbsp;1, 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Loan Documents</U>&#148; means this Agreement, the Bank Product Agreements, the Guaranties,
the Security Agreements, the Reaffirmation Agreement, any note or notes executed by Borrower in
connection with this Agreement and payable to Bank, and any other agreement entered into, now or in
the future, by Borrower, any Guarantor or any of their respective Affiliates and Bank in connection
with this Agreement or any of the foregoing agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Material Adverse Change</U>&#148; means (a)&nbsp;a material adverse change in the business,
prospects, operations, results of operations, assets, liabilities or condition (financial or
otherwise) of Borrower and its Subsidiaries, taken as a whole, (b)&nbsp;a material impairment of
Borrower&#146;s and its Subsidiaries&#146; ability to perform their obligations under the Loan Documents to
which they are parties or of Bank&#146;s ability to enforce the Obligations or realize upon the
Collateral, or (c)&nbsp;a material impairment of the enforceability or priority of the Bank&#146;s Liens with
respect to the Collateral as a result of an action or failure to act on the part of Borrower or its
Subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Maximum Line of Credit Amount</U>&#148; means, as of any date of determination, an amount
equal to:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp; for the period commencing on the Closing Date through and including March&nbsp;31,
2008, $40,000,000,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp; for the period commencing on April&nbsp;1, 2008 through and including September&nbsp;30,
2008, $65,000,000,
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp; for the period commencing on October&nbsp;1, 2008 through and including October&nbsp;31,
2008, $40,000,000,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp; for the period commencing on November&nbsp;1, 2008 through and including January&nbsp;31,
2009, $20,000,000,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp; for the period commencing on February&nbsp;1, 2009 through and including March&nbsp;31,
2009, $40,000,000,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp; for the period commencing on April&nbsp;1, 2009 through and including September&nbsp;30,
2009, $65,000,000,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp; for the period commencing October&nbsp;1, 2009 through and including October&nbsp;31, 2009,
$40,000,000, and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) for the period commencing on November&nbsp;1, 2009 and thereafter, $20,000,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Mortgages</U>&#148; means, individually and collectively, one or more mortgages, deeds of
trust, or deeds to secure debt, executed and delivered by Borrower or its Subsidiaries in favor of
Bank, in form and substance satisfactory to Bank, that encumber the Real Property Collateral and
the related improvements thereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Mortgage Related Documents</U>&#148; means, with respect to each parcel composing the Real
Property Collateral, each of the following, in each case in form, scope and substance satisfactory
to Bank:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) marked-up commitments for a policy of title insurance, insuring the first priority
of Bank&#146;s Liens, with title insurance companies (the &#147;<U>Title Companies</U>&#148;) acceptable
to Bank on each of parcel subject to a Mortgage, with the final title insurance policy being
delivered within thirty (30)&nbsp;days of the Closing Date;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) any customary affidavits and indemnities in favor of the Title Companies as may be
required or necessary to obtain title insurance satisfactory to Bank;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) copies of all recorded documents creating exceptions to the title policy referred
to in Paragraph (a)&nbsp;above;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) a survey; and, the surveyors retained for such survey shall be acceptable to Bank;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) environmental assessments, audits or reports as Bank may request; and, the
environmental consultants retained for such assessments, audits or reports shall be
acceptable to Bank;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) evidence of property and liability insurance on such parcel in form and substance
acceptable to Bank naming Bank as first mortgagee; and
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) such other certificates, documents and information as are reasonably requested by
Bank, including, without limitation, permanent certificates of occupancy and evidence of
zoning.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Net Income</U>&#148; means, with reference to any period, the net income (or net loss) of
Borrower and its Subsidiaries for such period computed on a consolidated basis in accordance with
GAAP; <I>provided </I>that there shall be excluded from Net Income (a)&nbsp;the net income (or net loss) of any
Person accrued prior to the date it becomes a Subsidiary of, or has merged into or consolidated
with, Borrower or any of its Subsidiaries; and (b)&nbsp;the net income (or net loss) of any Person
(other than a Guarantor) in which Borrower or any of its Subsidiaries has a equity interest in,
except to the extent of the amount of dividends or other distributions actually received by
Borrower or such Guarantor during such period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Obligations</U>&#148; means (a)&nbsp;all loans, Advances, debts, principal, interest (including any
interest that, but for the commencement of an Insolvency Proceeding, would have accrued),
contingent reimbursement obligations with respect to outstanding Letters of Credit, premiums,
liabilities, obligations (including indemnification obligations), fees, charges, costs, expenses,
lease payments, guaranties, covenants, and duties of any kind and description owing by Borrower or
a Guarantor to Bank pursuant to or evidenced by the Loan Documents and irrespective of whether for
the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, and including all interest not paid when due, and (b)&nbsp;all Bank
Product Obligations. Any reference in this Agreement or in the Loan Documents to the Obligations
shall include all extensions, modifications, renewals or alterations thereof, both prior and
subsequent to any Insolvency Proceeding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Permitted Liens</U>&#148; has the meaning set forth in Section&nbsp;5.4.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Person</U>&#148; means natural persons, corporations, limited liability companies, limited
partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land
trusts, business trusts, or other organizations, irrespective of whether they are legal entities,
and governments and agencies and political subdivisions thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Reaffirmation Agreement</U>&#148; means a reaffirmation agreement among Borrower, Guarantors
and Bank, in form and substance satisfactory to Bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Real Property</U>&#148; means any estates or interests in real property now owned or hereafter
acquired by Borrower or its Subsidiaries and the improvements thereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Real Property Collateral</U>&#148; means the parcel or parcels of Real Property identified on
<U>Schedule&nbsp;R-1</U> and any Real Property hereafter acquired by Borrower or its Subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Security Agreement</U>&#148; means the security agreement among Borrower, Guarantors and Bank,
in form and substance satisfactory to Bank, as amended, restated, supplemented or otherwise
modified from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Solvent</U>&#148; means, with respect to any Person on a particular date, that, at fair
valuations, the sum of such Person&#146;s assets is greater than all of such Person&#146;s debts.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Subsidiary</U>&#148; of a Person means a corporation, partnership, limited partnership,
limited liability company, or other entity in which that Person directly or indirectly owns or
controls the shares of Stock having ordinary voting power to elect a majority of the board of
directors (or appoint other comparable managers) of such corporation, partnership, limited
liability company, or other entity. Unless otherwise qualified, all references to a
&#147;<U>Subsidiary</U>&#148; or to &#147;<U>Subsidiaries</U>&#148; in this Agreement and the other Loan Documents
shall refer to a Subsidiary or Subsidiaries of Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Total Funded Debt</U>&#148; means, at any date, the sum of (a)&nbsp;Indebtedness and all other
interest bearing liabilities of Borrower and its Subsidiaries, <I>plus </I>(b)&nbsp;all reimbursement or other
obligations of Borrower and its Subsidiaries in respect of letters of credit <I>plus </I>(c)&nbsp;all
Guarantied Obligations of Borrower and its Subsidiaries, in each case outstanding as of such date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Accounting Terms and Determinations</U>. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted and all accounting determinations hereunder shall
be made in accordance with GAAP. All financial statements required to be delivered hereunder shall
be prepared in accordance with GAAP as in effect from time to time, applied on a basis consistent
(except for changes concurred in by the Borrower&#146;s independent public accountants) with the most
recent audited consolidated financial statements of the Borrower and its Subsidiaries delivered to
the Lender.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Other Definitional Provisions</U>. References in this Agreement to &#147;Articles&#148;,
&#147;Sections&#148;, &#147;Schedules&#148; or &#147;Exhibits&#148; shall be to Articles, Sections, Schedules or Exhibits of or
to this Agreement unless otherwise specifically provided. Any of the terms defined in Annex A may,
unless the context otherwise requires, be used in the singular or plural depending on the
reference. &#147;Include&#148; or &#147;includes&#148; and &#147;including&#148; shall be deemed to be followed by &#147;without
limitation&#148; whether or not they are in fact followed by such words or words of like import.
&#147;Writing&#148;, &#147;written&#148; and comparable terms refer to printing, typing and other means of reproducing
words in a visible form. References to any agreement or contract are to such agreement or contract
as amended, modified or supplemented from time to time in accordance with the terms hereof and
thereof. References to any Person include the successors and assigns of such Person. References
&#147;from&#148; or &#147;through&#148; any date mean, unless otherwise specified, &#147;from and including&#148; or &#147;through and
including&#148;, respectively.
</DIV>

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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>v39244exv10w2.htm
<DESCRIPTION>EXHIBIT 10.2
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 10.2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><b>EXHIBIT 10.2</b>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">REVOLVING LINE OF CREDIT NOTE
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">$65,000,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">West Covina, California<BR>
March&nbsp;12, 2008</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED, the undersigned VIRCO MFG. CORPORATION (&#147;<U>Borrower</U>&#148;) promises to
pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (&#147;<U>Bank</U>&#148;) at its office at San
Gabriel Valley Regional Commercial Banking Office, 1000 Lakes Drive, Suite&nbsp;250, West Covina,
California, or at such other place as the holder hereof may designate, in lawful money of the
United States of America and in immediately available funds, the principal sum of Sixty Five
Million Dollars ($65,000,000), or so much thereof as may be advanced and be outstanding, with
interest thereon, to be computed on each advance from the date of its disbursement as set forth
herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Revolving Line of Credit Note (this &#147;<U>Note</U>&#148;) is the Line of Credit Note issued
pursuant to the Second Amended and Restated Credit Agreement dated as of March&nbsp;12, 2008 (as
amended, restated, supplemented or otherwise modified, the &#147;<U>Credit Agreement</U>&#148;) between
Borrower and Bank. Terms defined in the Credit Agreement and not otherwise defined herein are used
herein as therein defined. Reference hereby is made to the Loan Documents for a description of the
assets in which a Lien has been granted, the nature and extent of the security and the guaranties,
the terms and conditions upon which the Liens and each guaranty were granted and the rights of the
holder of this Note in respect thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DEFINITIONS:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As used herein, the following terms shall have the meanings set forth after each, and any
other term defined in this Note shall have the meaning set forth at the place defined:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&#147;<U>Applicable Margin</U>&#148; means the following percentages <I>per annum</I>, based upon the
Consolidated EBITDA as set forth in the most recent Compliance Certificate received by Bank
pursuant to Section&nbsp;4.3(f) of the Credit Agreement:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Trailing 12 month</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Tier</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Consolidated EBITDA</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">LIBOR Margin</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Prime Rate Margin</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top">I</TD>
    <TD>&nbsp;</TD>
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px">&#060;$17,999,999</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.50</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">II</TD>
    <TD>&nbsp;</TD>
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">$18,000,000 to $19,999,999</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.25</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top">III</TD>
    <TD>&nbsp;</TD>
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">$20,000,000 to $21,999,999</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.00</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD nowrap align="right" valign="top">-0.25</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">IV</TD>
    <TD>&nbsp;</TD>
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px">&#062; $22,000,000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.75</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD nowrap align="right" valign="top">-0.50</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Any increase or decrease in the Applicable Margin resulting from a change in the Consolidated
EBITDA for any relevant period shall become effective as of the first Business Day immediately
following the date a Compliance Certificate is delivered pursuant to Section&nbsp;4.3(f); <I>provided,
however</I>, that if a Compliance Certificate is not delivered when due in accordance with such
Section, then Pricing Tier 1 shall apply as of the first Business Day after the date on which such
Compliance Certificate was required to have been delivered. The Applicable Margin in effect from
the Closing Date through the date that the Compliance Certificate (and audited financial
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">statements) required to be delivered for the fiscal year ended January&nbsp;31, 2008 is delivered to
Bank shall be determined based upon Pricing Tier 1.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&#147;<U>Fixed Rate Term</U>&#148; means a period commencing on a Business Day and continuing for
one (1), two (2), three (3), six (6), nine (9)&nbsp;or twelve (12)&nbsp;months, as designated by Borrower,
during which all or a portion of the outstanding principal balance of this Note bears interest
determined in relation to LIBOR; <I>provided however, </I>that no Fixed Rate Term may be selected for a
principal amount less than $1,000,000; and <I>provided further, </I>that no Fixed Rate Term shall extend
beyond the Line of Credit Termination Date. If any Fixed Rate Term would end on a day which is not
a Business Day, then such Fixed Rate Term shall be extended to the next succeeding Business Day.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&#147;<U>LIBOR</U>&#148; means the rate per annum (rounded upward, if necessary, to the nearest
whole 1/8 of 1%) and determined pursuant to the following formula:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>LIBOR =
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Base LIBOR</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
100% - LIBOR Reserve Percentage
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) &#147;<U>Base LIBOR</U>&#148; means the rate per annum for United States dollar deposits
quoted by Bank as the Inter-Bank Market Offered Rate, with the understanding that such rate
is quoted by Bank for the purpose of calculating effective rates of interest for loans
making reference thereto, on the first day of a Fixed Rate Term for delivery of funds on
said date for a period of time approximately equal to the number of days in such Fixed Rate
Term and in an amount approximately equal to the principal amount to which such Fixed Rate
Term applies. Borrower understands and agrees that Bank may base its quotation of the
Inter-Bank Market Offered Rate upon such offers or other market indicators of the Inter-Bank
Market as Bank in its discretion deems appropriate including, but not limited to, the rate
offered for U.S. dollar deposits on the London Inter-Bank Market.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) &#147;<U>LIBOR Reserve Percentage</U>&#148; means the reserve percentage prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for &#147;Eurocurrency
Liabilities&#148; (as defined in Regulation&nbsp;D of the Federal Reserve Board, as amended), adjusted
by Bank for expected changes in such reserve percentage during the applicable Fixed Rate
Term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&#147;<U>Prime Rate</U>&#148; means at any time the rate of interest most recently announced within
Bank at its principal office as its Prime Rate, with the understanding that the Prime Rate is one
of Bank&#146;s base rates and serves as the basis upon which effective rates of interest are calculated
for those loans making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">INTEREST:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<U>Interest</U>. The outstanding principal balance of this Note shall bear interest
(computed on the basis of a 360-day year, actual days elapsed) either (i)&nbsp;at a fluctuating rate <I>per
annum </I>equal to the Prime Rate in effect from time to time <I>plus </I>the Applicable Margin or (ii)&nbsp;at a
fixed rate <I>per annum </I>determined by Bank equal to LIBOR in effect on the first day of the
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">applicable Fixed Rate Term <I>plus </I>the Applicable Margin. When interest is determined in
relation to the Prime Rate, each change in the rate of interest hereunder shall become effective on
the date each Prime Rate change is announced within Bank. With respect to each LIBOR selection
hereunder, Bank is hereby authorized to note the date, principal amount, interest rate and Fixed
Rate Term applicable thereto and any payments made thereon on Bank&#146;s books and records (either
manually or by electronic entry) and/or on any schedule attached to this Note, which notations
shall be prima facie evidence of the accuracy of the information noted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<U>Selection of Interest Rate Options</U>. At any time any portion of this Note bears
interest determined in relation to LIBOR, it may be continued by Borrower at the end of the Fixed
Rate Term applicable thereto so that all or a portion thereof bears interest determined in relation
to the Prime Rate or to LIBOR for a new Fixed Rate Term designated by Borrower. At any time any
portion of this Note bears interest determined in relation to the Prime Rate, Borrower may convert
all or a portion thereof so that it bears interest determined in relation to LIBOR for a Fixed Rate
Term designated by Borrower. At such time as Borrower requests an advance hereunder or wishes to
select a LIBOR option for all or a portion of the outstanding principal balance hereof, and at the
end of each Fixed Rate Term, Borrower shall give Bank notice specifying: (i)&nbsp;the interest rate
option selected by Borrower; (ii)&nbsp;the principal amount subject thereto; and (iii)&nbsp;for each LIBOR
selection, the length of the applicable Fixed Rate Term; <I>provided, however, </I>that if an Event of
Default has occurred and is continuing, Borrower may not elect to continue or convert any Advance
outstanding hereunder into a LIBOR rate loan. Any such notice may be given by telephone (or such
other electronic method as Bank may permit) so long as, with respect to each LIBOR selection,
(A)&nbsp;if requested by Bank, Borrower provides to Bank written confirmation thereof not later than
three (3)&nbsp;Business Days after such notice is given, and (B)&nbsp;such notice is given to Bank prior to
10:00&nbsp;a.m. on the first day of the Fixed Rate Term, or at a later time during any Business Day if
Bank, at it&#146;s sole option but without obligation to do so, accepts Borrower&#146;s notice and quotes a
fixed rate to Borrower. If Borrower does not immediately accept a fixed rate when quoted by Bank,
the quoted rate shall expire and any subsequent LIBOR request from Borrower shall be subject to a
redetermination by Bank of the applicable fixed rate. If no specific designation of interest is
made at the time any advance is requested hereunder or at the end of any Fixed Rate Term, Borrower
shall be deemed to have made a Prime Rate interest selection for such advance or the principal
amount to which such Fixed Rate Term applied.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;<U>Taxes and Regulatory Costs</U>. Borrower shall pay to Bank immediately upon demand,
in addition to any other amounts due or to become due hereunder, any and all (i)&nbsp;withholdings,
interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed
by any Governmental Authority and related in any manner to LIBOR, and (ii)&nbsp;future, supplemental,
emergency or other changes in the LIBOR Reserve Percentage, assessment rates imposed by the Federal
Deposit Insurance Corporation, or similar requirements or costs imposed by any Governmental
Authority or resulting from compliance by Bank with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority and related in any manner
to LIBOR to the extent they are not included in the calculation of LIBOR. In determining which of
the foregoing are attributable to any LIBOR option available to Borrower hereunder, any reasonable
allocation made by Bank among its operations shall be conclusive and binding upon Borrower.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;<U>Payment of Interest</U>. Interest accrued on this Note shall be payable on the first
day of each month, commencing March&nbsp;1, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;<U>Default Interest</U>. From and after the maturity date of this Note, or such earlier
date as all principal owing hereunder becomes due and payable by acceleration or otherwise, the
outstanding principal balance of this Note shall bear interest until paid in full at an increased
rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to four percent
(4%) above the rate of interest from time to time applicable to this Note.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">BORROWING AND REPAYMENT:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<U>Borrowing and Repayment</U>. Borrower may from time to time during the term of this
Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of
the limitations, terms and conditions of this Note and of any document executed in connection with
or governing this Note; <I>provided however, </I>that the total outstanding borrowings under this Note
shall not at any time exceed the principal amount set forth above or such lesser amount as shall at
any time be available hereunder, as set forth in the Credit Agreement. The unpaid principal
balance of this obligation at any time shall be the total amounts advanced hereunder by the holder
hereof less the amount of principal payments made hereon by or for any Borrower, which balance may
be endorsed hereon from time to time by the holder. The outstanding principal balance of this Note
shall be due and payable in full on Line of Credit Termination Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<U>Advances</U>. Advances hereunder, to the total amount of the principal sum stated
above, may be made by the holder at the oral or written request of (i)&nbsp;Robert A. Virtue, Robert
Dose, Doug Virtue or Bassey Yau, any one of them acting alone, who are authorized to request
Advances and direct the disposition of any Advances until written notice of the revocation of such
authority is received by the holder at the office designated above, or (ii)&nbsp;any person, with
respect to Advances deposited to the credit of any deposit account of Borrower, which advances,
when so deposited, shall be conclusively presumed to have been made to or for the benefit of
Borrower regardless of the fact that persons other than those authorized to request Advances may
have authority to draw against such account. The holder shall have no obligation to determine
whether any person requesting an Advance is or has been authorized by Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;<U>Application of Payments</U>. Each payment made on this Note shall be credited first,
to any interest then due and second, to the outstanding principal balance hereof. All payments
credited to principal shall be applied first, to the outstanding principal balance of this Note
which bears interest determined in relation to the Prime Rate, if any, and second, to the
outstanding principal balance of this Note which bears interest determined in relation to LIBOR,
with such payments applied to the oldest Fixed Rate Term first.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">PREPAYMENT:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<U>Prime Rate</U>. Borrower may prepay principal on any portion of this Note which bears
interest determined in relation to the Prime Rate at any time, in any amount and without penalty.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<U>LIBOR</U>. Borrower may prepay principal on any portion of this Note which bears
interest determined in relation to LIBOR at any time and in the minimum amount of $1,000,000;
<I>provided, however, </I>that if the outstanding principal balance of such portion of this Note is less
than said amount, the minimum prepayment amount shall be the entire outstanding principal balance
thereof. In consideration of Bank providing this prepayment option to Borrower, or if any such
portion of this Note shall become due and payable at any time prior to the last day of the Fixed
Rate Term applicable thereto by acceleration or otherwise, Borrower shall pay to Bank immediately
upon demand a fee which is the sum of the discounted monthly differences for each month from the
month of prepayment through the month in which such Fixed Rate Term matures, calculated as follows
for each such month:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Determine the amount of interest which would have accrued each month on the amount
prepaid at the interest rate applicable to such amount had it remained outstanding until the
last day of the Fixed Rate Term applicable thereto.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Subtract from the amount determined in (i)&nbsp;above the amount of interest which
would have accrued for the same month on the amount prepaid for the remaining term of such
Fixed Rate Term at LIBOR in effect on the date of prepayment for new loans made for such
term and in a principal amount equal to the amount prepaid.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) If the result obtained in (ii)&nbsp;for any month is greater than zero, discount that
difference by LIBOR used in (ii)&nbsp;above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrower acknowledges that prepayment of such amount may result in Bank incurring additional
costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such
costs, expenses and/or liabilities. Borrower, therefore, agrees to pay the above described
prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment
costs, expenses and/or liabilities of Bank. If Borrower fails to pay any prepayment fee when due,
the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum two
percent (2%) above the Prime Rate in effect from time to time (computed on the basis of a 360&nbsp;day
year, actual days elapsed). Each change in the rate of interest on any such past due prepayment
fee shall become effective on the date each Prime Rate change is announced within Bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;The principal Indebtedness evidenced hereby shall be payable as follows and without set
off, counterclaim or reduction of any kind:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the amount, if any, by which the LC Usage Amount at any time exceeds the Maximum
Line of Credit Amount at such date shall be payable immediately; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the principal Indebtedness evidenced hereby shall be payable on the Line of Credit
Termination Date
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">EVENTS OF DEFAULT:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any default in the payment or performance of any obligation under this Note, or any defined
event of default under the Credit Agreement, shall constitute an &#147;Event of Default&#148; under this
Note.
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt">MISCELLANEOUS:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<U>Obligations Joint and Several</U>. Should more than one person or entity sign this
Note as a Borrower, the obligations of each such Borrower shall be joint and several.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<U>Governing Law</U>. This Note shall be governed by and construed in accordance with
the laws of the State of California.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;Signature Page Follows&#093;
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">VIRCO MFG. CORPORATION<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Robert E. Dose&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Robert E. Dose&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Vice President &#150; Finance, Secretary and
Treasurer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>v39244exv10w3.htm
<DESCRIPTION>EXHIBIT 10.3
<TEXT>
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<HEAD>
<TITLE>Exhibit 10.3</TITLE>
</HEAD>
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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><b>EXHIBIT 10.3</b>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>MASTER REAFFIRMATION AGREEMENT </B></U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MASTER REAFFIRMATION AGREEMENT dated as of March&nbsp;12, 2008 (&#147;<U>Agreement</U>&#148;) among VIRCO
MFG. CORPORATION, a Delaware corporation (the &#147;<U>Borrower</U>&#148;), VIRCO, INC., a Delaware
corporation (&#147;<U>Virco</U>&#148;), VIRCO MGMT. CORPORATION, a Delaware corporation (&#147;<U>Virco
Mgmt</U>&#148;; and, together with the Borrower and Virco, the &#147;<U>Loan Parties</U>&#148;), and WELLS FARGO
BANK, NATIONAL ASSOCIATION (the &#147;<U>Bank</U>&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">W I T N E S S ET H:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, concurrently with the execution and delivery of this Agreement, the Borrower and the
Bank have entered into that certain Second Amended and Restated Credit Agreement dated as of the
date hereof (as further amended, modified, restated or otherwise supplemented from time to time,
the &#147;<U>Credit Agreement</U>&#148;; terms defined in the Credit Agreement and not otherwise defined
herein are used herein as therein defined), which has amended and restated in its entirety that
certain Amended and Restated Credit Agreement dated as of January&nbsp;27, 2004 (as amended or otherwise
modified prior to the date hereof, the &#147;<U>Prior Credit Agreement</U>&#148;) between the Borrower and
the Bank; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the Loan Parties have previously executed and delivered to the Bank various
guaranties, security agreements and mortgages, each listed on <U>Annex A</U> attached hereto
(collectively, the &#147;<U>Existing Security Documents</U>&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the premises set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the
undersigned agrees as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;<U>Amendments to Existing Security Documents</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;All references in the Existing Security Documents to the &#147;Credit Agreement&#148; shall be
deemed to refer to the Credit Agreement. Cross references in the Existing Security Documents to
particular section references in the Prior Credit Agreement shall be deemed to be cross references
to the corresponding sections of the Credit Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;All references to the obligations guaranteed or secured under the Existing Security
Documents shall be deemed to include all of the Obligations of the Loan Parties.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;<U>Reaffirmation</U>. Each Loan Party, as debtor, grantor, mortgagor, pledgor, guarantor,
assignor, or in other similar capacities in which such Loan Party has granted liens or security
interests in its properties and/or acts as a guarantor, surety or an accommodation party, as the
case may be, under any of the Existing Security Documents to which it is a party hereby
(i)&nbsp;ratifies and reaffirms all of its payment and performance obligations, contingent or otherwise,
and undertakings arising under or pursuant to each of such Existing Security Documents and
(ii)&nbsp;acknowledges and agrees that, subsequent to the execution and delivery of, and after taking
into account and giving effect to, the Credit Agreement, each of such Existing Security Documents
remains in full force and effect as hereby ratified, amended and confirmed. To the extent such
Loan Party granted liens on, or security interests in, any of its properties pursuant to
any such Existing Security Documents as security for the Obligations arising under, pursuant
to or as defined in the Prior Credit
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Agreement, each such Credit Party hereby ratifies and
reaffirms such grant of security and confirms and agrees that, subsequent to the execution and
delivery of, and after taking into account and giving effect to, the Credit Agreement, such liens
and security interests hereafter secure all of the Obligations arising under, pursuant to or as
defined in the Credit Agreement. The execution of this Agreement shall not operate as a waiver of
any right, power or remedy of the Bank, nor constitute a waiver of any provision of any of the
Existing Security Documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;<U>Indemnification</U>. Each Loan Party agrees to indemnify and hold harmless the Bank
(including each Person obligated on a Hedging Agreement that is a Loan Document if such Person was
an affiliate of Bank at the time of it entered into such Hedging Agreement) and each of their
respective Affiliates, and each of the directors, officers, employees, agents, trustees,
representatives, attorneys, consultants and advisors of or to any of the foregoing (each such
Person being an &#147;Indemnitee&#148;) from and against any and all claims, damages, liabilities,
obligations, losses, penalties, actions, judgments, suits, costs, disbursements and expenses, joint
or several, of any kind or nature (including reasonable fees, disbursements and expenses of
financial and legal advisors to any such Indemnitee) that may be imposed on, incurred by or
asserted against any such Indemnitee in connection with or arising out of any investigation,
litigation or proceeding, whether or not such investigation, litigation or proceeding is brought by
any such Indemnitee or any of its directors, security holders or creditors or any such Indemnitee,
director, security holder or creditor is a party thereto, whether direct, indirect, or
consequential and whether based on any federal, state or local law or other statutory regulation,
securities or commercial law or regulation, or under common law or in equity, or on contract, tort
or otherwise, in any manner relating to or arising out of the Credit Agreement, the Prior Credit
Agreement, any other Loan Document, any Obligation, or any act, event or transaction related or
attendant to any thereof, or the use or intended use of the proceeds of the Advances or Letters of
Credit or in connection with any investigation of any potential matter covered hereby
(collectively, the &#147;Indemnified Matters&#148;); provided, however, that the Borrower shall not have any
liability hereunder to an Indemnitee with respect to any Indemnified Matter that has resulted
primarily from the gross negligence or willful misconduct of that Indemnitee, as determined by a
court of competent jurisdiction in a final non-appealable judgment or order.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;<U>Successors and Assigns</U>. This Agreement shall be binding upon each of the Loan
Parties and upon their respective successors and assigns and shall inure to the benefit of the Bank
and its successors and assigns. The successors and assigns of such entities shall include, without
limitation, their respective receivers, trustees, or debtors-in-possession.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;<U>Further Assurances</U>. Each Loan Party hereby agrees from time to time, as and when
requested by the Bank to execute and deliver, or cause to be executed and delivered, all such
documents, instruments and agreements and to take or cause to be taken such further or other action
as the Bank may reasonably deem necessary or desirable in order to carry out the intent and
purposes of this Agreement and any Security Documents to which such Loan Party is a party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;<U>Definitions</U>. All references to the singular shall be deemed to include the plural
and vice versa where the context so requires.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;<U>Authorization</U>. The Bank is hereby authorized by the Loan Parties to file UCC
financing statements with respect to the Collateral in which security interests are granted and
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">affirmed, which UCC financing statements may describe such collateral as &#147;all assets&#148; of the debtor
named therein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;<U>Governing Law; Arbitration</U>. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES. The provisions of Section&nbsp;7.11 of the Credit Agreement are hereby
incorporated by reference, mutatis mutandis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;<U>Severability</U>. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;<U>Merger</U>. This Agreement represents the final agreement of each of the Loan Parties
with respect to the matters contained herein and may not be contradicted by evidence of prior or
contemporaneous agreements, or prior or subsequent oral agreements, among any of the Loan Parties
and the Bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;<U>Execution in Counterparts</U>. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall constitute one and
the same agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;<U>Section&nbsp;Headings</U>. The section headings herein are for convenience of reference
only, and shall not affect in any way the interpretation of any of the provisions hereof.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;<I>Signature Page Follows</I>&#093;
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WITNESS the due execution of this Agreement by the respective duly authorized officers of the
undersigned as of the date first written above.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">VIRCO MFG. CORPORATION<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Robert E. Dose&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Robert E. Dose&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" nowrap>Vice President - Finance, Secretary and Treasurer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">VIRCO INC.<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Robert E. Dose&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Robert E. Dose&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" nowrap>Vice President - Finance, Secretary and Treasurer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">VIRCO MGMT. CORPORATION<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Robert E. Dose&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Robert E. Dose&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" nowrap>Vice President - Finance, Secretary and Treasurer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">WELLS FARGO BANK, NATIONAL ASSOCIATION<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Jeff Heisinger&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Jeff Heisinger&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Vice President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Annex A</B><BR>
Existing Security Documents
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;the Subsidiary Guaranty dated as of January&nbsp;27, 2004 executed by Virco, Inc., a
Delaware corporation (&#147;<U>Virco</U>&#148;), in favor of Wells Fargo Bank, National Association
(the &#147;<U>Bank</U>&#148;);
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;the Subsidiary Guaranty dated as of January&nbsp;27, 2004 executed by Virco Mgmt.
Corporation, a Delaware corporation (&#147;<U>Virco Mgmt</U>&#148;), in favor of the Bank;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;the Amended and Restated Security Agreement dated as of January&nbsp;27, 2004 among
Virco Mfg. Corporation, a Delaware corporation (the &#147;<U>Borrower</U>&#148;), Virco, Virco Mgmt
and the Bank, including the powers of attorney executed by the Borrower, Virco and Virco
Mgmt in connection therewith;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;the Intellectual Property Security Agreement dated as of January&nbsp;27, 2004 between
the Borrower and the Bank;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;the Intellectual Property Security Agreement dated as of January&nbsp;27, 2004 between
Virco and the Bank;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)&nbsp;the Intellectual Property Security Agreement dated as of January&nbsp;27, 2004 between
Virco Mgmt and the Bank; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)&nbsp;the Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and
Fixture Filing executed by the Borrower in favor of the Bank.
</DIV>


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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>5
<FILENAME>v39244exv10w4.htm
<DESCRIPTION>EXHIBIT 10.4
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 10.4</TITLE>
</HEAD>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><b>EXHIBIT 10.4</b>
</DIV>
<DIV align="right" style="font-size: 10pt; margin-top: 6pt">
Loan No. 8079119402
</div>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>THIS INSTRUMENT PREPARED BY:</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Gibson Dunn &#038; Crutcher LLP<BR>
333 S. Grand Avenue<BR>
Los Angeles, CA 90071<BR>
Attn: Mark Nicoletti

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>AND WHEN RECORDED MAIL TO:</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Commercial Banking Group (AU #2702)<BR>
201 Third Street, 8th Floor<BR>
San Francisco, CA 94013<BR>
Attn: Records Management / Team 2<BR>
Loan No.&nbsp;8079119402

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>THIS MORTGAGE SECURES A NOTE THAT</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><B>PROVIDES FOR A VARIABLE INTEREST RATE</B></DIV>



<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>AMENDED AND RESTATED MORTGAGE<BR>
WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,<BR>
SECURITY AGREEMENT AND FIXTURE FILING</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THE PARTIES TO THIS AMENDED AND RESTATED MORTGAGE WITH ABSOLUTE ASSIGNMENT OF LEASES AND
RENTS, SECURITY AGREEMENT AND FIXTURE FILING (this &#147;Mortgage&#148;), made as of March&nbsp;12, 2008, are
VIRCO MFG. CORPORATION, a Delaware corporation (&#147;Mortgagor&#148;), and WELLS FARGO BANK, NATIONAL
ASSOCIATION (&#147;Mortgagee&#148;). The mailing address of Mortgagor and Mortgagee are the addresses for
those parties set forth or referred to in Section&nbsp;7.10 below.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RECITALS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, Mortgagor did execute and deliver that certain Mortgage with Absolute Assignment of
Leases and Rents, Security Agreement and Fixture Filing dated January&nbsp;26, 2004 (as amended,
restated, supplemented or otherwise modified, the &#147;Original Mortgage&#148;) to and for the benefit of
Mortgagee; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the Original Mortgage was recorded and filed in the Official Records of the County of
Faulkner, Arkansas (the &#147;Official Records&#148;) on January&nbsp;28, 2004, as Document No.&nbsp;2004-1700 and
re-recorded and filed February&nbsp;27, 2004, as Document No.&nbsp;2004-3958, as modified by that certain
Modification Agreement (Secured Loan) executed by Mortgagor on January&nbsp;27, 2005, which was recorded
and filed in the Official Records on February&nbsp;3, 2005, as Document No.&nbsp;2005-2338, and by that
certain Modification Agreement (Secured Loan) executed
by Mortgagor on December&nbsp;8, 2005, which was recorded and filed in the Official Records on
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">December&nbsp;15, 2005, as Document No.&nbsp;2005-27794, and by that certain Modification Agreement (Secured
Loan) executed by Mortgagor on March&nbsp;26, 2007, which was recorded and filed in the Official Records
on April&nbsp;10, 2007, as Document No.&nbsp;2007-7273; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, Mortgagor and Mortgagee are parties to that certain Second Amended and Restated
Credit Agreement dated as of the date hereof (as amended, restated, supplemented or otherwise
modified, from time to time, the &#147;Credit Agreement&#148;), which amends and restates, in its entirety,
that certain Amended and Restated Credit Agreement dated as of January&nbsp;27, 2004; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, Mortgagor and Mortgagee, now desire to amend and restate the Original Mortgage, in
its entirety, and replace it with this Mortgage.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 1. GRANT OF MORTGAGE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.1 </B><U><B>GRANT</B></U>. For the purposes of and upon the terms and conditions in this Mortgage and
for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
Mortgagor irrevocably grants, bargains, sells, conveys and assigns to Mortgagee, with power of sale
and right of entry and possession, all of that real property located in the City of Conway, County
of Faulkner, State of Arkansas, described on <U>Exhibit&nbsp;A</U> attached hereto, together with all
right, title, interest, and privileges of Mortgagor in and to all streets, ways, roads, and alleys
used in connection with or pertaining to such real property, all development rights or credits, air
rights, water, water rights and water stock related to the real property, and all minerals, oil and
gas, and other hydrocarbon substances in, on or under the real property, and all appurtenances,
easements, rights and rights of way appurtenant or related thereto; all buildings, other
improvements and fixtures now or hereafter located on the real property, including, but not limited
to, all apparatus, equipment, and appliances used in the operation or occupancy of the real
property, it being intended by the parties that all such items shall be conclusively considered to
be a part of the real property, whether or not attached or affixed to the real property (the
&#147;Improvements&#148;); all interest or estate which Mortgagor may hereafter acquire in the property
described above, and all additions and accretions thereto, and the proceeds of any of the
foregoing; (all of the foregoing being collectively referred to as the &#147;Subject Property&#148;). The
listing of specific rights or property shall not be interpreted as a limit of general terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.2 </B><U><B>ADDRESS</B></U>. The addresses of the Subject Property are (i)&nbsp;1701 Sturgis Road, (ii)
900 Robbins Street, and (iii)&nbsp;701 Bruce Street. However, neither the failure to designate an
address nor any inaccuracy in the addresses designated shall affect the validity or priority of the
lien of this Mortgage on the Subject Property as described on <U>Exhibit&nbsp;A</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.3 </B><U><B>INCORPORATION OF RECITALS</B></U><B>. </B>The Recitals (above)&nbsp;are true and correct and are
hereby incorporated herein by this reference.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 2. OBLIGATIONS SECURED</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.1 </B><U><B>OBLIGATIONS SECURED</B></U>. Mortgagor makes this Mortgage for the purpose of securing
the following obligations (&#147;Secured Obligations&#148;):
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Payment to Mortgagee of all sums at any time owing under that certain Revolving Line of
Credit Note of even date herewith in the principal amount of Sixty-Five Million and No/100 Dollars
($65,000,000) (the &#147;Note&#148;), executed by Mortgagor, as &#147;<I>Borrower</I>,&#148; and payable to the order of
Mortgagee, as &#147;<I>Lender</I>;&#148; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Payment to Mortgagee of all sums representing Bank Product Obligations, as defined in the
Credit Agreement; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Payment and performance of all covenants and obligations of Mortgagor under this Mortgage;
and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Payment and performance of all covenants and obligations on the part of Mortgagor under
the Credit Agreement and each other Loan Document executed in connection therewith; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Payment and performance of all future advances and other obligations that the then record
owner of all or part of the Subject Property may agree to pay and/or perform (whether as principal,
surety or guarantor) for the benefit of Mortgagee, when such future advance or obligation is
evidenced by a writing which recites that it is secured by this Mortgage; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;All amendments, restatements, modifications, extensions and renewals of any of the
obligations secured hereby, however evidenced, including, without limitation: (i)&nbsp;modifications of
the required principal payment dates or interest payment dates or both, as the case may be,
deferring or accelerating payment dates wholly or partly; or (ii)&nbsp;amendments, restatements,
modifications, extensions or renewals at a different rate of interest whether or not in the case of
a note, the amendment, restatement, modification, extension or renewal is evidenced by a new or
additional promissory note or notes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.2 </B><U><B>OBLIGATIONS</B></U>. The term &#147;obligations&#148; is used herein in its broadest and most
comprehensive sense and shall be deemed to include, without limitation, all interest and charges,
prepayment charges (if any), late charges and loan fees at any time accruing or assessed on any of
the Secured Obligations, including, without limitation, any interest or other payment obligations
that would have accrued on the Secured Obligations but for the application of the United States
Bankruptcy Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.3 </B><U><B>INCORPORATION</B></U>. All terms of the Secured Obligations and the documents evidencing such obligations are
incorporated herein by this reference. All persons who may have or acquire an interest in the
Subject Property shall be deemed to have notice of the terms of the Secured Obligations and to have
notice, if provided therein, that: (a)&nbsp;the Note or the Credit Agreement may permit borrowing,
repayment and re-borrowing so that repayments shall not reduce the amounts of the Secured
Obligations; and (b)&nbsp;the rate of interest on one or more Secured Obligations may vary from time to
time.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.1 </B><U><B>ASSIGNMENT</B></U>. Mortgagor hereby irrevocably assigns to Mortgagee all of Mortgagor&#146;s
right, title and interest in, to and under: (a)&nbsp;all leases of the Subject Property or any
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">portion
thereof, and all other agreements of any kind relating to the use or occupancy of the Subject
Property or any portion thereof, whether now existing or entered into after the date hereof
(&#147;Leases&#148;); and (b)&nbsp;the rents, revenue, income, issues, deposits and profits of the Subject
Property, including, without limitation, all amounts payable and all rights and benefits accruing
to Mortgagor under the Leases (&#147;Payments&#148;). The term &#147;Leases&#148; shall also include all guarantees of
and security for the lessees&#146; performance thereunder, and all amendments, extensions, renewals or
modifications thereto which are permitted hereunder. This is a present and absolute assignment,
not an assignment for security purposes only, and Mortgagee&#146;s right to the Leases and Payments is
not contingent upon, and may be exercised without possession of, the Subject Property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.2 </B><U><B>GRANT OF LICENSE</B></U>. Mortgagee confers upon Mortgagor a license (&#147;License&#148;) to
collect and retain the Payments as they become due and payable, until the occurrence of a Default
(as hereinafter defined). Upon a Default, the License shall be automatically revoked and Mortgagee
may collect and apply the Payments pursuant to Section&nbsp;6.4 without notice and without taking
possession of the Subject Property. Mortgagor hereby irrevocably authorizes and directs the
lessees under the Leases to rely upon and comply with any notice or demand by Mortgagee for the
payment to Mortgagee of any rental or other sums which may at any time become due under the Leases,
or for the performance of any of the lessees&#146; undertakings under the Leases, and the lessees shall
have no right or duty to inquire as to whether any Default has actually occurred or is then
existing hereunder. Mortgagor hereby relieves the lessees from any liability to Mortgagor by
reason of relying upon and complying with any such notice or demand by Mortgagee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.3 </B><U><B>EFFECT OF ASSIGNMENT</B></U>. The foregoing irrevocable assignment shall not cause
Mortgagee to be: (a)&nbsp;a mortgagee in possession; (b)&nbsp;responsible or liable for the control, care,
management or repair of the Subject Property or for performing any of the terms, agreements,
undertakings, obligations, representations, warranties, covenants and conditions of the Leases; or
(c)&nbsp;responsible or liable for any waste committed on the Subject Property by the lessees under any
of the Leases or any other parties; for any dangerous or defective condition of the Subject
Property; or for any negligence in the management, upkeep, repair or control of the Subject
Property resulting in loss
or injury or death to any lessee, licensee, employee, invitee or other person. Mortgagee
shall not directly or indirectly be liable to Mortgagor or any other person as a consequence of:
(i)&nbsp;the exercise or failure to exercise by Mortgagee, or any of its employees, agents, contractors
or subcontractors, any of the rights, remedies or powers granted to Mortgagee hereunder; or (ii)
the failure or refusal of Mortgagee to perform or discharge any obligation, duty or liability of
Mortgagor arising under the Leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.4 </B><U><B>REPRESENTATIONS AND WARRANTIES</B></U>. Mortgagor represents and warrants that: (a)&nbsp;the
Schedule of Leases attached hereto as Schedule&nbsp;1 is, as of the date hereof, a true, accurate and
complete list of all Leases; (b)&nbsp;all existing Leases are in full force and effect and are
enforceable in accordance with their respective terms, and no breach or default, or event which
would constitute a breach or default after notice or the passage of time, or both, exists under any
existing Leases on the part of any party; (c)&nbsp;no rent or other payment under any existing Lease has
been paid by any lessee for more than one (1)&nbsp;month in advance; and (d)&nbsp;none of the lessor&#146;s
interests under any of the Leases has been transferred or assigned.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.5 </B><U><B>COVENANTS</B></U>. Mortgagor covenants and agrees at Mortgagor&#146;s sole cost and expense
to: (a)&nbsp;perform the obligations of lessor contained in the Leases and enforce by all available
remedies performance by the lessees of the obligations of the lessees contained in the Leases; (b)
give Mortgagee prompt written notice of any default which occurs with respect to any of the Leases,
whether the default be that of the lessee or of the lessor; (c)&nbsp;exercise Mortgagor&#146;s best efforts
to keep all portions of the Subject Property that are capable of being leased at all times at
rentals not less than the fair market rental value; (d)&nbsp;deliver to Mortgagee fully executed,
counterpart original(s) of each and every Lease if requested to do so; and (e)&nbsp;execute and record
such additional assignments of any Lease or specific subordinations (or subordination, attornment
and non-disturbance agreements executed by the lessor and lessee) of any Lease to the Mortgage, in
form and substance acceptable to Mortgagee, as Mortgagee may request. Mortgagor shall not, without
Mortgagee&#146;s prior written consent or as otherwise permitted by any provision of the Credit
Agreement: (i)&nbsp;enter into any Leases after the date thereof; (ii)&nbsp;execute any other assignment
relating to any of the Leases; (iii)&nbsp;discount any rent or other sums due under the Leases or
collect the same in advance, other than to collect rentals one (1)&nbsp;month in advance of the time
when it becomes due; (iv)&nbsp;terminate, modify or amend any of the terms of the Leases or in any
manner release or discharge the lessees from any obligations thereunder; (v)&nbsp;consent to any
assignment or subletting by any lessee; or (vi)&nbsp;subordinate or agree to subordinate any of the
Leases to any other Mortgage or encumbrance. Any such attempted action in violation of the
provisions of this Section&nbsp;3.5 shall be null and void. Without in any way limiting the requirement
of Mortgagee&#146;s consent hereunder, any sums received by Mortgagor in consideration of any
termination (or the release or discharge of any lessee) modification or amendment of any Lease
shall be applied to reduce the outstanding Secured Obligations and any such sums received by
Mortgagor shall be held in trust by Mortgagor for such purpose.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.6 </B><U><B>ESTOPPEL CERTIFICATES</B></U>. Within thirty (30)&nbsp;days after written request by Mortgagee, Mortgagor shall deliver to
Mortgagee and to any party designated by Mortgagee estoppel certificates executed by Mortgagor and
by each of the lessees, in recordable form, certifying (if such be the case): (a)&nbsp;that the
foregoing assignment and the Leases are in full force and effect; (b)&nbsp;the date of each lessee&#146;s
most recent payment of rent; (c)&nbsp;that there are no defenses or offsets outstanding, or stating
those claimed by Mortgagor or lessees under the foregoing assignment or the Leases, as the case may
be; and (d)&nbsp;any other information reasonably requested by Mortgagee.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.1 </B><U><B>SECURITY INTEREST</B></U>. Mortgagor hereby grants and assigns to Mortgagee as of the
&#147;Closing Date&#148; (defined in the Credit Agreement) a security interest, to secure payment and
performance of all of the Secured Obligations, in all of the following described personal property
in which Mortgagor now or at any time hereafter has any interest (collectively, the &#147;Collateral&#148;):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;All goods, building and other materials, supplies, inventory, work in process, equipment,
machinery, fixtures, furniture, furnishings, signs and other personal property and embedded
software included therein and supporting information, wherever situated, which are or are to be
incorporated into, used in connection with, or appropriated for use on (i)&nbsp;the real
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">property
described on <U>Exhibit&nbsp;A</U> attached hereto and incorporated by reference herein or (ii)&nbsp;any
existing or future improvements on the real property (which real property and improvements are
collectively referred to herein as the &#147;Subject Property&#148;); together with all rents and security
deposits derived from the Subject Property; all inventory, accounts, cash receipts, deposit
accounts, accounts receivable, contract rights, licenses, agreements, general intangibles, payment
intangibles, software, chattel paper (whether electronic or tangible), instruments, documents,
promissory notes, drafts, letters of credit, letter of credit rights, supporting obligations,
insurance policies, insurance and condemnation awards and proceeds, proceeds of the sale of
promissory notes, any other rights to the payment of money, trade names, trademarks and service
marks arising from or related to the ownership, management, leasing, operation, sale or disposition
of the Subject Property or any business now or hereafter conducted thereon by Mortgagor; all
development rights and credits, and any and all permits, consents, approvals, licenses,
authorizations and other rights granted by, given by or obtained from, any governmental entity with
respect to the Subject Property; all water and water rights, wells and well rights, canals and
canal rights, ditches and ditch rights, springs and spring rights, and reservoirs and reservoir
rights appurtenant to or associated with the Subject Property, whether decreed or undecreed,
tributary, non-tributary or not non-tributary, surface or underground or appropriated or
unappropriated, and all shares of stock in water, ditch, lateral and canal companies, well permits
and all other evidences of any of such rights; all deposits or other security now or hereafter made
with or given to utility companies by Mortgagor with respect to the Subject Property; all advance
payments of insurance premiums made by Mortgagor with respect to the Subject Property; all plans,
drawings and specifications relating to the Subject Property; all loan funds held by Mortgagee,
whether or not disbursed; all funds deposited with Mortgagee pursuant to any loan agreement; all
reserves, deferred payments, deposits, accounts, refunds, cost savings and payments of any kind
related to the Subject Property or any portion thereof; together with all
replacements and proceeds of, and additions and accessions to, any of the foregoing; together
with all books, records and files relating to any of the foregoing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;As to all of the above described personal property which is or which hereafter becomes a
&#147;fixture&#148; under applicable law, this Mortgage constitutes a fixture filing under the Arkansas
Uniform Commercial Code, as amended or recodified from time to time (&#147;UCC&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.2 </B><U><B>REPRESENTATIONS AND WARRANTIES</B></U>. Mortgagor represents and warrants that: (a)
Mortgagor has, or will have, good title to the Collateral; (b)&nbsp;Mortgagor has not previously
assigned or encumbered the Collateral, and no financing statement covering any of the Collateral
has been delivered to any other person or entity; (c)&nbsp;Mortgagor&#146;s principal place of business is
located at the address shown in Section&nbsp;7.10; and (d)&nbsp;Mortgagor&#146;s legal name is exactly as set
forth on the first page of this Mortgage and all of Mortgagor&#146;s organizational documents or
agreements delivered to Mortgagee are complete and accurate in every respect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.3 </B><U><B>COVENANTS</B></U>. Mortgagor agrees: (a)&nbsp;to execute and deliver such documents as
Mortgagee deems necessary to create, perfect and continue the security interests contemplated
hereby; (b)&nbsp;not to change its name, and as applicable, its chief executive office, its principal
residence or the jurisdiction in which it is organized and/or registered without giving Mortgagee
prior written notice thereof; (c)&nbsp;to cooperate with Mortgagee in perfecting all security interests
granted herein and in obtaining such agreements from third parties as Mortgagee deems
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">necessary,
proper or convenient in connection with the preservation, perfection or enforcement of any of its
rights hereunder; and (d)&nbsp;that Mortgagee is authorized to file financing statements in the name of
Mortgagor to perfect Mortgagee&#146;s security interest in Collateral.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.4 </B><U><B>RIGHTS OF MORTGAGEE</B></U>. In addition to Mortgagee&#146;s rights as a &#147;Secured Party&#148; under
the UCC, Mortgagee may, but shall not be obligated to, at any time without notice and at the
expense of Mortgagor: (a)&nbsp;give notice to any person of Mortgagee&#146;s rights hereunder and enforce
such rights at law or in equity; (b)&nbsp;insure, protect, defend and preserve the Collateral or any
rights or interests of Mortgagee therein; (c)&nbsp;inspect the Collateral; and (d)&nbsp;endorse, collect and
receive any right to payment of money owing to Mortgagor under or from the Collateral.
Notwithstanding the above, in no event shall Mortgagee be deemed to have accepted any property
other than cash in satisfaction of any obligation of Mortgagor to Mortgagee unless Mortgagee shall
make an express written election of said remedy under UCC &#167; 9-620, or other applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.5 </B><U><B>RIGHTS OF MORTGAGEE ON DEFAULT</B></U>. Upon the occurrence of a Default (hereinafter
defined) under this Mortgage, then in addition to all of Mortgagee&#146;s rights as a &#147;Secured Party&#148;
under the UCC or otherwise at law:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Mortgagee may (i)&nbsp;upon written notice, require Mortgagor to assemble any or all of the
Collateral and make it available to Mortgagee at a place designated by Mortgagee; (ii)&nbsp;without
prior notice, enter upon the Subject Property or other place where any of the Collateral may be
located and take possession of, collect, sell, lease, license and dispose of any or all of the
Collateral, and store the same at locations acceptable to Mortgagee at Mortgagor&#146;s expense; (iii)
sell, assign and deliver at any place or in any lawful manner all or any part of the Collateral and
bid and become the purchaser at any such sales;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Mortgagee may, for the account of Mortgagor and at Mortgagor&#146;s expense: (i)&nbsp;operate, use,
consume, sell, lease, license or dispose of the Collateral as Mortgagee deems appropriate for the
purpose of performing any or all of the Secured Obligations; (ii)&nbsp;enter into any agreement,
compromise, or settlement, including insurance claims, which Mortgagee may deem desirable or proper
with respect to any of the Collateral; and (iii)&nbsp;endorse and deliver evidences of title for, and
receive, enforce and collect by legal action or otherwise, all indebtedness and obligations now or
hereafter owing to Mortgagor in connection with or on account of any or all of the Collateral; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;In disposing of Collateral hereunder, Mortgagee may disclaim all warranties of title,
possession, quiet enjoyment and the like. Any proceeds of any disposition of any Collateral may be
applied by Mortgagee to the payment of expenses incurred by Mortgagee in connection with the
foregoing, including reasonable attorneys&#146; fees, and the balance of such proceeds may be applied by
Mortgagee toward the payment of the Secured Obligations in such order of application as Mortgagee
may from time to time elect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Notwithstanding any other provision hereof, Mortgagee shall not be deemed to have accepted
any property other than cash in satisfaction of any obligation of Mortgagor to Mortgagee unless
Mortgagor shall make an express written election of said remedy
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">under UCC &#167; 9-620, or other applicable law. Mortgagor agrees that Mortgagee shall have no obligation to process or prepare any
Collateral for sale or other disposition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.6 </B><U><B>POWER OF ATTORNEY</B></U>. Mortgagor hereby irrevocably appoints Mortgagee as Mortgagor&#146;s
attorney-in-fact (such agency being coupled with an interest), and as such attorney-in-fact
Mortgagee may, without the obligation to do so, in Mortgagee&#146;s name, or in the name of Mortgagor,
prepare, execute and file or record financing statements, continuation statements, applications for
registration and like papers necessary to create, perfect or preserve any of Mortgagee&#146;s security
interests and rights in or to any of the Collateral, and, upon a Default hereunder, take any other
action required of Mortgagor; provided, however, that Mortgagee as such attorney-in-fact shall be
accountable only for such funds as are actually received by Mortgagee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.7 </B><U><B>POSSESSION AND USE OF COLLATERAL</B></U>. Except as otherwise provided in this Section or
the other Loan Documents (as defined in the Credit Agreement), so long as no Default exists under
this Mortgage or any of the Loan Documents, Mortgagor may possess, use, move, transfer or dispose
of any of the Collateral in the ordinary course of Mortgagor&#146;s business and in accordance with the
Credit Agreement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.1 </B><U><B>TITLE</B></U>. Mortgagor represents and warrants that, except as disclosed to Mortgagee
in a writing which refers to this warranty, Mortgagor lawfully holds and possesses fee simple title
to the Subject Property without limitation on the right to encumber, and that this Mortgage is a
first and prior lien on the Subject Property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.2 </B><U><B>TAXES AND ASSESSMENTS</B></U>. Subject to Mortgagor&#146;s rights to contest payment of taxes
as may be provided in the Credit Agreement, Mortgagor shall pay prior to delinquency all taxes,
assessments, levies and charges imposed by any public or quasi-public authority or utility company
which are or which may become a lien upon or cause a loss in value of the Subject Property or any
interest therein. Mortgagor shall also pay prior to delinquency all taxes, assessments, levies and
charges imposed by any public authority upon Mortgagee by reason of its interest in any Secured
Obligation or in the Subject Property, or by reason of any payment made to Mortgagee pursuant to
any Secured Obligation; provided, however, Mortgagor shall have no obligation to pay taxes which
may be imposed from time to time upon Mortgagee and which are measured by and imposed upon
Mortgagee&#146;s net income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.3 </B><U><B>TAX AND INSURANCE IMPOUNDS</B></U>. At any time following the occurrence of a Default, at
Mortgagee&#146;s option and upon its demand, Mortgagor, shall, until all Secured Obligations have been
paid in full, pay to Mortgagee monthly, annually or as otherwise directed by Mortgagee an amount
estimated by Mortgagee to be equal to: (a)&nbsp;all taxes, assessments, levies and charges imposed by
any public or quasi-public authority or utility company which are or may become a lien upon the
Subject Property or Collateral and will become due for the tax year during which such payment is so
directed; and (b)&nbsp;premiums for fire, hazard and insurance required or requested pursuant to the
Loan Documents when same are next due. If Mortgagee determines that any amounts paid by Mortgagor
are insufficient for the payment in full of such taxes, assessments, levies, charges and/or
insurance premiums, Mortgagee shall notify
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Mortgagor of the increased amounts required to pay all
amounts when due, whereupon Mortgagor shall pay to Mortgagee within thirty (30)&nbsp;days thereafter the
additional amount as stated in Mortgagee&#146;s notice. All sums so paid shall not bear interest,
except to the extent and in any minimum amount required by law; and Mortgagee shall, unless
Mortgagor is otherwise in Default hereunder or under any Loan Document, apply said funds to the
payment of, or at the sole option of Mortgagee release said funds to Mortgagor for the application
to and payment of, such sums, taxes, assessments, levies, charges, and insurance premiums. Upon
Default by Mortgagor hereunder or under any Secured Obligation, Mortgagee may apply all or any part
of said sums to any Secured Obligation and/or to cure such Default, in which event Mortgagor shall
be required to restore all amounts so applied, as well as to cure any other events or conditions of
Default not cured by such application. Upon assignment of this Mortgage, Mortgagee shall have the
right to assign all amounts collected and in its possession to its assignee whereupon Mortgagee
shall be released from all liability with respect thereto. Within ninety-five (95)&nbsp;days following
full repayment of the Secured
Obligations (other than full repayment of the Secured Obligations as a consequence of a
foreclosure or conveyance in lieu of foreclosure of the liens and security interests securing the
Secured Obligations) or at such earlier time as Mortgagee may elect, the balance of all amounts
collected and in Mortgagee&#146;s possession shall be paid to Mortgagor and no other party shall have
any right or claim thereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.4 </B><U><B>PERFORMANCE OF SECURED OBLIGATIONS</B></U>. Mortgagor shall promptly pay and perform each
Secured Obligation when due.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.5 </B><U><B>LIENS, ENCUMBRANCES AND CHARGES</B></U>. Mortgagor shall immediately discharge any lien
not approved by Mortgagee in writing that has or may attain priority over this Mortgage. Subject
to the provisions of the Credit Agreement regarding mechanics&#146; liens, Mortgagor shall pay when due
all obligations secured by or which may become liens and encumbrances which shall now or hereafter
encumber or appear to encumber all or any part of the Subject Property or Collateral, or any
interest therein, whether senior or subordinate hereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.6 </B><U><B>DAMAGES; INSURANCE AND CONDEMNATION PROCEEDS</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The following (whether now existing or hereafter arising) are all absolutely and
irrevocably assigned by Mortgagor to Mortgagee and, at the request of Mortgagee, shall be paid
directly to Mortgagee: (i)&nbsp;all awards of damages and all other compensation payable directly or
indirectly by reason of a condemnation or proposed condemnation for public or private use affecting
all or any part of, or any interest in, the Subject Property or Collateral; (ii)&nbsp;all other claims
and awards for damages to, or decrease in value of, all or any part of, or any interest in, the
Subject Property or Collateral; (iii)&nbsp;all proceeds of any insurance policies (whether or not
expressly required by Mortgagee to be maintained by Mortgagor, including, but not limited to,
earthquake insurance and terrorism insurance, if any) payable by reason of loss sustained to all or
any part of the Subject Property or Collateral; and (iv)&nbsp;all interest which may accrue on any of
the foregoing. Subject to applicable law, and without regard to any requirement contained in
Section&nbsp;5.7(d), Mortgagee may at its discretion apply all or any of the proceeds it receives to its
expenses in settling, prosecuting or defending any claim and may apply the balance to the Secured
Obligations in any order acceptable to Mortgagee, and/or Mortgagee may release all or any part of
the proceeds to Mortgagor upon any conditions Mortgagee may impose. Mortgagee may commence, appear
in, defend or prosecute
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">any assigned claim or action and may adjust, compromise, settle and collect
all claims and awards assigned to Mortgagee; <U>provided</U>, <U>however</U>, in no event shall
Mortgagee be responsible for any failure to collect any claim or award, regardless of the cause of
the failure, including, without limitation, any malfeasance or nonfeasance by Mortgagee or its
employees or agents.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;At its sole option, Mortgagee may permit insurance or condemnation proceeds held by
Mortgagee to be used for repair or restoration but may condition such application upon reasonable
conditions, including, without limitation: (i)&nbsp;the deposit with Mortgagee of such additional funds
which Mortgagee determines are needed to pay all costs of
the repair or restoration, (including, without limitation, taxes, financing charges, insurance
and rent during the repair period); (ii)&nbsp;the establishment of an arrangement for lien releases and
disbursement of funds acceptable to Mortgagee; (iii)&nbsp;the delivery to Mortgagee of plans and
specifications for the work, a contract for the work signed by a contractor acceptable to
Mortgagee, a cost breakdown for the work and a payment and performance bond for the work, all of
which shall be acceptable to Mortgagee; and (iv)&nbsp;the delivery to Mortgagee of evidence acceptable
to Mortgagee (aa)&nbsp;that after completion of the work the income from the Subject Property will be
sufficient to pay all expenses and debt service for the Subject Property; (bb)&nbsp;of the continuation
of Leases acceptable to and required by Mortgagee; (cc)&nbsp;that upon completion of the work, the size,
capacity and total value of the Subject Property will be at least as great as it was before the
damage or condemnation occurred; (dd)&nbsp;that there has been no material adverse change in the
financial condition or credit of Mortgagor since the date of this Mortgage; and (ee)&nbsp;of the
satisfaction of any additional conditions that Mortgagee may reasonably establish to protect its
security. Mortgagor hereby acknowledges that the conditions described above are reasonable, and,
if such conditions have not been satisfied within thirty (30)&nbsp;days of receipt by Mortgagee of such
insurance or condemnation proceeds, then Mortgagee may apply such insurance or condemnation
proceeds to pay the Secured Obligations in such order and amounts as Mortgagee in its sole
discretion may choose.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.7 </B><U><B>INSURANCE, MAINTENANCE AND PRESERVATION OF THE SUBJECT PROPERTY</B></U>. Subject to the
provisions of the Credit Agreement, while any obligation of Mortgagor or any guarantor under any
Loan Document remains outstanding, Mortgagor covenants:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;to maintain at Mortgagor&#146;s sole expense, with licensed insurers approved by Mortgagee, the
following policies of insurance in form and substance satisfactory to Mortgagee, with Mortgagee
named as first mortgagee on all such policies: (i)&nbsp;title insurance (including a Title Policy,
together with any endorsements which Mortgagee may require, insuring Mortgagee in the principal
amount of the Notes), (ii)&nbsp;property insurance (including, without limitation, such endorsements as
Mortgagee may require, insuring Mortgagee against damage to the Subject Property in an amount
acceptable to Mortgagee, with Mortgagee named on the policy under a Lender&#146;s Loss Payable
Endorsement), (iii)&nbsp;flood hazard insurance, as required by applicable governmental regulations, or
as deemed necessary by Mortgagee, (iv)&nbsp;liability insurance (including a policy of comprehensive
general liability insurance) with limits as required by Mortgagee, insuring against liability for
injury and/or death to any person and/or damage to any property occurring on the Subject Property
and/or from any cause whatsoever. Mortgagor shall provide to Mortgagee the originals of all
required insurance policies, or other evidence of insurance acceptable to Mortgagee. All insurance
policies shall provide that the
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">insurance shall not be cancelable or materially changed without
thirty (30)&nbsp;days&#146; prior written notice to Mortgagee. Mortgagee shall be named under a Lender&#146;s
Loss Payable Endorsement (form #438BFU or equivalent) on all insurance policies which Mortgagor
actually maintains with respect to the Property. Mortgagor shall provide to Mortgagee evidence of
any other hazard insurance Mortgagee may deem necessary at any time during the loan secured by this
Mortgage;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;to keep the Subject Property and Collateral in good condition and repair;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;not to remove or demolish the Subject Property or Collateral or any part thereof, not to
alter, restore or add to the Subject Property or Collateral (except in the ordinary course of
business) and not to initiate or acquiesce in any change in any zoning or other land classification
which affects the Subject Property without the Mortgagee&#146;s prior written consent;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;in the event of any damage or other casualty relating to the Subject Property or the
Collateral and so long as Mortgagee has released any insurance claim proceeds relating thereto in
accordance with Section&nbsp;5.6 hereof, to complete or restore promptly and in good and workmanlike
manner the Subject Property and Collateral, or any part thereof which may be damaged or destroyed;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;to comply with all laws, ordinances, regulations and standards, and all covenants,
conditions, restrictions and equitable servitudes, whether public or private, of every kind and
character which affect the Subject Property or Collateral and pertain to acts committed or
conditions existing thereon, including, without limitation, any work, alteration, improvement or
demolition mandated by such laws, covenants or requirements;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;not to commit or permit waste of the Subject Property or Collateral; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;to do all other acts which from the character or use of the Subject Property or Collateral
may be reasonably necessary to maintain and preserve its value.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.8 </B><U><B>INTENTIONALLY OMITTED</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.9 </B><U><B>APPROVAL OF LEASES</B></U>. All leases of all or any part of the Subject Property shall:
(a)&nbsp;be upon terms and with tenants approved by Mortgagee prior to Mortgagor&#146;s execution of any such
lease; and (b)&nbsp;include estoppel, subordination, attornment and mortgagee protection provisions
satisfactory to Mortgagee. All standard lease forms and any material deviation from any form,
shall be approved by Mortgagee prior to execution of any lease using such form.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.10 </B><U><B>DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS</B></U>. At Mortgagor&#146;s sole expense,
Mortgagor shall protect, preserve and defend the Subject Property and Collateral and title to and
right of possession of the Subject Property and Collateral, the security hereof and the rights and
powers of Mortgagee hereunder against all adverse claims. Mortgagor shall give Mortgagee prompt
notice in writing of the assertion of any claim, of the filing of any action or proceeding, of the
occurrence of any damage to the Subject Property or Collateral and of any condemnation offer or
action.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.11 </B><U><B>CERTAIN POWERS OF MORTGAGEE</B></U>.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;From time to time and without affecting the personal liability of any person for payment
of any indebtedness or performance of any obligations secured hereby, Mortgagee may, without
liability therefor and without notice: (a)&nbsp;release from the lien of this Mortgage all or any part
of the Subject Property; (b)&nbsp;consent to the making of any map or plat thereof; and (c)&nbsp;join in any
grant of easement thereon, any declaration of covenants and restrictions, or any extension
agreement or any agreement subordinating the lien or charge of this Mortgage.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Except as may be required by applicable law, Mortgagee may from time to time apply to any
court of competent jurisdiction for aid and direction in the enforcement of the rights and remedies
available hereunder, and may obtain orders or decrees directing or confirming or approving the
enforcement of said remedies.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.12 </B><U><B>COMPENSATION; EXCULPATION; INDEMNIFICATION</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Mortgagor shall pay to Mortgagee reasonable compensation for services rendered concerning
this Mortgage, including without limit any statement of amounts owing under any Secured Obligation.
Mortgagee shall not directly or indirectly be liable to Mortgagor or any other person as a
consequence of (i)&nbsp;the exercise of the rights, remedies or powers granted to Mortgagee in this
Mortgage; (ii)&nbsp;the failure or refusal of Mortgagee to perform or discharge any obligation or
liability of Mortgagor under any agreement related to the Subject Property or Collateral or under
this Mortgage; or (iii)&nbsp;any loss sustained by Mortgagor or any third party resulting from
Mortgagee&#146;s failure (whether by malfeasance, nonfeasance or refusal to act) to lease the Subject
Property after a Default (hereinafter defined) or from any other act or omission (regardless of
whether same constitutes negligence) of Mortgagee in managing the Subject Property after a Default
unless the loss is caused by the gross negligence or willful misconduct of Mortgagee and no such
liability shall be asserted against or imposed upon Mortgagee, and all such liability is hereby
expressly waived and released by Mortgagor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(b)&nbsp;MORTGAGOR INDEMNIFIES MORTGAGEE AGAINST, AND HOLDS MORTGAGEE HARMLESS FROM, ALL LOSSES,
DAMAGES, LIABILITIES, CLAIMS, CAUSES OF ACTION, JUDGMENTS, COURT COSTS, ATTORNEYS&#146; FEES AND OTHER
LEGAL EXPENSES, COST OF EVIDENCE OF TITLE, COST OF EVIDENCE OF VALUE, AND OTHER EXPENSES WHICH IT
MAY SUFFER OR INCUR: (i)&nbsp;BY REASON OF THIS MORTGAGE; (ii)&nbsp;BY REASON OF THE EXECUTION OF THIS
MORTGAGE OR IN PERFORMANCE OF ANY ACT REQUIRED OR PERMITTED HEREUNDER OR BY LAW; (iii)&nbsp;AS A RESULT
OF ANY FAILURE OF MORTGAGOR TO PERFORM MORTGAGOR&#146;S OBLIGATIONS; OR (iv)&nbsp;BY REASON OF ANY ALLEGED
OBLIGATION OR UNDERTAKING ON MORTGAGEE&#146;S PART TO PERFORM OR DISCHARGE ANY OF THE REPRESENTATIONS,
WARRANTIES, CONDITIONS, COVENANTS OR OTHER OBLIGATIONS CONTAINED IN ANY OTHER DOCUMENT RELATED TO
THE SUBJECT PROPERTY. THE ABOVE OBLIGATION OF MORTGAGOR TO INDEMNIFY AND HOLD HARMLESS MORTGAGEE
SHALL SURVIVE THE
RELEASE AND CANCELLATION OF THE SECURED OBLIGATIONS AND THE RELEASE OR PARTIAL RELEASE OF THIS
MORTGAGE.</B>
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Mortgagor shall pay all amounts and indebtedness arising under this Section&nbsp;5.12
immediately upon demand by Mortgagee together with interest thereon from the date the indebtedness
arises at the rate of interest then applicable to the principal balance of the Notes as specified
therein.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.13 </B><U><B>INTENTIONALLY OMITTED</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.14 </B><U><B>DUE ON SALE OR ENCUMBRANCE</B></U>. If the Subject Property or any interest therein
shall be sold, transferred (including, without limitation, through sale or transfer of a majority
or controlling interest of the corporate stock or general partnership interests or limited
liability company interests of Mortgagor), mortgaged, assigned, further encumbered or leased,
whether directly or indirectly, whether voluntarily, involuntarily or by operation of law, without
the prior written consent of Mortgagee, THEN Mortgagee, in its sole discretion, may declare all
Secured Obligations immediately due and payable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.15 </B><U><B>RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY</B></U>. Without notice to
or the consent, approval or agreement of any persons or entities having any interest at any time in
the Subject Property and Collateral or in any manner obligated under the Secured Obligations
(&#147;Interested Parties&#148;), Mortgagee may, from time to time, release any person or entity from
liability for the payment or performance of any Secured Obligation, take any action or make any
agreement extending the maturity or otherwise altering the terms or increasing the amount of any
Secured Obligation, or accept additional security or release all or a portion of the Subject
Property and Collateral and other security for the Secured Obligations. None of the foregoing
actions shall release or reduce the personal liability of any of said Interested Parties, or
release or impair the priority of the lien of and security interests created by this Mortgage upon
the Subject Property and Collateral.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.16 </B><U><B>INTENTIONALLY OMITTED</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.17 </B><U><B>SUBROGATION</B></U>. Mortgagee shall be subrogated to the lien of all encumbrances,
whether released of record or not, paid in whole or in part by Mortgagee pursuant to the Loan
Documents or by the proceeds of any loan secured by this Mortgage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.18 </B><U><B>RIGHT OF INSPECTION</B></U>. Mortgagee, its agents and employees, may enter the Subject Property at any reasonable time
for the purpose of inspecting the Subject Property and Collateral and ascertaining Mortgagor&#146;s
compliance with the terms hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.19 </B><U><B>INTENTIONALLY OMITTED</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.20 </B><U><B>HAZARDOUS MATERIALS</B></U>. Mortgagor agrees as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U><B>No Hazardous Activities</B></U>. Mortgagor shall not cause or permit the Subject Property
to be used as a site for the use, generation, manufacture, storage, treatment, release, discharge,
disposal, transportation or presence of any &#147;hazardous substances,&#148; &#147;hazardous wastes,&#148; &#147;hazardous
materials,&#148; &#147;toxic substances,&#148; &#147;wastes,&#148; &#147;regulated substances,&#148; &#147;industrial solid wastes,&#148; or
&#147;pollutants&#148; under the Hazardous Materials Laws, as described below, and/or other applicable
environmental laws, ordinances and regulations (collectively, the &#147;Hazardous Materials&#148;).
&#147;Hazardous Materials&#148; shall not include commercially reasonable
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">amounts of such materials used in
the ordinary course of operation of the Property which are used and stored in accordance with all
applicable environmental laws, ordinances and regulations. &#147;Hazardous Materials Laws&#148; are defined
as laws, ordinances and regulations relating to Hazardous Materials, including, without limitation:
the Clean Air Act, as amended, 42 U.S.C. Section&nbsp;7401 <U>et seq</U>.; the Federal Water Pollution
Control Act, as amended, 33 U.S.C. Section&nbsp;1251 <U>et seq</U>.; the Resource Conservation and
Recovery Act of 1976, as amended, 42 U.S.C. Section&nbsp;6901 <U>et seq</U>.; the Comprehensive
Environment Response, Compensation and Liability Act of 1980, as amended (including the Superfund
Amendments and Reauthorization Act of 1986, &#147;CERCLA&#148;), 42 U.S.C. Section&nbsp;9601 <U>et seq</U>.; the
Toxic Substances Control Act, as amended, 15 U.S.C. Section&nbsp;2601 <U>et seq</U>.; the Occupational
Safety and Health Act, as amended, 29 U.S.C. Section&nbsp;651, the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. Section&nbsp;11001 <U>et seq</U>.; the Mine Safety and Health Act
of 1977, as amended, 30 U.S.C. Section&nbsp;801 <U>et seq</U>.; the Safe Drinking Water Act, as
amended, 42 U.S.C. Section&nbsp;300f <U>et seq</U>.; and all comparable state and local laws, laws of
other jurisdictions or orders and regulations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U><B>Compliance</B></U>. Mortgagor shall comply and cause the Subject Property to comply with
all Hazardous Materials Laws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <U><B>Notices</B></U>. Mortgagor shall immediately notify Mortgagee in writing of: (i)&nbsp;the
discovery of any Hazardous Materials on, under or about the Property; (ii)&nbsp;any knowledge by
Mortgagor that the Property does not comply with any Hazardous Materials Laws; and (iii)&nbsp;any claims
or actions (&#147;Hazardous Materials Claims&#148;) pending or threatened against Mortgagor or the Property
by any
governmental entity or agency or by any other person or entity relating to Hazardous Materials
or pursuant to the Hazardous Materials Laws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <U><B>Remedial Action</B></U>. In response to the presence of any Hazardous Materials on, under
or about the Property, Mortgagor shall immediately take, at Mortgagor&#146;s sole expense, all remedial
action required by any Hazardous Materials Laws or any judgment, consent decree, settlement or
compromise in respect to any Hazardous Materials Claims.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.21 </B><U><B>HAZARDOUS MATERIALS INDEMNITY</B></U><B>. MORTGAGOR HEREBY AGREES TO DEFEND, INDEMNIFY AND
HOLD HARMLESS MORTGAGEE, ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS FROM
AND AGAINST ANY AND ALL LOSSES, DAMAGES, LIABILITIES, CLAIMS, ACTIONS, JUDGMENTS, COURT COSTS AND
LEGAL OR OTHER EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS&#146; FEES AND EXPENSES) WHICH
MORTGAGEE MAY INCUR AS A DIRECT OR INDIRECT CONSEQUENCE OF THE USE, GENERATION, MANUFACTURE,
STORAGE, DISPOSAL, THREATENED DISPOSAL, TRANSPORTATION OR PRESENCE OF HAZARDOUS MATERIALS IN, ON,
UNDER OR ABOUT THE PROPERTY. MORTGAGOR SHALL IMMEDIATELY PAY TO MORTGAGEE UPON DEMAND ANY AMOUNTS
OWING UNDER THIS INDEMNITY, TOGETHER WITH INTEREST FROM THE DATE THE INDEBTEDNESS ARISES UNTIL PAID
AT THE RATE OF INTEREST APPLICABLE TO THE PRINCIPAL BALANCE OF THE NOTES. MORTGAGOR&#146;S DUTY AND
OBLIGATIONS TO DEFEND, INDEMNIFY AND HOLD HARMLESS MORTGAGEE SHALL SURVIVE THE CANCELLATION OF THE
NOTES AND THE RELEASE, OR PARTIAL RELEASE OF THIS MORTGAGE.</B>
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.22 </B><U><B>LEGAL EFFECT OF SECTION</B></U>. Mortgagor and Mortgagee agree that Mortgagor&#146;s duty to
indemnify Mortgagee hereunder shall survive: (a)&nbsp;any judicial or non-judicial foreclosure under
this Mortgage, or transfer of the Subject Property in lieu thereof, (b)&nbsp;the release or cancellation
of this Mortgage; and (c)&nbsp;the satisfaction of all of Mortgagor&#146;s obligation under the Loan
Documents.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 6. DEFAULT PROVISIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.1 </B><U><B>DEFAULT</B></U>. For all purposes hereof, the term &#147;Default&#148; shall mean (a)&nbsp;at
Mortgagee&#146;s option, the failure of Mortgagor to make any payment of principal or interest on the
Notes or to pay any other amount due hereunder or under the Notes when the same is due and payable,
whether at maturity, by acceleration or otherwise; (b)&nbsp;the failure of Mortgagor to perform any
non-monetary obligation hereunder, or the failure to be true of any representation or warranty of
Mortgagor contained herein and the continuance of such failure for ten (10)&nbsp;days after notice, or
within any longer grace period, if any, allowed in the Credit Agreement for such failure, (c)&nbsp;the
condemnation, seizure or appropriation of, or occurrence of an uninsured casualty with respect
to any material portion of the Subject Property; (d)&nbsp;the sequestration or attachment of, or any
levy or execution upon any of the Subject Property, which sequestration, attachment, levy or
execution is not released, expunged or dismissed prior to the earlier of thirty (30)&nbsp;days or the
sale of the assets affected thereby; (e)&nbsp;the failure at any time of this Mortgage to be a valid
first lien upon the Subject Property or any portion thereof, other than as a result of any release
of the Mortgage with respect to all or any portion of the Subject Property pursuant to the terms
and conditions of the Credit Agreement; (f)&nbsp;the discovery of any Hazardous Materials, which in
Mortgagee&#146;s sole discretion, have a materially adverse impact on the value of the Subject Property,
in, on or about the Subject Property subsequent to the Closing Date, as defined in the Credit
Agreement; or (g)&nbsp;the existence of any Default as defined in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.2 </B><U><B>RIGHTS AND REMEDIES</B></U>. At any time after Default, Mortgagee shall have all the
following rights and remedies:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;With or without notice, to declare all Secured Obligations immediately due and payable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;With or without notice, and without releasing Mortgagor from any Secured Obligation, and
without becoming a mortgagee in possession, to cure any breach or Default of Mortgagor and, in
connection therewith, to enter upon the Subject Property and do such acts and things as Mortgagee
deems necessary or desirable to protect the security hereof, including, without limitation: (i)&nbsp;to
appear in and defend any action or proceeding purporting to affect the security of this Mortgage or
the rights or powers of Mortgagee under this Mortgage; (ii)&nbsp;to pay, purchase, contest or compromise
any encumbrance, charge, lien or claim of lien which, in the sole judgment of Mortgagee, is or may
be senior in priority to this Mortgage, the judgment of Mortgagee being conclusive as between the
parties hereto; (iii)&nbsp;to obtain insurance; (iv)&nbsp;to pay any premiums or charges with respect to
insurance required to be carried under this Mortgage; or (v)&nbsp;to employ counsel, accountants,
contractors and other appropriate persons.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;To commence and maintain an action or actions in any court of competent jurisdiction to
foreclose this instrument as a mortgage or to obtain specific enforcement of the
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">covenants of
Mortgagor hereunder, and Mortgagor agrees that such covenants shall be specifically enforceable by
injunction or any other appropriate equitable remedy and that for the purposes of any suit brought
under this subparagraph, Mortgagor waives the defense of laches and any applicable statute of
limitations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;To the fullest extent permitted by law, to seek non-judicial foreclosure pursuant to Ark.
Code Ann. Section&nbsp;18-50-101, <I>et seq</I>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;To apply to a court of competent jurisdiction for and obtain appointment of a receiver of
the Subject Property as a matter of strict right and without regard to the adequacy of the security
for the repayment of the Secured Obligations, the existence of a declaration that the Secured
Obligations are immediately due and payable, or the filing of a notice of default, and Mortgagor
hereby consents to such appointment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;To enter upon, possess, manage and operate the Subject Property or any part thereof, to
take and possess all documents, books, records, papers and accounts of Mortgagor or the then owner
of the Subject Property, to make, terminate, enforce or modify Leases of the Subject Property upon
such terms and conditions as Mortgagee deems proper, to make repairs, alterations and improvements
to the Subject Property as necessary, in Mortgagee&#146;s sole judgment, to protect or enhance the
security hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;To give such notice of such Default and of its election to cause the Subject Property to
be sold as may be required by law or as may be necessary to cause the Mortgagee to exercise the
power of sale granted herein. As a condition precedent to any such sale, Mortgagee shall give and
record such notice as the law then requires. When the minimum period of time required by law after
such notice has elapsed, Mortgagee, without notice to or demand upon Mortgagor except as required
by law, shall sell the Subject Property at the time and place of sale fixed by it in the notice of
sale, at one or several sales, either as a whole or in separate parcels and in such manner and
order, as deemed advisable by Mortgagee, or by Mortgagor to the extent required by law, at public
auction to the highest bidder for cash, in lawful money of the United States, payable at time of
sale. Except as required by law, neither Mortgagor nor any other person or entity other than
Mortgagee shall have the right to direct the order in which the Subject Property is sold. Subject
to requirements and limits imposed by law, Mortgagee may from time to time postpone sale of all or
any portion of the Subject Property by public announcement at such time and place of sale.
Mortgagee shall deliver to the purchaser at such sale a deed conveying the Subject Property or
portion thereof so sold, but without any covenant or warranty, express or implied. The recitals in
the deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any
person, including Mortgagor or Mortgagee may purchase at the sale. Mortgagor hereby expressly
waives any right of redemption, including any rights under the Act passed by the Arkansas General
Assembly on May&nbsp;8, 1899, and all acts amendatory or in replacement thereof or supplemental thereto.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;To resort to and realize upon the security hereunder and any other security now or later
held by Mortgagee concurrently or successively and in one or several consolidated or independent
judicial actions or lawfully taken non-judicial proceedings, or both, and to apply the proceeds
received upon the Secured Obligations all in such order and manner as Mortgagee determines in its
sole discretion.
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;Upon sale of the Subject Property at any judicial or non-judicial foreclosure, Mortgagee
may credit bid (as determined by Mortgagee in its sole and absolute discretion) all or any portion
of the Secured Obligations. In determining such credit bid, Mortgagee may, but is not obligated
to, take into account all or any of the following: (i)&nbsp;appraisals of the Subject Property as such
appraisals may be discounted or adjusted by Mortgagee in its sole and absolute underwriting
discretion; (ii)&nbsp;expenses and costs incurred by Mortgagee with respect to the Subject Property
prior to foreclosure; (iii)&nbsp;expenses and costs which Mortgagee anticipates will be incurred with
respect to the Subject Property after foreclosure, but prior to resale, including, without
limitation, costs of structural reports and other due diligence, costs to carry the Subject
Property prior to resale, costs of resale (e.g. commissions, attorneys&#146; fees, and taxes), costs of
any hazardous materials clean-up and monitoring, costs of deferred maintenance, repair,
refurbishment and retrofit, costs of defending or settling litigation affecting the Subject
Property, and lost opportunity costs (if any), including
the time value of money during any anticipated holding period by Mortgagee; (iv)&nbsp;declining
trends in real property values generally and with respect to properties similar to the Subject
Property; (v)&nbsp;anticipated discounts upon resale of the Subject Property as a distressed or
foreclosed property; (vi)&nbsp;the fact of additional collateral (if any), for the Secured Obligations;
and (vii)&nbsp;such other factors or matters that Mortgagee (in its sole and absolute discretion) deems
appropriate. In regard to the above, Mortgagor acknowledges and agrees that: (w)&nbsp;Mortgagee is not
required to use any or all of the foregoing factors to determine the amount of its credit bid; (x)
this Section does not impose upon Mortgagee any additional obligations that are not imposed by law
at the time the credit bid is made; (y)&nbsp;the amount of Mortgagee&#146;s credit bid need not have any
relation to any loan-to-value ratios specified in the Loan Documents or previously discussed
between Mortgagor and Mortgagee; and (z)&nbsp;Mortgagee&#146;s credit bid may be (at Mortgagee&#146;s sole and
absolute discretion) higher or lower than any appraised value of the Subject Property.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;Upon the completion of any foreclosure sale of all or a portion of the Subject Property,
commence an action to recover any of the Secured Obligations that remains unpaid or unsatisfied.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.3 </B><U><B>APPLICATION OF FORECLOSURE SALE PROCEEDS</B></U>. Except as may be otherwise required by
applicable law, after deducting all costs, fees and expenses including, without limitation, cost of
evidence of title and attorneys&#146; fees in connection with sale and costs and expenses of sale and of
any judicial proceeding wherein such sale may be made, all proceeds of any foreclosure sale shall
be applied: (a)&nbsp;to payment of all sums expended by Mortgagee under the terms hereof and not then
repaid, with accrued interest at four percent (4%) above the Prime Rate in effect from time to
time; (b)&nbsp;to payment of all other Secured Obligations; and (c)&nbsp;the remainder, if any, to the person
or persons legally entitled thereto. As used herein, the term &#147;Prime Rate&#148; means at any time the
rate of interest most recently announced within Wells Fargo Bank, National Association (&#147;WFB&#148;) at
its principal office, as its Prime Rate, with the understanding that the Prime Rate is one of WFB&#146;s
base rates and serves as the basis upon which effective rates of interest are calculated for those
loans making reference thereto, and is evidenced by the recording thereof after its announcement in
such internal publication or publications as WFB may designate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.4 </B><U><B>APPLICATION OF OTHER SUMS</B></U>. All sums received by Mortgagee under Section&nbsp;6.2 or
Section&nbsp;3.2, less all costs and expenses incurred by Mortgagee or any receiver
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">under Section&nbsp;6.2 or
Section&nbsp;3.2, including, without limitation, attorneys&#146; fees, shall be applied in payment of the
Secured Obligations in such order as Mortgagee shall determine in its sole discretion; provided,
however, Mortgagee shall have no liability for funds not actually received by Mortgagee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.5 </B><U><B>NO CURE OR WAIVER</B></U>. Neither Mortgagee&#146;s nor any receiver&#146;s entry upon and taking
possession of all or any part of the Subject Property and Collateral, nor any collection of rents,
issues, profits, insurance proceeds, condemnation proceeds or damages, other security or proceeds
of other security, or other sums, nor the application of any collected sum to any Secured
Obligation, nor the exercise
or failure to exercise of any other right or remedy by Mortgagee or any receiver shall cure or
waive any breach, Default or notice of default under this Mortgage, or nullify the effect of any
notice of default or sale (unless all Secured Obligations then due have been paid and performed and
Mortgagor has cured all other defaults), or impair the status of the security, or prejudice
Mortgagee in the exercise of any right or remedy, or be construed as an affirmation by Mortgagee of
any tenancy, lease or option or a subordination of the lien of or security interests created by
this Mortgage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.6 </B><U><B>PAYMENT OF COSTS, EXPENSES AND ATTORNEYS&#146; FEES</B></U>. Mortgagor agrees to pay to
Mortgagee immediately and without demand all costs and expenses incurred by Mortgagee pursuant to
Section&nbsp;6.2 (including, without limitation, court costs and attorneys&#146; fees, whether incurred in
litigation or not) with interest from the date of expenditure until said sums have been paid at the
rate of interest then applicable to the principal balance of the Notes as specified therein. In
the event of any legal proceedings, court costs and attorneys&#146; fees shall be set by the court and
not by jury and shall be included in any judgment obtained by Mortgagee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.7 </B><U><B>POWER TO FILE NOTICES AND CURE DEFAULTS</B></U>. Mortgagor hereby irrevocably appoints
Mortgagee and its successors and assigns, as its attorney-in-fact, which agency is coupled with an
interest, (a)&nbsp;to execute and/or record any notices of completion, cessation of labor, or any other
notices that Mortgagee deems appropriate to protect Mortgagee&#146;s interest, (b)&nbsp;upon the issuance of
a deed pursuant to the foreclosure of the lien of this Mortgage or the delivery of a deed in lieu
of foreclosure, to execute all instruments of assignment or further assurance with respect to the
Subject Property and Collateral, Leases and Payments in favor of the grantee of any such deed, as
may be necessary or desirable for such purpose, (c)&nbsp;to prepare, execute and file or record
financing statements, continuation statements, applications for registration and like papers
necessary to create, perfect or preserve Mortgagee&#146;s security interests and rights in or to any of
the Subject Property and Collateral, and (d)&nbsp;upon the occurrence of an event, act or omission
which, with notice or passage of time or both, would constitute a Default, Mortgagee may perform
any obligation of Mortgagor hereunder; provided, however, that: (i)&nbsp;Mortgagee as such
attorney-in-fact shall only be accountable for such funds as are actually received by Mortgagee;
and (ii)&nbsp;Mortgagee shall not be liable to Mortgagor or any other person or entity for any failure
to act (whether such failure constitutes negligence) by Mortgagee under this Section.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.8 </B><U><B>REMEDIES CUMULATIVE</B></U>. All rights and remedies of Mortgagee provided hereunder are
cumulative and are in addition to all rights and remedies provided by applicable law (including
specifically that of foreclosure of this instrument as though it were a mortgage) or in any other
agreements between Mortgagor and Mortgagee. No failure on the part of Mortgagee
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->18<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">to exercise any of
its rights hereunder arising upon any Default shall be construed to prejudice its rights upon the
occurrence of any other or subsequent Default. No delay on the part of Mortgagee in exercising any
such rights shall be construed to preclude it from the exercise thereof at any time while that
Default is continuing. Mortgagee may enforce any one or more remedies or rights hereunder
successively
or concurrently. By accepting payment or performance of any of the Secured Obligations after
its due date, Mortgagee shall not thereby waive the agreement contained herein that time is of the
essence, nor shall Mortgagee waive either its right to require prompt payment or performance when
due of the reminder of the Secured Obligations or its right to consider the failure to so pay or
perform a Default.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 7. MISCELLANEOUS PROVISIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.1 </B><U><B>ADDITIONAL PROVISIONS</B></U>. The Loan Documents contain or incorporate by reference the
entire agreement of the parties with respect to matters contemplated herein and supersede all prior
negotiations. The Loan Documents grant further rights to Mortgagee and contain further agreements
and affirmative and negative covenants by Mortgagor which apply to this Mortgage and to the Subject
Property and Collateral and such further rights and agreements are incorporated herein by this
reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.2 </B><U><B>MERGER</B></U>. No merger shall occur as a result of Mortgagee&#146;s acquiring any other
estate in, or any other lien on, the Subject Property unless Mortgagee consents to a merger in
writing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.3 </B><U><B>OBLIGATIONS OF MORTGAGOR, JOINT AND SEVERAL</B></U>. If more than one person has executed
this Mortgage as &#147;Mortgagor&#148;, the obligations of all such persons hereunder shall be joint and
several.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.4 </B><U><B>WAIVER OF MARSHALLING RIGHTS</B></U>. Mortgagor, for itself and for all parties claiming
through or under Mortgagor, and for all parties who may acquire a lien on or interest in the
Subject Property and Collateral, hereby waives all rights to have the Subject Property and
Collateral and/or any other property, which is now or later may be security for any Secured
Obligation (&#147;Other Property&#148;) marshaled upon any foreclosure of the lien of this Mortgage or on a
foreclosure of any other lien or security interest against any security for any of the Secured
Obligations. Mortgagee shall have the right to sell, and any court in which foreclosure
proceedings may be brought shall have the right to order a sale of, the Subject Property and any or
all of the Collateral or Other Property as a whole or in separate parcels, in any order that
Mortgagee may designate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.5 </B><U><B>RULES OF CONSTRUCTION</B></U>. When the identity of the parties or other circumstances
make it appropriate the masculine gender includes the feminine and/or neuter, and the singular
number includes the plural. The term &#147;Subject Property&#148; and &#147;Collateral&#148; means all and any part of
the Subject Property and Collateral, respectively, and any interest in the Subject Property and
Collateral, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.6 </B><U><B>SUCCESSORS IN INTEREST</B></U>. The terms, covenants, and conditions herein contained shall be binding upon and inure to
the benefit of the heirs, successors and assigns of
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the parties hereto; provided, however, that
this Section&nbsp;7.6 does not waive or modify the provisions of Section&nbsp;5.14.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.7 </B><U><B>EXECUTION IN COUNTERPARTS</B></U>. To facilitate execution, this document may be executed
in as many counterparts as may be convenient or required. It shall not be necessary that the
signature or acknowledgment of, or on behalf of, each party, or that the signature of all persons
required to bind any party, or the acknowledgment of such party, appear on each counterpart. All
counterparts shall collectively constitute a single document. It shall not be necessary in making
proof of this document to produce or account for more than a single counterpart containing the
respective signatures of, or on behalf of, and the respective acknowledgments of, each of the
parties hereto. Any signature or acknowledgment page to any counterpart may be detached from such
counterpart without impairing the legal effect of the signatures or acknowledgments thereon and
thereafter attached to another counterpart identical thereto except having attached to it
additional signature or acknowledgment pages.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.8 </B><U><B>CHOICE OF LAW</B></U>. The entire transaction contemplated by this Mortgage and the
Credit Agreement and all terms and provisions of this Mortgage, the Credit Agreement and the other
Loan Documents shall be governed by the laws of the State of California, except for the creation,
perfection and enforcement of certain lien rights and remedies provided herein which must be
governed by the laws of the situs of the Subject Property, that being Arkansas, regarding which
lien rights and remedies Arkansas law shall govern.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.9 </B><U><B>INCORPORATION</B></U>. <U>Exhibit&nbsp;A</U> and <U>Schedule&nbsp;1</U>, all as attached, are
incorporated into this Mortgage by this reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.10 </B><U><B>NOTICES</B></U>. All notices, demands or other communications required or permitted to
be given pursuant to the provisions of this Mortgage shall be in writing and shall be considered as
properly given if delivered personally or sent by first class United States Postal Service mail,
postage prepaid, except that notice of Default may be sent by certified mail, return receipt
requested, or by Overnight Express Mail or by overnight commercial courier service, charges
prepaid. Notices so sent shall be effective three (3)&nbsp;days after mailing, if mailed by first class
mail, and otherwise upon receipt at the address set forth below; provided, however, that
non-receipt of any communication as the result of any change of address of which the sending party
was not notified or as the result of a refusal to accept delivery shall be deemed receipt of such
communication. For purposes of notice, the address of the parties shall be:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mortgagor:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">VIRCO MFG. CORPORATION</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2027 Harpers Way</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Torrance, California 90501</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attn: Robert E. Dose,</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mortgagee:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">WELLS FARGO BANK, NATIONAL ASSOCIATION</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Commercial Banking Group (AU #2702)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">201 Third Street, 8th Floor</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">San Francisco, CA 94013</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attn: Records Management / Team 2</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Loan #: 8079119402</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">With a copy to:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">WELLS FARGO BANK, NATIONAL ASSOCIATION</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">San Gabriel Valley Regional Commercial Banking Office</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1000 Lakes Drive, Suite&nbsp;250</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">West Covina, CA 91790</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attn: Randall J. Repp</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">With a copy to:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">WELLS FARGO BANK, NATIONAL ASSOCIATION</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Disbursement and Operations Center</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2120 East Park Place, Suite&nbsp;100</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">El Segundo, CA 90245</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attention: DISBURSEMENT REPRESENTATIVE</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Any party shall have the right to change its address for notice hereunder to any other location
within the continental United States by the giving of thirty (30)&nbsp;days notice to the other party in
the manner set forth hereinabove. Mortgagor shall forward to Mortgagee, without delay, any
notices, letters or other communications delivered to the Subject Property or to Mortgagor naming
Mortgagee, &#147;Lender&#148; or any similar designation as addressee, or which could reasonably be deemed to
affect the ability of Mortgagor to perform its obligations to Mortgagee under the Notes or the
Credit Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.11 </B><U><B>ARBITRATION</B></U>. THE PROVISIONS OF SECTION 7.11 OF THE CREDIT AGREEMENT ARE
INCORPORATED HEREIN IN THEIR ENTIRETY, <I>MUTATIS MUTANDIS</I>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.12 </B><U><B>PATRIOT ACT NOTICE COMPLIANCE</B></U>. The USA Patriot Act of 2001 (Public Law 107-56)
and federal regulations issued with respect thereto require all financial institutions to obtain,
verify and record certain information that identifies individuals or business entities which open
an &#147;account&#148; with such financial institution. Consequently, Lender may from time-to-time request,
and Mortgagor shall provide to Lender, Mortgagor&#146;s name, address, tax identification number and/or
such other identification information as shall be necessary for Lender to comply with federal law.
An &#147;account&#148; for this purpose may include, without limitation, a deposit account, cash management
service, a
transaction or asset account, a credit account, a loan or other extension of credit, and/or
other financial services product.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;Signature Page Follows&#093;
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, Mortgagor has executed this Mortgage as of the day and year set forth
above.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">MORTGAGOR:<BR>
<BR>
<BR>
VIRCO MFG. CORPORATION,<BR>
a Delaware corporation<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Robert E. Dose&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left" style="border-bottom: 1px solid #000000">Robert E. Dose&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left" style="border-bottom: 1px solid #000000">Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(ALL SIGNATURES MUST BE ACKNOWLEDGED)
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->22<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
]
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Loan No.&nbsp;8079119402
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Page</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE 1. GRANT OF MORTGAGE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.1 GRANT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.2 ADDRESS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.3 INCORPORATION OF RECITALS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE 2. OBLIGATIONS SECURED</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2.1 OBLIGATIONS SECURED</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2.2 OBLIGATIONS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2.3 INCORPORATION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.1 ASSIGNMENT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.2 GRANT OF LICENSE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.3 EFFECT OF ASSIGNMENT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.4 REPRESENTATIONS AND WARRANTIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.5 COVENANTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.6 ESTOPPEL CERTIFICATES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.1 SECURITY INTEREST</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.2 REPRESENTATIONS AND WARRANTIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.3 COVENANTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.4 RIGHTS OF MORTGAGEE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.5 RIGHTS OF MORTGAGEE ON DEFAULT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.6 POWER OF ATTORNEY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.7 POSSESSION AND USE OF COLLATERAL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.1 TITLE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.2 TAXES AND ASSESSMENTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.3 TAX AND INSURANCE IMPOUNDS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.4 PERFORMANCE OF SECURED OBLIGATIONS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.5 LIENS, ENCUMBRANCES AND CHARGES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.6 DAMAGES; INSURANCE AND CONDEMNATION PROCEEDS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.7 INSURANCE, MAINTENANCE AND PRESERVATION OF THE SUBJECT PROPERTY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.8 INTENTIONALLY OMITTED</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.9 APPROVAL OF LEASES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Loan No.&nbsp;8079119402
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Table of Contents<br>(Continued)</B>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Page</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.10 DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.11 CERTAIN POWERS OF MORTGAGEE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.12 COMPENSATION; EXCULPATION; INDEMNIFICATION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.13 INTENTIONALLY OMITTED</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.14 DUE ON SALE OR ENCUMBRANCE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.15 RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.16 INTENTIONALLY OMITTED</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.17 SUBROGATION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.18 RIGHT OF INSPECTION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.19 INTENTIONALLY OMITTED</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.20 HAZARDOUS MATERIALS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.21 HAZARDOUS MATERIALS INDEMNITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.22 LEGAL EFFECT OF SECTION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE 6. DEFAULT PROVISIONS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.1 DEFAULT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.2 RIGHTS AND REMEDIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.3 APPLICATION OF FORECLOSURE SALE PROCEEDS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.4 APPLICATION OF OTHER SUMS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.5 NO CURE OR WAIVER</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.6 PAYMENT OF COSTS, EXPENSES AND ATTORNEYS&#146; FEES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.7 POWER TO FILE NOTICES AND CURE DEFAULTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.8 REMEDIES CUMULATIVE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE 7. MISCELLANEOUS PROVISIONS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.1 ADDITIONAL PROVISIONS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.2 MERGER</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.3 OBLIGATIONS OF MORTGAGOR, JOINT AND SEVERAL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.4 WAIVER OF MARSHALLING RIGHTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.5 RULES OF CONSTRUCTION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.6 SUCCESSORS IN INTEREST</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.7 EXECUTION IN COUNTERPARTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.8 CHOICE OF LAW</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.9 INCORPORATION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.10 NOTICES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.11 ARBITRATION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.12 PATRIOT ACT NOTICE COMPLIANCE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
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<TYPE>EX-99.1
<SEQUENCE>6
<FILENAME>v39244exv99w1.htm
<DESCRIPTION>EXHIBIT 99.1
<TEXT>
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<TITLE>Exhibit 99.1</TITLE>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 18pt">Exhibit 99.1
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
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<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">FOR IMMEDIATE RELEASE
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Contact:</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Robert A. Virtue, President</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Douglas A. Virtue, Executive Vice President</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Robert E. Dose, Chief Financial Officer</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Virco Mfg. Corporation</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(310) 533-0474</TD>
</TR>
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</DIV>


<DIV align="center" style="font-size: 14pt; margin-top: 18pt">Virco Announces Improved Line of Credit
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Torrance, California, March&nbsp;24, 2008 &#151; Virco Mfg. Corporation (NASDAQ: VIRC) announced today that
it has renewed and amended its credit facility with Wells Fargo Bank in the following letter to
stockholders from Robert A. Virtue, President and CEO:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I am pleased to report that Virco has renewed its credit facility with Wells Fargo. The terms of
the facility have been favorably modified to reflect Virco&#146;s strong balance sheet.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The facility provides $65,000,000 of working capital through our seasonal peak of late summer, but
unlike recent years there is no permanent floor of term debt that carries through the off-season.
Our voluntary elimination of the term debt component means that we are now borrowing only to
finance the seasonality of our business. As with last year, we believe that we will be debt-free
around the end of our third quarter, when accounts receivable from summer deliveries will have been
collected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The facility allows Virco to borrow at Wells Fargo prime or LIBOR based rates. We believe this
competitive rate will contribute to lower overall interest payments in fiscal 2008, continuing the
favorable trend of the last two years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This marks our 19<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> consecutive year of banking with Wells Fargo. The stability of this
relationship gives us great comfort. It also supports our long-term goal of being a reliable,
trustworthy supplier of furniture and equipment for educators of all grade levels.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>This news release contains &#147;forward-looking statements&#148; as defined by the Private Securities
Litigation Reform Act of 1995. These statements include, but are not limited to, statements
regarding: new business strategies; the cost and availability of credit; expectations regarding
working capital needs; market, including credit market, conditions; the cost of steel and other raw
materials; the continuing impact of our Assemble-to-Ship and Equipment for Educators programs on
earnings; market demand and acceptance of new products; development of new distribution channels;
pricing; and seasonality. Forward-looking statements are based on current expectations and beliefs
about future events or circumstances, and you should not place undue reliance on these statements.
Such statements involve known and unknown risks, uncertainties, assumptions and other factors, many
of which are out of our control and difficult to forecast. These factors may cause actual results
to differ materially from those which are anticipated. Such factors include, but are not limited
to: changes in general economic conditions including raw material, energy and freight costs; the
seasonality of our markets; the markets for school and office furniture generally; the specific
markets and customers with which we conduct our principal business; and the response of competitors
to our price increases. See our Annual Report on Form&nbsp;10K for year ended January&nbsp;31, 2007, and
other materials filed with the Securities and Exchange Commission for a further description of
these and other risks and uncertainties applicable to our business. We assume no, and hereby
disclaim any, obligation to update any of our forward-looking statements. We nonetheless reserve
the right to make such updates from time to time by press release, periodic reports or other
methods of public disclosure without the need for specific reference to this press release. No
such update shall be deemed to indicate that other statements which are not addressed by such an
update remain correct or create an obligation to provide any other updates.</I>
</DIV>



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