Exhibit 10.1


 


December 18, 2008


 


By Electronic Mail and Overnight Courier


 


Channell
Commercial Corporation

Channell Commercial Canada Inc.

26040 Ynez Road


Temecula,
California  92589-9022


Attention:  Michael L. Perica, Corporate Treasurer


 


Dear Ladies and Gentlemen:


 


This letter agreement, is entered into by and among Channell Commercial
Corporation, a Delaware corporation (“Domestic Borrower”), Channell Commercial
Canada Inc., an Ontario corporation (“Canadian Borrower” and, together with
Domestic Borrower, “Borrowers”), Bushman Water Harvesting Corporation, a
Delaware corporation, Bushman Water Harvesting Inc., an Ontario corporation,
Channell Limited, Channell Commercial Europe Limited, A.C. Egerton (Holdings)
Limited,  Bank of America, N.A., as sole
Domestic Lender and Administrative Agent (“Administrative Agent”), and Bank of
America, N.A., as sole Canadian Lender and Canadian Agent (“Canadian Agent”
and, together with Administrative Agent, “Agents”), with reference to the
Amended and Restated Loan and Security Agreement dated as of July 30,
2007, between Borrowers, the Lenders referred to therein, and Agent (as
heretofore amended, the “Loan Agreement”). 
Capitalized terms used in this letter are used with the meaning set
forth those terms in the Loan Agreement.


 


As of the date of this letter, you acknowledge that you are in default
of your obligations under the Loan Agreement as a result of your failure to (a) maintain
minimum Aggregate Availability of $1,000,000, as required by Section 8.2.18
of the Loan Agreement and (b) reduce the Domestic Revolving Credit
Exposure to an amount equal to or less than the Aggregate Borrowing Base, as
required by Section 10.1.1 of the Loan Agreement.


 


As of yesterday afternoon (and in addition to term debt in an aggregate
principal amount of $3,650,792.03), the aggregate outstanding principal amount
of the Domestic Revolving Credit Exposure and the Canadian Revolving Credit
Exposure was $4,132,684.63 and the Aggregate Borrowing Base (after deduction of
letter of credit reserves) is $3,845,143.95 resulting in an Overadvance of
$287,540.68.  You have indicated that
this Overadvance will grow to approximately $600,000 to $800,000 today. You
acknowledge that we have no obligation to 


 


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make further Loans or Domestic Letters of Credit available to you as a
consequence of these conditions.  You
further acknowledge that the current outstanding Loans and other Obligations
are payable pursuant to the terms of the Loan Agreement without counterclaim,
deduction or offset.


 


In order to induce us to make additional Loans and Domestic Letters of
Credit available, you agree:


 


(a)                                  to cause Jacqueline M. Channell, as an
individual and as Jacqueline M. Channell, Trustee of the Survivor’s Trust created
under the Channel Family Trust, established UTA dated June 29, 1990, as
amended (the “Trust”) to deliver to us no later than December 19, 2008, (i) a
duly executed limited guaranty of the obligations under the Loan Agreement in
the principal amount of $2,000,000, in the form of Exhibit A, and (ii) a
certificate of the Trust duly executed by Jacqueline M Channell, in a form
satisfactory to us, which shall have attached to it (A) the trust
agreement of the Trust and (B) the 2007 personal tax returns of Jacqueline
M. Channell, demonstrating a financial position which is acceptable to us.


 


(b)                                 commencing with February 1, 2009, to
provide Administrative Agent with a weekly Borrowing Base Certificate as of the
last day of each week, no later than the first day of following week, along
with such supporting materials as Administrative Agent shall reasonably
request, including, without limitation, roll forwards of accounts receivables,
updated inventory balances, and updated loan balances (such reporting is referred
to herein as the “Weekly Reporting”).


 


(c)                                  that so long as Aggregate Availability
remains below $1,000,000, the Overadvance remains outstanding, or any other
Default or Event of Default is continuing, notwithstanding the provisions of
the Loan Agreement to the contrary, the Applicable Margin with respect to the
outstanding Obligations shall be as follows:


 


	
  Domestic Base

  Rate Loans

  (Revolving)

  	
   

  	
  Domestic Base Rate

  Loans (Term and

  Cap Ex)

  	
   

  	
  Domestic

  LIBOR Loans

  (Revolving)

  	
   

  	
  Domestic LIBOR

  Loans (Term and

  Cap Ex)

  	
   

  	
  Canadian

  Revolving

  Credit Loans

  	
   

  	
  Unused

  Line Fee

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.75

  	
  %

  	
  1.75

  	
  %

  	
  3.50

  	
  %

  	
  3.50

  	
  %

  	
  3.75

  	
  %

  	
  0.50

  	
  %

  



 


Notwithstanding the
foregoing, upon notice to Borrowers and the other Lenders, Agents, in their
sole discretion, may lower the Applicable Margin during the Forbearance Period
(as defined below) to the levels existing immediately prior to the
effectiveness of this letter.


 


(d)                                 during the Forbearance Period (as defined
below), as of the last day of each calendar month, EBITDA for the period since January 1,
2008 shall be no less than amount set forth below opposite the applicable test
date:


 


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  Test Date

  	
   

  	
  Minimum Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  January 31,
  2009

  	
   

  	
  $

  	
  -448,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  February 28,
  2009

  	
   

  	
  $

  	
  -150,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2009

  	
   

  	
  $

  	
  600,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  April 30,
  2009

  	
   

  	
  $

  	
  1,146,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  May 31,
  2009

  	
   

  	
  $

  	
  1,837,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  June 30,
  2009

  	
   

  	
  $

  	
  2,759,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  July 31,
  2009

  	
   

  	
  $

  	
  3,715,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  August 31,
  2009

  	
   

  	
  $

  	
  4,518,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  September 30,
  2009

  	
   

  	
  $

  	
  5,179,000

  	
   

  



 


For purposes of this
covenant only, the amount of any losses due to bulk inventory sales may, at the
sole discretion of the Agents, be added to EBITDA, provided that (i) such
bulk inventory sales were consented to by the Administrative Agent and (ii) such
losses were deducted in calculating Consolidated net income.


 


Additionally, Borrowers
shall provide a calculation of EBITDA for such test dates along with the
monthly reporting required pursuant to Section 8.1.3(b) of the Loan
Agreement.


 


(e)                                  that so long as Aggregate Availability
remains below $1,000,000, the Overadvance remains outstanding, or any other
Default or Event of Default is continuing, notwithstanding the provisions of
the Loan Agreement to the contrary, the availability of the Domestic Cap Ex
Loans shall be suspended.


 


(f)                                    that Borrowers’ failure to satisfy any of the
covenants and agreements described herein, including, without limitation, the
failure to deliver the items described in clause (a) and (b) above,
shall constitute an Event of Default under the Loan Agreement.


 


In consideration of the foregoing, through September 30, 2009 (the
“Forbearance Period”), we will forbear from exercising remedies under the Loan
Agreement by reason of the Default and Events of Default described in this letter
(but not additional Defaults or Events of Default) and we will permit an
Overadvance of up to $2,000,000 to exist, provided that until such time as the
Weekly Reporting is received, such permitted Overadvance shall not exceed
$1,500,000.  We reserve the right to
terminate our forbearance should additional Defaults or Events of Default,
including, without limitation, any Default or Event of Default hereunder, occur
or become known to us following the date of this letter.


 


We have agreed with you that if the Trust either (i) provides
Domestic Borrower with cash loans in the amount of $2,000,000 which are on
terms which are acceptable to us and which are in any event fully subordinated
to the obligations under the Loan Agreement, or (ii) provides us with a lien
upon real estate or other collateral which is solely acceptable to us (and
having an unencumbered value which provides equivalent credit support of the
obligations under the Loan Agreement (i.e., after a discount to the value
determined by us, provides at least $2,000,000 of credit support)), then we
shall release the guarantee issued by the Trust unless additional Defaults or
Events of Default have occurred under the Loan Agreement.


 


[Remainder of this page intentionally blank –
Signatures follow]


 


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If you are in agreement with us concerning the foregoing, please sign
this letter in the space provided below.


 


Sincerely,


 


BANK OF AMERICA, N.A.,

as sole Domestic Lender and Administrative Agent


 


 


	
  By:

  	
  /s/ Carlos Gil

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Carlos Gil, Vice President

  	
   

  
	
   

  	
   

  
	
  BANK OF AMERICA, N.A., CANADA BRANCH,

  	
   

  
	
  as sole Canadian Lender and Canadian Agent

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Medina Sales De Andrade

  	
   

  
	
  Name:
  Medina Sales De Andrade

  	
   

  
	
  Title:
  Vice President

  	
   

  



 


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ACKNOWLEDGED AND AGREED TO:


	
   

  	
   

  
	
  CHANNELL COMMERCIAL

  CORPORATION,

  	
  CHANNELL LIMITED

  
	
  a Delaware corporation

  	
  By:

  	
  /s/ William H. Channell, Jr.

  
	
   

  	
  Name: William H. Channell, Jr.

  
	
  By:

  	
  /s/ William H. Channell, Jr.

  	
   

  	
  Title: Chief Executive Officer

  
	
  Name: William H. Channell, Jr.

  	
   

  
	
  Title: Chief Executive Officer

  	
  By:

  	
  /s/ G J O’Connor

  
	
   

  	
  Name: G J O’Connor

  
	
   

  	
  Title: Director

  
	
   

  	
   

  
	
  CHANNELL COMMERCIAL CANADA

  	
  CHANNELL COMMERCIAL EUROPE

  
	
  INC.,

  an Ontario corporation

  	
  LIMITED

  
	
   

  	
  By:

  	
  /s/ William H. Channell, Jr.

  
	
  By:

  	
  /s/ William H. Channell, Jr.

  	
   

  	
  Name: William H. Channell, Jr.

  
	
  Name: William H. Channell, Jr.

  	
  Title: Chief Executive Officer

  
	
  Title: Chief Executive Officer

  	
   

  
	
   

  	
  By:

  	
  /s/ G J O’Connor

  
	
   

  	
  Name: G J O’Connor

  
	
   

  	
  Title: Director

  
	
   

  	
   

  
	
  BUSHMAN WATER HARVESTING 

  CORPORATION,

  	
  A.C. EGERTON (HOLDINGS) LIMITED

  
	
  a Delaware corporation

  	
  By:

  	
  /s/ William H. Channell, Jr.

  
	
   

  	
  Name: William H. Channell, Jr.

  
	
  By:

  	
  /s/ William H. Channell, Jr.

  	
   

  	
  Title: Chief Executive Officer

  
	
  Name: William H. Channell, Jr.

  	
   

  
	
  Title: Chief Executive Officer

  	
  By:

  	
  /s/ G J O’Connor

  
	
   

  	
  Name: G J O’Connor

  
	
   

  	
  Title: Director

  
	
   

  	
   

  
	
  BUSHMAN WATER HARVESTING INC., 

  an Ontario corporation

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ William H. Channell, Jr.

  	
   

  	
   

  
	
  Name: William H. Channell, Jr.

  	
   

  
	
  Title: Chief Executive Officer

  	
   

  
							



 


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