10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549
FORM 10-K

(Mark One)

x Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2007; or

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

                                                For the transition period from                          to

Commission File Number 0-28582

CHANNELL COMMERCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	95-2453261
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

26040 Ynez Road, Temecula, CA  92591

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (951) 719-2600

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.01 Par Value	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  oNo  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.   Yes  oNo  x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  xNo  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of “ large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   o                                                                                                     Accelerated filer o

Non- accelerated filer    o (Do not check if a smaller reporting company)                          Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  oNo  x

On March 24, 2008, the registrant had 9,544,134 shares of Common Stock outstanding.  The aggregate market value of the shares held by non-affiliates of the registrant was $20,765,890 computed by reference to the price at which the shares were last sold, as of the last business day of the registrant’s most recently completed second fiscal quarter.  Shares of Common Stock held by each officer and director and by each person who may be deemed to be an affiliate have been excluded.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this Form 10-K incorporates by reference certain information from the registrant’s definitive proxy statement for its 2008 annual meeting of stockholders, which is anticipated to be filed with the Securities and Exchange Commission within 120 days after the close of the registrant’s fiscal year.

TABLE OF CONTENTS

PART I		Page
Item 1.	Business	1
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	11
Item 2.	Properties	11
Item 3.	Legal Proceedings	11
Item 4.	Submission of Matters to a Vote of Security Holders	11
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	11
Item 6.	Selected Financial Data	13
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 8.	Financial Statements and Supplementary Data	23
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	23
Item 9A(T).	Controls and Procedures	23
Item 9B.	Other Information	24
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	24
Item 11.	Executive Compensation	24
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	25
Item 13.	Certain Relationships and Related Transactions, and Director Independence	25
Item 14.	Principal Accountant Fees and Services	25
PART IV
Item 15.	Exhibits, Financial Statement Schedules	25
	FINANCIAL STATEMENTS	F-1
	GLOSSARY OF TERMS	G-1

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PART I

Item 1. Business.

Background

Channell Commercial Corporation (the “Company”) was incorporated in Delaware on April 23, 1996, as the successor to Channell Commercial Corporation, a California corporation.  The Company’s executive offices are located at 26040 Ynez Road, Temecula, California 92591, and its telephone number at that address is (951) 719-2600.

General

The Company is a designer and manufacturer of telecommunications equipment supplied to broadband and telephone network providers worldwide.  Major product lines include a complete line of thermoplastic and metal fabricated enclosures, advanced copper VoIP termination and connectorization products, fiber optic cable management systems for fiber to the premises (“FTTP”) networks, and heat shrink products.  The Company’s enclosure products house, protect and provide access to advanced telecommunications hardware, including both radio frequency (“RF”) electronics and photonics, and transmission media, including coaxial cable, copper wire and optical fibers, used in the delivery of voice, video and data services.  The enclosure products are deployed within the access portion of the local signal delivery network, commonly known as the “outside plant,” “local loop” or “last mile” that connects the network provider’s signal origination point or local office with its residential and business customers.  The Company’s connectivity products provide critical network connection points between cables or network transmission devices.

The Company also designs, manufactures and markets polyethylene water harvesting systems for rural and residential markets in Australia and the United States.  The Company’s primary product line is water harvesting systems, for which a rotationally molded tank is the major component, is principally used in the agricultural sector where water shortages require storage of rain and ground water.  The Company also markets a range of water harvesting systems for use in residential and rural-residential markets.  The Company’s Australian water harvesting business operates out of six leased facilities in Australia.  The facilities are located in New South Wales (2), Queensland (2), Victoria and South Australia.  Water tanks for the North American market are manufactured in Temecula, California.

The Company entered the Australian water harvesting market in August 2004 with the acquisition of Bushman Tanks.  Bushman Tanks is one of Australia’s largest manufacturer and distributor of rotational molded polyethylene water storage tanks.  In late 2007, the Company introduced products to serve its North American water harvesting market.

The Company’s enclosure product line accounted for 43%, 46%, and 44% of the Company’s net sales in 2007, 2006 and 2005, respectively.  The Company diversified its business with the acquisition of Bushman Tanks in 2004.  The Company’s water related products product line accounted for 44%, 45%, and 48% of the Company’s net sales in 2007, 2006 and 2005, respectively.  The Company had long-lived assets in Australia with a book value of $7.2 million, $6.8 million, and $5.3 million at December 31, 2007, 2006 and 2005, respectively.  For additional financial segment and geographic information, see Note N to the Company’s Consolidated Financial Statements included herein.

Industry

The Company serves customers primarily in two industries, the global telecommunications industry and the water harvesting industry.

In the telecommunications industry, CATV/broadband and local telephone operators are building, rebuilding or upgrading signal delivery networks around the world.  These networks are designed to deliver video, voice and/or data transmissions to individual residences and businesses.  Operators deploy a variety of network technologies and architectures, such as HFC, VoIP, DLC, ADSL and FTTP (see “Glossary of Terms”) to carry broadband and narrowband signals.  These architectures are constructed of electronic hardware connected via coaxial cables, copper wires and/or optical fibers, including various access devices, amplifiers, nodes, hubs and other signal transmission and powering electronics.  Nearly all of these devices in the outside plant require housing in secure, protective enclosures and cable management connectivity systems, such as those manufactured by the Company.

As critical components of the outside plant, enclosure products provide (i) environmental and vandalism protection, (ii) ready access for technicians who maintain and manage the outside plant and (iii) in some cases, dissipation of heat generated by the active electronic hardware.  CATV/broadband and local telephone network operators place great reliance on manufacturers of protective enclosures because any material damage to the distributed network elements is likely to disrupt communications services.  Connectivity products provide critical broadband data-rated connection points that support cost effective service deployment and ensure signal integrity is maintained throughout the network.

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The primary drivers of demand for enclosures in the communications industry are the construction, rebuilding, upgrading and maintenance of signal delivery networks by CATV/broadband network operators and local telephone companies.  For example, broadband networks continue to be upgraded and enhanced for advanced two-way services such as high-speed Internet access via cable modems, high-definition television (HDTV), video on demand (VoD), voice-over-Internet Protocol (VoIP) telephony and xDSL transport. Local telephone service providers are employing advanced technologies, such as a variety of digital subscriber line (“DSL”) technologies, which utilize installed copper wires for broadband services.  These “local loop” copper wire systems often require significant upgrading and maintenance to provide the optimal throughput necessary to carry high-speed broadband signals, increasing the need for data-rated fully sealed outside plant facilities in order to sustain network reliability and longevity.   Local telephone service providers are also employing various FTTP technologies to deliver higher bandwidth services to customers.  FTTP utilizes outside plant enclosures to protect the networks, as well as fiber cable management devices, both of which are manufactured by the Company.  Similar architectures that utilize multiple configurations of enclosure and connectivity products are deployed world-wide.

In the Australian water harvesting industry, consumers utilize plastic, steel or concrete tanks for the storage of water.  Australia has an arid climate with limited water resources.  The combination of a growing population, a movement of people away from urban areas and generally limited rainfall has historically resulted in water shortages in most geographic areas.  As such, certain local, state and national governments have implemented regulations intended to conserve water.  These include restrictions on the use of potable water and requirements to install water storage systems or other conservancy products in new residential dwellings in selected areas.  Water storage systems are used to store rain and ground water on-site at both residential and commercial properties.  While the primary application for stored water has been for agricultural purposes and irrigation, increasingly stored water is being pumped into residences for non-potable uses such as washing machines and toilets and may often be used as a source of drinking water.  The Company anticipates that in North America similar factors may, over time, lead to water shortages and increased interest in water conservation and harvesting.

Business Strategy

The Company’s strategy is to capitalize on its established customer relationships, knowledge of communications networks and core capabilities in the design and manufacture of thermoplastic products, metal products and connectivity products.

The Company pursues opportunities in the global communications industry by providing enclosures, connectivity products and other complementary components to meet the evolving needs of its customers’ communications networks.  The Company’s wide range of products, manufacturing expertise, application-based sales and marketing approach and reputation for high quality products address key requirements of its customers.

In addition to the communications industry, the Company seeks to leverage its expertise in plastics and metal manufacturing technologies to diversify into other industries.  Bushman Tanks utilizes plastic rotational molding technology to produce water tanks, a process similar to that used by the Company to manufacture thermoplastic enclosures for the communications industry.

Principal elements of the Company’s strategy include the following:

Focus on Core Telecommunications Business. The Company will continue to seek to capitalize on its position as a leading designer, manufacturer and marketer of enclosures, grade level boxes, and copper wire connectors for the broadband/CATV and local telephone industries in the North America, Europe, Middle East, Africa, Australia and Asia markets through direct marketing and new product development.  The Company believes it currently supplies a substantial portion of the enclosure product requirements of a number of major broadband network operators.

The Company has invested in the development of a broad range of products designed specifically for telecom applications. These include connectivity and enclosure products for xDSL and FTTP based networks.  The Company has successfully marketed its traditional broadband/CATV products to local telephone companies that have been designing and deploying broadband networks to deliver competitive video and data services.  The Company will continue to target this market for growth, using its direct sales force as well as partnering with major system original equipment manufacturers (“OEMs”).

Expand International Presence in Communications Industry.  Management believes international markets offer significant opportunities for increased sales to both broadband and telephone companies. The Company’s principal international markets currently include Canada, Mexico, South Asia, the Pacific Rim, the Middle East, Africa and Europe.  Trends expected to result in international growth opportunities include the on-going deregulation and privatization of telecommunications in many nations around the world and the focus of numerous countries on building, expanding and enhancing their communications systems to deliver broadband services in order to participate fully in the information-based global economy.  The Company will concentrate on expansion in international markets that are characterized by deregulation or privatization of telecommunications and by the availability of capital for the construction of signal delivery networks.

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Develop New Products and Enter New Markets.The Company continues to leverage its core capabilities in developing innovative products that meet the evolving needs of its customers.  Innovative products offered by the Company include its MAH Series™ free-breathing telephony enclosures, GLB™  grade level box sub-surface enclosures, the Mini-Rocker™ insulation displacement copper connectivity products, and a range of Rhino™ metal fabricated enclosures.  The Company continually invests in ongoing improvement and enhancement projects for the existing products developed by the Company, several of which have received U.S. and international patent protection.  The Company’s products are designed to improve the performance of its customers’ outside plant systems.  The Company has a proven record in designing, developing and manufacturing “next generation” products that provide solutions for its customers and offer advantages over those offered by other suppliers to the industry.  The Company also believes its core capabilities are applicable to markets outside the telecommunications industry.

The Company is expanding its product offering of water storage products to include smaller systems designed primarily for the residential markets in Australia.  The Company’s principal customers are currently in rural areas.  However, due to various water restrictions and government rebates, more industry growth is projected for the urban markets.  The Company continues to develop innovative products to expand its presence in both the residential and rural markets of Australia.  In the second half of 2007, the Company launched a limited range of water harvesting systems targeting the residential market in North America.

Concentrate on Core Capabilities to Diversify into Other Industries.  The Company believes its core competencies are in the design and manufacture of plastic and metal enclosure products for industrial infrastructure applications and copper wire connectivity.  The Company is pursuing a strategy to utilize these core competencies to diversify into other industries to grow profitably.  Relevant industries that the Company may pursue include water, irrigation, power utility and other outside plant infrastructure products.  The Company continues to assess new market opportunities either through internal product development or acquisitions.

Products

The Company currently markets over 60 product families, with several thousand optional product configurations.  The primary functions of the Company’s products designed for the telecommunications industry are cable routing and management, equipment access, heat dissipation and security.   The Company believes that it offers one of the most complete lines of outside plant infrastructure products in the telecommunications industry. The primary functions of the Company’s products designed for the water harvesting industry are the filtration, storage and distribution of water for both outside and inside rural and suburban residences.

Enclosures.  The Company manufactures precision-molded, highly engineered and application-specific thermoplastic and metal fabricated enclosures for the communications industry that are considered state-of-the-industry, having been field tested and received approvals and standardization certifications from major broadband/CATV and telephone company operators.  Most of the Company’s products are designed for buried and underground network applications.  The Company’s enclosure products provide technicians access to network equipment for maintenance, upgrades and installation of new services.  Buried and underground networks and enclosures are generally preferred by broadband/CATV and telecommunications operators for increased network reliability, lower maintenance, improved security, reduced utility right-of-way conflicts, and aesthetic appeal. The enclosure products, particularly the thermoplastic versions, must provide advanced heat dissipation characteristics increasingly required for the protection of active electronics in many network installations.  The Company is also a designer and manufacturer of metal fabricated enclosures that house advanced electronics, fiber optic cable and power systems for broadband/CATV and telecommunications networks (branded as “Rhino Enclosures™”).  The Company designs and manufactures a series of termination blocks, brackets and cable management devices for mounting inside its enclosure products.  The Company is recognized in the industry for its differentiated product designs and the functionality, field performance and service life of its products.

Copper Connectivity.  The Company is a designer and manufacturer of innovative copper wire connectivity devices.  The Company’s Insulation Displacement Connector (“IDC”) technology provides advanced “tool-less” termination systems for copper wires, the predominant medium used in the “Last Mile” and in-building premises distribution for telephone services worldwide.  These proprietary IDC products environmentally seal network termination points with a high level of reliability.  The Company’s Mini-Rocker™ line of copper connectivity modules, blocks and accessories offer environmentally sealed and Cat-5 data rated IDC tool-less circuit installation and have been accepted as a universal connectivity platform for network applications worldwide, including xDSL and VoIP services.

Water Related Products - Grade Level Boxes.  The Company is a designer and supplier of grade level boxes used for sub-surface network access.  The Company’s line of grade level boxes are designed and configured for water distribution and irrigation applications.  Applications include storage of underground cables, irrigation valves, power and water utility distribution equipment.  Additionally, a series of these products has also been designed specifically for, and such products are widely deployed in, FTTP networks.

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Water Related Products - Water Harvesting.  The Company offers a range of water harvesting systems, which mainly consists of a large volume polyethylene tank and accessory equipment (hoses, piping, diverter valves, filtration systems, electrical pumps, etc.), for the storage of potable and non-potable water.  These products typically store rain water collected from the roofs of homes or other buildings or water pumped from underground wells.  These products are primarily used by residential homes, agricultural properties and commercial buildings.

OEM Programs.  The Company has OEM marketing programs through which other manufacturers incorporate the Company’s products as components of their telecommunications systems.  These OEM programs generally include exchanges of technical information that the Company can use in developing new products and improvements and enhancements to existing designs.  The Company has established additional relationships with systems integrators and innovative end users that provide valuable product improvement information.

Marketing and Sales

The Company markets its products primarily through a direct sales force of technically trained salespeople. The Company employs an application-specific systems approach to marketing its products, offering the customer a complete, cost-effective system solution to meet its outside plant requirements. All sales personnel have technical expertise in the products they market and are supported by the Company’s engineering and technical marketing staff. Product marketing specialists are assigned to provide technical support and commercial direction for the Company’s strategic product groups.

Internal sales/customer service departments schedule incoming orders, handle requests for product enhancements and service inquiries and support the Company’s direct sales force. These departments maintain direct communications with customers and the Company’s field sales and operations personnel.

By engaging in public relations activities, product literature development, market research and advertising, the marketing department also promotes and positions the Company within both domestic and international markets.  The Company regularly attends, participates and exhibits its products at industry trade shows and conferences within domestic and international markets throughout the year.

Specific to the Company’s water harvesting products, the Company augments its direct sales force through the use of an extensive network of over 100 agents and distributors.  A key sales channel for the Company’s water harvesting products are agricultural field days in Australia.  Agricultural field days are held in most rural areas once or twice per year and are used by rural customers to purchase a variety of hardware products by attending a single event.  The Company also uses limited radio and television advertising to promote its water harvesting products and maintain brand recognition throughout Australia.

Manufacturing Operations

The Company’s vertically integrated manufacturing operations enable the Company to control each step in the manufacturing process, including product design and engineering and design and production of many of its own dies, tools, molds and fixtures.  The vertically integrated manufacturing operations apply to both the communications equipment and water product lines.

The Company’s manufacturing expertise enables it to modify its product lines to meet changing market demands, rapidly and efficiently produce large volumes of products, control expenses and ensure product quality.  Management considers the Company’s manufacturing expertise a distinct and significant competitive advantage, providing it with the ability to satisfy the requirements of major customers with relatively short lead-times by promptly booking and shipping orders.

The Company owns a majority of its manufacturing equipment.  Manufacturing processes are performed by trained Company personnel.  These manufacturing processes include injection molding, structural foam molding, rotational molding, metal fabrication, rubber injection, transfer and compression molding, and termination block fabrication.  The Company has implemented several comprehensive process and quality assurance programs, including continuous monitoring of key processes, regular product inspections and comprehensive testing.

The Company’s manufacturing, distribution and office facilities as of December 31, 2007, include approximately 371,000 square feet used in the Americas segment, net of 53,000 square feet that the Company sub-leases to a third party, and 145,000 square feet used by the International segment.

Product Development and Engineering

The Company’s product development and engineering staff designs and tests the Company’s products and continues to build on its core competencies and knowledge in telecommunications outside plant and water harvesting products. As a direct result, the Company has been able to develop a broad series of superior products designed to meet the specific needs of customers.  Distinguishing characteristics of the Company’s products include:

·Advanced mechanical innovations providing unique application-specific performance and feature sets;

·Sub-surface network access systems;

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·Modular metal fabricated enclosure product line covering multiple applications;

·Effective heat dissipation qualities for enclosure products;

·Advanced copper IDC connectivity products;

·A superior environmental sealing and protection system in enclosure products that, unlike many competitors’ products, does not require gels, compounds or other methods to maintain the required seal;

·Product designs allowing communications equipment technicians easy access through covers that can be removed to fully expose the enclosed electronics;

·Compatibility with a variety of communications equipment signal delivery network architectures;

·Versatility of design to accommodate communications network growth through custom hardware and universal mounting systems that adapt to a variety of new electronic hardware;

·Excellent protection and management of optical fibers and cables;

·Thermoplastic Epoxy Coating that bonds directly to metal hardware and protects against rust and deterioration;

·High strength and UV protected water storage products;

·Underground water storage products; and

·A complete line of water storage accessories products, including filtration, pumps and connection devices.

The Company’s product development approach is applications-based and customer driven.  A team comprised of engineering, marketing, manufacturing and direct sales personnel work together to define, develop and deliver comprehensive systems solutions to customers, focusing on the complete design cycle from product concept through tooling and high-volume manufacturing.  The Company is equipped to conduct many of its own product testing requirements for performance qualification purposes, enabling it to accelerate the product development process.  The Company spent $1.9 million in 2007, $2.2 million in 2006, and $2.4 million in 2005 on research and development.

Customers and Backlog

The Company sells its telecommunications-related products directly to broadband operators and telephone companies throughout the world, principally within developed nations.  The Company sells its products to OEMs on a global basis.  The Company sells its water harvesting products in Australia directly to end users in addition to retailers, wholesalers, distributors and agents. During 2007, the Company’s five largest customers accounted for 33% of total net sales. In 2007, the Company’s five largest customers by sales in the United States were Verizon, Comcast, Time Warner, Trinet, and Cox. During 2006, the Company’s five largest customers accounted for 29.4% of total net sales. In 2006, the Company’s five largest customers by sales in the United States were Verizon, Comcast, Time Warner, Cox, and Bright House Networks.  There were no customers that accounted for more than 10% of the Company’s net sales for 2007 or 2006.  In international markets, the Company’s five largest customers in 2007 by sales were McCrackens (Australia), Stratco (Australia), Telstra (Australia), Shaw (Canada), and British Telecom (UK).   The Company’s five largest customers in international markets in 2006 by sales were Telstra (Australia), British Telecom (UK), Shaw (Canada), Rogers (Canada) and Middencorp Electric (Australia).

The Company has historically operated with a relatively small backlog. Sales and operating results in any quarter are primarily dependent upon orders booked and products shipped in the quarter.  The Company’s customers generally do not enter into long-term supply contracts providing for future purchase commitments of the Company’s products.  Rather, the Company believes that many of its customers periodically review their supply relationships and adjust buying patterns based upon their current assessment of the products and pricing available in the marketplace.  From fiscal period to fiscal period, significant changes in the level of purchases of the Company’s products by specific customers can and do result from this periodic assessment.  Customers of water products in Australia are typically rural business owners that may keep their product for several years before making a repeat purchase, as well as distributors that buy in quantity and market the Company’s products.

Intellectual Property

The Company owns substantially all of the patents and other technology employed by it in the manufacture and design of its products.  The Company’s patents, which expire through the year 2026, cover various aspects of the Company’s products.  In addition, the Company has certain trade secrets, know-how and trademarks related to its technology and products.

Management does not believe any single patent or other intellectual property right is material to the Company’s success as a whole.  The Company maintains an intellectual property protection program designed to preserve its intellectual property assets.

Competition

Telecommunications.  The telecommunications industry is highly competitive.  The Company’s competitors include companies that are much larger than the Company, such as Tyco, 3M, Emerson, and Corning, in addition to competitors similar in size to the Company, such as Carson Industries.  The Company believes its competitive advantages include its ability to service national and multi-national customers, its direct sales force, its specialized engineering resources and its vertically integrated manufacturing operations.

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Management believes the principal competitive factors in the telecommunications equipment market are customer service, new product development capabilities, price, product availability, and product performance.

Competitive price pressures are common in the industry.  In the past, the Company has responded effectively to competition with cost controls through vertical integration utilizing advanced manufacturing techniques, cost-effective product designs and material selection, and an aggressive procurement approach.

In the past, certain of the Company’s telecommunications customers have required relatively lengthy field testing of new products prior to purchasing such products in quantity.  While field testing can delay the introduction of new products, it can also act as a competitive advantage for those products tested and approved.

Water Harvesting.  The water storage products industry in Australia is characterized by a few large competitors, including Hills Industries, Nylex and Clark Tanks, and a large number of smaller, regional competitors.  The Company believes its competitive advantages include its nationally recognized brand, high-volume production capacity, manufacturing expertise, product design, marketing and sales expertise and its nationwide transportation capabilities.

Management believes that the principal competitive factors in the water storage industry are product quality, manufacturing capacity, and geographic location for logistics support, technical support and customer service.  The multiple manufacturing plant locations, combined with urban distribution centers, provide nationwide market coverage in the industry.

Competitive price pressures are prevalent in this industry.  The Company has responded to these with ongoing process improvements, design optimization and targeted procurement programs.  In the first half of 2007, high demand for products nationwide and related long lead times experienced by most producers, eased some of the pricing pressures.

The existing customer base is widely dispersed throughout the rural market areas.  Promotion and awareness of the Company’s products and services are strongly reinforced.  Long-term direct marketing programs, including media advertising, radio and television, and high profile promotion at exhibitions, have been developed by the Company over many years.  These marketing programs have established strong brand equity, which creates a competitive advantage in several significant market areas.

Raw Materials; Availability of Complementary Products

The principal raw materials used by the Company are thermoplastic resins, neoprene rubbers, hot and cold rolled steel, stainless steel, copper and brass.  The Company also uses certain other raw materials, such as fasteners, packaging materials and communications cable.  Management believes the Company has adequate sources of supply for the raw materials used in its manufacturing processes and it attempts to develop and maintain multiple sources of supply in order to extend the availability and encourage competitive pricing of these materials.

Most plastic resins are purchased under individual purchase orders based on price and availability at the time of order.  Neoprene rubbers are manufactured using the Company’s proprietary formulas.  Metal products are supplied in standard stock shapes, coils and custom roll forms.

The Company also relies on certain other manufacturers to supply products that complement the Company’s own product line, such as grade level boxes.  The Company believes there are multiple sources of supply for these products.

Employees

As of December 31, 2007, the Company employed 618 people.  The Americas segment includes 403 employees and the International segment includes 215 employees.  The Company considers its employee relations to be good and recognizes its ability to attract and retain qualified employees is an important factor in its growth and development.  None of the Company’s employees is subject to a collective bargaining agreement, and the Company has not experienced any business interruption as a result of labor disputes within the past five years.

Regulation

The telecommunications industry is subject to regulations in the United States and other countries.  Federal and state regulatory agencies regulate most of the Company’s domestic customers.  On February 1, 1996, the United States Congress passed the Telecommunications Act of 1996 that the President signed into law on February 8, 1996.  The Tele-communications Act lifted certain restrictions on the ability of companies, including RBOCs and other customers of the Company, to compete with one another and generally reduced the regulation of the communications industry.

The Company is also subject to a wide variety of federal, state and local environmental laws and regulations.  The Company utilizes, principally in connection with its thermoplastic manufacturing processes, a limited number of chemicals or similar substances that are classified as hazardous.  It is difficult to predict what impact these environmental laws and regulations may have on the Company in the future.  Restrictions on chemical uses or certain

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manufacturing processes could restrict the ability of the Company to operate in the manner that it currently operates or is permitted to operate.  Management believes that the Company’s operations are in compliance in all material respects with current environmental laws and regulations.  Nevertheless, it is possible that the Company may experience releases of certain chemicals to environmental media which could constitute violations of environmental law (and have an impact on its operations) or which could cause the Company to incur material cleanup costs or other damages.  For these reasons, the Company might become involved in legal proceedings involving exposure to chemicals or the remediation of environmental contamination from past or present operations.  Because certain environmental laws impose strict joint and several retrospective liability upon current owners or operators of facilities from which there have been releases of hazardous substances, the Company could be held liable for remedial measures or other damages (such as liability in personal injury actions) at properties it owns or utilizes in its operations, even if the contamination were not caused by the Company’s operations.

The water storage products industry in Australia is also subject to regulation.  National, state and local regulatory agencies regulate and in some cases mandate the use of water storage products to conserve water usage.  Examples include restrictions on the use of potable water for gardening, the washing of cars and other non-essential uses.  In addition, several agencies have offered rebates to those who purchase water storage products to conserve water.  Most recently, government agencies have mandated that new residential dwellings in the states of New South Wales and Victoria require a water conservation device such as a water storage tank.  The city of Sydney is located in New South Wales and the city of Melbourne is located in Victoria.  The effect of these regulations has been to increase the demand for water storage tanks in Australia.  However, there can be no guarantee that these regulations and rebates will remain in existence.

Item 1A. Risk Factors.

Forward Looking Statements

Certain statements contained in this Annual Report on Form 10-K are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”), which provides certain “safe harbor” provisions for forward-looking statements.  All forward-looking statements made in this Annual Report on Form 10-K are made pursuant to the Act.  Forward-looking statements include statements that are predictive in nature; that depend upon or refer to future events or conditions; or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” or variations or negatives thereof or by similar or comparable words or phrases.  In addition, any statements that may be provided by our management concerning future financial performance, ongoing business strategies or prospects or our possible future actions are also forward-looking statements as defined by the Act.  Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties, and assumptions about us; and economic and market factors in the countries in which we do business, among other things.  These statements are not guarantees of future performance, and we have no specific intentions to update these statements.  References to “we,” “us” or “our” are references to the Company.

Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors.  The principal important risk factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, the risk factors discussed below.

Risk Factors

The industries in which we operate are subject to obsolescence and technological change, which could adversely affect our sales. The communications industry is in a state of rapid technological change.  The introduction of new technologies, network architectures or changes in industry standards can render our existing products or products under development obsolete or unmarketable, which could adversely affect our sales.  For example, satellite, wireless and other communication technologies under development or currently being deployed may represent a threat to copper, coaxial and fiber optic-based systems by reducing the need for wire-line networks.  Our growth strategies are designed, in part, to take advantage of opportunities that we believe are emerging as a result of the development of enhanced voice, video, data and other transmission networks and high-speed Internet access in the telecommunications industry.  Reductions in demand resulting from these emerging trends or failure of our products to continue to receive market acceptance could adversely affect our sales.

Increases in raw materials prices may cause our results of operations to suffer.  Our cost of sales, gross margins and results of operations have been and may continue to be materially affected by increases in the market prices of the raw materials used in our manufacturing processes.  In particular, the products we manufacture for sale in both our communications infrastructure market and our water storage market are primarily composed of polyethylene resins, which are derived from petroleum-based commodities.  The increasing price of these commodities has significantly increased our raw materials cost within these markets and, as a result, has significantly reduced our gross margins.

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Because we are limited in our ability to pass on incremental price increases to our customers, and because we do not engage in hedging transactions for our raw materials, we may not be able to effectively offset increases in the prices of raw materials.  Accordingly, continued increases in these costs, particularly continued increases in the cost of oil, will continue to reduce our gross margins and negatively impact our results of operations.

A significant reduction in new product development could negatively affect our business and results of operations.  A significant factor in our ability to grow and remain competitive will be our ability to anticipate changes in technology, industry standards and customer preferences, and to successfully develop and introduce new products on a timely basis.  New product development often requires long-term forecasting of market trends, development and implementation of new designs and processes, and substantial capital commitment.  Trends toward consolidation of the communications industry and convergence of technologies may require us to quickly adapt to rapidly changing market conditions and customer requirements.  Trends in consumer preferences in Australia for the aesthetic design and other attributes of water storage tanks may require us to redesign or develop new water tanks and accessory products.

Our manufacturing and marketing expertise has enabled us to successfully develop and market new products in the past.  However, any failure by us to anticipate or respond in a cost-effective and timely manner to technological developments or changes in industry standards or customer requirements, or any significant delays in product development or introduction, could have a material adverse effect on our business, operating results and financial condition.

We are dependent on a small number of customers for a significant percentage of sales.  The telecommunications industry is the largest industry in which we operate and is highly concentrated. A relatively small number of customers account for a large percentage of our available market.  Consequently, our five largest customers accounted for 33% and 29.4% of our total net sales in 2007 and 2006, respectively.  There were no customers greater than 10% of our total net sales in 2007 or 2006.  Mergers and acquisitions in the telecommunications industry, which are expected to continue, not only increase the concentration of the industry and of our customer base, but also from time to time delay customers’ capital expenditures as newly merged service providers consolidate operations.  In the event one of our major customers was to terminate purchases of our products, our operating results would be adversely affected.

A significant reduction in capital spending patterns of telecommunications industry service providers could adversely affect our results of operations.  Although we diversified our business with the acquisition of Bushman Tanks, we expect that sales to the telecommunications industry will continue to represent a substantial portion of our total sales.  Demand for products within this industry depends primarily on capital spending by service providers for constructing, rebuilding, maintaining or upgrading their systems.  The amount of capital spending and, therefore, our sales and results of operations, are affected by a variety of factors, including general economic conditions, the rate of new home construction,  access by service providers to financing, government regulation of service providers, demand for services and developments in the telecommunications technology.  While the industry generally experienced substantial growth in the late 1990’s, since 2001 the telecommunications equipment industry has been materially adversely affected by service providers’ reductions of their overall capital expenditures.

Our success is dependent upon continued demand by the communications industry for products used in signal transmission systems, which may be affected by factors beyond our control, including the convergence of video, voice, and data transmission systems occurring within the broadband and telephone markets, continuing consolidation of companies within those markets and the provision of Internet access, and other bandwidth intensive services, by broadband operators and local telephone companies.  A reduction in demand for products used in signal transmission systems could adversely affect our sales and results of operations.

We operate with a relatively small backlog amount, and accordingly, any change in customer buying patterns may adversely affect our results of operations.  Our customers typically require prompt shipment of our products within a narrow timeframe.  As a result, we have historically operated with a relatively small backlog.  Sales and operating results in any quarter are principally dependent upon orders booked and products shipped in that quarter.  Further, our customers generally do not enter into long-term supply contracts providing for future purchase commitments for our products.  These factors, when combined with our operating leverage and the need to incur certain capital expenditures and expenses, in part based upon the expectation of future sales, may place our operating results at risk to changing customer buying patterns.  If sales levels in a particular period do not coincide with our expectations, operating results for that period may be materially and adversely affected.

Disruptions or delays in obtaining certain components of our products could disrupt the manufacture of our products and cause our sales and results of operations to suffer.  In order to position ourselves as a full-line product supplier, we rely on certain manufacturers to supply products, including major subcomponents that complement the products manufactured by us. Although we believe there are multiple sources of supply for these products, disruptions or delays in the supply of such products could have a material adverse effect on sales of our own products, which, in turn, could negatively affect our results of operations.

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Increases in the cost, and interruption in the availability, of energy may adversely impact our sales and result of operations.  Our cost of sales may be materially affected by increases in the market prices of electricity, natural gas and water used in our manufacturing processes.  California is the site of our largest manufacturing operation.  The energy costs of California manufacturing firms may increase.  There exists the possibility of interruption(s) in the supply of energy to California’s manufacturing firms.  There can be no assurance that our energy costs can be passed on to our customers through increases in product prices.  Further, disruptions or delays in the supply of electricity, natural gas and water to us could have a material adverse effect on sales of our products.

We may not be successful in identifying and acquiring suitable acquisition targets and integrating acquired companies.There can be no assurance that we will be able to identify and acquire attractive acquisition candidates.  In the event of an acquisition by us, we cannot provide assurance that we will profitably manage any of the acquired businesses or successfully integrate such acquired businesses into our business without substantial costs, delays or other problems.  Acquisitions involve a number of special risks, including, but not limited to, adverse short-term effects on our reported financial condition or results of operations, diversion of management’s attention, dependence on retention, hiring and training of key personnel, risks associated with unanticipated problems or liabilities and amortization of acquired intangible assets, some or all of which could have a material adverse effect on our business, financial condition or results of operations.

In addition, there can be no assurance that any businesses we acquire in the future will be profitable at the time of acquisition or will achieve sales and profitability justifying our investment therein or that we will realize the synergies expected from such acquisitions.

The failure to obtain any or all of the desired results from acquisitions could have a material adverse effect on our business, financial condition and results of operations.

As a result of the fixed costs of operating our business, a reduction in sales or sales growth could disproportionately affect our financial results.  Because the fixed costs of facilities, product development, engineering, tooling and manufacturing are a relatively high percentage of total costs, our ability to operate profitably is dependent on generating a sufficient volume of product sales, thereby spreading fixed costs over the sales base.  Due to this “operating leverage,” a reduction in sales or the rate of sales growth has had in the past and could have in the future a disproportionately adverse effect on our financial results.

Our operating results may fluctuate significantly from quarter to quarter due to seasonal selling patterns and other factors.  Our business is seasonal in nature, with the first and fourth quarters generally reflecting lower sales due to the impact of adverse weather conditions on construction projects that may alter or postpone the needs of customers for delivery of our telecommunications products.  Furthermore, a large portion of our sales are linked to discretionary capital spending budgets of our customers, which may exacerbate the seasonality of our revenue when customers implement internal cost reduction measures.  In addition, first quarter sales may also reflect telecommunication customer delays in implementation of their annual capital expenditure plans.  The water storage tank business in Australia is traditionally slow during the fourth quarter due to holidays and restrictions on the number of days in which large trucks can utilize major roads to deliver water storage tanks to customers.  Our operating results may also fluctuate significantly from quarter to quarter due to several other factors, including the volume and timing of orders from and shipments to major customers, the timing of new product introductions and deployment as well as the availability of products by us or our competitors, the availability and amount of fiscal incentives, weather conditions in Australia, which may affect the sales of water storage tanks as a large percentage of sales occur at outdoor agricultural farm fairs, the overall level of capital expenditures by broadband operators and telephone companies, market acceptance of new and enhanced versions of our products, variations in the mix of products we sell, and the availability and costs of raw materials.

Our international operations subject us to the social, political and economic risks of doing business in foreign countries.  International sales, including export sales from U.S. operations, accounted for 48.7%, 49.8%, and 47.5% of our net sales in 2007, 2006 and 2005, respectively.  The percentage of international sales to our total sales has increased with the acquisition of the Bushman Tanks business.  Due to our international sales, we are subject to the risks of conducting business internationally, including unexpected changes in or impositions of legislative or regulatory requirements, fluctuations in the U.S. dollar, which could materially adversely affect U.S. dollar revenues or operating expenses, tariffs and other barriers and restrictions, longer collection cycles, greater difficulty in accounts receivable collection, potentially adverse taxes and the burdens of complying with a variety of international laws and communications standards.  We are also subject to general geopolitical risks, such as political and economic instability and changes in diplomatic and trade relationships, in connection with our international operations.  There can be no assurance that these risks of conducting business internationally will not have a material adverse effect on our business.

We face competition in the industries in which we sell our products.  The industries in which we operate are highly competitive.  The level and intensity of competition may increase in the future.  Our competitors in the telecommunications industry include companies that are much larger than us, such as Tyco, 3M, Emerson and Corning.  Our business strategy includes increased focus on telephone connectivity.  There can be no assurance that we will be able to compete successfully against our competitors, most of whom have access to greater financial resources than we do.  Our competitors in the Australian water storage tank business include Hills Industries, Nylex and Clark Tanks.  There can be no assurances that we will be able to successfully compete against these competitors or increase our sales by obtaining a higher market share.

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A disruption at our Temecula, California manufacturing facility could adversely affect our business and results of operations.  The majority of our manufacturing operations are currently located at our facilities in Temecula, California, which also includes our principal warehouse and corporate office operations.  Our success depends in large part on the orderly operation of these facilities.  Although we maintain property and business interruption insurance on this facility, a fire, earthquake, power interruption or other disaster could materially and adversely affect our business and results of operations.

Inability to renew our related party leases could adversely affect our business.  We currently lease a portion of our Temecula facilities from the Channell Family Trust, one of our principal stockholders, of which Jacqueline M. Channell, our Chairman of the Board and corporate secretary, is sole trustee.  In addition, the Company also leases a parcel of land, adjacent to its headquarters building, from William H. Channell Jr., President and Chief Executive Officer and his wife, Carolyn Channell.  We believe the terms of the leases for our Temecula, California facilities are no less favorable than would be available from an unrelated third party after arm’s length negotiations.

In addition, we currently lease three facilities in Australia from the former owners of Bushman Tanks, who are also stockholders of ours.  Although we believe these leases are in total in excess of fair market value by $27,000 per year, we do not believe that amount is significant compared to total manufacturing costs and thus does not place us at a competitive disadvantage.

Although our leases expire in, or have renewal options through, the year 2025, there can be no assurance that we will be able to agree on additional renewal terms for the properties currently leased by us. Our failure to renew the leases would require us to relocate our existing facilities, which could have a material adverse effect on our business, financial condition or results of operations.

The termination of transportation and logistics services by the primary freight provider for our Bushman Tanks business could continue to adversely impact our results of operations.  As of October 12, 2006, the primary freight provider for our Bushman Tanks water storage tank manufacturing and distribution business unilaterally withdrew its transportation and logistics services.  Accordingly, the agreement with the freight provider has been terminated, and Bushman Tanks has reserved its rights in relation to any damages it suffers as a result of the termination of such services.  The freight provider claims that Bushman Tanks has breached the agreement.  Although we do not believe Bushman Tanks has breached the terms of the agreement, we have accrued for amounts in dispute.  If the dispute with the freight provider cannot be resolved, either Bushman Tanks or the freight provider may pursue legal action. Although no litigation has been initiated, the legal cost associated with potential litigation related to the termination of such services, and any settlements as a result of legal disputes related thereto, could negatively affect our working capital and results of operations.

We are subject to governmental laws and regulations, which could adversely affect our business. The communications industry is subject to regulation in the United States and other countries.  Federal and state agencies regulate most of our domestic customers. Changes in current or future laws or regulations, in the United States or elsewhere, could materially adversely affect our business.  Government regulation in Australia has increased demand for water storage tanks by encouraging the installation of water storage tanks or other water conservation products in new homes built in selected regions.  There can be no assurances that these regulations will remain in effect.  A lessening of these regulations and related incentives most likely would lead to lower demand for water storage products and thus negatively affect our sales.

If we are unable to attract and retain key management and other personnel, our business and results of operations could be adversely affected.  Our business has required and is expected to continue to require significant resources in terms of personnel, management and other infrastructure.  Our future success depends in part on our ability to attract and retain key executive, engineering, marketing and sales personnel.  Our key personnel include William H. Channell, Jr., President and Chief Executive Officer and our other executive officers.

In addition, our ability to manage effectively the volatility of the telecommunications industry requires us to attract, train, motivate and manage new employees successfully, to integrate new employees into our overall operations and to continue to improve our operational, financial and management information systems. Because the market for qualified personnel in the communications industry is competitive, loss of our key personnel could have a material adverse effect on us.   Likewise, our inability to attract new employees, or to train, manage or retain such employees, could adversely affect our results of operations.

Environmental laws and regulations could limit our ability to operate as we are currently operating and could result in additional costs.  We are subject to a wide variety of federal, state and local environmental laws and regulations and use a limited number of chemicals that are classified or could be classified as hazardous or similar substances.  Although we believe that our operations are in compliance in all material respects with current environmental laws and regulations, our failure to comply with such laws and regulations could limit our ability to operate as we are currently operating and could result in fines or penalties, which, in turn, could have a material adverse effect on our business and results of operations.

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Weather patterns in Australia may affect the demand for water storage tanks.  Our business may be affected by adverse changes in weather patterns in Australia that may affect the demand for water storage tanks.  Prior to 2007, Australia experienced a severe water shortage for several years due to less rainfall, inadequate national infrastructure to store water for use during drought periods and the growth in population in both urban and non urban areas.  Beginning in the latter part of 2007 and continuing into 2008, Australia has received a significant amount of rainfall.  A prolonged period of changed weather patterns providing additional rainfall and lessening the effect of the drought could have a negative impact on the demand for water storage tanks and, accordingly, adversely affect our sales.

Item 1B.  Unresolved Staff Comments.

Not applicable.

Item 2.  Properties.

The Company’s manufacturing, warehouse and office facilities approximate 516,000 square feet worldwide.  In Temecula, California, 265,000 square feet of the total 364,000 square feet are leased from the Channell Family Trust, one of the Company’s principal stockholders, of which Jacqueline M. Channell, the Company’s Chairman of the Board, and Company secretary, is a trustee.  In addition, the Company also leases a parcel of land, adjacent to its headquarters building, from William H. Channell Jr., President and Chief Executive Officer and his wife, Carolyn Channell.  The Temecula facilities are used by the Americas segment. The Company also leases an aggregate of approximately 152,000 square feet of manufacturing, warehouse and office space in Canada, Australia and the United Kingdom. In Australia, 72,000 square feet of manufacturing and distribution space in Dalby, Terang, and Adelaide are leased from the former owners of Bushman Tanks. The Canada facilities are used by the Americas segment and the Australia and United Kingdom facilities are used by the International segment.  The Company considers its current facilities to be adequate for its operations.

Item 3.  Legal Proceedings.

The Company is from time to time involved in ordinary routine litigation incidental to the conduct of its business.  The Company regularly reviews all pending litigation matters in which it is involved and establishes reserves deemed appropriate for such litigation matters.  Management believes that no presently pending litigation matters are likely to have a material adverse effect on the Company’s financial statements or results of operations, taken as a whole.

Item 4.  Submission of Matters to a Vote of Security Holders.

None.

PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The Company’s common stock is listed on the NASDAQ Global Market (formerly the NASDAQ National Market) and is traded under the symbol “CHNL.”  The following table sets forth, for the periods indicated, the high and low sale prices for the Company’s Common Stock, as reported on the NASDAQ Global Market.

	High		Low
Year Ended December 31, 2007:
First Quarter	$	4.27	$	2.93
Second Quarter	5.19		3.67
Third Quarter	6.01		3.35
Fourth Quarter	4.75		1.10
Year Ended December 31, 2006:
First Quarter	$	5.25	$	3.57
Second Quarter	5.00		3.22
Third Quarter	3.48		2.75
Fourth Quarter	3.34		2.38

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The Company has not declared any dividends subsequent to its initial public offering in July 1996.

The Company currently anticipates it will retain all available funds to finance its business.  The Company does not intend to pay cash dividends in the foreseeable future.  Under the terms of the Company’s Loan and Security Agreement, the Company has agreed not to pay any dividends (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”).

As of March 21, 2008, the Company had 9,544,134 shares of its Common Stock outstanding, held by approximately 100 stockholders of record.

The disclosure required by Item 201(d) of Regulation S-K is incorporated by reference to the Company’s definitive proxy statement for its 2008 Annual Meeting of Stockholders.

STOCKHOLDER RETURN PERFORMANCE GRAPH

The following is a line graph presentation comparing the Company’s cumulative total return from December 31, 2002 to December 31, 2007 with the performance of the NASDAQ market, the Standard & Poor’s Industrials Index (“S & P Industrials”) and Standard and Poor’s Communications Equipment Index (“S & P Communications Equipment”) for the same period.

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Item 6.  Selected Financial Data.

The selected consolidated financial data presented below as of and for each of the five years in the period ended December 31, 2007, have been derived from the Company’s audited consolidated financial statements, which as of December 31, 2006 and 2007 and for the years ended December 31, 2005, 2006 and 2007 appear elsewhere herein. The data should be read in conjunction with the financial statements, related notes and other financial information included therein (amounts in thousands, except per share data).

	Year Ended December 31,
	2007			2006			2005			2004			2003
OPERATING DATA:
Net sales	$	133,163		$	109,138		$	116,065		$	102,200		$	78,100
Cost of goods sold	92,240			76,055			81,060			72,151			53,960
Gross profit	40,923			33,083			35,005			30,049			24,140
Operating expenses
Selling	22,131			21,993			22,407			16,345			11,028
General and administrative	14,868			12,500			11,688			8,811			7,837
Research and development	1,865			2,222			2,356			2,109			1,775
Restructuring charge (recovery)	—			—			—			(690		)	1,565
Goodwill impairment charge	—			4,829			—			—			—
Asset impairment charge	—			—			97			—			1,238
	38,864			41,544			36,548			26,575			23,443
Income (loss) from operations	2,059			(8,461		)	(1,543		)	3,474			697
Interest income (expense), net	(1,323		)	(857		)	(495		)	(489		)	(571		)
Income (loss) before income tax expense (benefit)	736			(9,318		)	(2,038		)	2,985			126
Income taxes (benefit)	484			(777		)	5,012			(791		)	200
Net income (loss) before minority interest	252			(8,541		)	(7,050		)	3,776			(74		)
Minority interest in income (loss) of subsidiaries	(21		)	(1,712		)	(170		)	167			—
Net income (loss)	$	273		$	(6,829	)	$	(6,880	)	$	3,609		$	(74	)
NET INCOME (LOSS) PER SHARE:
Basic	$	0.03		$	(0.72	)	$	(0.73	)	$	0.39		$	(0.01	)
Diluted	$	0.03		$	(0.72	)	$	(0.73	)	$	0.39		$	(0.01	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic	9,544			9,543			9,448			9,203			9,126
Diluted	9,545			9,543			9,448			9,223			9,126
BALANCE SHEET DATA:
Current assets	$	33,049		$	29,457		$	25,022		$	37,686		$	30,407
Total assets	66,847			61,878			60,706			78,481			53,435
Long-term obligations (including current maturities)(1)	18,153			14,245			7,624			8,840			3,906
Stockholders’ equity	31,764			30,150			35,959			42,484			36,816
OTHER DATA:
Gross margin(2)	30.7		%	30.3		%	30.2		%	29.4		%	30.9		%
Operating margin(3)	1.6			(7.8		)	(1.3		)	3.4			0.9
Capital expenditures (excluding capital leases)	3,917			3,871			4,339			3,281			1,203
Cash provided by (used in):
Operating activities	1,596			(2,287		)	1,672			9,395			7,127
Investing activities	(3,754		)	(3,765		)	(4,315		)	(20,025		)	1,154
Financing activities	2,228			5,564			201			7,383			(2,662		)

(1)	Includes all interest bearing debt and capital lease obligations.
(2)	Gross margin is gross profit as a percentage of net sales.
(3)	Operating margin is income (loss) from operations as a percentage of net sales.

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Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Introduction and Overview

The Company is a designer and manufacturer of telecommunications equipment supplied to communications network operators worldwide and water storage tanks distributed in consumer markets throughout Australia. In late 2007, the Company introduced products to serve North American water harvesting markets.  Major product lines include a complete line of thermoplastic and metal fabricated enclosures, advanced copper termination and connectorization products, fiber-optic cable management systems and polyethylene water storage tanks.

The Company has two reportable segments, Americas and International.  The Americas segment includes the Company’s operations in the United States and Canada.  The International segment includes the Company’s operations in Australia (including the Bushman Tanks business) and the United Kingdom.

During the last six years, demand for communications infrastructure equipment has fluctuated dramatically.  At various times in the past there have been significant slowdowns in capital spending by both cable and telecom network operators due to several factors including, but not limited to, service provider consolidation, delays in outside plant upgrade/rebuild projects, and enhancing free cash flow to strengthen their balance sheets and pay down debt.  These changes have had a significant negative impact on overall demand for infrastructure products, and at various times have directly reduced demand for the Company’s products and increased price competition within its industry, which has led to reductions in the Company’s revenues and contributed to the Company’s reported operating losses in 2006 and 2005.

Within the water storage portion of the Company’s business, demand continues to grow in Australia due to the country’s generally arid climate and the widespread water conservation efforts.  Demand for the Company’s water storage products is also driven by regulatory factors at the local, state, and federal government levels.  However, periods of significant rainfall could negatively affect the sales of the Company’s product.

Within both the communications infrastructure market and water storage market, the high price of petroleum-based commodities has had a negative impact on the Company’s gross margins.  The products manufactured in both of the markets in which the Company operates are primarily composed of polyethylene resins, which are primarily derived from commodities such as oil and natural gas.  The Company is limited in its ability to pass on incremental price increases to its customers.  Continued petroleum-based commodity price increases would have a negative impact on the Company’s performance.

The Company continues to invest in the development of new communications infrastructure products and water storage tanks and believes that in both markets it has the leading product portfolios in terms of performance and features.

The Company measures its success by monitoring net sales and gross margins with a near-term goal of maintaining positive cash flows, while striving to achieve long-term operating profits.  The Company believes that there continue to be long-term growth opportunities within both the communications infrastructure equipment and water tank markets.

Critical Accounting Policies

The Company’s Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management bases its estimates on historical experience and on assumptions that are believed to be reasonable under the circumstances and revises its estimates, as appropriate, when changes in events or circumstances indicate that revisions may be necessary. Although these estimates are based on management’s knowledge of and experience with past and current events and on management’s assumptions about future events, it is possible that they may ultimately differ materially from actual results.  However, the Company is not currently aware of any reasonably likely events or circumstances that could result in materially different results from the current estimates.

The Company believes the following critical accounting policies are the most significant to the presentation of its financial statements and require the most subjective and complex judgments.  These matters, and the judgments and uncertainties affecting them, are also essential to understanding the Company’s reported and future operating results.  See Note B to the Consolidated Financial Statements for a more comprehensive discussion of the Company’s significant accounting policies, including recent accounting pronouncements.

Revenue Recognition and Accounts Receivable Reserves.  Revenues are recognized when title passes and the risks and rewards of ownership have passed to the customer, based on the terms of sale.  Title passes generally upon shipment.  Provisions for estimated sales returns are based on the Company’s historical sales returns experience.  Provisions for uncollectible accounts are made based upon specific percentages of the past due outstanding accounts receivable aging categories or upon specific circumstances.  Development of the specific percentages requires a high

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degree of judgment and the use of various internal and external factors. An adverse change in the financial condition of a significant customer or group of customers could materially affect management’s estimate of the percentages for provisions for uncollectible accounts.

Inventories.  The estimates of excess and obsolete inventory are based on management’s assumptions about and analysis of relevant factors including historical sales and usage of items in inventory, current levels of orders and backlog, forecasted demand, product life cycle and market conditions.  Management personnel play a key role in the Company’s inventory risk assessment process of providing updated sales forecasts, managing new product introductions and working with manufacturing to maximize recovery of excess inventory.  If actual market conditions become less favorable than anticipated by management, additional allowances for excess and obsolete inventory could be required.  In the event management adjusts estimates such as forecasted sales or expected product lifecycles, the value of the Company’s inventory may become understated or overstated and recognition of such understatement or overstatement will affect cost of sales in a future period, which could materially affect the Company’s operating results and financial position.

Impairment of Long-Lived and Intangible Assets.   The Company accounts for goodwill and other intangible assets in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 requires that goodwill and identifiable intangible assets with indefinite useful lives be tested for impairment at least annually. SFAS No. 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives and reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

The Company assesses the recoverability of the carrying value of goodwill and other intangible assets with indefinite useful lives at least annually or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable.  The impairment test consists of a comparison of the fair value of an intangible asset with its carrying amount.  If the carrying amount of an intangible asset exceeds its fair value, then an impairment loss is recognized in an amount equal to the excess.  Recoverability of goodwill is measured at the reporting unit level based on a two-step approach. First, the carrying amount of the reporting unit is compared to the fair value as estimated by the future net discounted cash flows expected to be generated by the reporting unit. To the extent that the carrying value of the reporting unit exceeds the fair value of the reporting unit, a second step is performed, wherein the reporting unit’s assets and liabilities are valued. The implied fair value of goodwill is calculated as the fair value of the reporting unit in excess of the fair value of all non-goodwill assets and liabilities allocated to the reporting unit. To the extent the reporting unit’s carrying value of goodwill exceeds its implied fair value, an impairment exists and must be recognized. This process requires the use of discounted cash flow models that utilize estimates of future revenue and expenses as well as the selection of appropriate discount rates.  To measure the impairment of indefinite-lived intangibles, the Company uses the relief from royalty method in its valuation.  Under the relief from royalty method, an estimated royalty rate is applied against an estimate of future revenues, discounted to present value, to determine the savings associated with owning the trademark intangible.  The impairment test consists of a comparison of the fair value of an intangible asset with its carrying amount.  If the carrying amount of an intangible asset exceeds its fair value, then an impairment loss is recognized in an amount equal to that excess.  There is inherent uncertainty in these estimates, and changes in these factors over time could result in an impairment charge.  Goodwill impairment tests performed on the Bushman Tanks reporting unit as of December 31, 2007, 2006 and 2005 indicated that no impairment charges were required, while the June 30, 2006 test resulted in an impairment of $4,829.  Any material change in the estimates of future sales, gross profit or operating expenses individually or collectively would result in additional impairment.

Income Taxes.  Income taxes are recorded for each of the jurisdictions in which the Company operates. Management records the actual current income tax payable and assesses the temporary differences resulting from differing treatment of items, such as reserves and accruals, for tax and accounting purposes. These differences result in deferred tax assets and liabilities which are included within the consolidated balance sheet.  In addition, SFAS 109, Accounting for Income Taxes, requires recognition of future tax benefits attributable to tax net loss carryforwards and deductible temporary differences between financial statement and income tax bases of assets and liabilities.

Deferred tax assets must be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the benefits will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible.  Since the Company has had cumulative net operating losses in its domestic operations in recent years, its ability to use forecasted future earnings is diminished.  As a result, management concluded, as of December 31, 2005 and 2006, that a full valuation allowance against the domestic net deferred tax asset was appropriate.  The Company continues to recognize a full valuation allowance against its net domestic deferred tax asset at December 31, 2007.  Management has also determined that a full valuation allowance is required on the net operating loss carryforward in one of the Asian operations within its International segment because of uncertainty regarding its realization.  No valuation was required on the remaining foreign net deferred tax asset as management has determined that it is more likely than not to be realized.  The ultimate realization of the remaining net foreign deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences

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become deductible. Significant management judgment is involved in assessing the Company’s ability to realize any future benefit from deferred tax assets. In the event that actual results differ from management estimates and management adjusts these estimates in future periods, the Company’s operating results and financial position could be materially affected.

Foreign Currency Translation.  The Company has foreign subsidiaries that together accounted for 48.6% of the Company’s net revenues and 61.0% of the Company’s assets as of and for the year ended December 31, 2007. In preparing the Company’s consolidated financial statements, the Company is required to translate the financial statements of its foreign subsidiaries from the currencies in which they keep their accounting records into United States dollars. This process results in exchange gains and losses which, under relevant accounting guidance, are either included within the Company’s statement of operations or as a separate part of the Company’s net equity under the caption “accumulated other comprehensive income.”

Under relevant accounting guidance, the treatment of these translation gains or losses depends upon management’s determination of the functional currency of each subsidiary. This determination involves consideration of relevant economic facts and circumstances affecting the subsidiary. Generally, the currency in which the subsidiary transacts a majority of its transactions, including billings, financing, payroll and other expenditures, would be considered the functional currency. However, management must also consider any dependency of the subsidiary upon the parent and the nature of the subsidiary’s operations.

If management deems any subsidiary’s functional currency to be its local currency, then any gain or loss associated with the translation of that subsidiary’s financial statements is included in accumulated other comprehensive income. However, if management deems the functional currency to be United States dollars, then any gain or loss associated with the translation of these financial statements would be included within the Company’s statement of operations.

If the Company disposes of any of its subsidiaries, any cumulative translation gains or losses would be realized into the Company’s statement of operations. If management determines that there has been a change in the functional currency of a subsidiary to United States dollars, then any translation gains or losses arising after the date of the change would be included within the Company’s statement of operations.

Based on management’s assessment of the factors discussed above, the Company considers the functional currency of each of its international subsidiaries to be each subsidiary’s local currency.

Results of Operations

The following table sets forth the Company’s operating results for the periods indicated expressed as a percentage of net sales.

	Year Ended December 31,
	2007		2006		2005
Net Sales	100.0	%	100.0	%	100.0	%
Cost of Sales	69.3		69.7		69.8
Gross Profit	30.7		30.3		30.2
Selling	16.6		20.2		19.3
General and administrative	11.1		11.5		10.1
Research and development	1.4		2.0		2.0
Impairment of goodwill	—		4.4		—
Asset impairment charge	—		—		0.1
Income (loss) from operations	1.6		(7.8	)	(1.3	)
Interest expense, net	1.0		(0.8	)	(0.4	)
Income (loss) before income tax expense (benefit)	0.6		(8.6	)	(1.7	)
Income taxes (benefit)	0.4		(0.7	)	4.3
Net income (loss) before minority interest	0.2		(7.9	)	(6.0	)
Minority interest	—		(1.6	)	(0.1	)
Net income (loss)	0.2	%	(6.3	)%	(5.9	)%

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Comparison of Year Ended December 31, 2007 with Year Ended December 31, 2006

Net Sales.  Net sales increased $24.1 million or 22.1% from $109.1 million in 2006 to $133.2 million in 2007.   The increase was primarily due to higher demand across all product lines within both of the Company’s reporting segments.

Americas net sales increased $14.7 million or 24.6% from $59.3 million in 2006 to $74.0 million in 2007.  The increase was primarily due to higher demand from the Company’s core telecom and cable customers that have been upgrading their network infrastructures.  Sales to large telecom and service providers fluctuate from period to period based on the status of such customers’ infrastructure projects and therefore are difficult to predict.

International net sales increased $9.4 million or 18.9% from $49.8 million in 2006 to $59.2 million in 2007.  The increase was primarily due increased demand for the Company’s products due to the ongoing drought, regulatory requirements, and incentives in the urban markets of Australia.

Gross Profit.  Gross profit increased $7.8 million from $33.1 million in 2006 to $40.9 million in 2007.  The increase was due to higher gross profit dollars resulting from the higher revenues in both reporting segments of the Company.  Gross profit dollars in the Americas segment increased $3.6 million from $18.2 million in 2006 to $21.8 million in 2007.  Gross profit of $19.1 million in 2007 in the International segment was $4.2 million higher than in 2006.

As a percentage of net sales, gross profit increased from 30.3% in 2006 to 30.7% in 2007.  The increase is primarily due to a higher gross profit percentage in the International segment, which increased from 29.9% in 2006 to 32.4% in 2007.  This increase is primarily as a result of manufacturing cost reductions along with price increases.  Offsetting the increase in the International segment was a decrease in the gross profit percentage in the Americas segment from 30.7% in 2006 to 29.4% in 2007.  This decrease was primarily due to higher raw material costs related to increased commodity prices and higher direct labor costs as a percentage of sales.

Selling.  Selling expenses increased slightly from $22.0 million in 2006 to $22.1 million in 2007.

As a percentage of net sales, selling expenses decreased from 20.2% in 2006 to 16.6% in 2007.  The lower percentage is primarily due to the small increase in total selling expenses compared to the increase in sales.  The Company was able to keep selling expenses down primarily as a result of increased efficiencies associated with the management and operation of the Company’s international shipping activities.

General and Administrative.  General and administrative expenses were $14.9 million in 2007, an increase of $2.4 million or 19.2% from 2006.  The increase is due primarily to higher compensation and benefits expense of $1.7 million due to increased head count, higher expenses related to the upgrading of the Company’s Enterprise Resource Planning systems of $0.8 million and start-up costs related to the development of the water storage business in the Americas segment of $0.2 million.  These increases were partially offset by decreases in other general and administrative expenses.

As a percentage of net sales, general and administrative expenses decreased from 11.5% in 2006 to 11.2% in 2007.

Research and Development.  Research and development expenses were $1.9 million in 2007, a decrease of $0.3 million or 13.6% from 2006.  Spending on new product development programs in 2007 was slightly less than the previous year due to a higher level of capitalization of internal costs in the development of new tools and equipment associated with new designs of products.

As a percentage of net sales, research and development expenses decreased from 2.0% in 2006 to 1.4% in 2007.

Impairment of Goodwill.  Goodwill impairment expense was $4.8 million in 2006, compared to no impairment in 2007.  The impairment was related to the Company’s Bushman Tanks operation in Australia.  The primary cause for this impairment of goodwill was the decrease in gross margins and operating income in the Bushman Tanks business, which have been negatively impacted as a result of increasing prices in raw materials.  The primary raw materials used in the manufacture of Bushman Tanks products are petroleum-based resins.  The price of these resins has been continually increasing as the price of oil increases.  The valuation methodology for goodwill is summarized in Note B to the Consolidated Financial Statements.

Income (Loss) from Operations.  As a result of the items discussed above, income from operations was $2.1 million in 2007 compared to a loss from operations of ($8.5) million in 2006.  Operating margin as a percent of sales was 1.6% in 2007 compared to (7.8%) in 2006.

Interest Expense, Net.  Interest expense, net of interest income, was $1.3 million in 2007 compared to $0.9 million in 2006 due to the higher level of outstanding debt in 2007.

Income Taxes.  Income tax expense of $0.5 million in 2007 compares to an income tax benefit of ($0.8) million in 2006.  The effective tax rate was 65.8% in 2007 and (8.3%) in 2006.  The Company has a full valuation allowance on the realization of the domestic net deferred tax asset.  Approximately $.04 million of state tax expense has been

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recorded in the results of operations in the U.S. for 2007.  The tax expense recorded in the current year was primarily a result of the income in the Company’s foreign operations.  The tax benefit recorded in 2006 was the result of the loss in the foreign operations.  The low effective tax rate for 2006 was primarily related to the $4,829 charge for the impairment of goodwill, which is a non-deductible item for determining income tax.

Comparison of Year Ended December 31, 2006 with Year Ended December 31, 2005

Net Sales.  Net sales decreased $7.0 million or 6.0% from $116.1 million in 2005 to $109.1 million in 2006.   The decrease was primarily due to the lower demand from the Company’s telecom and cable customers in the Americas segment.

Americas net sales decreased $6.0 million or 9.2% from $65.3 million in 2005 to $59.3 million in 2006.  The decrease was due to the lower volume of sales to the Company’s core telecom and cable customers.  Sales to large telecom and service providers fluctuate period to period based on the status of such customers’ infrastructure projects and therefore are difficult to predict.

International net sales decreased $1.0 million or 1.9% from $50.8 million in 2005 to $49.8 million in 2006.  The decrease was primarily due to the lower volume of sales to the Company’s telecom customers in Australia and Asia due to reduced capital expenditures and slower deployment of certain Company-supplied products.

Sales to Verizon declined in 2006 to slightly less than 10% of Company sales in the period.  Sales to Verizon of $19.9 million in 2005 represented 17.2% of Company sales in the period.  Sales to Verizon have historically fluctuated from year to year.

Gross Profit.  Gross profit decreased $1.9 million from $35.0 million in 2005 to $33.1 million in 2006. The decrease was primarily due to the lower amount of gross profit in the International segment.  Gross profit dollars in the International segment decreased by $2.8 million due to lower sales volume and a lower gross profit percentage due primarily to higher raw material costs.  The decrease in the International segment was partially offset by an increase of $0.9 million in the Americas segment due to a higher gross profit percentage caused by greater leveraging of fixed costs.

As a percentage of net sales, gross profit increased from 30.2% in 2005 to 30.3% in 2006.  The increase is primarily due to a higher gross profit percentage in the Americas segment, which increased from 26.5% in 2005 to 30.7% in 2006.  This increase is primarily due to a stronger mix of the higher margin enclosure product line.  Offsetting the increase in the Americas segment was a decrease in the gross profit percentage in the International segment from 34.8% in 2005 to 29.9% in 2006.  This decrease was primarily due to higher raw material costs related to increased commodity prices, labor inefficiencies associated with the local move of one of the Australian manufacturing operations to a new facility and disruptions caused by the termination of transportation and logistics services by the primary freight provider of Bushman Tanks.

Selling.Selling expenses decreased $0.4 million or 1.8% from $22.4 million in 2005 to $22.0 million in 2006.  The decrease is due to the lower volume of sales.

As a percentage of net sales, selling expenses increased from 19.3% in 2005 to 20.2% in 2006.  The higher percentage is primarily due to the increase in freight costs in both the Americas and International segments due to fuel surcharges in addition to inefficiencies associated with the management and operation of the Company’s international shipping activities.

General and Administrative.  General and administrative expenses were $12.5 million in 2006, an increase of $0.8 million or 6.8% from 2005.  The increase is due primarily to stock-based compensation expense of $0.3 million, lease settlement costs of $0.3 million in the International segment, severance cost of $0.2 million and other various expenses.

As a percentage of net sales, general and administrative expenses increased from 10.1% in 2005 to 11.5% in 2006.  The increase is due to the decreased sales level without a proportional decrease in general and administrative costs that are relatively fixed in nature.

Research and Development.  Research and development expenses were $2.2 million in 2006, a decrease of $0.2 million or 8.3% from 2005.  Spending on new product development programs in 2006 was slightly less than the previous year due to the introduction of fewer communication products.

As a percentage of net sales, research and development expenses remained the same at 2.0% in 2006 and 2005.

Impairment of Goodwill.  Goodwill impairment expense was $4.8 million in 2006, compared to no impairment in 2005.  The impairment was related to the Company’s Bushman Tanks operation in Australia.  The primary cause for this impairment of goodwill was the decrease in gross margins and operating income in the Bushman Tanks business, which have been negatively impacted as a result of increasing prices in raw materials.  The primary raw materials used in the manufacture of Bushman Tanks products are petroleum-based resins.  The price of these resins has been continually increasing as the price of oil increases.  The valuation methodology for goodwill is summarized in Note B to the Consolidated Financial Statements.

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Impairment of Fixed Assets.  There was no impairment of fixed assets in 2006.  In 2005, there was an impairment charge of $0.1 million due to the writedown of some manufacturing equipment in the Americas segment.

Income from Operations.  As a result of the items discussed above, loss from operations increased $6.9 million from ($1.5) million in 2005 to ($8.5) million in 2006.  Operating margin as a percent of sales decreased from (1.3%) in 2005 to (7.8%) in 2006.

Interest Expense, Net.  Interest expense, net of interest income, was $0.9 million in 2006 compared to $0.5 million in 2005.

Income Taxes.  There was an income tax benefit of ($0.8) million in 2006 compared to an income tax expense of $5.0 million in 2005.  The effective tax rate was an income tax benefit of (8.3%) in 2006 and an income tax expense of 246.0% in 2005. The benefit in 2006 was primarily due to the current year loss in foreign operations whereas the expense in 2005 was primarily the result of recognizing a full valuation allowance on the domestic net deferred tax asset.  No benefit was recorded for the 2006 domestic loss due to the full valuation allowance recognized on the net domestic deferred tax asset at December 31, 2006.

Liquidity and Capital Resources

Cash and cash equivalents on December 31, 2007 were $2.1 million, a slight decrease of $0.1 million from the December 31, 2006 balance of $2.2 million.  The decrease was due to cash used for capital expenditures, offset by cash provided by operating activities and financing activities.

Net cash provided by operating activities was $1.6 million during 2007, compared to net cash used in operating activities of ($2.3) million in 2006.  The cash provided by operating activities in 2007 is primarily due to the combination of net income of $0.3 million and the $6.1 million of non-cash deductions most of which is depreciation and amortization, which more than offset the cash used in operating activities as a result of the increase in inventories of $2.7 million, increase in accounts receivable of $0.6 million, and a decrease in accounts payable of $2.2 million.

Net cash used in investing activities was $3.8 million in 2007 and 2006.  During 2007, the Company spent $1.3 million more than the previous year in the Americas segment on new tools and equipment for the production of new products, whereas the Company spent $1.2 million less than the previous year in the International segment, primarily due to a $1.6 million purchase in 2006 of trucks and trailers in association with its transition of transportation and logistics services from an outside freight provider to internally managed operations.

Net cash provided by financing activities was $2.2 million in 2007 compared to net cash provided by financing activities of $5.6 million in 2006.  The increase is due to additional borrowings under the Company’s credit facilities needed to fund operations in 2006 and 2007 and to purchase the trucks and trailers in the International segment in 2006.

Accounts receivable increased from $11.7 million at December 31, 2006 to $12.8 million at December 31, 2007 primarily due to a higher level of sales at the end of 2007 in the Americas segment of the Company.  In terms of days sales outstanding, accounts receivable decreased from 43 days at December 31, 2006 to 39 days at December 31, 2007 due to a higher percentage increase of sales in the fourth quarter of 2007 compared to the percentage increase in the accounts receivable balance.

Inventories increased from $13.0 million at December 31, 2006 to $15.8 million at December 31, 2007.  The increase is in line with higher sales levels in 2007.  Days inventory on hand increased from 63 days at December 31, 2006 to 68 days at December 31, 2007.

Accounts payable decreased from $10.9 million at December 31, 2006 to $9.4 million at December 31, 2007.  Days payables decreased from 53 days at December 31, 2006 to 41 days at December 31, 2007.  The decrease is primarily due to the lower accounts payable balance in the International segment at year end.

The Company and its subsidiaries have entered into the following financing arrangements:

1.On July 30, 2007, the Company and Channell Commercial Canada Inc. (“Channell Canada”), as borrowers, entered into an Amended and Restated Loan and Security Agreement with Bank of America, N.A. and Bank of America, Canada Branch.  The Amended and Restated Loan and Security Agreement contains a term loan of $2,500,000, capital expenditure facility of up to $5,000,000 and revolving credit facility of up to $12,500,000 (depending on the level of certain qualifying assets), which includes availability for letters of credit.  $8.1 million in proceeds from the Amended and Restated Loan and Security Agreement were used to repay in full the outstanding loans under the prior Loan and Security Agreement with the same lenders.  The Amended and Restated Loan and Security Agreement terminates on June 30, 2010 (unless terminated earlier pursuant to the terms thereof).

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The term loan is repayable in monthly payments based on a 60-month amortization schedule and a balloon payment due June 30, 2010.   The capital expenditure loans will be repayable in equal monthly installments equal to the original principal amount of the loan divided by 60, with the remaining outstanding balance due on June 30, 2010.  At December 31, 2007, the outstanding balance of the term loan was $2.3 million and the outstanding balance on the revolver was $5.6 million.  No amounts were outstanding under the capital expenditure facility as of that date.

Under the Amended and Restated Loan and Security Agreement, the outstanding balance of the term loan and the revolver each bears interest payable monthly at a variable rate based on either LIBOR or the lender’s base rate.  The interest rate under the Amended and Restated Loan and Security Agreement at December 31, 2007 was 7.75%.

The loans under the Amended and Restated Loan and Security Agreement are guaranteed by Channell Limited, Channell Commercial Europe Limited and A.C. Egerton (Holdings) Limited, which are subsidiaries of the Company (the “Subsidiary Guarantors”) and are secured by substantially all assets of the Company and the Subsidiary Guarantors.  In addition, any borrowings made by Channell Canada are secured by substantially all of the assets of Channell Canada.  The Amended and Restated Loan and Security Agreement contains various financial and operating covenants that impose limitations on the borrowers’ and their subsidiaries’ ability, among other things, to incur additional indebtedness, merge or consolidate, sell assets except in the ordinary course of business, make certain investments, enter into leases and pay dividends.  The Amended and Restated Loan and Security Agreement requires the Company to maintain a lockbox on the revolving credit facility. The Amended and Restated Loan and Security Agreement also generally provides that if there exists an event of default thereunder, the lenders or administrative agents would have the option of accelerating the outstanding obligations and terminating all commitments thereunder.

2.On October 3, 2007, Channell Bushman Pty Ltd, a majority-owned subsidiary of the Company (“Channell Bushman”), and Bushmans Group Pty Limited, Australian Bushman Tanks Pty Limited, Bushmans Engineering Pty Limited and Polyrib Tanks Pty Limited, each a wholly owned subsidiary of Channell Bushman (the “Channell Bushman Subsidiaries”), entered into a Facility Agreement with an Australian private debt fund and a Fixed and Floating Charge (the “Security Agreement”) with the same private debt fund.  The Facility Agreement terminates on September 30, 2010 (unless terminated earlier pursuant to the terms thereof). The Facility Agreement contains a term loan of $7,104,000 and a revolving credit facility of up to $4,440,000 (depending on the level of certain qualifying assets).   $9.9 million in proceeds from the Facility Agreement was used to repay, in full, the Company’s outstanding debt under a Loan and Security Agreement with a commercial bank in Australia.

The term loan is repayable in monthly payments beginning March 2008 based on a fifty-month amortization schedule and a balloon payment due September 30, 2010.  At December 31, 2007, the outstanding balance under the term loan was $7.0 million and the outstanding balance on the revolver was $2.8 million.

In March 2008, Channell Bushman entered into a sale and leaseback transaction with an equipment finance company with respect to its truck fleet.  The net proceeds from the sale of $1,276,000 were used to pay down the term loan.

Under the Facility Agreement, the outstanding balance of the term loan bears interest payable monthly at a variable rate based on the lender’s base rate.  The interest rate under the Facility Agreement at December 31, 2007 was 12.39% for the term loan and 13.39% for the revolver.

The loans under the Facility Agreement are guaranteed by the Channell Bushman Subsidiaries, and are secured by all assets of Channell Bushman and the Channell Bushman Subsidiaries.  The Facility Agreement and Security Agreement contain various financial and operating covenants that impose limitations on Channell Bushman’s and the Channell Bushman Subsidiaries’ ability to, among other things, incur or guarantee additional indebtedness, merge or consolidate, sell assets except in the ordinary course of business, make certain investments, issue or redeem shares, transfer ownership of the share capital of the Channell Bushman Subsidiaries, grant further security interests, and pay dividends. The Facility Agreement and Security Agreement provide that on the occurrence of an event of default, the lender may declare the outstanding obligations under the Facility Agreement immediately due and payable, terminate its commitments under the Facility Agreement and enforce its rights under its security interests, including taking possession of and otherwise acting as owner of the assets of Channell Bushman and the Channell Bushman Subsidiaries, appointing a receiver over the assets of Channell Bushman and the Channell Bushman Subsidiaries with the power to, among other things, sell the assets, and causing 100% of the shares of each controlled entity to be registered in its name. The lender may also declare the outstanding obligations under the Facility Agreement immediately due and payable should any change of control in Channell Bushman or any Channell Bushman Subsidiary occur.

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3.On October 8, 2007, Channell Pty Ltd and Bushman Group Pty Limited entered into a new Loan and Security Agreement with a commercial bank in Australia that amended the prior agreement under which the outstanding loan balances were paid off with the initial borrowing from the Facility Agreement described above.   The new Loan and Security Agreement extends the expiration of all remaining facilities to October 31, 2008.  The remaining facilities include performance guarantees, credit card facilities and payroll processing facilities.

The loans under the Loan and Security Agreement are secured by all the assets of Channell Pty Limited and a term deposit that was released in March 2008.  The Loan and Security Agreement contains various operating covenants that impose limitations on Channell Pty Limited’s and Bushman Group Pty Limited’s ability, among other things, to merge or consolidate, sell assets except in the ordinary course of business, and pay dividends.

In March 2008, Channell Pty Limited and Bushman Group Pty Limited refinanced the facilities under the Loan and Security Agreement with another commercial bank in Australia.  In addition to the performance guarantees, credit card facilities and payroll processing facilities, the new agreement includes an equipment financing facility for each entity.

4.On August 2, 2004, the Company and Channell Bushman entered into an Investment and Shareholder’s Agreement with a private equity firm in Australia.  The private equity investment was obtained as part of the financing of the Bushman Tanks acquisition.  The private equity party invested $2.6 million, the net amount received after paying a capital raising fee, for ownership of 25% of the outstanding and voting shares of Channell Bushman.  As part of the Shareholder’s Agreement, the private equity party has the right to appoint one member of the Board of Directors of Channell Bushman with the Company appointing the remaining three members.  The Shareholder’s Agreement specifies that certain actions taken by the Board of Directors require unanimous approval, including, without limitation, a proposal to sell all or substantially all of the assets of Channell Bushman, material asset acquisitions or disposals not included in the annual business plan, any plan to limit or dissolve the business, the issuance of any securities, capital restructuring, granting of a security interest on assets and related party transactions.

It is the intent of the private equity party to exit from its investment in Channell Bushman within 5 years after the original investment.  The Shareholder’s Agreement contains clauses to facilitate the exit of the private equity party.  The Shareholder’s Agreement specifies that after the date that is two years after the original investment, the Company has an option to acquire all of the shares owned by the private equity party.  The Shareholder’s Agreement specifies that the value of the shares is to be fair market value as determined by an independent appraiser.  There are no minimum or maximum amounts specified in the Shareholder’s Agreement.  After the date that is five years after the original investment, both the Company and the private equity party have the right to initiate a sale of Channell Bushman.  At such time, the other party may elect to buy out the shares of the party initiating the sale at the fair market value as determined by an independent appraiser.  Otherwise, Channell Bushman would be offered for sale with the assistance of a financial advisor.

Contractual obligations consist principally of payment for noncancellable operating lease obligations, long-term debt and capital leases.  Future payments required under these contractual obligations have been summarized in the notes to the Consolidated Financial Statements as follows: (i) lease commitments — Note L, (ii) long term debt — Note F, and (iii) capital lease obligations — Note G.

During the first quarter of 2008, the Company reduced its U.S. workforce by approximately 25% as part of an overall restructuring plan.  Severance payments related to the reduction in headcount were approximately $200,000.  In addition, the Company anticipates that it will spend approximately $600,000 on facilities rationalization efforts in the first half of 2008.

Beginning in the latter part of 2007 and continuing into 2008, much of Australia has received unusually high levels of rainfall, which will result in materially lower first quarter revenues for Channell Bushman than were previously expected.   This reduction in revenue is expected to limit Channell Bushman’s ability to borrow under the Facility Agreement described above, at least in the short term, as the amounts available for borrowing thereunder are dependent on the level of qualifying assets, which has been negatively impacted by the reduced revenues.  The reduction in available borrowing may require the Company and Channell Bushman to seek additional financing, or take alternative steps, to provide for Channell Bushman’s near-term liquidity needs. Management believes there are several alternatives to address this short-term issue and is currently evaluating these alternatives.

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Except as noted above with respect to Channell Bushman, the Company believes that cash flow from operations and the Company’s existing debt facilities should be sufficient to fund the Company’s capital expenditure and working capital requirements beyond 2008.

Contractual Obligations and Other Commitments

The following table summarizes the Company’s contractual obligations and other commitments as of December 31, 2007:

			2009 to		2011 to		2013 and
(amounts in thousands)	2008		2010		2012		Thereafter		Total
Contractual Obligations
Long-Term Debt (1)	$	11,611	$	8,045	$	5	$	—	$	19,661
Capital Lease Obligations(2)	178		210		—		—		388
Operating Lease Obligations (3)	3,805		6,833		4,989		4,651		20,278
Employment Contracts (4)	836		—		—		—		836
	$	16,430	$	15,088	$	4,994	$	4,651	$	41,163

(1)The Company is party to an Amended and Restated Loan and Security Agreement, which includes a term loan, revolving line of credit and capital expenditure facility with asset-based lenders in the United States and Canada, which expires June 30, 2010. In October 2007, certain subsidiaries of the Company also entered into a three-year Facility Agreement with an Australian private debt fund, which includes a term loan and revolving line of credit. Amounts include interest based on the rates in effect at December 31, 2007. See Note F to the Consolidated Financial Statements and “Liquidity and Capital Resources” above.

(2)See Note G to the Consolidated Financial Statements.

(3)The Company leases manufacturing and office space and machinery and equipment under several operating leases expiring through 2015. See Note L to the Consolidated Financial Statements.

(4)The Company has an employment agreement with its President and Chief Executive Officer expiring December 8, 2008. This contract is renewable every 5 years. The President and Chief Executive Officer’s salary was $825,000 for 2007 and is subject to an annual cost of living increase based on the consumer price index. Base salary may also be increased at the discretion of the Board of Directors. In the event the President and Chief Executive Officer is terminated, the Company will be obligated to make a lump sum severance payment equal to three times his then current base salary. See Note L to the Consolidated Financial Statements.

Off-Balance Sheet Arrangements

As discussed in Note K to the Consolidated Financial Statements, the Company guaranteed debt of the Channell Family Trust, one of the Company’s principal stockholders, of which the Company’s Chairman of the Board and Secretary (who is also a director) is trustee, of approximately $0.8 million in 1997.  The guaranteed debt was incurred in connection with construction of the facilities leased to the Company and is collateralized by said facilities.  The loan amount subject to the unsecured guarantee is expected to decline before expiring in 2017.  It is not practicable to estimate the fair value of the guarantee; however, the Company does not anticipate that it will incur losses as a result of this guarantee.  The Company has not recorded a liability for this guarantee.  If the principal stockholder were to default on the outstanding loan balance, the Company may be required to repay the remaining principal balance.  The maximum potential amount the Company would be required to pay is equal to the outstanding principal and interest balance of the loan to the stockholder.  At December 31, 2007, the outstanding loan balance subject to the guarantee totaled $0.5 million.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk.

The risk inherent in the Company’s market sensitive instruments is the potential loss arising from adverse changes in interest rates and foreign currency exchange rates.  All financial instruments held by the Company described below are held for purposes other than trading.

Interest Rate Sensitivity

The Company and its subsidiaries have entered into two financing agreements.  In July 2007, the Company entered into a three-year Loan and Security Agreement with asset based lenders in the United States and Canada that expires June 30, 2010.  The agreement contains a term loan, revolving line of credit and capital expenditure facility.  In October 2007, many of the Company’s Australian subsidiaries entered into a Facility Agreement with an Australian private debt fund in Australia, which contains a term loan and a revolving line of credit that expire in September 2010.  These agreements allow for the outstanding balance to bear interest at a variable rate based on the lender’s base rate.  The credit facilities expose the Company to changes in short-term interest rates since the interest rates on the credit facility are variable.

22

Based upon the amount of variable rate debt outstanding at the end of the year, and holding the variable rate debt balance constant, each one percentage point increase in interest rates occurring on the second day of an annual period would result in an increase in interest expense of approximately $0.18 million per year.  This analysis does not consider the effects of economic activity on the Company’s sales and profitability in such an environment.

Exchange Rate Sensitivity

The Company has assets and liabilities outside the United States that are subject to fluctuations in foreign currency exchange rates.  Assets and liabilities outside the United States are primarily located in the United Kingdom, Australia, and Canada.  The Company’s investment in foreign subsidiaries with a functional currency other than the U.S. dollar is generally considered long-term.  Accordingly, the Company does not hedge these investments.  The Company also purchases a limited portion of its raw materials from foreign countries.  These purchases are generally denominated in U.S. dollars and are accordingly not subject to exchange rate fluctuations.  The Company has minimal foreign currency transaction gains or losses.  The Company has not engaged in forward purchases of foreign currency and other similar contracts to reduce its economic exposure to changes in exchange rates because the associated risk is not considered significant.

Item 8.  Financial Statements and Supplementary Data.

Selected Quarterly Financial Data

See Note O to the Company’s Consolidated Financial Statements.

Consolidated Financial Statements of Channell Commercial Corporation are as follows:

Report of Independent Registered Public Accounting Firm	F-1
Report of Independent Registered Public Accounting Firm	F-2
Report of Independent Registered Public Accounting Firm	F-3
Consolidated Balance Sheets as of December 31, 2006 and December 31, 2007	F-4
Consolidated Statements of Operations and Comprehensive Income (Loss) for the years endedDecember 31, 2005, December 31, 2006, and December 31, 2007	F-5
Consolidated Statement of Stockholders’ Equity for the years ended December 31, 2005,December 31, 2006, and December 31, 2007	F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2005,December 31, 2006, and December 31, 2007	F-7
Notes to Consolidated Financial Statements	F-8
Financial statement schedules are as follows:
Schedule II - Valuation and Qualifying Accounts
All remaining schedules are omitted because they are not applicable, or the required information isincluded in the financial statements or the notes thereto.

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A(T).  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission regulations, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  As of

23

December 31, 2007, the management of the Company, including the Chief Executive Officer and Chief Financial Officer, carried out an assessment of the Company’s disclosure controls and procedures and concluded that they were not effective as of the end of the period covered by this report.

Management’s Report on Internal Control over Financial Reporting

This Section of this Annual Report on Form 10-K will not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates this information by reference, and will not otherwise be deemed filed under the Securities Act of 1933, as amended, or the Exchange Act.

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). A system of internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management, including the Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Management has concluded that, as of December 31, 2007, the Company’s internal control over financial reporting is not effective based on these criteria.

During the process of assessing the status of the internal control infrastructure, the Company identified significant deficiencies in internal controls that rose to the level of “material weaknesses” in the financial closing cycle at the Company’s Bushman Tanks operating segment.  As a result of the weaknesses identified in management’s evaluation, the Company committed to take the following actions to improve internal control over financial reporting:

1.Design, implement and document control procedures adequate to support the Company’s day-to-day accounting and the financial closing and reporting process.

2.Strengthen controls and procedures to require formal reviews and sign-offs evidencing review and approval of each journal entry, account reconciliation and accounting analysis by an individual at a more senior level who possesses the requisite skills and is independent of the preparation of the entry or reconciliation.

This Annual Report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting during the quarter ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect the Company’s internal controls over financial reporting.

Item 9B.  Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this item is incorporated by reference to the Company’s definitive proxy statement for its 2008 Annual Meeting of Stockholders.

Item 11. Executive Compensation.

The information required by this item is incorporated by reference to the Company’s definitive proxy statement for its 2008 Annual Meeting of Stockholders.

24

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item is incorporated by reference to the Company’s definitive proxy statement for its 2008 Annual Meeting of Stockholders.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is incorporated by reference to the Company’s definitive proxy statement for its 2008 Annual Meeting of Stockholders.

Item 14. Principal Accountant Fees and Services.

The information required by this item is incorporated by reference to the Company’s definitive proxy statement for its 2008 Annual Meeting of Stockholders.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)		The following financial statements and schedules are filed as a part of this report:
	(1)	Consolidated Financial Statements
		See index included in Part II, Item 8.
	(2)	Consolidated Financial Statement Schedules
		Schedule II — Valuation and Qualifying Accounts
		All remaining schedules are omitted because they are not applicable, or the required information is included in the financial statements or notes thereto.
	(a)(3) and (c).  The following exhibits are filed herewith:

Exhibit
Number	Description
3.1	Restated Certificate of Incorporation of the Company (Exhibit 3.1)(1)
3.2	Bylaws of the Company, as amended as of December 17, 2007 (34)
4	Form of Common Stock Certificate (Exhibit 4)(1)
10.1	Tax Agreement between the Company and the Existing Stockholders (Exhibit 10.1)(1)
10.2*	Channell Commercial Corporation 1996 Incentive Stock Plan (including forms of Stock Option Agreements and Restricted Stock Agreement) (Exhibit 10.2)(1)
10.3*	Channell Commercial Corporation 2003 Incentive Stock Plan (including forms of Stock Option Agreement and Restricted Stock Agreement)(6)
10.4*	Channell Commercial Corporation 2004 Incentive Bonus Plan(8)
10.5	Loan and Security Agreement dated as of September 25, 2002 by and among the Company, Channell Commercial Canada Inc., Fleet Capital Corporation, Fleet Capital Canada Corporation and, under the circumstances set forth therein, Fleet National Bank, London U.K. Branch, trading as Fleet Boston Financial, and the U.K. Borrowers (as defined therein, if any) (Exhibit 99)(5)
10.6	Investment and Shareholders Agreement dated August 2, 2004 by and among Channell Bushman Pty Ltd and Australia and New Zealand Banking Group Ltd. (Exhibit 10.3.4)(10)
10.7*	Employment Agreement dated July 8, 1996 between the Company and William H. Channell, Sr. (Exhibit 10.8)(1)
10.8*	Channell Commercial Corporation 1996 Performance-Based Annual Incentive Compensation Plan (Exhibit 10.10)(1)

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10.9	Lease dated December 22, 1989 between the Company and the Channell Family Trust (as successor in interest to William H. Channell, Sr.), as amended (Exhibit 10.11)(1)
10.10	Lease dated May 29, 1996 between the Company and the Channell Family Trust (Exhibit 10.12)(1)
10.11	Third Amendment to Lease dated December 22, 1989 between the Company and the Channell Family Trust (as successor in interest to William H. Channell, Sr.), effective as of June 1, 2005 (Exhibit 99.1)(11)
10.12	Form of Indemnity Agreement (Exhibit 10.17)(1)
10.13	Form of Agreement Regarding Intellectual Property (Exhibit 10.18)(1)
10.14	401(k) Plan of the Company (Exhibit 10.19)(3)
10.15	A.C. Egerton (Holdings) PLC Share Purchase Agreement (Exhibit 2)(2)
10.16	Lease dated June 27, 2002 between the Company and Ynez Street, Ltd. (Exhibit 10.29)(4)
10.17*	Amendment to Employment Agreement dated December 9, 2003 between the Company and William H. Channell, Sr. (Exhibit 10.19)(7)
10.18*	Employment Agreement dated December 9, 2003 between the Company and William H. Channell, Jr. (Exhibit 10.20)(7)
10.19	Share and Asset Purchase Agreement dated as of July 14, 2004 by and among Australia’s Bushman Tanks Pty Ltd, Douglas Robin Young, Richard James Young, Lokan Nominees Pty Ltd and Lenbridge Grange Pty Ltd, Belsiasun Pty Ltd and Elcarva Pty Ltd, the holders of all the outstanding shares of Bushmans Group Pty Ltd, Hold-On Industries Australia Pty Ltd, Australian Bushman Tanks Pty Ltd, and Polyrib Tanks Pty Ltd, on the one hand, and Channell Commercial Corporation and Channell Bushman Pty Limited, on the other hand (Exhibit 99.2)(9)
10.20*	Employment Letter dated June 27, 2005 between the Company and Jerry Collazo (Exhibit 99.2)(12)
10.21*	Long-Term Incentive Plan for William H. Channell, Jr. (Exhibit 10.1)(13)
10.22	Waiver and Third Amendment to Loan and Security Agreement dated as of November 18, 2005 by and among the Company, Channell Commercial Canada Inc., Channell Limited, Channell Commercial Europe Limited, Bank of America, N.A., BABC Global Finance Inc., Bank of America, N.A., and the lenders party to the Loan and Security Agreement dated as of September 25, 2002 (as amended) (Exhibit 10.25)(14)
10.23	Assignment and Assumption Agreement dated November 18, 2005 by and between Banc of America Leasing and Capital, LLC and Bank of America, N.A. (relating to U.S. Loan and Security Agreement) (Exhibit 10.26)(14)
10.24	Waiver and Fourth Amendment to Loan and Security Agreement dated as of February 28, 2006 by and among the Company, Bank of America, N.A., BABC Global Finance Inc., Bank of America, N.A. and the lenders party to the Loan and Security Agreement dated as of September 25, 2002 (as amended) (Exhibit 10.1)(15)
10.25	Lease dated July 13, 2006 between Channell Pty Ltd and Ing Management Ltd (Exhibit 10.32)(17)
10.26*	Employment Letter dated August 31, 2006 between the Company and Patrick E. McCready (Exhibit 10.1)(18)
10.27	Loan and Security Agreement dated August 11, 2006 and effective August 25, 2006, by and among Channell Bushman Pty Ltd, Bushmans Group Pty Ltd, certain other subsidiaries of the Company, and National Australia Bank Ltd (Exhibit 10.1)(19)
10.28	Loan and Security Agreement dated November 8, 2006 and effective November 15, 2006, by and among Channell Bushman Pty Ltd, Bushmans Group Pty Ltd, certain other subsidiaries of the Company, and National Australia Bank Ltd (Exhibit 10.1)(20)
10.29	Loan and Security Agreement dated February 2, 2007 and effective February 7, 2007 by and among Channell Bushman Pty Ltd, Bushmans Group Pty Ltd, certain other subsidiaries of the Company, and National Australia Bank Ltd (Exhibit 10.1) (21)
10.30	Waiver and Fifth Amendment to Loan and Security Agreement dated as of February 12, 2007 by and among the Company and the other borrowers thereunder, Bank of America, N.A., BABC Global Finance Inc., Bank of America, N.A. and the lenders party to the Loan and Security Agreement dated as of September 25, 2002 (as amended) (Exhibit 10.1)(22)
10.31	Sixth Amendment to Loan and Security Agreement dated as of April 2, 2007 by and among the Company and the other borrowers thereunder, Bank of America, N.A., BABC Global Finance Inc., Bank of America, N.A. and the lenders party to the Loan and Security Agreement dated as of September 25, 2002 (as amended)(Exhibit 10.37)(24)

26

10.32	Loan and Security Agreement dated May 16, 2007, by and among Channell Bushman Pty Ltd, Bushmans Group Pty Ltd, certain other subsidiaries of the Company, and National Australia Bank Ltd (Exhibit 10.1)(25)
10.33	Seventh Amendment to Loan and Security Agreement, dated as of June 26, 2007, by and among the Company, Channell Commercial Canada Inc., Channell Limited, Channell Commercial Europe Limited, Bank of America, N.A. (as assignee of Banc of America Leasing and Capital, LLC, successor-in-interest to Fleet Capital Corporation), as administrative agent, BABC Global Finance Inc. (as assignee of Fleet Capital Global Finance, Inc., as assignee of Fleet Capital Canada Corporation), as Canadian agent, Bank of America, N.A. (as successor-in-interest to Fleet National Bank, London U.K. Branch), as UK agent, and the lenders party to the Loan and Security Agreement dated as of September 25, 2002 (as amended) (Exhibit 10.1)(26)
10.34	Amendment to Loan and Security Agreement dated July 24, 2007, and effective July 25, 2007, by and among Channell Bushman Pty Ltd, Bushmans Group Pty Ltd, certain other subsidiaries of the Company, and National Australia Bank Ltd (Exhibit 10.1)(27)
10.35	Amended and Restated Loan and Security Agreement dated July 30, 2007, by and among Bank of America, N.A., Bank of America, Canada Branch, the Company and Channell Commercial Canada Inc. (Exhibit 10.1)(28)
10.36	Amendment to Loan and Security Agreement dated August 27, 2007, and effective August 28, 2007, by and among Channell Bushman Pty Ltd, Bushmans Group Pty Ltd, certain other subsidiaries of the Company, and National Australia Bank Ltd (Exhibit 10.1)(29)
10.37	Letter dated September 28, 2007 from National Australia Bank Ltd to Channell Bushman Pty Ltd, Bushmans Group Pty Ltd and certain other subsidiaries of the Company (Exhibit 10.1)(30)
10.38	Facility Agreement dated October 3, 2007, by and among Channell Bushman Pty Limited, Bushmans Group Pty Limited, Australian Bushman Tanks Pty Limited, Bushmans Engineering Pty Limited, Polyrib Tanks Pty Limited and Australian Executor Trustees Limited as custodian for the Causeway Australasian Private Debt Opportunities Fund (Exhibit 10.1)(31)
10.39	Fixed and Floating Charge (Incorporating an Equitable Mortgage of Shares) dated October 3, 2007, by and among Channell Bushman Pty Limited, Bushmans Group Pty Limited, Australian Bushman Tanks Pty Limited, Bushmans Engineering Pty Limited, Polyrib Tanks Pty Limited and Australian Executor Trustees Limited as custodian for the Causeway Australasian Private Debt Opportunities Fund (Exhibit 10.2)(31)
10.40	Loan and Security Agreement dated October 8, 2007, and effective October 9, 2007, by and among Channell Pty Limited, Bushmans Group Pty Limited and National Australia Bank Limited (Exhibit 10.3)(31)
10.41	Lease dated September 13, 2007 between the Company, on the one hand, and William H. Channell, Jr. and Carolyn Channell, on the other hand (Exhibit 10.47)(33)
10.42	Amendment No. 2 to Lease dated May 1996 between the Company and the Channell Family Trust, dated as of November 12, 2007(Exhibit 10.48)(33)
10.43	First Amendment to Amended and Restated Loan and Security Agreement, dated as of November 27, 2007, by and among Bank of America, N.A., Bank of America, Canada Branch, the Company and Channell Commercial Canada Inc.(34)
10.44*	Employment Letter dated October 23, 2007 between the Company and Christopher Glenn(34)
10.45*	Employment Letter dated February 5, 2008 between the Company and Robert Swelgin(34)
10.46	Business Finance Agreement effective March 12, 2008 between Channell Pty Limited and Westpac Banking Corporation(34)
10.47	Business Finance Agreement effective March 12, 2008 between Bushman Group Pty Limited and Westpac Banking Corporation(34)
14	Channell Commercial Corporation Code of Business Conduct and Ethics (Exhibit 14)(7)
16.1	Letter dated March 27, 2006 from Grant Thornton LLP, regarding change in Certifying Accountant (Exhibit 16.1)(16)
16.2	Letter dated October 22, 2007 from Deloitte & Touche LLP, regarding change in Certifying Accountant (Exhibit 16.1)(32)
18	Letter dated March 30, 2007 from Deloitte & Touche LLP, regarding change in Accounting Principle (Exhibit 18.2) (23)
21	Subsidiaries of the Company(34)

27

23.1	Consent of BDO Seidman, LLP(34)
23.2	Consent of Deloitte and Touche LLP(34)
23.3	Consent of Grant Thornton LLP(34)
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) under the Securities and Exchange Act of 1934(34)
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) under the Securities and Exchange Act of 1934(34)
32.1	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 by William H. Channell, Jr., CEO and Patrick E. McCready, CFO(34)

* Management contract or compensatory plan or arrangement.

(1)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Registration Statement on Form S-1 (File No. 333-03621).
(2)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on May 18, 1998.
(3)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 10-K on March 31, 1999.
(4)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 10-Q on August 12, 2002.
(5)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on October 1, 2002.
(6)	Incorporated by reference to Appendix B filed in connection with the Company’s Definitive Proxy Statement on March 26, 2003.
(7)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 10-K on March 5, 2004.
(8)	Incorporated by reference to Appendix B filed in connection with the Company’s Definitive Proxy Statement on April 16, 2004.
(9)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on August 6, 2004.
(10)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 10-Q on November 15, 2004.
(11)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on June 15, 2005.
(12)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on June 28, 2005.
(13)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on September 9, 2005.
(14)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 10-Q on November 21, 2005.
(15)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on March 6, 2006.
(16)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on March 29, 2006.
(17)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 10-Q on August 17, 2006.
(18)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on September 8, 2006.
(19)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on September 21, 2006.
(20)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on November 17, 2006.
(21)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on February 8, 2007.
(22)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on February 15, 2007.
(23)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 10-K on April 2, 2007.
(24)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 10-Q on May 15, 2007.
(25)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on May 18, 2007.
(26)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on June 29, 2007.
(27)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on July 31, 2007.
(28)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on August 3, 2007.
(29)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on September 4, 2007.
(30)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on October 4, 2007.

28

(31)	Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on October 10, 2007.
(32)		Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K on October 22, 2007.
(33)		Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 10-Q on November 14, 2007.
(34)		Filed herewith.

29

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Channell Commercial Corporation

Temecula, California

We have audited the accompanying consolidated balance sheet of Channell Commercial Corporation (the “Company”) as of December 31, 2007 and the related consolidated statements of operations and comprehensive (loss) income, stockholders’ equity, and cash flows for the year then ended. In connection with our audit of the financial statements, we have also audited the 2007 financial statement schedule listed in the accompanying index.  These consolidated financial statements and schedule are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Channell Commercial Corporation at December 31, 2007 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the 2007 financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/s/ BDO Seidman, LLP

San Diego, California

March 24, 2008

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Channell Commercial Corporation

We have audited the accompanying consolidated balance sheet of Channell Commercial Corporation and subsidiaries (the “Company”) as of December 31, 2006, and the related consolidated statements of operations and comprehensive  income (loss), stockholders’ equity, and cash flows for the year then ended.  Our audit also included the financial statement schedule for the year ended December 31, 2006 listed in the index at Item 15.  These financial statements and the financial statement schedule are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such 2006 consolidated financial statements present fairly, in all material respects, the financial position of Channell Commercial Corporation and subsidiaries as of December 31, 2006, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, such financial statement schedule, when considered in relation to the basic 2006 consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

 As discussed in Note B to the financial statements, the Company changed its method of accounting for share-based payment in conformity with Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, effective January 1, 2006.

/s/ DELOITTE & TOUCHE LLP

San Diego, California

April 2, 2007

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Channell Commercial Corporation

We have audited the consolidated statement of operations and comprehensive income (loss), stockholders’ equity, and cash flows of Channell Commercial Corporation (a Delaware corporation) and subsidiaries (collectively, the “Company”) for the year ended December 31, 2005.  Our audit of the basic financial statements included the financial statement schedule listed in the index appearing under Item 15 (a) (2).  These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Channell Commercial Corporation and subsidiaries for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/s/ Grant Thornton LLP

Los Angeles, California

March 31, 2006

F-3

CHANNELL COMMERCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

December 31,

(amounts in thousands, except per share data)

	2007			2006
ASSETS
Current assets
Cash and cash equivalents	$	1,825		$	2,235
Restricted cash	282			—
Accounts receivable, net of allowance for doubful accounts of $281 at December 31, 2007 and $220 at December 31, 2006	12,807			11,673
Inventories, net	15,763			13,018
Prepaid expenses and other current assets	1,436			931
Income taxes receivable	—			881
Deferred income taxes, net	936			719
Total current assets	33,049			29,457
Property and equipment, net	19,036			18,799
Deferred income taxes, net	642			1,017
Goodwill	10,998			9,848
Intangible assets, net	2,128			2,097
Other assets	994			660
	$	66,847		$	61,878
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	9,447		$	10,902
Short-term debt (including current maturities of long-term debt)	10,335			13,723
Current maturities of capital lease obligations	153			138
Income taxes payable	178			—
Accrued expenses	5,444			4,371
Total current liabilities	25,557			29,134
Long-term debt, less current maturities	7,467			—
Capital lease obigations, less current maturities	198			384
Other long-term liabilities	906			1,332
Total liabilities	34,128			30,850
Commitments and contingencies (Note L)	—			—
Minority interest	955			878
Stockholders’ equity
Preferred stock, par value $.01 per share, authorized - 1,000 shares, none issued and outstanding	—			—
Common stock, par value $.01 per share, authorized - 19,000 shares; issued 9,788 at December 31, 2007 and 9,787 at December 31, 2006, outstanding - 9,544 shares at December 31, 2007 and 9,543 shares at December 31, 2006	98			98
Additional paid-in capital	31,210			31,093
Treasury stock - 244 shares in 2007 and 2006	(1,871		)	(1,871		)
Retained earnings (accumulated deficit)	113			(160		)
Accumulated other comprehensive income -
Foreign currency translation	2,214			990
Total stockholders’ equity	31,764			30,150
	$	66,847		$	61,878

The accompanying notes are an integral part of these financial statements.

F-4

CHANNELL COMMERCIAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

Year ended December 31,

(amounts in thousands, except per share data)

	2007			2006			2005
Net sales	$	133,163		$	109,138		$	116,065
Cost of goods sold	92,240			76,055			81,060
Gross Profit	40,923			33,083			35,005
Operating expenses
Selling	22,131			21,993			22,407
General and administrative	14,868			12,500			11,688
Research and development	1,865			2,222			2,356
Impairment of goodwill	—			4,829			—
Asset impairment charge	—			—			97
	38,864			41,544			36,548
Income (loss) from operations	2,059			(8,461		)	(1,543		)
Interest income	43			86			70
Interest expense	(1,366		)	(943		)	(565		)
Income (loss) before income tax expense (benefit)	736			(9,318		)	(2,038		)
Income tax expense (benefit)	484			(777		)	5,012
Income (loss) before minority interest	252			(8,541		)	(7,050		)
Minority interest in loss of subsidiaries	(21		)	(1,712		)	(170		)
Net income (loss)	$	273		$	(6,829	)	$	(6,880	)
Net income (loss) per share
Basic and diluted	$	0.03		$	(0.72	)	$	(0.73	)
Net income (loss)	$	273		$	(6,829	)	$	(6,880	)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment	1,224			677			(726		)
Comprehensive income (loss)	$	1,497		$	(6,152	)	$	(7,606	)

The accompanying notes are an integral part of these financial statements.

F-5

CHANNELL COMMERCIAL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years ended December 31, 2005, 2006 and 2007

(amounts in thousands)

										Retained			Accumulated
				Additional						earnings			other			Total
	Common stock			paid-in		Treasury stock				(accumulated			comprehensive			stockholders’
	Shares	Amount		capital		Shares	Amount			deficit)			Income (loss)			equity
Balance, January 1, 2005	9,608	$	96	$	29,671	244	$	(1,871	)	$	13,549		$	1,039		$	42,484
Exercise of employee stock options	179	2		1,079		—	—			—			—			1,081
Foreign currency translation	—	—		—		—	—			—			(726		)	(726		)
Net loss for the year	—	—		—		—	—			(6,880		)	—			(6,880		)
Balance, December 31, 2005	9,787	$	98	$	30,750	244	$	(1,871	)	$	6,669		$	313		$	35,959
Stock-based compensation	—	—		343		—	—			—			—			343
Foreign currency translation	—	—		—		—	—			—			677			677
Net loss for the year	—	—		—		—	—			(6,829		)	—			(6,829		)
Balance, December 31, 2006	9,787	$	98	$	31,093	244	$	(1,871	)	$	(160	)	$	990		$	30,150
Stock-based compensation	—	—		115		—	—			—			—			115
Exercise of employee stock options	1	—		2		—	—			—			—			2
Foreign currency translation	—	—		—		—	—			—			1,224			1,224
Net income for the year	—	—		—		—	—			273			—			273
Balance, December 31, 2007	9,788	$	98	$	31,210	244	$	(1,871	)	$	113		$	2,214		$	31,764

The accompanying notes are an integral part of these financial statements.

F-6

CHANNELL COMMERCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended December 31,

(amounts in thousands)

	2007			2006			2005
Cash flows from operating activities:
Net income (loss)	$	273		$	(6,829	)	$	(6,880	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	4,929			5,101			4,480
Stock-based compensation	115			343			—
Asset impairment charge	—			—			97
Loss (gain) on disposal of fixed assets	50			43			(6		)
Amortization of deferred gain on sale leaseback	(60		)	(60		)	(60		)
Impairment of goodwill	—			4,829			—
Deferred income taxes	336			(758		)	4,924
Provision for doubtful accounts	125			(31		)	95
Provision for inventory obsolescence	656			131			797
Minority interest in (loss) income of subsidiaries	(21		)	(1,712		)	(170		)
Changes in assets and liabilities:
Accounts receivable	(582		)	(2,562		)	5,051
Inventories	(2,724		)	(1,277		)	1,561
Prepaid expenses and other current assets	(457		)	93			(155		)
Income taxes	1,070			(816		)	1,292
Other assets	(311		)	(60		)	(337		)
Accounts payable	(2,239		)	1,602			(6,930		)
Restructuring liability	—			—			(141		)
Accrued expenses and other liabilities	436			(324		)	(1,946		)
Net cash provided by (used in) operating activities	1,596			(2,287		)	1,672
Cash flows from investing activities:
Purchase of property and equipment	(3,917		)	(3,871		)	(4,339		)
Proceeds from sale of property and equipment	163			106			24
Net cash used in investing activities	(3,754		)	(3,765		)	(4,315		)
Cash flows from financing activities:
Repayment of debt	(14,695		)	(1,972		)	(2,395		)
Borrowings from credit facilities	17,882			7,710			1,550
Repayment of obligations under capital lease, net	(679		)	(174		)	(35		)
Restricted cash	(282		)	—			—
Exercise of employee stock options	2			—			1,081
Net cash provided by financing activities	2,228			5,564			201
Effect of exchange rates on cash	(480		)	(425		)	137
Decrease in cash and cash equivalents	(410		)	(913		)	(2,305		)
Cash and cash equivalents, beginning of year	2,235			3,148			5,453
Cash and cash equivalents, end of year	$	1,825		$	2,235		$	3,148
Cash paid during the year for:
Interest	$	1,348		$	1,064		$	499
Income taxes	$	21		$	604		$	148
Non-cash investing acitivities:
Purchases of property and equipment which are included in:
Obligations under capital leases	$	464		$	506		$	—
Accounts payable	$	63		$	48		$	—

The accompanying notes are an integral part of these financial statements.

F-7

CHANNELL COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-continued

(amounts in thousands, except per share data)

NOTE A—DESCRIPTION OF BUSINESS

Channell Commercial Corporation and its subsidiaries (collectively, the “Company”) is a designer and manufacturer of telecommunications equipment supplied to broadband and telephone network providers worldwide.  Major product lines include a complete line of thermoplastic and metal fabricated enclosures, advanced copper termination and connectorization products, fiber optic cable management systems for fiber to the premises (FTTP) networks, and heat shrink products.  The Company’s enclosure products house, protect and provide access to advanced telecommunications hardware, including both radio frequency electronics and photonics, and transmission media, including coaxial cable, copper wire and optical fibers, used in the delivery of voice, video and data services.  The enclosure products are deployed within the access portion of the local signal delivery network, commonly known as the “outside plant,” “local loop” or “last mile,” that connects the network provider’s signal origination point or local office with its residential and business customers.  The Company’s connectivity products provide critical network connection points between cables or network transmission devices.

The Company also designs, manufactures and markets polyethylene water tanks for rural and residential markets in Australia.  The Company’s primary product line of rotational molded tanks is used in the agricultural sector where water shortages require storage of rain and ground water.  The Company also markets a range of water storage tanks for use in residential and rural-residential markets.

NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Estimates.  In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Significant estimates include accounts receivables allowances, inventory valuation reserve, valuation of goodwill and long-lived assets and the deferred tax asset valuation allowance.  Actual results could differ from those estimates, and the differences could be material.

Basis of Consolidation.The consolidated financial statements include the accounts of Channell Commercial Corporation and its subsidiaries.  All intercompany transactions and balances have been eliminated.  Minority interest represents a 25% equity interest in Bushman Tanks acquired by ANZ Private Equity.

Foreign Currency Translation.  Assets and liabilities of foreign operations are translated into U.S. dollars at year-end exchange rates.  Income and expenses are translated into U.S. dollars at average rates of exchange prevailing during the period.  Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are included in other comprehensive income.  Foreign currency transaction gains and losses are included in general and administrative expenses.  Transactions gains and losses were not significant in 2007, 2006 and 2005.

Cash and Cash Equivalents.  Cash and cash equivalents include cash on hand, cash in banks and short-term investments with original maturities of 90 days or less.

Inventories.Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out method of accounting.  Cost includes material, direct production costs, and factory overhead costs.  Reserves for excess and obsolete inventories are determined by an analysis of relevant factors including historical sales and usage of items in inventory, current levels of orders and backlog, forecasted demand, product life cycle, and market conditions.

Property and Equipment.  Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets.  Capital lease assets are amortized over the lease term.  Expenditures for all maintenance and repairs are charged against income. Additions, major renewals and replacements that increase the useful lives of assets are capitalized. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the lease term or the estimated useful life of the leasehold improvements.

Impairment of Long-Lived and Intangible Assets.  When events or circumstances indicate the carrying value of a long-lived asset may be impaired, the Company estimates the future undiscounted cash flows to be derived from the asset to assess whether or not a potential impairment exists.  If the carrying value exceeds the estimate of future undiscounted cash flows, the impairment is calculated as the excess of the carrying value of the asset over the estimate of its fair value.  The Company recorded an impairment of $97 in the year ended December 31, 2005.  No impairment was recorded in the years ended December 31, 2007 and 2006.

F-8

Income Taxes.  The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting for Income Taxes, which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse.  Deferred income tax benefit (expense) results from the change in deferred tax assets or deferred tax liabilities.  A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.

Impairment of Goodwill and Other Intangible Assets.  The Company accounts for goodwill and other intangible assets in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 requires that goodwill and identifiable intangible assets with indefinite useful lives be tested for impairment at least annually.

The Company assesses the recoverability of the carrying value of goodwill and other intangible assets with indefinite useful lives at least annually or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable. The impairment test consists of a comparison of the fair value of an intangible asset with its carrying amount.  If the carrying amount of an intangible asset exceeds its fair value, then an impairment loss is recognized in an amount equal to that excess. Recoverability of goodwill is measured at the reporting unit level based on a two-step approach. First, the carrying amount of the reporting unit is compared to the fair value as estimated by the future net discounted cash flows expected to be generated by the reporting unit. To the extent that the carrying value of the reporting unit exceeds the fair value of the reporting unit, a second step is performed, wherein the reporting unit’s assets and liabilities are valued. The implied fair value of goodwill is calculated as the fair value of the reporting unit in excess of the fair value of all non-goodwill assets and liabilities allocated to the reporting unit. To the extent the reporting unit’s carrying value of goodwill exceeds its implied fair value, an impairment exists and must be recognized. This process requires the use of discounted cash flow models that utilize estimates of future revenue and expenses as well as the selection of appropriate discount rates.  To measure the impairment of indefinite-lived intangibles, the Company uses the relief from royalty method in its valuation.  Under the relief from royalty method, an estimated royalty rate is applied against an estimate of future revenues, discounted to present value, to determine the savings associated with owning the trademark intangible.  The impairment test consists of a comparison of the fair value of an intangible asset with its carrying amount.  If the carrying amount of an intangible asset exceeds its fair value, then an impairment loss is recognized in an amount equal to that excess.

The Company tests the value of goodwill for impairment annually at December 31 (prior to December 31, 2006 goodwill was tested for impairment at June 30 for the Bushman Tanks reporting unit) or whenever events or changes in circumstance indicate that the carrying amount of such assets may not be recoverable.  The test involves significant judgment in estimating projections of fair value generated through future performance of the operating segment.  In calculating the fair value, the Company relies on factors such as operating results, business plans, economic projections, and anticipated cash flows used in discounting the cash flows.  Inherent uncertainties exist in determining and applying such factors.

During the fourth quarter ended December 31, 2006, the Company changed the date of its annual goodwill impairment testing from June 30 to December 31 for the Bushman Tanks reporting unit in order to better align with the Company’s normal business process for updating its strategic plan and forecasts.  Additionally this change will coincide with the Company’s Australian statutory reporting, which requires annual impairment testing at December 31.  The Company believes that the resulting change in accounting principle related to the annual testing date will not delay, accelerate, or avoid an impairment charge.  Goodwill impairment tests performed as of December 31, 2007, 2006, and 2005 and June 30, 2005 indicated that no impairment charges were required, while the June 30, 2006 test resulted in an impairment of $4,829.  The Company determined that the change in accounting principle related to the annual testing date is preferable under the circumstances and does not result in adjustments to the financial statements when applied retrospectively.

On August 2, 2004 the Company, through a majority-owned subsidiary, acquired a controlling interest in Bushman Tanks, a manufacturer and distributor of rotational molded plastic (polyethylene) water storage tanks.  Included in the Share and Asset Purchase Agreement, the sellers of Bushman Tanks agreed to a “non-compete” clause whereby the sellers of Bushman Tanks would not directly or indirectly carry on or be engaged or involved in any trade, business or undertaking that is in competition with the Bushman Tanks business.  The Company performed an evaluation of the non-compete agreement and determined the fair value to be $1,600.  The non-compete agreement is recorded in the reporting unit of Bushman Tanks, which is part of the International segment, as a separately identifiable intangible asset and is being amortized over the ten-year contractual term on a straight-line basis.  The amount of goodwill recorded in the Bushman Tanks acquisition is not deductible for tax purposes.

During the quarter ended June 30, 2006, the Company reclassified a nonamortizing indefinite-life trademark

F-9

intangible asset from goodwill to intangible assets, including the December 31, 2005 amounts for comparative purposes, which resulted in an increase in intangible assets of $655, a decrease in goodwill of $459, and an increase in deferred tax liabilities of $196, as of December 31, 2005.  The difference in amounts between the two balance sheet dates is because of a difference in the foreign currency translation rate at those dates.  This reclassification occurred in the Bushman reporting unit, which is part of the International segment. The table below has been adjusted to reflect this reclassification effective January 1, 2005.

The changes in the carrying amount of goodwill, the non-compete agreement and the trademark intangible for the years ended December 31, 2005, 2006 and 2007 are summarized as follows:

				Intangible
				Non-Compete			Trademark
	Goodwill			Agreement			Intangible
Balance at January 1, 2005	$	14,232		$	1,763		702
Contingent receivable for warranty claims	(146		)	—			—
Earn-out payment	380			—			—
Contingent earn-out payment	380			—			—
Amortization of non-compete agreement	—			(177		)	—
Effect of foreign currency translation	(899		)	(109		)	(47		)
Balance at December 31, 2005	13,947			1,477			655
Impairment of goodwill	(4,829		)	—			—
Adjustment for final settlement agreement	(86		)	—			—
Amortization of non-compete agreement	—			(204		)	—
Effect of foreign currency translation	816			114			55
Balance at December 31, 2006	9,848			1,387			710
Amortization of non-compete agreement	—			(195		)	—
Effect of foreign currency translation	1,150			147			79
Balance at December 31, 2007	$	10,998		$	1,339		$	789

As of December 31, 2007, the Company has recorded goodwill of $804 in its Canadian reporting unit, which is part of the Americas segment and $10,194 of goodwill in its Bushman Tanks reporting unit, which is part of the International segment.

Based on the impairment test as of June 30, 2006, the Company recorded a $4,829 impairment related to the carrying value of goodwill related to the Bushman Tanks reporting unit.  The primary cause for this impairment of goodwill was the decrease in gross margins and operating income, which have been negatively impacted by increasing prices in petroleum-based raw materials and other factors, which resulted in revisions of projected future earnings and cash flows.  The fair value of the Bushman Tanks reporting unit was estimated using a combination of valuation techniques, including the expected present value of future cash flows. Measurement of the impairment loss is an estimate, and continued increases in raw materials costs in excess of the expectations of management, or other negative events or circumstances, could result in additional impairment of goodwill in future reporting periods. There was no impairment to the carrying value of goodwill in 2007 or 2005.

The estimated amortization expense of the intangible non-compete agreement based on the current balance and the December 31, 2007 foreign currency exchange rates, is $203 per year for the next five fiscal years, and $324 thereafter.

Revenue Recognition and Accounts Receivable Reserves.  Revenues are recognized when title passes and the risks and rewards of ownership have passed to the customer, based on the terms of sale.  Title passes generally upon shipment.  Provisions for estimated sales returns are based on the Company’s historical sales returns experience.  Provisions for uncollectible accounts are made based upon specific percentages derived from historical experience of the past due outstanding accounts receivable aging categories or upon specific circumstances.

F-10

Shipping and Handling Costs.  Shipping and handling costs paid to outside parties and billed to customers are included in sales, and the related costs are included in selling expenses. Shipping and handling costs are charged to expense as incurred. Total shipping costs of $6,130, $10,638, and $10,543 were included in selling expenses for 2007, 2006 and 2005, respectively.

Sales Tax.  Revenues are disclosed net of sales tax collected from customers and remitted to governmental entities.

Income (Loss) Per Share.  Basic income (loss) per share excludes dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period.  Diluted income per share reflects the potential dilution that could occur if options to acquire common stock were exercised.

The following is a reconciliation of the number of shares (denominator) used in the basic and diluted income (loss) per share computations:

	2007			2006				2005
		Per			Per				Per
		Share			Share				Share
	Shares	Amount		Shares	Amount			Shares	Amount
Basic income (loss) per share	9,544	$	0.03	9,543	$	(0.72	)	9,448	$	(0.73	)
Effect of dilutive stock options	1	—		—	—			—	—
Diluted income (loss) per share	9,545	$	0.03	9,543	$	(0.72	)	9,448	$	(0.73	)

The following weighted average options to purchase shares of common stock were not included in the computation of diluted income (loss) per share due to their antidilutive effect:

	2007	2006	2005
Options to purchase shares of common stock	1,725	1,751	1,934
Exercise prices	$4.15 –	$2.83 –	$3.25 –
	$13.75	$13.75	$13.75
Expiration dates	July 2010 –	July 2010 –	July 2006 –
	May 2017	October 2016	August 2015

Fair Value of Financial Instruments.  The carrying amount of cash, accounts receivable, accounts payable, accrued expenses and short-term borrowings approximates fair value because of the short maturity of these financial instruments.  Long-term obligations are carried at amounts that approximate fair value.

Accounting for Stock-Based Compensation.  Effective January 1, 2006 the Company adopted SFAS No. 123R, Share-Based Payment, which requires that compensation expense be recognized over the requisite service period based on the fair value of the award, at the date of grant.  The Company used the “modified prospective” method as described in SFAS No. 123R.  In the “modified prospective” method, compensation cost is recognized for all share-based payments granted after the effective date and for all unvested awards granted prior to the effective date.  In accordance with SFAS No. 123R, prior period amounts were not restated.  SFAS No. 123R also requires cash retained as a result of excess tax benefits associated with these share-based payments to be classified as financing activities in the Consolidated Statements of Cash Flows, rather than as operating cash flows as required under previous accounting principles.  The Company recorded no excess tax benefits for the years ended December 31, 2007 and 2006.

Share-based compensation expense recognized during a period is based on the value of the portion of share-based payment awards that is ultimately expected to vest.  Share-based compensation expense recognized in the Company’s consolidated statements of operations for the years ended December 31, 2007 and 2006 included compensation expense for share-based payment awards granted prior to, but not yet vested as of, December 31, 2005 based on the

F-11

grant date fair value estimated in accordance with the pro forma provisions of SFAS No. 123,  Accounting for Stock Based Compensation, adjusted for estimated forfeitures, and share-based payment awards granted subsequent to December 31, 2005 based on the grant date fair value estimated in accordance with SFAS No. 123R.  For share awards granted in 2007 and 2006, expenses are amortized under the straight-line attribution method over the requisite service period.  For all unvested share awards granted prior to 2006, expenses are amortized under the straight-line method over the remaining vesting period of the options.

Total stock-based compensation expense recognized in general and administrative expense was $115 or $(.01) per share and $343 or $(.04) per share for the years ended December 31, 2007 and 2006, respectively.

Prior to the adoption of SFAS No. 123R, the stock-based compensation plans were accounted for using the intrinsic value method under APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations.  Pro forma information regarding the impact of total stock-based compensation on net income and income per share for prior periods is required by SFAS No. 123R.

Such pro forma information, determined as if the Company had accounted for its employee stock options under the fair value method according to SFAS No. 123 during 2005, is illustrated in the following table:

	Year ended
	December 31, 2005
Reported net loss	$	(6,880	)
Add stock-based compensation expense reported in net (loss) income	—
Less total stock-based compensation expense, determined under the fair value method, net of tax	(473		)
Pro forma net loss	$	(7,353	)
Reported basic and diluted net (loss) income per share	$	(0.73	)
Add stock-based compensation expense reported in net loss	—
Less total stock-based compensation expense, determined under the fair value method	(0.05		)
Pro forma basic and diluted net (loss) income per share	$	(0.78	)

Recent Accounting Pronouncements.  In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements.  This Statement will be effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.  The Company has not determined the impact, if any, the adoption of SFAS 157 will have on its financial position and results of operations, but does not believe the impact will be material.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of SFAS No. 115, which allows measurement at fair value of eligible financial assets and liabilities that are not otherwise measured at fair value. If the fair value option for an eligible item is elected, then unrealized gains and losses for that item shall be reported in current earnings at each subsequent reporting date. SFAS No. 159 also establishes presentation and disclosure requirements designed to draw comparison between the different measurement attributes the company elects for similar types of assets and liabilities. This statement is effective for fiscal years beginning after November 15, 2007. The Company is in the process of evaluating the application of the fair value option and its effect on the Company’s results of operations or financial condition.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin (“ARB”) No. 51, which establishes and expands accounting and reporting standards for minority interests, which will be recharacterized as noncontrolling interests, in a subsidiary and the deconsolidation of a subsidiary.  This statement is effective for fiscal years beginning on or after December 15, 2008.  Early adoption of this statement is prohibited, and the presentation and disclosure requirements shall be applied retrospectively for all periods presented.  The Company is currently assessing the potential impact that the adoption of this statement will have on its financial position and results of operations.

F-12

In December 2007, the FASB issued SFAS No. 141(revised), Business Combinations.  Under SFAS No. 141(R) an entity is required to recognize the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair values on the acquisition date.  SFAS No. 141(R) applies to all business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.  This statement is effective for fiscal years beginning on or after December 15, 2008.  The impact, if any, that the adoption of this statement will have on the Company’s financial position and results of operations will depend on the nature and size of business combinations the Company consummates after the effective date.

Research and Development Costs.  The Company follows the policy of expensing research and development costs in the periods incurred.

Advertising Costs.  The Company follows the policy of expensing advertising costs in the periods incurred.  Advertising expenses were $596, $516, and $696, in 2007, 2006, and 2005, respectively.

Warranty.  Warranty expense is estimated at the time of the sale based on historical warranty costs and analysis of defects that have occurred.

Reclassifications. In 2007, the Company reclassified the long-term portion of accrued workers’ compensation from accrued expenses to other long-term liabilities, including the December 31, 2006 amount of $818 for comparative purposes.  The Company had previously classified such accrued expenses under current liabilities.

NOTE C—INVENTORIES

Inventories are summarized as follows:

	2007			2006
Raw materials	$	6,786		$	6,043
Work-in-process	4,100			3,318
Finished goods	6,459			4,891
	17,345			14,252
Less inventory valuation reserve	(1,582		)	(1,234		)
	$	15,763		$	13,018

NOTE D—PROPERTY AND EQUIPMENT

Property and equipment are summarized as follows:

							Estimated
	2007			2006			useful lives
Machinery and equipment	$	73,317		$	68,221		3-10 years
Office furniture and equipment	4,314			3,749			3 -7 years
Leasehold improvements	3,809			3,612			2-10 years
	81,440			75,582
Less accumulated depreciation and amortization	(62,404		)	(56,783		)
	$	19,036		$	18,799

Included in machinery and equipment is $434 and $598 of equipment under capital lease at December 31, 2007 and 2006, respectively.  Accumulated amortization of assets under capital lease totaled $95 and $147 at December 31, 2007 and 2006, respectively.  Total depreciation and amortization expense was $4,734, $4,897 and $4,303 for the years ended December 31, 2007, 2006 and 2005, respectively.

F-13

CHANNELL COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–continued

(amounts in thousands, except per share data)

NOTE E—ACCRUED EXPENSES

Accrued expenses consist of the following:

	2007		2006
Accrued compensation and benefits	$	3,319	$	2,541
Accrued warranty expenses	1,363		1,144
Other	762		686
	$	5,444	$	4,371

The Company provides a warranty for the replacement and repair of a defective product.  Historically, the Company has not experienced significant warranty costs or returns.  The Company acquired Bushman Tanks in August 2004.  Associated with the acquisition of Bushman Tanks was the assumption of warranties related to Bushman Tanks polyethylene water tanks.  Prior to November 1, 2006 the warranty period was 25 years.  Effective November 1, 2006, all new tanks ordered have a warranty period of 10 years.

Warranty expense is estimated by management at the time of the sale based on historical warranty costs and analysis of defects that have occurred in field installations.  The change in the Company’s warranty liability for the years ended December 31, 2007, 2006 and 2005 is summarized as follows:

Balance January 1, 2005	$	1,165
Expense for new warranties	266
Warranty claims	(319		)
Effect of foreign currency translation	(93		)
Balance, December 31, 2005	1,019
Expense for new warranties	491
Warranty claims	(451		)
Effect of foreign currency translation	85
Balance, December 31, 2006	$	1,144
Expense for new warranties	563
Warranty claims	(470		)
Effect of foreign currency translation	126
Balance, December 31, 2007	$	1,363

F-14

CHANNELL COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–continued

(amounts in thousands, except per share data)

NOTE F—DEBT

The Company’s debt consists of the following at December 31:

	2007		2006
Channell Commercial Corporation and Channell Commercial Canada Inc., which is a subsidiary of Channell Commercial Corporation (“Channell Canada”), as borrowers, entered into an Amended and Restated Loan and Security Agreement with asset-based lenders in the United States and Canada in July 2007. The Amended and Restated Loan and Security Agreement contains a three-year term loan that expires June 30, 2010 and is repayable in equal monthly payments of $42 based on a five-year amortization schedule with a balloon payment of $1,042 at maturity. Amounts borrowed under this facility bear interest at a variable rate based on either the lender’s Base Rate or LIBOR. The interest rate under the term loan was 7.75% at December 31, 2007. The loans under the Amended and Restated Loan and Security Agreement are guaranteed by Channell Limited, Channell Commercial Europe Limited and A.C. Egerton (Holdings) Limited, which are direct and indirect subsidiaries of Channell Commercial Corporation (the “Subsidiary Guarantors”), and are secured by substantially all the assets of the borrowers as well as the assets of the Subsidiary Guarantors. The interest rate on the term loan from the original Loan and Security Agreement that was paid off in July 2007 with proceeds of the Amended and Restated Loan and Security Agreement was 9.25% at December 31, 2006.	$	2,333	$	942
Channell Commercial Corporation and Channell Canada entered into an Amended Loan and Security Agreement with asset-based lenders in the United States and Canada in July 2007. The Amended Loan and Security Agreement contains a revolving credit facility that expires June 30, 2010. Amounts borrowed under this facility bear interest at a variable rate based on either the lender’s Base Rate or LIBOR. The interest rate under the term loan was 7.75% at December 31, 2007. The loans under the Loan and Security Agreement are guaranteed by the Subsidiary Guarantors and are secured by all the assets of the borrowers and the Subsidiary Guarantors. The interest rate on the revolving credit facility from the original Loan and Security Agreement that was paid off in July 2007 was 9.25% at December 31, 2006. As the Company is obligated to repay the revolving credit facility as cash flow permits, the balance outstanding is classified as current.	5,620		5,374
Channell Bushman Pty Limited (“Channell Bushman”), a majority-owned subsidiary of Channell Commercial Corporation (“Channell Bushman”), and Bushmans Group Pty Limited, Australian Bushman Tanks Pty Limited, Bushmans Engineering Pty Limited and Polyrib Tanks Pty Limited, each a wholly-owned subsidiary of Channell Bushman and an indirect subsidiary of Channell Commercial Corporation together, the “Channell Bushman Subsidiaries”), entered into a three-year Facility Agreement (the “Facility Agreement”) with an Australian private debt fund in October 2007, which contains a term loan. The term loan interest rate under the Facility Agreement at December 31, 2007 was 12.39%. The term loan under the Facility Agreement requires payments of $142 per month beginning March 2008 with a balloon payment of $2,842 at maturity. The loans under the Facility Agreement are guaranteed by the Channell Bushman Subsidiaries and are secured by all the assets of Channell Bushman and subsidiaries.	7,016		—
Channell Bushman and the Channell Bushman Subsidiaries entered into a three-year Loan Facility Agreement with an Australian private debt fund in October 2007 which contains a revolving line of credit. The loans under the Facility Agreement are guaranteed by the Channell Bushman Subsidiaries and are secured by all the assets of Channell Bushman and Subsidiaries. The interest rate under the Facility Agreement at December 31, 2007 for the revolving line of credit was 13.39%.	2,806		—

F-15

CHANNELL COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–continued

(amounts in thousands, except per share data)

Channell Bushman and Subsidiaries were party to a five-year Loan and Security Agreement (the “Prior Australia Loan Agreement”) with a commercial bank in Australia that was paid off in October 2007. The interest rate under the Loan and Security Agreement for the term loan was 6.74% at December 31, 2006.	—		3,629
The interest rates under the Prior Australia Loan Agreement at December 31, 2006 for the revolving line of credit, “earn out” facility and capital expenditure facility were 6.65%, 6.74%, and 6.85%, respectively.	—		3,745
Other	27		33
	17,802		13,723
Less current maturities	10,335		13,723
	$	7,467	$	—

Channell Commercial Corporation, Channell Canada and the Subsidiary Guarantors are parties to an Amended and Restated Loan and Security Agreement with asset-based lenders in the United States and Canada.  The Amended and Restated Loan and Security Agreement contains: (i) a term loan of $2,500; (ii) capital expenditure loans in an aggregate amount of up to $5,000; and (iii) a revolving credit facility with borrowings of up to a maximum of $12,500, depending on the level of certain qualifying assets.  The revolver under the Amended and Restated Loan and Security Agreement has a $2,000 sub-limit for letters of credit.  As of December 31, 2007 and 2006, outstanding letters of credit totaled $586 and $1,186, respectively.  The obligations under the Amended and Restated Loan and Security Agreement are guaranteed by the Subsidiary Guarantors and are secured by substantially all assets of the Company and the Subsidiary Guarantors.  In addition, any borrowings made by Channell Canada are secured by substantially all of the assets of Channell Canada.  The Amended and Restated Loan and Security Agreement terminates on June 30, 2010 (unless terminated earlier pursuant to the terms thereof).  The terms and conditions of the Amended and Restated Loan and Security Agreement (other than the borrowing limits) are substantially similar to the previous Loan and Security Agreement with those same lenders (the “Previous Agreement”).  As of December 31, 2006, the borrowers were in default under the Previous Agreement for failure: to maintain a minimum aggregate availability of $1,500 under the revolver (the aggregate availability was $851); to have prepaid the domestic revolving loans in the amount of the excess of the domestic revolving credit exposure over the domestic borrowing base; and to have delivered the projections of Channell Commercial Corporation and its subsidiaries for fiscal year 2007.  In February 2007, the borrowers received a waiver from the lenders for these defaults.

The Amended and Restated Loan and Security Agreement contains various financial and operating covenants that impose limitations on the borrowers’ and their subsidiaries’ ability, among other things, to incur additional indebtedness, merge or consolidate, sell assets except in the ordinary course of business, make certain investments, enter into leases and pay dividends.  The Amended and Restated Loan and Security Agreement requires Channell Commercial Corporation to maintain a lockbox on the revolving credit facility. The Amended and Restated Loan and Security Agreement also generally provides that if there exists an event of default thereunder, the lenders or administrative agents would have the option of accelerating the outstanding obligations and terminating all commitments thereunder. The Company was in compliance with all covenants at December 31, 2007 except for one negative covenant prohibiting certain sales transactions for which it received a waiver.

Channell Bushman and the Channell Bushman Subsidiaries are parties to a Facility Agreement with an Australian private debt fund.  In connection with the Facility Agreement, Channell Bushman and the Channell Bushman Subsidiaries also entered into a Fixed and Floating Charge (Incorporating an Equitable Mortgage of Shares) (the “Security Agreement”), by and among Channell Bushman, the Channell Bushman Subsidiaries and the lender.

The Facility Agreement (denominated in Australian dollars) provides for credit facilities in the aggregate principal amount of $11,544, consisting of: (i) a term loan of $7,104 and (ii) a revolving facility with borrowings of up to $4,440, depending on the level of certain qualifying assets. The obligations of Channell Bushman under the Facility Agreement are guaranteed by the Channell Bushman Subsidiaries. In addition, under the Security Agreement, a first-ranking security interest in all of the assets of Channell Bushman and the Channell Bushman Subsidiaries is granted to, and all of the share capital of the Channell Bushman Subsidiaries is pledged to, the lender as security for Channell Bushman and the Channell Bushman Subsidiaries’ obligations under the Facility Agreement. The Facility Agreement terminates on September 30, 2010, unless earlier terminated pursuant to the terms thereof.  In March 2008, Channell Bushman entered into a sale and leaseback transaction with an equipment finance company with respect to its truck

F-16

CHANNELL COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–continued

(amounts in thousands, except per share data)

fleet.  The net proceeds from the sale of $1,276 were used to pay down the term loan.

The Facility Agreement and Security Agreement contain various financial and operating covenants that impose limitations on Channell Bushman and the Channell Bushman Subsidiaries’ ability to, among other things, incur or guarantee additional indebtedness, merge or consolidate, sell assets except in the ordinary course of business, make certain investments, issue or redeem shares, transfer ownership of the share capital of the Channell Bushman Subsidiaries, grant further security interests, and pay dividends. The Facility Agreement and Security Agreement provide that on the occurrence of an event of default, the lender may declare the outstanding obligations under the Facility Agreement immediately due and payable, terminate its commitments under the Facility Agreement and enforce its rights under its security interests, including taking possession of and otherwise acting as owner of the assets of Channell Bushman and the Channell Bushman Subsidiaries, appointing a receiver over the assets of Channell Bushman and the Channell Bushman Subsidiaries with the power to, among other things, sell the assets, and causing 100% of the shares of each Channell Bushman Subsidiary to be registered in its name. The lender may also declare the outstanding obligations under the Facility Agreement immediately due and payable should any change of control in Channell Bushman or any Channell Bushman Subsidiary occur. Channell Bushman was in compliance with all covenants at December 31, 2007.

On October 8, 2007, Channell Pty Limited and Bushman Group Pty Limited, which are indirect subsidiaries of Channell Commercial Corporation, entered into a new Loan and Security Agreement with the Bank that amended the Prior Australia Loan Agreement. The new Loan and Security Agreement extends the expiration date of all remaining facilities under the Prior Australia Loan Agreement that were not repaid with the initial borrowing under the Facility Agreement to October 31, 2008.  The remaining facilities include performance guarantees, credit card facilities and payroll processing facilities. The loans under the New Loan and Security Agreement are secured by all the assets of Channell Pty Limited and a term deposit that was released in February 2008.

The new Loan and Security Agreement contains various operating covenants that impose limitations on Channell Pty Limited and Bushman Group Pty Limited’s ability, among other things, to merge or consolidate, sell assets except in the ordinary course of business, and pay dividends.  Except as amended as described above, the remaining terms and conditions of the Prior Australia Loan Agreement (as they relate to Channell Pty Limited and Bushman Group Pty Limited) generally remain unchanged. Channell Pty Limited and Bushman Group Pty Limited were in compliance with all covenants at December 31, 2007.

In March 2008, Channell Pty Limited and Bushman Group Pty Limited refinanced the facilities under the Loan and Security Agreement with another commercial bank in Australia.  In addition to the performance guarantees, credit card facilities and payroll processing facilities, the new agreement includes an equipment financing facility for each entity.

The Company’s debt at December 31, 2007 is scheduled to mature as follows:

Year	Amount
2008	$	10,335
2009	2,191
2010	5,271
2011	5
2012	—
	$	17,802

F-17

CHANNELL COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–continued

(amounts in thousands, except per share data)

NOTE G—CAPITAL LEASE OBLIGATIONS

The Company, under various agreements, leases certain machinery and equipment that are classified as capital leases.  The leases expire on various dates through May 2010.  Future minimum payments, by year, are as follows:

Year	Amount
2008	$	178
2009	154
2010	56
	388
Less amount representing interest	(37		)
	351
Less current maturities	(153		)
	$	198

NOTE H—INCOME TAXES

The components of income tax expense (benefit) are as follows:

	2007		2006			2005
Current
Federal	$	12	$	78		$	(119	)
State	25		24			20
Foreign	123		(104		)	187
	160		(2		)	88
Deferred
Federal	—		—			4,353
State	—		—			1,151
Foreign	324		(775		)	(580		)
	324		(775		)	4,924
Total income tax expense (benefit)	$	484	$	(777	)	$	5,012

The components of income (loss) before income tax expense were as follows:

	2007		2006			2005
United States	$	652	$	(1,127	)	$	(1,541	)
Foreign	84		(8,191		)	(497		)
	$	736	$	(9,318	)	$	(2,038	)

A reconciliation from the U.S. Federal statutory income tax rate to the effective income tax rate for the years ended December 31, is as follows:

F-18

Channel Commercial Corporation

Notes to Consolidated Financial Statements-continued

(amounts in thousands, except per share data)

	2007		2006		2005
U.S. Federal statutory rate	34	%	(34	)%	(34	)%
State income taxes, net of federal tax benefit	5		(1	)	(5	)
Research and development tax credit	—		—		(25	)
Change in valuation allowance	(19	)	6		330
Excess compensation	10		—		—
Meals and Entertainment	12		—		—
Nondeductible expenses	2		2		(1	)
Effect of subsidiaries taxed at other than the U.S. statutory rate	22		19		(19	)
	66	%	(8	)%	246	%

The significant change in the effective income tax rate in 2005 is primarily the result of recognizing a full valuation allowance against the domestic net deferred tax asset in 2005.  The Company continued to maintain a full valuation allowance against its domestic net deferred tax asset in 2006 and 2007.

Significant components of the Company’s deferred tax assets and liabilities are as follows:

	2007			2006
Domestic Assets
Patents	$	49		$	147
Allowance for bad debts	—			86
Inventory capitalization	134			67
Vacation pay	306			261
Accrued liabilities and reserves	13			103
Deferred gain on sale leaseback	103			126
Deferred rent	—			61
Goodwill	1,431			1,689
State tax credits and loss carryforwards	1,316			1,354
Federal tax credits and loss carryforwards	4,092			3,869
Inventory reserves	131			21
Share-based compensation	174			130
	7,749			7,914
Valuation allowance	(6,114		)	(6,268		)
	1,635			1,646
Domestic Liabilities
Accelerated depreciation	(1,635		)	(1,646		)
Net domestic deferred tax assets	—			—

F-19

Channel Commercial Corporation

Notes to Consolidated Financial Statements-continued

(amounts in thousands, except per share data)

	2007			2006
Foreign deferred tax assets:
Accrued liabilities and reserves	$	1,278		$	827
Loss carryforwards	822			1,180
	2,100			2,007
Foreign Deferred tax liabilities
Purchased intangibles	(237		)	(213		)
Exchange gain/loss and prepaid expenses	(285		)	(58		)
	(522		)	(271		)
Net foreign deferred tax assets	$	1,578		$	1,736

The classification of the net deferred tax asset between current and non-current is as follows:

	2007		2006
Net current assets	$	936	$	719
Net long-term assets (liabilities)	642		1,017
Net deferred tax assets	$	1,578	$	1,736

Deferred tax assets and liabilities are determined based on temporary basis differences between assets and liabilities reported for financial reporting and tax reporting.  The ultimate realization of the net deferred tax asset is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers projected future taxable income, recent financial performance and tax planning strategies in making this assessment.  The Company is required to record a valuation allowance to reduce its net deferred tax asset to the amount that management believes is more likely than not to be realized.  Accounting guidance allows the Company to look to future earnings to support the realizability of the net deferred assets.  Since the Company has had cumulative net operating losses in the domestic operations in recent years, the ability to use forecasted future earnings is diminished.  As a result, management concluded as of December 31, 2005 and 2006 that a full valuation allowance against the domestic net deferred tax asset was appropriate.  The Company continues to recognize a full valuation allowance against its net domestic deferred tax asset at December 31, 2007.  In addition, the Company had approximately $1,323 of net operating loss carryforwards with a potential tax benefit of $370 in one of the Asian operations within its International segment.  Management has concluded that a full valuation allowance is required on this net operating loss carryforward because of uncertainty regarding its realization.  The ultimate realization of the remaining net deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers projected future taxable income and tax planning strategies in making this assessment.  Based on historical foreign taxable income and projections for future taxable income over periods that the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences.  The amounts of deferred taxes considered realizable however, could materially change in the future if estimates of future taxable income during the carryforward period are changed.

The Company has not provided for U.S. income taxes on foreign subsidiaries’ undistributed earnings of $5,005 at December 31, 2007, since those earnings are expected to be reinvested indefinitely outside the U.S.  It is not practicable to predict the amount of U.S. income taxes that might be payable if these earnings were eventually repatriated.

As of December 31, 2007, the Company has federal net operating losses of $11,663 and state net operating losses of $24,007.  The federal net operating losses expire in varying amounts beginning in 2024 unless previously utilized.

F-20

Channel Commercial Corporation

Notes to Consolidated Financial Statements-continued

(amounts in thousands, except per share data)

The state net operating losses generally begin expiring in material amounts in 2011.  The Company also has foreign net operating losses of approximately $4,064 that can be carried forward indefinitely.

As of December 31, 2007, the Company has federal research and development credit carryforwards totaling $241.  The Company also has federal alternative minimum tax credit carryforwards totaling $79 that can be carried forward indefinitely and a foreign tax credit carryforward totaling $11, which can be carried forward for ten years.

The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), an interpretation of SFAS No. 109, on January 1, 2007.  FIN 48 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transitions issues.  The adoption of FIN 48 resulted in no impact to the Company’s consolidated financial statements.  As of the date of the adoption, the Company had no material unrecognized tax benefits. Based on the information currently available, no significant changes in unrecognized tax benefits are expected in the next twelve months. As of the date of adoption, the Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions.  The 2002 through 2007 tax years remain subject to examination by federal tax authorities while the 2003 through 2007 tax years remain subject to examination by most state and foreign jurisdictions.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.  As of the date of the adoption of FIN 48 and December 31, 2007, the Company had no provisions for interest or penalties related to uncertain tax positions.

NOTE I—STOCK-BASED COMPENSATION

In July 1996, the Company adopted the 1996 Incentive Stock Plan (the “1996 Stock Plan”), under which it was authorized to issue non-qualified stock options and incentive stock options to key employees, directors and consultants to purchase up to an aggregate of 750 shares of the Company’s common stock.  The options have a term of ten years and generally become fully vested by the end of the third year.  In May 1999, the 1996 Stock Plan was amended to increase the authorized number of shares to 1,500.

In January 2003, the Board of Directors approved an offer allowing current employees and non-employee directors to exchange all of their outstanding options granted under the 1996 Stock Plan for new options to be granted under the Company’s 2003 Incentive Stock Plan or any other stock option plan that may be adopted by the Company.  The 2003 Incentive Stock Plan was approved at the Annual Meeting of Stockholders on April 25, 2003.  The authorized shares under the 2003 Incentive Stock Plan are 3,100.

A total of 1,327 options to purchase shares of the Company were accepted for exchange and cancelled on March 20, 2003.  On September 24, 2003, a total of 1,324 new options were exchanged for options cancelled in March 2003.

Eligible option holders who participated in the offer received a new option on the new grant date in exchange for each old option that was validly tendered and accepted for exchange. The number of shares covered by each new option was equal to the number of shares covered by the old options, and the vested status and vesting schedule of the old options was preserved and continued. The exercise price of the new options was equal to the closing sale price of the Company’s common stock as reported on the NASDAQ Stock Market on the grant date of the new options. No expense was recognized in connection with the exchange of options.

At December 31, 2007, under the two plans described above, the Company had total unvested stock-based compensation expense of $129. The unvested stock options will vest at various intervals over the next 2.4 years. Total stock-based compensation expense, recognized in general and administrative expenses during the years ended December 31, 2007 and 2006 is shown in the following table:

	Year ended December 31,
	2007			2006
Stock-based compensation expense included in net income	$	115		$	343
Effect on diluted income (loss) per share	$	(0.01	)	$	(0.04	)

The fair value of options at the date of grant was estimated using the Black-Scholes option valuation model with the following weighted average assumptions for all options granted during the period:

F-21

Channel Commercial Corporation

Notes to Consolidated Financial Statements-continued

(amounts in thousands, except per share data)

	SFAS No. 123R Expense 2007		SFAS No. 123R Expense 2006		SFAS No. 123  Pro forma 2005
Expected term	5 years		5 years		5 years
Risk-free interest rate	4.9	%	4.7	%	3.9	%
Expected volatility	100	%	62	%	50	%
Expected forfeiture rate	7.5	%	9.1	%	—
Expected dividend yield	—		—		—

The weighted-average grant-date fair value of options granted during the years ended December 31, 2007, 2006 and 2005 was $3.12, $1.89, and $3.52, respectively.  The expected volatility is based on the historical volatility of the Company’s common stock.  The expected term and forfeiture rate of options granted are based on analysis of historical employee termination rates and option exercises.  The risk-free interest rates are based on the U.S. Treasury yield for a period consistent with the expected term of the option at the date of grant.

The total intrinsic value of options exercised during the years ended December 31, 2007, 2006 and 2005 was $1, $0, and $635, respectively.

A summary of option activity under the Company’s two stock plans, as of December 31, 2007 and changes during the year then ended is presented below:

	Shares of common stock under options		Weighted- average exercise price		Weighted- average remaining contractual term	Aggregate intrinsic value
Outstanding at January 1, 2007	1,751		$	4.70
Options granted	14		4.07
Options forfeited	(94	)	4.72
Options expired	—		—
Options exercised	(1	)	4.84
Outstanding at December 31, 2007	1,670		$	4.70	6.0	$	—
Exercisable at December 31, 2007	1,636		$	4.72	5.9	$	—
Ending vested and expected to vest in the future as of December 31, 2007	1,667		$	4.70	6.0	$	—
Available for grant at December 31, 2007	1,281

A summary of the status of the Company’s nonvested shares as of December 31, 2007 and changes during the year then ended is presented below:

Nonvested Shares	Shares		Fair Value
Nonvested at January 1, 2007	101		$	1.79
Granted	14		3.12
Vested	(79	)	1.71
Forfeited or expired	(2	)	2.37
Nonvested at December 31, 2007	34		$	2.04

F-22

Channel Commercial Corporation

Notes to Consolidated Financial Statements-continued

(amounts in thousands, except per share data)

NOTE J—RETIREMENT PLAN

The Company established a retirement plan in accordance with section 401(k) of the Internal Revenue Code. Under the terms of this plan, eligible employees may make voluntary contributions to the extent allowable by law.  Employees of the Company are eligible after 90 days of employment.  Matching contributions by the Company to this plan are discretionary and will not exceed that allowable for Federal income tax purposes.  The Company’s contributions are vested over five years in equal increments.  The accompanying statements of operations include contribution expense of $0, $0, and $163 for the years ended December 31, 2007, 2006 and 2005, respectively.

NOTE K—RELATED PARTY TRANSACTIONS

The Company has two leases for approximately 265 square feet of manufacturing, warehouse and office space in Temecula, California, with the Channell Family Trust, one of the Company’s principal stockholders, of which Jacqueline M. Channell, the Company’s Chairman of the Board and secretary, is a trustee. The term of the lease dated December 22, 1989 (as amended), for 103 square feet, expires on December 31, 2015.  The term of the lease dated May 29, 1996 (as amended), for 162 square feet, expires on April 30, 2012 and has two renewal options, one for three years, eight months and a second for five years. Both leases provide for payments by the Company of insurance, repairs, maintenance and property taxes.  Rent expense paid under the leases was $1,416, $1,383, and $1,334 for the years ended December 31, 2007, 2006, and 2005, respectively.  Also, in 1997, the Company guaranteed debt of the Channell Family Trust of approximately $754 in connection with construction of one of the leased facilities described above.  The loan amount subject to the guarantee has declined and is expected to decline further before expiring in 2017.  At December 31, 2007, the outstanding loan balance subject to the guarantee totaled $486.  It is not practicable to estimate the fair value of the guarantee; however, the Company does not anticipate that it will incur losses as a result of this guarantee.  As such, the Company has not recorded a liability for this guarantee.  If the Channell Family Trust were to default on the outstanding loan balance, the Company might be required to repay the remaining principal balance.   Management has determined that the Channell Family Trust does not qualify as a “variable interest entity” subject to consolidation under FIN 46 and FIN 46(R).

In 2007 the Company entered into a lease with William H. Channell, Jr., the Company’s President and Chief Executive Officer, and his wife, Carolyn Channell, related to a parcel of land adjacent to the Company’s headquarters building in Temecula.  The lease dated September 13, 2007 expires December 31, 2015 and has two five-year renewal options.  Rent paid under the lease was $25 in 2007.

Carolyn Channell was hired as an employee of the Company in June 2005. The Company paid Mrs. Channell $70 in 2007 and 2006.  Prior to being hired as an employee to handle specific insurance matters for the Company, Mrs. Channell was paid an additional $40 for her consulting services in the first half of 2005.  Mrs. Channell is the wife of William H. Channell, Jr., the Company’s President and Chief Executive Officer.

The Company has facilities in Dalby, Terang, and Adelaide, Australia that are leased from stockholders of the Company.  These stockholders are former owners of Bushman Tanks.  The facilities comprise 72 square feet of manufacturing, warehouse and office space.  The aggregate rent expense paid for these facilities was $261 and $254 in 2007 and 2006, respectively.  At the time of the Bushman Tanks acquisition in 2004, the Company hired an independent firm to appraise the market lease rates for these facilities and it was determined that the existing leases were in excess of fair market value by approximately $27 per year.  Included in the liabilities assumed in the Bushman Tanks acquisition is $93 related to these unfavorable leases.

NOTE L—COMMITMENTS AND CONTINGENCIES

Leases. The Company leases manufacturing and office space and machinery & equipment under several operating leases expiring through 2015. Rent expense under all operating leases amounted to $3,396, $3,277, and $2,791 for the years ended December 31, 2007, 2006 and 2005, respectively. Rent expense for the years ended December 31, 2007 and 2006 is net of sublease rental income of $263 and $99, respectively. Total future minimum rental payments under noncancellable operating leases and subleases with initial or remaining terms in excess of one year as of December 31, 2007, including the operating leases with the related parties discussed in Note K, are as follows:

F-23

Channel Commercial Corporation

Notes to Consolidated Financial Statements-continued

(amounts in thousands, except per share data)

	Rental		Sublease
Year	Payments		Income
2008	$	3,805	$	131
2009	3,650
2010	3,183
2011	2,856
2012	2,133
Thereafter	4,651
	$	20,278	$	131

In addition to these minimum rental commitments, certain of these operating leases provide for payments of insurance, repairs and maintenance and property taxes.

In June, 2002, the Company entered into a sale and leaseback agreement for a warehouse facility located in Temecula, California.  The proceeds from the sale totaled approximately $6,200 and resulted in a pretax deferred gain of $604.  The resulting lease is being accounted for as an operating lease.  The base lease term is ten years with two five-year options at rental amounts to be adjusted to the fair market rental value at the end of the base term.  The Company recorded income of $60, $61 and $60 in 2007, 2006 and 2005 respectively, related to the amortization of the deferred gain.  The balance of the unamortized gain was $272 and $332 at December 31, 2007 and 2006, respectively.

Employment Agreements.  In December, 2003 the Company entered into an employment agreement with William H. Channell Jr., its President and Chief Executive Officer.  The employment agreement is for an initial five-year term and is automatically renewed for additional five-year terms unless it is terminated by the Company or by Mr. Channell, Jr. in accordance with the agreement. Mr. Channell, Jr.’s salary (1) may be increased from time to time in the discretion of the Board of Directors and (2) will be increased annually, beginning July 1, 2004, to reflect the most recently published annualized percentage increase in the consumer price index for the Los Angeles, California area.  The agreement also provides that his base salary will not be decreased below $718 (which was the base salary on the original effective date of the agreement).  The total amount paid to Mr. Channell, Jr. as salary for 2007 was $825.

In addition to base salary, Mr. Channell, Jr. is entitled to participate in cash and other bonus programs, including the 2003 Incentive Stock Plan, 401(k) plan and the 2004 Incentive Bonus Plan. Pursuant to the agreement, the Company is also required to maintain certain insurance policies for Mr. Channell Jr.’s benefit and he is also entitled to certain other benefits, including an automobile allowance, health insurance, and vacation and sick leave, in accordance with customary practices for senior executive officers.  In the event that (1) the Company terminates Mr. Channell, Jr.’s employment without “cause,” as defined in the agreement, or (2) Mr. Channell, Jr. terminates his employment with the Company for “good reason,” which is also specifically defined in the agreement, Mr. Channell, Jr. would be entitled to a lump sum payment equal to three times his then current base salary, all health and life insurance benefits for three years, and accelerated vesting of any stock options or restricted stock granted to him.  In addition, if the Company terminates Mr. Channell, Jr.’s employment for any reason other than cause, it is required to maintain Mr. Channell, Jr.’s disability policy, at its expense, until the date on which Mr. Channell, Jr. is 65 years old.  The agreement also provides for certain benefits to Mr. Channell, Jr. upon his death or disability.

The Company was party to an employment agreement with William H. Channell, Sr., the Company’s former chairman of the board of directors.  The agreement was terminated on April 8, 2007, the date on which Mr. Channell, Sr. passed away.  In accordance with the agreement, the Company will continue to provide Mrs. Jacqueline M. Channell with medical insurance (to the same extent such insurance is provided to the Company’s senior executive officers) during her lifetime.  Mrs. Channell is currently being provided with medical insurance in connection with her employment by the Company.

Taxes.  The Federal income taxes of the Company for the years ended December 31, 2003 and 2004 are currently under examination by the Internal Revenue Service (“IRS”).  As of December 31, 2007, the Company and the IRS have resolved all outstanding issues except for the one related to an ordinary worthless stock deduction.  The amount of the benefit under dispute is approximately $3,000.  The net benefit recognized for this position was approximately $300 with the remaining benefit being offset by the valuation allowance that has been established against the deferred tax asset.  The Company does not anticipate a material adverse impact on its financial statements for this item.

F-24

CHANNELL COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

(amounts in thousands, except per share data)

Termination of Transportation and Logistics Services by Primary Freight Provider for Bushman Tanks Business.  As of October 12, 2006, the primary freight provider for the Company’s Bushman Tanks water storage tank manufacturing and distribution business unilaterally withdrew its transportation and logistics services.  Accordingly, the agreement with the freight provider has been terminated, and Bushman Tanks has reserved its rights in relation to any damages it suffers as a result of the termination of such services.  The freight provider claims that Bushman Tanks has breached the agreement.  Although the Company does not believe Bushman Tanks has breached the terms of the agreement, the Company has accrued for amounts in dispute.  If the dispute with the freight provider cannot be resolved, either Bushman Tanks or the freight provider may pursue legal action. Although no litigation has been initiated, the legal cost associated with potential litigation related to the termination of such services, and any settlements as a result of legal disputes related thereto, could negatively affect the Company’s working capital and results of operations.

Minority Interest. On August 2, 2004, the Company and Channell Bushman entered into an Investment and Shareholder’s Agreement with a private equity firm in Australia.  The private equity investment was obtained as part of the financing of the Bushman Tanks acquisition.  The private equity party invested $2.6 million, the net amount received after paying a capital raising fee, for ownership of 25% of the outstanding and voting shares of Channell Bushman.  As part of the Shareholder’s Agreement, the private equity party has the right to appoint one member of the Board of Directors of Channell Bushman with the Company appointing the remaining three members.  The Shareholder’s Agreement specifies that certain actions taken by the Board of Directors require unanimous approval, including, without limitation, a proposal to sell all or substantially all of the assets of Channell Bushman, material asset acquisitions or disposals not included in the annual business plan, any plan to limit or dissolve the business, the issuance of any securities, capital restructuring, granting of a security interest on assets and related party transactions.

It is the intent of the private equity party to exit from its investment in Channell Bushman within five years after the original investment.  The Shareholder’s Agreement contains clauses to facilitate the exit of the private equity party.  The Shareholder’s Agreement specifies that after the date that is two years after the original investment, the Company has an option to acquire all of the shares owned by the private equity party.  The Shareholder’s Agreement specifies that the value of the shares is to be fair market value as determined by an independent appraiser.  There are no minimum or maximum amounts specified in the Shareholder’s Agreement.  After the date that is five years after the original investment, both the Company and the private equity party have the right to initiate a sale of Channell Bushman.  At such time, the other party may elect to buy out the shares of the party initiating the sale at the fair market value as determined by an independent appraiser.  Otherwise, Channell Bushman would be offered for sale with the assistance of a financial advisor.

Legal Proceedings.  The Company is from time to time involved in ordinary routine litigation incidental to the conduct of its business.  The Company regularly reviews all pending litigation matters in which it is involved and establishes reserves deemed appropriate for such litigation matters.  Management believes that no presently pending litigation matters are likely to have a material adverse effect on the Company’s financial statements or results of operations, taken as a whole.

NOTE M—CREDIT CONCENTRATIONS AND MAJOR CUSTOMERS

The Company maintains cash balances in financial institutions located in the United States, Canada, Australia and the United Kingdom.  Cash balances held in financial institutions in the U.K. totaled $298 and $162 at December 31, 2007 and 2006, respectively.  Cash balances held in financial institutions in Australia totaled $1,051 and $506 at December 31, 2007 and 2006, respectively.  Cash balances held in financial institutions in Canada totaled $638 and $200 at December 31, 2007 and 2006, respectively.  Cash balances held in financial institutions located in the United States may, at times, exceed federally insured limits.  The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.

The telecommunications industry is the largest industry in which the Company operates and is highly concentrated.  A relatively small number of customers account for a large percentage of the Company’s available market.  Consequently, the Company’s five largest customers accounted for 33.0%, 29.4%, and 33.6%, of the Company’s total net sales in 2007, 2006, and 2005 respectively.  Verizon accounted for 7.7% of the Company’s total net sales in 2007, 8.3% of the Company’s total net sales in 2006, and 17.2% of the Company’s net sales in 2005.  Mergers and acquisitions in the telecommunications industry not only increase the concentration of the industry and of the Company’s customer base, but also from time to time delay customers’ capital expenditures as newly merged services providers consolidate their operations.  In the event one of the Company’s major customers were to terminate purchases of the Company’s products, the Company’s operating results would be adversely affected.  The Company also operates in

F-25

CHANNELL COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

(amounts in thousands, except per share data)

the water storage industry in Australia.  No single customer accounts for a large percentage of sales in the sector.  The primary markets for the sale of these products are to individuals and small businesses in the farming industry.  See Note N for the relative percentages of revenue from product line sales.

NOTE N—SEGMENT AND GEOGRAPHIC INFORMATION

The operating segments of the Company have been aggregated into two geographical reporting segments:  Americas and International.  Americas includes the United States, Central and South America and Canada.  International includes Europe, Africa, the Middle East, Australia and Asia.  The chief operating decision maker of both segments is William H. Channell, Jr., President and Chief Executive Officer of the Company.  The Company’s four product lines are sold in both segments.  The following tables summarize segment information:

	2007		2006			2005
Revenues from external customers(1):
Americas(2)	$	74,009	$	59,383		$	65,283
International	59,154		49,755			50,782
	$	133,163	$	109,138		$	116,065
Income (loss) from operations:
Americas	$	1,174	$	(702	)	$	(1,416	)
International	885		(7,759		)	(127		)
	$	2,059	$	(8,461	)	$	(1,543	)
Interest income:
Americas	$	4	$	29		$	3
International	39		57			67
	$	43	$	86		$	70
Interest expense:
Americas	$	696	$	477		$	201
International	670		466			364
	$	1,366	$	943		$	565
Income tax expense (benefit):
Americas	$	44	$	130		$	5,300
International	440		(907		)	(288		)
	$	484	$	(777	)	$	5,012
Identifiable assets:
Americas(3)	$	28,335	$	28,682		$	28,313
International(4)(5)(6)	38,512		33,196			32,393
	$	66,847	$	61,878		$	60,706
International change in goodwill:
Balance January 1,	$	9,171	$	13,273		$	13,574
Impairment of goodwill	—		(4,829		)	—
Adjustment for warranty claims and earn out agreement	—		(86		)	614
Foreign currency translation	1,023		813			(915		)
Balance December 31,	$	10,194	$	9,171		$	13,273

F-26

CHANNELL COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

(amounts in thousands, except per share data)

	2007		2006		2005
Depreciation and amortization:
Americas	$	3,043	$	2,970	$	3,060
International	1,886		2,131		1,420
	$	4,929	$	5,101	$	4,480
Capital expenditures:
Americas	$	2,879	$	1,632	$	2,391
International	1,038		2,239		1,948
	$	3,917	$	3,871	$	4,339

(1)	Revenues from external customers from any individual foreign country did not exceed 10% of total revenue.
(2)	Includes export sales from the United States of approximately $146, $42, and $242, in 2007, 2006 and 2005, respectively.
(3)	Includes goodwill of $804, $677, and $674, in 2007, 2006 and 2005, respectively. The change in goodwill relates to foreign currency translation adjustment. Includes long-lived assets in the United States of $11,778, $11,902, and $13,191, in 2007, 2006 and 2005, respectively.
(4)	Includes long-lived assets in the United Kingdom of $9, $8, and $10, in 2007, 2006 and 2005, respectively.
(5)	Includes long-lived assets in Australia of $7,249, $6,736, and $5,326, in 2007, 2006 and 2005 respectively.
(6)	Includes goodwill of $10,194, $9,171, and $13,273, non-compete agreement of $1,339, $1,387, and $1,477, and trademark intangible of $789, $710 and $655 in 2007, 2006 and 2005, respectively.

The Company had revenues from external customers from the following product lines:

	2007		2006		2005
Enclosures	$	56,628	$	50,033	$	51,395
Water related products	58,996		48,736		54,881
Connectivity	12,176		8,608		9,006
Other	5,363		1,761		783
Total	$	133,163	$	109,138	$	116,065

NOTE O—QUARTERLY FINANCIAL DATA (Unaudited)

Summarized quarterly financial data for 2007 and 2006 follows:

	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
2007
Net sales	$	32,853	$	36,722	$	33,856	$	29,732
Gross profit	9,974		11,927		10,148		8,874
Net income (loss)	115		931		42		(815		)
Income (loss) per share
Basic	0.01		0.10		—		(0.09		)

F-27

CHANNELL COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

(amounts in thousands, except per share data)

	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
2006
Net sales	$	25,152		$	29,948		$	29,376		$	24,662
Gross profit	7,589			10,336			9,197			5,961
Net loss (1)	(1,556		)	(2,386		)	(106		)	(2,781		)
Loss per share
Basic	(0.16		)	(0.25		)	(0.01		)	(0.29		)

(1) During the second quarter of 2006, the Company recorded a $4,829 impairment related to the carrying value of goodwill in its International segment.

F-28

GLOSSARY OF TERMS

ADSL (Asymmetric Digital Subscriber Line):  A standard allowing digital broadband signals and standard telephone service to be transmitted up to 12,000 feet over a twisted copper pair.

Broadband:  Transmission rates in excess of 1.544 mega bits per second typically deployed for delivery of high-speed data, video and voice services. Also, a system for distributing television programming by a cable network rather than by broadcasting electromagnetic radiation.

Cat-5 (Category 5):  Network cabling that consists of four twisted pairs of copper wire terminated by data rated connectors.  Cat-5 cabling supports frequencies up to 100 MHz and speeds up to 1000 Mbps.

CATV (Community Antenna Television): More commonly known as cable TV.

Cable Modem:  Electronic transmission device placed on the broadband network, located at end user locations, providing two-way, high-speed data service capability, including internet access for subscribers.

Coaxial Cable:  The most commonly used means of transmitting cable television signals.  It consists of a cylindrical outer conductor (shield) surrounding a center conductor held concentrically in place by an insulating material.

DLC (Digital Loop Carrier):  Telecommunications transmission technology which multiplexes multiple individual voice circuits onto copper or fiber cables.

DSL (Digital Subscriber Line): Generic descriptor covering various versions of DSL services delivered over copper wires.  Included are HDSL and ADSL services.

Fiber Optics:  The process of transmitting infrared and visible light frequencies through a low-loss glass fiber with a transmitting laser or LED and a photo diode receiver.

FTTP (Fiber-To-The-Premises):  In a long distance network consisting of fiber optics, fiber-to-the-premises refers to the fiber optics running from the distribution plant to the customer premise, which may be the curb or the outside wall of the premise, at which point copper is used for the remaining connection.

HDSL (High bit rate Digital Subscriber Line):  By using sophisticated coding techniques, a large amount of information may be transmitted over copper.  The HDSL scheme uses such coding over four copper wires and is primarily intended for high capacity bi-directional business services.

HFC (Hybrid Fiber Coax):  A type of distribution plant that utilizes fiber optics to carry service from a CO to the carrier serving area, then coaxial cable within the CSA to or close to the individual residences.

RBOC (Regional Bell Operating Company):  A term for the regional holding companies created when AT&T divested the Bell operating companies.

RF (Radio Frequency):  An electromagnetic wave frequency intermediate between audio frequencies and infrared frequencies used especially in wireless telecommunications and broadband transmission.

VoIP (Voice over Internet Protocol): A technology that allows you to make telephone calls using a broadband Internet connection instead of a regular (or analog) phone line.

xDSL (Digital Subscriber Line): Represents Generic description of  DSL covering higher bandwidth.

G-1

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-K Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CHANNELL COMMERCIAL CORPORATION
		a Delaware corporation
By:	/s/ Jacqueline M. Channell
	Jacqueline M. Channell
	Chairman of the Board, Secretary and Director
	(Duly authorized officer of the Registrant)
Date:	March 28, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K Annual Report has been signed by the following persons on behalf of the registrant and in the capacities indicated below as of March 28, 2008.

Signature	Capacity in Which Signed
/s/ Jacqueline M. Channell	Chairman of the Board, Secretary and Director
Jacqueline M. Channell
/s/ William H. Channell, Jr.	President and Chief Executive Officer and Director
William H. Channell, Jr.	(Principal Executive Officer)
/s/ Dana Brenner	Director
Dana Brenner
/s/ Guy Marge	Director
Guy Marge
/s/ Patrick E. McCready	Chief Financial Officer (Principal Financial
Patrick E. McCready	Officer and Principal Accounting Officer)

CHANNELL COMMERCIAL CORPORATION

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

(Amounts in thousands)

Column A	Column B				Column C					Column D			Column E
					Additions
	Balance at				Charged to			Charged to					Balance at
	Beginning of				Cost and			Other		Write-offs and			End of
	Period				Expenses			Accounts		Deductions, Net			Period
Accounts receivables reserves	(2007	)	$	220	$	124		$	—	$	(63	)	$	281
	(2006	)	265		(28		)	20		(37		)	220
	(2005	)	319		95			40		(189		)	265
Inventory valuation reserve	(2007	)	$	1,234	$	656		$	—	$	(308	)	$	1,582
	(2006	)	1,724		131			—		(621		)	1,234
	(2005	)	1,251		797			—		(324		)	1,724

EX-3.2

Exhibit 3.2

CHANNELL COMMERCIAL CORPORATION

BYLAWS

[Conformed to reflect December 19, 2007 amendment]

TABLE OF CONTENTS

		Page
ARTICLE I  OFFICES		1
	Section 1. Registered Office	1
	Section 2. Corporate Headquarters	1
	Section 3. Other Offices	1
ARTICLE II  MEETINGS OF STOCKHOLDERS		1
	Section 1. Place of Meetings	1
	Section 2. Annual Meeting	1
	Section 3. Special Meetings	1
	Section 4. Notice of Meetings	1
	Section 5. Quorum; Adjournment	2
	Section 6. Proxies and Voting	2
	Section 7. Stock List	3
ARTICLE III  BOARD OF DIRECTORS		3
	Section 1. Duties and Powers	3
	Section 2. Number and Term of Office	4
	Section 3. Vacancies	4
	Section 4. Meetings	4
	Section 5. Quorum	5
	Section 6. Actions of Board Without a Meeting	5
	Section 7. Meetings by Means of Conference Telephone	5
	Section 8. Committees	5
	Section 9. Compensation	6
	Section 10. Removal	6
ARTICLE IV  OFFICERS		6
	Section 1. General	6
	Section 2. Election; Term of Office	6
	Section 3. Chairman of the Board	6
	Section 4. Chief Executive Officer	7
	Section 5. President	7
	Section 6. Vice President	7
	Section 7. Secretary	7
	Section 8. Assistant Secretaries	8
	Section 9. Treasurer	8
	Section 10. Assistant Treasurers	8
	Section 11. Other Officers	8
ARTICLE V  STOCK		8
	Section 1. Form of Certificates	8
	Section 2. Signatures	9
	Section 3. Lost Certificates	9
	Section 4. Transfers	9
	Section 5. Record Date	9
	Section 6. Beneficial Owners	10
	Section 7. Voting Securities Owned by the Corporation	10
ARTICLE VI  NOTICES		10
	Section 1. Notices	10
	Section 2. Waiver of Notice	10
ARTICLE VII  GENERAL PROVISIONS		11
	Section 1. Dividends	11
	Section 2. Disbursements	11
	Section 3. Corporation Seal	11
ARTICLE VIII   DIRECTORS’ LIABILITY AND INDEMNIFICATION		11
	Section 1. Directors’ Liability	11
	Section 2. Right to Indemnification	11
	Section 3. Right to Advancement of Expenses	12
	Section 4. Right of Indemnitee to Bring Suit	12
	Section 5. Non-Exclusivity of Rights	13
	Section 6. Insurance	13
	Section 7. Indemnification of Employees and Agents of the Corporation	13
	Section 8. Amendment	13
ARTICLE IX  AMENDMENTS		14

BYLAWS

OF

CHANNELL COMMERCIAL CORPORATION

(hereinafter called the “Corporation”)

ARTICLE I

OFFICES

Section 1.  Registered Office.  The registered office of the Corporation shall be in the City of Dover, County of Kent, State of Delaware.

Section 2.  Corporate Headquarters.  The corporate headquarters of the Corporation shall be in the City of Temecula, California.

Section 3.  Other Offices.  The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1.  Place of Meetings.  Meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors or the officer of the Corporation calling the meeting as authorized by the Corporation’s Certificate of Incorporation and stated in the notice of the meeting or in a duly executed waiver of notice thereof.

Section 2.  Annual Meeting.  Each Annual Meeting of Stockholders shall be held on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which meetings the stockholders shall elect by a plurality vote a Board of Directors, and transact such other business as may properly be brought before the meeting.

Section 3.  Special Meetings.  Special meetings of the stockholders, other than those required by statute, may be called only as provided, and for the purposes specified, in the Corporation’s Certificate of Incorporation.

Section 4.  Notice of Meetings.  Written notice of the place, date, and time of all meetings of the stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting, except as otherwise provided herein or as required from time to time by the Delaware General Corporation Law or the Certificate of Incorporation.  The notice of a special meeting shall also state the purpose or purposes for which the meeting is called.

1

Section 5.  Quorum; Adjournment.  At any meeting of the stockholders, the holders of a majority of all of the shares of the stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by law or the Certificate of Incorporation.  If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares of stock entitled to vote who are present, in person or by proxy, may adjourn the meeting to another place, date, or time without notice other than announcement at the meeting, until a quorum shall be present or represented.

When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date and time of the adjourned meeting shall be given in conformity herewith.  At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting.

Section 6.  Proxies and Voting.  At any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing filed in accordance with the procedure established for the meeting.

Each stockholder shall have one vote for every share of stock entitled to vote which is registered in his name on the record date for the meeting, except as otherwise provided herein or required by law or the Certificate of Incorporation.

All voting, including on the election of directors but excepting where otherwise provided herein or required by law or the Certificate of Incorporation, may be by a voice vote; provided, however, that upon demand therefor by a stockholder entitled to vote or such stockholder’s proxy, or at the discretion of the chairperson of the meeting, a stock vote shall be taken. Every stock vote shall be taken by ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting.  Every vote taken by ballots shall be counted by an inspector or inspectors appointed by the Board of Directors or the chairperson of the meeting.

All elections shall be determined by a plurality of the votes cast, and except as otherwise required by law or the Certificate of Incorporation, all other matters shall be determined by a majority of the votes cast.

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Section 7.  Stock List.  A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in such stockholder’s name, shall be open to the examination of any such stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held.

The stock list shall also be kept at the place of the meeting during the whole time thereof and shall be open to the examination of any such stockholder who is present.  This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.

ARTICLE III

BOARD OF DIRECTORS

Section 1.  Duties and Powers.  The business of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders.

Section 2.  Number and Term of Office.  The Board of Directors shall consist of one (1) or more members.  The number of directors shall be fixed and may be changed from time to time by resolution duly adopted by a majority of the directors then in office, except as otherwise provided by law or the Certificate of Incorporation.  Except as provided in Section 3 of this Article, directors shall be elected by the holders of record of a plurality of the votes cast at Annual Meetings of Stockholders.  Any director may resign at any time upon written notice to the Corporation.  Directors need not be stockholders.

The directors, other than those who may be elected by the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, shall be classified, with respect to the time for which they severally hold office, into three classes:  Class I, Class II and Class III.  Each class shall consist, as nearly as may be possible, of one-third of the whole number of the Board of Directors.  The terms of office of the initial classes of directors shall be as follows:  the Class I Directors shall be elected to hold office for a term to expire at the first annual meeting of stockholders thereafter, or until his or her earlier resignation or removal; the Class II Directors shall be elected to hold office for a term to expire at the second annual meeting of stockholders thereafter, or until his or her earlier resignation or removal; and the Class III Directors shall be elected to hold office for a term to expire at the third annual meeting of stockholders thereafter, or until his or her earlier resignation or removal, and in the case of each class, until their respective successors are duly elected and qualified. At each annual meeting of stockholders the directors elected to succeed those whose terms have expired shall be identified as being of the same class as the directors they succeed and shall be elected to hold office for a term to expire at the third annual meeting of stockholders after their election, or until his or her earlier resignation or removal, and until their respective successors are duly elected and qualified.  This paragraph of Article III, Section 2 is also contained in Article TEN, Section (A) of the Corporation’s Certificate of Incorporation, and accordingly, may be altered, amended or repealed only to the extent and at the time the comparable Certificate Article is altered, amended or repealed.

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Section 3.  Vacancies.  Except as otherwise fixed pursuant to the provisions of Article FOUR of the Corporation’s Certificate of Incorporation relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors:

(a)  In case of any increase in the number of directors, the additional director or directors, and in case of any vacancy in the Board of Directors due to death, resignation, removal, disqualification or any other reason, the successors to fill the vacancies, shall be elected by a majority of the directors then in office, even though less than a quorum, or by  a sole remaining director, and the director or directors so chosen shall hold office until the next Annual Meeting or special meeting of stockholders duly called for that purpose and until their successors are duly elected and qualified, or until their earlier resignation or removal.

(b)  Directors appointed in the manner provided in paragraph (a) to newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board of Directors resulting from death, resignation, removal, disqualification or any other cause shall hold office for a term expiring at the next annual meeting of stockholders at which the term of the class to which they have been elected expires.

(c)  No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

This Article III, Section 3 is also contained in Article TEN, Section (B) of the Corporation’s Certificate of Incorporation, and accordingly, may be altered, amended or repealed only to the extent and at the time the comparable Certificate Article is altered, amended or repealed.

Section 4.  Meetings.  The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware.  The first meeting of each newly-elected Board of Directors shall be held immediately following the Annual Meeting of Stockholders and no notice of such meeting shall be necessary to be given the newly-elected directors in order legally to constitute the meeting, provided a quorum shall be present.  Regular meetings of the Board of Directors may be held without notice at such time and at such place as may from time to time be determined by the Board of Directors.  Special meetings of the Board of Directors may be called by the Chairman of the Board, the President or a majority of the directors then in office.  Notice thereof stating the place, date and hour of the meeting shall be given to each director either by mail not less than forty-eight (48 ) hours before the date of the meeting, by telephone, telegram or facsimile transmission on twenty-four (24) hours notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances.  Meetings may be held at any time without notice if all the directors are present or if all those not present waive such notice in accordance with Section 2 of Article VI of these Bylaws.

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Section 5.  Quorum.  Except as may be otherwise specifically provided by law, the Certificate of Incorporation or these Bylaws, at all meetings of the Board of Directors, a majority of the directors then in office shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors.  If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

Section 6.  Actions of Board Without a Meeting.  Unless otherwise provided by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee.

Section 7.  Meetings by Means of Conference Telephone.  Unless otherwise provided by the Certificate of Incorporation or these Bylaws, members of the Board of Directors of the Corporation, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 7 shall constitute presence in person at such meeting.

Section 8.  Committees.  The Board of Directors may, by resolution passed by a majority of the directors then in office, designate one or more committees, each committee to consist of one or more of the directors of the Corporation.  The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee.  In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.  Any committee, to the extent allowed by law and provided in the Bylaw or resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it.  Each committee shall keep regular minutes and report to the Board of Directors when required.

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Section 9.  Compensation.  Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board of Directors shall have the authority to fix the compensation of directors.  The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director.  No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.  Members of special or standing committees may be allowed like compensation for attending committee meetings.

Section 10.  Removal.  Any director or directors may be removed from office only as provided in the Corporation’s Certificate of Incorporation.

ARTICLE IV

OFFICERS

Section 1.  General.  The officers of the Corporation shall be appointed by the Board of Directors and shall consist of a Chairman of the Board, a Chief Executive Officer, a President, such number of Vice Presidents as the Board of Directors shall elect from time to time, a Secretary, a Treasurer (or a position with the duties and responsibilities of a Treasurer) and such other officers and assistant officers (if any) as the Board of Directors may from time to time appoint.  Any number of offices may be held by the same person, unless the Certificate of Incorporation or these Bylaws otherwise provide.

Section 2.  Election; Term of Office.  The Board of Directors at its first meeting held after each Annual Meeting of Stockholders shall elect a Chairman of the Board or a President, or both, a Secretary and a Treasurer (or a position with the duties and responsibilities of a Treasurer), and may also elect at that meeting or any other meeting, such other officers and agents as it shall deem necessary or appropriate.  Each officer of the Corporation shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors together with the powers and duties customarily exercised by such officer; and each officer of the Corporation shall hold office until such officer’s successor is elected and qualified or until such officer’s earlier resignation or removal.  Any officer may resign at any time upon written notice to the Corporation.  The Board of Directors may at any time, with or without cause, by the affirmative vote of a majority of directors then in office, remove any officer.

Section 3.  Chairman of the Board.  The Chairman of the Board shall preside at all meetings of the stockholders and the Board of Directors and shall have such other duties and powers as may be prescribed by the Board of Directors from time to time.  The Board of Directors may also designate one of its members as Vice Chairman of the Board.  The Vice Chairman of the Board shall, during the absence or inability to act of the Chairman of the Board, have the powers and perform the duties of the Chairman of the Board, and shall have such other powers and perform such other duties as shall be prescribed from time to time by the Board of Directors.

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Section 4.  Chief Executive Officer.  The Chief Executive Officer shall have general charge and control over the affairs of the Corporation, subject to the Board of Directors, shall see that all orders and resolutions of the Board of Directors are carried out, shall report thereon to the Board of Directors, and shall have such other powers and perform such other duties as shall be prescribed from time to time by the Board of Directors.

Section 5.  President.  The President shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect.  The President shall have and exercise such further powers and duties as may be specifically delegated to or vested in the President from time to time by these Bylaws or the Board of Directors.  In the absence of the Chairman of the Board or the Vice Chairman of the Board (if any) or in the event of the inability of or refusal to act by the Chairman of the Board or the Vice Chairman of the Board (if any), or if the Board has not designated a Chairman or Vice Chairman, the President shall perform the duties of the Chairman of the Board, and when so acting, shall have all of the powers and be subject to all of the restrictions upon the Chairman of the Board.

Section 6.  Vice President.  In the absence of the President or in the event of his inability or refusal to act, the Vice President (or in the event there be more than one vice president, the vice presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President.  The vice presidents shall perform such other duties and have such other powers as the Board of Directors or the President may from time to time prescribe.

Section 7.  Secretary.  The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for the standing committees when required.  The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the President.  If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, and if there be no Assistant Secretary, then either the Board of Directors or the President may choose another officer to cause such notice to be given.  The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary.  The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his or her signature.  The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be.

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Section 8.  Assistant Secretaries.  Except as may be otherwise provided in these Bylaws, Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, or the Secretary, and shall have the authority to perform all functions of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary.

Section 9.  Treasurer.  The Treasurer shall have the custody of the corporate funds and securities, shall keep complete and accurate accounts of all receipts and disbursements of the Corporation, and shall deposit all monies and other valuable effects of the Corporation in its name and to its credit in such banks and other depositories as may be designated from time to time by the Board of Directors.  The Treasurer shall disburse the funds of the Corporation, taking proper vouchers and receipts for such disbursements.  The Treasurer shall, when and if required by the Board of Directors, give and file with the Corporation a bond, in such form and amount and with such surety or sureties as shall be satisfactory to the Board of Directors, for the faithful performance of his or her duties as Treasurer.  The Treasurer shall have such other powers and perform such other duties as the Board of Directors or the President shall from time to time prescribe.

Section 10.  Assistant Treasurers.  Except as may be otherwise provided in these Bylaws, Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, or the Treasurer, and shall have the authority to perform all functions of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer.

Section 11.  Other Officers.  Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors.  The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers.

ARTICLE V

STOCK

Section 1.  Certificates of Stock.  The shares of stock of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation’s stock shall be uncertificated shares.  Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation.  Every holder of a stock represented by certificates shall be entitled to a certificate signed by, or in the name of the Corporation by, the Chairman of the Board, the Vice Chairman of the Board, the President or a Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, certifying the number of shares owned by him or her.  Any or all of the signatures on the certificate may be by facsimile.

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Section 2.  Signatures.  Any or all the signatures on the certificate may be a facsimile.  In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.

Section 3.  Lost Certificates.  The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed.  When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or such owner’s legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

Section 4.  Transfers.  Stock of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws.  Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by such person’s attorney lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be cancelled before a new certificate shall be issued.

Section 5.  Record Date.   In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action.  A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

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Section 6.  Beneficial Owners.   The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.

Section 7.  Voting Securities Owned by the Corporation.   Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chairman of the Board, the President, any Vice President or the Secretary and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present.  The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons.

ARTICLE VI

NOTICES

                Section 1.  Notices.  Whenever written notice is required by law, the Certificate of Incorporation or these Bylaws, to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at such person’s address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail.  Written notice may also be given personally or by telegram, facsimile transmission, telex or cable and such notice shall be deemed to be given at the time of receipt thereof if given personally or at the time of transmission thereof if given by telegram, facsimile transmission, telex or cable.

                Section 2.  Waiver of Notice.  Whenever any notice is required by law, the Certificate of Incorporation or these Bylaws to be given to any director, member or a committee or stockholder, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to notice.

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ARTICLE VII

GENERAL PROVISIONS

Section 1.  Dividends.  Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting or by any Committee of the Board of Directors having such authority at any meeting thereof, and may be paid in cash, in property, in shares of the capital stock or in any combination thereof.  Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve.

Section 2.  Disbursements.  All notes, checks, drafts and orders for the payment of money issued by the Corporation shall be signed in the name of the Corporation by such officers or such other persons as the Board of Directors may from time to time designate.

Section 3.  Corporation Seal.  The corporate seal, if the Corporation shall have a corporate seal, shall have inscribed thereon the name of the Corporation, the year of its organization and the words “Corporate Seal, Delaware”.  The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

ARTICLE VIII

DIRECTORS’ LIABILITY AND INDEMNIFICATION

Section 1.  Directors’ Liability.  A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which such director derived any improper personal benefit.  If the Delaware General Corporation Law is amended to authorize corporate action further eliminating the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as amended.  Any repeal or modification of this provision shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.

Section 2.  Right to Indemnification.  Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she is or was a director or an officer of the Corporation or is or was serving at the request of the Corporation as a director, officer,

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employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law pe rmitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys’ fees, judgments, fines, excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith; provided, however, that, except as provided in Section 4 of this Article VIII with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.

Section 3.  Right to Advancement of Expenses.  The right to indemnification conferred in Section 2 of this Article VIII shall include the right to be paid by the Corporation the expenses (including attorneys’ fees) incurred in defending any such proceeding in advance of its final disposition (hereinafter an “advancement of expenses”); provided, however, that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an “undertaking”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a “final adjudication”) that such indemnitee is not entitled to be indemnified for such expenses under this Section 3 or otherwise.  The rights to indemnification and to the advancement of expenses conferred in Sections 2 and 3 of this Article VIII shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the indemnitee’s heirs, executors and administrators.

Section 4.  Right of Indemnitee to Bring Suit.  If a claim under Section 2 or 3 of this Article VIII is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim.  If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit.  In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) in any suit

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brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the Delaware General Corporation Law.  Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit.  In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement or expenses pursuant to the terms of an undertaking, the burden or proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VIII or otherwise shall be on the Corporation.

Section 5.  Non-Exclusivity of Rights.  The rights to indemnification and to the advancement of expenses conferred in this Article VIII shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Corporation’s Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise.

Section 6.  Insurance.  The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.

Section 7.  Indemnification of Employees and Agents of the Corporation.  The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Article with respect to the indemnification and advancement of expenses of directors and officers of the Corporation.

Section 8.  Amendment.  This Article VIII is also contained in Articles SEVEN and EIGHT of the Corporation’s Certificate of Incorporation, and accordingly, may be altered, amended or repealed only to the extent and at the time the comparable Certificate Article is altered, amended or repealed.  Any repeal or modification of this Article VIII shall not change the rights of an officer or director to indemnification with respect to any action or omission occurring prior to such repeal or modification.

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ARTICLE IX

AMENDMENTS

Except as otherwise specifically stated within an Article to be altered, amended or repealed, these Bylaws may be altered, amended or repealed and new Bylaws may be adopted at any meeting of the Board of Directors or of the stockholders, provided notice of the proposed change was given in the notice of the meeting.

THIS IS TO CERTIFY:

That I am the duly elected, qualified and acting Secretary of Channell Commercial Corporation and that the foregoing bylaws were adopted as the bylaws of said corporation as of the 26th day of April, 1996 by Unanimous Written Consent of the Directors of said corporation.

Dated as of April 26, 1996

/s/ Jacqueline M. Channell, Secretary

Jacqueline M. Channell, Secretary

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EX-10.43

Exhibit 10.43

FIRST AMENDMENT TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Amendment”) dated as of November 27, 2007 (the “Effective Date”), 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”), Bank of America, N.A., as Administrative Agent (in such capacity, “Administrative Agent”), Bank of America, N.A., Canada Branch, as Canadian agent (in such capacity, “Canadian Agent”), and the Lenders party to the Loan Agreement referred to below, with reference to the following facts:

RECITALS

A.Borrowers are party to the Amended and Restated Loan and Security Agreement dated as of July 30, 2007 (the “Loan Agreement”), with the lenders party thereto from time to time (collectively, the “Lenders”), Administrative Agent, and Canadian Agent, pursuant to which the Lenders have provided certain credit facilities to the Borrowers.

B.Borrowers have informed Administrative Agent that (i) on August 31, 2007, Domestic Borrower formed Bushman Water Harvesting Corporation, a Delaware corporation (“Domestic Bushman”), all of the issued and outstanding shares of capital stock of which are owned by Domestic Borrower and (ii) on August 30, 2007, Canadian Borrower formed Bushman Water Harvesting Inc., an Ontario corporation (“Canadian Bushman”, and together with Domestic Bushman, the “Bushman Entities”), all of the issued and outstanding shares of capital stock of which are owned by Canadian Borrower.

C.The Lenders are willing to consent to the formation of the BushmanEntities and to make certain other amendments to the Loan Agreement, subject to the conditions hereof.

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the adequacy of which is hereby acknowledged, each of the undersigned hereby agrees as follows:

1.            Defined Terms. Any and all initially capitalized terms used in this Amendment without definition shall have the respective meanings specified in the Loan Agreement.

2.            Amendment to Correct Cross-Reference. Section 1.3.2 of the Loan Agreement is hereby amended so that the reference to “Section 3.1.1(d)” contained in the first paragraph of such section shall be amended to read “Section 3.1.1(c)”.

3.            Amendments to Schedules. Schedules 6.1.1, 7.1.1, 7.1.4, 7.1.4A, 7.1.5, 7.1.14, 7.1.22, 8.2.3(b), and 8.2.4 of the Loan Agreement are hereby amended and replaced in their entirety by Annexes 1, 2, 3, 4, 5, 6, 7, 8, and 9, respectively, each of which is attached hereto.

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4.            Consent to Bushman Entities. Notwithstanding the provisions of Sections 8.2.13 and 8.2.14 of the Loan Agreement to the contrary, the Lenders hereby consent, with retroactive effect, to the creation of the Bushman Entities.

5.            Covenant Regarding Bushman Entities Documentation. In consideration of the foregoing consent, Borrowers hereby agree to deliver each of the following documents within thirty (30) days of the date hereof, each in form and substance satisfactory to Administrative Agent and Canadian Agent:

5.1.1  an original Guaranty duly executed by Domestic Bushman, guaranteeing the obligations of Domestic Borrower under the Loan Documents (the “Domestic Bushman Guaranty (Domestic Obligations)”);

5.1.2  an original Guaranty duly executed by Domestic Bushman, guaranteeing the obligations of Canadian Borrower under the Loan Documents (the “Domestic Bushman Guaranty (Canadian Obligations)”);

5.1.3  an original Guaranty duly executed by Canadian Bushman, guaranteeing the obligations of Canadian Borrower under the Loan Documents (the “Canadian Bushman Guaranty”);

5.1.4  an original Security Agreement duly executed by Domestic Bushman, securing its obligations under the Domestic Bushman Guaranty (Domestic Obligations) and the Domestic Bushman Guaranty (Canadian Obligations);

5.1.5  an original Security Agreement duly executed by Canadian Bushman, securing its obligations under the Canadian Bushman Guaranty;

5.1.6  an original Pledge Agreement duly executed by Canadian Borrower, pledging its equity interests in Canadian Bushman to secure its obligations under the Loan Documents;

5.1.7  stock certificates representing the equity interests in the Bushman Entities, together with executed undated stock powers (or the equivalent) relating thereto, endorsed in blank;

5.1.8  authorization to file such PPSA or UCC-1 financing statements as Administrative Agent or Canadian Agent may request;

5.1.9  with respect to the Bushman Entities, such documentation as Administrative Agent may reasonably require to establish the due organization, valid existence and good standing of such entities, their qualification to engage in business in each material jurisdiction in which they are engaged in business or required to be so qualified, their authority to execute, deliver and perform the Loan Documents to which they are a party, the identity, authority and capacity of each responsible officer thereof authorized to act on their behalf, including certified copies of articles or certificates of incorporation and amendments thereto, bylaws and amendments thereto, certificates of good standing and/or qualification to engage in business, tax clearance certificates, certificates of corporate resolutions, incumbency certificates, certificates of responsible officers, and the like;

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5.1.10  the favorable written legal opinion(s) of counsel to Borrowers and the Bushman Entities, opining as to such matters as Administrative Agent and Canadian Agent may reasonably request, together with copies of factual certificates and legal opinions, if any, delivered to such counsel in connection with such opinion upon which such counsel has relied;

5.1.11  with respect to the Bushman Entities, evidence that the Bushman Entities have obtained the insurance policies and the loss payable and additional insured endorsements relating thereto as required by the Loan Documents; and

5.1.12  such additional agreements, certificates, reports, approvals, instruments, documents, consents and/or reaffirmations as Administrative Agent and Canadian Agent may reasonably request.

6.             Conditions Precedent.  The effectiveness of this Amendment shall be subject to the prior satisfaction of the following conditions:

6.1.1    Documentation. Administrative Agent shall have received, each in form and substance satisfactory to Administrative Agent and Canadian Agent, the following documents:

(a)an original of this Amendment, duly executed by Borrowers, Administrative Agent and Canadian Agent;

(b)an original of the Consent attached hereto as Exhibit A, duly executed by each of the UK Guarantors; and

(c)an original intercompany note duly executed by Channell Pty Limited evidencing any debt owed to Domestic Borrower, along with an original endorsement allonge for such note, duly executed by Domestic Borrower.

6.1.2No Defaults. Borrowers and all other Loan Parties shall be in compliance with all the terms and provisions of the Loan Documents applicable to such Person or its Property, and no Default or Event of Default shall have occurred and be continuing; and

6.1.3Accuracy of Representations and Warranties. All of Borrowers’ representations and warranties contained herein shall be true and correct on and as of the date of execution hereof.

7.             Representations and Warranties.

7.1.1Reaffirmation of Prior Representations and Warranties. Each Borrower hereby reaffirms and restates as of the date hereof all of the representations and warranties made by such Borrower in the Loan Agreement and the other Loan Documents, which shall be true and correct in all material respects, except to the extent such representations and warranties specifically relate to an earlier date.

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7.1.2No Default. No Default or Event of Default has occurred and remains continuing under any of the Loan Documents.

8.             Miscellaneous.

8.1.1Reference to Loan Agreement. The Loan Agreement, each of the other Loan Documents, and any and all other agreements, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof, or pursuant to the terms of the Loan Agreement as amended hereby, are hereby amended so that any reference therein to the Loan Agreement shall mean a reference to the Loan Agreement as amended by this Amendment.

8.1.2    Loan Agreement Remains in Effect. The Loan Agreement and the other Loan Documents remain in full force and effect and the Borrowers ratify and confirm their agreements and covenants contained therein.

8.1.3Amendment as Loan Document. This Amendment shall constitute a Loan Document under the Loan Agreement, and, accordingly, it shall be an Event of Default under the Loan Agreement if Borrowers fail to perform or comply with any covenant or agreement contained herein, including without limitation, Section 5. Any provision of any Loan Document which applies to Loan Documents generally shall apply to this Amendment.

8.1.4APPLICABLE LAW. THIS AMENDMENT SHALL BEDEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN THE STATE OF CALIFORNIA AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.

8.1.5Counterparts. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument.

[signature page follows]

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IN WITNESS WHEREOF, the parties have entered into this Amendment by their respective duly authorized officers as of the date first above written.

Channell Commercial Corporation,a Delaware corporation
By:	/s/ Patrick E McCready
Name:	Patrick E McCready
Title:	CFO
Channell Commercial Canada Inc., an Ontario corporation
By:	/s/ Michael L. Perica
Name:	Michael L. Perica
Title:	Treasurer
Bank of America, N.A.,
as Administrative Agent and as sole
Domestic Lender
By:	/s/ Matthew R. Van Steenhuyse
	Matthew R. Van Steenhuyse
	Senior Vice President & Portfolio Manager
Bank of America, N.A., Canada Branch,
as Canadian Agent and sole Canadian Lender
By:	/s/ Nelson Lam
Name:	Nelson Lam
Title:	Vice President

S-1

EXHIBIT A

CONSENT

Each of the undersigned parties (collectively, the “UK Guarantors”) hereby (a) acknowledges receipt of a copy of the attached First Amendment to Amended and Restated Loan and Security Agreement (the “Amendment”), (b) consents to Borrowers entering into the Amendment and all of the other documents, instruments and agreements now or hereafter executed in connection therewith, and (c) agrees that nothing contained in the Amendent, or in any other document, instrument or agreement executed in connection therewith, shall serve to diminish, alter, amend or affect in any way the Loan Documents to which it is a party. Each UK Guarantor expressly and knowingly reaffirms its liability under the Loan Documents to which it is a party and acknowledges that it has no known defense, offset or counterclaim against Lenders with respect to such Loan Documents.

Dated as of November 27, 2007

Channell Commercial Europe Limited,		Channell Limited,
a limited liability company incorporated under the laws of England and Wales (Company number 02837910)		a limited liability company incorporated under the laws of England and Wales (Company number 00912862)
By:	/s/ Patrick E McCready		By:	/s/ Patrick E McCready
Name:	Patrick E McCready		Name:	Patrick E McCready
Title:	Director		Title:	Director
A.C. Egerton (Holdings) Limited,
a limited liability company incorporated under the laws of England and Wales (Company number 00818919)
By:	/s/ Patrick E McCready
Name:	Patrick E McCready
Title:	Director

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EX-10.44

Exhibit 10.44

February 1, 2008

Mr. Robert H. Swelgin

608 12^th Street

Huntington Beach, CA 92648

Dear Bob,

The following outline describes our offer for you to join Channell Commercial Corporation in the position of President, Americas.  This offer is subject to Board approval.  But if you accept this offer your start date will be February 19, 2008.

·	Title:	President, Americas Channell Commercial Corp.
·	Location:	Channell Headquarters
		26040 Ynez Road
		Temecula, CA 92591
·	Report:	Directly to President/CEO
·	Job Description:	Oversee all North America, Canada and Latin America operations for both Telecom and Bushman Water Harvesting Divisions.
·	Salary:	$350,000 (*) annual salary, paid bi-weekly
·	Bonus Plan:	Annual 50% (*) bonus target, based on:
		·50%EPS (29¢ - Q2 through Q4)
		·45%Expense and cash flow management
		·5%goals and objectives
		Prorated bonus will be apply to 2008 Plan starting on April 1, 2008. (See Attachments B1 and B2)

·	Stock Options:	50,000 (*) shares subject to Board approval.Strike prices based on upcoming Board meeting approval dates of 25,000 shares February 2008 and 25,000 September 2008.
·	401K Savings Plan:	Qualified after 90-days of employment (See Employee Handbook)
·	Automobile:	$650.00 monthly car allowance. Automobile must be a hybrid regardless if you or the company purchase the vehicle; maintenance and gas are paid by the company.
·	Credit Cards:	You will be supplied an American Express and Visa cards, a phone card and auto rental card for your use.
·	Cash Advance:	$1,000 advance will be provided to assist you with your expenses for reimbursement.
		This money will be returned upon your departure from the Company.
·	Healthcare:	You will be enrolled under the U.S. healthcare benefits program, effective date March 1, 2008. (See attached documents).
·	Life & Disability
	Insurance:	See enclosed Employee Handbook.
·	Vacation & Holidays:	Minimum 4 weeks vacation first year; See enclosed Employee Handbook regarding Holidays.
·	Air Travel Benefits:	Over six hours of in-flight air travel, business Class seating is approved unless corporate financial cut-backs are in effect. 50% of all annual (direct of indirect) frequent flyer air miles are the property of Channell.
·	Living Expenses:	Four months of two hotel nights in Temecula per week. (Meals included)

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·	Probationary Period:	Six months
·	Termination Provisions:	(See Attachment T)
·	Employee Prerequisites:	Mandatory drug test and DMV license check, Confidentiality Agreement

(*) Review and adjustments to these items will be made on an annual basis by the Compensation Committee.

Hopefully this offer is acceptable to you and you will commence your employment at Channell in February, 2008.  Please sign below and return this document plus the confidentiality agreement to Jeanne Bond by fax 951.719.2791 no later than February 5, 2008 accepting this position.

Cordially,

/s/ William H. Channell, Jr.

William H. Channell, Jr.

President and CEO

jb
cc:	Channell Board of Directors, Compensation Committee:
	Dana Brenner, Guy Marge, Stephen Gill

Signed:	/s/	Robert H. Swelgin
		Robert H. Swelgin
Dated:	Feb. 05, 2008

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EX-10.45

Exhibit 10.45

October 19, 2007

Mr. Chris Glenn

18 Viewway

Nedlands WA 6009

Dear Chris:

The general conditions of engagement are outlined below:

1.Commencement Date:  7 January, 2008

2.Appointment: Managing Director, Australasia

3.Job Description: An outline of the job has been discussed.  Your responsibilities include all aspects of P&L for both Channell Australia Pty., Ltd. and Bushman Tanks, encompassing the Australasia region.  The company reserves the right to vary or add duties as required.

4.Salary:  The salary for this position will be set at $385,000 per annum (base), paid monthly.  This salary is inclusive of all penalty and overtime payments.  Additionally, a vehicle allowance of $27,000 per annum will be paid monthly, covering all vehicle costs. The vehicle allowance can also be in the form of a novated lease arrangement. The salary and vehicle allowance will be reviewed annually.

This salary does not include the Company’s responsibilities under the Superannuation Guarantee Act, which will be paid as per Item 11.

Probationary Period: 6 months

5.Options: Upon hire, the Company will provide 10,000 options of Channell Commercial Corporation stock at the market value after Board approval.  These options will include a pro rated, 3-year vesting period.

6.Bonuses: The Company will provide for participation in both a short-term and long-term bonus plan.  The short-term plan will allow for a maximum bonus of 40% of base salary and will be based upon the individual performances of

Bushman Tanks and Channell Australia Pty., Ltd.  The split by company will be 15% dedicated for Channell and 25% for Bushmans.  The parameters of your bonus will be based on the following elements as it relates to Bushmans in 2008:

Cash flow from operations	50% of bonus
Revenue growth	15% of bonus
EPS growth	25% of bonus
Develop two-year business plan for urban market (by March 2008)	10% of bonus

Additionally, the parameters for the Channell portion of your annual bonus will be as follows:

Revenue growth	30% of bonus
EPS growth	40% of bonus
Develop 3-year business plan (by May 2008)	30% of bonus

These percentages will be reviewed and revised annually in conjunction with the Company’s annual planning process.  The short-term bonus will be paid in January of the following year except for the EPS growth elements which will be paid upon the filing of Channell Commercial Corporation’s Form 10-K with the Securities and Exchange Commission.

The long-term plan will be in the form of an LTIP (Long-Term Incentive Plan) based upon the contribution of the Australasia region to the overall market performance of the parent company.  The plan will cover a 3-year period, and if the percentage market capitalization increase for any year is 20% or greater (calculated by using the volume weighted average price (VWAP) for the final 60 days of the calendar year vs. beginning year stock price), the plan will provide a payout calculated as a percentage of the Australasia region earnings versus the consolidated earnings of Channell Commercial Corporation.  This percentage will be multiplied by 1% of the absolute market capitalization increase for such year, subject to a maximum payout of $150,000 for any one year.  For example, if Australasia contributes 60% of the company’s overall earnings for a period, and the 20% market capitalization increase threshold is met, the payout would be 0.6% times the absolute market capitalization increase in dollars (subject to the $150,000 maximum).

For each year the LTIP is earned, 50% of the amount earned during that year will be paid in January of the following year with the remainder paid upon the filing of the Company’s Form 10-K with the Securities and Exchange

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Commission, which is due no later than March 31 of the following year.  You agree that you will remain employed with the Company until June 30 of the year following the LTIP payout or forfeit 50% of that year’s LTIP earnings.

7.Annual Leave: Your entitlement will be 20 recreational days leave per year.  Dates and times of this leave are by mutual agreement with your supervisor.  No annual leave loading applies.

8.Sick Leave: Allowance of 10 sick days first year, after probationary period and 10 days annually thereafter.

9.Long Service Leave: Provisions as stipulated in the NSW Long Service Leave Act.

10.Superannuation:  Contribution to Sunsuper, or a complying fund of the executive’s choice as per legislation with availability of voluntary contributions, if required (currently 9%).

11.Hours of Work: As a member of senior management, you will be expected to work as many hours as necessary in order to perform your duties at a professional level, including any additional hours that may be required on weekends.

12.Place of Work: You will be provided with office facilities and support at 3 Healey Circuit, Huntingwood, NSW 2148.

13.Period of Notice:

(a) By the executive: Should you wish to terminate your employment, 8 weeks notice is required.  Failure to provide proper notice will result in the forfeiture of any accrued incentive compensation.

(b) By the company: After probationary period expires this agreement may be terminated at any time by the company giving not less than six months’ notice in writing during the first two years of employment except in the event of termination for cause where no notice period will be required.  The notice period will be increased by one month after completion of each additional year of employment after the initial two-year period.  The maximum notice period will be twelve months after completion of eight years of service.

(c) Change of control:  In the event of termination by the executive when a change of control occurs, 8 weeks notice is required.  In the event of termination by the company when a change of control occurs, six months pay in lieu of notice will be provided, irrespective of the length of service.

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14.Confidentiality:  While employed with the Company and after termination of your employment with the Company for whatever reason, to the extent that this condition will survive the termination of your employment by the Company, for whatever reason, you shall be indefinitely restrained from giving to any person other than a director of the Company any “confidential information” (which term includes but is not limited to any documents or information marked as confidential and any information received or developed by you in the course of your employment, which is not publicly available and relates to the business, work or interests of the Company including but not limited to specifications, discoveries, invention (whether patentable or not), copyright such as manuals, technical data, trade secrets, financial information, computer software developed by and for the Company, and marketing information (such as customer lists) which has come to your notice during your employment with, or as a result of you having been employed by, the Company).

Any breach of confidentiality will lead to immediate dismissal.

Furthermore, upon acceptance of this offer, you will be required to sign a patent protection document for the company.

15.Reporting:  You will report directly to the President and Chief Executive Officer of the parent company in the US. The Managing Director of Australasia will be responsible for running and directing the operations in accordance with the approved business plan based on the current business environment and always in compliance with corporate governance policies.

16.Environment:  The Company’s workplace environment in the context of all legislation or Company policies, regulations and procedures must be observed in all instances.

17.Instant Dismissal:  It is agreed that the company may instantly dismiss you for serious misconduct including but not limited to the following:

a)	Serious neglect of duty.
b)	Extreme inefficiency or incompetence.
c)	Gross insubordination and abuse.
d)	Dishonesty including theft.
e)	Drunkenness or taking illegal drugs.
f)	Forms of serious misbehavior, including fighting.
g)	Serious willful disobedience.
h)	Breaches of the OH&S or Company Policies.

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i)Severe damage to company property and recurring loss of company property.

j)Refusing a Random Drug and Alcohol test.

k)Convicted of a serious crime.

18.Directors and Officers Indemnity Insurance: The companies will provide directors and officers liability insurance.

If the foregoing arrangements are acceptable to you, please signify acceptance by signing and returning the enclosed copy of this letter.  You will be requested to pass a physical and drug test to qualify for this position.  We will notify you of the location in Perth to fulfill this request.

Yours sincerely,

/s/ William H. Channell, Jr.

William H. Channell, Jr.

President and Chief Executive Officer

Signed and Accepted:

/s/ Chris Glenn
Chris Glenn
Dated:	23/10/07

jb
cc:	Pat McCready
	George Apostolidis

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EX-10.46

Exhibit 10.46

DOCUMENT COMPLETION CERTIFICATE

To	NSW Metro Norwest - Sukhi Singh (DN100560046)			BSB	032407	Mgr No.  —
Customer	Channell Pty Ltd ACN 002 735 622					Z No.	65675780
Total Facility Approved	$896,925.75	Date of Approval	22/01/2008	Amount of increase (+) or decrease (-)		(+) $896,925.75

BEFORE THIS MATTER CAN PROCEED TO SETTLEMENT / DRAWDOWN

1.	The security documentation relevant to the above matter, listed on the reverse of this certificate, is in order for signing by customers and other relevant parties.
2.	If customer is a Company, documents are to be executed without seal. If the customer advises that the company seal must be used, the documents will need to be reissued with the correct execution clause for signing under seal.
3.	The outstanding matters detailed on the reverse of this certificate require your attention BEFORE this matter can proceed to settlement/drawdown. Alternatively, Credit approval must be obtained to waive these requirements, OR, defer follow-up until after drawdown.

Securities Officer (signature):	/s/ William Widjaja
Name: William Widjaja		Date: 23 January 2008
Phone number: 02 8767 3234		Desk location number:

SALES MANAGER / RESPONSIBLE OFFICER SIGN OFF

The security documents have been executed by the customer; AND,

all conditions of approval (including hindsight review where applicable) and outstanding matters listed on the REVERSE are EITHER satisfied (and attached where appropriate), OR Credit Approval is held to waive or defer follow-up.

PLEASE RETURN EXECUTED DOCUMENTATION AND THIS FORM COMPLETED AND SIGNED OFF.

Sales Manager/Responsible Officer (signature): /s/ Sukhi Singh

Name:		Sukhi Singh	Date:	13.02.08
XTN:	0409221537

DRAWDOWN DATE REQUIRED:          /       /   /s/ Sukhi Singh

GENERAL/SPECIAL INSTRUCTIONS

Please seek Refinance from NAB.

CREDIT APPROVAL (if applicable)

The outstanding matters indicated on the reverse of this form (by initial), are EITHER waived for the purpose of
drawdown OR, Credit Approval is given to defer follow-up. The SALES MANAGER must clear outstanding
items as indicated by                                                       (date).

Credit Officer (signature):
Name:	Date:
XTN:

A COPY OF THE COMPLETED FORM (ALL PAGES) MUST BE KEPT ON THE MANAGERIAL FILE

DOCUMENT COMPLETION CERTIFICATE

LIST OF DOCUMENTS ATTACHED:

PLEASE HAVE THE DOCUMENTS BELOW EXECUTED.

BFA x2	MCP
FFC	Asset Value Declaration Form
LE213 - GX

OUTSTANDING MATTERS:

THESE ITEMS MUST BE ACTIONED BEFORE SETTLEMENT & DRAWDOWN CAN GO AHEAD.

Loan Centre Use	Manager Use	Credit Centre Use
Outstanding Matters	Satisfied/ Attached (initials)	APPROVED Follow-up Waived (initials)	APPROVED Follow-up Post drawdown ** (initials)
Banker’s Undertaking signed by attorney in escrow - subject to manager obtaining customer’s execution of all security documents and Customer Indemnity, and all other outstanding matters being attended to before the Banker’s Undertaking is issued.
Pls ensure all docs are signed and return
Many Thanks
Recommendation To Credit (Manager Use Only)

**       THE SALES MANAGER IS RESPONSIBLE FOR COMPLETING OUTSTANDING MATTERS AFTER DRAWDOWN AS INDICATED ABOVE.

Westpac Banking Corporation ABN 33 007 457 141

		BFS Sales Support NSW 1 King Street Concord West NSW 2138
The Secretary Channell Pty Ltd		Telephone 0409 221 537 Facsimile (02)9836 1292 Our Ref: 100553695 Your Ref: 65675780
27/50 Bridge Street	BANK COPY
Sydney NSW 2000	Please Sign & Return	23 January 2008

Dear Sir/ Madam,

Thank you for the opportunity to discuss your finance requirements. I am pleased to advise that your request for finance has been approved. Full details regarding your Facilities are detailed in the attached Business Finance Agreement.

Would you kindly sign and return the duplicate Business Finance Agreement to accept this finance offer.

We appreciate the opportunity to provide your finance on this occasion and look forward to being of assistance to you in the future.

If you have any questions about any aspect of your finance or the attached documentation, please do not hesitate to contact me.

Yours sincerely,

/s/ Sukhi Singh

Sukhi Singh

Senior Relationship Manager

0409 221 537

www.westpac.com.au

Westpac Banking Corporation	ABN 33 007 457 141
Business Finance Agreement

23 January 2008

To: Channell Pty Ltd ACN: 002 735 622

We are pleased to offer finance as detailed in the following sections and attachments to this letter:

·	FINANCE DETAILS	Page 2
	This schedule details the Facilities, including the finance amount, term, repayment arrangements, interest rate and fees payable.
·	DETAILS OF FEES & CHARGES	Page 4
	This schedule displays details of the fees and charges payable, and how they are calculated.
·	TERMS OF FINANCE OFFER	Page 6
	These are terms specific to your finance arrangements.
·	ACKNOWLEDGEMENT & ACCEPTANCE	Page 10
	This section must be signed and returned to accept this finance offer.
·	ADDITIONAL ATTACHMENTS
	Product Schedules
	These contain information specific to certain types of Facilities. If all of the details you need to know about a Facility are contained in the Finance Details, that Facility will not have a separate Product Schedule. The attached Product Schedules relevant to your Facilities are:
	·   Banker’s Undertaking
	General Conditions Booklet version 3, dated 03/2003 (the “booklet”)
	This booklet contains terms and conditions that apply to all borrowers.

For definitions of terms used in this letter please refer to your booklet.

This Agreement only applies to the Facilities listed in the attached Finance Details.

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Finance Details

Borrower’s Name	Channell Pty Ltd ACN: 002 735 622
Facility A	Banker’s Undertaking - Individual Limit
Purpose	To assist with working capital
Existing Limit	$	Nil
Change in Limit	$	+296,925.75
Resultant Limit	$	296,925.75
Payment Details
Payment Type	On Demand
Facility Fee(s)
Facility Fee Type	Service Fee		Amount & Accrual Cycle		(1.25%) per half year in advance. The minimum fee is $100 (which is subject to change). The Service Fee is charged six monthly in advance and is non-refundable.
Facility B	Westpac Equipment Finance - Revolving Limit
Existing Limit	$	Nil		The terms and conditions including any security details for this facility have been
Change in Limit	$	+250,000.00		provided to you separately.
Resultant Limit	$	250,000.00
Facility C	Transaction Negotiation Authority
Existing Limit	$	Nil		Terms and conditions for this product have been provided to you separately.
Change in Limit	$	+400,000.00
Resultant Limit	$	400,000.00
Facility D	Westpac Business Card
Existing Limit	$	Nil		Terms and conditions for this product have been provided to you separately.
Change in Limit	$	+350,000.00
Resultant Limit	$	350,000.00

The following specific conditions apply to this Borrower’s Facilities:-

The Bank will require release of National Australia Bank Limited fixed and floating charge No 44525 over Channell Pty Ltd prior to any drawdown of approved facilities.

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The following specific conditions apply to this Borrower’s Facilities:-

You must provide the following reports to us, certified by the director / principal, on a half yearly basis commencing 15/8/2008. These reports are to be provided within 45 days of the corresponding balance date 30/6 and 31/12 and are to include:

1)	Balance Sheet /Trading profit & loss statements (including year to date figures).
2)	Aged debtor & creditor listing.
3)	Cash flow budget (including historical results vs budget year to date and forward projections for at least the next 12 months).
4)	Comments on any material variation to plan and steps taken to correct these.
5)	Our “Working Asset Statement” (your manager will provide you with the standard form for completion).

The Facilities for this Borrower will be secured by the following:-

Status	Details
Offered	Fixed and Floating Charge by Channell Pty Ltd ACN 002 735 622 over all assets and uncalled capital

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Details of Fees & Charges

What are the set up costs for this finance?

Lender
Establishment Fee	$	500.00
Total (excludes ongoing fees)	$	500.00
Government
Loan Security Duty (estimate)	$	1,341.00
Registration Fee – Mortgage Debenture (estimate)	$	135.00
Total estimate	$	1,476.00

Do property valuation fees apply?

We may, at any time, obtain a valuation of any new security property or an updated valuation of any existing security property from a Licensed Valuer. If we do, you will have to pay for the valuation. We will advise you before we do so. The cost may be debited to one of your accounts.

Is the amount of these fees and charges likely to vary?

The fees and charges quoted above are indicative of what is payable to us and/or to the Government.

Should we be required to pay additional Government charges in relation to the security documentation and they are not quoted above, then you will be required to cover these costs. Any fees or charges not paid by you (or authorised for payment) after acceptance of this offer may be debited to any of your accounts.

If the Facilities or Securities are complicated in nature, we may instruct our solicitors to prepare the Securities. If so, you will have to pay their costs and disbursements. An estimate of the amount payable will be provided to you on request.

If you increase, extend or vary a Facility, additional fees and charges may apply.

What happens if the Agreement does not proceed?

· You will be responsible for payment of any legal fees and disbursements incurred up to that time; and

· You may be required to pay, or we may keep (or debit any of your accounts with) any other fees and charges incurred, which would have been payable under the Agreement.

If, after accepting this offer, you decide not to proceed, we are entitled to retain the Establishment Fee, but part of the Establishment Fee may be refunded to you. As you will appreciate, the funds retained will be used to compensate us for work completed up to the point of you notifying us that the Facilities are no longer required.

How are the ongoing fees and charges on my facilities calculated?

The Finance Details set out each fee applicable to your Facilities, and the amounts or rates of those fees. The method of calculation and charging for these fees is detailed below.

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Banker’s Undertaking

Service Fee is calculated as a percentage of the value of each Banker’s Undertaking issued, with a minimum fee of currently $100.00, but subject to change. The Service Fee is charged six monthly in advance and is non-refundable.

Establishment fee is payable for each additional Banker’s Undertaking issued under a Banker’s Undertaking Revolving Limit. This fee is currently $100.00, but subject to change. The fee is charged on issue of the additional Banker’s Undertaking.

Banker’s Undertaking Demand Processing Fee of $250 is payable each time the Bank is required to make payment (either full or in part) in response to a demand received from a Favouree under a Banker’s Undertaking.

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Terms of Finance Offer

What do I need to do before the finance will be available to me?

This offer of finance is subject to the following conditions. You need to:

·accept this offer (See “How can I accept this finance offer?”)

·pay the Establishment Fee

·complete and sign any new security documentation to our satisfaction

Do I have to provide Security?

This is not an agreement to give Security. However, unless a Facility is stated as unsecured in the Finance Details, we will not provide any Facility until you do so.

When will my finance arrangements be reviewed?

We may review each Facility:

·annually and

·at any other time after giving notice to you.

Refer to your booklet for further information.

What should I know about interest rates and margins?

Where an interest rate applies to a Facility:

·interest will be calculated on the daily balance owing in the loan account from the first day of drawing to the date of repayment

·if no period is specified in the Finance Details, interest is payable on the last business day of each calendar month

·quarterly interest (where applicable) will be payable on the last business day of March, June, September and December

·half yearly interest (where applicable) will be payable on the last business day of March and September

·interest may be debited to the loan account without notice to you.

You agree to pay:

·interest on each Facility at the interest rate and margin stated in the Finance Details

·interest on overdue amounts including excesses above Facility Limits at the Unarranged Lending Rate, which will be determined by the Bank from time to time.

We can vary the margin at any review and we will notify you of any change to the margin. The Unarranged Lending Rate will be published in a tombstone with our other Business Finance lending rates.

Advertisements of our current variable base rates and the Unarranged Lending Rate will appear in the Australian Financial Review and The Australian every second Monday. If Monday is a public holiday, the advertisement will appear on the next business day. We will also give you information on current interest rates, on request.

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Can the amount of my fees and charges change?

Fees and charges quoted in the Finance Details are based on the finance product selected. Any changes to amount outstanding, or to terms and conditions, may result in a change to the amount of those fees. See “How are the ongoing Fees and Charges on my Facilities calculated?” for more details.

We may vary the fees and charges payable, or introduce new fees and charges, as explained in the booklet.

Goods and services tax (GST) is a tax payable in respect of taxable supplies (as defined in the GST law) made on or after 1 July 2000.

Some fees and charges may be varied as a result of the introduction of GST in the manner outlined above.

Where, as provided in the booklet you have to :

·indemnify us against an amount; or

·pay or reimburse us for an amount we will pay or have paid to someone else (a Supplier) and the cost to us includes GST payable to the Australian Tax Office by the Supplier,

the amount you will pay us, or that we may charge to any of your accounts, will include any GST or other tax paid or payable by us or the Supplier.

However, to the extent that we are entitled to claim an input tax credit or a reduced input tax credit in respect of any supply which is paid or reimbursed by you, and the benefit of that credit is not reflected in the amount you have paid, it will be passed on to you later.

Where are the ongoing fees charged?

Those fees may be charged to any of your accounts. Generally this will be the facility account or the principal transaction account of the borrower.

Are my Facilities repayable on demand?

Yes, unless otherwise stated in the Finance Details.

How often will I receive statements of account?

We will send you a statement of your loan account every six months or more frequently as agreed between us.

Does the code of Banking Practice apply?

If any one borrower is a small business as defined by the Code:

Each relevant provision of the Code of Banking Practice will apply to your finance from the date we adopt that provision.

The relevant descriptive information referred to in sections 13.1 and 13.2 of the Code of Banking Practice is set out in our Terms and Conditions booklets:

·Deposit Accounts for Personal Customers Product Disclosure Statement - incorporating Terms and Conditions for using your account

·Deposit Accounts for Business Customers Product Disclosure Statement - incorporating Terms and Conditions for using your account

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These booklets include the following information:

·our account opening procedures;

·our obligations regarding the confidentiality of your information;

·complaint handling procedures;

·general descriptive information regarding bank cheques;

·a recommendation that you inform us promptly if you are in financial difficulty; and

·a recommendation that you carefully read the terms and conditions applying to the relevant banking service (which in relation to your business finance means you should carefully read your Business Finance Agreement before signing it).

Copies of these booklets are available on request.

If none of the borrowers are a small business as defined by the Code:
No.

If I am borrowing with someone else, can I determine my liability?

If there is more than one borrower, each of you is individually liable for the full amount of the facilities, unless this Agreement provides otherwise. We will allow a borrower to terminate their liability in respect of future advances or financial accommodation on giving us written notice. This right only applies where we can terminate any obligation we have to provide further credit to any other borrower under the same facility.

How can I make my payments?

You can make your payments:

·by periodical payment from an account in your name you conduct with us. You can choose this option by completing the details in the Acknowledgement and Acceptance section. Current periodical payment fees are quoted in our Banking Services brochure, which you can obtain from any branch, or by calling Business Telephone Banking on 132 142; or

·by periodical payment from an account with another financial institution – you will need to organise this with that financial institution; or

·at any of our branches in Australia. Please let your Business Banking Manager know if you require a deposit book; or

·by use of Business Internet Banking or Business Telephone Banking.

Some of the options listed above may not be available to you, depending on your Facility. Your Business Banking Manager can assist you in selecting the right payment option for your Facility.

Can I stop my obligations in respect of further advances?

If you are jointly and severally liable under a credit facility, we will allow you to terminate your liability in respect of future advances or financial accommodation on giving us written notice. This right only applies where we can terminate any obligation we have to provide further credit to any other debtor under the same credit facility, for example any obligation we may have to pay unpresented cheques under an overdraft facility.

How can I accept this finance offer?

You have 30 days from the date of this offer to accept it, unless we extend the date.

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You will need to complete, sign, date and return the second copy of this Finance Agreement to this office. When we receive your acceptance, the Agreement will commence and will replace all previous agreements between us in relation to the Facilities.

We may withdraw this offer at any time before you accept it, if we become aware of anything we consider changes the basis on which the offer was made.

If you do not draw any Facility (except for Overdraft or Line of Credit Facilities) within 3 months after you accept the offer, we may cancel that Facility unless we have agreed otherwise.

Signed for and on behalf of Westpac Banking Corporation by:

Sukhi Singh

Senior Relationship Manager
BFS Sales Support NSW
0409 221 537

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Acknowledgement & Acceptance

Acknowledgements And Acceptance of Business Finance Terms and Conditions

Each Borrower:

1.	accepts the offer dated 23 January 2008
2.	acknowledges receipt of, has read and understood the booklet and any Product Schedules
3.	requests that you prepare any Securities
4.	*encloses a cheque for the total amount of fees payable (I/We will forward a cheque for any valuation fees applicable, once advised of the amount.)
	*authorises you to debit the following account(s) for the fees payable (including any valuation fees applicable):

Account Number	032071 – 393493	Account Number	032071 – 393493
Branch		Branch
Amount $		Amount $

5.	*requests that you debit my/our account number                               at                                 branch for the balance of the purchase moneys payable at settlement. *(up to the sum of $                          ), and pay this amount as my/our solicitor/agent/conveyancer directs.
6.	*authorises you to debit my/our account and pay my/our solicitor’s/agent’s/conveyancer’s account, as instructed at settlement.
7.	*authorises you to debit my/our account number                                  at                                branch for any fees relating to the Banker’s Undertaking.
	(*delete & initial whichever is not required)
8.	confirms that they do not hold any assets as the trustee of a trust unless the Agreement states that it is a trustee;
9.	acknowledges that each Borrower is liable for the whole amount of the facility. This means that you can require any borrower to pay all the principal, all the interest and all other amounts. If the other Borrower or Borrowers do not pay any amount, each Borrower acknowledges that it will have to pay the full amount itself.

DATED: 31/1/’08

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SIGNED for and on behalf of Channell Pty Ltd ACN: 002 735 622

/s/ Brett Becroft
Director
Print Name	Brett Becroft

/s/ Amar Kulkarni
Secretary
Print Name	Amar Kulkarni

The Solicitor, Settlement Agent or Land Broker acting for me/us is:-

Name:

Address:

Phone/Fax:

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BANKER’S UNDERTAKING

This Schedule sets out additional terms and conditions of your Banker’s Undertaking facility which are not included in the Finance Details.

Revolving Facility

If the Finance Details states that you have a Revolving Facility, you may request the Lender to issue more than one Banker’s Undertaking up to the unused portion of the Limit Amount quoted in the Finance Details. The Lender may state additional pre-conditions to the issue of each Banker’s Undertaking. The following terms and conditions also apply to each Banker’s Undertaking issued under the Revolving Facility.

Payment

The Lender may at any time, without being required to do so, pay to the favouree any amount required by the favouree to discharge the Lender’s obligations under the Banker’s Undertaking.

The Lender may pay any amount that it is called upon to pay or which the Lender, in its discretion, decides to pay under the Banker’s Undertaking without reference to you or any surety, and without enquiring whether the conditions or obligations under any agreement between you and the favouree have or have not been complied with. The Lender is not required to investigate the correctness of any information, statement or document or verify any signature or title on any document given to the Lender in relation to the Banker’s Undertaking.

Where a Banker’s Undertaking is issued in Western Australia, if the Lender pays an amount under a Banker’s Undertaking, the Lender will debit any of your accounts or open an account and debit that account for the amount paid by the Lender.

Where a Banker’s Undertaking is not issued in Western Australia, if the Lender pays an amount under a Banker’s Undertaking you will pay that amount to the Lender immediately on demand. The Lender may also debit any of your accounts for that amount, or open an account and debit that amount to that account.

Account for Charging of Fees

If you do not already conduct an account with the Lender you will be required to open one, to enable the Lender to automatically deduct all ongoing fees. You must continue to conduct an account with the Lender until you notify the Lender that the Banker’s Undertaking facility is no longer required.

Bill Of Lading

If a Banker’s Undertaking is to be in the form of a guarantee signed by you and endorsed by the Lender to enable you to obtain the delivery of goods without production of the Bill of Lading in relation to those goods, then you will return the Banker’s Undertaking to the Lender as soon as the Bill of Lading has been delivered to the shipping agents. Your obligations under the Banker’s Undertaking and this Agreement will continue whether or not drafts or documents presented to the Lender are in accordance the terms and conditions of the documentary credit or collection transaction of which they are a part. You undertake that the goods referred to in the Bill of Lading are not included in the list of prohibited goods specified by the Customs Department.

Cancellation Of Banker’s Undertakings

The Lender’s obligations under a Banker’s Undertaking cease on the earliest of the following:

a)	notification is received by the Lender from the favouree that the Undertaking is no longer required;
b)	the Undertaking is returned to the Lender;
c)	all payments by the Lender to the favouree under the Undertaking total the amount payable under it;
d)	the favouree notifies the Lender that the payments made by the Lender constitute the total amount required to be paid;
e)	on the expiry date, if any, of the Undertaking.

Consent

The Lender may give to any surety copies of:

·      the Business Facility Agreement including all Schedules and the booklet;

·      the Banker’s Undertaking;

·      any formal demand that is sent to you.

DECLARATION OF ASSET VALUES

To: Westpac Banking Corporation ABN 33 007 457 141

Re: Fixed and Floating Charge (the “Charge”) given by Channell Pty Ltd ACN 002 735 622 on 31/01/08 in its own right (the “Company”) in favour of Westpac Banking Corporation (the “Bank”).

I,	BRETT BECROFT, being an officer of the company.
1.	confirm that the charge relates to assets with the following respective values in the following states and territories of Australia;

Queensland	$
New South Wales	$	2,000,000
Victoria	$
South Australia	$
Western Australia	$
Tasmania	$
Northern Territory	$
Australian Capital Territory	$
Off shore Assets	$
TOTAL	$

2	authorise and direct the bank to attend to stamping of the charge,
In consideration of the bank accepting this authority and direction the company agrees to the following;
·	The company RELEASES the bank from any claim for loss, damage or liability sustained by the company as a consequence of the bank’s reliance on the company’s authority and direction to stamp the charge and the company agrees to hold the bank INDEMNIFIED against all actions, suits, loss, costs, charges, taxes (including any goods and services tax) and expenses which the bank may incur or become liable for by reason of the bank having acted in accordance with the company’s authority and direction to stamp the charge.
·	The above provisions shall not apply in the event that it is conclusively proved that the bank or its employees have acted negligently in consequence of the company’s authority and direction to stamp the charge.

Signed  by		Brett Becroft	/s/ Brett Becroft
in the presence of
/s/ Sukhi Singh
Signature of witness
Sukhi Singh
Name of witness (print).
Date	31/01/08

BANK COPY

Please Sign & Return

Fixed and Floating Charge

Channell Pty Ltd ACN 002 735 622

Westpac Banking Corporation

© Copyright Allens Arthur Robinson 2001

Fixed and Floating Charge
TABLE OF CONTENTS
1. INTERPRETATION			1
1.1		Memorandum of Common Provisions	1
1.2		Definitions	1
2. CHARGE			2
2.1	Charge		2
2.2	Priority		2
2.3	Nature of charge		2
2.4	Crystallisation		3
2.5	De-crystallisation		4
3. ACKNOWLEDGMENT OF INDEBTEDNESS			4
SCHEDULE			5
Prior Ranking Security Interests			5

i

Date	31/JAN/2008
Parties
l.	Channell Pty Ltd ACN 002 735 622 of C/- Baker & McKenzie ‘AMP centre’ Level 27 50 Bridge Street Street, Sydney NSW 2000 (the Mortgagor);
2.	Westpac Banking Corporation (ABN 33 007 457 141) of 1 King Street, Concord West 2138 New South Wales (the Lender).
It is agreed as follows.
1.	Interpretation
1.1	Memorandum of Common Provisions
	The Memorandum of Common Provisions referred to below applies to this Deed. It forms part of this Deed. Terms defined in it have the same meaning.
	The Memorandum is retained by: the New South Wales Land Titles Office, Sydney, as number 9488920.
1.2	Definitions
	The following definitions apply unless the context requires otherwise.
	Government Agencymeans any government or any governmental, semi-governmental or judicial entity or authority, including local government and statutory organisations. It also includes any self-regulatory organisation established under statute, and any stock exchange.
	Intellectual Propertymeans any intellectual or industrial property. It includes without limitation:
	(a)	a patent, trade mark or service mark, copyright, registered design, trade secret or confidential information; or
	(b)	a licence or other right to use or to grant the use of any of the foregoing or to be the registered proprietor or used of any of the foregoing.
	Security Interest includes:
	(a)	any mortgage, pledge, lien or charge; or
	(b)	any security or preferential interest or arrangement of any kind; or
	(c)	any other right of or arrangement with any creditor to have its claim satisfied in priority to other creditors with, or from the  proceeds, of, any asset.
	Without limitation it includes retention of title other than in the ordinary course of day-to-day trading and a deposit of money by way of security. It excludes a charge or lien arising in favour of a Government Agency by operation of statute unless there is default in payment of money secured by that charge or lien.

1

2.	Charge
2.1	Charge
	For value, including the Lender giving or continuing credit or agreeing to do so (even conditionally), the Mortgagor charges to the Lender all the Mortgagor’s present and future assets and undertaking as set out in this Deed and the Memorandum of Common Provisions referred to in clause 1.1. This includes, without limitation, its uncalled or unpaid share capital.
2.2	Priority
	The charge created by this Deed is a first charge except where the Lender agrees otherwise. It takes priority over all Security Interests except those described in the Schedule.
2.3	Nature of charge
	The charge created by this Deed operates as follows.
	(a)	It is a fixed charge as regards all present and future:
		(i)	interests in land, including freehold and leasehold;
		(ii)	uncalled or unpaid share capital or premiums;
		(iii)	machinery (other than stock-in-trade) and plant;
		(iv)	insurance policies, and all proceeds of those policies;
		(v)	books of account, registers, minute books, statements, invoices, accounting and other records (including, without limitation, those recorded electronically) and all software;
		(vi)	Intellectual Property and goodwill;
		(vii)	documents or agreements, including:
			(A)	if the Mortgagor enters this Deed as trustee of a trust, the relevant trust document;
			(B)	any lease or other right to use property of any type (including, a right to use intellectual property or any franchise); or
			except any document or agreement which is not material to the business of the Mortgagor, the Property or the security of the Lender, and which would be regularly disposed of in the normal day to day business of the Mortgagor;
		(viii)	Marketable Securities as defined in the Corporations Act 2001; and
			(A)	anything referred to in the exceptions to the definition of “debenture” in the Corporations Act 2001;
			(B)	units or other interests in a trust or partnership;
			(C)	negotiable instruments; and
			(D)	rights or options in respect of a Marketable Security (including, without limitation, any of the above), whether issued or unissued.,
			other than those which are acquired and disposed of regularly in the normal course

2

				of the normal day to day business of the Mortgagor;
		(ix)		Authorisations;
		(x)		documents of any kind deposited with the Lender and property which those documents represent or to which they relate;
		(xi)		accounts and deposits with the Lender where there is some restriction on the right of the Mortgagor to withdraw or use the funds in those accounts or deposits;
		(xii)		other assets that are not acquired for disposal in the ordinary course of the Mortgagor’s business;
		(xiii)		book debts owed to the Mortgagor not included in the above which arise in the ordinary course of trading, but this does not include proceeds of those debts which are received before the first occur of:
				(A)	the Lender requiring such proceeds to be paid into an account or deposit of the type mentioned in sub-paragraph (xi); and
				(B)	the charge created by this Deed being enforced (the Lender may require proceeds to be paid into such an account at any time); and
		(xiv)		all other debts owed to the Mortgagor including the proceeds of those debts.
	(b)	Subject to clause 2.4, it is a floating charge as regards all other assets charged.
	All sub-paragraphs of paragraph (a) are to be construed independently. None limits the generality of any other.
2.4	Crystallisation
	The floating charge created by this Deed will automatically and immediately crystallise and operate as a fixed charge:
	(a)	in respect of any assets:
		(i)	on notice to the Mortgagor from the Lender;
		(ii)	if the Mortgagor:
			(A)		creates or allows any Security Interest over;
			(B)		sells, leases, parts with possession or otherwise disposes of;
			(C)		creates or allows any interest in; or
			(D)		parts with possession of,
			that asset in breach of a Lender Arrangement, or agrees or attempts to do so or takes any step towards doing so;
		(iii)	on any step being taken with a view to levying or enforcing any distress, attachment or other execution on that asset or to enforcing any Security Interest in respect of that asset;
		(iv)	on the Commissioner of Taxation or his delegate or successor signing a notice under:
			(A)		s218 or s255 of the Income Tax Assessment Act 1936;

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(B)           s260-5 of Schedule 1 to the Taxation Administration Act 1953;

(C)           s34 of the Taxation Administration Act 1953;

(D)          any similar legislation,

which will affect that asset; or

(v)on a Government Agency taking any step which may result in an amount of Tax or an amount owing to a Government Agency ranking ahead of the floating charge with respect to that asset; or

(b)in respect of all the Property:

(i)if an order is made or a resolution is passed for the winding up of the Mortgagor; or

(ii)on the security constituted by this Deed being enforced in any way.

Except where expressly stated, no notice or action by the Lender is necessary for the charge to crystallise.

2.5          De-crystallisation

By notice to the Mortgagor, the Lender may at any time release from the fixed charge any asset which has become subject to a fixed charge under clause 2.4.

That asset will then again be subject to the floating charge and to the further operation of that Clause.

3.           Acknowledgment of Indebtedness

The Mortgagor acknowledges that it owes the Lender at least $1.

4

Schedule

Prior Ranking Security Interests

5

Executed as a Deed.

SIGNED SEALED AND DELIVERED by
Channell Pty Ltd ACN 002 735 622
by authority of its directors

/s/ Amar Kulkarni	/s/ Brett Becroft
Secretary	Director
AMAR KULKARNI	BRETT BECROFT
Name in full (BLOCK LETTERS)	Name in full (BLOCK LETTERS)

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	Westpac Banking Corporation ABN 33 007 457 141
		Business Loan Centre NSW
		1 King Street
		Concord West NSW 2138
		Telephone: 02 8767 3234
		Facsimile: 02 9767 1170

BANKER’S UNDERTAKING

To:     ING Management Limited ACN 006 065 032 of 3 Healy Circuit Huntingwood NSW 2148 (the “Favouree”)

At the request of:       Channell Pty Ltd ACN 002 735 622 (the “Customer”)

and in consideration of the Favouree accepting this Undertaking for rental bond for the premises at Huntingwood, WESTPAC BANKING CORPORATION (the “Bank”) unconditionally undertakes to pay on demand any amount or amounts which may from time to time be demanded in writing purporting to be signed by or on behalf of the Favouree, up to a maximum aggregate sum of $296,925.75 (the “Amount”).

Payment of the Amount or any part thereof will be made by the Bank to the Favouree without reference to the Customer and regardless of any notice from the Customer to the Bank not to pay any amount.

The Bank’s obligations under this Undertaking cease on the earliest of the following:

·         written notification is received by the Bank from the Favouree that the Undertaking is no longer required

·         the Undertaking is returned to the Bank

·         all payments by the Bank to the Favouree under the Undertaking total the Amount

·         the Favouree notifies the Bank that the payments made by the Bank constitute the total amount required to be paid

Notwithstanding any other obligations of the Bank under this Undertaking the Bank may at any time, without being required to do so, extinguish any liability it has under the Undertaking by paying to the Favouree the Amount less any amount or amounts it has previously paid under this Undertaking, or any lesser amount the Favouree notifies the Bank as being acceptable to it.

The benefit of this Undertaking is personal to the named Favouree and is not capable of assignment.

1

BANKER’S UNDERTAKING

By:WESTPAC BANKING CORPORATION ABN 33 007 457 141 (the “Bank”)

To:ING Management Limited ACN 006 065 032 of 3 Healy Circuit Huntingwood NSW 2148 (the “Favouree”)

At the request of:         Channell Pty Ltd ACN 002 735 622 (the “Customer”)

Amount:      $296,925.75

Dated at Concord West, this 23^rd day of January 2008.

I certify that the Attorney for the Bank, with whom I am personally acquainted or as to whose identity I am otherwise satisfied, signed this instrument in my presence.				SIGNED by	CERISE UDEN
				as attorney for Westpac Banking Corporation ABN 33 007 457 141 under power of attorney registered Book 4299 No 332.
Signature of Witness:			/s/ William Widjaja	/s/ Cerise Uden
				Signature TIER THREE ATTORNEY
Name of Witness:	WILLIAM WIDJAJA			By executing this instrument the attorney states that the
				attorney has received no notice of the revocation of the power of attorney.
Address of Witness:		BANK OFFICER NSW SERVICE CENTRE 1 KING ST. CONCORD WEST

Please forward all notices and correspondence to The Manager, Westpac Banking Corporation at Business Loan Centre NSW 1 King Street Concord West NSW 2138 (ref: NSW Metro Norwest branch).

This is the duplicate copy of the Banker’s Undertaking.

2

EX-10.47

Exhibit 10.47

DOCUMENT COMPLETION CERTIFICATE

To	BB Norwest - Sukhi Singh (DN100560046)			BSB	032047	Mgr—No.
Customer	Bushmans Group Pty Ltd ACN 090 744 022					Z No.	91991558
Total Facility Approved	$836,745.00	Date of Approval	31/01/2008	Amount of increase (+) or decrease (-)		(+) $836,745.00

BEFORE THIS MATTER CAN PROCEED TO SETTLEMENT / DRAWDOWN

1.The security documentation relevant to the above matter, listed on the reverse of this certificate, is in order for signing by customers and other relevant parties.

2.If customer is a Company, documents are to be executed without seal. If the customer advises that the company seal must be used, the documents will need to be reissued with the correct execution clause for signing under seal.

3.The outstanding matters detailed on the reverse of this certificate require your attention BEFORE this matter can proceed to settlement/drawdown. Alternatively, Credit approval must be obtained to waive these requirements, OR, defer follow-up until after drawdown.

Securities Officer (signature):
Name: William Widjaja	Date: 27 January 2008
Phone number: 02 87673234	Desk location number:

SALES MANAGER / RESPONSIBLE OFFICER SIGN OFF

The security documents have been executed by the customer; AND,

all conditions of approval (including hindsight review where applicable) and outstanding matters listed on the REVERSE are EITHER satisfied (and attached where appropriate), OR Credit Approval is held to waive or defer follow-up.

PLEASE RETURN EXECUTED DOCUMENTATION AND THIS FORM COMPLETED AND SIGNED OFF.

Sales Manager/Responsible Officer (signature): /s/ Sukhi Singh

Name:	Sukhi Singh	Date:	12-02-08
XTN:

DRAWDOWN DATE REQUIRED: /s/ Sukhi Singh

GENERAL/SPECIAL INSTRUCTIONS

Please contact NAB for discharge of FFC.

CREDIT APPROVAL (if applicable)

The outstanding matters indicated on the reverse of this form (by initial), are EITHER waived for the purpose of drawdown OR, Credit Approval is given to defer follow-up. The SALES MANAGER must clear outstanding items as indicated by                               (date).

Credit Officer (signature):
Name:	Date:
XTN:

A COPY OF THE COMPLETED FORM (ALL PAGES) MUST BE KEPT ON THE MANAGERIAL FILE

DOCUMENT COMPLETION CERTIFICATE

LIST OF DOCUMENTS ATTACHED:

PLEASE HAVE THE DOCUMENTS BELOW EXECUTED.

BFA x3	MCP
LD175 - Channell Pty Ltd	LE171 & LE174 - Channell Pty Ltd
LE213

OUTSTANDING MATTERS:

THESE ITEMS MUST BE ACTIONED BEFORE SETTLEMENT & DRAWDOWN CAN GO AHEAD.

Loan Centre Use	Manager Use	Credit Centre Use
Outstanding Matters	Satisfied/ Attached (initials)	APPROVED Follow-up Waived (initials)	APPROVED Follow-up Post drawdown ** (initials)
Banker’s Undertaking signed by attorney in escrow - subject to manager obtaining customer’s execution of all security documents and Customer Indemnity, and all other outstanding matters being attended to before the Banker’s Undertaking is issued.
Pls ensure all docs are signed and return
Pls ensure to return to us the GX copy for loading
Many Thanks

Recommendation To Credit
(Manager Use Only)

**THE SALES MANAGER IS RESPONSIBLE FOR COMPLETING OUTSTANDING MATTERS AFTER DRAWDOWN AS INDICATED ABOVE.

Westpac Banking Corporation ABN 33 007 457 141

BANK COPY
Please Sign and Return

	BFS Sales Support NSW
	1 King Street
	Concord West NSW 2138
	Telephone 0409 221 537
	Facsimile (02)9836 1292
The Secretary	Our Ref: 100553695
Bushmans Group Pty Ltd	Your Ref: 91991558
1/171 Brisbane Road
Mooloolaba QLD 4557	31 January 2008

Dear Sir/ Madam,

Thank you for the opportunity to discuss your finance requirements. I am pleased to advise that your request for finance has been approved. Full details regarding your Facilities are detailed in the attached Business Finance Agreement.

Would you kindly sign and return the duplicate Business Finance Agreement to accept this finance offer.

We appreciate the opportunity to provide your finance on this occasion and look forward to being of assistance to you in the future.

If you have any questions about any aspect of your finance or the attached documentation, please do not hesitate to contact me.

Yours sincerely,

/s/ Sukhi Singh

Sukhi Singh

Senior Relationship Manager

0409 221 537

www. westpac.com.au

Westpac Banking Corporation	ABN 33 007 457 141
Business Finance Agreement

31 January 2008

To: Bushmans Group Pty Ltd ACN: 090 744 022

We are pleased to offer finance as detailed in the following sections and attachments to this letter:

·	FINANCE DETAILS	Page 2
	This schedule details the Facilities, including the finance amount, term, repayment arrangements, interest rate and fees payable.
·	DETAILS OF FEES & CHARGES	Page 4
	This schedule displays details of the fees and charges payable, and how they are calculated.
·	TERMS OF FINANCE OFFER	Page 6
	These are terms specific to your finance arrangements.
·	ACKNOWLEDGEMENT & ACCEPTANCE	Page 10
	This section must be signed and returned to accept this finance offer.
·	ADDITIONAL ATTACHMENTS
	Product Schedules
	These contain information specific to certain types of Facilities. If all of the details you need to know about a Facility are contained in the Finance Details, that Facility will not have a separate Product Schedule. The attached Product Schedules relevant to your Facilities are:
	·Banker’s Undertaking
	General Conditions Booklet version 3, dated 03/2003 (the “booklet”)
	This booklet contains terms and conditions that apply to all borrowers.

For definitions of terms used in this letter please refer to your booklet.

This Agreement only applies to the Facilities listed in the attached Finance Details.

1

Finance Details

Borrower’s Name	Bushmans Group Pty Ltd ACN: 090 744 022
Facility A	Banker’s Undertaking - Individual Limit
Purpose	For Rental Bond

Existing Limit	$	Nil
Change in Limit	$	+86,744.89
Resultant Limit	$	86,744.89

Payment Details
Payment Type	On Demand
Facility Fee(s)
Facility Fee Type	Service Fee	Amount & Accrual Cycle	(1.25%) per half year in advance. The minimum fee is $100 (which is subject to change). The Service Fee is charged six monthly in advance and is non-refundable.
Facility B	Westpac Equipment Finance - Revolving Limit

Existing Limit	$	Nil	The terms and conditions including any security details for this facility have been provided to you separately.
Change in Limit	$	+750,000.00
Resultant Limit	$	750,000.00

The following specific conditions apply to this Borrower’s Facilities:-

The Bank will require execution of ASIC form 312 by Australian Executor Trustees Limited to release assets purchased by Bushmans Group Pty Ltd under Westpac Equipment finance.

You must provide the following reports to us, certified by the director / principal, on a half yearly basis commencing 15/8/2008. These reports are to be provided within 45 days of the corresponding balance date 30/6 and 31/12 and are to include:

1)Balance Sheet/Trading profit & loss statements (including year to date figures).

2)Aged debtor & creditor listing.

3)Cash flow budget (including historical results vs budget year to date and forward projections for at least the next 12 months).

4)Comments on any material variation to plan and steps taken to correct these.

5)Our “Working Asset Statement” (your manager will provide you with the standard form for completion).

2

The Facilities for this Borrower will be secured by the following:-

Status	Details
Offered	$836,745.00 Limited Guarantee by Channell Pty Ltd ACN 002 735 622 supported by
Offered	Fixed and Floating Charge by Channell Pty Ltd ACN 002 735 622 over all assets and uncalled capital

3

Details of Fees & Charges

What are the set up costs for this finance?

Lender
Establishment Fee	$	500.00
Total (excludes ongoing fees)	$	500.00

Do property valuation fees apply?

We may, at any time, obtain a valuation of any new security property or an updated valuation of any existing security property from a Licensed Valuer. If we do, you will have to pay for the valuation. We will advise you before we do so. The cost may be debited to one of your accounts.

Is the amount of these fees and charges likely to vary?

The fees and charges quoted above are indicative of what is payable to us and/or to the Government.

Should we be required to pay additional Government charges in relation to the security documentation and they are not quoted above, then you will be required to cover these costs. Any fees or charges not paid by you (or authorised for payment) after acceptance of this offer may be debited to any of your accounts.

If the Facilities or Securities are complicated in nature, we may instruct our solicitors to prepare the Securities. If so, you will have to pay their costs and disbursements. An estimate of the amount payable will be provided to you on request.

If you increase, extend or vary a Facility, additional fees and charges may apply.

What happens if the Agreement does not proceed?

·You will be responsible for payment of any legal fees and disbursements incurred up to that time; and

·You may be required to pay, or we may keep (or debit any of your accounts with) any other fees and charges incurred, which would have been payable under the Agreement.

If, after accepting this offer, you decide not to proceed, we are entitled to retain the Establishment Fee, but part of the Establishment Fee may be refunded to you. As you will appreciate, the funds retained will be used to compensate us for work completed up to the point of you notifying us that the Facilities are no longer required.

How are the ongoing fees and charges on my facilities calculated?

The Finance Details set out each fee applicable to your Facilities, and the amounts or rates of those fees. The method of calculation and charging for these fees is detailed below.

Banker’s Undertaking

Service Fee is calculated as a percentage of the value of each Banker’s Undertaking issued, with a minimum fee of currently $100.00, but subject to change. The Service Fee is charged six monthly in advance and is non-refundable.

4

Establishment fee is payable for each additional Banker’s Undertaking issued under a Banker’s Undertaking Revolving Limit. This fee is currently $100.00, but subject to change. The fee is charged on issue of the additional Banker’s Undertaking.

Banker’s Undertaking Demand Processing Fee of $250 is payable each time the Bank is required to make payment (either full or in part) in response to a demand received from a Favouree under a Banker’s Undertaking.

5

Terms of Finance Offer

What do I need to do before the finance will be available to me?

This offer of finance is subject to the following conditions. You need to:

·accept this offer (See “How can I accept this finance offer?”)

·pay the Establishment Fee

·supply a statement signed by each corporate Guarantor, satisfactory to us, as to the commercial benefit it will receive as a result of giving any Collateral Security

·complete and sign any new security documentation to our satisfaction

·in order for us to accept a guarantee as security, the Guarantor will need to meet with one of our representatives without you being present. The Guarantor will also need to obtain independent legal advice from an independent lawyer (neither yours nor ours) who will provide us with a certificate to the effect that the Guarantor fully understands and agrees to the terms of the new guarantee. (please note that we will not be responsible for the cost of that advice - the lawyer’s costs are the responsibility of you or the guarantor). A Guarantee Document Preparation Fee also applies.

Do I have to provide Security?

This is not an agreement to give Security. However, unless a Facility is stated as unsecured in the Finance Details, we will not provide any Facility until you do so.

When will my finance arrangements be reviewed?

We may review each Facility:

·annually and

·at any other time after giving notice to you.

Refer to your booklet for further information.

What should I know about interest rates and margins?

Where an interest rate applies to a Facility:

·interest will be calculated on the daily balance owing in the loan account from the first day of drawing to the date of repayment

·if no period is specified in the Finance Details, interest is payable on the last business day of each calendar month

·quarterly interest (where applicable) will be payable on the last business day of March, June, September and December

·half yearly interest (where applicable) will be payable on the last business day of March and September

·interest may be debited to the loan account without notice to you.

You agree to pay:

·interest on each Facility at the interest rate and margin stated in the Finance Details

6

·interest on overdue amounts including excesses above Facility Limits at the Unarranged Lending Rate, which will be determined by the Bank from time to time.

We can vary the margin at any review and we will notify you of any change to the margin. The Unarranged Lending Rate will be published in a tombstone with our other Business Finance lending rates.

Advertisements of our current variable base rates and the Unarranged Lending Rate will appear in the Australian Financial Review and The Australian every second Monday. If Monday is a public holiday, the advertisement will appear on the next business day. We will also give you information on current interest rates, on request.

Can the amount of my fees and charges change?

Fees and charges quoted in the Finance Details are based on the finance product selected. Any changes to amount outstanding, or to terms and conditions, may result in a change to the amount of those fees. See “How are the ongoing Fees and Charges on my Facilities calculated?” for more details.

We may vary the fees and charges payable, or introduce new fees and charges, as explained in the booklet.

Goods and services tax (GST) is a tax payable in respect of taxable supplies (as defined in the GST law) made on or after 1 July 2000.

Some fees and charges may be varied as a result of the introduction of GST in the manner outlined above.

Where, as provided in the booklet you have to:

·indemnify us against an amount; or

·pay or reimburse us for an amount we will pay or have paid to someone else (a Supplier) and the cost to us includes GST payable to the Australian Tax Office by the Supplier,

the amount you will pay us, or that we may charge to any of your accounts, will include any GST or other tax paid or payable by us or the Supplier.

However, to the extent that we are entitled to claim an input tax credit or a reduced input tax credit in respect of any supply which is paid or reimbursed by you, and the benefit of that credit is not reflected in the amount you have paid, it will be passed on to you later.

Where are the ongoing fees charged?

Those fees may be charged to any of your accounts. Generally this will be the facility account or the principal transaction account of the borrower.

Are my Facilities repayable on demand?

Yes, unless otherwise stated in the Finance Details.

How often will I receive statements of account?

We will send you a statement of your loan account every six months or more frequently as agreed between us.

7

Does the code of Banking Practice apply?

If any one borrower is a small business as defined by the Code:

Each relevant provision of the Code of Banking Practice will apply to your finance from the date we adopt that provision.

The relevant descriptive information referred to in sections 13.1 and 13.2 of the Code of Banking Practice is set out in our Terms and Conditions booklets:

·Deposit Accounts for Personal Customers Product Disclosure Statement - incorporating Terms and Conditions for using your account

·Deposit Accounts for Business Customers Product Disclosure Statement - incorporating Terms and Conditions for using your account

These booklets include the following information:

·our account opening procedures;

·our obligations regarding the confidentiality of your information;

·complaint handling procedures;

·general descriptive information regarding bank cheques;

·a recommendation that you inform us promptly if you are in financial difficulty; and

·a recommendation that you carefully read the terms and conditions applying to the relevant banking service (which in relation to your business finance means you should carefully read your Business Finance Agreement before signing it).

Copies of these booklets are available on request.

If none of the borrowers are a small business as defined by the Code:

No.

If I am borrowing with someone else, can I determine my liability?

If there is more than one borrower, each of you is individually liable for the full amount of the facilities, unless this Agreement provides otherwise. We will allow a borrower to terminate their liability in respect of future advances or financial accommodation on giving us written notice. This right only applies where we can terminate any obligation we have to provide further credit to any other borrower under the same facility.

How can I make my payments?

You can make your payments:

·by periodical payment from an account in your name you conduct with us. You can choose this option by completing the details in the Acknowledgement and Acceptance section. Current periodical payment fees are quoted in our Banking Services brochure, which you can obtain from any branch, or by calling Business Telephone Banking on 132 142; or

·by periodical payment from an account with another financial institution – you will need to organise this with that financial institution; or

·at any of our branches in Australia. Please let your Business Banking Manager know if you require a deposit book; or

·by use of Business Internet Banking or Business Telephone Banking.

Some of the options listed above may not be available to you, depending on your Facility. Your Business Banking Manager can assist you in selecting the right payment option for your Facility.

8

Can I stop my obligations in respect of further advances?

If you are jointly and severally liable under a credit facility, we will allow you to terminate your liability in respect of future advances or financial accommodation on giving us written notice. This right only applies where we can terminate any obligation we have to provide further credit to any other debtor under the same credit facility, for example any obligation we may have to pay unpresented cheques under an overdraft facility.

How can I accept this finance offer?

You have 30 days from the date of this offer to accept it, unless we extend the date.

You will need to complete, sign, date and return the second copy of this Finance Agreement to this office. When we receive your acceptance, the Agreement will commence and will replace all previous agreements between us in relation to the Facilities.

We may withdraw this offer at any time before you accept it, if we become aware of anything we consider changes the basis on which the offer was made.

If you do not draw any Facility (except for Overdraft or Line of Credit Facilities) within 3 months after you accept the offer, we may cancel that Facility unless we have agreed otherwise.

Signed for and on behalf of Westpac Banking Corporation by:

/s/ Sukhi Singh

Sukhi Singh

Senior Relationship Manager

0409 221 537

9

Acknowledgement & Acceptance

Acknowledgements And Acceptance of Business Finance Terms and Conditions

Each Borrower:

1.accepts the offer dated 31 January 2008

2.acknowledges receipt of, has read and understood the booklet and any Product Schedules

3.requests that you prepare any Securities

4.*encloses a cheque for the total amount of fees payable (I/We will forward a cheque for any valuation fees applicable, once advised of the amount.)

*authorises you to debit the following account(s) for the fees payable (including any valuation fees applicable):

Account Number	032071 - 393522	Account Number	032071 - 393522
Branch		Branch
Amount $		Amount $

5.*requests that you debit my/our account number               at               branch for the balance of the purchase moneys payable at settlement. *(up to the sum of $               ), and pay this amount as my/our solicitor/agent/conveyancer directs.

6.*authorises you to debit my/our account and pay my/our solicitor’s/agent’s/conveyancer’s account, as instructed at settlement.

7.*authorises you to debit my/our account number               at               branch for any fees relating to the Banker’s Undertaking. (*delete & initial whichever is not required)

8.confirms that they do not hold any assets as the trustee of a trust unless the Agreement states that it is a trustee;

9.acknowledges that each Borrower is liable for the whole amount of the facility. This means that you can require any borrower to pay all the principal, all the interest and all other amounts. If the other Borrower or Borrowers do not pay any amount, each Borrower acknowledges that it will have to pay the full amount itself.

DATED: 31 / 01 / ’08

10

SIGNED for and on behalf of Bushmans Group Pty Ltd ACN: 090 744 022

/s/ George Apostoliais
Director
Print Name	George Apostoliais
/s/ Amar Kulkarni
Secretary
Print Name	Amar Kulkarni

The Solicitor, Settlement Agent or Land Broker acting for me/us is:-

Name:

Address:

Phone/Fax:

11

BANKER’S UNDERTAKING

This Schedule sets out additional terms and conditions of your Banker’s Undertaking facility which are not included in the Finance Details.

Revolving Facility

If the Finance Details states that you have a Revolving Facility, you may request the Lender to issue more than one Banker’s Undertaking up to the unused portion of the Limit Amount quoted in the Finance Details. The Lender may state additional pre-conditions to the issue of each Banker’s Undertaking. The following terms and conditions also apply to each Banker’s Undertaking issued under the Revolving Facility.

Payment

The Lender may at any time, without being required to do so, pay to the favouree any amount required by the favouree to discharge the Lender’s obligations under the Banker’s Undertaking.

The Lender may pay any amount that it is called upon to pay or which the Lender, in its discretion, decides to pay under the Banker’s Undertaking without reference to you or any surety, and without enquiring whether the conditions or obligations under any agreement between you and the favouree have or have not been complied with. The Lender is not required to investigate the correctness of any information, statement or document or verify any signature or title on any document given to the Lender in relation to the Banker’s Undertaking.

Where a Banker’s Undertaking is issued in Western Australia, if the Lender pays an amount under a Banker’s Undertaking, the Lender will debit any of your accounts or open an account and debit that account for the amount paid by the Lender.

Where a Banker’s Undertaking is not issued in Western Australia, if the Lender pays an amount under a Banker’s Undertaking you will pay that amount to the Lender immediately on demand. The Lender may also debit any of your accounts for that amount, or open an account and debit that amount to that account.

Account for Charging of Fees

If you do not already conduct an account with the Lender you will be required to open one, to enable the Lender to automatically deduct all ongoing fees. You must continue to conduct an account with the Lender until you notify the Lender that the Banker’s Undertaking facility is no longer required.

Bill Of Lading

If a Banker’s Undertaking is to be in the form of a guarantee signed by you and endorsed by the Lender to enable you to obtain the delivery of goods without production of the Bill of Lading in relation to those goods, then you will return the Banker’s Undertaking to the Lender as soon as the Bill of Lading has been delivered to the shipping agents. Your obligations under the Banker’s Undertaking and this Agreement will continue whether or not drafts or documents presented to the Lender are in accordance the terms and conditions of the documentary credit or collection transaction of which they are a part. You undertake that the goods referred to in the Bill of Lading are not included in the list of prohibited goods specified by the Customs Department.

Cancellation Of Banker’s Undertakings

The Lender’s obligations under a Banker’s Undertaking cease on the earliest of the following:

a)	notification is received by the Lender from the favouree that the Undertaking is no longer required;
b)	the Undertaking is returned to the Lender;
c)	all payments by the Lender to the favouree under the Undertaking total the amount payable under it;
d)	the favouree notifies the Lender that the payments made by the Lender constitute the total amount required to be paid;
e)	on the expiry date, if any, of the Undertaking.

Consent

The Lender may give to any surety copies of:

·      the Business Facility Agreement including all Schedules and the booklet;

·      the Banker’s Undertaking;

·      any formal demand that is sent to you.

BANK COPY	BUSINESS VERSION
	Specific facility
Please Sign and Return

WARNING: THIS IS A VERY IMPORTANT DOCUMENT

You may have to pay money owed by the Customer referred to below as well as or

instead of the Customer.

BEFORE YOU SIGN IT:

·      you should read carefully both it and the Memorandum of Common Provisions referred to below;

·      you should check for yourself whether the Customer can and will pay its debts; and

·      you should see your own lawyer and financial adviser.

GUARANTEE AND INDEMNITY

by

you, the Guarantor

Channell Pty Ltd ACN 002 735 622 of C/- Baker & Mckenzie ‘AMP Centre’ Level 27 50 Bridge Street, Sydney NSW 2000 and any other person listed as a Guarantor on the back cover

to

the Lender

WESTPAC BANKING CORPORATION ABN 33 007 457 141 of 275 Kent Street, Sydney, NSW

in respect of money now or in the future owed by

the Customer

Bushmans Group Pty Ltd ACN 090 744 022 of C/- Baker & Mckenzie ‘AMP Centre’ Level 27 50 Bridge Street, Sydney NSW 2000 and any other person listed as a Customer on the back cover (and if there is more than one any more of them)

in relation to

the Guaranteed Obligations

all liabilities and obligations of the Customer (alone or with others) now or in the future under or in respect of any of the following or any amendment or replacement for them.

Business Finance Agreement dated 31/01/2008; or any other arrangement or obligation you agree is covered by this Guarantee

on the terms set out in the Memorandum of Common Provisions referred to below.

There is a limit on the amount to be paid under this Guarantee and Indemnity. It is $836,745.00 (or any other amount agreed in writing) plus a further amount of 20% of that figure (to cover Excesses) ** plus amounts like government duties and charges, fees, costs, expenses and interest.

**“Excesses”means any unarranged drawing by the Customer or an authorised representative of the Customer where the resultant debt exceeds the formally agreed limit described in the Business Finance Agreement.

Security for this Guarantee & Indemnity includes the following:

New Fixed and Floating Charge by Channell Pty Ltd ACN 002 735 622 over all assets and uncalled capital.

You sign this Guarantee or Indemnity for value including the Lender, at your request, giving or continuing credit for the Customer or agreeing to do so even conditionally.

You confirm that you have read and understood the Memorandum of Common Provisions registered in the New South Wales Land Titles Office as number 9488920. It forms part of this Guarantee and Indemnity.

This Guarantee and Indemnity may consist of a number of counterparts and if so the counterparts taken together constitute one and the same instrument.

DATED: 31 / JAN / 2008

SIGNED by

Channell Pty Ltd ACN 002 735 622

by authority of its directors

/s/ Amar Kulkarni	/s/ Brett Becroft
Secretary	Director
Amar Kulkarni	Brett Becroft
Name in full (BLOCK LETTERS)	Name in full (BLOCK LETTERS)

Each individual signing on behalf of a Guarantor which is a corporation should complete the following:

I Amar Kulkarniam secretary of the Guarantor.

I confirm that each of the statements in the Schedule of the Memorandum of Common Provisions under the heading “for Corporations” is true in relation to the Guarantor.

The Guarantor is able to pay its debts as they fall due.

/s/ Amar Kulkarni

Signed

Channell Pty Ltd ACN 002 735 622 [Secretary]

Statutory Warning

If the Customer is a minor (that is under 18) you may not be able to recover from the Customer amounts you pay under this document.

2

EX-21

Exhibit 21

SUBSIDIARIES OF THE REGISTRANT

CHANNELL COMMERCIAL CORPORATION

December 31, 2007

Name	Jurisdiction of Organization	Direct Stockholder	Percentage Owned by Direct Stockholder
Bushman Water Harvesting Corporation	Delaware	Channell Commercial Corporation	100	%
Channell Commercial Canada Inc.	Ontario, Canada	Channell Commercial Corporation	100	%
Bushman Water Harvesting Inc.	Ontario, Canada	Channell Commercial Corporation	100	%
Channell Commercial Europe Limited	England and Wales	Channell Commercial Corporation	100	%
AC Egerton (Holdings) Limited	England and Wales	Channell Commercial Corporation	100	%
Channell Limited	England and Wales	AC Egerton (Holdings) Limited	100	%
CC Holdings, Inc.	California	Channell Commercial Corporation	100	%
Channell Pty Limited	Australia	Channell Commercial Corporation Channell Limited (England and Wales)	82 18	% %
Channell Limited	New Zealand	Channell Pty Limited	100	%
Channell Bushman Pty Limited	Australia	Channell Commercial Corporation	75	%
Bushmans Group Pty Limited	Australia	Channell Bushman Pty Limited	100	%
Australian Bushman Tanks Pty Limited	Australia	Channell Bushman Pty Limited	100	%
Polyrib Tanks Pty Limited	Australia	Channell Bushman Pty Limited	100	%
Bushman Engineering Pty Limited	Australia	Channell Bushman Pty Limited	100	%
Channell Commercial Malaysia Sendirian Berhad	Malaysia	Channell Commercial Corporation	33	%
Channell Commercial Hong Kong Limited	Hong Kong	Channell Commercial Corporation CC Holdings, Inc.	99 1	% %
Channel de Mexico, S.A. de C.V.	Mexico	Channell Commercial Corporation	51	%

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Channell Commercial Corporation

Temecula, California:

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-36097 and No. 333-109771) of Channell Commercial Corporation of our report dated March 24, 2008, relating to the consolidated financial statements and schedule of Channell Commercial Corporation as of and for the year ended December 31, 2007, which appears in this Annual Report on Form 10-K.

/s/ BDO Seidman, LLP

San Diego, California

March 24, 2008

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements No. 333-36097 and No. 333-109771 on Form S-8 of our report dated April 2, 2007, relating to the financial statements and financial statement schedule of Channell Commercial Corporation and subsidiaries as of and for the year ended December 31, 2006 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the adoption of Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, effective January 1, 2006), appearing in this Annual Report on Form 10-K of Channell Commercial Corporation and subsidiaries for the year ended December 31, 2007.

/s/ DELOITTE & TOUCHE LLP

San Diego, California

March 26, 2008

EX-23.3

Exhibit 23.3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated March 31, 2006 accompanying the 2005 consolidated financial statements included in the Annual Report of Channell Commercial Corporation on Form 10-K for the year ended December 31, 2007.  We hereby consent to the incorporation by reference of said report in the Registration Statements of Channell Commercial Corporation on Form S-8 (File No. 333-36097, filed September 22, 1997 and File No. 333-109771, filed October 17, 2003).

/s/ Grant Thornton LLP

Los Angeles, California

March 27, 2008

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, William H. Channell, Jr., certify that:

1.       I have reviewed this annual report on Form 10-K of Channell Commercial Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a—15(f) and 15d—15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter  (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 28, 2008	By:/s/ William H. Channell, Jr.
	William H. Channell, Jr.
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Patrick E. McCready, certify that:

1.       I have reviewed this annual report on Form 10-K of Channell Commercial Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a—15(f) and 15d—15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter  (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 28, 2008	By:/s/ Patrick E. McCready
	Patrick E. McCready
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      Each of the undersigned hereby certifies, in his capacity as an officer of Channell Commercial Corporation (the “Company”), for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

·The Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 2007 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

·The information contained in such report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: March 28, 2008

/s/ William H. Channell, Jr.
Name:	William H. Channell, Jr.
Title:	President and Chief Executive Officer

/s/ Patrick E. McCready
Name:	Patrick E. McCready
Title:	Chief Financial Officer