Exhibit 10.3

 

AMENDED AND RESTATED

 

SERIES B-1 NOTE

 

THE SECURITY REPRESENTED BY THIS INSTRUMENT HAS NOT BEEN REGISTERED UNDER ANY
APPLICABLE SECURITIES LAW.  THIS SECURITY CANNOT BE SOLD OR OTHERWISE
TRANSFERRED UNLESS IT IS REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 OR THE
BORROWER IS FURNISHED WITH AN ACCEPTABLE OPINION OF COUNSEL THAT AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.

 

THIS NOTE HAS NOT BEEN QUALIFIED BY THE FILING OF A PROSPECTUS UNDER APPLICABLE
CANADIAN SECURITIES LAWS.  BY ITS ACCEPTANCE OF THIS NOTE, THE HOLDER REPRESENTS
THAT IT IS AN ACCREDITED INVESTOR, AS SUCH TERM IS DEFINED IN ONTARIO SECURITIES
COMMISSION RULE 45-501, AND AGREES THAT THIS NOTE IS NOT BEING ACQUIRED WITH A
VIEW TO DISTRIBUTION.

 

Series B-1 Senior Secured Note Due 2006

 

U.S.$30,000,000.00

November 8, 2002

 

SECTION 1.                                            GENERAL.

 

(A)                                  BOOKHAM TECHNOLOGY PLC, A PUBLIC LIMITED
COMPANY INCORPORATED UNDER THE LAWS OF ENGLAND AND WALES (THE “BORROWER”), FOR
VALUE RECEIVED, HEREBY PROMISES TO PAY, SUBJECT TO THE FURTHER PROVISIONS
HEREOF, TO NORTEL NETWORKS UK LIMITED (THE “LENDER”), THE PRINCIPAL AMOUNT OF
THIRTY MILLION U.S. DOLLARS (U.S.$30,000,000.00), AS SUCH PRINCIPAL AMOUNT MAY
BE REDUCED BY PREPAYMENTS PURSUANT TO SECTION 3 AND SECTION 4 OF THIS NOTE (AS
DEFINED BELOW), ON NOVEMBER 8, 2006 (SUCH DATE, THE “MATURITY DATE”), ON
PRESENTATION AND SURRENDER OF THIS NOTE TO THE BORROWER, IN SUCH COIN OR
CURRENCY OF THE UNITED STATES OF AMERICA AS AT THE TIME OF PAYMENT SHALL BE
LEGAL TENDER THEREIN FOR THE PAYMENT OF PUBLIC AND PRIVATE DEBTS.

 

(B)                                 THE BORROWER FURTHER AGREES TO PAY INTEREST
ON THE OUTSTANDING PRINCIPAL AMOUNT HEREOF FROM TIME TO TIME FROM THE DATE
HEREOF AT THE INTEREST RATE (AS DEFINED BELOW), PAYABLE IN ARREARS ON EACH
INTEREST PAYMENT DATE (AS DEFINED BELOW) AND ON THE MATURITY DATE.  INTEREST
SHALL BE CALCULATED ON THE BASIS OF A 360-DAY YEAR OF TWELVE 30-DAY MONTHS.

 

(C)                                  THE LENDER SHALL ACT ON BEHALF OF AND AS
AGENT FOR ALL PRESENT AND FUTURE HOLDERS (AS DEFINED BELOW) AND SHALL
EXCLUSIVELY EXERCISE OR ENFORCE ANY AND ALL RIGHTS, POWERS, PRIVILEGES AND
REMEDIES HEREUNDER.  IF THE HOLDER IS NOT THE LENDER, THE BORROWER AND THE
GUARANTORS SHALL SATISFY ANY REQUIREMENT HEREUNDER TO DELIVER TO THE HOLDER ANY
NOTICE OR PAYMENT BY DELIVERING SUCH NOTICE OR PAYMENT TO THE LENDER RATHER THAN
THE HOLDER.

 

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SECTION 2.                                            SECURITY INTEREST,
RETENTION OF TITLE AND LIMITATION ON LIENS.

 

(A)                                  AS SECURITY FOR THE INDEBTEDNESS (AS
DEFINED BELOW), AND AS SECURITY FOR THE AGREEMENTS AND OTHER OBLIGATIONS OF THE
BORROWER AND THE GUARANTORS (AS DEFINED BELOW) HEREUNDER AND IN ORDER TO SECURE
THE FULL AND PUNCTUAL PAYMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER IN
ACCORDANCE WITH THE TERMS SET FORTH HEREIN, (I) THE BORROWER HAS PLEDGED, AND
BOOKHAM, INC. HAS CAUSED CERTAIN OF ITS SUBSIDIARIES TO PLEDGE, AND THE BORROWER
WILL PLEDGE AND BOOKHAM, INC. WILL CAUSE CERTAIN OF ITS SUBSIDIARIES TO PLEDGE,
THE COLLATERAL (AS DEFINED BELOW) PURSUANT TO THE SECURITY AGREEMENTS AND THE
DOCUMENTS DELIVERED PURSUANT THERETO AND PURSUANT TO CERTAIN OTHER DOCUMENTS
DELIVERED OR TO BE DELIVERED, AS APPLICABLE, PURSUANT TO THE RESTRUCTURING
AGREEMENT, AND (II) THE SELLER (AS DEFINED IN THE ACQUISITION AGREEMENT) AND ITS
SUBSIDIARIES HAVE RETAINED TITLE TO CERTAIN OF THE ASSETS (AS DEFINED IN THE
ACQUISITION AGREEMENT) PURSUANT TO THE BILL OF SALE, DATED AS OF NOVEMBER 8,
2002 DELIVERED BY SELLER AND CERTAIN OF ITS SUBSIDIARIES TO BOOKHAM
(SWITZERLAND) AG (AS SUCH TITLE RETENTION ARRANGEMENTS HAVE BEEN MODIFIED BY
CERTAIN DOCUMENTS AND AGREEMENTS DELIVERED OR TO BE DELIVERED, AS APPLICABLE,
PURSUANT TO THE RESTRUCTURING AGREEMENT).

 

(B)                                 NONE OF THE BORROWER AND THE GUARANTORS
SHALL (AND NONE OF THEM SHALL PERMIT ANY OF ITS SUBSIDIARIES TO) CREATE, INCUR,
ASSUME OR PERMIT TO EXIST ANY LIEN ON ANY OF THE COLLATERAL, EXCEPT FOR
PERMITTED LIENS.

 

SECTION 3.                                            VOLUNTARY PREPAYMENT.

 

This Note shall be prepayable, at the option of the Borrower, in whole or in
part, on one or more occasions, on not less than two (2) Business Days (as
defined below) and not more than twenty (20) calendar days prior written notice
to the Holder, at a price in cash equal to 100% of the outstanding principal
amount to be prepaid, plus accrued and unpaid interest to such prepayment date.

 

SECTION 4.                                            MANDATORY PREPAYMENT.

 

(A)                                  WITHIN ONE (1) BUSINESS DAY AFTER THE
CONSUMMATION OF ANY QUALIFIED FINANCING (AS DEFINED BELOW), THE BORROWER SHALL
PREPAY IN CASH ON A PRO RATA BASIS BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE
FUNDS THE OUTSTANDING OBLIGATIONS UNDER THE SERIES B-1 NOTE IN AN AMOUNT EQUAL
TO 20% OF THE NET PROCEEDS (AS DEFINED BELOW) OF SUCH QUALIFIED FINANCING TO THE
EXTENT SUCH NET PROCEEDS CONSTITUTE ALL OR PART OF THE INITIAL NET PROCEEDS (AS
DEFINED BELOW).

 

(B)                                 WITHIN ONE (1) BUSINESS DAY AFTER THE
CONSUMMATION OF ANY QUALIFIED FINANCING, THE BORROWER SHALL PREPAY IN CASH ON A
PRO RATA BASIS BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS THE OUTSTANDING
OBLIGATIONS UNDER THE SERIES B-1 NOTE IN AN AMOUNT EQUAL TO 40% OF THE NET
PROCEEDS OF SUCH QUALIFIED FINANCING TO THE EXTENT SUCH NET PROCEEDS CONSTITUTE
ALL OR PART OF THE SUBSEQUENT NET PROCEEDS (AS DEFINED BELOW).

 

(C)                                  WITHIN ONE (1) BUSINESS DAY AFTER THE
CONSUMMATION OF ANY SALE, DISTRIBUTION, ASSIGNMENT, LEASE, TRANSFER OR OTHER
DISPOSITION IN VIOLATION OF SECTION 7(D), THE BORROWER SHALL PREPAY ON A PRO
RATA BASIS BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS THE OUTSTANDING
OBLIGATIONS UNDER THE SERIES B-1 NOTE IN AN AMOUNT EQUAL TO THE NET PROCEEDS OF
SUCH SALE, DISTRIBUTION, ASSIGNMENT, LEASE, TRANSFER OR OTHER DISPOSITION

 

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(D)                                 WITHIN ONE (1) BUSINESS DAY AFTER A CHANGE
OF CONTROL (AS DEFINED BELOW) OF BOOKHAM, INC., THE BORROWER SHALL PREPAY THE
SERIES B-1 NOTE IN FULL AT A PRICE IN CASH EQUAL TO 100% OF THE OUTSTANDING
PRINCIPAL AMOUNT, PLUS ACCRUED AND UNPAID INTEREST TO SUCH PREPAYMENT DATE.

 

SECTION 5.                                            REPLACEMENT OF NOTE.

 

At the request of the Holder upon receipt by the Borrower of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this Note
and, in case of loss, theft or destruction, of indemnity reasonably satisfactory
to it, or, in the case of mutilation, upon surrender and cancellation of this
Note, and in all cases upon reimbursement to the Borrower of all reasonable
expenses incidental thereto, the Borrower and the Guarantors shall make and
deliver to the Holder a replacement Note of like tenor in lieu of this Note.

 

SECTION 6.                                            AMENDMENTS, MODIFICATIONS
AND WAIVERS.

 

No covenant, agreement or condition contained in this Note may be amended or
modified and no right hereunder may be waived (either generally or in a
particular instance and either retroactively or prospectively) other than by a
written instrument or agreement executed by the Holder and the Borrower.  Any
such amendment, modification or waiver shall be binding upon each present and
future holder of this Note and upon the Borrower.  Upon the request of the
Borrower, the Holder shall submit this Note to the Borrower so that this Note be
marked to indicate such amendment, modification or waiver, and any Note issued
thereafter shall bear a similar notation referring to any such amendment,
modification or continuing waiver.

 

SECTION 7.                                            EXISTENCE; CONDUCT OF
BUSINESS; REPORT ON CASH BALANCE AND FORECAST OF CASH FLOWS; SALES OF ASSETS;
CONFIDENTIALITY; TRADING IN SECURITIES.

 

(A)                                  EACH OF THE BORROWER AND THE GUARANTORS
SHALL DO OR CAUSE TO BE DONE ALL THINGS NECESSARY TO PRESERVE, RENEW AND KEEP IN
FULL FORCE AND EFFECT ITS LEGAL EXISTENCE AND THE RIGHTS, CONTRACTS, LICENSES,
PERMITS, PRIVILEGES, FRANCHISES, PATENTS, COPYRIGHTS, TRADEMARKS AND TRADE NAMES
THAT ARE, IN THE BORROWER’S REASONABLE JUDGMENT, MATERIAL TO THE CONDUCT OF ITS
BUSINESS.

 

(B)                                 PROVIDED THAT FROM TIME TO TIME THE HOLDER
MAY INSTRUCT THE BORROWER TO DISCONTINUE THE DELIVERY OF REPORTS PURSUANT TO
THIS SECTION 7(B), BOOKHAM, INC. SHALL DELIVER THE FOLLOWING REPORTS TO THE
HOLDER VIA EMAIL TO PAOLINI@NORTELNETWORKS.COM AND VIA FACSIMILE AT 905-863-8261
(OR SUCH OTHER EMAIL ADDRESS OR FACSIMILE NUMBER AS THE HOLDER SHALL DESIGNATE
IN WRITING):

 

(I)                                     BY TUESDAY OF THE FOLLOWING CALENDAR
WEEK, FOR EACH CALENDAR WEEK ENDING AFTER THE DATE OF THIS NOTE, BOOKHAM, INC.
SHALL PROVIDE THE HOLDER WITH A REPORT, ON A CONSOLIDATED BASIS, OF THE AMOUNT
OF BANK CASH (AS DEFINED BELOW), AS OF THE END OF THE DAY ON FRIDAY OF SUCH
CALENDAR WEEK.

 

(II)                                  BY THE 10TH DAY OF EACH CALENDAR MONTH
ENDING AFTER THE DATE OF THIS NOTE, BOOKHAM, INC. SHALL PROVIDE THE HOLDER WITH
A REPORT STATING THE CASH BALANCE (AS DEFINED BELOW) OF BOOKHAM, INC. AND ITS
SUBSIDIARIES, ON A CONSOLIDATED BASIS, AS OF THE END OF

 

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THE PRIOR CALENDAR MONTH (OR THE NEAREST BUSINESS DAY THEREAFTER IF THE END OF
THE CALENDAR MONTH IS NOT A BUSINESS DAY).

 

(III)                               BY THE 25TH DAY OF EACH CALENDAR MONTH
ENDING AFTER THE DATE OF THIS NOTE, BOOKHAM, INC. SHALL PROVIDE THE HOLDER WITH
A REPORT STATING THE CASH BALANCE OF THE BORROWER AND ITS SUBSIDIARIES, ON A
CONSOLIDATED BASIS, AS OF THE 15TH DAY OF THE THEN CURRENT CALENDAR MONTH OR, IF
THE 15TH DAY IS NOT A FRIDAY, THE NEAREST FRIDAY TO THE 15TH DAY.

 

(C)                                  WITHIN 15 BUSINESS DAYS OF THE END OF EACH
CALENDAR MONTH ENDING AFTER THE DATE OF THIS NOTE, BOOKHAM, INC. SHALL PROVIDE
THE HOLDER WITH (I) A STATEMENT OF OPERATIONS, BALANCE SHEET AND STATEMENT OF
CASHFLOWS PREPARED IN ACCORDANCE WITH BOOKHAM, INC.’S INTERNAL FORMAT FOR
BOOKHAM, INC. AND ITS SUBSIDIARIES, ON A CONSOLIDATED BASIS, FOR THE PREVIOUS
CALENDAR MONTH AND (II) A FINANCIAL FORECAST OF BOOKHAM, INC. AND ITS
SUBSIDIARIES, ON A CONSOLIDATED BASIS, FOR THE CURRENT QUARTER AND FOR THE FOUR
SUBSEQUENT QUARTERS, CONSISTING OF A STATEMENT OF OPERATIONS, BALANCE SHEET AND
STATEMENT OF CASHFLOWS PREPARED IN ACCORDANCE WITH BOOKHAM, INC.’S INTERNAL
FORMAT, AS WELL AS QUALITATIVE ANALYSIS OF SUCH FORECASTS AND ANY CHANGES FROM
PRIOR FORECASTS PROVIDED TO THE HOLDER IN ACCORDANCE WITH THIS SECTION 7(C);
PROVIDED, HOWEVER, THAT FROM TIME TO TIME THE HOLDER MAY INSTRUCT THE BORROWER
TO DISCONTINUE THE DELIVERY OF REPORTS PURSUANT TO THIS SECTION 7(C).

 

(D)                                 NEITHER THE BORROWER NOR ANY GUARANTOR SHALL
DISTRIBUTE, SELL, ASSIGN, TRANSFER OR OTHERWISE DISPOSE OF ANY COLLATERAL
WITHOUT THE PRIOR WRITTEN CONSENT OF THE HOLDER WHILE THE GUARANTEED OBLIGATIONS
ARE OUTSTANDING, EXCEPT FOR THE DISPOSITION OF EQUIPMENT HAVING A FAIR MARKET
VALUE NOT TO EXCEED $5,000,000 IN THE AGGREGATE.

 

(E)                                  THE HOLDER AND ITS REPRESENTATIVES SHALL
HOLD IN CONFIDENCE, AND SHALL NOT DISCLOSE TO ANY PERSON OUTSIDE ITS
ORGANIZATION, ANY OF THE INFORMATION PROVIDED BY BOOKHAM, INC. PURSUANT TO
SECTION 7(B) OR SECTION 7(C) WITHOUT THE PRIOR WRITTEN CONSENT OF BOOKHAM,
INC..  THE HOLDER SHALL DISCLOSE SUCH INFORMATION ONLY TO PERSONS WITHIN ITS
ORGANIZATION WHO HAVE A NEED TO KNOW SUCH INFORMATION IN THE COURSE OF THE
PERFORMANCE OF THEIR DUTIES.  THE HOLDER WILL PROMPTLY REPORT TO BOOKHAM, INC.
ANY ACTUAL VIOLATION OF THE TERMS OF THIS SECTION 7(E) AND WILL TAKE ALL
REASONABLE FURTHER STEPS REQUESTED BY BOOKHAM, INC. TO PREVENT, CONTROL OR
REMEDY ANY SUCH VIOLATION.  THE OBLIGATIONS OF THE HOLDER IN THIS SECTION 7(E)
SHALL NOT APPLY, AND THE HOLDER SHALL HAVE NO FURTHER OBLIGATIONS, WITH RESPECT
TO (I) ANY INFORMATION THAT IS KNOWN TO THE HOLDER PRIOR TO THE DATE OF
DISCLOSURE OF SUCH INFORMATION PURSUANT TO SECTIONS 7(B) OR 7(C) HEREOF OR IS
PUBLICLY AVAILABLE WHEN PROVIDED OR THAT THEREAFTER BECOMES PUBLICLY AVAILABLE
OTHER THAN THROUGH A BREACH BY THE HOLDER OF THIS SECTION 7(E), OR (II) ANY
INFORMATION THAT THE HOLDER OR ITS REPRESENTATIVES ARE REQUIRED TO DISCLOSE TO
OR BY A COURT, GOVERNMENTAL OR REGULATORY AGENCY, STOCK EXCHANGE OR SIMILAR
BODY, OR AS OTHERWISE REQUIRED BY APPLICABLE LAW, PROVIDED THAT THE HOLDER
EXERCISES ITS REASONABLE EFFORTS TO PRESERVE THE CONFIDENTIALITY OF THE
INFORMATION, INCLUDING, WITHOUT LIMITATION, BY COOPERATING WITH BOOKHAM, INC. TO
OBTAIN AN APPROPRIATE PROTECTIVE ORDER OR OTHER RELIABLE ASSURANCE THAT
CONFIDENTIAL TREATMENT WILL BE ACCORDED THE INFORMATION BY THE PERSON OR ENTITY
RECEIVING SUCH INFORMATION.

 

(F)                                    THE HOLDER ACKNOWLEDGES THAT IT IS AWARE
APPLICABLE SECURITIES LAWS PROHIBIT ANY PERSON WHO IS AWARE OF MATERIAL,
NON-PUBLIC INFORMATION ABOUT A COMPANY OBTAINED DIRECTLY OR INDIRECTLY FROM THAT
COMPANY FROM PURCHASING OR SELLING SECURITIES OF SUCH COMPANY

 

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OR FROM COMMUNICATING SUCH INFORMATION TO ANY OTHER PERSON UNDER CIRCUMSTANCES
IN WHICH IT IS REASONABLY FORESEEABLE THAT SUCH PERSON IS LIKELY TO PURCHASE OR
SELL SUCH SECURITIES AND AGREES THAT IT WILL NOT DO SO WHILE IN POSSESSION OF
ANY MATERIAL NONPUBLIC INFORMATION ABOUT BOOKHAM, INC..

 

SECTION 8.                                            GUARANTEES.

 

(A)                                  EACH GUARANTOR HEREBY JOINTLY AND SEVERALLY
UNCONDITIONALLY GUARANTEES, AS A PRIMARY OBLIGOR AND NOT MERELY AS A SURETY, TO
THE HOLDER THE FULL AND PUNCTUAL PAYMENT WHEN DUE, WHETHER AT THE MATURITY DATE,
BY ACCELERATION, BY PREPAYMENT OR OTHERWISE, OF ALL OBLIGATIONS OF THE BORROWER
UNDER THIS NOTE, WHETHER FOR PAYMENT OF PRINCIPAL OR INTEREST (INCLUDING
INTEREST ACCRUING DURING THE PENDENCY OF ANY BANKRUPTCY, INSOLVENCY,
RECEIVERSHIP OR OTHER SIMILAR PROCEEDING, REGARDLESS OF WHETHER ALLOWED OR
ALLOWABLE IN SUCH PROCEEDING) IN RESPECT OF THE NOTE AND ALL OTHER MONETARY
OBLIGATIONS OF THE BORROWER UNDER THIS NOTE, WHETHER FOR FEES, EXPENSES,
INDEMNIFICATION OR OTHERWISE (ALL THE FOREGOING BEING HEREINAFTER COLLECTIVELY
CALLED THE “GUARANTEED OBLIGATIONS”).  EACH GUARANTOR FURTHER AGREES THAT THE
GUARANTEED OBLIGATIONS MAY BE EXTENDED OR RENEWED, IN WHOLE OR IN PART, PURSUANT
TO THE TERMS OF SECTION 6, WITHOUT NOTICE TO OR FURTHER ASSENT FROM EACH SUCH
GUARANTOR, AND THAT EACH SUCH GUARANTOR SHALL REMAIN BOUND UNDER THIS SECTION 8
NOTWITHSTANDING ANY EXTENSION OR RENEWAL OF ANY GUARANTEED OBLIGATION.

 

(B)                                 EACH GUARANTOR WAIVES PRESENTATION TO,
DEMAND OF PAYMENT FROM AND PROTEST TO THE BORROWER OF ANY OF THE GUARANTEED
OBLIGATIONS AND ALSO WAIVES NOTICE OF ACCEPTANCE OF ITS GUARANTEE AND NOTICE OF
PROTEST FOR NONPAYMENT.  EACH GUARANTOR WAIVES NOTICE OF ANY DEFAULT UNDER THIS
NOTE.  THE OBLIGATIONS OF EACH GUARANTOR HEREUNDER SHALL NOT BE AFFECTED BY (I)
THE FAILURE OF THE HOLDER TO ASSERT ANY CLAIM OR DEMAND OR TO ENFORCE ANY RIGHT
OR REMEDY AGAINST THE BORROWER OR ANY OTHER PERSON (AS DEFINED BELOW) UNDER THIS
NOTE OR ANY OTHER AGREEMENT OR OTHERWISE; (II) ANY EXTENSION OF THE REPAYMENT
TERMS OF THE GUARANTEED OBLIGATIONS; (III) ANY RESCISSION, WAIVER, AMENDMENT OR
MODIFICATION OF ANY OF THE TERMS OR PROVISIONS OF THIS NOTE OR ANY OTHER
AGREEMENT; (IV) THE FAILURE TO PERFECT ANY SECURITY INTEREST IN, OR THE RELEASE
OF, ANY SECURITY HELD BY THE HOLDER FOR THE GUARANTEED OBLIGATIONS OR ANY OF
THEM; OR (V) THE FAILURE OF THE HOLDER TO EXERCISE ANY RIGHT OR REMEDY AGAINST
ANY OTHER GUARANTOR.  IN THE EVENT THAT THERE IS A CHANGE IN CONTROL WITH
RESPECT TO ANY GUARANTOR, ALL OBLIGATIONS OF SUCH GUARANTOR HEREUNDER SHALL BE
RELIEVED IN FULL AND SUCH GUARANTOR SHALL CEASE TO BE SUBJECT TO ANY OBLIGATION
HEREUNDER OR TO BE DEEMED A “GUARANTOR” UPON THE EFFECTIVENESS OF SUCH CHANGE IN
CONTROL.

 

(C)                                  EACH GUARANTOR HEREBY WAIVES ANY RIGHT TO
WHICH IT MAY BE ENTITLED TO HAVE ITS OBLIGATIONS HEREUNDER DIVIDED AMONG THE
GUARANTORS, SUCH THAT SUCH GUARANTOR’S OBLIGATIONS WOULD BE LESS THAN THE FULL
AMOUNT CLAIMED.  EACH GUARANTOR HEREBY WAIVES ANY RIGHT TO WHICH IT MAY BE
ENTITLED TO HAVE THE ASSETS OF THE BORROWER FIRST BE USED AND DEPLETED AS
PAYMENT OF THE BORROWER’S OR SUCH GUARANTOR’S OBLIGATIONS HEREUNDER PRIOR TO ANY
AMOUNTS BEING CLAIMED FROM OR PAID BY SUCH GUARANTOR HEREUNDER.  EACH GUARANTOR
HEREBY WAIVES ANY RIGHT TO WHICH IT MAY BE ENTITLED TO REQUIRE THAT THE BORROWER
BE SUED PRIOR TO AN ACTION BEING INITIATED AGAINST SUCH GUARANTOR.

 

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(D)                                 EACH GUARANTOR FURTHER AGREES THAT ITS
GUARANTEE HEREIN CONSTITUTES A GUARANTEE OF PAYMENT WHEN DUE (AND NOT A
GUARANTEE OF COLLECTION) AND WAIVES ANY RIGHT TO REQUIRE THAT ANY RESORT BE HAD
BY THE HOLDER TO ANY SECURITY HELD FOR PAYMENT OF THE GUARANTEED OBLIGATIONS.

 

(E)                                  THE OBLIGATIONS OF EACH GUARANTOR HEREUNDER
SHALL NOT BE SUBJECT TO ANY REDUCTION, LIMITATION, IMPAIRMENT OR TERMINATION FOR
ANY REASON (OTHER THAN PAYMENT OF THE GUARANTEED OBLIGATIONS IN FULL), INCLUDING
ANY CLAIM OF WAIVER, RELEASE, SURRENDER, ALTERATION OR COMPROMISE OF ANY
GUARANTEED OBLIGATION, AND SHALL NOT BE SUBJECT TO ANY DEFENSE OF SETOFF,
COUNTERCLAIM, RECOUPMENT OR TERMINATION WHATSOEVER OR BY REASON OF THE
INVALIDITY, ILLEGALITY OR UNENFORCEABILITY OF THE GUARANTEED OBLIGATIONS OR
OTHERWISE.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE OBLIGATIONS OF
EACH GUARANTOR HEREIN SHALL NOT BE DISCHARGED OR IMPAIRED OR OTHERWISE AFFECTED
BY THE FAILURE OF THE HOLDER TO ASSERT ANY CLAIM OR DEMAND OR TO ENFORCE ANY
REMEDY UNDER THIS NOTE OR ANY OTHER AGREEMENT, BY ANY WAIVER OR MODIFICATION OF
ANY PROVISION THEREOF BY ANY DEFAULT, FAILURE OR DELAY, WILLFUL OR OTHERWISE, IN
THE PERFORMANCE OF THE GUARANTEED OBLIGATIONS, OR BY ANY OTHER ACT OR OMISSION
OR DELAY TO DO ANY OTHER ACT THAT MAY OR MIGHT IN ANY MANNER OR TO ANY EXTENT
VARY THE RISK OF ANY GUARANTOR OR THAT WOULD OTHERWISE OPERATE AS A DISCHARGE OF
ANY GUARANTOR AS A MATTER OF LAW OR EQUITY.

 

(F)                                    EACH GUARANTOR AGREES THAT ITS GUARANTEE
SHALL REMAIN IN FULL FORCE AND EFFECT UNTIL PAYMENT IN FULL OF ALL THE
GUARANTEED OBLIGATIONS.  EACH GUARANTOR FURTHER AGREES THAT ITS GUARANTEE HEREIN
SHALL CONTINUE TO BE EFFECTIVE OR BE REINSTATED, AS THE CASE MAY BE, IF AT ANY
TIME PAYMENT, OR ANY PART THEREOF, OF PRINCIPAL OF OR INTEREST ON ANY GUARANTEED
OBLIGATION IS RESCINDED OR MUST OTHERWISE BE RESTORED BY THE HOLDER UPON THE
BANKRUPTCY OR REORGANIZATION OF THE BORROWER OR OTHERWISE.

 

(G)                                 IN FURTHERANCE OF THE FOREGOING AND NOT IN
LIMITATION OF ANY OTHER RIGHT WHICH THE HOLDER HAS AT LAW OR IN EQUITY AGAINST
ANY GUARANTOR BY VIRTUE HEREOF, UPON THE FAILURE OF THE BORROWER TO PAY THE
GUARANTEED OBLIGATION WHEN AND AS THE SAME SHALL BECOME DUE, WHETHER AT
MATURITY, BY ACCELERATION, BY PREPAYMENT OR OTHERWISE, EACH GUARANTOR HEREBY
PROMISES TO AND SHALL, UPON RECEIPT OF WRITTEN DEMAND BY THE HOLDER, FORTHWITH
PAY, OR CAUSE TO BE PAID, IN CASH, TO THE HOLDER AN AMOUNT EQUAL TO THE SUM OF
(I) THE UNPAID AMOUNT OF SUCH GUARANTEED OBLIGATIONS AND (II) ACCRUED AND UNPAID
INTEREST ON SUCH GUARANTEED OBLIGATIONS THEN DUE AND OWING (BUT ONLY TO THE
EXTENT NOT PROHIBITED BY LAW).

 

(H)                                 EACH GUARANTOR AGREES THAT IT SHALL NOT BE
ENTITLED TO ANY RIGHT OF SUBROGATION IN RELATION TO THE HOLDER IN RESPECT OF ANY
GUARANTEED OBLIGATIONS GUARANTEED HEREBY UNTIL PAYMENT IN FULL OF ALL GUARANTEED
OBLIGATIONS.  EACH GUARANTOR FURTHER AGREES THAT, AS BETWEEN IT AND THE HOLDER,
(I) THE MATURITY OF THE GUARANTEED OBLIGATIONS GUARANTEED HEREBY MAY BE
ACCELERATED AS PROVIDED IN SECTION 9 FOR THE PURPOSES OF ANY GUARANTEE HEREIN,
NOTWITHSTANDING ANY STAY, INJUNCTION OR OTHER PROHIBITION PREVENTING SUCH
ACCELERATION IN RESPECT OF THE GUARANTEED OBLIGATIONS GUARANTEED HEREBY, AND
(II) IN THE EVENT OF ANY DECLARATION OF ACCELERATION OF SUCH GUARANTEED
OBLIGATIONS AS PROVIDED IN SECTION 10, SUCH GUARANTEED OBLIGATIONS (WHETHER OR
NOT DUE AND PAYABLE) SHALL FORTHWITH BECOME DUE AND PAYABLE BY SUCH GUARANTOR
FOR THE PURPOSES OF THIS SECTION 8.

 

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(I)                                     EACH GUARANTOR ALSO AGREES TO PAY ANY
AND ALL COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES AND EXPENSES)
INCURRED BY THE HOLDER IN ENFORCING ANY RIGHTS UNDER THIS SECTION 8.

 

(J)                                     BOOKHAM, INC. SHALL CAUSE EACH OF ITS
SUBSIDIARIES THAT (I) HAS NOT EXECUTED AND DELIVERED THIS NOTE “AS GUARANTOR”
AND (II) IS OR BECOMES A PRINCIPAL BORROWER SUBSIDIARY TO EXECUTE AND DELIVER
SUCH INSTRUMENTS AND DO SUCH ACTS AS MAY BE NECESSARY FOR SUCH PRINCIPAL
BORROWER SUBSIDIARY TO BECOME A GUARANTOR UNDER THIS SECTION 8.

 

(K)                                  UPON REQUEST OF THE HOLDER, EACH GUARANTOR
SHALL EXECUTE AND DELIVER SUCH FURTHER INSTRUMENTS AND DO SUCH FURTHER ACTS AS
MAY BE REASONABLY NECESSARY OR PROPER TO CARRY OUT MORE EFFECTIVELY THE PURPOSE
OF THIS NOTE.

 

(L)                                     IN THE CASE OF ANY PAYMENTS MADE BY A
GUARANTOR PURSUANT TO THIS SECTION 8, THE FOLLOWING SHALL APPLY:

 

(I)                                     ALL SUCH PAYMENTS SHALL BE MADE TO THE
HOLDER WITHOUT WITHHOLDING OR DEDUCTION FOR, OR ON ACCOUNT OF, TAXES (OTHER THAN
THOSE WITHHOLDINGS OR DEDUCTIONS TO WHICH PAYMENTS BY THE BORROWER ARE
SUBJECT).  IN THE EVENT ANY WITHHOLDING OR DEDUCTION FOR TAXES IS REQUIRED BY
LAW OR BY THE INTERPRETATION OR ADMINISTRATION THEREOF BY THE RELEVANT
GOVERNMENTAL AUTHORITY, SUCH GUARANTOR SHALL PAY SUCH ADDITIONAL AMOUNTS AS MAY
BE NECESSARY IN ORDER THAT THE NET AMOUNTS RECEIVED BY THE HOLDER AFTER SUCH
WITHHOLDING OR DEDUCTION MAY NOT BE LESS THAN THE NET AMOUNT THAT WOULD HAVE
BEEN RECEIVED BY THE HOLDER FROM THE BORROWER.

 

(II)                                  IF THE HOLDER IS ENTITLED TO CLAIM AN
EXEMPTION FROM, OR A REDUCTION OF, ANY WITHHOLDING OR DEDUCTION FOR OR ON
ACCOUNT OF TAXES UNDER ANY APPLICABLE LAW OR TREATY, THE HOLDER HEREBY COVENANTS
AND AGREES THAT IT WILL TAKE ALL REASONABLY NECESSARY STEPS TO SECURE THE
BENEFIT OF SUCH EXEMPTION OR REDUCTION.  FURTHER, IF THE HOLDER IS ENTITLED TO
CLAIM A REFUND OF ANY WITHHOLDING OR DEDUCTION OF OR ON ACCOUNT OF TAXES UNDER
ANY APPLICABLE LAW OR TREATY, THE HOLDER HEREBY COVENANTS AND AGREES THAT IT
WILL TAKE ALL REASONABLY NECESSARY STEPS TO SECURE SUCH REFUND, AND (TO THE
EXTENT THAT SUCH GUARANTOR HAS MADE A PAYMENT OF AN ADDITIONAL AMOUNT PURSUANT
TO THIS SECTION 8(L)) ACCOUNT FOR SUCH REFUND TO SUCH GUARANTOR.

 

(III)                               IF (AND FOR SO LONG AS) THE HOLDER FAILS TO
SATISFY ITS OBLIGATIONS UNDER CLAUSE (II) OF THIS SECTION 8(L), SUCH GUARANTOR
SHALL NOT BE REQUIRED TO MAKE ANY PAYMENTS UNDER THIS SECTION 8 TO THE EXTENT
THAT SUCH PAYMENTS COULD HAVE BEEN AVOIDED IF THE HOLDER HAD COMPLIED WITH ITS
OBLIGATIONS UNDER CLAUSE (II) OF THIS SECTION 8(L).  FOR EXAMPLE (AND SOLELY FOR
PURPOSES OF ILLUSTRATION), IF PAYMENTS BY SUCH GUARANTOR ARE SUBJECT TO A
WITHHOLDING TAX OF 15%, BUT UNDER THE APPLICABLE TAX TREATY THE HOLDER IS
ENTITLED TO CLAIM A REDUCTION OF WITHHOLDING TAX FROM 15% TO 10%, THEN, IF THE
HOLDER FAILS TO COMPLY WITH ITS OBLIGATIONS UNDER CLAUSE (II) OF THIS
SECTION 8(L), SUCH GUARANTOR SHALL BE OBLIGATED TO MAKE PAYMENTS UNDER CLAUSE
(I) OF THIS SECTION 8(L) ON THE REDUCED 10% WITHHOLDING TAX AND SHALL HAVE NO
OBLIGATION UNDER CLAUSE (I) OF THIS SECTION 8(L) WITH RESPECT TO THE 5%
WITHHOLDING TAX THAT COULD HAVE BEEN AVOIDED IF THE HOLDER HAD COMPLIED WITH ITS
OBLIGATIONS UNDER CLAUSE (II) OF THIS SECTION 8(L).

 

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SECTION 9.                                            EVENTS OF DEFAULT.

 

(A)                                  AN “EVENT OF DEFAULT” OCCURS IF:

 

(I)                                     ANY DEFAULT SHALL BE MADE IN THE PAYMENT
OF THE PRINCIPAL OF OR CASH INTEREST ON THE SERIES B-1 NOTE, WHEN AND AS THE
SAME SHALL BECOME DUE AND PAYABLE, WHETHER AT THE DUE DATE THEREOF, UPON
ACCELERATION THEREOF OR OTHERWISE;

 

(II)                                  ANY EVENT OR CONDITION OCCURS THAT RESULTS
IN ANY MATERIAL INDEBTEDNESS BECOMING DUE PRIOR TO ITS SCHEDULED MATURITY;
PROVIDED THAT THIS CLAUSE (II) SHALL NOT APPLY IN THE CASE OF (A) VOLUNTARY OR
MANDATORY PREPAYMENTS UNDER THE SERIES A-2 NOTE OR THE SERIES B-1 NOTE THAT ARE
PAID IN FULL WHEN DUE OR (B) ANY SECURED INDEBTEDNESS THAT BECOMES DUE AS A
RESULT OF THE VOLUNTARY SALE OR TRANSFER OF THE PROPERTY OR ASSETS SECURING SUCH
INDEBTEDNESS;

 

(III)                               AN EVENT OF DEFAULT (AS DEFINED IN THE
SERIES A-2 NOTE) OCCURS WITH RESPECT TO THE SERIES A-2 NOTE;

 

(IV)                              BOOKHAM, INC. OR ANY OF ITS SUBSIDIARIES
DEFAULTS IN ANY MATERIAL RESPECT IN ITS OBLIGATIONS HEREUNDER (OTHER THAN ANY
OBLIGATIONS FOR THE PAYMENT OF PRINCIPAL OR INTEREST) OR IN ANY OF THE SECURITY
AGREEMENTS, THE RESTRUCTURING AGREEMENT OR THE AGREEMENTS DELIVERED PURSUANT
THERETO; PROVIDED THAT SUCH DEFAULT SHALL NOT HAVE BEEN CURED WITHIN TWENTY (20)
BUSINESS DAYS AFTER WRITTEN NOTICE OF SUCH DEFAULT;

 

(V)                                 BOOKHAM, INC. OR THE BORROWER BECOMES
SUBJECT TO A BANKRUPTCY EVENT;

 

(VI)                              (A) EXCEPT AS PERMITTED BY THIS NOTE, ANY OF
THE SECURITY AGREEMENTS OR OTHER DOCUMENTS DELIVERED PURSUANT THERETO OR
PURSUANT TO ANY OTHER DOCUMENTS DELIVERED OR TO BE DELIVERED, AS APPLICABLE,
PURSUANT TO THE RESTRUCTURING AGREEMENT SHALL BE HELD IN ANY JUDICIAL PROCEEDING
TO BE UNENFORCEABLE OR INVALID, OR SHALL CEASE FOR ANY REASON TO BE IN FULL
FORCE AND EFFECT AND SUCH DEFAULT CONTINUES FOR TWENTY (20) BUSINESS DAYS AFTER
WRITTEN NOTICE, OR (B) THE BORROWER OR ANY GUARANTOR, OR ANYONE ACTING ON BEHALF
OF THE BORROWER OR ANY GUARANTOR, SHALL DENY OR DISAFFIRM ITS OBLIGATIONS UNDER
ANY OF THE SECURITY AGREEMENTS OR OTHER DOCUMENTS DELIVERED PURSUANT THERETO OR
PURSUANT TO ANY OTHER DOCUMENTS DELIVERED OR TO BE DELIVERED, AS APPLICABLE,
PURSUANT TO THE RESTRUCTURING AGREEMENT;

 

(VII)                           BOOKHAM, INC. AND ITS SUBSIDIARIES, ON A
CONSOLIDATED BASIS, FAIL TO MAINTAIN A CASH BALANCE OF AT LEAST U.S.$25,000,000,
AS REPORTED PURSUANT TO SECTION 7(B)(II) OR SECTION 7(B)(III), AND BOOKHAM, INC.
RECEIVES WRITTEN NOTICE FROM THE HOLDER OF SUCH FAILURE;

 

(VIII)                        BOOKHAM, INC. FAILS TO PROVIDE THE INFORMATION
REQUIRED BY SECTION 7(B)(II) OR SECTION 7(B)(III) WITHIN THE TIME PERIODS SET
FORTH IN SUCH SECTIONS; PROVIDED THAT BOOKHAM, INC. MAY CURE SUCH DEFAULT BY
PROVIDING THE INFORMATION REQUIRED BY SECTION 7(B)(II) OR SECTION 7(B)(III), AS
APPLICABLE, WITHIN 3 CALENDAR DAYS OF SUCH DEFAULT IF THE MOST RECENT REPORT
DELIVERED BY BOOKHAM, INC. PURSUANT TO SECTION 7(B)(I) BOTH (A) WAS DELIVERED
WITHIN THE TIME PERIOD SET FORTH IN SUCH SECTION AND (B) REPORTED AN AMOUNT OF
BANK CASH IN EXCESS OF U.S.$35,000,000;

 

(IX)                                BOOKHAM, INC. FAILS TO PROVIDE THE
INFORMATION REQUIRED BY SECTION 7(C) WITHIN THE TIME PERIOD SET FORTH IN SUCH
SECTION; PROVIDED THAT BOOKHAM, INC. MAY CURE SUCH

 

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DEFAULT BY PROVIDING THE INFORMATION REQUIRED BY SECTION 7(C) WITHIN 10 CALENDAR
DAYS OF SUCH DEFAULT.

 

(B)                                 IF AN EVENT OF DEFAULT OCCURS, THEN THE
HOLDER OF THIS NOTE MAY, BY WRITTEN NOTICE TO THE BORROWER, DECLARE THIS NOTE TO
BE FORTHWITH DUE AND PAYABLE, WHEREUPON THIS NOTE SHALL BECOME FORTHWITH DUE AND
PAYABLE, BOTH AS TO PRINCIPAL AND INTEREST, WITHOUT PRESENTMENT, DEMAND,
PROTEST, OR OTHER NOTICE OF ANY KIND, ALL OF WHICH ARE HEREBY EXPRESSLY WAIVED.

 

SECTION 10.                                      NOTICES OF MATERIAL EVENTS.

 

(A)                                  THE BORROWER SHALL FURNISH THE HOLDER
WRITTEN NOTICE OF THE OCCURRENCE OF ANY EVENT OF DEFAULT OR ANY DEVELOPMENT OR
CIRCUMSTANCE THAT HAS, OR COULD REASONABLY BE EXPECTED TO HAVE, A BORROWER
MATERIAL ADVERSE EFFECT (AS DEFINED BELOW) PROMPTLY UPON THE BORROWER’S
OBTAINING KNOWLEDGE THEREOF.

 

(B)                                 EACH NOTICE DELIVERED UNDER THIS SECTION 10
SHALL BE ACCOMPANIED BY A STATEMENT OF AN EXECUTIVE OFFICER OF THE BORROWER
SETTING FORTH THE DETAILS OF THE EVENT, DEVELOPMENT OR CIRCUMSTANCE REQUIRING
SUCH NOTICE AND ANY ACTION TAKEN OR PROPOSED TO BE TAKEN WITH RESPECT THERETO.

 

SECTION 11.                                      EXTENSION OF MATURITY.

 

Should the principal of and interest on this Note become due and payable on
other than a Business Day, the maturity hereof shall be extended to the next
succeeding Business Day, and interest shall be payable at the rate per annum
herein specified during such extension.

 

SECTION 12.                                      SUCCESSORS AND ASSIGNS.

 

The provisions of this Note shall be binding upon and inure to the benefit of
the Borrower and the Guarantors and their respective successors and permitted
assigns and the Holder of this Note and its successors and assigns.  None of the
obligations of the Borrower or any Guarantor hereunder may be assigned without
the prior written consent of the Holder.  Subject to applicable federal and
state securities Laws, this Note is transferable and assignable by the Holder
(or its successor) only to a Subsidiary of the Holder (or back to the Holder). 
Any transfer of this Note may be made only upon surrender of the original Note
for registration of transfer, duly endorsed, or accompanied by a duly executed
written instrument of transfer.

 

SECTION 13.                                      NO WAIVER.

 

Neither a failure nor a delay on the part of the Holder in exercising any right,
power or privilege under this Note shall operate as a waiver thereof, nor shall
a single or partial exercise thereof preclude any other or further exercise of
any right, power or privilege.  The rights, remedies and benefits of the Holder
herein expressly specified are cumulative and not exclusive of any other rights
remedies or benefits which either may have under this Note at law, in equity, by
statute or otherwise.

 

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SECTION 14.                                      GOVERNING LAW.

 

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.  This Note was negotiated and executed in the State and
County of New York.  All actions, suits and proceedings arising out of relating
to this Note shall be heard and determined exclusively in a New York state or
federal court sitting in the County of New York, and the Holder, the Borrower
and the Guarantors hereby irrevocably submit to the exclusive jurisdiction of
such courts in any such action or proceeding and irrevocably agree to the laying
of venue in such courts and waive the defense of an inconvenient forum to the
maintenance of any such action, suit or proceeding.

 

SECTION 15.                                      TITLES AND SUBTITLES.

 

The titles and subtitles used in this Note are used for convenience only and are
not to be considered in construing or interpreting this Note.

 

SECTION 16.                                      DEFINITIONS.  ALL ACCOUNTING
AND FINANCIAL TERMS NOT DEFINED HEREIN SHALL BE CONSTRUED IN ACCORDANCE WITH
U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, AS IN EFFECT FROM TIME TO TIME. 
IN ADDITION, AS USED IN THIS NOTE, UNLESS OTHERWISE SPECIFIED, THE FOLLOWING
TERMS HAVE THE MEANINGS SPECIFIED BELOW:

 

“Acquisition Agreement” means the Acquisition Agreement between Nortel Networks
Corporation and the Borrower dated as of October 7, 2002 (as amended through the
date hereof).

 

“Bank Cash” means cash held in any deposit account in the name of Bookham, Inc.
or any of its Subsidiaries.

 

“Bankruptcy Event” has the meaning set forth in the Acquisition Agreement.

 

“Borrower” has the meaning set forth in Section 1(a).

 

“Borrower Material Adverse Effect” means any long-term or short-term effect that
is or is reasonably likely to be materially adverse to (i) the business, results
of operations, assets, liabilities or condition (financial or otherwise) of the
Borrower and its Subsidiaries, taken as a whole, or (ii) the ability of the
Borrower and its Subsidiaries to perform their respective obligations under the
Security Documents and the Supply Agreement between the Borrower and Nortel
Networks Corporation dated as of the date hereof, but in each case shall not
include any effect arising out of or resulting from (A) a change in general
economic or financial conditions (provided that such changes do not affect the
Borrower and its Subsidiaries, taken as a whole, in a materially
disproportionate manner in comparison to other companies engaged in the same
industry) or (B) a change, condition or circumstance in the industry in which
the Borrower and its Subsidiaries operate (provided that such changes do not
affect the Borrower and its Subsidiaries, taken as a whole, in a materially
disproportionate manner in comparison to other companies engaged in the same
industry); provided, however, that (1) any decrease in the market price or
trading volume of the Borrower’s securities or any shareholder litigation
resulting therefrom shall not, in and of itself, constitute a Borrower Material
Adverse Effect and (2) the

 

10

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failure of the Borrower to achieve internal or external financial forecasts or
projections shall not, in and of itself, constitute a Borrower Material Adverse
Effect.

 

“Business Day” means any day that is not a Saturday, Sunday or other day on
which banks are required or authorized by law to be closed in New York, New
York; London, England or Toronto, Ontario, Canada.

 

“Cash Balance” of any party as of a reference date means the amount of Bank
Cash, marketable securities and other cash equivalents of such party as of the
reference date (which, for the avoidance of doubt, shall be less any bank checks
issued and not cleared as of such reference date).

 

“Change of Control” has the meaning set forth in the Acquisition Agreement.

 

“Collateral” means all of the collateral described in the Security Agreements
and the documents delivered pursuant thereto and pursuant to certain other
documents delivered or to be delivered, as applicable, pursuant to the
Restructuring Agreement.

 

“Control” or “Controlled” means, as to any Person, the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.

 

“Equity Interest” of any Person means any and all common stock, preferred stock
and any other class of capital stock of, and any partnership or limited
liability company interests in, such Person or any other similar interests in
such Person if such Person is not a corporation, partnership or limited
liability company and includes any interest that is convertible into or
exchangeable or exercisable for any Equity Interest and any other right to
acquire any Equity Interest.

 

“Event of Default” has the meaning set forth in Section 9(a).

 

“Guaranteed Obligations” has the meaning set forth in Section 8.

 

“Guarantors” means (i) subject to the last sentence of Section 8(b), those
Subsidiaries of Bookham, Inc. that have executed and delivered this Note on the
date hereof “as Guarantor” and (ii) such other Subsidiaries of Bookham, Inc.
that have guaranteed the Series B-1 Note pursuant to Section 8(j).

 

“Highest Lawful Rate” means the maximum non-usurious rate of interest, as in
effect from time to time, which may be charged, contracted for, reserved,
received or collected by the Holder in connection with this Note under
applicable law.

 

“Holder” means the Person named as the Lender or such Person’s permitted
transferee or assign.

 

“Indebtedness” means any obligation in respect of (i) borrowed money, (ii)
capitalized lease obligations, (iii) obligations under interest rate agreements
and currency

 

11

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agreements, (iv) guarantees of any obligation of any third Person, (v) letters
of credit and (vi) indemnities or performance bonds.

 

“Initial Net Proceeds” means the first $50,000,000 of the aggregate Net Proceeds
of all Qualified Financings consummated after the date hereof.

 

“Interest Payment Date” means each February 8, May 8, August 8 and November 8
beginning on February 8, 2003.

 

“Interest Rate” means 7.00% per annum; provided that such interest rate shall
increase by 0.25% on each Interest Payment Date, up to a maximum rate of 10.00%
per annum; provided further that anything herein to the contrary
notwithstanding, if during any period for which interest is computed hereunder,
the amount of interest computed on the basis provided for in this Note, together
with all fees, charges and other payments that are treated as interest under
applicable law, as provided for herein or in any other document executed in
connection herewith, would exceed the amount of such interest computed on the
basis of the Highest Lawful Rate, neither the Borrower nor any Guarantor shall
be obligated to pay, and the Holder shall not be entitled to charge, collect,
receive, reserve or take, interest in excess of the Highest Lawful Rate, and
during any such period the interest payable hereunder shall be computed on the
basis of the Highest Lawful Rate.

 

“Lender” has the meaning set forth in Section 1(a).

 

“Liens” means any mortgage, easement, tenancy, right-of-way, restriction, deed
or trust, pledge, hypothecation, security interest, encumbrance, claim, lien,
license, lease or charge of any kind.

 

“Material Indebtedness” means any Indebtedness of Bookham, Inc. or any of its
Subsidiaries having an outstanding principal amount of at least U.S.$5,000,000,
individually or in the aggregate, whether such Indebtedness now exists or shall
hereafter be created.

 

“Maturity Date” has the meaning set forth in Section 1(a).

 

“Net Proceeds” means, with respect to the sale, transfer or other disposition of
any asset, the issuance of any security or any financing, the aggregate amount
of cash proceeds (including any other consideration that is converted into cash)
therefrom, in each case net of any customary attorneys’ fees, accountants’ fees,
underwriters’ or placement agents’ fees, discounts or commissions and brokerage
and consultant fees actually incurred in connection, and contemporaneously,
therewith.

 

“Note” means this Note and any replacement Note executed and delivered by the
Borrower and the Guarantors pursuant to Section 5 hereof.

 

“Permitted Liens” has the meaning set forth in the Security Agreements.

 

“Person” means any natural person, general or limited partnership, corporation,
limited liability company, firm, association or other legal entity.

 

12

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“Principal Borrower Subsidiary” means any Subsidiary of Bookham, Inc. the assets
of which have an aggregate fair market value equal to or greater than
$1,000,000.

 

“Qualified Financing” means (i) any issuance by Bookham, Inc. or any of its
Subsidiaries of any Equity Interests and any Indebtedness incurred by Bookham,
Inc. or any of its Subsidiaries that is convertible into or exchangeable or
exercisable for any Equity Interests (other than the issuance of shares of
common stock of Bookham, Inc. or options with respect thereto to employees,
directors or officers of Bookham, Inc. or any Subsidiary of Bookham, Inc. in the
ordinary course consistent with past practice) and (ii) any “sale-leaseback” or
similar transaction involving the Collateral located in Shenzhen, China.

 

“Representatives” means, with respect to a Person, such Person’s directors,
officers, employees, agents or advisors (including, without limitation,
attorneys, accountants, consultants, bankers, financial advisors and members of
advisory boards).

 

“Restructuring Agreement” means the Restructuring Agreement among Bookham
Technology plc, Bookham, Inc., the subsidiaries of Bookham, Inc. whose names
appear on the signature pages thereto, Nortel Networks UK Limited and Nortel
Networks Corporation, dated as of December 2, 2004.

 

“Security Agreements” means the Security Agreements (as defined in the
Acquisition Agreement), each as amended and restated as of the date hereof.

 

“Series A-2 Note” means the Amended and Restated Series A-2 Senior Secured Note
due November 8, 2007 in an original principal amount of U.S.$20,000,000 issued
by Bookham, Inc.

 

“Series B-1 Note” means the Amended and Restated Series B-1 Senior Secured Note
due November 8, 2006 in an original aggregate principal amount of
U.S.$30,000,000 issued by Bookham Technology plc.

 

“Subsequent Net Proceeds” means the excess over $50,000,000 of Net Proceeds of
all Qualified Financings consummated after the date hereof.

 

“Subsidiary” of any Person means any corporation, partnership, joint venture,
limited liability company, trust or estate of which (or in which) more than 50%
of (a) the issued and outstanding capital stock (or other Equity Interest)
having ordinary voting power to elect a majority of the board of directors (or
similar governing body) of such entity or (b) the interest in the capital or
profits of such entity is at the time directly or indirectly owned or Controlled
by such Person, by such Person and one or more of its other Subsidiaries or by
one or more of such Person’s other Subsidiaries.

 

“Taxes” has the meaning set forth in the Acquisition Agreement.

 

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IN WITNESS WHEREOF, each of the Borrower and the Guarantors has duly executed
and delivered this Note as of the date first written above.

 

 

 

BOOKHAM TECHNOLOGY PLC, as Borrower

 

 

 

 

 

By:

/s/ Stephen Abely

 

 

   Name: Steve Abely

 

   Title: Director

 

 

 

 

 

NEW FOCUS, INC., as Guarantor

 

 

 

 

 

By:

/s/ Stephen Abely

 

 

   Name: Steve Abely

 

   Title: President

 

 

 

 

 

ONETTA, INC., as Guarantor

 

 

 

 

 

By:

/s/ Philip Davis

 

 

   Name: Philip Davis

 

   Title: President

 

 

 

 

 

BOOKHAM (US) INC., as Guarantor

 

 

 

 

 

By:

/s/ Stephen Abely

 

 

   Name: Steve Abely

 

   Title: President

 

 

 

 

 

BOOKHAM (CANADA) INC., as Guarantor

 

 

 

 

 

By:

/s/ Philip Davis

 

 

   Name: Philip Davis

 

   Title: Treasurer

 

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BOOKHAM (SWITZERLAND) AG, as Guarantor

 

 

 

 

 

By:

/s/ Stephen Abely

 

 

   Name: Steve Abely

 

   Title: President and Director

 

 

 

 

 

IGNIS OPTICS, INC., as Guarantor

 

 

 

 

 

By:

/s/ Stephen Abely

 

 

   Name: Steve Abely

 

   Title: President

 

 

 

 

 

BOOKHAM, INC., as Guarantor

 

 

 

 

 

By:

/s/ Stephen Abely

 

 

   Name: Steve Abely

 

   Title: CFO

 

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