Document:

Exhibit 10.1

 

RESTRUCTURING
AGREEMENT

 

This Restructuring Agreement (the “Agreement”)
is entered into as of December 2, 2004, among Bookham Technology plc, a
public limited company incorporated under the laws of England and Wales (“Bookham
plc”), Bookham, Inc., a Delaware corporation (“Bookham, Inc.” and,
together with Bookham plc and its other subsidiaries whose names appear on the
signature pages hereto, the “Bookham Parties”), Nortel Networks UK
Limited (“NNUKL”) and Nortel Networks Corporation (“Nortel Networks”).

 

WHEREAS, Bookham plc has issued a Series B
Senior Secured Note dated November 8, 2002 in aggregate principal amount
of $30,000,000.00 (the “Series B Note”), which is currently held by
NNUKL;

 

WHEREAS, Bookham, Inc. issued to NNUKL a
Series A-1 Senior Unsecured Convertible Note dated September 10, 2004 in
the principal amount of $20,000,000.00 (the “Series A-1 Note”);

 

WHEREAS, Bookham plc and NNUKL desire to
amend and restate the Series B Note in the form of Exhibit A hereto (the
“Series B-1 Note”);

 

WHEREAS, Bookham, Inc. and NNUKL desire to
amend and restate the Series A-1 Note in the form of Exhibit B hereto
(the “Series A-2 Note”);

 

WHEREAS, the parties desire to amend certain
security agreements and enter into certain new agreements to provide that the
collateral pledged to secure the obligations under the Series B Note shall also
be pledged to secure the obligations under the Series B-1 Note and the Series
A-2 Note and that Bookham, Inc. and its subsidiaries pledge certain additional
assets to secure the various obligations of Bookham, Inc., Bookham plc and the
guarantors under each of the Series A-2 Note and the Series B-1 Note; and

 

WHEREAS, the parties desire that Bookham plc
pledge certain real property located at Caswell, U.K. to secure the obligations
under the Series A-2 Note and Series B-1 Note;

 

NOW THEREFORE, in consideration of the mutual
premises hereinafter set forth and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto hereby agree as
follows:

 

1.                                       Agreements.                            Contemporaneously
with the execution and delivery of this Agreement:

 

(a)                                  Bookham
plc shall deliver to NNUKL the Series B-1 Note which amends and restates the
Series B Note;

 

1

 

(b)                                 Bookham,
Inc. shall deliver to NNUKL the Series A-2 Note which amends and restates the
Series A-1 Note;

 

(c)                                  Each
of the Bookham Parties and Nortel Networks shall execute and deliver an
agreement that amends and restates the U.S. Security Agreement dated as of November 8,
2002 between Bookham plc, certain subsidiaries of Bookham plc and Nortel
Networks in the form attached hereto as Exhibit C (as amended, the “U.S.
Security Agreement”);

 

(d)                                 Bookham
plc and NNUKL shall execute and deliver a Debenture relating to the real
property at Caswell, U.K., in the form attached hereto as Exhibit D;

 

(e)                                  Bookham
plc, NNUKL and Nortel Networks shall execute an amendment to the Debenture
relating to real property at Paignton, U.K. dated November 8, 2002 between
Bookham plc and Nortel Networks in the form attached hereto as Exhibit E;

 

(f)                                    Bookham,
Inc. shall cause Bookham (Canada) Inc. to execute and deliver and Nortel
Networks shall execute and deliver, and shall cause NNUKL to execute and
deliver, an agreement that amends and restates the Security Agreement dated as
of November 8, 2002 between Bookham (Canada) Inc. and Nortel Networks, in
the form attached hereto as Exhibit F.

 

2.                                       Post-Signing
Actions.  (a) Within 14 calendar days
of the execution and delivery of this Agreement, and to the extent permitted by
applicable law, Bookham, Inc. shall (i) cause all of the outstanding capital
stock or other equity interests of Bookham International Ltd., a company
organized in the Cayman Islands that is a wholly-owned subsidiary of Bookham,
Inc., to be pledged, in favor of NNUKL, on a first priority basis (to the
extent such priority is contemplated by applicable law) as security for the
Obligations (as defined in the U.S. Security Agreement) of Bookham, Inc. and
its subsidiaries under the Series B-1 Note and the Series A-2 Note and the
Security Agreements, pursuant to an agreement reasonably acceptable to Nortel
Networks, (ii) cause such pledges to be perfected under the laws of the Cayman
Islands and (iii) deliver to NNUKL an opinion from Maples and Calder, Cayman
counsel to Bookham, Inc., addressed to NNUKL in substantially the form of Exhibit
G.

 

(b) As soon as reasonably practicable after
the execution of this agreement, and to the extent permitted by applicable law,
Bookham, Inc. shall cause the property, plant and equipment (including real
property) located in China that is owned by subsidiaries of Bookham, Inc.
(including Bookham Technology (Shenzhen) (FFTZ) Co. Ltd. and New Focus Pacific
(SHIP) Co. Ltd.) to be mortgaged or pledged on a first-priority basis (to the
extent such priority is contemplated by applicable law) for the benefit of
NNUKL as security for the Obligations of Bookham, Inc. and its subsidiaries
under the Series B-1 Note and the Series A-2 Note and the Security Agreements
to the extent that such assets may be legally pledged and to perfect such
security interests (to the extent perfection is contemplated by applicable law)
pursuant to agreements and documents in each case reasonably acceptable in form
and substance to Nortel Networks.  Such
agreements and documents shall limit the sales and transfers of such assets
consistent with the restrictions set forth in the U.S. Security Agreement,
except that they shall permit Bookham, Inc. and its subsidiaries to enter into
one or more “sale-leaseback” or similar transactions relating to such assets on
the terms and conditions set forth in Section 2.06(d) of the U.S. Security
Agreement.

 

2

 

(c) Within 5 Business Days after Bookham,
Inc. complies with its obligations under Section 2(b) of this Agreement,
Nortel Networks shall cause NNUKL to waive, release or take such other action
as is necessary to discharge any lien or equitable charge over the capital
stock or other equity securities of Bookham International Ltd. granted for the
benefit of NNUKL.

 

(d) Within 5 Business Days of a request from
Nortel Networks, Bookham, Inc. shall, and shall cause its subsidiaries to,
execute and deliver such English law security documents (together with all
other connected or ancillary documents required for the creation and perfection
of the security interest created thereunder) as Nortel Networks may reasonably
request. Such security documents shall be on terms and conditions satisfactory
to Nortel Networks (acting reasonably) and only create security interests in
favor of NNUKL over assets that are expressly stated as being the subject of
the security interests under the U.S. Security Agreement.

 

(e)                                  As
soon as reasonably practicable after the execution of this Agreement (but in no
event later than 30 calendar days after the execution of this Agreement), and
to the full extent permitted by applicable law, Bookham, Inc. shall cause
Bookham (Switzerland) AG to execute and deliver and Nortel Networks shall
execute and deliver, and shall cause certain of its subsidiaries to execute and
deliver, an agreement pursuant to which, to the full extent permitted by
applicable law, the Swiss Assets (as defined in the Bill of Sale dated November 8,
2002 by and among Bookham (Switzerland) AG, Nortel Networks and certain
subsidiaries of Nortel Networks), all Improvements (as defined in the
Intellectual Property Agreement) to the Intellectual Property and all property,
plant and equipment that is then or thereafter owned by Bookham (Switzerland)
AG, excluding Excluded Equipment (as defined in the U.S. Security Agreement)
and leasehold improvements, shall be pledged (or otherwise made available as
collateral to the full extent allowed under Swiss law) on a first priority
basis (to the extent such priority is contemplated by applicable law) for the
benefit of Nortel Networks and certain of its subsidiaries as security for the
Obligations of Bookham, Inc. and its subsidiaries under the Series B-1 Note and
the Series A-2 Note and the Security Agreements to the full extent that such
assets may be legally pledged and to perfect such security interests (to the
extent perfection is contemplated by applicable law) pursuant to agreements and
documents in each case reasonably acceptable in form and substance to Nortel
Networks.  Such agreements and documents
shall limit the sales and transfers of such assets consistent with the
restrictions set forth in the U.S. Security Agreement.

 

3.                                       Representations
and Warranties.  The Bookham Parties
hereby jointly represent and warrant to NNUKL and Nortel Networks as follows:

 

(a)                                  Each
Bookham Party is a corporation or legal entity duly organized and validly
existing under the laws of the jurisdiction of its organization and is duly
qualified or licensed to do business and is in good standing (if and to the
extent such term is recognized in the relevant jurisdiction) in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to so qualify would not reasonably be
expected to result in damages to the Bookham Parties of more than $1,000,000 in
the aggregate.

 

3

 

(b)                                 Each
Bookham Party has the requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as currently conducted and
the requisite corporate power and authority to enter into and perform this Agreement
and all other agreements and documents contemplated hereby (the “Additional
Documents”) and to carry out the transactions contemplated by this
Agreement and the Additional Documents.

 

(c)                                  This
Agreement has been, and the Additional Documents when executed will be, duly
executed and delivered by the applicable Bookham Party, and constitute valid
and binding obligations of such Bookham Party, enforceable in accordance with
their respective terms, except that no such representation and warranty is made
herein with respect to the law of any jurisdiction outside of the United
States.

 

(d)                                 Other
than (A) as set forth on Exhibit H, (B) Indebtedness secured by purchase
money security interests, (C) the Series A-2 Note, (D) the Series B-1 Note and
(E) capitalized leases, letters of credit, indemnity obligations and
performance bonds not exceeding U.S.$2,000,000 in the aggregate, the Bookham
Parties do not have any Indebtedness. “Indebtedness” means any
obligation in respect of (i) borrowed money (excluding intercompany loans),
(ii) capitalized lease obligations, (iii) obligations under interest rate
agreements and currency agreements, (iv) guarantees of any obligation of any
third Person, (v) letters of credit and (vi) indemnity obligations or
performance bonds.

 

(e)                                  The
amendment and restatement of the Series A-1 Note and the authorization,
issuance, execution and delivery of the Series A-2 Note has been duly
authorized by all requisite corporate action on the part of the Bookham, Inc.

 

(f)                                    The
amendment and restatement of the Series B Note and the authorization, issuance,
execution and delivery of the Series B-1 Note has been duly authorized by all
requisite corporate action on the part of Bookham plc.

 

(g)                                 Neither
the execution or delivery by any Bookham Party of this Agreement, the
consummation of the transactions contemplated hereby, nor the compliance by the
Bookham Parties with any of the provisions hereof will (i) conflict with,
violate or result in the breach of, any provision of the certificate of incorporation
or by-laws or other organizational documents of any Bookham Party; (ii)
conflict with, violate, or result in the breach by any Bookham Party of any
applicable law; (iii) conflict with, violate, result in the breach or
termination of, or constitute a default or give rise to any right of
termination or acceleration or right to increase the obligations or otherwise
modify the terms under any contract, agreement or understanding to which any
Bookham Party is a party or by which any Bookham Party or any of its assets is
bound; or (iv) result in the creation of any lien upon any of the assets of the
Bookham Parties (other than the liens created pursuant to the transactions
contemplated hereby), in each case, with respect to the foregoing, except for
such conflicts, violations, breaches, terminations, defaults, rights or liens
that have not had and would not reasonably by expected to have, individually or
in the aggregate, a material adverse effect on any Bookham Party.

 

(h)                                 No
consent, approval or authorization of, permit from, or declaration, filing or
registration with, any governmental authority or any other person is required
to be made or obtained by any Bookham Party in connection with the execution,
delivery and performance

 

4

 

of this Agreement and the consummation of the transactions contemplated
hereby, except where the failure to obtain such consent, approval,
authorization or permit, or to make such declaration, filing or registration,
has not had and would not reasonably be expected to have, individually or in
the aggregate, a material adverse effect on any Bookham Party.

 

(i)                                     As
of the date hereof, other than Bookham (Canada), Inc. neither Bookham, Inc.,
nor any of its subsidiaries owns, leases or operates any assets in Canada,
except for any Intellectual Property registered in Canada. The aggregate fair
market value of the assets of Bookham, Inc. and its subsidiaries in Canada does
not exceed $1,500,000 as of the date hereof. 
“Intellectual Property” means trademarks, service marks, brand
names, distinguishing guises, trade dress, trade names, words, symbols, color
schemes, business names, internet domain names and other indications of origin,
patents and pending patent applications, utility models, inventors’
certificates and invention disclosures

 

(j)                                     Bookham
Technology (Shenzhen) (FFTZ) Co. Ltd. and New Focus Pacific (SHIP) Co. Ltd. are
the only entities organized under the laws of China in which Bookham, Inc. or
any of its subsidiaries holds an equity interest; and Bookham International
Ltd. owns all the outstanding equity interests of Bookham Technology (Shenzhen)
(FFTZ) Co. Ltd. and New Focus Pacific (SHIP) Co. Ltd. free and clear of all
Liens.

 

(k)                                  Each
Principal Subsidiary (as defined in the U.S. Security Agreement) of Bookham,
Inc. is a party to the U.S. Security Agreement and is a Guarantor (as defined
in the Series A-2 Note) of the obligations of Bookham, Inc. under the Series
A-2 Note and the obligations of Bookham plc under the Series B-1 Note and is a
Pledgor Party under the U.S. Security Agreement or the Canadian Security
Agreement.

 

4.                                       Appraisals.  Bookham, Inc., at its own expense, shall
engage a certified appraiser to appraise the value of all material Collateral
(as defined in the U.S. Security Agreement). 
Bookham, Inc. shall cause such certified appraiser to issue a valuation
report with respect to such material Collateral to NNUKL and Nortel Networks
within 90 calendar days of the date of this Agreement.

 

5.                                       Miscellaneous.

 

(a)                                  Parties
in Interest.  All covenants,
agreements, representations, warranties and undertakings in this Agreement made
by and on behalf of any of the parties hereto shall bind and inure to the
benefit of the respective successors and permitted assigns of the parties
hereto.

 

(b)                                 Amendments
and Waivers.  Except as set forth in
this Agreement, changes in or additions to this Agreement may be made, or
compliance with any term, covenant, agreement, condition or provision set forth
herein may be omitted or waived (either generally or in a particular instance
and either retroactively or prospectively), upon the written consent of all of
the parties to this Agreement.

 

5

 

(c)                                  Governing
Law.  This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York (without reference to the conflicts of law provisions thereof).

 

(d)                                 Notices.  All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be deemed
delivered (i) two business days after being sent by registered or
certified mail, return receipt requested, postage prepaid or (ii) one
business day after being sent via a reputable nationwide overnight courier
service guaranteeing next business day delivery, in each case to the intended
recipient as set forth below:

 

(i)                                     If
to any Bookham Party, at Bookham Technology plc, Caswell Towcester,
Northamptonshire NN12 8EQ, United Kingdom, Attention: Corporate Secretary, with
a copy to Thomas S. Ward, Esq., Wilmer Cutler Pickering Hale and Dorr LLP, 60
State Street, Boston, MA 02109; and

 

(ii)                                  If
to NNUKL or Nortel Networks, at Nortel Networks Corporation, 8200 Dixie Road,
Brampton, ON L6T 5P6, Canada, Attention: Secretary, with a copy to Robert
Fishman, Nortel Networks Corporation, 2221 Lakeside Boulevard, Mail Stop
991-14-B40, Richardson, TX 75082-4399.

 

(iii)                               Any
party may give any notice, request, consent or other communication under this
Agreement using any other means (including, without limitation, personal
delivery, messenger service, telecopy, first class mail or electronic mail),
but no such notice, request, consent or other communication shall be deemed to
have been duly given unless and until it is actually received by the party for whom
it is intended.  Any party may change the
address to which notices, requests, consents or other communications hereunder
are to be delivered by giving the other parties notice in the manner set forth
in this Section 3(d).

 

(e)                                  Entire
Agreement.  This Agreement and the
exhibits hereto together with any other agreement referred to herein constitute
the entire agreement among the parties with respect to the subject matter
hereof.  This Agreement supersedes all
prior agreements between the parties with respect to the note purchased
hereunder and the subject matter hereof.

 

(f)                                    Severability.  The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.

 

(g)                                 Counterparts;
Facsimile Signatures.  This Agreement
may be executed in any number of counterparts, each of which shall be deemed to
be an original, and all of which shall constitute one and the same
document.  This Agreement may be executed
by facsimile signatures.

 

(h)                                 Legends.  It is understood that the Series A-2 Note and
the Series B-1 Note shall bear a legend substantially in the following form and
such other legends that may be required under the laws of any applicable
jurisdiction:

 

6

 

“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.”

 

(i)                                     Expenses.  Bookham, Inc. shall pay the reasonable fees
and disbursements of external legal counsel to NNUKL and Nortel Networks and
any filing fees incurred by NNUKL or Nortel Networks relating to the
transactions contemplated hereby up to a maximum of $75,000 in the
aggregate.  Except as otherwise expressly
set forth in this Agreement, each party shall otherwise bear all of its own
expenses incurred in connection with the transactions contemplated hereby.

 

*  * 
*  *  *

 

7

 

IN WITNESS WHEREOF, this Restructuring
Agreement has been executed by the parties hereto as of the day and year first
written above.

 

	
   

  	
  BOOKHAM TECHNOLOGY PLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Stephen Abely

  	
   

  
	
   

  	
  Name:

  	
   Steve Abely

  	
   

  
	
   

  	
  Title:

  	
     Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BOOKHAM, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Stephen Abely

  	
   

  
	
   

  	
  Name:

  	
   Steve Abely

  	
   

  
	
   

  	
  Title:

  	
     CFO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NEW FOCUS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Stephen Abely

  	
   

  
	
   

  	
  Name:

  	
   Steve Abely

  	
   

  
	
   

  	
  Title:

  	
     President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ONETTA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Philip Davis

  	
   

  
	
   

  	
  Name:

  	
   Philip Davis

  	
   

  
	
   

  	
  Title:

  	
     President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  IGNIS OPTICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Stephen Abely

  	
   

  
	
   

  	
  Name:

  	
   Steve Abely

  	
   

  
	
   

  	
  Title:

  	
     President

  	
   

  
									

 

 

[SIGNATURE PAGE TO
RESTRUCTURING AGREEMENT]

 

 

	
   

  	
  BOOKHAM (CANADA), INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Philip Davis

  	
   

  
	
   

  	
  Name:

  	
   Philip Davis

  	
   

  
	
   

  	
  Title:

  	
     Treasurer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BOOKHAM (SWITZERLAND) AG

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Stephen Abely

  	
   

  
	
   

  	
  Name:

  	
   Steve Abely

  	
   

  
	
   

  	
  Title:

  	
     President and Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BOOKHAM (US), INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Philip Davis

  	
   

  
	
   

  	
  Name:

  	
   Philip Davis

  	
   

  
	
   

  	
  Title:

  	
     Treasurer

  	
   

  
							

 

 

[SIGNATURE PAGE TO
RESTRUCTURING AGREEMENT]

 

 

	
   

  	
  NORTEL NETWORKS UK LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Geoffrey Lloyd

  	
   

  
	
   

  	
  Name:

  	
   Geoffrey Lloyd

  	
   

  
	
   

  	
  Title:

  	
     Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NORTEL NETWORKS CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Khush Dadyburjor

  	
   

  
	
   

  	
  Name:

  	
   Khush Dadyburjor

  	
   

  
	
   

  	
  Title:

  	
     Attorney-in-fact

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
											

 

 

[SIGNATURE PAGE TO
RESTRUCTURING AGREEMENT]Exhibit
10.2

 

AMENDED
AND RESTATED

 

SERIES
A-2 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 A-2 Senior Secured Note Due
2007

 

	
  U.S.$20,000,000

  	
  September 10,
  2004

  

 

Section 1.                                            General.

 

(a)                                  Bookham, Inc., a
Delaware corporation (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 TWENTY MILLION U.S.
DOLLARS (U.S.$20,000,000.00), 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, 2007 (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.

 

 

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 has caused certain of its Subsidiaries to pledge, and
will pledge and 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 A-2 Note in an amount equal to the Net
Proceeds (as defined below) of such Qualified Financing to the extent such Net
Proceeds constitute all or part of the Threshold Net Proceeds (as defined
below).

 

(b)                                 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 A-2 Note in an
amount equal to the Net Proceeds of such sale, distribution, assignment, lease,
transfer or other disposition to the extent such amount is not required to be
applied to prepay the Series B-1 Note.

 

(c)                                  Within one (1)
Business Day after a Change of Control (as defined below) of the Borrower, the
Borrower shall prepay the Series A-2 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.

 

2

 

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), the Borrower 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, the Borrower 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, the Borrower shall
provide the Holder with a report stating the Cash Balance (as defined below) of
the Borrower and its Subsidiaries, on a consolidated basis, as of the end of
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, the Borrower shall provide
the Holder with a report stating the Cash Balance of the

 

3

 

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, the
Borrower shall provide the Holder with (i) a statement of operations, balance
sheet and statement of cashflows prepared in accordance with the Borrower’s
internal format for the Borrower and its Subsidiaries, on a consolidated basis,
for the previous calendar month and (ii) a financial forecast of the Borrower
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 the Borrower’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 the Borrower
pursuant to Section 7(b) or Section 7(c) without the prior written
consent of the Borrower.  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 the Borrower any actual violation of the terms of this Section 7(e) and
will take all reasonable further steps requested by the Borrower 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 the Borrower 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 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 the Borrower.

 

4

 

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.

 

(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.

 

5

 

(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.

 

(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)                                     The Borrower shall
cause each Subsidiary that (i) has not executed and delivered this Note “as
Guarantor” and (ii) is or becomes a Principal Borrower Subsidiary to

 

6

 

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, including without limitation Bookham Technology plc.

 

(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).

 

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 A-2
Note, when and as the same shall become due and payable, whether at the due
date thereof, upon acceleration thereof or otherwise;

 

7

 

(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 B-1 Note) occurs with respect to the Series B-1 Note;

 

(iv)                              the Borrower 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)                                 the Borrower becomes
subject to a Bankruptcy Event;

 

(vi)                              the Borrower 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 the Borrower receives written notice from the Holder of such failure;

 

(vii)                           (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;

 

(viii)                        The Borrower 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 Borrower 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 Borrower 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)                                The Borrower fails to
provide the information required by Section 7(c) within the time period
set forth in such section; provided that Borrower may cure such 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.

 

8

 

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.

 

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.

 

9

 

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 Bookham
Technology plc 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 the Borrower 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 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).

 

10

 

“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 the Borrower that
have executed and delivered this Note on the date hereof “as Guarantor” and
(ii) such other Subsidiaries of the Borrower that have guaranteed the Series
A-2 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 agreements, (iv) guarantees of any
obligation of any third Person, (v) letters of credit and (vi) indemnities or
performance bonds.

 

“Interest Payment Date” means each February 8,
May 8, August 8 and November 8 beginning on November 8, 2004.

 

“Interest Rate” means 4.00% per annum;
provided 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,

 

11

 

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 the Borrower 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.

 

“Principal Borrower Subsidiary” means
any Subsidiary of the Borrower 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 the Borrower or any of its Subsidiaries of any Equity Interests and
any Indebtedness incurred by the Borrower 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 the Borrower or options with
respect thereto to employees, directors or officers of the Borrower or any
Subsidiary of the Borrower 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

 

12

 

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.

 

“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.

 

“Threshold Net Proceeds” means the
excess over $100,000,000 of Net Proceeds of all Qualified Financings
consummated after the date hereof.

 

13

 

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, INC., as Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Stephen Abely

  
	
   

  	
     Name:
  Steve Abely

  
	
   

  	
     Title:
  CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BOOKHAM TECHNOLOGY PLC, as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  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

  
				

 

14

 

	
   

  	
  BOOKHAM (CANADA), INC., as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Philip
  Davis

  
	
   

  	
   Name:
  Philip Davis

  
	
   

  	
   Title:
  Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  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

  

 

15

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