Bookham announces transactions, extends supply agreement with Nortel

Jan. 13, 2006

January 13, 2006 San Jose, CA-- Bookham, a provider of optical components, modules, and subsystems, announced that it has entered into a series of financing transactions, which will result in the retirement of the company's $45.9 million of secured notes and $19.4 million of the $25.5 million of outstanding Convertible Debentures. The company also announced that it has entered into an agreement with Nortel to amend and extend a current supply agreement through 2006.

According to a press release, for these transactions, the company used $20 million of cash to repay a portion of debt, and plans to issue an aggregate of approximately 10.3 million shares of common stock and new warrants to purchase approximately 1.1 million shares of common stock, and will use approximately $2.2 million in cash to prepay interest that would have accrued in future periods under the terms of the Debentures.

Bookham also announced that it has entered into an agreement with Nortel Networks to amend and extend a current supply agreement through 2006. As part of the transactions, Bookham paid Nortel $20 million in cash plus accrued interest to retire its $20 million aggregate principal amount Series A-2 Senior Secured Note due November 2007. Under the terms of the amended supply agreement, Nortel will purchase a minimum of $72 million in product from Bookham during calendar 2006. In addition, Nortel has entered into a Lock-up Agreement through July 1, 2006 for the approximately 4.0 million shares of Bookham common stock that Nortel currently owns.

In an additional transaction, Bookham issued approximately 5.12 million shares of common stock and warrants to purchase 686,000 shares of common stock in exchange for the $25.9 million aggregate principal amount Series B-1 Senior Secured Note due November 2006. The newly issued warrants have an exercise price of $7.00 per share and a term of five years. This additional transaction, which was led by New York-based Cipher Merchant Partners, LLC, included a selected number of accredited institutional investors who had entered into separate purchase agreements to purchase portions of the company's Series B-1 Senior Secured Note.

Bookham also entered into transactions with the holders of its 7.0% Senior Unsecured Convertible Debentures. In these transactions, the owners of the Convertible Debentures converted $19.4 million of the $25.5 million of outstanding Convertible Debentures into approximately 3.9 million shares of Bookham common stock. These holders also received warrants to purchase approximately 304,000 shares of common stock, which have an exercise price of $7.00 per share with a term of five years, and approximately $1.7 million in cash.

In addition, the holder of the Debentures have agreed, subject to shareholder approval, to convert the remaining $6.1 million of outstanding Convertible Debentures into approximately 1.3 million shares of Bookham common stock, and upon conversion would also receive warrants to purchase approximately 109,000 shares of common stock with an exercise price of $7.00 per share with a term of five years, and approximately $0.5 million in cash. The company expects to seek shareholder approval for this portion of the transaction within the next 60 days.

The company reiterates its previous revenue guidance, which was announced on November 2, 2005, that it expects revenue for the second quarter of fiscal 2006, ended December 31, 2005, to be in the range of $58 million to $61 million. Bookham cautions that its anticipated revenue results are preliminary based on the best information currently available and subject to completion of preparation of the financial statements for the second quarter of fiscal 2006.

Burnham Hill Partners acted as the financial advisor in connection with the transactions.