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Filed Pursuant to Rule 424(b)(3)
File No. 333-157528
 
     
(BOOKHAM)  
(AVANEX)
 
SPECIAL MEETINGS OF STOCKHOLDERS
MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT
 
The boards of directors of Bookham, Inc. and Avanex Corporation have each unanimously approved a merger combining Bookham and Avanex.
 
If the merger is consummated, holders of Avanex common stock will be entitled to receive 5.426 shares of Bookham common stock for each share of Avanex common stock they own (the exchange ratio does not give effect to the proposed reverse stock split discussed in the section of this joint proxy statement/prospectus entitled “Bookham Proposal No. 3 — Amendments to Bookham’s Restated Certificate of Incorporation to Effect a Reverse Stock Split and to Reduce the Number of Authorized Shares of Bookham Common Stock and Preferred Stock”). The exchange ratio will not be adjusted for changes in the stock price of either company before the merger is consummated. Bookham common stock is listed on the NASDAQ Global Market under the symbol “BKHM.” On March 24, 2009, the last trading day before the date of this joint proxy statement/prospectus, the closing price of Bookham common stock was $0.31 per share. Avanex common stock is listed on the NASDAQ Global Market under the symbol “AVNX.”
 
Bookham is soliciting proxies for use at a special meeting of its stockholders to consider and vote upon (i) a proposal to approve the issuance of Bookham common stock to the stockholders of Avanex in the merger, (ii) a proposal to approve an amendment to Bookham’s restated certificate of incorporation to increase the number of authorized shares of Bookham common stock to 450,000,000 shares (on a pre-reverse stock split basis), (iii) a proposal to approve amendments to Bookham’s restated certificate of incorporation that would effect a reverse stock split of the issued and outstanding shares of Bookham common stock and a corresponding proportionate reduction in the total number of authorized shares of Bookham common stock and preferred stock, and (iv) an adjournment of the Bookham special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of any of these proposals.
 
Avanex is soliciting proxies for use at a special meeting of its stockholders to consider and vote upon (i) a proposal to adopt the merger agreement with Bookham, and (ii) an adjournment of the Avanex special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of any of this proposal.
 
The dates, times and places of the special meetings are as follows:
 
     
For Bookham stockholders:
April 27, 2009
11:00 a.m., local time
Bookham, Inc.
2584 Junction Avenue
San Jose, California 95134
  For Avanex stockholders:
April 27, 2009
11:00 a.m., local time
Avanex Corporation
40919 Encyclopedia Circle
Fremont, California 94538
 
This joint proxy statement/prospectus refers to important business and financial information about Bookham and Avanex that is not included in or delivered with this joint proxy statement/prospectus. Such information is available without charge to stockholders of Bookham and Avanex upon written or oral request at the following addresses: For information concerning Bookham, Bookham, Inc., Attn: Investor Relations, 2584 Junction Avenue, San Jose, CA 95134 or by telephone at (408) 383-1400 and for information concerning Avanex, Avanex Corporation, Attn: Investor Relations, 40919 Encyclopedia Circle, Fremont, CA 94538 or by telephone at (510) 897-4188. To obtain timely delivery, Bookham stockholders must request the information no later than five business days before the date of the Bookham special meeting, or no later than April 20, 2009, and Avanex stockholders must request the information no later than five business days before the date of the Avanex special meeting, or no later than April 20, 2009.
 
     
-s- Alain Couder   -s- Giovanni Barbarossa
Alain Couder   Giovanni Barbarossa, Ph.D.
Chief Executive Officer and President   Chief Executive Officer
Bookham, Inc.   Avanex Corporation
 
FOR A DISCUSSION OF SIGNIFICANT MATTERS THAT SHOULD BE CONSIDERED BEFORE VOTING AT THE SPECIAL MEETINGS, SEE “RISK FACTORS” BEGINNING ON PAGE 26.
 
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORS HAVE APPROVED OR DISAPPROVED THE BOOKHAM COMMON STOCK TO BE ISSUED IN THE MERGER OR DETERMINED WHETHER THIS JOINT PROXY STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
This joint proxy statement/prospectus is dated March 25, 2009, and is first being mailed to stockholders of Bookham and Avanex on or about March 27, 2009.
 
THIS JOINT PROXY STATEMENT/PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.


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BOOKHAM, INC.
2584 Junction Avenue
San Jose, California 95134
(408) 383-1400
 
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 27, 2009
 
To the Stockholders of Bookham, Inc.:
 
On behalf of the board of directors of Bookham, Inc., a Delaware corporation, we are pleased to deliver this joint proxy statement/prospectus for the proposed merger combining Bookham and Avanex Corporation, a Delaware corporation. A special meeting of stockholders of Bookham will be held on Monday, April 27, 2009 at 11:00 a.m., local time, at the principal executive offices of Bookham located at 2584 Junction Avenue, San Jose, California 95134, for the following purposes:
 
1. To consider and vote upon the issuance of shares of Bookham common stock in the merger contemplated by the Agreement and Plan of Merger and Reorganization, dated as of January 27, 2009, by and among Bookham, Inc., Ultraviolet Acquisition Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Bookham, and Avanex Corporation, a Delaware corporation.
 
2. To approve an amendment to Bookham’s restated certificate of incorporation to increase the number of authorized shares of Bookham common stock to 450,000,000 (on a pre-reverse stock split basis).
 
3. To approve amendments to Bookham’s restated certificate of incorporation that would effect a reverse stock split, pursuant to which any whole number of issued and outstanding shares of Bookham common stock between and including five and thirty would be combined and reclassified into one share of Bookham common stock, and pursuant to which the total number of authorized shares of Bookham common stock and preferred stock would be proportionately reduced, and to authorize the Bookham board of directors to select and file one such amendment that would effect the reverse stock split within such range and that would proportionately reduce the total number of authorized shares of Bookham common stock and preferred stock.
 
4. To consider and vote upon an adjournment of the Bookham special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of any of Bookham Proposal Nos. 1, 2 or 3.
 
5. To transact such other business as may properly come before the special meeting or any adjournment or postponement thereof.
 
The board of directors of Bookham has fixed March 18, 2009 as the record date for the determination of stockholders entitled to notice of, and to vote at, the Bookham special meeting and any adjournment or postponement thereof. Only holders of record of shares of Bookham common stock at the close of business on the record date are entitled to notice of, and to vote at, the Bookham special meeting. At the close of business on the record date, Bookham had outstanding and entitled to vote 100,959,545 shares of common stock.
 
Your vote is important. The affirmative vote of the holders of a majority of the voting power of the shares voting in person or by proxy at the Bookham special meeting is required for approval of each of Bookham Proposal Nos. 1 and 4, and the affirmative vote of the holders of a majority of the voting power of Bookham common stock outstanding on the record date for the Bookham special meeting is required for approval of Bookham Proposal Nos. 2 and 3. Even if you plan to attend the Bookham special meeting in person, we request that you sign and return the enclosed proxy card or vote by telephone or by using the Internet as instructed on the enclosed proxy card and thus ensure that your shares will be represented at the special meeting if you are unable to attend. If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be counted as a vote in favor of each of Bookham Proposal Nos. 1, 2, 3 and 4. If you fail to return your proxy card or vote by


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telephone or by using the Internet, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the special meeting. If you do attend the Bookham special meeting and wish to vote in person, you may withdraw your proxy and vote in person.
 
By Order of the Board of Directors,
 
-s- Alain Couder
 
Alain Couder
Chief Executive Officer and President
 
San Jose, California
March 25, 2009
 
BOOKHAM’S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED AND BELIEVES THAT EACH OF THE BOOKHAM PROPOSALS OUTLINED ABOVE IS ADVISABLE TO, AND IN THE BEST INTERESTS OF, BOOKHAM AND ITS STOCKHOLDERS, AND HAS APPROVED EACH SUCH PROPOSAL. THE BOOKHAM BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT BOOKHAM STOCKHOLDERS VOTE “FOR” EACH PROPOSAL.


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AVANEX CORPORATION
40919 Encyclopedia Circle
Fremont, California 94538
(510) 897-4188
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 27, 2009
To the Stockholders of Avanex Corporation:
On behalf of the board of directors of Avanex Corporation, a Delaware corporation, we are pleased to deliver this joint proxy statement/prospectus for the proposed merger combining Bookham, Inc., a Delaware corporation, and Avanex. A special meeting of stockholders of Avanex will be held on Monday, April 27, 2009 at 11:00 a.m., local time, at the principal executive offices of Avanex located at 40919 Encyclopedia Circle, Fremont, California 94538, for the following purposes:
1. To consider and vote upon the adoption of the Agreement and Plan of Merger and Reorganization, dated as of January 27, 2009, by and among Bookham, Inc., a Delaware corporation, Ultraviolet Acquisition Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Bookham, and Avanex Corporation.
2. To consider and vote upon an adjournment of the special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of Avanex Proposal No. 1.
3. To transact such other business as may properly come before the special meeting or any adjournment or postponement thereof.
The board of directors of Avanex has fixed March 18, 2009 as the record date for the determination of stockholders entitled to notice of, and to vote at, the special meeting and any adjournment or postponement thereof. Only holders of record of shares of Avanex common stock at the close of business on the record date are entitled to notice of, and to vote at, the Avanex special meeting. At the close of business on the record date, Avanex had outstanding and entitled to vote 15,623,421 shares of common stock.
Your vote is important. The affirmative vote of the holders of a majority of the voting power of the shares of Avanex common stock outstanding on the record date for the Avanex special meeting is required for approval of Avanex Proposal No. 1 regarding the adoption of the merger agreement. The affirmative vote of the holders of a majority of the votes cast in person or by proxy at the Avanex special meeting is required to approve Avanex Proposal No. 2 regarding an adjournment of the Avanex special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of Avanex Proposal No. 1. Even if you plan to attend the special meeting in person, we request that you sign and return the enclosed proxy card or vote by telephone or by using the Internet as instructed on the enclosed proxy card and thus ensure that your shares will be represented at the special meeting if you are unable to attend. If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be counted as a vote in favor of the adoption of the merger agreement and in favor of an adjournment of the Avanex special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of Avanex Proposal No. 1. If you fail to return your proxy card or vote by telephone or by using the Internet, the effect will be a vote against the adoption of the merger agreement and your shares will not be counted for purposes of determining whether a quorum is present at the Avanex special meeting. If you do attend the Avanex special meeting and wish to vote in person, you may withdraw your proxy and vote in person.
 
Please do not send any certificates representing your Avanex common stock at this time.
By Order of the Board of Directors,
-s- Giovanni Barbarossa
Giovanni Barbarossa, Ph.D.
Chief Executive Officer
Fremont, California
March 25, 2009
 
AVANEX’S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED AND BELIEVES THAT THE MERGER IS ADVISABLE AND FAIR TO, AND IN THE BEST INTERESTS OF, AVANEX AND ITS STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT AVANEX STOCKHOLDERS VOTE “FOR” AVANEX PROPOSAL NO. 1 AND “FOR” AVANEX PROPOSAL NO. 2.


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ABOUT THIS DOCUMENT
 
This document, which forms part of a registration statement on Form S-4 filed with the U.S. Securities and Exchange Commission by Bookham (File No. 333-157528), constitutes a prospectus of Bookham under Section 5 of the Securities Act of 1933, as amended, which we refer to as the Securities Act, with respect to the shares of Bookham common stock to be issued in the merger contemplated by the merger agreement.
 
This document also constitutes a notice of meeting and a proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, (i) with respect to the Bookham’s special meeting, at which Bookham stockholders will be asked to consider and vote upon certain proposals, including a proposal to approve the issuance of shares of Bookham common stock in the merger contemplated by the merger agreement, and (ii) with respect to the Avanex special meeting, at which Avanex stockholders will be asked to consider and vote upon certain proposals, including a proposal to adopt the merger agreement.
 
As used in this joint proxy statement/prospectus, references to “Bookham” refer collectively to Bookham, Inc. and all of its subsidiaries unless the context requires otherwise, references to “Avanex” refer to Avanex Corporation and all of its subsidiaries unless the context requires otherwise, and references to the “combined company” refer to Bookham following the consummation of the proposed merger described in this joint proxy statement/prospectus.


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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE STOCKHOLDER MEETINGS
 
The following section provides answers to frequently asked questions about the merger and the effect of the merger on holders of Bookham common stock and security holders of Avanex, the Bookham special meeting and the Avanex special meeting. This section, however, only provides summary information. Bookham and Avanex urge you to read carefully the remainder of this joint proxy statement/prospectus, including the annexes to this joint proxy statement/prospectus, because the information in this section does not provide all the information that might be important to you regarding the merger and the other matters being considered at the Bookham special meeting and the Avanex special meeting.
 
Unless specifically stated otherwise, the following information and all other information contained in this joint proxy statement/prospectus, including that regarding the exchange ratio pursuant to the merger agreement, does not give effect to the proposed reverse stock split discussed in the section entitled “Bookham Proposal No. 3 — Amendments to Bookham’s Restated Certificate of Incorporation to Effect a Reverse Stock Split and to Reduce the Number of Authorized Shares of Bookham Common Stock and Preferred Stock.”
 
Q: What is the merger?
 
A: Bookham and Avanex have entered into an Agreement and Plan of Merger and Reorganization, dated January 27, 2009, which is referred to in this joint proxy statement/prospectus as the merger agreement, that contains the terms and conditions of the proposed business combination of Bookham and Avanex. Under the merger agreement, Ultraviolet Acquisition Sub, Inc., a wholly owned subsidiary of Bookham, will merge with and into Avanex, with Avanex surviving as a wholly owned subsidiary of Bookham, which transaction is referred to as the merger. The shares of Bookham common stock issued to Avanex stockholders in connection with the merger are expected to represent approximately 46.75% of the outstanding shares of Bookham common stock immediately following the consummation of the merger, based on the number of shares of Bookham common stock and Avanex common stock that were outstanding on January 27, 2009, assuming that no Avanex or Bookham stock options or warrants are exercised after January 27, 2009 and prior to the effective time of the merger, and without giving effect to the vesting of any outstanding Avanex or Bookham restricted stock units prior to the effective time of the merger. For a more complete description of the merger, please see the section entitled “Bookham Proposal No. 1 and Avanex Proposal No. 1 — The Merger” on page 71 of this joint proxy statement/prospectus.
 
Q: Why are the two companies proposing to merge?
 
A: Both Bookham and Avanex believe that the combination will create significant cost saving synergies and will form a leader in the metro and long-haul optical markets that will be better positioned to compete in the market. The companies also believe that the integration of their product lines, technologies and research teams will allow the combined company to benefit from synergies and cost saving opportunities and maximize research and development resources. For a discussion of the reasons for the merger, we urge you to read the information in the section entitled “Bookham Proposal No. 1 and Avanex Proposal No. 1 — The Merger — Reasons for the Merger” on page 84 of this joint proxy statement/prospectus.
 
Q: Why am I receiving this joint proxy statement/prospectus?
 
A: You are receiving this joint proxy statement/prospectus because you have been identified as a stockholder of either Bookham or Avanex, and thus you are entitled to vote at such company’s special meeting. This document serves as both a joint proxy statement of Bookham and Avanex, used to solicit proxies for each of the company’s special meetings, and as a prospectus of Bookham, used to offer shares of Bookham common stock in exchange for shares of Avanex common stock pursuant to the terms of the merger agreement. This document contains important information about the merger and the special meetings of Bookham and Avanex, and you should read it carefully.


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Q: When and where will the Avanex special meeting take place?
 
A: The Avanex special meeting will be held on April 27, 2009 at 11:00 a.m., Pacific Time, at 40919 Encyclopedia Circle, Fremont, CA 94538.
 
Q: When and where will the Bookham special meeting take place?
 
A: The Bookham special meeting will be held on April 27, 2009 at 11:00 a.m., Pacific Time, at 2584 Junction Avenue, San Jose, CA 95134.
 
Q: Who can attend and vote at the stockholders meetings?
 
A: Avanex: All Avanex stockholders of record as of the close of business on March 18, 2009, the record date for the Avanex special meeting, are entitled to receive notice of and to vote at the Avanex special meeting.
 
Bookham: All Bookham stockholders of record as of the close of business on March 18, 2009, the record date for the Bookham special meeting, are entitled to receive notice of and to vote at the Bookham special meeting.
 
Q: What is required to consummate the merger?
 
A: To consummate the merger, Bookham stockholders must approve: (a) the issuance of shares of Bookham common stock in the merger, which approval requires the affirmative vote of the holders of a majority of the voting power of the shares of Bookham voting in person or by proxy on such matter; and (b) an amendment to Bookham’s restated certificate of incorporation to increase the number of authorized shares of Bookham common stock, which approval requires the affirmative vote of the holders of a majority of the voting power of the shares of Bookham common stock outstanding on the record date for the Bookham special meeting. In addition, Avanex stockholders must adopt the merger agreement, which adoption requires the affirmative vote of the holders of a majority of the voting power of the shares of Avanex common stock outstanding on the record date for the Avanex special meeting. In addition to the receipt of stockholder approval, each of the other closing conditions set forth in the merger agreement must be satisfied or waived. For a more complete description of the closing conditions under the merger agreement, we urge you to read the section entitled “The Merger Agreement — Conditions to the Merger” on page 126 of this joint proxy statement/prospectus and the merger agreement attached to this joint proxy statement/prospectus as Annex A.
 
Q: Why is Bookham asking to amend its restated certificate of incorporation to increase the number of authorized shares of its common stock?
 
A: Approval of an amendment to Bookham’s restated certificate of incorporation to increase the number of authorized shares of Bookham common stock (which is the subject of Bookham Proposal No. 2) is one of the conditions to the consummation of the merger. Without an increase in the number of authorized shares of Bookham common stock, Bookham would not have a sufficient number of authorized shares to effect the merger and to issue the Bookham common stock to the Avanex stockholders in the merger pursuant to the merger agreement.
 
Q: What is the reverse stock split of Bookham and why are Bookham’s stockholders being asked to approve it?
 
A: Bookham’s board of directors has unanimously approved proposed amendments to Bookham’s restated certificate of incorporation that would effect a reverse stock split of all outstanding shares of Bookham common stock at a reverse stock split ratio ranging from one-for-five to one-for-thirty, in connection with which the total number of shares of Bookham common stock and preferred stock that Bookham is authorized to issue would be proportionately reduced. Upon receiving stockholder approval, the Bookham board of directors will, for a period of one year from the date of the Bookham special meeting, have the sole discretion to effect a reverse stock split within the range described above and the corresponding proportionate reduction in the authorized shares of Bookham common stock and preferred stock as it determines to be in the best interests of Bookham and its stockholders and regardless of whether the proposed


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merger is consummated. Bookham common stock is currently, and will be following the completion of the merger, listed on the NASDAQ Global Market. According to applicable NASDAQ rules, in order for Bookham common stock to continue to be listed on the NASDAQ Global Market, Bookham must satisfy certain listing maintenance standards established by the NASDAQ Global Market. Among other things, if the closing bid price of Bookham common stock is under $1.00 per share for 30 consecutive trading days and does not thereafter reach $1.00 per share or higher for a minimum of ten consecutive trading days during the 180 calendar days following notification by NASDAQ, NASDAQ may take action to delist Bookham common stock from trading on the NASDAQ Global Market. NASDAQ has currently suspended enforcement of the closing bid price requirement, but according to NASDAQ, the closing bid requirement will be reinstated on July 20, 2009. As of March 24, 2009, the closing bid price of Bookham common stock was $0.31, lower than the minimum bid requirement. Therefore, a reverse stock split may be necessary in order for Bookham common stock to continue to be listed on the NASDAQ Global Market.
 
Q: What will Avanex stockholders receive in the merger?
 
A: As a result of the merger, Avanex stockholders will receive 5.426 shares of Bookham common stock for each share of Avanex common stock they own, which we refer to as the exchange ratio. For example, if you own 1,000 shares of Avanex common stock, you will receive 5,426 shares of Bookham common stock (which amount does not give effect to the proposed reverse stock split discussed in the section entitled “Bookham Proposal No. 3 — Amendments to Bookham’s Restated Certificate of Incorporation to Effect a Reverse Stock Split and to Reduce the Number of Authorized Shares of Bookham Common Stock and Preferred Stock”) in exchange for your Avanex shares. The number of shares of Bookham common stock to be issued for each share of Avanex common stock is fixed and will not be adjusted based upon changes in the value of Avanex common stock or Bookham common stock before the merger is consummated (however, the exchange ratio is subject to adjustments for changes in the number of outstanding shares of Bookham or Avanex by reason of future stock splits, reverse stock splits, division of shares, stock dividends or other similar transactions). As a result, the value of the Bookham shares Avanex stockholders will receive in the merger will not be known before the merger, and will go up or down as the market price of Bookham common stock goes up or down. We encourage you to obtain current market quotations of Avanex common stock and Bookham common stock. No fractional shares of Bookham common stock will be issued in the merger. Instead, each Avanex stockholder otherwise entitled to a fraction of a share of Bookham common stock will be entitled to receive in cash the dollar amount determined by multiplying such fraction by the average closing price of Bookham common stock over a ten day period as specified in the merger agreement. For a more complete description of what Avanex stockholders will receive in the merger, please see the section entitled “The Merger Agreement — Manner and Basis of Converting Shares” on page 111 of this joint proxy statement/prospectus.
 
Q: What will Avanex option holders receive in the merger?
 
A: At the effective time of the merger, each Avanex stock option that is outstanding and unexercised immediately prior to the effective time will be converted into an option to purchase Bookham common stock (adjusted to give effect to the exchange ratio) and Bookham will assume such stock option in accordance with the terms of the applicable Avanex stock option plan and terms of the stock option agreement relating to such Avanex stock option, subject to certain adjustments to the number of shares subject to such option and the exercise price applicable to such option. For more information, please see “The Merger Agreement — Avanex Stock Options” on page 113.
 
Q: What will the holders of Avanex restricted stock units receive in the merger?
 
A: At the effective time of the merger, each Avanex restricted stock unit that is outstanding and unvested immediately prior to the effective time will be converted into a restricted stock unit reflecting Bookham common stock (adjusted to give effect to the exchange ratio), subject to adjustments to the number of shares subject to the restricted stock unit, and will remain subject to the same conditions of the applicable Avanex restricted stock unit (including the vesting schedule). For more information, please see “The Merger Agreement — Avanex Restricted Stock Units” on page 113.


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Q: What will the holders of Avanex warrants receive in the merger?
 
A: At the effective time of the merger, each warrant to purchase shares of Avanex common stock that is outstanding and unexercised immediately prior to the effective time will be converted into and become a warrant to purchase Bookham common stock (adjusted to give effect to the exchange ratio) and Bookham will replace such warrant by issuing a reasonably equivalent replacement warrant in accordance with the terms of the applicable warrant agreement by which such warrant is evidenced, subject to certain adjustments to the number of shares subject to such warrant and the exercise price applicable to such warrant. For more information, please see “The Merger Agreement — Avanex Warrants” on page 113.
 
Q: Will there be any changes to the Bookham board of directors if the merger becomes effective?
 
A: The merger agreement provides that the Bookham board of directors following the effective time of the merger will be comprised of three members designated by Avanex (currently expected to be Giovanni Barbarossa, Greg Dougherty and Joel A. Smith, III) and four members to be designated by Bookham (currently expected to be Alain Couder, Bernard Couillaud, Lori Holland and Edward Collins). For more information, please see the sections entitled “The Merger Agreement — The Board of Directors of Bookham Following the Merger” on page 132 and “Management and Other Information of the Combined Company” on page 178.
 
Q: Who will be the executive officers of Bookham immediately following the merger?
 
A: It is currently expected that the executive officers of Bookham following the merger will be substantially similar to the current executive officers of Bookham. In addition, following the effective time of the merger, Bookham contemplates that certain employees of Avanex will join Bookham as officers of Bookham and thus may become executive officers of Bookham. In the event that new personnel become executive officers of Bookham, certain persons who currently serve as executive officers of Bookham may no longer serve in such capacity. As of the date of this joint proxy statement/prospectus it is not known which Avanex employees, if any, will become executive officers of Bookham and no determinations by Bookham have been made in this regard. Similarly, it is not known which of Bookham’s current executive officers, if any, will cease to serve in such capacity. The current executive officers of Bookham are: Alain Couder (President and Chief Executive Officer), Jerry Turin (Chief Financial Officer), James Haynes (Chief Operating Officer), Adrian Meldrum (Executive Vice President, Telecom Division) and Kate Rundle (Executive Vice President, General Counsel and Corporate Secretary).
 
Q: How will Bookham stockholders be affected by the merger and issuance of shares of Bookham common stock?
 
A: After the merger each Bookham stockholder will have the same number of shares of Bookham common stock that the stockholder held immediately prior to the effective time of the merger. However, because Bookham will be issuing new shares of Bookham common stock to Avanex stockholders in the merger, each share of Bookham common stock outstanding immediately prior to the merger will represent a smaller percentage of the aggregate number of shares of Bookham common stock outstanding after the merger. As a result of the merger, each Bookham stockholder will own a smaller percentage of the shares of common stock of a larger company with more outstanding shares and more assets. Based on the number of shares of Bookham and Avanex that were outstanding on January 27, 2009, Bookham stockholders would own in the aggregate approximately 53.25% of Bookham following the merger, assuming that no Avanex or Bookham stock options or warrants are exercised after January 27, 2009 and prior to the effective time of the merger, and without giving effect to the vesting of any outstanding Avanex or Bookham restricted stock units prior to the effective time of the merger.
 
Q: What are the material federal income tax consequences of the merger to me?
 
A: The merger has been structured to qualify as a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and it is a closing condition to the merger that Bookham and Avanex receive opinions of their respective outside counsel regarding such qualification. As a result of the merger’s anticipated qualification as a reorganization, Avanex stockholders will


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generally not recognize gain or loss for United States federal income tax purposes upon the exchange of shares of Avanex common stock for shares of Bookham common stock, except with respect to cash received in lieu of fractional shares of Bookham common stock.
 
Tax matters are very complicated, and the tax consequences of the merger to a particular stockholder will depend in part on such stockholder’s circumstances. Accordingly, we urge you to consult your own tax advisor for a full understanding of the tax consequences of the merger to you, including the applicability and effect of federal, state, local and foreign income and other tax laws.
 
For more information, please see the section entitled “Bookham Proposal No. 1 and Avanex Proposal No. 1 — The Merger — Material U.S. Federal Income Tax Consequences of the Merger” on page 107 of this joint proxy statement/prospectus.
 
Q: How does Bookham’s board of directors recommend that Bookham stockholders vote?
 
A: After careful consideration, Bookham’s board of directors unanimously recommends that Bookham stockholders vote “FOR” Bookham Proposal No. 1 to approve the issuance of shares of Bookham common stock in the merger; “FOR” Bookham Proposal No. 2 to approve an amendment to Bookham’s restated certificate of incorporation to increase its authorized shares of common stock; “FOR” Bookham Proposal No. 3 to approve amendments to Bookham’s restated certificate of incorporation in order to effect a reverse stock split and to reduce the number of authorized shares of Bookham common stock and preferred stock; and “FOR” Bookham Proposal No. 4 to adjourn the Bookham special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of any of Bookham Proposal Nos. 1, 2 or 3. For a description of the reasons underlying the recommendations of Bookham’s board, see the sections entitled “Bookham Proposal No. 1 and Avanex Proposal No. 1 — The Merger — Reasons for the Merger” on page 84; “Bookham Proposal No. 2 — Amendment to Bookham’s Restated Certificate of Incorporation to Increase the Authorized Shares of Common Stock” on page 135; “Bookham Proposal No. 3 — Amendments to Bookham’s Restated Certificate of Incorporation to Effect a Reverse Stock Split and to Reduce the Number of Authorized Shares of Bookham Common Stock and Preferred Stock” on page 137; and the section entitled “Bookham Proposal No. 4 — Possible Adjournment of the Bookham Special Meeting” on page 147.
 
Q: How does the Avanex board of directors recommend that Avanex stockholders vote?
 
A: After careful consideration, Avanex’s board of directors unanimously recommends that the Avanex stockholders vote “FOR” Avanex Proposal No. 1 to adopt the merger agreement and “FOR” Avanex Proposal No. 2 to adjourn the Avanex special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of Avanex Proposal No. 1. For a description of the reasons underlying the recommendations of Avanex’s board, see the section entitled “Bookham Proposal No. 1 and Avanex Proposal No. 1 — The Merger — Reasons for the Merger” on page 84, and the section entitled “Avanex Proposal No. 2 — Possible Adjournment of the Avanex Special Meeting” on page 148.
 
Q: What risks should I consider in deciding whether to vote in favor of the share issuance or the adoption of the merger agreement?
 
A: You should carefully review the section of this joint proxy statement/prospectus entitled “Risk Factors” beginning on page 26, which presents risks and uncertainties related to the merger and risks and uncertainties related to the operation of each of Bookham and Avanex.
 
Q: When do you expect the merger to be consummated?
 
A: Bookham and Avanex are working to complete the merger as quickly as practicable and currently anticipate that the consummation of the merger will occur by mid-calendar year 2009, but we cannot predict the exact timing. For more information, please see the section entitled “The Merger Agreement — Conditions to the Merger” on page 126.


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Q: What do I need to do now?
 
A: We urge you to read this joint proxy statement/prospectus carefully, including its annexes, and to consider how the merger affects you.
 
If you are a Bookham stockholder, you may provide your proxy instructions in three different ways. First, you may vote by completing and signing the Bookham proxy card that accompanies this joint proxy statement/prospectus and promptly mailing it in the enclosed postage-prepaid envelope. Alternatively, you may submit your proxy to vote your shares by telephone by following the instructions set forth on the enclosed Bookham proxy card. Finally, you may submit your proxy to vote your shares over the Internet from any location in the world by following the instructions set forth on the enclosed Bookham proxy card. Please provide your proxy instructions only once and as soon as possible so that your shares can be voted at the special meeting of Bookham stockholders.
 
If you are an Avanex stockholder, you may provide your proxy instructions in three different ways. First, you can mail your signed Avanex proxy card in the enclosed return envelope. Alternatively, you can provide your proxy instructions via the toll-free call center set up for this purpose indicated on the enclosed Avanex proxy card and following the instructions provided. Please have your Avanex proxy card available when you call. Finally, you can provide your proxy instructions via the Internet by accessing the website indicated on the enclosed proxy card and following the instructions provided. Please have your Avanex proxy card available when you access the web page. Please provide your proxy instructions only once and as soon as possible so that your shares can be voted at the special meeting of Avanex stockholders.
 
Q: What happens if I do not return a proxy card or otherwise provide proxy instructions?
 
A: If you are a Bookham stockholder, the failure to return your proxy card or otherwise provide proxy instructions could be a factor in establishing a quorum for the special meeting of Bookham stockholders, which is required to transact business at the meeting. If you are a Bookham stockholder and you do not submit a proxy card or vote at the Bookham special meeting, your shares will not be counted as present for the purpose of determining the presence of a quorum and will have no effect on the approval of Bookham Proposal Nos. 1 and 4, but would have the same effect as voting against Bookham Proposal Nos. 2 and 3. Broker non-votes will similarly have no effect on the approval of Bookham Proposal Nos. 1 and 4, but would have the same effect as voting against Bookham Proposal Nos. 2 and 3. If you submit a proxy card and affirmatively elect to abstain from voting, your proxy will be counted as present for the purpose of determining the presence of a quorum for the special meeting of Bookham stockholders, but will not be voted at the meeting. As a result, your abstention will have no effect on the approval of Bookham Proposal Nos. 1 and 4, but would have the same effect as voting against Bookham Proposal Nos. 2 and 3.
 
If you are an Avanex stockholder, the failure to return your proxy card or otherwise provide proxy instructions will have the same effect as voting against the adoption of the merger agreement and could be a factor in establishing a quorum for the special meeting of Avanex stockholders, which is required to transact business at the meeting. The failure to submit a proxy card or vote at the Avanex special meeting, or an abstention, vote withheld or “broker non-votes” will have no effect on the outcome of Avanex Proposal No. 2.
 
Q: May I vote in person?
 
A: If your shares of Bookham common stock or Avanex common stock are registered directly in your name with Bookham’s or Avanex’s transfer agent, respectively, you are considered, with respect to those shares, the stockholder of record, and the proxy materials and proxy card are being sent directly to you by Bookham or Avanex, respectively. If you are a Bookham stockholder of record, you may attend the special meeting of Bookham stockholders to be held on April 27, 2009 and vote your shares in person, rather than signing and returning your proxy card or otherwise providing proxy instructions. If you are an Avanex stockholder of record, you may attend the special meeting of Avanex stockholders to be held on April 27, 2009 and vote your shares in person, rather than signing and returning your proxy card or otherwise providing proxy instructions.


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If your shares of Bookham common stock or Avanex common stock are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in “street name,” and the proxy materials are being forwarded to you together with a voting instruction card. As the beneficial owner, you are also invited to attend the special meeting of Bookham stockholders or the special meeting of Avanex stockholders, respectively. Since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the applicable special meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the meeting.
 
Q: If my shares are held in “street name” by my broker, will my broker vote my shares for me?
 
A: Your broker will not be able to vote your shares without instructions from you. You should instruct your broker to vote your shares, following the procedure provided by your broker.
 
Q: May I change my vote after I have provided proxy instructions?
 
A: Yes. You may change your vote at any time before your proxy is voted at the Bookham special meeting or Avanex special meeting, as applicable. You can do this in one of three ways. First, you can send a written notice stating that you would like to revoke your proxy. Second, you can submit new proxy instructions either on a new proxy card, by telephone or via the Internet. Third, you can attend the Bookham special meeting or Avanex special meeting, as applicable, and vote in person. Your attendance alone will not revoke your proxy. If you have instructed a broker to vote your shares, you must follow directions received from your broker to change those instructions.
 
Q: Should Avanex stockholders send in their stock certificates now?
 
A: No. If you are an Avanex stockholder, after the merger is consummated, you will receive written instructions from an exchange agent explaining how to exchange your stock certificates representing shares of Avanex common stock for certificates representing shares of Bookham common stock. You will also receive a cash payment in lieu of any fractional share of Bookham common stock. Bookham stockholders will not exchange their stock certificates in connection with the merger.
 
Q: When is the Bookham reverse stock split expected to be effected and should Bookham stockholders send in their stock certificates now?
 
A: If Bookham Proposal No. 3 — “Amendments to Bookham’s Restated Certificate of Incorporation to Effect a Reverse Stock Split and to Reduce the Number of Authorized Shares of Bookham Common Stock and Preferred Stock” is approved, the Bookham board of directors will, for a period of one year from the date of the Bookham special meeting, have the sole discretion to effect a reverse stock split within the range described herein (with the corresponding proportionate reduction in the authorized shares of Bookham common stock and preferred stock) as it determines to be in the best interests of Bookham and its stockholders and regardless of whether any of the other Bookham Proposals are approved or whether the proposed merger is consummated. If the Bookham board of directors determines to effect a reverse stock split, the Bookham stockholders at the time of such determination will receive written instructions from an exchange agent explaining how to exchange their stock certificates, so Bookham stockholders should not send in their stock certificates now.
 
Q: Am I entitled to appraisal rights in connection with the merger?
 
A: No. Under Delaware law, holders of Avanex common stock are not entitled to appraisal rights in connection with the merger because both Bookham common stock and Avanex common stock are listed on the NASDAQ Global Market. Under Delaware law, Bookham stockholders are not entitled to appraisal rights in connection with the merger.
 
Q: Are Bookham stockholders entitled to appraisal rights in connection with the reverse stock split, if effected?
 
A: No. Under Delaware law, Bookham stockholders are not entitled to dissenter’s appraisal rights with respect to the proposed amendments to the Bookham restated certificate of incorporation to effect a


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reverse stock split and a corresponding proportionate reduction in the number of authorized shares of Bookham common stock and preferred stock.
 
Q: Who is paying for this proxy solicitation?
 
A: Bookham and Avanex are conducting this proxy solicitation and will bear the cost of soliciting proxies, including the preparation, assembly, printing and mailing of this joint proxy statement/prospectus, the proxy card and any additional information furnished to stockholders. Bookham has engaged the services of Okapi Partners LLC to distribute proxy solicitation materials to brokers, banks and other nominees and to assist in the solicitation of proxies from Bookham stockholders. Avanex has retained Morrow & Co., LLC to aid in Avanex’s proxy solicitation process. Bookham estimates that its proxy solicitor fees will be approximately $15,000 and Avanex estimates that its proxy solicitor fees will be approximately $8,000. Bookham and Avanex may also reimburse brokerage houses and other custodians, nominees and fiduciaries for their costs of forwarding proxy and solicitation materials to beneficial owners.
 
Q: Who can help answer my questions?
 
A: If you are a Bookham stockholder, and would like additional copies, without charge, of this joint proxy statement/prospectus or if you have questions about the merger, including the procedures for voting your shares, you should contact:
 
Bookham, Inc.
Attn: Investor Relations
2584 Junction Avenue
San Jose, California 95134
Telephone: (888) 528-0788
Email: ir@bookham.com
 
OR
 
Okapi Partners LLC
780 Third Avenue, 30th Floor
New York, NY 10017
Telephone: (212) 297- 0720
Toll Free: (877) 285-5990
Email: info@okapipartners.com
 
If you are an Avanex stockholder, and would like additional copies, without charge, of this joint proxy statement/prospectus or if you have questions about the merger, including the procedures for voting your shares, you should contact:
 
Avanex Corporation
Attn: Investor Relations
40919 Encyclopedia Circle
Fremont, California 94538
Telephone: (510) 897-4188
E-mail: ir@avanex.com
 
OR
 
Morrow & Co., LLC
470 West Avenue
Stamford, CT 06902
Telephone: (203) 658-9400
Toll Free: (800) 279-6413
Email: avanex.info@morrowco.com


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SUMMARY
 
This summary highlights selected information from this document. To understand the merger fully, you should read carefully this entire document and the documents to which we refer, including the annexes attached hereto. See “Where You Can Find More Information” on page 272. The merger agreement is attached as Annex A to this joint proxy statement/prospectus. We encourage you to read the merger agreement as it is the legal document that governs the merger. We have included page references in parentheses to direct you to a more detailed description of the topics presented in this summary.
 
Unless specifically stated otherwise, the following information and all other information contained in this joint proxy statement/prospectus, including that regarding the exchange ratio pursuant to the merger agreement, does not give effect to the proposed reverse stock split discussed in the section entitled “Bookham Proposal No. 3 — Amendments to Bookham’s Restated Certificate of Incorporation to Effect a Reverse Stock Split and to Reduce the Number of Authorized Shares of Bookham Common Stock and Preferred Stock.”
 
Comparative Per Share Market Price Information
 
Bookham common stock and Avanex common stock are listed on the NASDAQ Global Market under the symbols “BKHM” and “AVNX,” respectively. On January 27, 2009, the last full trading day prior to the public announcement of the proposed merger, Bookham common stock closed at $0.40 and Avanex common stock closed at $1.30. On March 24, 2009, Bookham common stock closed at $0.31 and Avanex common stock closed at $1.52.
 
The Companies (Page 62)
 
Bookham, Inc.
2584 Junction Avenue
San Jose, California 95134
(408) 383-1400
 
Bookham designs, manufactures and markets optical components, modules and subsystems that generate, detect, amplify, combine and separate light signals principally for use in high-performance fiber optics communications networks. Bookham’s primary operating segment, which it refers to as its telecom segment, addresses the optical communications market. Bookham’s remaining product lines, which comprise its non-telecom segment, leverage its optical component technologies and expertise in manufacturing optical subsystems to address opportunities in other markets, including industrial, research, semiconductor capital equipment, military and biotechnology.
 
Ultraviolet Acquisition Sub, Inc. is a wholly owned subsidiary of Bookham that was incorporated in Delaware in January 2009. Ultraviolet Acquisition Sub does not engage in any operations and exists solely to facilitate the merger.
 
Avanex Corporation
40919 Encyclopedia Circle
Fremont, California 94538
(510) 897-4188
 
Avanex is a global provider of high-performance, intelligent, photonic products including optical components, modules and subsystems. Its products enable optical communication networks to regenerate, transmit and manage voice, video and data optical signals efficiently. Telecommunication system integrators and their network carrier customers use Avanex products to enhance system performance and increase network speed and capacity.
 
Recent Developments
 
On February 3, 2009, a purported class action complaint was filed against Avanex and its directors, Bookham, Inc., and Ultraviolet Acquisition Sub, Inc. in the Superior Court of California, Alameda County by


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two individuals who purport to be shareholders of Avanex. Plaintiffs purport to bring this action on behalf of all shareholders of Avanex. On March 3, 2009, these individuals filed an amended complaint. The amended complaint alleges that the defendants breached their fiduciary duties by failing to maximize shareholder value in connection with the contemplated merger of Avanex and Bookham, and that the joint proxy statement/prospectus fails to provide stockholders with material information or contains materially misleading information thereby rendering the stockholders unable to cast an informed vote on the proposed merger. The complaint also alleges that Avanex, Bookham, and Ultraviolet Acquisition Sub aided and abetted the individual defendants’ alleged breach of fiduciary duties. Plaintiffs seek to permanently enjoin the merger with Bookham, monetary damages in an unspecified amount attributable to the alleged breach of duties, and legal fees and expenses. Avanex, Bookham, Ultraviolet Acquisition Sub, Inc. and the individual defendants intend to defend against the complaint vigorously.
 
On February 13, 2009, a lawsuit was filed against Avanex, its chief executive and chief financial officers, and one of its secretaries in the Superior Court of California, Los Angeles County, by an individual claiming to be a former stockholder of Avanex. Plaintiff claims that defendants made false statements to him about the reasons for the departure of the prior chief executive officer of Avanex and about Avanex’s business and prospects, which allegedly caused him to purchase and hold Avanex stock. Plaintiff asserts claims for intentional misrepresentation, negligent misrepresentation, deceit (concealment), and breach of fiduciary duty. Plaintiff seeks compensatory damages of $5 million, punitive damages, interest, and costs of suit. Avanex and the individual defendants intend to defend themselves vigorously.
 
The Special Meetings
 
The Bookham Special Meeting (Page 63)
 
Time, Date and Place.  A special meeting of the stockholders of Bookham will be held on Monday, April 27, 2009, at the principal executive offices of Bookham located at 2584 Junction Avenue, San Jose, California 95134 at 11:00 a.m., local time, to vote on: Bookham Proposal No. 1 to approve the issuance of shares of Bookham common stock in the merger; Bookham Proposal No. 2 to approve an amendment to Bookham’s restated certificate of incorporation to increase the authorized shares of its common stock; Bookham Proposal No. 3 to approve amendments to Bookham’s restated certificate of incorporation to effect a reverse stock split and to reduce the number of authorized shares of Bookham common stock and preferred stock; and Bookham Proposal No. 4 to adjourn the special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of any of Bookham Proposal Nos. 1, 2 or 3.
 
Record Date and Voting Power for Bookham.  You are entitled to vote at the Bookham special meeting if you owned shares of Bookham common stock at the close of business on March 18, 2009, the record date for the Bookham special meeting. You will have one vote at the Bookham special meeting for each share of Bookham common stock you owned at the close of business on the record date. There are 100,959,545 shares of Bookham common stock entitled to be voted at the Bookham special meeting.
 
Bookham Required Vote.  The affirmative vote of the holders of a majority of the voting power of the shares voting in person or by proxy at the Bookham special meeting is required for approval of each of Bookham Proposal No. 1 to approve the issuance of shares of Bookham common stock in the merger and Bookham Proposal No. 4 to adjourn the Bookham special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of any of Bookham Proposal Nos. 1, 2 or 3. The affirmative vote of the holders of a majority of the voting power of Bookham common stock outstanding on the record date for the Bookham special meeting is required for approval of Bookham Proposal No. 2 to approve an amendment to Bookham’s restated certificate of incorporation to increase the number of authorized shares of Bookham common stock and Bookham Proposal No. 3 to approve amendments to Bookham’s restated certificate of incorporation to effect a reverse stock split and to reduce the number of authorized shares of Bookham common stock and preferred stock.
 
Share Ownership of Management.  As of March 18, 2009, the directors and executive officers of Bookham beneficially owned approximately 1.63% of the shares entitled to vote at the Bookham special meeting. The directors and certain officers of Bookham have agreed to vote their shares of Bookham common stock in favor of the issuance of shares of Bookham common stock in the merger.


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The Avanex Special Meeting (Page 67)
 
Time, Date and Place.  A special meeting of the stockholders of Avanex will be held on Monday, April 27, 2009, at the principal executive offices of Avanex located at 40919 Encyclopedia Circle, Fremont, California 94538, at 11:00 a.m., local time, to vote on Avanex Proposal No. 1 to adopt the merger agreement and Avanex Proposal No. 2 to adjourn the Avanex special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of Avanex Proposal No. 1.
 
Record Date and Voting Power for Avanex.  You are entitled to vote at the Avanex special meeting if you owned shares of Avanex common stock at the close of business on March 18, 2009, the record date for the Avanex special meeting. You will have one vote at the Avanex special meeting for each share of Avanex common stock you owned at the close of business on the record date. There are 15,623,421 shares of Avanex common stock entitled to be voted at the Avanex special meeting.
 
Avanex Required Vote.  The affirmative vote of the holders of a majority of the voting power of the shares of Avanex common stock outstanding on the record date for the Avanex special meeting is required to approve Avanex Proposal No. 1 to adopt the merger agreement. The affirmative vote of the holders of a majority of the votes cast in person or by proxy at the Avanex special meeting is required to approve Avanex Proposal No. 2 to adjourn the Avanex special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of Avanex Proposal No. 1.
 
Share Ownership of Management As of March 18, 2009, the current directors and executive officers of Avanex beneficially owned approximately 1.75% of the shares entitled to vote at the Avanex special meeting. The directors and certain executive officers of Avanex have agreed to vote their shares of Avanex common stock in favor of the adoption of the merger agreement.
 
Recommendations to Stockholders
 
To Bookham Stockholders (Page 63).  The Bookham board of directors has unanimously determined and believes that each of: (a) the issuance of shares of Bookham common stock in the merger; (b) the amendment to Bookham’s restated certificate of incorporation to increase the number of authorized shares of Bookham common stock; (c) amendments to Bookham’s restated certificate of incorporation to effect a reverse stock split and to reduce the number of authorized shares of Bookham common stock and preferred stock; and (d) to adjourn the special meeting, if a quorum is present, for a period of not more than 30 days for the purpose of soliciting additional proxies to approve any of Bookham Proposal Nos. 1, 2 or 3, is advisable to, and in the best interests of, Bookham and its stockholders. The Bookham board of directors unanimously recommends that the holders of Bookham common stock vote “FOR” Bookham Proposal No. 1 to approve the issuance of shares of Bookham common stock in the merger, “FOR” Bookham Proposal No. 2 to approve an amendment to Bookham’s restated certificate of incorporation to increase the number of authorized shares of Bookham common stock, “FOR” Bookham Proposal No. 3 to approve amendments to Bookham’s restated certificate of incorporation to effect a reverse stock split and to reduce the number of authorized shares of Bookham common stock and preferred stock, and “FOR” Bookham Proposal No. 4 to adjourn the Bookham special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of any of the Bookham Proposals Nos. 1, 2 or 3.
 
To Avanex Stockholders (Page 67).  The Avanex board of directors has unanimously determined and believes that the merger is advisable and fair to, and in the best interests of, Avanex and its stockholders. The Avanex board of directors unanimously recommends that the holders of Avanex common stock vote “FOR” Avanex Proposal No. 1 to adopt the merger agreement and “FOR” Proposal No. 2 to adjourn the Avanex special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of Avanex Proposal No. 1.
 
The Merger (Page 111)
 
In the merger, Ultraviolet Acquisition Sub, Inc., a wholly owned subsidiary of Bookham, will merge with and into Avanex, and Avanex will become a wholly owned subsidiary of Bookham. Holders of Avanex


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common stock, options, restricted stock units and warrants will become holders of Bookham common stock, stock options, restricted stock units and warrants, respectively, following the merger. The shares of Bookham common stock issued to Avanex stockholders in connection with the merger are expected to represent approximately 46.75% of the outstanding shares of Bookham common stock immediately following the consummation of the merger, based on the number of shares of Bookham common stock and Avanex common stock that were outstanding on January 27, 2009, assuming that no Avanex or Bookham stock options or warrants are exercised after January 27, 2009 and prior to the effective time of the merger, and without giving effect to the vesting of any outstanding Avanex or Bookham restricted stock units prior to the effective time of the merger.
 
Manner and Basis of Converting Shares (Page 111)
 
If you are an Avanex stockholder, you will receive 5.426 shares of Bookham common stock in exchange for each share of Avanex common stock you own. The exchange ratio is fixed meaning that regardless of fluctuations in the market price of Bookham common stock or Avanex common stock, the exchange ratio will not change between now and the date the merger is consummated. The exchange ratio is, however, subject to adjustments for changes in the number of outstanding shares of Bookham or Avanex by reason of future stock splits, reverse stock splits, division of shares, stock dividends or other similar transactions.
 
Fractional Shares (Page 111)
 
No fractional shares of Bookham common stock will be issued in the merger. Instead, each Avanex stockholder otherwise entitled to a fraction of a share of Bookham common stock will be entitled to receive in cash the dollar amount determined by multiplying such fraction by the average closing price of Bookham common stock over a ten day period as specified in the merger agreement. For a more complete description of what Avanex stockholders will receive in the merger, please see the section entitled “The Merger Agreement — Manner and Basis of Converting Shares” on page 111 of this joint proxy statement/prospectus.
 
Treatment of Avanex Stock Options (Page 113)
 
The merger agreement provides that at the effective time of the merger each Avanex stock option that is outstanding and unexercised immediately prior to the effective time will be converted into an option (adjusted to give effect to the exchange ratio) to purchase Bookham common stock and Bookham will assume such stock option in accordance with the terms of the applicable Avanex stock option plan and terms of the stock option agreement relating to such Avanex stock option (subject to certain adjustments to the number of shares subject to that option and the exercise price applicable to such option).
 
Treatment of Avanex Restricted Stock Units (Page 113)
 
The merger agreement provides that at the effective time of the merger, each restricted stock unit of Avanex common stock that is outstanding immediately prior to the effective time will be converted into a restricted stock unit of Bookham common stock (adjusted to give effect to the exchange ratio) and will remain subject to the same conditions as the Avanex restricted stock unit (subject to certain adjustment to the number of shares subject to the restricted stock unit).
 
Treatment of Avanex Warrants (Page 113)
 
The merger agreement provides that at the effective time of the merger, each warrant to purchase common stock of Avanex that is outstanding and unexercised immediately prior to the effective time of the merger will be converted into and become a warrant to purchase common stock of Bookham (adjusted to give effect to the exchange ratio and subject to certain adjustment to the number of shares subject to such warrant and the exercise price applicable to such warrant). Bookham will replace each such Avanex warrant by issuing a reasonably equivalent replacement warrant in accordance with the terms of such warrant.


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Risks Relating to the Merger (Page 26)
 
In evaluating the merger agreement or the issuance of shares of Bookham common stock in the merger, you should carefully read this joint proxy statement/prospectus and especially consider the factors discussed in the section entitled “Risk Factors — Risks Relating to the Merger” on page 26.
 
Reasons for the Merger
 
Mutual Reasons (Page 84).  Bookham and Avanex believe that the combination of the companies’ product lines, supply chains, sales teams, administrative functions and technologies will create significant cost savings synergies and form a leader in the metro and long-haul optical markets. It is expected that the two companies together will be able to meet more of their customers’ needs by integrating their product lines and technologies. Both companies believe that the industry is in a period of consolidation and that the combined company will have the scale to better compete in this environment. In addition, there is little overlap between the businesses of Bookham and Avanex and the companies’ products and offerings complement each other. Both companies also believe that combining the creative and operational capacities of the two companies will allow them to focus their research and development efforts and to accelerate innovations. From a manufacturing standpoint, both companies believe that the combination of their different manufacturing methods will create an efficient mix of manufacturing operations. From a geographic standpoint the combination is expected to enhance the strength of the geographic footprint of the combined company.
 
Bookham’s Reasons (Page 85).  In addition to the reasons above, the Bookham board of directors considered in evaluating the merger a number of other factors. See the section entitled “The Merger Agreement — Reasons for the Merger — Bookham’s Reasons for the Merger” on page 85.
 
Avanex’s Reasons (Page 87).  In addition to the reasons above, the Avanex board of directors considered in evaluating the merger a number of other factors. See the section entitled “The Merger Agreement — Reasons for the Merger — Avanex’s Reasons for the Merger” on page 87.
 
Opinions of Financial Advisors
 
Opinion of Bookham’s Financial Advisor (Page 90).  Citigroup Global Markets Inc., also referred to as Citi, delivered its opinion to Bookham’s board of directors that, as of January 27, 2009, and based on and subject to the assumptions, limitations, qualifications and other matters set forth therein, the exchange ratio of 5.426 shares of Bookham common stock to be issued in exchange for each share of Avanex common stock pursuant to the merger agreement was fair to Bookham from a financial point of view.
 
The full text of the written opinion of Citigroup Global Markets Inc., dated January 27, 2009, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex D. Citigroup Global Markets Inc. provided its opinion for the information of Bookham’s board of directors in connection with its evaluation of the merger. The Citigroup Global Markets Inc. opinion is not intended to be and does not constitute a recommendation as to how any holder of Bookham common stock should vote with respect to the issuance of shares of Bookham common stock in the merger. Bookham urges you to read the entire opinion carefully.
 
Opinion of Avanex’s Financial Advisor (Page 96).  In connection with the merger, Avanex’s financial advisor, Banc of America Securities LLC, referred to as Banc of America Securities, delivered to Avanex’s board of directors a written opinion, dated January 27, 2009, as to the fairness, from a financial point of view and as of the date of the opinion, to the holders of Avanex common stock of the exchange ratio provided for in the merger agreement of 5.426 shares of Bookham common stock for each outstanding share of Avanex common stock. The full text of the written opinion, dated January 27, 2009, of Banc of America Securities, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex E to this joint proxy statement/prospectus and is incorporated by reference in this joint proxy statement/prospectus in its entirety. Banc of America Securities delivered its opinion to Avanex’s board of directors for the benefit and use of Avanex’s board of directors in connection with and for purposes of its evaluation of the exchange ratio from a financial


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point of view. Banc of America Securities’ opinion does not address any other aspect of the merger and does not constitute a recommendation to any stockholder as to how to vote or act in connection with the proposed merger. Avanex encourages holders of Avanex common stock to read the opinion carefully in its entirety.
 
Interests of Bookham’s Directors in the Merger (Page 104)
 
When considering the recommendations by the Bookham board of directors, you should be aware that a number of Bookham’s directors have interests in the merger that are different from those of other Bookham stockholders.
 
Interests of Avanex’s Executive Officers and Directors in the Merger (Page 105)
 
When considering the recommendations by the Avanex board of directors, you should be aware that a number of Avanex’s executive officers and directors have interests in the merger that are different from those of other Avanex stockholders.
 
Restrictions on Resales (Page 110)
 
All shares of Bookham common stock received by Avanex stockholders in the merger will be freely tradable, except that shares of Bookham common stock received by persons who become affiliates of Bookham for purposes of Rule 144 under the Securities Act may be resold by them only in transactions permitted by Rule 144, or as otherwise permitted under the Securities Act.
 
Limitation on the Solicitation, Negotiation and Discussion by Avanex and Bookham of Other Acquisition Proposals (Page 123)
 
Each of Avanex and Bookham has agreed to a number of limitations with respect to soliciting, negotiating and discussing acquisition proposals involving persons other than Avanex and Bookham, and to certain related matters.
 
Change of Board Recommendation (Page 122)
 
Subject to limited conditions, the board of directors of Avanex or Bookham may withdraw or modify its recommendation in the case of Avanex in support of the adoption of the merger agreement and in the case of Bookham in support of the issuance of shares of Bookham common stock in the merger and the amendment to Bookham’s restated certificate of incorporation to increase the number of authorized shares of Bookham common stock. In the event that the board of directors of either company withdraws or modifies its recommendation in a manner adverse to the other company, the company whose board of directors withdrew or modified its recommendation may be required to pay a termination fee of $1.64 million to the other company.
 
Conditions to the Merger (Page 126)
 
The respective obligations of Bookham and Avanex to consummate the merger are subject to the satisfaction of certain conditions.
 
Termination of the Merger Agreement (Page 129)
 
Either Bookham or Avanex can terminate the merger agreement under certain circumstances, which would prevent the merger from being consummated.
 
Expenses and Termination Fees (Page 131)
 
Subject to limited exceptions, all fees and expenses incurred in connection with the merger agreement will be paid by the party incurring such expenses; provided, however, that Bookham and Avanex will share equally all fees and expenses, other than attorneys’ fees, incurred in connection with: (a) the filing, printing


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and mailing of the registration statement on Form S-4 and this joint proxy statement/prospectus; and (b) the filing by the parties of any notice or other document under any applicable antitrust or competition legal requirement.
 
A termination fee of $1.64 million may be payable by either Bookham or Avanex to the other party upon the termination of the merger agreement under several circumstances. Further, in certain circumstances, either Bookham or Avanex may be required to pay to the other party after termination of the merger agreement the other party’s expenses in connection with the merger in the amount of $1.0 million, which fee will be credited against the termination fee described above.
 
Tax Matters (Page 107)
 
Cooley Godward Kronish LLP, outside counsel to Bookham, and Wilson Sonsini Goodrich & Rosati, Professional Corporation, outside counsel to Avanex, are expected to each issue a tax opinion to the effect that the merger will constitute a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended, or the Code. In a reorganization, an Avanex stockholder generally will not recognize any gain or loss for U.S. federal income tax purposes upon the exchange of its shares of Avanex common stock for shares of Bookham common stock. However, any cash received for any fractional share will result in the recognition of gain or loss as if such stockholder sold its fractional share. An Avanex stockholder’s tax basis in the shares of Bookham common stock that it receives in the merger will equal its current tax basis in its Avanex common stock (reduced by the basis allocable to any fractional share interest for which it receives cash).
 
Tax matters can be complicated, and the tax consequences of the merger to you will depend on the facts of your own situation. You should consult your own tax advisors to fully understand the tax consequences of the merger to you, including the applicability and effect of federal, state, local and foreign income and other tax laws.
 
Regulatory Approvals (Page 109)
 
In the United States, Bookham must comply with applicable federal and state securities laws and the rules and regulations of the NASDAQ Global Market in connection with the issuance of shares of Bookham common stock in the merger and the filing of this joint proxy statement/prospectus with the U.S. Securities and Exchange Commission, or the SEC. Although the merger is not subject to reporting obligations under the Hart-Scott-Rodino Act, certain governmental entities may take such actions under the antitrust laws as such entity deems necessary or desirable in the public interest, including seeking to enjoin the merger or seeking divestiture of assets of Bookham or Avanex.
 
Anticipated Accounting Treatment (Page 109)
 
The merger is expected to be accounted for using the purchase method of accounting pursuant to Statement of Financial Accounting Standards No. 141, Business Combinations, or SFAS No. 141, with Bookham as the acquiror. Under the purchase method of accounting, the total estimated purchase price is allocated to the assets of Avanex acquired and liabilities of Avanex assumed in connection with the merger, based on their estimated fair values. These allocations will be based upon a valuation that has not yet been finalized. If the merger is consummated after June 27, 2009, the merger will be accounted for pursuant to SFAS No. 141 (revised 2007), or SFAS No. 141R. Under SFAS No. 141R there are significant differences as compared to SFAS No. 141 in determining the purchase price of an acquired entity, including the requirement to expense transaction costs and to reflect the fair value of contingent purchase price adjustments at the date of acquisition.
 
Appraisal Rights (Page 109)
 
Under Delaware law, holders of Avanex common stock are not entitled to appraisal rights in connection with the merger because both Bookham common stock and Avanex common stock are listed on the NASDAQ Global Market. Under Delaware law, holders of Bookham common stock are not entitled to appraisal rights in connection with the merger.


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The Board of Directors and Executive Officers of the Combined Company (Page 178)
 
The board of directors of Bookham following the effective time of the merger will be composed of three members of Avanex’s current board of directors (currently expected to be Giovanni Barbarossa, Greg Dougherty and Joel A. Smith, III) and four members to be determined by the Bookham board of directors (currently expected to be Alain Couder, Bernard Couillaud, Lori Holland and Edward Collins). It is currently expected that the executive officers of Bookham following the merger will be substantially similar to the current executive officers of Bookham. In addition, following the effective time of the merger, Bookham contemplates that certain employees of Avanex will join Bookham as officers of Bookham and thus may become executive officers of Bookham. In the event that new personnel become executive officers of Bookham, certain persons who currently serve as executive officers of Bookham may no longer serve in such capacity. As of the date of this joint proxy statement/prospectus it is not known which Avanex employees, if any, will become executive officers of Bookham and no determinations by Bookham have been made in this regard. Similarly, it is not known which of Bookham’s current executive officers, if any, will cease to serve in such capacity. The current executive officers of Bookham are: Alain Couder (President and Chief Executive Officer), Jerry Turin (Chief Financial Officer), James Haynes (Chief Operating Officer), Adrian Meldrum (Executive Vice President, Telecom Division) and Kate Rundle (Executive Vice President, General Counsel and Corporate Secretary).
 
Listing of Bookham Common Stock and Delisting and Deregistration of Avanex Common Stock
 
Application will be made to have the shares of Bookham common stock issued in the merger approved for listing on the NASDAQ Global Market. If the merger is completed, Avanex common stock will no longer be listed on the NASDAQ Global Market and will be deregistered under the Exchange Act, and Avanex will no longer file periodic reports with the SEC.
 
Comparison of Rights of Bookham Stockholders and Avanex Stockholders (Page 232)
 
Avanex stockholders, whose rights are currently governed by the Avanex amended and restated certificate of incorporation, the Avanex bylaws, as amended, and Delaware law, will, upon completion of the merger, become stockholders of Bookham and their rights will be governed by the Bookham restated certificate of incorporation, the Bookham bylaws, as amended, and Delaware law.


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The selected historical consolidated financial data set forth below is only a summary and should be read in conjunction with Bookham’s consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Bookham” appearing elsewhere in this joint proxy statement/prospectus. Prior to June 2004, Bookham Technology plc reported on a December 31 fiscal year end basis. In June 2004, Bookham Technology plc approved a change in its fiscal year end from December 31 to the Saturday closest to June 30. Pursuant to a scheme of arrangement under the laws of the United Kingdom, Bookham, Inc. assumed the financial reporting history of Bookham Technology plc effective September 10, 2004. In addition, in connection with the scheme of arrangement, Bookham changed its corporate domicile from the United Kingdom to the United States and changed its reporting currency from the U.K. pound sterling to the U.S. dollar effective September 10, 2004. Subsequent to the scheme of arrangement, Bookham’s common stock is traded only on the NASDAQ Global Market whereas, previously, its ordinary shares had been traded on the London Stock Exchange and its American Depositary Shares had been traded on the NASDAQ National Market, which is the former name of the NASDAQ Global Market.
 
The selected historical consolidated financial data set forth below at December 27, 2008 and for the six months ended December 27, 2008 and December 29, 2007, are derived from Bookham’s unaudited condensed consolidated financial statements included elsewhere in this joint proxy statement/prospectus. The selected financial data set forth below at June 28, 2008 and June 30, 2007, and for the years ended June 28, 2008, June 30, 2007 and July 1, 2006, are derived from Bookham’s audited consolidated financial statements included elsewhere in this joint proxy statement/prospectus. The selected historical consolidated financial data as of July 1, 2006 and as of and for the period ended July 2, 2005 are derived from audited consolidated financial statements not included in this joint proxy statement/prospectus. The selected financial data as of and for the period ended July 3, 2004 are derived from unaudited condensed consolidated financial statements not included in this joint proxy statement/prospectus.
 
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
 
                                                         
            Twelve Months
    Six Months Ended   Year Ended   Ended
    December 27,
  December 29,
  June 28,
  June 30,
  July 1,
  July 2,
  July 3,
    2008   2007   2008   2007   2006   2005   2004
    (In thousands, except per share data)
 
Revenues
  $ 116,735     $ 113,238     $ 235,491     $ 202,814     $ 231,649     $ 200,256     $ 158,198  
Cost of revenues
  $ 91,401     $ 87,467     $ 182,518     $ 173,493     $ 190,085     $ 193,647     $ 159,508  
Gross margin
  $ 25,334     $ 25,771     $ 52,973     $ 29,321     $ 41,564     $ 6,609     $ (1,310 )
Total operating expenses
  $ 45,378     $ 44,638     $ 83,240     $ 109,178     $ 118,928     $ 250,596     $ 125,887  
Operating loss
  $ (20,044 )   $ (18,867 )   $ (30,267 )   $ (79,857 )   $ (77,364 )   $ (243,987 )   $ (127,197 )
Net loss
  $ (4,268 )   $ (16,141 )   $ (23,440 )   $ (82,175 )   $ (87,497 )   $ (247,972 )   $ (125,078 )
Net loss per share (basic and diluted)
  $ (0.04 )   $ (0.19 )   $ (0.25 )   $ (1.17 )   $ (1.87 )   $ (7.43 )   $ (5.17 )
Weighted average shares of common stock used in computing net loss per share (basic and diluted)
    100,209       86,775       93,099       70,336       46,679       33,379       24,243  


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CONSOLIDATED BALANCE SHEET DATA:
 
                                                 
    As of
    December 27,
  June 28,
  June 30,
  July 1,
  July 2,
  July 3,
    2008   2008   2007   2006   2005   2004
    (In thousands)
 
Cash and cash equivalents
  $ 35,296     $ 32,863     $ 36,631     $ 37,750     $ 24,934     $ 109,682  
Short-term investments
  $ 8,894     $ 17,845     $     $     $     $ 6,985  
Total assets
  $ 180,086     $ 212,090     $ 204,526     $ 236,797     $ 238,578     $ 468,025  
Long-term obligations
  $ 1,821     $ 1,336     $ 1,908     $ 5,337     $ 76,925     $ 64,507  
Total liabilities
  $ 52,487     $ 63,028     $ 83,559     $ 101,656     $ 147,510     $ 137,435  
Total stockholders’ equity
  $ 127,599     $ 149,062     $ 120,967     $ 135,141     $ 91,068     $ 330,590  


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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF AVANEX
 
The selected historical consolidated financial data set forth below is only a summary and should be read in conjunction with Avanex’s consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Avanex” appearing elsewhere in this joint proxy statement/prospectus.
 
The selected historical consolidated financial data set forth below at December 31, 2008 and for the six months ended December 31, 2008 and 2007, are derived from Avanex’s unaudited condensed consolidated financial statements included elsewhere in this joint proxy statement/prospectus. The selected historical consolidated financial data set forth below at June 30, 2008 and 2007, and for the years ended June 30, 2008, 2007 and 2006, are derived from Avanex’s audited consolidated financial statements included elsewhere in this joint proxy statement/ prospectus. The selected historical consolidated financial data as of June 30, 2006 and for the years ended June 30, 2005 and 2004 are derived from audited consolidated financial statements not included in this joint proxy statement/prospectus.
 
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
 
                                                         
    Six Months Ended   Year Ended
    Dec. 31,
  Dec. 31,
  June 30,
  June 30,
  June 30,
  June 30,
  June 30,
    2008   2007   2008   2007   2006   2005   2004
    (In thousands, except per share data)
 
Revenues
  $ 83,275     $ 106,716     $ 208,094     $ 212,755     $ 162,944     $ 160,695     $ 106,932  
Cost of revenue
  $ 69,660     $ 75,405     $ 144,509     $ 174,550     $ 154,484     $ 165,258     $ 133,259  
Gross profit
  $ 13,615     $ 31,311     $ 63,585     $ 38,205     $ 8,460     $ (4,563 )   $ (26,327 )
Total operating expenses
  $ 40,464     $ 32,277     $ 61,886     $ 70,673     $ 55,655     $ 100,830     $ 94,985  
Operating income (loss)
  $ (26,849 )   $ (966 )   $ 1,699     $ (32,468 )   $ (47,195 )   $ (105,393 )   $ (121,312 )
Net income (loss)
  $ (26,455 )   $ 131     $ 4,720     $ (30,605 )   $ (54,692 )   $ (108,371 )   $ (124,067 )
Net income (loss) per common share:
                                                       
Basic
  $ (1.71 )   $ 0.01     $ 0.31     $ (2.16 )   $ (5.03 )   $ (11.27 )   $ (14.25 )
Diluted
  $ (1.71 )   $ 0.01     $ 0.31     $ (2.16 )   $ (5.03 )   $ (11.27 )   $ (14.25 )
Weighted-average shares used in computing net income (loss) per common share:
                                                       
Basic:
    15,460       15,176       15,242       14,196       10,882       9,616       8,704  
Diluted:
    15,460       15,424       15,370       14,196       10,882       9,616       8,704  
 
CONSOLIDATED BALANCE SHEET DATA:
 
                                                 
    As of
    Dec. 31,
  June 30,
  June 30,
  June 30,
  June 30,
  June 30,
    2008   2008   2007   2006   2005   2004
    (In thousands)
 
Cash and cash equivalents
  $ 13,897     $ 14,839     $ 14,837     $ 28,963     $ 26,811     $ 21,637  
Short-term investments
  $ 19,550     $ 40,590     $ 28,942     $ 38,696     $ 38,929     $ 46,787  
Total assets
  $ 106,119     $ 141,067     $ 135,000     $ 165,558     $ 199,656     $ 275,196  
Convertible notes
  $     $     $     $ 4,569     $ 29,408     $  
Other long-term obligations
  $ 4,977     $ 6,563     $ 9,619     $ 24,618     $ 23,511     $ 26,556  
Total liabilities
  $ 43,474     $ 55,672     $ 62,918     $ 92,220     $ 145,908     $ 117,732  
Total stockholders’ equity
  $ 62,645     $ 85,395     $ 72,082     $ 73,338     $ 53,748     $ 157,464  


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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
(in thousands, except per share data)
 
The following table presents information about the unaudited pro forma condensed combined financial data after giving effect to the merger. The selected financial data set forth below at December 27, 2008, for the six months ended December 27, 2008 and for the year ended June 28, 2008 should be read together with the historical consolidated financial statements of Bookham and Avanex, including the related notes, appearing elsewhere in this joint proxy statement/prospectus, and the other consolidated historical financial data of Bookham and Avanex and unaudited pro forma combined financial statements, including the related notes, appearing elsewhere in this joint proxy statement/prospectus. See also “Risk Factors” beginning on page 26 and “Cautionary Statement Regarding Forward-Looking Information” on page 25 of this joint proxy statement/prospectus.
 
The unaudited pro forma condensed combined financial statements have been prepared by Bookham’s management for illustrative purposes only and are not necessarily indicative of the condensed combined financial position or results of operations in future periods or the results that actually would have been realized had Bookham and Avanex been a combined company during the specified periods. The pro forma adjustments are based on the information available at the time of the preparation of this joint proxy statement/prospectus.
 
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
 
                 
    Six Months
   
    Ended
  Year Ended
    December 27,
  June 28,
    2008   2008
 
Revenues
  $ 198,295     $ 439,405  
Cost of revenues
  $ 159,630     $ 323,444  
Gross margin
  $ 38,665     $ 115,961  
Total operating expenses
  $ 74,781     $ 141,963  
Operating loss
  $ (36,116 )   $ (26,002 )
Net loss
  $ (19,962 )   $ (16,186 )
Net loss per share (basic and diluted)
  $ (0.11 )   $ (0.09 )
Weighted average shares of common stock used in computing net loss per share (basic and diluted)
    185,828       178,718  
 
CONSOLIDATED BALANCE SHEET DATA:
 
         
    December 27,
    2008
 
Cash and cash equivalents
  $ 42,783  
Short-term investments
  $ 28,444  
Total assets
  $ 268,709  
Long-term obligations
  $ 6,798  
Total liabilities
  $ 95,744  
Total stockholders’ equity
  $ 172,965  


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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA
 
The following information does not give effect to the proposed reverse stock split discussed in the section entitled “Bookham Proposal No. 3 — Amendments to Bookham’s Restated Certificate of Incorporation to Effect a Reverse Stock Split and to Reduce the Number of Authorized Shares of Bookham Common Stock and Preferred Stock.”
 
The following information reflects the historical net loss and book value per share of Bookham common stock and the historical net income (loss) and book value per share of Avanex common stock in comparison with the unaudited pro forma net loss and book value per share after giving effect to the proposed merger of Bookham with Avanex on a pro forma combined basis. The unaudited pro forma combined per common share data are provided for informational purposes only and are not necessarily indications of the results that would have been achieved had the transaction been completed as of the dates indicated or that may be achieved in the future. We have derived the unaudited pro forma combined per common share data from the unaudited pro forma condensed combined financial statements presented elsewhere in this joint proxy statement/prospectus.
 
Because of different fiscal period ends, the unaudited pro forma condensed combined statements of operations data for the six months ended December 27, 2008 combines Bookham’s historical consolidated statement of operations for the six months then ended with Avanex’s historical consolidated statement of operations for the six months ended December 31, 2008. The unaudited pro forma condensed combined statements of operations data for the fiscal year ended June 28, 2008 combines Bookham’s historical consolidated statement of operations for the fiscal year then ended with Avanex’s results of operations for the fiscal year ended June 30, 2008.
 
You should read the tables below in conjunction with the respective audited and unaudited consolidated financial statements and related notes of Bookham and Avanex included elsewhere in this joint proxy statement/prospectus, and the unaudited pro forma condensed combined financial statements and notes related to such unaudited pro forma condensed combined financial statements included elsewhere in this joint proxy statement/prospectus.
 
Bookham
 
                 
    Six Months Ended
  Fiscal Year Ended
    December 27,
  June 28,
    2008   2008
 
Historical Per Common Share Data:
               
Basic and diluted net loss per share
  $ (0.04 )   $ (0.25 )
Book value per share as of the period end(1)
  $ 1.27     $ 1.48  
 
Avanex
 
                 
    Six Months Ended
  Fiscal Year Ended
    December 31,
  June 30,
    2008   2008
 
Historical Per Common Share Data:
               
Basic and diluted net income (loss) per share
  $ (1.71 )   $ 0.31  
Book value per share as of the period end(1)
  $ 4.01     $ 5.57  
 
Pro Forma Combined Company
 
                 
    Six Months Ended
  Fiscal Year Ended
    December 27,
  June 28,
    2008   2008
 
Unaudited Pro Forma Combined Per Common Share Data:
               
Basic and diluted net loss per share
  $ (0.11 )   $ (0.09 )
Book value per share as of the period end(1)
  $ 0.93       N/A  


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(1) The historical book value per Bookham share is computed by dividing stockholders’ equity by the number of shares of common stock outstanding at December 27, 2008 and June 28, 2008. The historical book value per Avanex share is computed by dividing stockholders’ equity by the number of shares of common stock outstanding at December 30, 2008 and June 30, 2008. The unaudited pro forma combined book value per share as of December 27, 2008 is computed by dividing the unaudited pro forma combined stockholders’ equity by the unaudited pro forma combined number of shares of Bookham common stock outstanding at December 27, 2008 assuming the merger had occurred as of that date.


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MARKET PRICE AND DIVIDEND INFORMATION
 
The following information does not give effect to the proposed reverse stock split discussed in the section entitled “Bookham Proposal No. 3 — Amendments to Bookham’s Restated Certificate of Incorporation to Effect a Reverse Stock Split and to Reduce the Number of Authorized Shares of Bookham Common Stock and Preferred Stock.”
 
Bookham common stock and Avanex common stock are listed on the NASDAQ Global Market under the symbols “BKHM” and “AVNX,” respectively. The following tables present, for the periods indicated, the range of high and low per share closing sales prices for Bookham common stock and Avanex common stock as reported on the NASDAQ Global Market. Neither Bookham nor Avanex has ever declared or paid any cash dividend on shares of its common stock.
 
Bookham’s fiscal years end on the Saturday closest to June 30th, and Avanex’s fiscal years end on June 30th.
 
Bookham Common Stock
 
                 
    High     Low  
 
Fiscal Year 2007
               
First quarter
  $ 3.97     $ 2.42  
Second quarter
    4.30       3.08  
Third quarter
    4.15       2.19  
Fourth quarter
    2.54       1.98  
Fiscal Year 2008
               
First quarter
  $ 2.97     $ 2.25  
Second quarter
    3.32       2.25  
Third quarter
    2.58       1.21  
Fourth quarter
    2.24       1.31  
Fiscal Year 2009
               
First quarter
  $ 2.02     $ 1.12  
Second quarter
    1.24       0.30  
Third quarter (through March 24, 2009)
    0.56       0.21  
 
Avanex Common Stock
 
                 
    High     Low  
 
Fiscal Year 2007
               
First quarter
  $ 28.80     $ 18.75  
Second quarter
    31.65       22.35  
Third quarter
    34.20       26.40  
Fourth quarter
    27.45       22.35  
Fiscal Year 2008
               
First quarter
  $ 30.75     $ 22.50  
Second quarter
    28.35       14.55  
Third quarter
    15.45       8.70  
Fourth quarter
    18.00       9.60  
Fiscal Year 2009
               
First quarter(1)
  $ 16.20     $ 4.30  
Second quarter
    4.78       0.75  
Third quarter (through March 24, 2009)
    1.90       1.01  


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(1) Effective as of August 13, 2008, Avanex effected a one-for-fifteen reverse stock split of its common stock.
 
The following table presents the closing per share price of Bookham common stock and Avanex common stock, as reported on the NASDAQ Global Market, and the estimated equivalent per share price (as explained below) of Avanex common stock on January 27, 2009, the last full trading day before the public announcement of the proposed merger, and on March 24, 2009:
 
                         
    Bookham
  Avanex
  Estimated Equivalent
    Common Stock   Common Stock   Avanex Per Share Price
 
January 27, 2009
  $ 0.40     $ 1.30     $ 2.17  
March 24, 2009
  $ 0.31     $ 1.52     $ 1.68  
 
The estimated equivalent per share price of a share of Avanex common stock equals the exchange ratio of 5.426 multiplied by the price of a share of Bookham common stock. You may use this calculation to estimate what your shares of Avanex common stock will be worth if the merger is consummated. If the merger had occurred on March 24, 2009, you would have received a number of shares of Bookham common stock worth $1.68 for each share of Avanex common stock you owned. The actual equivalent per share price of a share of Avanex common stock that you will receive if the merger is consummated may be different from this price because the per share price of Bookham common stock on the NASDAQ Global Market fluctuates continuously.
 
Following the consummation of the merger, Bookham common stock will continue to be listed on the NASDAQ Global Market, and there will be no further market for Avanex common stock. Pursuant to the merger agreement, Bookham and Avanex will take all actions necessary to ensure that the name of the combined company following the merger will be the name mutually agreed to by Bookham and Avanex. The name change has not yet been determined between the parties; however, when (and if) a name change is effected, a change in Bookham’s trading symbol may be effected as well.


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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
 
This joint proxy statement/prospectus includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “believes,” “budget,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “potential,” “predicts,” “project,” “should,” “will” and similar expressions are intended to identify such forward-looking statements. Forward-looking statements in this joint proxy statement/prospectus include, without limitation, statements regarding forecasts of market growth, future revenue, benefits of the proposed merger, potential synergies, cost savings and costs as a result of the proposed merger, future expectations concerning available cash and cash equivalents, assumptions underlying or relating to any of the foregoing, and other matters that involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to differ materially from results expressed in or implied by this joint proxy statement/prospectus. Such risk factors include, among others: difficulties we may encounter in integrating the merged businesses; uncertainties as to the consummation of the merger, and the satisfaction of closing conditions to the merger (including the receipt of required stockholder approvals); whether certain markets will grow as anticipated; the competitive environment in the optical components industry and competitive responses to the proposed merger; whether the companies can successfully develop new products on a timely basis and the degree to which these gain market acceptance; risks associated with general business and economic conditions; the performance of financial markets; the impact of the filing for bankruptcy by Nortel Networks Corporation, or Nortel Networks or Nortel, on its ability to pay for existing products and its demand for products in the future; the lack of availability of credit; changes in inventory and product mix; degradation in the exchange rate of the Unites States dollar relative to the currencies of the U.K., China, the European Union and Thailand; the continued ability of Bookham to maintain requisite financial resources; the failure to realize synergies and cost savings from the transaction or delay in realization thereof; the businesses or employees of Bookham and Avanex not being combined and integrated successfully, or such combination taking longer, being more difficult, more time consuming or more costly to accomplish than expected; operating costs and business disruption following the merger, including adverse effects on employee retention, design wins and on the business relationship with third parties; and the effect of litigation challenging the merger. Additional risk factors that can cause the actual results, levels of activity, performance or achievements to differ materially from results expressed in or implied by this joint proxy statement/prospectus are described in the section “Risk Factors” on page 26.
 
Actual results may differ materially from those contained in the forward-looking statements in this joint proxy statement/prospectus. Additional information concerning these and other risk factors is contained elsewhere in this joint proxy statement/prospectus. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this joint proxy statement/prospectus. All forward-looking statements are qualified in their entirety by this cautionary statement. We assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements.


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RISK FACTORS
 
You should consider the following factors in evaluating whether to approve the issuance of shares of Bookham common stock in the merger or whether to adopt the merger agreement, as the case may be. These factors should be considered in conjunction with the other information included by Bookham and Avanex in this joint proxy statement/prospectus.
 
Risks Relating to the Merger
 
The combined company may not achieve strategic objectives, anticipated synergies and cost savings and other potential benefits of the merger.
 
Both companies expect to realize strategic and other financial and operating benefits as a result of the merger, including, among other things, significant cost savings synergies. However, neither company can predict with certainty the extent to which these benefits will actually be achieved or the timing of any such benefits. The following factors, among others, may prevent the combined company from realizing these benefits:
 
  •  the inability of the combined company to increase product sales;
 
  •  unfavorable customer reaction to the combined company’s products;
 
  •  competitive factors, including technological advances attained by competitors and patents granted to or contested by competitors, which would enhance their ability to compete against the combined company;
 
  •  the failure of key markets for the combined company’s products to develop to the extent or as rapidly as currently expected;
 
  •  the impact of the current economic and financial downturn and the extent to which the current adverse economic conditions and disruptions in the credit and financial markets improve or ameliorate, if at all;
 
  •  changes in technology that increase the number of competitors that the combined company faces after the merger or require the combined company to make significant capital expenditures to develop competitive products;
 
  •  unfavorable reaction to the merger by the combined company’s third party manufacturers;
 
  •  employment law or regulations or other limitations in foreign jurisdictions that could have an impact on timing, amounts or costs of achieving synergies; and
 
  •  the failure to retain key employees.
 
Failure to achieve the strategic objectives of the merger could have a material adverse effect on the revenues, expenses and the operating results and cash resources of the combined company and could result in the combined company not achieving the anticipated potential benefits of the merger. In addition, Bookham and Avanex cannot assure you that the growth rate of the combined company will equal the historical growth rate experienced by either Bookham or Avanex.
 
Bookham and Avanex may not successfully integrate their businesses and may not realize the anticipated benefits of the merger.
 
Achieving the potential benefits of the merger will depend in substantial part on the successful integration of the two companies’ technologies, operations and personnel. Bookham and Avanex will face significant challenges in integrating their organizations and operations in a timely and efficient manner. Some of the challenges involved in this integration include:
 
  •  demonstrating to the customers of Bookham and Avanex that the merger will not result in adverse changes in client service standards or business focus and helping customers conduct business easily with the combined company;


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  •  consolidating and rationalizing corporate information technology, engineering and administrative infrastructures;
 
  •  integrating product offerings;
 
  •  coordinating sales and marketing efforts to effectively communicate the capabilities of the combined company;
 
  •  coordinating and integrating the supply chains;
 
  •  coordinating and integrating the manufacturing activities of the two companies, including with respect to third party manufacturers;
 
  •  coordinating the international activities of the two companies;
 
  •  coordinating and rationalizing research and development activities to enhance introduction of new products and technologies with reduced cost; and
 
  •  preserving important relationships of both Bookham and Avanex and resolving potential conflicts that may arise.
 
The integration of Bookham and Avanex will be a complex, time consuming and expensive process. It is not certain that Bookham and Avanex can be successfully integrated in a timely manner or at all or that any of the anticipated benefits will be realized. Failure to do so could have a material adverse effect on the revenues, expenses and the operating results and cash resources of the combined company and could result in the combined company not achieving the anticipated potential benefits of the merger.
 
Integrating the companies may divert management’s attention away from our operations.
 
Successful integration of Bookham’s and Avanex’s operations, products and personnel may place a significant burden on Bookham’s management and its internal resources, following the completion of the merger. The diversion of management attention and any difficulties encountered in the transition and integration process could harm Bookham’s business, financial condition, operating results and evaluating strategic actions.
 
Bookham expects to incur significant costs integrating the companies into a single business, and if such integration is not successful Bookham may not realize the expected benefits of the merger.
 
Bookham expects to incur significant costs integrating Avanex’s operations, products and personnel. These costs may include costs for:
 
  •  employee redeployment, relocation or severance;
 
  •  conversion of information systems;
 
  •  combining research and development teams and processes;
 
  •  reorganization or closures of redundant or excess facilities; and
 
  •  relocation or disposition of excess equipment.
 
In addition, Bookham expects to incur significant costs in connection with the merger. Bookham does not know whether it will be successful in these integration efforts or in consummating the merger and cannot assure you that it will realize the expected benefits of the merger. In addition, Bookham may incur restructuring costs in connection with the merger that exceed the current expectations. Finally, the board of directors and employees of the combined entity will consist of individuals from both Bookham and Avanex, and the new members of the board of directors and employees of the combined entity, which have had limited exposure to each other, may not be able to work together effectively, which also could have an adverse effect on the business of the combined entity.


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If Bookham fails to retain key employees, the benefits of the merger could be diminished.
 
The successful combination of Bookham and Avanex will depend in part on the retention of key personnel. There can be no assurance that Bookham will be able to retain its or Avanex’s key management, technical, sales and customer support personnel. If Bookham fails to retain such key employees, it may not realize the anticipated benefits of the merger.
 
The sales of Bookham and/or Avanex could decline if customer relationships are disrupted by the merger.
 
Bookham’s and Avanex’s customers may not continue their current buying patterns during the pendency of, and following, the merger. Any loss of design wins or significant delay or reduction in orders for Bookham’s or Avanex’s products could harm the combined company’s business, financial condition and results of operations. Customers may defer purchasing decisions as they evaluate the likelihood of successful integration of Bookham’s and Avanex’s products and the combined company’s future product strategy, or consider purchasing products of our competitors. Customers may also seek to modify or terminate existing agreements, or prospective customers may delay entering into new agreements or purchasing our products. In addition, by increasing the breadth of Bookham’s and Avanex’s business, the merger may make it more difficult for the combined company to enter into relationships, including customer relationships, with strategic partners, some of whom may view the combined company as a more direct competitor than either Bookham or Avanex as an independent company.
 
Because Avanex stockholders will receive a fixed number of shares of Bookham common stock in the merger, rather than a fixed value, if the market price of Bookham common stock declines, Avanex stockholders will receive consideration in the merger of lesser value.
 
Upon the consummation of the merger, each Avanex share will be converted into the right to receive 5.426 shares of Bookham common stock. Since the exchange ratio is fixed, the number of shares that Avanex stockholders will receive in the merger will not change, even if the market price of Bookham or Avanex common stock changes. In recent years, the stock market, in general, and the securities of technology companies, in particular, have experienced extreme price and volume fluctuations. These market fluctuations may adversely affect the market price of Bookham common stock. The market price of Bookham common stock upon and after the consummation of the merger could be lower than the market price on the date of the merger agreement or the current market price. Avanex stockholders should obtain recent market quotations of Bookham common stock before they vote on the merger.
 
The ownership and voting interests of Bookham stockholders will be diluted as a result of the issuance of shares of Bookham common stock to the security holders of Avanex in the merger
 
After the merger, stockholders of Avanex who receive Bookham common stock in the merger will represent approximately 46.75% of Bookham common stock as of the date of the merger, based on the number of shares of Bookham common stock and Avanex common stock that were outstanding on January 27, 2009, assuming that no Avanex or Bookham stock options or warrants are exercised after January 27, 2009 and prior to the effective time of the merger, and without giving effect to the vesting of any outstanding Avanex or Bookham restricted stock units after January 27, 2009 and prior to the effective time of the merger. After the merger, Bookham stockholders will have the same number of shares of Bookham common stock held immediately prior to the merger and will therefore hold a smaller percentage, approximately 53.25% of the aggregate number of shares of Bookham common stock outstanding after the merger, based on the same assumptions as included in the previous sentence.
 
As a result of the merger, the combined company will be a larger and more geographically diverse organization, and if the combined company’s management is unable to manage the combined organization efficiently, its operating results will suffer.
 
Following the merger, the combined company will have approximately 2,783 employees in a total of 13 facilities around the world. As a result, the combined company will face challenges inherent in efficiently


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managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits and compliance programs. The inability to manage successfully the geographically more diverse (including from a cultural perspective) and substantially larger combined organization could have a material adverse effect on the operating results of the combined company after the merger and, as a result, on the market price of Bookham common stock.
 
Certain governmental authorities may seek to set material restrictions or conditions in order to consummate the merger, as they deem necessary or desirable in the public interest.
 
Although the merger is not subject to reporting obligations under the Hart-Scott-Rodino Act, each of the Antitrust Division of the U.S. Department of Justice or the Federal Trade Commission could take actions under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the merger or seeking divestiture of substantial assets of Bookham or Avanex. In addition, any state of the U.S. could take such actions under the antitrust laws as it deems necessary and desirable. Such actions can include seeking to enjoin the consummation of the merger or seeking divestiture of substantial assets of Bookham or Avanex.
 
The proposed merger may not be consummated.
 
Neither Bookham nor Avanex can provide any assurances that the proposed merger will be consummated. If the companies are unable to complete the proposed merger, each will have incurred substantial expenses and diverted significant management time and resources from their ongoing business without the intended benefit.
 
Bookham’s directors have interests that differ from other Bookham stockholders’ interests and may influence them to support and approve the merger.
 
The members of the board of directors of Bookham that will not continue to serve as directors of Bookham following the effective time of the merger (collectively referred to as the Bookham departing directors) have certain interests in the merger that differ from the interests of other Bookham stockholders. The Bookham departing directors are currently expected to be Peter F. Bordui, David Simpson, Joe Cook and W. Arthur Porter; however, a final determination as to who the Bookham departing directors will be has not been made and the persons who will be Bookham departing directors may change. Effective as of the effective time of the merger, the exercise period of Bookham stock options held by the Bookham departing directors will be extended and such stock options will be exercisable for a period of one year following the effective time of the merger. In addition, the vesting of the Bookham equity awards granted to the Bookham departing directors will accelerate in full. Further, each Bookham departing director will also be entitled to coverage under the current directors’ and officers’ liability insurance for a period similar to the period during which Avanex’s directors will be entitled to insurance coverage (six years following the effective time of the merger) for actions and omissions occurring prior to the effective time of the merger. Bookham stockholders should review the section titled “Bookham Proposal No. 1 and Avanex Proposal No. 1 — The Merger — Interests of Bookham’s Directors in the Merger” beginning on page 104 for a more complete description of these arrangements.
 
Avanex’s directors and executive officers have interests that differ from other Avanex stockholders’ interests and may influence them to support and approve the merger.
 
Avanex’s directors and executive officers have certain interests in the merger that differ from the interests of other Avanex stockholders. First, as of the effective time of the merger, each non-employee director of Avanex will be entitled to accelerated vesting of all of their outstanding options and restricted stock units issued under Avanex’s 1999 Director Option Plan. Second, pursuant to the terms of the outstanding option awards of those directors of Avanex who will resign and will not become a director of Bookham in connection with the merger, the post-termination exercise period for such options is two years. Third, certain executive officers of Avanex have entered into change in control agreements with Avanex providing each of them certain acceleration of vesting of their equity awards and certain severance payments under certain circumstances in


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connection with the merger. In addition, each Avanex director and officer will also be entitled to continuing indemnification from Avanex for a period of six years following the merger. As a result, Avanex directors and officers could be more likely to vote for the proposal to approve and adopt the merger agreement and approve the merger than if they did not have these interests. Avanex stockholders should review the section titled “Bookham Proposal No. 1 and Avanex Proposal No. 1 — The Merger — Interests of Avanex’s Executive Officers and Directors in the Merger” beginning on page 105 for a more complete description of these arrangements.
 
A purported class action lawsuit has been filed against Avanex, its directors, Bookham and Ultraviolet Acquisition Sub challenging the merger, and an unfavorable judgment or ruling in this lawsuit could prevent or delay the consummation of the merger, result in substantial costs or both.
 
On February 3, 2009, a purported class action complaint was filed against Avanex and its directors, Bookham, Inc., and Ultraviolet Acquisition Sub, Inc. in the Superior Court of California, Alameda County by two individuals who purport to be shareholders of Avanex. Plaintiffs purport to bring this action on behalf of all shareholders of Avanex. On March 3, 2009, these individuals filed an amended complaint. The amended complaint alleges that the defendants breached their fiduciary duties by failing to maximize shareholder value in connection with the contemplated merger of Avanex and Bookham, and that the joint proxy statement/prospectus fails to provide stockholders with material information or contains materially misleading information thereby rendering the stockholders unable to cast an informed vote on the proposed merger. The complaint also alleges that Avanex, Bookham, and Ultraviolet Acquisition Sub aided and abetted the individual defendants’ alleged breach of fiduciary duties. Plaintiffs seek to permanently enjoin the merger with Bookham, monetary damages in an unspecified amount attributable to the alleged breach of duties, and legal fees and expenses. Avanex, Bookham, Ultraviolet Acquisition Sub, Inc. and the individual defendants intend to defend against the complaint vigorously. However, there can be no assurance that the defendants will be successful in their defense. An unfavorable outcome in this lawsuit could prevent or delay the consummation of the merger, result in substantial costs to Avanex, Bookham or both.
 
If the merger is completed after June 27, 2009, it will be accounted for under new accounting standards.
 
In December 2007, the Financial Accounting Standard Board issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations (“SFAS No. 141R”). SFAS No. 141R establishes the principles and requirements for how an acquiror (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (ii) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141R makes significant changes to existing accounting practices for acquisitions, including the requirement to expense transaction costs and to reflect the fair value of contingent purchase price adjustments at the date of acquisition. SFAS No. 141R is to be applied prospectively to business combinations consummated on or after the beginning of the first annual reporting period on or after December 15, 2008. If the merger closes after June 27, 2009, it will be accounted for under SFAS No. 141R.
 
Risks Relating to Bookham
 
Risks Related to Our Business
 
We have a history of large operating losses and we may not be able to achieve profitability in the future.
 
We have historically incurred losses and negative cash flows from operations since our inception. As of December 27, 2008, we had an accumulated deficit of $1,063.8 million. We do not expect to be profitable in the quarter ending March 29, 2009, even if the merger with Avanex is consummated prior to that time.
 
Our net loss for the six months ended December 27, 2008 was $4.3 million. Our net loss for the year ended June 28, 2008 was $23.4 million. Our net loss for the year ended June 30, 2007 was $82.2 million. We may not be able to achieve profitability in any future period, and if we are unable to do so, we may need additional financing to execute on our current or future business strategies, which may not be available to us on commercially acceptable terms or at all.


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We may not be able to maintain current levels of gross margins.
 
We may not be able to maintain a positive gross margin to the extent that current economic uncertainty affects our overall revenue, and we are unable to adjust expenses as necessary. We must, in any event, continue to reduce our costs and improve our product mix to offset price erosion on certain product categories. In particular, over the last twelve to eighteen months we have introduced a family of tunable products that account for an increasing percentage of our overall product revenues. In the quarter ended September 27, 2008, we were capacity constrained in our delivery of these products due to component supply and production limitations, and we are only beginning to achieve margins on these products approaching our long-term target margins as we introduce them into large-scale production. Although we have plans in place both to address production constraints, and to maintain and further improve margins in our tunable products, any failure to do so will adversely affect our financial results, including our goal to achieve sustainable cash flow positive operations. Our gross margins in the three months ended December 27, 2008 were also adversely impacted by the deferral of revenue for $5.4 million in products shipped to two customers that were not reasonably assured of collectability in accordance with our revenue recognition policy.
 
Our business and results of operations may be negatively impacted by general economic and financial market conditions and such conditions may increase the other risks that affect our business.
 
The world’s financial markets are currently experiencing significant turmoil, resulting in reductions in available credit, dramatically increased costs of credit, extreme volatility in security prices, potential changes to existing credit terms, rating downgrades of investments and reduced valuations of securities generally. In light of these economic conditions, certain of our telecom customers have reduced their spending plans, leading them to draw down their existing inventory and reducing anticipated orders for optical components. Furthermore, it is possible that these customers, or others, will continue to significantly reduce capital expenditures in the near term, draw down their inventories, reduce production levels of existing products, defer introduction of new products or place orders and accept delivery for products for which they do not pay us due to their economic difficulties or other reasons. These actions have, and we expect that they will continue to have an adverse impact on our own revenues, which we anticipate will in any event be reduced in the third quarter of fiscal 2009 as compared to the preceding quarter. In addition, the financial downturn has affected the financial strength of certain of our customers, and could adversely affect others. In particular, Nortel Networks filed for bankruptcy relief on January 14, 2009, and, as a consequence, we have deferred $4.1 million in revenues that might otherwise have been recognized. There can be no assurance that Nortel Networks will continue to purchase our products at previously or currently anticipated levels while it is in insolvency proceedings for reasons including, but not limited to, Nortel’s distractions from its core business execution and the reaction of its own customers.
 
In addition, our suppliers may also be adversely affected by economic conditions that may impact their ability to provide important components used in our manufacturing processes on a timely basis, or at all.
 
These conditions could also result in reduced capital resources because of reduced credit availability, higher costs of credit and the stretching of payables by creditors seeking to preserve their own cash resources. We are unable to predict the likely duration and severity of the current disruption in financial markets and adverse economic conditions in the U.S. and other countries, but the longer the duration the greater risks we face in operating our business.
 
Our success will depend on our ability to anticipate and respond to evolving technologies and customer requirements.
 
The market for telecommunications equipment is characterized by substantial capital investment and diverse and evolving technologies. For example, the market for optical components is currently characterized by a trend toward the adoption of pluggable components and tunable transmitters that do not require the customized interconnections of traditional fixed wavelength gold box devices and the increased integration of components on subsystems. Our ability to anticipate and respond to these and other changes in technology, industry standards, customer requirements and product offerings and to develop and introduce new and


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enhanced products will be significant factors in our ability to succeed. We expect that new technologies will continue to emerge as competition in the telecommunications industry increases and the need for higher and more cost efficient bandwidth expands. The introduction of new products embodying new technologies or the emergence of new industry standards could render our existing products or products in development uncompetitive from a pricing standpoint, obsolete or unmarketable.
 
The market for optical components continues to be characterized by excess capacity and intense price competition which has had, and will continue to have, a material adverse effect on our results of operations.
 
There continues to be excess capacity for many optical components companies, intense price competition among optical component manufacturers and continued consolidation in the industry. As a result of this excess capacity and other industry factors, pricing pressure remains intense. The continued uncertainties in the telecommunications industry and the global economy make it difficult for us to anticipate revenue levels and therefore to make appropriate estimates and plans relating to cost management. Continued uncertain demand for optical components has had, and will continue to have, a material adverse effect on our results of operations.
 
We depend on a limited number of customers for a significant percentage of our revenues.
 
Historically, we have generated most of our revenues from a limited number of customers. For example, in the six months ended December 27, 2008, our three largest customers accounted for 36 percent of our revenues. In the fiscal year ended June 28, 2008 and the fiscal year ended June 30, 2007, our three largest customers accounted for 33 percent and 41 percent of our revenues, respectively. Revenues from any of our major customers may decline or fluctuate significantly in the future, which could have an adverse impact on our business and results of operations. For example, we expect that the revenues that we receive from the sale of products to Nortel Networks, which accounted for $5.4 million, or 11 percent, of our total revenues for the three months ended December 27, 2008, may decline in the future as a result of its bankruptcy filing on January 14, 2009. We may not be able to offset any decline in revenues from our existing major customers with revenues from new customers or other existing customers.
 
We and our telecom customers depend upon a limited number of major telecommunications carriers.
 
Our dependence on a limited number of customers is due to the fact that the optical telecommunications systems industry is dominated by a small number of large companies. These customers in turn depend primarily on a limited number of major telecommunications carrier customers to purchase their products that incorporate our optical components. Many major telecommunication systems companies and telecommunication carriers are reducing inventories and experiencing losses from operations in light of the current economic conditions. The further consolidation of the industry, coupled with declining revenues from our major customers, may have a material adverse impact on our business.
 
We typically do not enter into long-term contracts with our customers and our customers may decrease, cancel or delay their buying levels at any time with little or no advance notice to us.
 
Our customers typically purchase our products pursuant to individual purchase orders. While our customers generally provide us with their expected forecasts for our products several months in advance, in most cases they are not contractually committed to buy any quantity of products beyond those in purchase orders previously submitted to us. Our customers may decrease, cancel or delay purchase orders already in place. If any of our major customers decrease, stop or delay purchasing our products for any reason, our business and results of operations would be harmed. Cancellation or delays of such orders may cause us to fail to achieve our short-term and long-term financial and operating goals and result in excess and obsolete inventory.


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Our products may infringe the intellectual property rights of others which could result in expensive litigation or require us to obtain a license to use the technology from third parties, or we may be prohibited from selling certain products in the future.
 
Companies in the industry in which we operate frequently receive claims of patent infringement or infringement of other intellectual property rights. We have, from time to time, received such claims, including from competitors and from companies that have substantially more resources than us.
 
For example, on March 4, 2008, we filed a declaratory judgment complaint captioned Bookham, Inc. v. JDS Uniphase Corp. and Agility Communications, Inc., Civil Action No. 5:08-CV-01275-RMW, in the United States District Court for the Northern District of California, San Jose Division. Our complaint seeks declaratory judgments that our tunable laser products do not infringe any valid, enforceable claim of U.S. Patent Nos. 6,658,035, 6,654,400 and 6,687,278, and that all claims of the aforementioned patents are invalid and unenforceable. Our complaint also contains affirmative claims for relief against JDS Uniphase Corp. and Agility Communications, Inc. for statutory unfair competition, and for intentional interference with economic advantage.
 
On July 21, 2008, JDS Uniphase Corp. and Agility Communications, Inc. answered our complaint and asserted counterclaims against Bookham for infringement of U.S. Patent Nos. 6,658,035, 6,654,400 and 6,687,278, which JDS Uniphase Corp. acquired from Agility Communications, Inc. On October 6, 2008, JDS Uniphase Corp. indicated that its infringement claims are directed at Bookham’s LamdaFlextm TL500 VCJ; TL5000VLJ; TL3000; TL7000; TL8000 and TL9000 products. JDS Uniphase Corp. seeks unspecified compensatory damages, treble damages and attorneys’ fees from Bookham, and an order enjoining Bookham from future infringement of the patents-in-suit. This litigation has been stayed due to JDS Uniphase Corp.’s commencement of a U.S. International Trade Commission Investigation, which is described below.
 
On November 7, 2008, JDS Uniphase Corp. petitioned the U.S. International Trade Commission to commence an investigation into alleged violations by Bookham of Section 337 of the Tariff Act of 1930. On December 8, 2008, the U.S. International Trade Commission commenced investigation No. 337-TA-662 into Bookham’s alleged importation into the United States, sale for importation, and sale within the United States after importation of tunable laser chips, assemblies, and products containing the same that infringe U.S. Patent Nos. 6,658,035 and 6,687,278. JDS Uniphase Corp. seeks a general exclusion order prohibiting the importation of any Bookham tunable laser chip, assembly, or product containing the same that infringes any claim of the aforementioned patents, as well as an order prohibiting sales after importation into the United States of any allegedly infringing products. The U.S. International Trade Commission has adopted a target completion date of March 19, 2010 for the investigation, and indicated that a final initial determination should be filed by November 19, 2009. Any adverse ruling by the U.S. International Trade Commission, including an exclusion order that could prohibit us from importing into the United States tunable laser chips, assemblies, or products containing the same, or prolonged litigation may have an adverse effect on our business and any resolution may not be in our favor.
 
Third parties may in the future assert claims against us concerning our existing products or with respect to future products under development. We have entered into and may in the future enter into indemnification obligations in favor of some customers that could be triggered upon an allegation or finding that we are infringing other parties’ proprietary rights. If we do infringe a third party’s rights, we may need to negotiate with holders of those rights relevant to our business. We have from time to time received notices from third parties alleging infringement of their intellectual property and where appropriate have entered into license agreements with those third parties with respect to that intellectual property. We may not in all cases be able to resolve allegations of infringement through licensing arrangements, settlement, alternative designs or otherwise. We may take legal action to determine the validity and scope of the third-party rights or to defend against any allegations of infringement. In times of economic turmoil, such as we are currently experiencing, holders of intellectual property rights have been more aggressive in alleging infringement of those intellectual property rights and we may be the subject to such claims asserted by a third party. In the course of pursuing any of these means or defending against any lawsuits filed against us, we could incur significant costs and diversion of our resources. Due to the competitive nature of our industry, it is unlikely that we could increase


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our prices to cover such costs. In addition, such claims could result in significant penalties or injunctions that could prevent us from selling some of our products in certain markets or result in settlements that require payment of significant royalties that could adversely affect our ability to price our products profitably.
 
We are also subject to additional litigation as described in the section entitled “— Risks Related to Regulatory Compliance and Litigation — Litigation regarding Bookham Technology plc’s and New Focus’ initial and follow-on public offerings and Bookham’s proposed merger with Avanex, and any other litigation in which we become involved, including as a result of past or future acquisitions or the arrangements we have with suppliers and customers, may substantially increase our costs and harm our business.”
 
As a result of our global operations, our business is subject to currency fluctuations that have adversely affected our results of operations in recent quarters and may continue to do so in the future.
 
Our financial results have been materially impacted by foreign currency fluctuations and our future financial results may also be materially impacted by foreign currency fluctuations. At certain times in our history, declines in the value of the U.S. dollar versus the U.K. pound sterling have had a major negative effect on our profit margins and our cash flow. Despite our change in domicile from the United Kingdom to the United States in 2004 and the transfer of our assembly and test operations from Paignton, U.K. to Shenzhen, China, a significant portion of our expenses are still denominated in U.K. pounds sterling and substantially all of our revenues are denominated in U.S. dollars. Fluctuations in the exchange rate between these two currencies and, to a lesser extent, other currencies in which we collect revenues and or pay expenses will continue to have a material effect on our operating results. For example, from the end of our fiscal quarter ended December 29, 2007 to the end of our fiscal quarter ended December 27, 2008, the U.S. dollar has appreciated 25.9 percent relative to the U.K. pound sterling, which has favorably impacted our results. If the U.S. dollar stays the same or depreciates relative to the U.K. pound sterling in the future, our future financial results may also be materially impacted. Additional exposure could also result should the exchange rate between the U.S. dollar and the Chinese yuan or Swiss franc vary more significantly than they have to date.
 
We engage in currency hedging transactions in an effort to cover some of our exposure to U.S. dollar to U.K. pound sterling currency fluctuations, and we may be required to convert currencies to meet our obligations. Under certain circumstances, these transactions could have an adverse effect on our financial condition.
 
We have significant manufacturing operations in China, which exposes us to risks inherent in doing business in China.
 
We are taking advantage of the comparatively low costs of operating in China. We have recently transferred substantially all of our assembly and test operations, chip-on-carrier operations and manufacturing and supply chain management operations to our facility in Shenzhen, China, and have also transferred certain iterative research and development related activities from the U.K. to Shenzhen, China. We are also transferring certain non-telecom manufacturing operations from our San Jose, California facility to our Shenzhen facility, which is almost complete. The substantial portions of our assembly and test and related manufacturing operations are now concentrated in our single facility in China. To be successful in China we will need to:
 
  •  qualify our manufacturing lines and the products we produce in Shenzhen, as required by our customers;
 
  •  attract qualified personnel to operate our Shenzhen facility; and
 
  •  retain employees at our Shenzhen facility.
 
There can be no assurance we will be able to do any of these.
 
Employee turnover in China is high due to the intensely competitive and fluid market for skilled labor. To operate the facility, and to the extent we are unable to retain our existing workforce, we will need to continue to hire direct manufacturing personnel, administrative personnel and technical personnel; obtain and retain


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required legal authorization to hire such personnel and incur the time and expense to hire and train such personnel.
 
Operations in China are subject to greater political, legal and economic risks than our operations in other countries. In particular, the political, legal and economic climate in China, both nationally and regionally, is fluid and unpredictable. Our ability to operate in China may be adversely affected by changes in Chinese laws and regulations such as those related to taxation, import and export tariffs, environmental regulations, land use rights, intellectual property and other matters. In addition, we may not obtain or retain the requisite legal permits to continue to operate in China and costs or operational limitations may be imposed in connection with obtaining and complying with such permits.
 
We have, in the past, been advised that power may be rationed in the location of our Shenzhen facility, and were power rationing to be implemented, it could have an adverse impact on our ability to complete manufacturing commitments on a timely basis or, alternatively, could require significant investment in generating capacity to sustain uninterrupted operations at the facility, which we may not be able to do successfully.
 
We intend to continue to export the majority of the products manufactured at our Shenzhen facility. Under current regulations, upon application and approval by the relevant governmental authorities, we will not be subject to certain Chinese taxes and will be exempt from certain duties on imported materials that are used in the manufacturing process and subsequently exported from China as finished products. However, Chinese trade regulations are in a state of flux, and we may become subject to other forms of taxation and duties in China or may be required to pay export fees in the future. In the event that we become subject to new forms of taxation or export fees in China, our business and results of operations could be materially adversely affected. We may also be required to expend greater amounts than we currently anticipate in connection with increasing production at the Shenzhen facility. Any one of the factors cited above, or a combination of them, could result in unanticipated costs, which could materially and adversely affect our business.
 
Fluctuations in operating results could adversely affect the market price of our common stock.
 
Our revenues and operating results are likely to fluctuate significantly in the future. The timing of order placement, size of orders and satisfaction of contractual customer acceptance criteria, as well as order or shipment delays or deferrals, with respect to our products, may cause material fluctuations in revenues. Our lengthy sales cycle, which may extend to more than one year for our telecom products, may cause our revenues and operating results to vary from period to period and it may be difficult to predict the timing and amount of any variation. Delays or deferrals in purchasing decisions by our customers may increase as we develop new or enhanced products for new markets, including data communications, industrial, research, semiconductor capital equipment, military and biotechnology markets. Our current and anticipated future dependence on a small number of customers increases the revenue impact of each such customer’s decision to delay or defer purchases from us. Our expense levels in the future will be based, in large part, on our expectations regarding future revenue sources and, as a result, operating results for any quarterly period in which material orders fail to occur, or are delayed or deferred could vary significantly.
 
Because of these and other factors, quarter-to-quarter comparisons of our results of operations may not be an indication of future performance. In future periods, results of operations may differ from the estimates of public market analysts and investors. Such a discrepancy could cause the market price of our common stock to decline.
 
The investment of our cash balance and our investments in marketable debt securities are subject to risks which may cause losses and affect the liquidity of these investments.
 
At December 27, 2008, we had $35.8 million in cash and cash equivalents (including restricted cash of $0.5 million) and $8.9 million in investments in marketable debt securities. We have historically invested these amounts in U.S. treasury securities and U.S. government agency securities, corporate debt, money market funds, commercial paper and municipal bonds. Certain of these investments are subject to general credit, liquidity, market and interest rate risks. While we do not hold any investments whose value is directly


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correlated to sub-prime debt, the risks associated with holding certain investments, including some of the investments we hold, have been and may further be exacerbated by U.S. sub-prime mortgage defaults, which have affected various sectors of the financial markets and caused credit and liquidity issues.
 
In September 2008, Lehman Brothers Holdings Inc., or Lehman, filed a petition under Chapter 11 of the U.S. Bankruptcy Code. At December 27, 2008, we held a Lehman security with par value of $0.8 million. As of January 30, 2009, we do not have an estimate of the recovery value of this security, but we have reduced the carrying value of this security to $0.1 million. For the three and six months ended December 27, 2008, we have recorded impairment charges for the Lehman security of $0.1 million and $0.7 million, respectively, which are included in other expense in our accompanying condensed consolidated statement of operations for such periods.
 
There may be further declines in the value of our short-term investments, which we may determine to be other-than-temporary. These market risks associated with our investment portfolio may have a negative adverse effect on our results of operations, liquidity and financial condition.
 
We have recorded a significant impairment charge and we may record additional impairment charges which would adversely impact our results of operations.
 
We review our goodwill, intangible assets and long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be recoverable, and also review goodwill annually in accordance with SFAS No. 142, Goodwill and Other Intangibles. During the three month period ended December 27, 2008, we observed indicators of potential impairment of our goodwill, including the impact of the current general economic downturn on our future prospects and the continued decline of our current market capitalization, which caused us to conduct a preliminary interim goodwill impairment analysis. Our management has determined, in our preliminary goodwill impairment analysis, that our goodwill was in fact impaired, and as a result we have recorded a preliminary estimate of $7.9 million for the impairment loss in our statements of operations for the three and six months ended December 27, 2008. The goodwill was derived from our previous acquisitions. This $7.9 million is only a preliminary estimate. We are continuing to evaluate the impairment of our goodwill, and the amount of the actual impairment charge may vary materially from this initial estimate. We expect that we will complete the full evaluation of the impairment analysis during the quarter ending March 28, 2009.
 
During the year ended June 30, 2007, we designated the assets underlying our Paignton, U.K. manufacturing site as held for sale and subsequently sold the site to a third party for proceeds of £4.8 million (approximately $9.4 million based on an exchange rate of $1.96 to £1.00 in effect on the date of sale), net of selling costs. In connection with this designation we recorded an impairment charge of $1.9 million during the three month period ended September 30, 2006. During the fiscal year ended July 1, 2006, in connection with a review of our long-lived assets for impairment, we recorded $433,000 of impairment charges.
 
In the event that we determine in a future period that impairment of our intangible assets or long-lived assets exists for any reason, we would record an impairment charge in the period such determination is made, which would adversely impact our financial position and results of operations.
 
We may incur additional significant restructuring charges that will adversely affect our results of operations.
 
Over the past eight years, we have enacted a series of restructuring plans and cost reduction plans designed to reduce our manufacturing overhead and our operating expenses. In 2001, we reduced manufacturing overhead and our operating expenses in response to the initial decline in demand in the optical components industry. In connection with our acquisitions of the optical components business of Nortel Networks in November 2002 and New Focus in March 2004, we enacted restructuring plans related to the consolidation of our operations, which we expanded in September 2004 to include the transfer of our main corporate functions, including consolidated accounting, financial reporting, tax and treasury, from Abingdon, U.K. to our U.S. headquarters in San Jose, California.


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In May, September and December 2004, we announced restructuring plans, including the transfer of our assembly and test operations from Paignton, U.K. to Shenzhen, China, along with reductions in research and development and selling, general and administrative expenses. These cost reduction efforts were expanded in November 2005 to include the transfer of our chip-on-carrier assembly from Paignton to Shenzhen. The transfer of these operations was completed in the quarter ended March 31, 2007. In May 2006, we announced further cost reduction plans, which included transitioning all remaining manufacturing support and supply chain management, along with pilot line production and production planning, from Paignton to Shenzhen. This was substantially completed in the quarter ended June 30, 2007. We have spent an aggregate of $32.8 million on these restructuring programs.
 
On January 31, 2007, we adopted an overhead cost reduction plan which included workforce reductions, facility and site consolidation of our Caswell, U.K. semiconductor operations within our existing U.K. facilities and the transfer of certain research and development activities to our Shenzhen facility. We have incurred expenses of $7.7 million with respect to this cost reduction plan, the substantial portion being personnel severance and retention related expenses.
 
We plan on taking further advantage of the relatively lower operating costs in our Shenzhen facility by completing the transfer of most of the manufacturing operations from our San Jose, California non-telecom facility to Shenzhen over the next quarter. The substantial portion of the restructuring charges incurred were for personnel related severance and retention costs.
 
We may incur charges in excess of amounts currently estimated for these restructuring and cost reduction plans. We may incur additional charges in the future in connection with future restructurings and cost reduction plans.
 
Additionally, if the merger with Avanex is completed, we expect that we will incur an aggregate of approximately $7.0 million in restructuring expenses. These charges, along with any other charges, have adversely affected, and will continue to adversely affect, our results of operations for the periods in which such charges have been, or will be, incurred.
 
Our results of operations may suffer if we do not effectively manage our inventory, and we may incur inventory-related charges.
 
We need to manage our inventory of component parts and finished goods effectively to meet changing customer requirements. Accurately forecasting customers’ product needs is difficult. Some of our products and supplies have in the past, and may in the future, become obsolete while in inventory due to rapidly changing customer specifications or a decrease in customer demand. If we are not able to manage our inventory effectively, we may need to write down the value of some of our existing inventory or write off non-saleable or obsolete inventory, which would adversely affect our results of operations. We have from time to time incurred significant inventory-related charges. Any such charges we incur in future periods could significantly adversely affect our results of operations.
 
Bookham Technology plc may not be able to utilize tax losses and other tax attributes against the receivables that arise as a result of its transaction with Deutsche Bank.
 
On August 10, 2005, Bookham Technology plc purchased all of the issued share capital of City Leasing (Creekside) Limited, a subsidiary of Deutsche Bank. Creekside was entitled to receivables of £73.8 million (approximately $135.8 million, based on an exchange rate of $1.84 to £1.00 on September 2, 2005) from Deutsche Bank in connection with certain aircraft subleases and these payments have been applied over a two-year term to obligations of £73.1 million (approximately $134.5 million on September 3, 2005) owed to Deutsche Bank. As a result of the completion of these transactions, Bookham Technology plc has had available through Creekside cash of approximately £6.63 million (approximately $12.2 million on September 3, 2005). We expect Bookham Technology plc to utilize certain expected tax losses and other tax attributes to reduce the taxes that might otherwise be due by Creekside as the receivables are paid. In the event that Bookham Technology plc is not able to utilize these tax losses and other tax attributes when U.K. tax returns are filed for the relevant periods (or these tax losses and other tax attributes do not arise), Creekside may have


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to pay taxes, reducing the cash available from Creekside. In the event there is a future change in applicable U.K. tax law, Creekside and in turn Bookham Technology plc, would be responsible for any resulting tax liabilities, which amounts could be material to our financial condition or operating results.
 
Our products are complex and may take longer to develop than anticipated and we may not recognize revenues from new products until after long field testing and customer acceptance periods.
 
Many of our new products must be tailored to customer specifications. As a result, we are developing new products and using new technologies in those products. For example, while we currently manufacture and sell discrete gold box technology, we expect that many of our sales of gold box technology will soon be replaced by pluggable modules. New products or modifications to existing products often take many quarters to develop because of their complexity and because customer specifications sometimes change during the development cycle. We often incur substantial costs associated with the research and development and sales and marketing activities in connection with products that may be purchased long after we have incurred the costs associated with designing, creating and selling such products. In addition, due to the rapid technological changes in our market, a customer may cancel or modify a design project before we begin large-scale manufacture of the product and receive revenue from the customer. It is unlikely that we would be able to recover the expenses for cancelled or unutilized design projects. It is difficult to predict with any certainty, particularly in the present economic climate, the frequency with which customers will cancel or modify their projects, or the effect that any cancellation or modification would have on our results of operations.
 
If our customers do not qualify our manufacturing lines or the manufacturing lines of our subcontractors for volume shipments, our operating results could suffer.
 
Most of our customers do not purchase products, other than limited numbers of evaluation units, prior to qualification of the manufacturing line for volume production. Our existing manufacturing lines, as well as each new manufacturing line, must pass through varying levels of qualification with our customers. Our manufacturing lines have passed our qualification standards, as well as our technical standards. However, our customers also require that we pass their specific qualification standards and that we, and any subcontractors that we may use, be registered under international quality standards. In addition, we have in the past, and may in the future, encounter quality control issues as a result of relocating our manufacturing lines or introducing new products to fill production. We may be unable to obtain customer qualification of our manufacturing lines or we may experience delays in obtaining customer qualification of our manufacturing lines. Such delays or failure to obtain qualifications would harm our operating results and customer relationships.
 
Delays, disruptions or quality control problems in manufacturing could result in delays in product shipments to customers and could adversely affect our business.
 
We may experience delays, disruptions or quality control problems in our manufacturing operations or the manufacturing operations of our subcontractors. As a result, we could incur additional costs that would adversely affect gross margins, and product shipments to our customers could be delayed beyond the shipment schedules requested by our customers, which would negatively affect our revenues, competitive position and reputation. Furthermore, even if we are able to deliver products to our customers on a timely basis, we may be unable to recognize revenues at the time of delivery based on our revenue recognition policies. For example, at December 27, 2008, we have deferred an aggregate of $5.4 million in revenue for products delivered to two of our customers due our uncertainty about the collectability of these amounts.
 
We may experience low manufacturing yields.
 
Manufacturing yields depend on a number of factors, including the volume of production due to customer demand and the nature and extent of changes in specifications required by customers for which we perform design-in work. Higher volumes due to demand for a fixed, rather than continually changing, design generally results in higher manufacturing yields, whereas lower volume production generally results in lower yields. In addition, lower yields may result, and have in the past resulted, from commercial shipments of products prior to full manufacturing qualification to the applicable specifications. Changes in manufacturing processes


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required as a result of changes in product specifications, changing customer needs and the introduction of new product lines have historically caused, and may in the future cause, significantly reduced manufacturing yields, resulting in low or negative margins on those products. Moreover, an increase in the rejection rate of products during the quality control process, before, during or after manufacture, results in lower yields and margins. Finally, manufacturing yields and margins can also be lower if we receive or inadvertently use defective or contaminated materials from our suppliers.
 
We depend on a limited number of suppliers who could disrupt our business if they stopped, decreased or delayed shipments.
 
We depend on a limited number of suppliers of raw materials and equipment used to manufacture our products. Some of these suppliers are sole sources. We typically have not entered into long-term agreements with our suppliers and, therefore, these suppliers generally may stop supplying us materials and equipment at any time. Our reliance on a sole supplier or limited number of suppliers could result in delivery problems, reduced control over product pricing and quality, and an inability to identify and qualify another supplier in a timely manner. In addition, given the current macroeconomic downturn, some of our suppliers that may be small or undercapitalized may experience financial difficulties that could prevent them from supplying us materials and equipment. Any supply deficiencies relating to the quality or quantities of materials or equipment we use to manufacture our products could adversely affect our ability to fulfill customer orders and our results of operations.
 
Our intellectual property rights may not be adequately protected.
 
Our future success will depend, in large part, upon our intellectual property rights, including patents, copyrights, design rights, trade secrets, trademarks, know-how and continuing technological innovation. We maintain an active program of identifying technology appropriate for patent protection. Our practice is to require employees and consultants to execute non-disclosure and proprietary rights agreements upon commencement of employment or consulting arrangements. These agreements acknowledge our exclusive ownership of all intellectual property developed by the individuals during their work for us and require that all proprietary information disclosed will remain confidential. Although such agreements may be binding, they may not be enforceable in full or in part in all jurisdictions and any breach of a confidentiality obligation could have a very serious effect on our business and the remedy for such breach may be limited.
 
Our intellectual property portfolio is an important corporate asset. The steps we have taken and may take in the future to protect our intellectual property may not adequately prevent misappropriation or ensure that others will not develop competitive technologies or products. We cannot assure investors that our competitors will not successfully challenge the validity of our patents or design products that avoid infringement of our proprietary rights with respect to our technology. There can be no assurance that other companies are not investigating or developing other similar technologies, that any patents will be issued from any application pending or filed by us or that, if patents are issued, the claims allowed will be sufficiently broad to deter or prohibit others from marketing similar products. In addition, we cannot assure investors that any patents issued to us will not be challenged, invalidated or circumvented, or that the rights under those patents will provide a competitive advantage to us. Further, the laws of certain regions in which our products are or may be developed, manufactured or sold, including Asia-Pacific, Southeast Asia and Latin America, may not protect our products and intellectual property rights to the same extent as the laws of the United States, the U.K. and continental European countries. This is especially relevant now that we have transferred certain non-telecom manufacturing activities from our San Jose, California facility and transferred all of our assembly and test operations and chip-on-carrier operations, including certain engineering related functions, from our facilities in the U.K. to Shenzhen, China and as our competitors establish manufacturing operations in China to take advantage of comparatively low manufacturing costs.


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If we fail to obtain the right to use the intellectual property rights of others necessary to operate our business, our ability to succeed will be adversely affected.
 
Certain companies in the telecommunications and optical components markets in which we sell our products have experienced frequent litigation regarding patent and other intellectual property rights. Numerous patents in these industries are held by others, including academic institutions and our competitors. Optical component suppliers may seek to gain a competitive advantage or other third parties, inside or outside our market, may seek an economic return on their intellectual property portfolios by making infringement claims against us. In the future, we may need to obtain license rights to patents or other intellectual property held by others to the extent necessary for our business. Unless we are able to obtain such licenses on commercially reasonable terms, patents or other intellectual property held by others could be used to inhibit or prohibit our production and sale of existing products and our development of new products for our markets. Licenses granting us the right to use third-party technology may not be available on commercially reasonable terms, if at all. Generally, a license, if granted, would include payments of up-front fees, ongoing royalties or both. These payments or other terms could have a significant adverse impact on our operating results. In addition, in the event we are granted such a license it is likely such license would be non-exclusive and other parties, including competitors, may be able to utilize such technology. Our larger competitors may be able to obtain licenses or cross-license their technology on better terms than we can, which could put us at a competitive disadvantage.
 
The markets in which we operate are highly competitive, which could result in lost sales and lower revenues.
 
The market for fiber optic components and modules is highly competitive and such competition could result in our existing customers moving their orders to competitors. We are aware of a number of companies that have developed or are developing optical component products, including tunable lasers, pluggables and thin film filter products, among others, that compete directly with our current and proposed product offerings. Certain of our competitors may be able to more quickly and effectively:
 
  •  respond to new technologies or technical standards;
 
  •  react to changing customer requirements and expectations;
 
  •  devote needed resources to the development, production, promotion and sale of products; and
 
  •  deliver competitive products at lower prices.
 
Many of our current competitors, as well as a number of our potential competitors, have longer operating histories, greater name recognition, broader customer relationships and industry alliances and substantially greater financial, technical and marketing resources than we do. In addition, market leaders in industries such as semiconductor and data communications, who may also have significantly more resources than we do, may in the future enter our market with competing products. All of these risks may be increased if the market were to further consolidate through mergers or other business combinations between competitors.
 
We may not be able to compete successfully with our competitors and aggressive competition in the market may result in lower prices for our products or decreased gross margins. Any such development would have a material adverse effect on our business, financial condition and results of operations.
 
We generate a significant portion of our revenues internationally and therefore are subject to additional risks associated with the extent of our international operations.
 
For the six months ended December 27, 2008 and for the years ended June 28, 2008 and June 30, 2007, 27 percent, 25 percent and 23 percent of our revenues, respectively, were derived in the United States and 73 percent, 75 percent and 77 percent of our revenues, respectively, were derived outside the United States. We are subject to additional risks related to operating in foreign countries, including:
 
  •  currency fluctuations, which could result in increased operating expenses and reduced revenues;


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  •  greater difficulty in accounts receivable collection and longer collection periods;
 
  •  difficulty in enforcing or adequately protecting our intellectual property;
 
  •  foreign taxes;
 
  •  political, legal and economic instability in foreign markets; and
 
  •  foreign regulations.
 
Any of these risks, or any other risks related to our foreign operations, could materially adversely affect our business, financial condition and results of operations.
 
We may be faced with product liability claims.
 
Despite quality assurance measures, defects may occur in our products. The occurrence of any defects in our products could give rise to liability for damages caused by such defects, including consequential damages. Such defects could, moreover, impair the market’s acceptance of our products. Both could have a material adverse effect on our business and financial condition. In addition, we may assume product warranty liabilities related to companies we acquire, which could have a material adverse effect on our business and financial condition. In order to mitigate the risk of liability for damages, we carry product liability insurance with a $26 million aggregate annual limit and errors and omissions insurance with a $5 million annual limit. We cannot assure investors that this insurance would adequately cover any or a portion of our costs arising from any defects in our products or otherwise.
 
If we fail to attract and retain key personnel, our business could suffer.
 
Our future depends, in part, on our ability to attract and retain key personnel. Competition for highly skilled technical people is extremely intense and we continue to face difficulty identifying and hiring qualified engineers in many areas of our business. We may not be able to hire and retain such personnel at compensation levels consistent with our existing compensation and salary structure. Our future success also depends on the continued contributions of our executive management team and other key management and technical personnel, each of whom would be difficult to replace. The loss of services of these or other executive officers or key personnel or the inability to continue to attract qualified personnel could have a material adverse effect on our business.
 
Similar to other technology companies, we rely upon stock options and other forms of equity-based compensation as key components of our executive and employee compensation structure. Historically, these components have been critical to our ability to retain important personnel and offer competitive compensation packages. Without these components, we would be required to significantly increase cash compensation levels (or develop alternative compensation structures) in order to retain our key employees. Accounting rules relating to the expensing of equity compensation may cause us to substantially reduce, modify, or even eliminate, all or portions of our equity compensation programs which may, in turn, prevent us from retaining or hiring qualified employees and declines in our stock price could reduce or eliminate the retentive effects of our equity compensation programs.
 
We may not be able to raise capital when desired on favorable terms, or at all, or without dilution to our stockholders.
 
The rapidly changing industry in which we operate, the length of time between developing and introducing a product to market and frequent changing customer specifications for products, among other things, makes our prospects difficult to evaluate. It is possible that we may not generate sufficient cash flow from operations or otherwise have sufficient capital resources to meet our future capital needs. If this occurs, we may need additional financing to execute on our current or future business strategies.
 
In the past, we have sold shares of our common stock in public offerings, private placements or otherwise in order to fund our operations. On November 13, 2007, we completed a public offering of 16,000,000 shares of common stock that generated $40.8 million of cash, net of underwriting commissions and expenses. On


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March 22, 2007, pursuant to a private placement, we issued 13,640,224 shares of common stock and warrants to purchase up to 4,092,066 shares of common stock. In September 2006, pursuant to a private placement, we issued an aggregate of 11,594,667 shares of common stock and warrants to purchase an aggregate of 2,898,667 shares of common stock.
 
If we raise funds through the issuance of equity or convertible debt securities, our stockholders may be significantly diluted, and these newly-issued securities may have rights, preferences or privileges senior to those of securities held by existing stockholders. We cannot assure you that additional financing will be available on terms favorable to us, or at all. If adequate funds are not available or are not available on acceptable terms, if and when needed, our ability to fund our operations, develop or enhance our products, or otherwise respond to competitive pressures could be significantly limited.
 
Risks Related to Regulatory Compliance and Litigation
 
Our business involves the use of hazardous materials, and we are subject to environmental and import/export laws and regulations that may expose us to liability and increase our costs.
 
We historically handled small amounts of hazardous materials as part of our manufacturing activities and now handle more and different hazardous materials as a result of the manufacturing processes related to the New Focus division of our non-telecom segment, the optical components business acquired from Nortel Networks and the product lines we acquired from Marconi. Consequently, our operations are subject to environmental laws and regulations governing, among other things, the use and handling of hazardous substances and waste disposal. We may incur costs to comply with current or future environmental laws. As with other companies engaged in manufacturing activities that involve hazardous materials, a risk of environmental liability is inherent in our manufacturing activities, as is the risk that our facilities will be shut down in the event of a release of hazardous waste, or that we would be subject to extensive monetary liability. The costs associated with environmental compliance or remediation efforts or other environmental liabilities could adversely affect our business. Under applicable EU regulations, we, along with other electronics component manufacturers, are prohibited from using lead and certain other hazardous materials in our products. We have incurred unanticipated expenses in connection with the related reconfiguration of our products, and could lose business or face product returns if we failed to implement these requirements properly or on a timely basis.
 
In addition, the sale and manufacture of certain of our products require on-going compliance with governmental security and import/export regulations. Our New Focus division has, in the past, been notified of potential violations of certain export regulations which on one occasion resulted in the payment of a fine to the U.S. federal government. We may, in the future, be subject to investigation which may result in fines for violations of security and import/export regulations. Furthermore, any disruptions of our product shipments in the future, including disruptions as a result of efforts to comply with governmental regulations, could adversely affect our revenues, gross margins and results of operations.
 
Litigation regarding Bookham Technology plc’s and New Focus’ initial and follow-on public offerings and Bookham’s proposed merger with Avanex, and any other litigation in which we become involved, including as a result of past or future acquisitions or the arrangements we have with suppliers and customers, may substantially increase our costs and harm our business.
 
On June 26, 2001, a putative securities class action captioned Lanter v. New Focus, Inc. et al., Civil Action No. 01-CV-5822 was filed against New Focus and several of its officers and directors, or the Individual Defendants, in the United States District Court for the Southern District of New York. Also named as defendants were Credit Suisse First Boston Corporation, Chase Securities, Inc., U.S. Bancorp Piper Jaffray, Inc. and CIBC World Markets Corp., or the Underwriter Defendants, the underwriters in New Focus’s initial public offering. Three subsequent lawsuits were filed containing substantially similar allegations. These complaints have been consolidated.
 
On November 7, 2001, a Class Action Complaint was filed against Bookham Technology plc and others in the United States District Court for the Southern District of New York. On April 19, 2002, plaintiffs filed


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an Amended Class Action Complaint, described below. The Amended Class Action Complaint names as defendants Bookham Technology plc, Goldman Sachs & Co. and FleetBoston Robertson Stephens, Inc., two of the underwriters of Bookham Technology plc’s initial public offering in April 2000, and Andrew G. Rickman, Stephen J. Cockrell and David Simpson, each of whom was an officer and/or director at the time of Bookham Technology plc’s initial public offering.
 
Various plaintiffs have filed similar actions asserting virtually identical allegations against more than 300 other public companies, their underwriters, and their officers and directors arising out of each company’s initial public offering. These actions, including the action against New Focus and the action against Bookham Technology plc, have been coordinated for pretrial purposes and captioned In re Initial Public Offering Securities Litigation, 21 MC 92.
 
On April 19, 2002, plaintiffs filed a Consolidated Amended Class Action Complaint in the New Focus action and an Amended Class Action Complaint in the Bookham Technology plc action (together, the “Amended Class Action Complaints”). The Amended Class Action Complaints assert claims under certain provisions of the securities laws of the United States. They allege, among other things, that the prospectuses for Bookham Technology plc’s and New Focus’s initial public offerings were materially false and misleading in describing the compensation to be earned by the underwriters in connection with the offerings, and in not disclosing certain alleged arrangements among the underwriters and initial purchasers of ordinary shares, in the case of Bookham Technology plc, or common stock, in the case of New Focus, from the underwriters. The Amended Class Action Complaints seek unspecified damages (or, in the alternative, rescission for those class members who no longer hold our or New Focus common stock), costs, attorneys’ fees, experts’ fees, interest and other expenses. In October 2002, the Individual Defendants were dismissed, without prejudice, from the action subject to their execution of tolling agreements. In July 2002, all defendants filed Motions to Dismiss the Amended Class Action Complaints. The motions were denied as to Bookham Technology plc and New Focus in February 2003. Special committees of the board of directors authorized the companies to negotiate a settlement of pending claims substantially consistent with a memorandum of understanding negotiated among class plaintiffs, all issuer defendants and their insurers.
 
The plaintiffs and most of the issuer defendants and their insurers entered into a stipulation of settlement for the claims against the issuer defendants, including Bookham Technology plc and New Focus. This stipulation of settlement was subject to, among other things, certification of the underlying class of plaintiffs. Under the stipulation of settlement, the plaintiffs would dismiss and release all claims against participating defendants in exchange for a payment guaranty by the insurance companies collectively responsible for insuring the issuers in the related cases, and the assignment or surrender to the plaintiffs of certain claims the issuer defendants may have against the underwriters. On February 15, 2005, the District Court issued an Opinion and Order preliminarily approving the settlement provided that the defendants and plaintiffs agree to a modification narrowing the scope of the bar order set forth in the original settlement agreement. The parties agreed to the modification narrowing the scope of the bar order, and on August 31, 2005, the District Court issued an order preliminarily approving the settlement.
 
On December 5, 2006, following an appeal from the underwriter defendants the United States Court of Appeals for the Second Circuit overturned the District Court’s certification of the class of plaintiffs who are pursuing the claims that would be settled in the settlement against the underwriter defendants. Plaintiffs filed a Petition for Rehearing and Rehearing En Banc with the Second Circuit on January 5, 2007 in response to the Second Circuit’s decision and have informed the District Court that they would like to be heard as to whether the settlement may still be approved even if the decision of the Court of Appeals is not reversed. The District Court indicated that it would defer consideration of final approval of the settlement pending plaintiffs’ request for further appellate review.
 
On April 6, 2007, the Second Circuit denied plaintiffs’ petition for rehearing, but clarified that the plaintiffs may seek to certify a more limited class in the District Court. In light of the overturned class certification on June 25, 2007, the District Court signed an Order terminating the settlement. The actions against Bookham Technology plc and New Focus remain stayed while litigation proceeds in six test cases against other companies which involve claims virtually identical to those that have been asserted against


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Bookham Technology plc and New Focus. On November 13, 2007, the issuer defendants in certain designated “focus cases” filed a motion to dismiss the second consolidated amended class action complaints that were filed in those cases. On March 26, 2008, the District Court issued an Opinion and Order denying, in large part, the motions to dismiss the amended complaints in the “focus cases.”
 
It is uncertain if the litigations will settle. If settlement of the litigations do not occur and litigation against Bookham Technology plc and New Focus continues, we believe that both Bookham Technology plc and New Focus have meritorious defenses to the claims made in the Amended Class Action Complaints and therefore believes that such claims will not have a material effect on its financial position, results of operations or cash flows.
 
As described more fully under “Risks Related to the Merger — A purported class action lawsuit has been filed against Avanex and its directors and Bookham and Ultraviolet Acquisition Sub, Inc. challenging the merger, and an unfavorable judgment or ruling in this lawsuit could prevent or delay the consummation of the merger, result in substantial costs or both,” Bookham and Ultraviolet Acquisition Sub, Inc. are named as defendants in a purported class action complaint filed in Alameda County Superior Court. The complaint seeks to have the action certified as a class action and it also seeks an accounting from the individual defendants, to enjoin the proposed transaction, to rescind the transaction if it is consummated, and attorneys’ fees. An unfavorable outcome in this lawsuit could prevent or delay the consummation of the proposed merger, result in substantial costs to us, or both. It is also possible that other, similar stockholder lawsuits may be filed.
 
Litigation is subject to inherent uncertainties, and an adverse result in these or other matters that may arise from time to time could have a material adverse effect on our business, results of operations and financial condition. Any litigation to which we are subject may be costly and, further, could require significant involvement of our senior management and may divert management’s attention from our business and operations.
 
Some anti-takeover provisions contained in our charter, by-laws and under Delaware law could hinder business combinations with third parties.
 
We are subject to the provisions of Section 203 of the General Corporation Law of the State of Delaware prohibiting, under some circumstances, publicly-held Delaware corporations from engaging in business combinations with some stockholders for a specified period of time without the approval of the holders of substantially all of our outstanding voting stock. Our restated certificate of incorporation and bylaws contain provisions relating to the limitations of liability and indemnification of our directors and officers, dividing our board of directors into three classes of directors serving staggered three year terms and providing that our stockholders can take action only at a duly called annual or special meeting of stockholders. In addition, our restated certificate of incorporation authorizes us to issue up to 5,000,000 shares of preferred stock with designations, rights and preferences determined from time-to-time by our board of directors. All of these provisions could delay or impede the removal of incumbent directors and could make more difficult a merger, tender offer or proxy contest involving us, even if such events could be beneficial, in the short-term, to the interests of the stockholders. In addition, such provisions could limit the price that some investors might be willing to pay in the future for shares of our common stock.
 
These provisions also may have the effect of deterring hostile takeovers or delaying changes in control or management of us.
 
Risks Related to Our Common Stock
 
A variety of factors could cause the trading price of our common stock to be volatile or decline.
 
The trading price of our common stock has been, and is likely to continue to be, highly volatile. Many factors could cause the market price of our common stock to rise and fall. In addition to the matters discussed in other risk factors included herein, some of the reasons for the fluctuations in our stock price are:
 
  •  fluctuations in our results of operations;


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  •  market reaction and other developments relating to the proposed merger with Avanex, including any developments related to the business of Avanex during the pendency of the merger;
 
  •  changes in our business, operations or prospects;
 
  •  hiring or departure of key personnel;
 
  •  new contractual relationships with key suppliers or customers by us or our competitors;
 
  •  proposed acquisitions by us or our competitors;
 
  •  financial results that fail to meet public market analysts’ expectations and changes in stock market analysts’ recommendations regarding us, other optical technology companies or the telecommunication industry in general;
 
  •  future sales of common stock, or securities convertible into or exercisable for common stock;
 
  •  adverse judgments or settlements obligating us to pay damages;
 
  •  acts of war, terrorism, or natural disasters;
 
  •  industry, domestic and international market and economic conditions, including the global macroeconomic downturn we are currently experiencing;
 
  •  low trading volume in our stock;
 
  •  developments relating to patents or property rights; and
 
  •  government regulatory changes.
 
Since Bookham Technology plc’s initial public offering in April 2000, Bookham Technology plc’s American Depository Shares, or ADSs, and ordinary shares, our shares of common stock and the shares of our customers and competitors have experienced substantial price and volume fluctuations, in many cases without any direct relationship to the affected company’s operating performance. An outgrowth of this market volatility is the significant vulnerability of our stock price and the stock prices of our customers and competitors to any actual or perceived fluctuation in the strength of the markets we serve, regardless of the actual consequence of such fluctuations. As a result, the market prices for these companies are highly volatile. These broad market and industry factors caused the market price of Bookham Technology plc’s ADSs, ordinary shares, and our common stock to fluctuate, and may in the future cause the market price of our common stock to fluctuate, regardless of our actual operating performance or the operating performance of our customers.
 
If we do not meet the NASDAQ Global Market continued listing requirements, our common stock may be delisted.
 
As of March 24, 2009, the closing bid price of our common stock on the NASDAQ Global Market was $0.31, which is below the minimum $1.00 per share requirement for continued inclusion on the NASDAQ Global Market pursuant to NASDAQ Marketplace Rule 4450(a)(5), or the Rule. In accordance with the Rule, if our closing bid price were to remain below $1.00 for a period of 30 consecutive business days, NASDAQ would provide written notification that our securities may be delisted unless the bid price of our common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days within 180 calendar days from such notification.
 
Given the current extraordinary market conditions, NASDAQ has determined to suspend the bid price and market value of publicly held shares requirements through July 19, 2009. In that regard, on October 16, 2008, NASDAQ filed an immediately effective rule change with the Securities and Exchange Commission, which was subsequently extended by NASDAQ on December 18, 2008 and March 18, 2009, such that companies will not be cited for any new concerns related to bid price or market value of publicly held shares deficiencies. According to NASDAQ, the bid price and market value of publicly held shares requirements will be reinstated on July 20, 2009.


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Although we are seeking stockholder approval for a series of amendments to our restated certificate of incorporation that would effect a reverse stock split of our common stock, even if the amendments are approved and our board of directors elects to effect a reverse stock split following such stockholder approval, there can be no assurance that the bid price of our common stock will be in excess of $1.00 per share when the Rule is reinstated on July 20, 2009 or that the bid price of our common stock will remain in excess of $1.00 per share thereafter. In addition, there can be no assurance that our common stock will not be delisted due to a failure to meet other continued listing requirements even if the bid price of our common stock after the reverse stock split remains in excess of $1.00 per share. Failure to maintain the listing of our common stock on the NASDAQ Global Market would have an adverse effect on a stockholder’s ability to sell its shares of our common stock, which could result in the complete loss of the investment.
 
We may incur significant costs from class action litigation due to our expected stock volatility.
 
Our stock price may fluctuate for many reasons, including as a result of public announcements regarding the progress of our product development efforts, the addition or departure of key personnel, variations in our quarterly operating results and changes in market valuations of companies in our industry. Recently, when the market price of a stock has been volatile, as our stock price may be, holders of that stock have occasionally brought securities class action litigation against the company that issued the stock. If any of our stockholders were to bring a lawsuit of this type against us, even if the lawsuit were without merit, we could incur substantial costs defending the lawsuit. The lawsuit could also divert the time and attention of our management. In addition, if the suit were resolved in a manner adverse to us, the damages we could be required to pay may be substantial and would have an adverse impact on our ability to operate our business.
 
Because we do not intend to pay dividends, stockholders will benefit from an investment in our common stock only if it appreciates in value.
 
We have never declared or paid any dividends on our common stock. We anticipate that we will retain any future earnings to support operations and to finance the development of our business and do not expect to pay cash dividends in the foreseeable future. As a result, the success of an investment in our common stock will depend entirely upon any future appreciation in its value. There is no guarantee that our common stock will appreciate in value or even maintain the price at which stockholders have purchased their shares.
 
We can issue shares of preferred stock that may adversely affect your rights as a stockholder of our common stock.
 
Our restated certificate of incorporation authorizes us to issue up to 5,000,000 shares of preferred stock with designations, rights and preferences determined from time-to-time by our board of directors. Accordingly, our board of directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights superior to those of holders of our common stock. For example, an issuance of shares of preferred stock could:
 
  •  adversely affect the voting power of the holders of our common stock;
 
  •  make it more difficult for a third party to gain control of us;
 
  •  discourage bids for our common stock at a premium;
 
  •  limit or eliminate any payments that the holders of our common stock could expect to receive upon our liquidation; or
 
  •  otherwise adversely affect the market price of our common stock.
 
We may in the future issue additional shares of authorized preferred stock at any time.


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Risks Relating to Avanex
 
I.   Financial and Revenue Risks.
 
We have had a history of negative cash flows and losses, which could continue if we do not to increase our revenue and/or further reduce our costs.
 
Prior to fiscal 2008, we experienced operating losses in each quarterly and annual period since our inception in 1997. As of December 31, 2008, we had an accumulated deficit of $726.8 million. For the six months ended December 31, 2008 and for each of our prior fiscal years except for fiscal 2008, we had negative operating cash flow, and we expect to incur negative operating cash flow in future periods. For the six months ended December 31, 2008, our net loss was $26.5 million which included an impairment charge of $9.6 million for goodwill and intangible assets. There can be no assurance that our business will be profitable in the future or that additional losses and negative cash flows from operations will not be incurred, which could have a material adverse affect on our financial condition. These factors may impair our ability to continue as a going concern.
 
Due to insufficient cash generated from operations in the past, we funded our operations primarily through the sale of equity securities, debt securities, bank borrowings, equipment lease financings, acquisitions and other capital raising transactions. Although we implemented cost reduction programs during the past several years, we continue to have significant fixed expenses, and we expect to continue to incur considerable manufacturing, sales and marketing, product development and administrative expenses. If we fail to generate higher revenues and increase our gross margins while containing our costs and operating expenses, our financial position will be harmed significantly. Our revenues may not grow in the future, and we may never generate sufficient revenues to achieve profitability again. This may impair our ability to continue as a going concern.
 
Our future profitability depends on our ability to maintain or improve gross margin and control operating expenses. If we do not maintain or improve gross margin and control operating expenses, our financial condition and results of operations will be adversely impacted.
 
During the six months ended December 31, 2008, our gross margin percentage was 16%. During the fiscal years ended June 30, 2008 and 2007, our gross margin percentage was 31% and 18%, respectively. Despite our continued efforts to improve our gross margin, there can be no assurance that our gross margin will improve or be maintained in the future.
 
We wrote off excess and obsolete inventory and recorded losses from purchase commitments of $3.9 million during the six months ended December 31, 2008 due to lower demand for certain products and lower expected usage of previously purchased inventory. During the fiscal years ended June 30, 2008 and 2007, we wrote off $4.7 million and $12.9 million. Despite our continued efforts to manage our inventory, there can be no assurance that the write-offs of excess and obsolete inventory will decline in the future.
 
We have reduced fixed costs through the extensive reliance on third party contract manufacturing and the relocation of most of our manufacturing operations into a central facility in Bangkok, Thailand. We may further reduce fixed costs by relocating certain transactional activities to lower cost regions. We have faced and may face execution issues working with our contract manufacturers, including difficulties managing our supply chain and deliveries to our customers. From a financial viewpoint, should these difficulties occur, we could see negative impacts to revenue, gross margin and inventory levels.
 
In addition, over our limited operating history, the average selling prices of our existing products have decreased and this trend may continue. However, our overall product mix has shifted toward products with higher levels of integration, typically selling at higher unit prices. Future price decreases may be due to a number of factors, including competitive pricing pressures, rapid technological change and sales discounts. Therefore, to maintain or improve our gross margin, we must develop and introduce new products and product enhancements on a timely basis and reduce our costs of production. Moreover, as our average selling prices decline, we must increase our unit sales volume, or introduce new products, to maintain or increase our total revenues. If our average selling prices decline more rapidly than our costs of production, our gross margin will


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decline. This would adversely impact our business, financial condition and results of operations. If we are unable to continue to generate positive gross margin, our cash flows from operations would be negatively impacted, and we would be unable to maintain profitability.
 
Our future revenues and operating results are inherently unpredictable, and as a result, we may fail to meet the expectations of securities analysts or investors, which could cause our stock price to decline.
 
Our revenues and operating results have fluctuated significantly from quarter-to-quarter in the past, and may continue to fluctuate significantly in the future. Factors that are likely to cause these fluctuations, some of which are outside of our control, include without limitation, the factors described elsewhere in this section and the following:
 
  •  the current recessionary macro economic environment, as well as the current economic environment and other developments in the telecommunications industry, including severe business setbacks, such as bankruptcy, of customers or potential customers;
 
  •  the average margin of the mix of products we sell;
 
  •  fluctuations in demand for and sales of our products, which will depend upon factors such as the speed and magnitude of the transition to an all-optical network, the acceptance of our products in the marketplace, and the general level of spending on infrastructure projects in the telecommunications industry;
 
  •  cancellations of orders and shipment rescheduling;
 
  •  changes in product specifications required by customers for existing and future products;
 
  •  satisfaction of contractual customer acceptance criteria and related revenue recognition issues;
 
  •  our ability to maintain appropriate manufacturing capacity through our contract manufacturers and materials suppliers, from whom we have no long-term commitments;
 
  •  the ability of our outsourced manufacturers to timely produce and deliver subcomponents, and possibly complete products in the quantity and of the quality we require;
 
  •  the current practice of our customers in the telecommunications industry of sporadically placing large orders with short lead times;
 
  •  our ability to comply with new rules and regulations;
 
  •  competitive factors, including the introduction of new products and product enhancements by competitors and potential competitors, pricing pressures, and the competitive environment in the markets into which we sell our photonic processing solutions and products, including competitors with substantially greater resources than we have;
 
  •  our ability to effectively develop, introduce, manufacture, and ship new and enhanced products in a timely manner without defects;
 
  •  the availability and cost of components for our products;
 
  •  new product introductions that may result in increased research and development expenses and sales and marketing expenses that are incurred in one quarter, with revenues, if any, that are not recognized until a subsequent quarter;
 
  •  the loss of, or significant reduction in, purchases by our customers, including as a result of industry consolidation, mergers or divestitures involving our customers;
 
  •  the unpredictability of customer demand and difficulties in meeting such demand;
 
  •  revisions to our estimated reserves and allowances, as well as other accounting provisions or charges;
 
  •  costs associated with, and the outcome of, any litigation to which we are, or may become, a party; and


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  •  customer perception of our financial condition and resulting effects on our orders and revenue.
 
A high percentage of our expenses, including those related to manufacturing, engineering, sales and marketing, research and development, and general and administrative functions, are fixed in the short term. As a result, if we experience delays in generating and recognizing revenue, our quarterly operating results are likely to be harmed.
 
Due to these and other factors, we believe that quarter-to-quarter comparisons of our operating results may not be meaningful. Our results for one quarter should not be relied upon as any indication of our future performance. It is possible that in future quarters our operating results may be below the expectations of public market analysts or investors. If this occurs, the price of our common stock would likely decrease.
 
We may not continue to realize the anticipated benefits from our restructuring efforts.
 
As part of our cost reduction efforts, over the past several years we have implemented various restructuring programs to realign our resources in response to changes in the industry and customer demand. These efforts have included transferring most of our manufacturing operations to lower-cost contract manufacturers and selling our semiconductor fabs and related product lines in France. In September 2008, we implemented a workforce reduction of 47 employees and announced the closure of our Melbourne, Florida facility and the transfer of the respective product lines, inventory, and fixed assets to other offices. Our past restructuring programs may have a material effect on our financial position in the future as we pay rent for excess facilities. We may initiate future restructuring actions, which are likely to result in additional expenses that could affect our results of operations or financial position. There can be no assurance that we will realize the benefits we anticipate from our current or future restructuring programs or that such programs will reduce our operating expenses and improve our cost structure.
 
A lack of effective internal control over financial reporting could result in an inability to report our financial results accurately, which could lead to a loss of investor confidence in our financial reports and have an adverse effect on our stock price.
 
Effective internal controls are necessary for us to provide reliable financial reports. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed. We have in the past discovered, and may in the future discover, deficiencies, including those considered to be material weaknesses, in our internal controls. For example, as more fully described in Item 9A of our Annual Report on Form 10-K filed with the SEC on September 5, 2008, our management concluded that as of June 30, 2008, we did not maintain effective internal controls over the following:
 
Controls over the review of journal entries for inventory and taxes related to certain foreign subsidiaries were inadequately designed to prevent or detect a material misstatement of the consolidated financial statements.
 
Our management determined that these control deficiencies were considered a material weakness that could result in a material misstatement to annual or interim financial statements that would not be prevented or detected. As a result, our management concluded that our internal control over financial reporting was not effective as of June 30, 2008 using the criteria set forth in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). We expect the remediation of this material weakness to occur during fiscal 2009.
 
A failure to implement and maintain effective internal control over financial reporting, including a failure to implement corrective actions to address the control deficiencies identified above, could result in a material misstatement of our financial statements or otherwise cause us to fail to meet our financial reporting obligations. This, in turn, could result in a loss of investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our business, financial condition, operating results and our stock price, and we could be subject to stockholder litigation.


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We incur increased costs as a result of being a public company.
 
As a public company, we incur significant legal, accounting and other expenses. In addition, the Sarbanes-Oxley Act of 2002, as well as future accounting rules and regulations subsequently implemented by the Securities and Exchange Commission and NASDAQ, have required changes in corporate governance practices of public companies. These rules and regulations have increased our legal and financial compliance costs and have made some activities more time consuming and costly. In addition, we incur additional costs associated with our public company reporting requirements.
 
Our stock price is highly volatile.
 
The trading price of our common stock has fluctuated significantly since our initial public offering in February 2000, and is likely to remain volatile in the future. For example, since the beginning of fiscal 2007 through January 30, 2009, our common stock has closed as low as $0.75 and as high as $34.20 per share. The trading price of our common stock could be subject to wide fluctuations in response to many events or factors, including the following:
 
  •  quarterly variations in our operating results;
 
  •  significant developments in the businesses of telecommunications companies;
 
  •  changes in financial estimates by securities analysts;
 
  •  changes in market valuations or financial results of telecommunications-related companies;
 
  •  announcements by us or our competitors of technology innovations, new products, or significant acquisitions, strategic partnerships or joint ventures;
 
  •  any deviation from projected growth rates in revenues;
 
  •  any loss of a major customer or a major customer order;
 
  •  additions or departures of key management or engineering personnel;
 
  •  any deviations in our net revenue or in losses from levels expected by securities analysts;
 
  •  activities of short sellers and risk arbitrageurs;
 
  •  future sales of our common stock or the availability of additional financing;
 
  •  volume fluctuations, which are particularly common among highly volatile securities of telecommunications-related companies; and
 
  •  material weaknesses in internal controls.
 
In addition, the stock market has experienced volatility that has particularly affected the market prices of equity securities of many high technology companies, which often has been unrelated or disproportionate to the operating performance of these companies. Market volatility has been particularly acute in fiscal 2008 and 2009. These broad market fluctuations have in the past and may in the future adversely affect the market price of our common stock. There is substantial risk that our quarterly results will fluctuate.
 
Sales of securities by our stockholders or warrant holders could affect the market price of our common stock or have a dilutive effect upon our stockholders.
 
On October 29, 2007, the Pirelli Group acquired all the shares of our common stock previously held by Alcatel-Lucent. As of January 30, 2009, the Pirelli Group owned shares of our common stock representing approximately 12% of the outstanding shares of our common stock. If the Pirelli Group or our other large stockholders sell substantial amounts of our common stock in the public market, it could cause the market price of our common stock to fall, and could make it more difficult for us to raise capital through public offerings or other sales of our capital stock.


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In addition, we have issued warrants to purchase initially up to an aggregate of 665,417 shares of common stock to certain institutional investors that are exercisable through 2011 at exercise prices ranging from $32.18 to $110.85 per share, subject to broad-based anti-dilution provisions, including weighted-average price-based anti-dilution provisions. If these institutional investors exercise the warrants, we will issue shares of our common stock and such issuances may be dilutive to our stockholders. Because the exercise price of the warrants may be adjusted from time to time in accordance with the provisions of the warrants, the number of shares that could actually be issued may be greater than the amount described above. For example, in connection with our March 1, 2007 financing, the holders of the warrants we issued on March 9, 2006 received an antidilution adjustment pursuant to the terms of such warrants resulting in up to 7,815 additional shares being issued upon the exercise of such warrants and the reduction of the exercise price of the warrants from $40.95 per share to $40.30 per share.
 
We may have difficulty obtaining additional capital.
 
Our balance of unrestricted cash, cash equivalents, and short-term investments decreased from $55.4 million at June 30, 2008 to $33.4 million at December 31, 2008. We expect that these balances will decline further in future quarters. Except for fiscal 2008, we have not been profitable, and there can be no assurance that our business will be profitable in the future. A failure to be profitable would have an adverse affect on our financial condition. If we do not consummate the proposed merger with Bookham, Inc. announced on January 27, 2009 or a transaction with another third party, we may need to secure additional funding, and it may be difficult for us to raise additional capital. If adequate capital is not available to us as required, or is not available on favorable terms, our business, operating results and financial condition would be adversely affected.
 
II.   Market and Competitive Risks.
 
Market conditions in the telecommunications industry may significantly harm our financial position.
 
Worldwide economic conditions generally, and market conditions in the telecommunications industry specifically, may significantly harm our financial position. We sell our products primarily to a few large customers in the telecommunications industry. Two customers accounted for an aggregate of 33% and 12% of our net revenue, respectively, for the three months ended December 31, 2008. Two customers accounted for an aggregate of 25% and 21% of our net revenue, respectively, for the fiscal year ended June 30, 2008. We expect that the majority of our revenues will continue to depend on sales of our products to a small number of customers. If current customers do not continue to place significant orders, or if they cancel or delay current orders, we may not be able to replace those orders. In addition, industry consolidation, mergers or divestitures involving our existing customers, bankruptcies involving existing customers, as well as any negative developments in the business of existing customers could result in significantly decreased sales to these customers, which could seriously harm our business, operating results and financial condition. We have experienced, and in the future we may experience, losses as a result of the inability to collect accounts receivable, as well as the loss of ongoing business from customers experiencing financial difficulties. For example, one of our customers, Nortel, filed for bankruptcy protection on January 14, 2009. If our customers fail to meet their payment obligations, we could experience reduced cash flows and losses in excess of amounts reserved. Because of our reliance on a limited number of customers, any decrease in revenues from, or loss of, one or more of these customers without a corresponding increase in revenues from other customers would harm our business, operating results and financial condition.
 
Our customers may cancel or delay purchases with little or no advance notice to us.
 
Our customers typically purchase our products pursuant to individual purchase orders, and only a small portion of our orders is non-cancelable. Accordingly, our customers may cancel, defer or decrease purchases without significant consequence to them and with little or no advance notice. Further, certain of our customers have a tendency to purchase our products near the end of a fiscal quarter. Cancellation or delays of such orders may cause us to fail to achieve that quarter’s financial and operating goals. Decreases in purchases,


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cancellations of purchase orders, or deferrals of purchases may significantly harm our business, operating results and financial condition, particularly if we are not able to anticipate these events.
 
We experience intense competition with respect to our products.
 
We believe that our principal competitors in the optical systems and components industry include Bookham, Inc., EMCORE Corporation, Finisar Corporation, JDS Uniphase Corporation, Oplink Communications, Inc., and Opnext Inc. We may also face competition from companies that expand into our industry in the future.
 
A few of our competitors have longer operating histories and significantly greater financial, technical, marketing and other resources than we have. As a result, some of these competitors are able to devote greater resources to the development, promotion, sale, and support of their products. In addition, our competitors that have larger market capitalization or cash reserves are better positioned than we are to acquire other companies in order to gain new technologies or products that may displace our product lines. Consolidation in the optical systems and components industry could intensify the competitive pressures that we face because these consolidated competitors may have longer operating histories and significantly greater financial, technical, marketing and other resources than we have.
 
Some existing customers and potential customers, as well as, suppliers and potential suppliers, are also our competitors. These customers and suppliers may develop or acquire additional competitive products or technologies in the future, which may cause them to reduce or cease their purchases from us or their supply to us, as the case may be. Further, these customers may reduce or discontinue purchasing our products if they perceive us as a serious competitive threat with regard to sales of products to their customers. Additionally, suppliers may reduce or discontinue selling materials to us if they perceive us as a serious competitive threat with regard to sales of products to their customers. As a result of these factors, we expect that competitive pressures will intensify and may result in price reductions, reduced margins, and loss of market share.
 
Competition in the optical systems and components industry has contributed to substantial price-driven competition. As a result, sales prices for specific products have decreased over time at varying rates, in some instances significantly. Pricing pressure is exacerbated by the rapid emergence of new technologies and the evolution of technical standards, which can greatly diminish the value of products relying on older technologies and standards. In addition, the current economic and industry environment in the telecommunications sector has resulted in pressure to reduce prices for our products, and we expect pricing pressure to continue for the foreseeable future, which may adversely affect our operating results. Reduced spending by our customers has caused and may continue to cause increased price competition, resulting in a decline in the prices we charge for our products. If our customers and potential customers continue to constrain their spending, or if the prices we charge continue to decline, our revenues and margins may be adversely affected.
 
We will lose market share and may not be successful if our customers do not qualify our products to be designed into their products and systems or if our customers significantly delay purchasing our products.
 
In the telecommunications industry, service providers and optical systems manufacturers often undertake extensive qualification processes prior to placing orders for large quantities of products such as ours, because these products must function as part of a larger system or network. Once they decide to use a particular supplier’s product or component, these potential customers design the product into their system, which is known as a “design-in” win. Suppliers whose products or components are not designed in are unlikely to make sales to that company until the adoption of a future redesigned system at the earliest, which could occur several years after the last design-in win. If we fail to achieve design-in wins in potential customers’ qualification processes, we may lose the opportunity for significant sales to such customers for a significant period of time.


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The long sales cycles for sales of our products to customers may cause operating results to vary from quarter to quarter, which could continue to cause volatility in our stock price, and may prevent us from being profitable.
 
The period of time between our initial contact with certain of our customers and the receipt of an actual purchase order from such customers often spans a time period of six to nine months, or longer. During this time, customers may perform, or require us to perform, extensive and lengthy evaluation and testing of our products and our manufacturing processes before purchasing our products. While our customers are evaluating our products before they place an order with us, we may incur substantial sales and marketing and research and development expenses, expend significant management efforts, increase manufacturing capacity and order long-lead-time supplies. If we increase capacity and order supplies in anticipation of an order that does not materialize, our gross margin will decline, and we will have to carry and write off excess inventory. Even if we receive an order, if we are required to add additional internal manufacturing capacity in order to service the customer’s requirements, such manufacturing capacity may be underutilized in subsequent periods, especially if orders are delayed or cancelled. Either situation could cause our business, results of operations, and financial condition to be below the expectations of public market analysts or investors, which could, in turn, cause the price of our common stock to decline.
 
If the communications industry does not continue to evolve and grow steadily, our business may not succeed.
 
Future demand for our products is uncertain and unpredictable, and will depend to a great degree on the speed of the widespread adoption of optical networks. If the transition occurs too slowly or ceases altogether, the market for our products and the growth of our business will be significantly limited.
 
Our future success depends on the continued growth and success of the telecommunications industry, including the continued growth of the Internet as a widely used medium for commerce and communication and the continuing demand for increased bandwidth over communications networks. If the Internet does not continue to expand as a widespread communication medium and commercial marketplace, the need for significantly increased bandwidth across networks and the market for optical transmission products may not develop. As a result, it would be unlikely that our products would achieve commercial success.
 
The rate at which telecommunications service providers and other optical network users have built new optical networks or installed new systems in their existing optical networks has fluctuated in the past, and these fluctuations may continue in the future. Sales of our components depend on sales of fiber optic telecommunications systems by our systems-level customers, which are shipped in quantity when telecommunications service providers add capacity. Systems manufacturers compete for sales in each capacity deployment. If systems manufacturers that use our products in their systems do not win a contract, their demand for our products will decline, reducing our future revenues. Similarly, a telecommunications service provider’s delay in selecting systems manufacturers for a deployment could delay our shipments and revenues.
 
III.  Acquisition and Divestiture Risks.
 
Acquisitions, divestitures and other significant transactions may adversely affect our business.
 
We regularly review acquisition, divestiture and other strategic opportunities that would further our business objectives, complement our existing product offerings, augment our market coverage, secure supplies of critical materials or enhance our technological capabilities. The anticipated benefits of our acquisitions, divestitures and other strategic transactions may not be realized or may be realized more slowly than we expected. Acquisitions, divestitures and other strategic opportunities have resulted in, and in the future could result in, a number of financial consequences, including without limitation:
 
  •  potentially dilutive issuances of equity securities;
 
  •  reduced cash balances and related interest income;
 
  •  higher fixed expenses, which require a higher level of revenues to maintain gross margin;


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  •  the incurrence of debt and contingent liabilities, including indemnification obligations;
 
  •  restructuring actions, which could result in charges that have a material effect on our results of operations and our financial position;
 
  •  loss of customers, suppliers, distributors, licensors or employees of the acquired company;
 
  •  legal, accounting and advisory fees;
 
  •  amortization expenses related to intangible assets; and
 
  •  one-time write-offs of large amounts.
 
For example, in connection with our acquisition of the optical components businesses of Alcatel and Corning, we issued shares of our common stock to Alcatel and to Corning representing 28% and 17%, respectively, of the outstanding shares of our common stock on a post-transaction basis. In connection with such acquisitions, we recorded restructuring liabilities at July 31, 2003 with a fair value of $64.1 million relating to workforce reductions, which were included in the purchase price of such acquisitions. Following these acquisitions, we recorded additional significant restructuring liabilities that involved the acquired businesses and resulted in, among other things, a significant reduction in the size of our workforce, consolidation of our facilities and increased reliance on outsourced, third-party manufacturing.
 
In fiscal 2007, we sold ninety percent (90%) of the shares of Avanex France, the operator of our semiconductor fabs and associated product lines located in Nozay, France. We agreed to indemnify the buyers of Avanex France generally for a period of up to two years in an amount generally not exceeding €5 million for breaches of certain representations, warranties and covenants relating to the condition of the business prior to and at the time of sale. Should any such liabilities or expenses be of a material amount, our finances could be materially and adversely affected. We may experience a shortfall in revenue, lose existing or potential customers or otherwise experience material adverse effects upon our business, results of operation and financial condition.
 
Additionally, if any potential acquisitions are not completed, we are required to expense the frequently significant legal, accounting, consulting and other costs of pursuing these transactions in the period in which the activity ceases, which could adversely affect our operating results and may not be anticipated. For example, in fiscal 2007, we expensed approximately $2.1 million in diligence and professional fees related to a potential acquisition that we decided not to pursue.
 
Furthermore, our past acquisition and disposition activity has involved, and our future acquisition, disposition and other significant transactions may involve, numerous operational risks, including:
 
  •  difficulties integrating or divesting operations, personnel, technologies, products and the information systems of the acquired or divested companies;
 
  •  diversion of management’s attention from other business concerns;
 
  •  diversion of resources from our existing businesses, products or technologies;
 
  •  risks of entering geographic and business markets in which we have no or limited prior experience; and
 
  •  potential loss of key employees of acquired organizations.
 
IV.   Operations and Research and Development Risks.
 
We face various risks related to our manufacturing operations that may adversely affect our business.
 
We may experience delays, disruptions or quality control problems in our manufacturing operations or the manufacturing operations of our third party manufacturers, and, as a result, product shipments to our customers could be delayed beyond the shipment schedules requested by our customers, which would negatively affect our business, results of operations, and financial condition. In the past, we have experienced disruptions in the manufacture of some of our products due to changes in our manufacturing processes, which resulted in reduced manufacturing yields, delays in the shipment of our products and deferral of revenue recognition. Any


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disruptions in the future could adversely affect our revenues, gross margin, and results of operations. Changes in our manufacturing processes or those of our third party manufacturers, or the inadvertent use of defective materials by our third party manufacturers or us, could significantly reduce our manufacturing yields and product reliability. Lower than expected manufacturing yields could delay product shipments and further impair our gross margin. These operational issues have included capacity constraints at our contract manufacturers, raw materials shortages, logistics issues, and manufacturing yield issues for some of our new products.
 
We may need to develop new manufacturing processes and techniques that will involve higher levels of automation, or may need to further relocate certain manufacturing operations to lower cost regions to improve our gross margin and achieve the targeted cost levels of our customers. If we fail to manage this process effectively, or if we experience delays, disruptions or quality control problems in our manufacturing operations, our shipments of products to our customers could be delayed.
 
We face risks related to our concentration of research and development efforts on a limited number of key industry standards and technologies, and our future success depends on our ability to develop and introduce new and enhanced products successfully that meet the needs of our customers in a timely manner.
 
In the past, we have concentrated our research and development efforts on a limited number of technologies that we believed had the best growth prospects. If we are unable to develop commercially viable products using these technologies, or these technologies do not become generally accepted, our business will likely suffer.
 
The markets for our products are characterized by rapid technological change, frequent new product introduction, changes in customer requirements, and evolving industry standards. Our future performance will depend upon the successful development, introduction and market acceptance of new and enhanced products that address these changes. We may not be able to develop the underlying core technologies necessary to create new or enhanced products, or to license or otherwise acquire these technologies from third parties. Product development delays may result from numerous factors, including:
 
  •  changing product specifications and customer requirements;
 
  •  difficulties in hiring and retaining necessary technical personnel;
 
  •  difficulties in reallocating engineering resources and overcoming resource limitations;
 
  •  changing market or competitive product requirements;
 
  •  unanticipated engineering complexities, and
 
  •  failure to compete with new product releases by our competitors.
 
Our industry has increased its focus on products that transmit voice, video and data traffic over shorter distances and that are offered at lower cost than the products that we offer to our telecommunications customers for transmission of information over longer distances. If we are unable to develop products that meet the requirements of potential customers of these products, our business, results of operations, and financial condition could suffer.
 
The development of new, technologically advanced products is a complex and uncertain process requiring high levels of innovation and highly skilled engineering and development personnel, as well as the accurate anticipation of technological and market trends. We cannot assure that we will be able to identify, develop, manufacture, market or support new or enhanced products successfully, or on a timely basis. In addition, the introduction of new and enhanced products may cause our customers to defer or cancel orders for existing products. To the extent customers defer or cancel orders for existing products due to the expectation of a new product release, or if there is any delay in the development or introduction of our new products or the enhancements of our products, our business, results of operations, and financial condition would suffer. Further, we cannot assure that our new products will gain market acceptance or that we will be able to respond


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effectively to competitive products, technological changes or emerging industry standards. Any failure to respond effectively to competitive products, technological change or emerging industry standards would significantly harm our business, results of operations and financial condition.
 
If we are unable to forecast component and material requirements accurately or if we are unable to commit to deliver sufficient quantities of our products to satisfy customers’ needs, our results of operations will be adversely affected.
 
Our customers typically require us to commit to delivering certain quantities of our products to them (in guaranteed safety stock, guaranteed capacity or otherwise) without committing themselves to purchase such products, or any quantity of such products. Therefore, wide variations between estimates of our customers’ needs and their actual purchases may result in:
 
  •  a surplus and potential obsolescence of inventory, materials and capacity, if estimates of our customers’ requirements are greater than our customers’ actual need; or
 
  •  a lack of sufficient products to satisfy our customers’ needs, if estimates of our customers’ requirements are less than our customers’ actual needs.
 
We use a rolling twelve-month demand forecast based on anticipated and historical product orders to determine our component and material requirements. It is very important that we accurately predict both the demand for our products and the lead times required to obtain the necessary components and materials. It is very difficult to develop accurate forecasts of product demand, especially given the current uncertain conditions in the telecommunications industry. Order cancellations and lower order volumes by our customers have in the past created excess inventories. For example, inventory write-offs are primarily the result of our inability to anticipate decreases in demand for certain of our products and variations in product mix ordered by our customers. For the three months ended December 31, 2008 and 2007, the combined cost of write-offs was $2.3 million and $1.8 million, respectively, for excess and obsolete inventory and losses from purchases commitments. For the fiscal years ended June 30, 2008 and June 30, 2007, we recorded write-offs of $4.7 million and $12.9 million, respectively, for excess and obsolete inventory. If we fail to accurately predict both the demand for our products and the lead times required to obtain the necessary components and materials in the future, we could incur additional excess and obsolete inventory write-downs. If we underestimate our component and material requirements, we may have inadequate inventory, which could interrupt our manufacturing and delay delivery of our products to our customers. Any of these occurrences would negatively affect our business, results of operations, and financial condition.
 
Network carriers and telecommunication system integrators historically have required that suppliers commit to provide specified quantities of products over a given period of time. If we are unable to commit to deliver sufficient quantities of our products to satisfy a customer’s anticipated needs, we may lose the opportunity to make significant sales to that customer over a lengthy period of time. In addition, we may be unable to pursue large orders if we do not have sufficient manufacturing capacity to enable us to provide customers with specified quantities of products. We rely heavily upon the capacity and willingness of third party contract manufacturers and materials suppliers to enable us to fulfill our commitments to our customers, but we generally do not have the benefit of long term or other supply or services contracts with our third party contract manufacturers and materials suppliers, who are generally not obligated to adhere to our production schedule. If we cannot deliver sufficient quantities of our products, we may lose business, which could adversely impact our business, results of operations and financial condition.
 
If our customers do not qualify our manufacturing processes, they may not purchase our products and our operating results could suffer.
 
Certain of our customers will not purchase our products prior to qualification of our manufacturing processes and approval of our quality assurance system. The qualification process determines whether the manufacturing line meets the quality, performance, and reliability standards of our customers. These customers may also require that we, and any manufacturer that we may use, be registered under international quality standards, such as ISO 9001. Our United States, Europe and Asia sites are currently TL-9000 certified. Delays


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in obtaining customer qualification of our manufacturing processes or approval of our quality assurance system may cause a product to be removed from a long-term supply program and result in significant lost revenue opportunity over the term of that program.
 
We depend upon a limited number of contract manufacturers and materials suppliers to manufacture and provide a majority of our products, and our dependence on these manufacturers and suppliers may result in product delivery delays, may harm our operations or have an adverse effect upon our business.
 
We rely on a limited number of outsourced manufacturers and suppliers to manufacture and provide a substantial majority of our components, subassemblies, and finished products. In particular, one contract manufacturer, Fabrinet, currently manufactures products for sale, which constitutes a significant majority of our net revenue. We intend to develop further our relationships with Fabrinet and with other manufacturers so that they will eventually manufacture many of our high volume key components and subassemblies in the future. The qualification of these independent manufacturers and materials suppliers under quality assurance standards is an expensive and time-consuming process. Our independent manufacturers have a limited history of manufacturing optical subcomponents. Any interruption in the operations of these manufacturers, or any deficiency in the quality or quantity of the subcomponents or products built for us by these manufacturers, could impede our ability to meet our scheduled product deliveries to our customers. Operational issues could result, such as capacity constraints at our contract manufacturers, raw materials shortages, logistics issues, and manufacturing yield issues for some of our new products. As a result, we may lose existing or potential customers.
 
We have limited experience in working with outsourced manufacturers and suppliers. As a result, we may not be able to manage our relationships with them effectively. If we cannot manage our manufacturing and supplier relationships effectively, or if these manufacturers and suppliers fail to deliver components in a timely manner, we could experience significant delays in product deliveries, which may have an adverse effect on our business and results of operations. Increased reliance on outsourced manufacturing and suppliers, and the ultimate disposition of our manufacturing capacity in the future, may result in impairment expense relating to our long-lived assets in future periods, which would have an adverse impact on our business, financial condition, and results of operations.
 
Our products may have defects that might not be detected until full deployment of a customer’s network, which could result in a loss of customers and revenue and in damage to our reputation.
 
Our products are designed to be deployed in large and complex optical networks and must be compatible with existing and future components of such networks. Our products can only be fully tested for reliability when deployed in networks for long periods of time. Our products may not operate as expected, and our customers may discover errors, defects, or incompatibilities in our products only after they have been fully deployed and are operating under peak stress conditions. If we are unable to fix errors or other problems, we could experience:
 
  •  loss of customers or customer orders;
 
  •  loss of or delay in revenues;
 
  •  loss of market share;
 
  •  loss or damage to our brand and reputation;
 
  •  inability to attract new customers or achieve market acceptance;
 
  •  diversion of development resources;
 
  •  increased service and warranty costs;
 
  •  legal actions by our customers; and
 
  •  increased insurance costs.


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We may be required to indemnify our customers against certain liabilities arising from defects in our products, which liabilities may also include the following costs and
 
  •  costs and expenses incurred by our customers or their customers to fix the problems; and
 
  •  costs and expenses incurred by our customers or their customers to replace our products, or their products which incorporate our products, with other product solutions.
 
While we carry insurance policies covering this type of liability, these policies may not provide sufficient protection should a claim be asserted. To date, product defects have not had a material negative effect on our business, results of operations, or financial condition; however, we cannot assure that they will not have a material negative effect on us in the future.
 
We depend on key personnel to manage our business effectively, and if we are unable to hire, retain, or motivate qualified personnel, our ability to sell our products could be harmed.
 
Our future success depends, in part, on certain key employees and on our ability to attract and retain highly skilled personnel. In addition, there have been changes in our executive management team, and there can be no assurance that these changes will be successful. The loss of the services of any of our key personnel, the inability to attract or retain qualified personnel, or delays in hiring required personnel, particularly engineering, sales or marketing personnel, may seriously harm our business, results of operations, and financial condition. For example, Dr. Jo Major, our former President and Chief Executive Officer, Marla Sanchez, our former Chief Financial Officer, and Pat Edsell, our former General Manager, recently left the Company. None of our officers or key employees has an employment agreement for a specific term, and these employees may terminate their employment at any time. We do not have key person life insurance policies covering any of our employees. Our ability to continue to attract and retain highly skilled personnel will be a critical factor in determining whether we will be successful in the future. Competition for highly skilled personnel is frequently intense, especially in the San Francisco Bay area. We may not be successful in attracting, assimilating or retaining qualified personnel to fulfill our current or future needs.
 
In addition, we have implemented restructuring programs designed to attempt to improve our financial performance. Among other things, we have moved substantially all of our manufacturing operations to lower cost locations. As a result, our headcount in North America and Europe has been substantially reduced and may be reduced further in the future. To date, such actions have not resulted in substantial work stoppages. Decreases in labor productivity, however, whether formalized by a work stoppage or a strike, or by decreased productivity due to morale issues could have an adverse effect on our business and operating results.
 
We face various risks that could prevent us from successfully manufacturing, marketing and distributing our products internationally.
 
We have expanded our international operations in Thailand and China, including the expansion of overseas product manufacturing, and we may continue to expand internationally in the future. Further, we have increased international sales and intend to further increase our international sales and the number of our international customers. We have also initiated significant restructuring programs overseas, and may initiate additional restructuring programs overseas in the future. Our international operations have required and will continue to require significant management attention and financial resources. For instance, we have incurred, and may continue to incur, startup costs to open our operations center in Thailand and our research and development office in Shanghai, and may incur costs in transferring operations to Thailand. We currently have limited experience in manufacturing, marketing and distributing our products internationally, particularly from our new operations center in Thailand. In addition, international operations are subject to inherent risks, including, without limitation, the following:
 
  •  greater difficulty in accounts receivable collection and longer collection periods;
 
  •  difficulties inherent in managing operations and employees in remote foreign operations;
 
  •  import or export licensing and product certification requirements;


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  •  tariffs, duties, price controls or other restrictions on foreign currencies or trade barriers imposed by foreign countries;
 
  •  potential adverse tax consequences;
 
  •  seasonal reductions in business activity in some parts of the world;
 
  •  burdens of complying with a wide variety of foreign laws and regulations, particularly with respect to taxes, intellectual property, license requirements, employment matters and environmental requirements;
 
  •  the impact of recessions in economies outside of the United States;
 
  •  unexpected changes in regulatory or certification requirements for optical systems or networks; and
 
  •  political and economic instability, terrorism and war.
 
Some of our suppliers and contract manufacturers, including Fabrinet, also have international operations and are subject to the risks described above. Even if we are able to manage the risks of international operations successfully, our business may be materially adversely affected if our suppliers or contract manufacturers are not able to manage these risks successfully.
 
A portion of our international revenues and expenses are now denominated in foreign currencies. It has not been our recent practice to engage in the hedging of foreign currency transactions to mitigate foreign currency risk. Therefore, fluctuations in the value of foreign currencies could have a negative impact on the profitability of our global operations, which would seriously harm our business, results of operations, and financial condition.
 
V.   Intellectual Property and Litigation Risks.
 
Current and future litigation against us could be costly and time consuming to defend.
 
We are subject to legal proceedings and claims that arise in the ordinary course of business. Litigation may result in substantial costs and may divert management’s attention and resources, which may seriously harm our business, results of operations, financial condition and liquidity.
 
We may be unable to protect our proprietary technology, which could significantly impair our ability to compete.
 
We rely on a combination of patent, copyright, trademark and trade secret laws, confidentiality agreements and other contractual restrictions on disclosure to protect our intellectual property rights. We also rely on confidentiality agreements with our employees, consultants and corporate partners, and controlled access to and distribution of our technology, documentation and other confidential information. We have numerous patents issued or applied for in the United States and abroad, of which some may be jointly filed or owned with other parties. Further, we license certain intellectual property from third parties, including Alcatel-Lucent and Corning, that is critical to our business, and we also license intellectual property to other parties. We cannot assure that any patent applications or issued patents will protect our proprietary technology effectively, or that any patent applications or patents issued will not be challenged by third parties. Further, we cannot assure that parties from whom we license intellectual property will not violate their agreements with us; that they will not license their intellectual property to third parties; that their patent applications, patents and other intellectual property will protect our technology, products and business; or that their patent applications, patents, and other intellectual property will not be challenged by third parties. For example, Alcatel-Lucent has cross licenses with various third parties, which, when combined with their own intellectual property, may permit these third parties to compete with us. Our intellectual property also consists of trade secrets, requiring more monitoring and control mechanisms to protect. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology. Monitoring unauthorized use of our products is difficult, and we cannot be certain that the steps we take will prevent misappropriation or unauthorized use of our technology. Further, other parties may


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independently develop similar or competing technology or design around any patents that may be issued or licensed to us.
 
We use various methods to attempt to protect our intellectual property rights. However, we cannot be certain that these methods will prevent the misappropriation of our intellectual property. In particular, the laws in foreign countries may not protect our proprietary rights as fully as the laws in the United States.
 
We face risks with regard to third-party intellectual property licenses.
 
From time to time we may be required to license technology or intellectual property from third parties for our product offerings or to develop new products or product enhancements. We cannot assure that third-party licenses will be available to us on commercially reasonable terms, if at all. The inability to obtain a necessary third-party license required for our product offerings or to develop new products and product enhancements could require us to substitute technology of lower quality or performance standards or of greater cost, either of which could prevent us from operating our business. If we are unable to obtain licenses from third parties if and as necessary, then we may also be subject to litigation to defend against infringement claims from these third parties.
 
We may become subject to litigation or claims from or against third parties regarding intellectual property rights, which could divert resources, cause us to incur significant costs, and restrict our ability to utilize certain technology.
 
We may become a party to litigation in the future to protect our intellectual property or we may be subject to litigation to defend against infringement claims of others. These claims and any resulting lawsuits, if successful, could subject us to significant liability for damages and invalidation of our proprietary rights. These lawsuits, regardless of their success, would likely be time-consuming and expensive to resolve and would divert management’s time and attention. Any potential intellectual property litigation also could force us to do one or more of the following:
 
  •  stop selling, incorporating, or using our products that use the challenged intellectual property;
 
  •  obtain a license to sell or use the relevant technology from the owner of the infringed intellectual property right, which license may not be available on reasonable terms, or at all;
 
  •  redesign the products that use the technology; or
 
  •  indemnify certain customers and others against intellectual property claims asserted against them.
 
If we are forced to take any of these actions, our business may be seriously harmed.
 
We may in the future initiate claims or litigation against third parties for infringement of our proprietary rights in order to determine the scope and validity of our proprietary rights or the proprietary rights of competitors, or we may be required to grant certain third parties permission to enforce our intellectual property on our behalf. These claims could result in us being joined as a party to a lawsuit, counterclaims against us or our customers, invalidation or narrow interpretations of our proprietary rights, costly litigation, and the diversion of our technical and management personnel’s time and attention. Although we carry general liability insurance, our insurance may not cover potential claims of the above types or may not be adequate to indemnify us for all liability that may be imposed.
 
VI.   Other Risks.
 
Our business and future operating results may be adversely affected by events that are outside of our control.
 
Our business and operating results are vulnerable to interruption by events outside of our control, such as earthquakes, fire, power loss, telecommunications failures and uncertainties arising out of terrorist attacks throughout the world, including the continuation or potential worsening of the current global economic environment, the economic consequences of military action and the associated political instability, and the


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effect of heightened security concerns on domestic and international travel and commerce. We cannot assure that the insurance we maintain against fires, floods and general business interruptions will be adequate to cover our losses for such events in any particular case.
 
In addition, we handle hazardous materials as part of our manufacturing activities and are subject to a variety of governmental laws and regulations related to the use, storage, recycling, labeling, reporting, treatment, transportation, handling, discharge and disposal of such hazardous materials. Although we believe that our operations conform to presently applicable environmental laws and regulations, we may incur costs in order to comply with current or future environmental laws and regulations, including costs associated with permitting, investigation and remediation of hazardous materials, and installation of capital equipment relating to pollution abatement, production modification and/or hazardous materials management. In addition, we currently sell products that incorporate firmware and electronic components. The additional level of complexity created by combining firmware and electronic components with our optical components requires that we comply with additional regulations, both domestically and abroad, related to power consumption, electrical emissions and homologation. Any failure to obtain the necessary permits or comply with the necessary laws and regulations successfully could have a material adverse effect on our operations.


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THE COMPANIES
 
Bookham
 
Bookham designs, manufactures and markets optical components, modules and subsystems that generate, detect, amplify, combine and separate light signals principally for use in high-performance fiber optics communications networks. Due to its advantages of higher capacity and transmission speed, optical transmission has become the predominant technology for large-scale communications networks. Bookham’s primary operating segment, which it refers to as the telecom segment, addresses the optical communications market. Bookham’s remaining product lines, which comprise the non-telecom segment, leverage its optical component technologies and expertise in manufacturing optical subsystems to address opportunities in other markets, including industrial, research, semiconductor capital equipment, military and biotechnology.
 
Bookham, Inc., a Delaware corporation, was incorporated on June 29, 2004. On September 10, 2004, pursuant to a scheme of arrangement under the laws of the United Kingdom, Bookham, Inc. became the publicly traded parent company of the Bookham Technology plc group of companies, including Bookham Technology plc, a public limited company incorporated under the laws of England and Wales. Bookham common stock is traded on the NASDAQ Global Market under the symbol “BKHM.” Pursuant to the merger agreement, Bookham and Avanex will take all actions necessary to ensure that the name of the combined company following the merger will be the name mutually agreed to by Bookham and Avanex. The name change has not yet been determined between the parties; however, when (and if) a name change is effected, a change in Bookham’s trading symbol may be effected as well.
 
Merger Sub
 
Ultraviolet Acquisition Sub, Inc., or Ultraviolet Acquisition Sub or merger sub, is a wholly owned subsidiary of Bookham that was incorporated in Delaware in January 2009. Merger sub does not engage in any operations and exists solely to facilitate the merger.
 
Avanex
 
Avanex is a global provider of high-performance, intelligent, photonic products including optical components, modules and subsystems. Its products enable optical communication networks to regenerate, transmit and manage voice, video and data optical signals efficiently. Telecommunication system integrators and their network carrier customers use Avanex products to enhance system performance and increase network speed and capacity. Avanex was incorporated in October 1997 in California and reincorporated in Delaware in January 2000. Avanex began making volume shipments of its products during the quarter ended September 30, 1999. Avanex common stock is traded on the NASDAQ Global Market under the symbol “AVNX.”


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THE BOOKHAM SPECIAL MEETING
 
Date, Time and Place
 
The special meeting of Bookham stockholders will be held on Monday, April 27, 2009, at the principal executive offices of Bookham located at 2584 Junction Avenue, San Jose, California 95134 commencing at 11:00 a.m. local time. We are sending this joint proxy statement/prospectus to Bookham stockholders in connection with the solicitation of proxies by the Bookham board of directors for use at the Bookham special meeting and any adjournments or postponements of the special meeting.
 
Purposes of the Bookham Special Meeting
 
The purposes of the Bookham special meeting are:
 
  •  to consider and vote on Bookham Proposal No. 1 to approve the issuance of shares of Bookham common stock in the merger;
 
  •  to consider and vote on Bookham Proposal No. 2 to approve an amendment to Bookham’s restated certificate of incorporation to increase the authorized shares of Bookham common stock to 450,000,000;
 
  •  to consider and vote on Bookham Proposal No. 3 to approve amendments to Bookham’s restated certificate of incorporation that would effect a reverse stock split, pursuant to which any whole number of issued and outstanding shares of Bookham common stock between and including five and thirty would be combined and reclassified into one share of Bookham common stock, and pursuant to which the total number of authorized shares of Bookham common stock and preferred stock would be proportionately reduced, and to authorize the Bookham board of directors to select and file one such amendment that would effect the reverse stock split within such range and that would proportionately reduce the total number of authorized shares of Bookham common stock and preferred stock;
 
  •  to consider and vote on Bookham Proposal No. 4 to adjourn the Bookham special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of any of Bookham Proposal Nos. 1, 2 or 3; and
 
  •  to transact such other business as may properly come before the Bookham special meeting or any adjournments or postponements of the special meeting.
 
Recommendation of Bookham’s Board of Directors
 
BOOKHAM’S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED AND BELIEVES THAT THE ISSUANCE OF SHARES OF BOOKHAM COMMON STOCK IN THE MERGER IS ADVISABLE TO, AND IN THE BEST INTERESTS OF BOOKHAM AND ITS STOCKHOLDERS AND HAS UNANIMOUSLY APPROVED SUCH ISSUANCE. BOOKHAM’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT BOOKHAM STOCKHOLDERS VOTE “FOR” BOOKHAM PROPOSAL NO. 1 TO APPROVE THE ISSUANCE OF SHARES OF BOOKHAM COMMON STOCK IN THE MERGER.
 
BOOKHAM’S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED AND BELIEVES THAT THE AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION TO INCREASE ITS AUTHORIZED SHARES OF COMMON STOCK TO 450,000,000 SHARES IS ADVISABLE TO, AND IN THE BEST INTERESTS OF BOOKHAM AND ITS STOCKHOLDERS AND HAS UNANIMOUSLY APPROVED SUCH AMENDMENT. BOOKHAM’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT BOOKHAM STOCKHOLDERS VOTE “FOR” BOOKHAM PROPOSAL NO. 2 TO APPROVE THE AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION FOR THIS PURPOSE.
 
BOOKHAM’S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED AND BELIEVES THAT AMENDMENTS TO THE RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A


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REVERSE STOCK SPLIT, PURSUANT TO WHICH ANY WHOLE NUMBER OF OUTSTANDING SHARES OF BOOKHAM COMMON STOCK BETWEEN AND INCLUDING FIVE AND THIRTY WOULD BE COMBINED AND RECLASSIFIED INTO ONE SHARE OF BOOKHAM COMMON STOCK, AND PURSUANT TO WHICH THE TOTAL NUMBER OF AUTHORIZED SHARES OF BOOKHAM COMMON STOCK AND PREFERRED STOCK WOULD BE PROPORTIONATELY REDUCED, AND THE RELATED AUTHORIZATION OF THE BOOKHAM BOARD OF DIRECTORS TO SELECT AND FILE ONE SUCH AMENDMENT THAT WOULD EFFECT THE REVERSE STOCK SPLIT WITHIN SUCH RANGE AND THAT WOULD PROPORTIONATELY REDUCE THE TOTAL NUMBER OF AUTHORIZED SHARES OF BOOKHAM COMMON STOCK AND PREFERRED STOCK, IS ADVISABLE TO, AND IN THE BEST INTERESTS OF BOOKHAM AND ITS STOCKHOLDERS AND HAS UNANIMOUSLY APPROVED SUCH AMENDMENTS. BOOKHAM’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT BOOKHAM STOCKHOLDERS VOTE “FOR” BOOKHAM PROPOSAL NO. 3 TO APPROVE AMENDMENTS TO THE RESTATED CERTIFICATE OF INCORPORATION FOR THESE PURPOSES.
 
BOOKHAM’S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED AND BELIEVES THAT THE PROPOSAL TO ADJOURN THE BOOKHAM SPECIAL MEETING, IF NECESSARY, IF A QUORUM IS PRESENT, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF ANY OF BOOKHAM PROPOSAL NOS. 1, 2 OR 3 IS ADVISABLE TO, AND IN THE BEST INTERESTS OF, BOOKHAM AND ITS STOCKHOLDERS AND HAS UNANIMOUSLY APPROVED AND ADOPTED THE PROPOSAL. ACCORDINGLY, BOOKHAM’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT ALL BOOKHAM STOCKHOLDERS VOTE “FOR” PROPOSAL NO. 4 TO ADJOURN THE BOOKHAM SPECIAL MEETING, IF NECESSARY, IF A QUORUM IS PRESENT, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF ANY OF BOOKHAM PROPOSAL NOS. 1, 2 OR 3.
 
Record Date and Voting Power
 
Only holders of record of Bookham common stock at the close of business on the record date, March 18, 2009, are entitled to notice of, and to vote at, the Bookham special meeting. There were approximately 10,523 holders of record of Bookham common stock at the close of business on the record date. Because many of such shares are held by brokers and other institutions on behalf of stockholders, Bookham is unable to estimate the total number of stockholders represented by these record holders. There were 100,959,545 shares of Bookham common stock issued and outstanding at the close of business on the record date. Each share of Bookham common stock entitles the holder thereof to one vote on each matter submitted for stockholder approval. See “Security Ownership of Certain Beneficial Owners and Management — Beneficial Ownership of Bookham Shares” for information regarding persons known to the management of Bookham to be the beneficial owners of more than 5% of the outstanding shares of Bookham common stock.
 
Voting and Revocation of Proxies
 
The proxy accompanying this joint proxy statement/prospectus is solicited on behalf of the board of directors of Bookham for use at the Bookham special meeting.
 
If you are a stockholder of record of Bookham as of the record date referred to above, you may vote in person at the Bookham special meeting or vote by proxy over the Internet, by telephone or using the enclosed proxy card. Whether or not you plan to attend the Bookham special meeting, Bookham urges you to vote by proxy to ensure your vote is counted. You may still attend the Bookham special meeting and vote in person if you have already voted by proxy.
 
If your shares are registered directly in your name, you may deliver your proxy to vote your shares in one of the following ways or you may vote in person at the Bookham special meeting.
 
  •  You may submit your proxy to vote by mail.  You may vote by completing and signing the proxy card that accompanies this joint proxy statement/prospectus and promptly mailing it in the enclosed postage-


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  prepaid envelope. You do not need to put a stamp on the enclosed envelope if you mail it in the United States. The shares you own will be voted according to the instructions on the proxy card you submit.
 
  •  You may submit your proxy to vote over the Internet.  If you have Internet access, you may submit your proxy to vote your shares over the Internet from any location in the world by following the instructions set forth on the enclosed proxy card.
 
  •  You may submit your proxy to vote by telephone.  You may submit your proxy to vote your shares by telephone by following the instructions set forth on the enclosed proxy card.
 
If your shares are held in “street name” for your account by a bank broker or other nominee, you may vote:
 
  •  By Mail.  You will receive instructions from your broker or other nominee explaining how to vote your shares.
 
  •  Over the Internet or By Telephone.  You will receive instructions from your broker or other nominee if you are permitted to vote over the Internet or by telephone.
 
  •  In Person at the Meeting.  Contact the bank, broker or other nominee that holds your shares to obtain a broker’s proxy card and bring it with you to the meeting. A broker’s proxy is not the form of proxy enclosed with this joint proxy statement/prospectus. You will not be able to vote shares you hold in “street name” at the meeting unless you have a proxy from your broker issued in your name giving you the right to vote the shares.
 
All properly executed proxies that are not revoked will be voted at the Bookham special meeting and at any adjournments or postponements of the special meeting in accordance with the instructions contained in the proxy. If a holder of Bookham common stock executes and returns a proxy and does not specify otherwise, the shares represented by that proxy will be voted “FOR” each of Bookham Proposal Nos. 1, 2, 3 and 4 in accordance with the recommendation of the Bookham board of directors.
 
A Bookham stockholder who has submitted a proxy may revoke it at any time before it is voted at the Bookham special meeting by executing and returning a proxy bearing a later date, providing proxy instructions via the telephone or the Internet (your latest telephone or Internet proxy is counted), filing written notice of revocation with the Corporate Secretary of Bookham stating that the proxy is revoked or attending the special meeting and voting in person.
 
Required Vote
 
The presence, in person or by proxy, at the Bookham special meeting of the holders of a majority of the shares of Bookham common stock outstanding and entitled to vote at the Bookham special meeting is necessary to constitute a quorum at the meeting. If Bookham stockholders do not vote by proxy or in person at the Bookham special meeting, the shares of common stock of such stockholders will not be counted as present for the purpose of determining a quorum. Abstentions and broker non-votes will be counted towards a quorum. The affirmative vote of the holders of a majority of the voting power of the shares voting in person or by proxy at the Bookham special meeting is required for approval of each of Bookham Proposal Nos. 1 and 4, and the affirmative vote of the holders of a majority of the voting power of Bookham common stock outstanding on the record date for the Bookham special meeting is required for approval of Bookham Proposal Nos. 2 and 3.
 
For Bookham Proposal Nos. 1 and 4, a failure to submit a proxy card or vote at the Bookham special meeting, or an abstention, vote withheld or “broker non-votes” will have no effect on the outcome of such proposals. For Bookham Proposal Nos. 2 and 3, a failure to submit a proxy card or vote at the Bookham special meeting, or an abstention, vote withheld or “broker non-vote” for such proposal, will have the same effect as a vote against the approval of Bookham Proposal Nos. 2 and 3.
 
As of the record date for the Bookham special meeting, the directors and executive officers of Bookham owned approximately 0.70% of the outstanding shares of Bookham common stock entitled to vote at the


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Bookham special meeting. David Simpson, Jerry Turin, Lori Holland, Alain Couder, Kate Rundle, Edward Collins, James Haynes, Yves LeMaitre, Kenneth Ibbs, Kathleen Zwickert, Bernard Couillaud, Peter Bordui, Joseph Cook, Adrian Meldrum and W. Arthur Porter, each either an officer and/or a director of Bookham have each entered into a voting agreement with Avanex, dated January 27, 2009. They have agreed in the voting agreements to vote all shares of Bookham common stock owned by them as of the record date in favor of the issuance of shares of Bookham common stock in the merger. They also granted Avanex irrevocable proxies to vote their shares of Bookham common stock in favor of the issuance of shares of Bookham common stock in the merger. Approximately 792,788 shares of Bookham common stock, which represent approximately 0.79% of the outstanding shares of Bookham common stock as of the record date, are subject to the voting agreements and irrevocable proxies. For more information regarding the voting agreements, see the section entitled “Voting Agreements” on page 133 of this joint proxy statement/prospectus.
 
Solicitation of Proxies
 
In addition to solicitation by mail, the directors, officers, employees and agents of Bookham may solicit proxies from Bookham’s stockholders by personal interview, telephone, telegram or otherwise. Bookham will bear the cost of the solicitation of proxies, except that Bookham and Avanex will each pay one-half of the costs of filing, printing and mailing of this joint proxy statement/prospectus, the proxy card and any additional information furnished to stockholders. Arrangements will also be made with brokerage firms and other custodians, nominees and fiduciaries who are record holders of Bookham common stock for the forwarding of solicitation materials to the beneficial owners of Bookham common stock. Bookham will reimburse these brokers, custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses they incur in connection with the forwarding of solicitation materials. Bookham has engaged the services of Okapi Partners LLC to distribute proxy solicitation materials to brokers, banks and other nominees and to assist in the solicitation of proxies from Bookham stockholders for a fee of approximately $15,000 plus reasonable out-of-pocket expenses.
 
Other Matters
 
As of the date of this joint proxy statement/prospectus, the Bookham board of directors does not know of any business to be presented at the Bookham special meeting other than as set forth in the notice accompanying this joint proxy statement/prospectus. If any other matters should properly come before the special meeting, it is intended that the shares represented by proxies will be voted with respect to such matters in accordance with the judgment of the persons voting the proxies.
 
Stockholder Proposals for Bookham’s 2009 Annual Meeting
 
If a stockholder intends to submit a proposal for inclusion in the proxy statement and proxy card for our 2009 annual meeting, the stockholder must follow the procedures outlined in Rule 14a-8 under the Securities Exchange Act of 1934, as amended. We must receive any proposals intended for inclusion in the proxy statement at our principal executive offices, Bookham, Inc., 2584 Junction Avenue, San Jose, California 95134, Attention: Corporate Secretary, no later than June 1, 2009.
 
If a stockholder wishes to present a proposal at the 2009 annual meeting, but does not wish to have the proposal considered for inclusion in our proxy statement and proxy card, the stockholder must also give written notice to us at the address noted above. Our bylaws specify the information that must be included in any such notice, including a brief description of the proposal and the name of the stockholder proposing such business. We must receive this notice at least 90 days, but not more than 120 days, prior to October 22, 2009. However, if the 2009 annual meeting is scheduled to be held prior to October 2, 2009 or after December 21, 2009, the notice must be received no earlier than the 120th day prior to the 2009 annual meeting and no later than the close of business on the later of (1) the 90th day prior to the 2009 annual meeting and (2) the 10th day following the date on which notice of the date of the meeting was mailed or public disclosure was made, whichever occurs first. If the stockholder fails to provide timely notice of a proposal to be presented at the 2009 annual meeting, the chairman of the meeting may exclude the proposal from being brought before the meeting and the proxies designated by our board of directors will have discretionary authority to vote on such proposal should it be allowed to come before the meeting.


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THE AVANEX SPECIAL MEETING
 
Date, Time and Place
 
The special meeting of Avanex stockholders will be held on Monday, April 27, 2009, at the principal executive offices of Avanex located at 40919 Encyclopedia Circle, Fremont, California 94538, commencing at 11:00 a.m. local time. We are sending this joint proxy statement/prospectus to Avanex stockholders in connection with the solicitation of proxies by the Avanex board of directors for use at the Avanex special meeting and any adjournments or postponements of the Avanex special meeting.
 
Purposes of the Avanex Special Meeting
 
The purposes of the Avanex special meeting are:
 
  •  to consider and vote upon Avanex Proposal No. 1 to adopt the merger agreement;
 
  •  to consider and vote on Avanex Proposal No. 2 to adjourn the Avanex special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of Avanex Proposal No. 1; and
 
  •  to transact such other business as may properly come before the special meeting or any adjournments or postponements of the Avanex special meeting.
 
Recommendations of Avanex’s Board of Directors
 
AVANEX’S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED AND BELIEVES THAT THE MERGER IS ADVISABLE AND FAIR TO, AND IN THE BEST INTERESTS OF, AVANEX AND ITS STOCKHOLDERS AND HAS UNANIMOUSLY APPROVED THE MERGER AND THE MERGER AGREEMENT. AVANEX’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT AVANEX STOCKHOLDERS VOTE “FOR” AVANEX PROPOSAL NO. 1 TO ADOPT THE MERGER AGREEMENT.
 
AVANEX’S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED AND BELIEVES THAT THE PROPOSAL TO ADJOURN THE AVANEX SPECIAL MEETING, IF NECESSARY, IF A QUORUM IS PRESENT, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF PROPOSAL NO. 1 IS ADVISABLE TO, AND IN THE BEST INTERESTS OF, AVANEX AND ITS STOCKHOLDERS AND HAS UNANIMOUSLY APPROVED AND ADOPTED THE PROPOSAL. ACCORDINGLY, AVANEX’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT AVANEX STOCKHOLDERS VOTE “FOR” AVANEX PROPOSAL NO. 2 TO ADJOURN THE AVANEX SPECIAL MEETING, IF NECESSARY, IF A QUORUM IS PRESENT, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF AVANEX PROPOSAL NO. 1.
 
Record Date and Voting Power
 
Only holders of record of Avanex common stock at the close of business on the record date, March 18, 2009, are entitled to notice of, and to vote at, the Avanex special meeting. There were approximately 476 holders of record of Avanex common stock at the close of business on the record date. There were 15,623,421 shares of Avanex common stock issued and outstanding at the close of business on the record date. Because many of such shares are held by brokers and other institutions on behalf of stockholders, Avanex is unable to estimate the total number of stockholders represented by these record holders. Each share of Avanex common stock entitles the holder thereof to one vote on each matter submitted for stockholder approval. See “Security Ownership of Certain Beneficial Owners and Management — Beneficial Ownership of Avanex Shares” for information regarding persons known to the management of Avanex to be the beneficial owners of more than 5% of the outstanding shares of Avanex common stock.


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Voting and Revocation of Proxies
 
The proxy accompanying this joint proxy statement/prospectus is solicited on behalf of the board of directors of Avanex for use at the Avanex special meeting.
 
If you are a stockholder of record of Avanex as of the record date referred to above, you may vote in person at the Avanex special meeting or vote by proxy over the Internet, by telephone or using the enclosed proxy card. Whether or not you plan to attend the Avanex special meeting, Avanex urges you to vote by proxy to ensure your vote is counted. You may still attend the special meeting and vote in person if you have already voted by proxy.
 
Voting by Proxy Card.  All shares entitled to vote and represented by properly executed proxy cards received prior to the Avanex special meeting, and not revoked, will be voted at the Avanex special meeting in accordance with the instructions indicated on those proxy cards. If no instructions are indicated on a properly executed proxy card, the shares represented by that proxy card will be voted as recommended by the board of directors. If any other matters are properly presented for consideration at the Avanex special meeting, , the persons named in the enclosed proxy card and acting thereunder will have discretion to vote on those matters in accordance with their best judgment.
 
Voting by Telephone or the Internet.  If you are a registered stockholder, you may vote your shares by calling the toll-free number indicated on the enclosed proxy card and following the recorded instructions or by accessing the website indicated on the enclosed proxy card and following the instructions provided. If your shares are registered in the name of a bank or brokerage firm, you may be able to vote your shares electronically over the Internet or by telephone; if so, your voting form will provide instructions. If your voting form does not reference Internet or telephone information, please complete and return the paper proxy card in the self-addressed postage paid envelope provided. When a stockholder votes via the Internet or by telephone, his or her vote is recorded immediately. Avanex encourages its stockholders to vote using these methods whenever possible.
 
Voting by Attending the Meeting.  A stockholder may vote his or her shares in person at the Avanex special meeting. A stockholder planning to attend the Avanex special meeting should bring proof of identification for entrance to the Avanex special meeting. If a stockholder attends the Avanex special meeting, he or she may submit his or her vote in person, and any previous votes that were submitted by the stockholder, whether by Internet, telephone or mail, will be superseded by the vote that such stockholder casts at the Avanex special meeting.
 
Changing Vote; Revocability of Proxies.  If a stockholder has voted by telephone, over the Internet or by returning a proxy card, such stockholder may change his or her vote before the Avanex special meeting.
 
A stockholder who has voted by telephone or over the Internet may later change his or her vote by making a timely and valid telephone or Internet vote, as the case may be, or by following the procedures in the following paragraph.
 
A stockholder may revoke any proxy given pursuant to this solicitation at any time before it is voted by: (1) filing with the Secretary of Avanex, at or before the taking of the vote at the Avanex special meeting, a written notice of revocation or a duly executed proxy card, in either case dated later than the prior proxy relating to the same shares, or (2) attending the Avanex special meeting and voting in person (although attendance at the Avanex special meeting will not by itself revoke a proxy). Any written notice of revocation or subsequent proxy card must be received by the Secretary of Avanex prior to the taking of the vote at the Avanex special meeting. Such written notice of revocation or subsequent proxy card should be hand delivered to the Secretary of Avanex or should be sent to Avanex Corporation, 40919 Encyclopedia Circle, Fremont, California 94538, Attention: Corporate Secretary.
 
Required Vote
 
The presence, in person or by proxy, at the Avanex special meeting of the holders of a majority of the shares of Avanex common stock outstanding and entitled to vote at the Avanex special meeting is necessary to


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constitute a quorum at the Avanex special meeting. Approval of Avanex Proposal No. 1 requires the affirmative vote of the holders of a majority of the voting power of the shares of Avanex common stock outstanding on the record date for the Avanex special meeting. Approval of Avanex Proposal No. 2 requires the affirmative vote of holders of a majority of the votes cast in person or by proxy at the Avanex special meeting. Abstentions will be counted towards a quorum and will have the same effect as negative votes on Avanex Proposal No. 1, but will not be counted for any purpose in determining whether Avanex Proposal No. 2 is approved. Broker non-votes will be counted towards a quorum, but will not be counted for any purpose in determining whether either proposal is approved.
 
Each of the current executive officers and directors of Avanex has entered into a voting agreement with Bookham dated January 27, 2009. They have agreed in the voting agreements to vote all shares of Avanex common stock owned by them as of the record date in favor of the adoption of the merger agreement. They also granted Bookham irrevocable proxies to vote their shares of Avanex common stock in favor of the adoption of the merger agreement. Approximately 98,664 shares of Avanex common stock, which represent approximately 0.63% of the outstanding shares of Avanex common stock as of the record date, are subject to the voting agreements and irrevocable proxies. For more information regarding the voting agreements, see the section entitled “Voting Agreements” on page 133 of this joint proxy statement/prospectus.
 
Solicitation of Proxies
 
In addition to solicitation by mail, the directors, officers, employees and agents of Avanex may solicit proxies from Avanex stockholders by personal interview, telephone, telegram or otherwise. Avanex will bear the costs of the solicitation of proxies from its stockholders, except that Bookham and Avanex will each pay one-half of the cost of filing, printing and mailing of this joint proxy statement/prospectus, the proxy card and any additional information furnished to stockholders. Arrangements will also be made with brokerage firms and other custodians, nominees and fiduciaries who are record holders of Avanex common stock for the forwarding of solicitation materials to the beneficial owners of Avanex common stock. Avanex will reimburse these brokers, custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses they incur in connection with the forwarding of solicitation materials. In connection with this joint proxy statement/prospectus, Avanex has retained a proxy solicitation firm, Morrow & Co., LLC, to aid in the solicitation process and will pay it a fee of approximately $8,000 for its services, plus any reasonable expenses incurred in connection with the solicitation.
 
Other Matters
 
As of the date of this joint proxy statement/prospectus, the Avanex board of directors does not know of any business to be presented at the Avanex special meeting other than as set forth in the notice accompanying this joint proxy statement/prospectus. If any other matters should properly come before the special meeting, it is intended that the shares represented by proxies will be voted with respect to such matters in accordance with the judgment of the persons voting the proxies.
 
Procedure for Submitting Stockholder Proposals
 
If the merger is completed, we will not have public stockholders and there will be no public participation in any future meeting of Avanex stockholders. However, if the merger is not completed or if we are otherwise required to do so under applicable law, we will hold a 2009 annual meeting of our stockholders.
 
Requirements for Stockholder Proposals to be Considered for Inclusion in Avanex’s Proxy Materials. Stockholders may present proper proposals for inclusion in Avanex’s proxy statement and for consideration at the annual meeting of its stockholders by submitting their proposals in writing to the Secretary of Avanex in a timely manner. In order to be included in Avanex’s proxy materials for the 2009 annual meeting of stockholders, stockholder proposals must be received by the Secretary of Avanex no later than the Notice Deadline (as defined below), and must otherwise comply with the requirements of Rule 14a-8 of the Exchange Act.


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Requirements for Stockholder Proposals to be Brought Before an Annual Meeting.  In addition, Avanex’s amended and restated bylaws establish an advance notice procedure for stockholders who wish to present certain matters before an annual meeting of stockholders. In general, nominations for the election of directors may be made by (1) the board of directors, (2) the corporate governance and nominating committee or (3) any stockholder entitled to vote who has delivered written notice to the Secretary of Avanex no later than the Notice Deadline, which notice must contain specified information concerning the nominees and concerning the stockholder proposing such nominations. If a stockholder wishes only to recommend a candidate for consideration by the corporate governance and nominating committee as a potential nominee for Avanex’s board of directors, such recommendations must be received by June 30 of the year in which the recommended candidate will be considered for nomination. Stockholder recommendations for candidates to the board of directors must be directed in writing to Avanex Corporation, 40919 Encyclopedia Circle, Fremont, California 94538, Attention: Corporate Secretary, and must include the candidate’s name, home and business contact information, detailed biographical data and qualifications, information regarding any relationships between the candidate and Avanex within the last three years and evidence of the nominating person’s ownership of Avanex common stock. Such recommendations must also include a statement from the recommending stockholder in support of the candidate, particularly within the context of the criteria for membership on the board of directors, including issues of character, judgment, diversity, age, independence, expertise, corporate experience, other commitments and the like, personal references, and an indication of the candidate’s willingness to serve.
 
Avanex’s bylaws also provide that the only business that may be conducted at an annual meeting is business that is (1) specified in the notice of meeting given by or at the direction of the board of directors, (2) properly brought before the meeting by or at the direction of the board of directors, or (3) properly brought before the meeting by a stockholder who has delivered written notice to the Secretary of Avanex no later than the Notice Deadline, which notice must contain specified information concerning the matters to be brought before such meeting and concerning the stockholder proposing such matters.
 
The “Notice Deadline” is defined as that date which is 120 days prior to the one-year anniversary of the date on which Avanex first mailed its proxy materials for the previous year’s annual meeting of stockholders. As a result, the Notice Deadline for the 2009 annual stockholder meeting is June 15, 2009.
 
If a stockholder who has notified Avanex of his or her intention to present a proposal at an annual meeting does not appear to present his or her proposal at such meeting, or does not send a representative who is qualified under Delaware law to present the proposal on his or her behalf, Avanex need not present the proposal for vote at such meeting.
 
A copy of the full text of the bylaw provisions discussed above may be obtained by writing to the Secretary of Avanex. All notices of proposals by stockholders, whether or not included in Avanex’s proxy materials, should be sent to Avanex Corporation, 40919 Encyclopedia Circle, Fremont, California 94538, Attention: Corporate Secretary.


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BOOKHAM PROPOSAL NO. 1 AND AVANEX PROPOSAL NO. 1 — THE MERGER
 
Unless specifically stated otherwise, the following information and all other information contained in this joint proxy statement/prospectus does not give effect to the proposed reverse stock split discussed in the section entitled “Bookham Proposal No. 3 — Amendments to Bookham’s Restated Certificate of Incorporation to Effect a Reverse Stock Split and to Reduce the Number of Authorized Shares of Bookham Common Stock and Preferred Stock.”
 
General Description of the Merger
 
At the effective time of the merger, Ultraviolet Acquisition Sub, Inc., or merger sub, will be merged with and into Avanex. Avanex will be the surviving corporation and will continue as a wholly owned subsidiary of Bookham. In the merger, each share of Avanex common stock outstanding at the effective time will automatically be converted into the right to receive 5.426 shares of Bookham common stock. Each Avanex stockholder who would otherwise be entitled to receive a fraction of a share of Bookham common stock (after aggregating all fractional shares to be received by such stockholder) will instead of such fraction be paid in cash the dollar amount (rounded to the nearest whole cent), without interest, determined by multiplying such fraction by the average closing price of a share of Bookham common stock on the NASDAQ Global Market for the ten most recent days that Bookham common stock has traded ending on the trading day one day prior to the date the merger becomes effective.
 
Based on the number of shares of Bookham common stock and Avanex common stock that were outstanding as of the record date, up to 85,783,567 shares of Bookham common stock will be issuable pursuant to the merger agreement, representing approximately 45.94% of the total Bookham common stock to be outstanding after such issuance. This assumes that no Avanex or Bookham stock options, restricted stock units or warrants are exercised or vest after the record date and prior to the effective time of the merger.
 
Background
 
From time to time, Avanex and Bookham each has analyzed various potential business alternatives and strategic transactions. For example, starting in March 2006 through early January 2007, Avanex and Bookham engaged in discussions from time to time regarding a potential business combination, conducted due diligence and engaged in negotiations of a merger agreement. In January 2007, the parties ceased discussions regarding a potential transaction. Thereafter, during the first half of 2007, Avanex and Bookham engaged in discussions from time to time regarding the fiber optics communications industry generally and Avanex’s interest in possibly acquiring part of Bookham’s business. Bookham decided not to pursue such a transaction.
 
In August 2007, Alain Couder joined Bookham as its Chief Executive Officer. In approximately early September 2007, Jo Major, Ph.D., who was then the Chief Executive Officer of Avanex, contacted Alain Couder to introduce himself and suggested that the two meet. In early September 2007, Dr. Major and Mr. Couder met for lunch and discussed the fiber optics communications industry generally. In the course of this discussion, Dr. Major and Mr. Couder discussed the possibility of a combination of Bookham and Avanex and shared their views about such a combination. Mr. Couder, having just recently joined Bookham at the time, informed Dr. Major that he needed to spend additional time learning about Bookham before he would consider whether to pursue a business combination. Thereafter, Peter Bordui, a member of Bookham’s board of directors, had occasional discussions with Dr. Major and Greg Dougherty, a member of Avanex’s board of directors, regarding the fiber optics communications industry generally and a potential business combination of Bookham and Avanex.
 
On April 21-22, 2008, at a meeting of the board of directors of Bookham, which was also attended by members of Bookham’s senior management, the Bookham board discussed the consolidation that was occurring in the fiber optics communications industry and the strategic alternatives available to Bookham, including the possibility of Bookham entering into a business combination or making one or more strategic acquisitions. At the conclusion of this meeting, the Bookham board indicated to management that its primary focus should be on the financial performance of Bookham; however, the Bookham board also authorized management to request that a private equity firm with relationships with representatives of both Bookham and


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Avanex contact Avanex’s board to determine whether Avanex would be interested in exploring a possible combination with Bookham.
 
In addition to formal meetings of the board of directors of Bookham, during the entire period from early 2008 through the signing of the merger agreement with Avanex in January 2009, Mr. Couder provided the Bookham board with numerous updates on the status of his interactions with, and obtained guidance from members of the Bookham board with respect to interactions with, Avanex.
 
On July 22, 2008, as part of a series of presentations to the board of directors of Bookham (and not in the context of any specific transaction), a representative of Cooley Godward Kronish, outside M&A counsel to Bookham, discussed with the board the fiduciary duties of the board, and other legal rights, privileges and obligations, in connection with the consideration by the board of various strategic alternatives, including buy-side M&A transactions.
 
On July 31, 2008, Giovanni Barbarossa, Ph.D., who was then Interim Chief Executive Officer of Avanex, and Mr. Couder spoke by telephone to become better acquainted and to discuss the fiber optics communications industry. On August 5, 2008, Dr. Barbarossa and Mr. Couder followed up on their earlier call and arranged to meet in person after Avanex’s first fiscal quarter 2009 earnings call. Also in August 2008, Mr. Dougherty communicated with Mr. Bordui, Chairman of the Board of Bookham, regarding the industry and their respective companies, and they arranged for Mr. Bordui to meet with Dr. Barbarossa.
 
On August 28, 2008, at a meeting of the board of directors of Bookham, attended by members of Bookham’s senior management, Bookham’s outside securities counsel and representatives of an investment bank that was not ultimately engaged by Bookham, representatives of the investment bank reviewed with the Bookham board various potential strategic alternatives available to Bookham, including a possible merger with Avanex. The Bookham board also discussed the merits of raising acquisition capital, including through an investment from a private equity firm.
 
On September 4, 2008, at a regular Avanex board meeting at which members of management and representatives of Wilson Sonsini Goodrich & Rosati, Professional Corporation, Avanex’s outside legal counsel, were present, the board discussed the consolidation that was occurring in the fiber optics communications industry, as well as Avanex’s strategic planning and the possibility of exploring potential strategic alternatives available to Avanex, including continuing as a stand-alone company or engaging in a potential business combination transaction. Both during and after the September 4, 2008 meeting, Dr. Barbarossa provided Avanex’s board of directors with management’s views regarding opportunities for Avanex to participate in the industry consolidation and the potential synergies that could be realized with a successful business combination. Avanex’s board of directors has regularly discussed and reviewed Avanex’s strategic goals, performance and prospects as part of the ongoing evaluation of its business and strategic planning. In this connection, management evaluated and reviewed with the board the strategic fit of a range of potential business combination partners, including Bookham.
 
In early September 2008, the acquisition committee of the Avanex board of directors, which was formed in 2006 and has assisted the Avanex board in the review of strategic transactions, together with Avanex management, met with representatives of Banc of America Securities and representatives of another investment bank. At these meetings, various potential strategic alternatives for Avanex were discussed, including potential combination transactions, stand-alone scenarios, and the possibility of acquiring other businesses complementary to Avanex. Avanex subsequently engaged Banc of America Securities as its financial advisor to assist Avanex in exploring potential strategic alternatives and transactions.
 
On September 10, 2008, Dr. Barbarossa and Mr. Couder met, and Mr. Couder raised the possibility of a potential business combination transaction involving the two companies.
 
On September 12, 2008, Mr. Couder delivered a letter to Dr. Barbarossa expressing, in a non-binding manner, that Bookham was interested in possibly acquiring all outstanding shares of the common stock of Avanex at a premium of 30% above Avanex’s then current stock price, using a form of consideration to be mutually agreed upon, subject to due diligence and negotiation of definitive agreements. Over the next several


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weeks, Mr. Couder and Dr. Barbarossa spoke occasionally by telephone or in person regarding a potential strategic transaction.
 
On September 13, 2008, the Avanex board of directors held a meeting at which members of management and representatives of Wilson Sonsini Goodrich & Rosati were present. At the meeting, the board discussed the letter received from Bookham, as well as the potential for strategic interest in Avanex from other parties. The board further discussed potential strategic alternatives for Avanex, including, among others, remaining an independent entity as well as business combination alternatives. The board also discussed the need for refinement and analysis of Avanex’s operating plan and opportunities for organic growth and growth through acquisition. Both during and after the September 13, 2008 meeting, Dr. Barbarossa provided Avanex’s board with management’s views regarding the characteristics of a potentially successful business combination in the consolidating fiber optics communications industry.
 
On September 19, 2008, the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s legal and financial advisors were present. At the meeting, Avanex’s financial advisor discussed with the board the competitive and market position of Avanex and potential strategic alternatives for Avanex, including potential combination transactions, stand-alone scenarios, and the possibility of acquiring other businesses complementary to Avanex.
 
On September 23, 2008, Dr. Barbarossa met with Mr. Bordui and discussed the fiber optics communications industry and the potential for a business combination transaction between Avanex and Bookham. Later that day, Dr. Barbarossa met again with Mr. Couder to discuss further a potential business combination transaction. Also in September 2008, Mr. Dougherty and Mr. Bordui had discussions regarding a possible Bookham and Avanex transaction.
 
On October 5, 2008, the Avanex board of directors held a meeting at which members of management and representatives of Wilson Sonsini Goodrich & Rosati were present. Dr. Barbarossa updated the board on various aspects of Avanex’s consideration of potential strategic alternatives, including discussions held to date with Bookham.
 
On October 7, 2008, Avanex and Bookham entered into a mutual confidentiality agreement, which was in addition to an existing mutual confidentiality agreement previously executed by the parties.
 
On October 10, 2008, Dr. Barbarossa and Messrs. Couder, Turin and Weinswig met at Mr. Couder’s home to discuss a potential financial model for a combined company, potential synergies, the relative ownership of a combined company by the two companies’ respective stockholders and the possible management structure, locations, functions, products and activities of a combined company. Commencing on this date and continuing until the date on which the merger agreement was entered into by the parties, Dr. Barbarossa and Messrs. Couder, Turin and Weinswig contacted each other periodically by telephone and via email, and met with each other from time to time (including meetings at Mr. Couder’s home on October 30 and 31, 2008 and at the offices of Citigroup Global Markets, Inc., Bookham’s financial advisor, on November 7, 2008), to discuss a possible combination of Bookham and Avanex and related matters.
 
On October 21-22, 2008, the board of directors of Bookham met in person. At these meetings, which were also attended by members of Bookham’s senior management and, with respect to part of the meeting on October 21, Bookham’s outside securities counsel, the Bookham board discussed various potential strategic alternatives available to Bookham. Mr. Couder updated the board on discussions between Bookham and Avanex. The Bookham board authorized management to continue discussions with Avanex.
 
On October 24, 2008, the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s legal and financial advisors were present. At the meeting, Avanex’s financial advisor discussed with the board Avanex’s financial and competitive position, financial projections prepared by Avanex’s management, and potential strategic alternatives for Avanex, including both stand-alone and combination scenarios. At the conclusion of the meeting, the board authorized and directed management, with the assistance of Avanex’s advisors, to continue to pursue discussions with Bookham and to approach other potentially interested parties regarding a possible combination transaction.


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In late October 2008, Dr. Barbarossa and senior executives of a public company which we refer to in this section as Company A spoke several times by telephone and in person regarding the possibility of a business combination involving the two companies.
 
On October 31, 2008, the acquisition committee of the Avanex board of directors held a meeting at which the acquisition committee was updated by Avanex’s management regarding their recent interactions with Bookham and Company A. At the conclusion of the meeting, the acquisition committee authorized Dr. Barbarossa to continue working with management and Avanex’s financial advisor to explore potential strategic opportunities.
 
In November 2008, at the direction of Avanex’s board of directors, Avanex’s financial advisor approached Company A and two other public companies which we refer to in this section as Company B and Company C, each of which expressed preliminary interest in pursuing discussions regarding a potential combination transaction with Avanex and signed confidentiality agreements with Avanex to enable further due diligence and discussions between the parties.
 
On November 7 and November 9, 2008, the acquisition committee of the Avanex board of directors held meetings at which members of management and representatives of Avanex’s legal and financial advisors were present. At the meetings, the acquisition committee was updated regarding recent interactions with Bookham and certain other parties regarding potential alternative business combinations.
 
On November 10, 2008, Mr. Couder and Dr. Barbarossa met to discuss a possible non-binding indication of interest for a business combination between Bookham and Avanex, and Messrs. Turin and Weinswig spoke by telephone regarding the pro forma financial model of the combined company.
 
On November 11, 2008, in anticipation of an Avanex board meeting that was scheduled for November 13, 2008 at the direction of Bookham management, a representative of Bookham’s financial advisor called a representative of Avanex’s financial advisor to discuss proposed terms of a potential offer for a business combination of Bookham and Avanex (which when received would be subject to customary conditions, including completion of due diligence). The terms discussed reflected a proposed exchange ratio of 4.300x shares of Bookham common stock for each outstanding share of Avanex common stock, which corresponded to an estimated implied ownership for Avanex stockholders of approximately 40% of the combined company. The terms discussed also proposed a board consisting of four representatives of Bookham (including its Chief Executive Officer who would be the Chief Executive Officer of the combined company) and three representatives of Avanex.
 
On November 12, 2008, following up on prior discussions between Mr. Couder and Dr. Barbarossa, Mr. Turin provided to Mr. Weinswig a list of topics and questions to be addressed in a possible offsite meeting between management representatives of Bookham and management representatives of Avanex.
 
On November 13, 2008, the acquisition committee of the Avanex board of directors held a meeting at which several other directors, members of management, and representatives of Avanex’s legal and financial advisors were present. The acquisition committee was further updated regarding recent interactions with Bookham and other parties regarding potential alternative business combinations, as well as the forward timeline for additional discussions with such parties.
 
Later that day, the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s legal advisor were present. At the meeting, the board discussed potential business combinations. In addition, at this meeting, Dr. Barbarossa was appointed President and Chief Executive Officer and a member of the board of directors.
 
On November 18, 2008, Bookham sent Avanex a preliminary, non-binding indication of interest proposing a stock-for-stock transaction in which Avanex stockholders would own approximately 40% of the combined company. The indication of interest, which was subject to customary conditions (including completion of due diligence), also contemplated a board consisting of four representatives of Bookham (including its Chief Executive Officer who would be the Chief Executive Officer of the combined company) and three representatives of Avanex.


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Also on November 18, 2008, Dr. Barbarossa and Mr. Weinswig, together with representatives of Avanex’s financial advisor, met with senior executives of Company C to exchange information and to discuss the possibility of a business combination involving the two companies.
 
On November 18, 2008, at the direction of Avanex’s board, a representative of Avanex’s financial advisor provided initial feedback to a representative of Bookham’s financial advisor with respect to the indication of interest, noting in particular that the Avanex board was contemplating a transaction in which the Avanex stockholders would own approximately 50% of the combined company.
 
On November 21, 2008, the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s legal and financial advisors were present. At the meeting, the board was updated regarding discussions with Bookham and other parties regarding potential combination transactions, including the receipt of the non-binding indication of interest from Bookham. Also at this meeting, Avanex’s financial advisor discussed financial aspects of Bookham’s indication of interest. The board also discussed various potential strategic alternatives available to Avanex, including stand-alone scenarios, and authorized management, with the assistance of Avanex’s advisors, to respond to Bookham that the terms of the indication of interest would need to improve in order for Avanex to continue discussions with Bookham.
 
Later on November 21, 2008, Dr. Barbarossa and Mr. Weinswig, together with representatives of Avanex’s financial advisor, met with senior executives of Company A to exchange information and to further discuss the possibility of a business combination involving the two companies. Dr. Barbarossa and Mr. Weinswig spoke further by telephone with senior executives at Company A in late November to explore the potential combination of the two companies.
 
On November 23, 2008, in response to Bookham’s indication of interest and at the direction of the Avanex board of directors, representatives of Avanex’s financial advisor provided to representatives of Bookham’s financial advisor a proposal from Avanex reflecting, among other things, a greater ownership percentage in the combined company for Avanex stockholders than reflected in Bookham’s proposal (49% rather than 40%) and a combined company board comprised of eight directors, including three independent members from each of the boards of Avanex and Bookham and the then current Chief Executive Officers of both companies.
 
Also on November 24, 2008, Dr. Barbarossa and a senior executive of Company B spoke by telephone regarding the possibility of a business combination involving the two companies. Avanex sent Company B information about Avanex’s business, but Company B did not reply.
 
On November 25, 2008 and December 1, 2008, the acquisition committee of the Avanex board of directors held meetings at which members of management and representatives of Avanex’s legal and financial advisors were present. During these meetings, the acquisition committee was updated on the recent interactions with Bookham and certain other potential parties regarding potential combination transactions. At the conclusion of each of these meetings, the acquisition committee authorized and directed management, with the assistance of Avanex’s advisors, to continue to pursue discussions with Bookham and other potentially interested parties regarding a possible combination.
 
On November 26, 2008, Mr. Weinswig met with senior executives of a public company which we refer to in this section as Company D. During the meeting, the Company D executives discussed the possibility of a business combination involving the two companies. The parties determined to meet again when Dr. Barbarossa could also be present.
 
Throughout November 2008, Mr. Couder discussed with the senior members of Avanex’s management Mr. Couder’s view of the rationale for the combination. Mr. Couder also obtained input from such persons regarding their potential roles in the combined company if the transaction were to be completed.
 
On November 30 and December 1, 2008, Mr. Dougherty and Mr. Bordui discussed the status of a potential transaction between Avanex and Bookham and the meetings held between the respective management teams and financial advisors of the two companies.


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On December 1, 2008, Mr. Weinswig, together with representatives of Avanex’s financial advisor, met with senior executives of Company C to exchange information and to discuss the possibility of a business combination involving the two companies.
 
On December 3, 2008, Mr. Couder contacted Dr. Barbarossa and asked whether Dr. Barbarossa had been able to discuss further with the Avanex board the terms of a possible combination of Bookham and Avanex, and suggested that Mr. Couder and Dr. Barbarossa meet on December 5, 2008 to determine whether to proceed with a transaction.
 
On December 5, 2008, Company A sent Avanex a preliminary, non-binding indication of interest proposing a stock-for-stock combination of the two companies and indicating other terms and conditions of a proposed transaction.
 
Also on December 5, 2008, Dr. Barbarossa and Mr. Weinswig met with senior executives of Company D regarding the possibility of a business combination involving the two companies.
 
Also on December 5, 2008, Dr. Barbarossa and Mr. Couder spoke regarding the potential combination transaction, including the potential respective ownership of Bookham and Avanex stockholders in the combined company. Following this discussion, the parties agreed that, subject to approval of each company’s board, they would be prepared to continue discussions regarding a potential combination transaction based on a Bookham stockholder to Avanex stockholder ownership ratio of approximately 55% to 45%. Mr. Couder and Dr. Barbarossa acknowledged that the transaction remained subject to satisfactory completion of mutual due diligence and negotiation of a mutually acceptable definitive agreement.
 
On December 6, 2008, the acquisition committee of the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s legal and financial advisors were present. The acquisition committee was updated on the status of ongoing discussions with Bookham and other parties regarding potential combination transactions, including the updated oral indication of interest from Bookham and the new indication of interest from Company A received the previous day. At the conclusion of the meeting, the acquisition committee authorized and directed management, with the assistance of Avanex’s advisors, to pursue further discussions with these and other interested parties as discussed at the meeting.
 
On December 8, 2008, as a follow-up to the oral indication of interest communicated on December 5, 2008, Bookham sent Avanex a revised preliminary, non-binding indication of interest proposing a stock-for-stock transaction in which Avanex stockholders would own approximately 45% of the combined company and indicating other terms and conditions of a proposed transaction. The revised indication of interest also proposed a board of the combined company consisting of four representatives of Bookham (including its Chief Executive Officer) and three representatives of Avanex (including its Chief Executive Officer).
 
During December 2008, Dr. Barbarossa and Messrs. Weinswig, Couder and Turin had several discussions regarding a potential transaction, including with respect to potential synergies that may be realized and additional information to be exchanged regarding each company.
 
On December 10, 2008, Mr. Couder sent to Dr. Barbarossa an email setting forth a proposed agenda for a possible offsite meeting scheduled for December 17 or December 18 between management representatives of Bookham and Avanex, respectively. The agenda contemplated a discussion of the operations of both companies (including a separate discussion of the companies’ telecom and non-telecom operations), the technology and products of both companies and various functional organizations, including sales and marketing, finance, information services, human resources and legal.
 
Also on December 10, 2008, a senior executive of Company C indicated that, due to internal priorities, Company C would not be submitting a proposal regarding a potential transaction with Avanex.
 
On December 11, 2008, Messrs. Turin and Weinswig met to discuss the process of moving forward jointly with a potential business combination, and on December 12, 2008 they exchanged emails regarding mutual due diligence.


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On December 12, 2008, the acquisition committee of the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s legal and financial advisors were present. The acquisition committee was updated on the status of ongoing discussions with Bookham and other parties regarding potential strategic transactions. At the conclusion of the meeting, the acquisition committee authorized and directed management, with the assistance of Avanex’s advisors, to pursue further discussions with such parties as discussed at the meeting.
 
On December 15, 2008, the acquisition committee of the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s financial advisor were present. Senior executives of Company A also were present for a portion of the meeting and discussed Company A’s preliminary indication of interest for a potential combination transaction between the two companies with the acquisition committee. At the conclusion of the meeting, the acquisition committee authorized and directed management, with the assistance of Avanex’s advisors, to pursue further discussions with Company A.
 
On December 16, 2008, Dr. Barbarossa and Mr. Weinswig, together with representatives of Avanex’s financial advisor, met with senior executives of Company D to further discuss the possibility of a business combination involving the two companies.
 
On December 17, 2008, the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s legal and financial advisors were present. Mr. Couder from Bookham also was present for a portion of the meeting and discussed the merits and potential synergies of a business combination transaction between Avanex and Bookham. After Mr. Couder departed from the meeting, the board discussed the current status of discussions with Bookham, Company A and other potential parties to alternative combination transactions. Following such discussion, the board authorized management to continue discussions with Bookham, to communicate to Company A’s financial advisor that Avanex was not prepared to move forward with Company A based on its initial proposal, but that it would continue discussion if Company A indicated it would consider improving its proposal, and to continue discussions with certain other parties to an alternative combination transaction.
 
Later on December 17 and continuing on December 18, 2008, Dr. Barbarossa, Mr. Weinswig and other members of Avanex management, together with representatives of Avanex’s financial advisor, met with Mr. Couder, Mr. Turin and other members of Bookham management and representatives of Bookham’s financial advisor. These meetings included further evaluation of the operational and other potential synergies of a combination transaction between the two companies as well as continuing due diligence. Thereafter and through the execution of the merger agreement on January 27, 2009, members of Bookham and Avanex management, with the assistance of Bookham’s and Avanex’s respective advisors, continued to evaluate the potential business combination, perform due diligence and held numerous telephonic and in person meetings to discuss the potential transaction.
 
After the December 17, 2008 meeting of the Avanex board of directors, Company A was informed that Avanex was not prepared to move forward with Company A based on its initial proposal, but that Avanex would continue discussions if Company A indicated it would consider improving its proposal. Dr. Barbarossa subsequently spoke by telephone with senior executives at Company A in late December 2008.
 
On December 18, 2008, Company D sent Avanex a preliminary, non-binding indication of interest proposing a stock-for-stock transaction and indicating other terms and conditions of a proposed combination transaction.
 
On December 19, 2008, the acquisition committee of the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s legal and financial advisors were present. The acquisition committee was updated on the status of ongoing discussions with Bookham and other parties regarding potential alternative combination transactions, including the recent management meetings with Bookham and the recent indication of interest from Company D. At the conclusion of the meeting, the acquisition committee authorized and directed management, with the assistance of Avanex’s advisors, to pursue further discussions with Bookham and certain other parties as discussed at the meeting.


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Also on December 19, 2008, at the direction of the acquisition committee, Mr. Weinswig and representatives of Avanex’s financial advisor spoke with a senior executive of Company D and indicated that Avanex was open to a further strategic dialogue.
 
On December 22, 2008, Dr. Barbarossa and a senior executive at a public company which we refer to in this section as Company E met to discuss the fiber optics communications industry generally as well as the possibility of a business combination involving the two companies. In late December 2008, Mr. Dougherty also spoke with a senior executive at Company E regarding the possibility of a business combination involving the two companies.
 
Also on December 22, 2008, Mr. Couder and Paul Smith, Chairman of the Board of Avanex, met and reviewed the status of discussions, due diligence and negotiations regarding a potential transaction. Mr. Couder and Mr. Smith also discussed the potential composition of the board of directors of the combined company should a transaction between Bookham and Avanex be consummated.
 
Beginning on December 22, 2008, representatives of Bookham’s legal advisor, Cooley Godward Kronish, and representatives of Avanex’s legal advisor exchanged drafts of a proposed merger agreement and voting agreements with respect to a combination transaction, and the management teams of Bookham and Avanex began preparing the disclosure schedules contemplated by the merger agreement. Thereafter and through the execution of the merger agreement and the voting agreements on January 27, 2009, members of Bookham and Avanex managements, with the assistance of Bookham’s and Avanex’s respective advisors, continued to negotiate the terms and conditions of the merger agreement and the voting agreements and to discuss the disclosure schedules.
 
On December 23, 2008, the board of directors of Bookham met via teleconference to receive an update from management of Bookham regarding the proposed business combination of Bookham and Avanex. This meeting was also attended by members of Bookham’s senior management, representatives of Bookham’s financial advisor and a representative of Cooley Godward Kronish. A representative of Cooley Godward Kronish reminded the Bookham board of its fiduciary duties in connection with a possible merger transaction. The Bookham board authorized management to continue its discussions with Avanex.
 
On December 26, 2008, the acquisition committee of the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s legal and financial advisors were present. The acquisition committee was updated on the status of ongoing discussions with Bookham and certain other parties regarding alternative potential combination transactions, including the receipt of a draft merger agreement from Bookham. The acquisition committee also discussed recent interactions with Company A, including that Company A had indicated a willingness to improve its initial indication of interest, and interactions with Company E. At the conclusion of the meeting, the acquisition committee authorized and directed management, with the assistance of Avanex’s advisors, to pursue further discussions with Bookham and the other parties as discussed at the meeting.
 
On December 29, 2008, Avanex and Company E entered into a confidentiality agreement to enable further due diligence and discussions between the parties.
 
On December 30, 2008, the acquisition committee of the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s legal and financial advisors were present. The acquisition committee discussed the potential timing of a transaction with Bookham and received an update on the status of discussions with Bookham and certain other interested parties to alternative business combinations. The representatives of Wilson Sonsini Goodrich & Rosati discussed certain material terms of the draft definitive agreement received from Bookham. At the conclusion of the meeting, the acquisition committee authorized and directed management, with the assistance of Avanex’s advisors, to pursue further negotiations with Bookham and certain other parties as discussed at the meeting.
 
In late December 2008, after separate discussions between Mr. Couder and each of Mr. Smith and W. Arthur Porter (the chair of the nominating and corporate governance committee of the Bookham board of directors) in which Mr. Couder asked each such person to consider the possible composition of the board of directors of the combined company, Messrs. Smith and Porter communicated several times regarding the


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composition of the board of directors of the combined company should a transaction between Bookham and Avanex be consummated. In addition, Mr. Porter communicated with other members of the Bookham board about the composition of the board of directors of the combined company should a transaction between Bookham and Avanex be consummated.
 
On December 31, 2008, and continuing until the date on which the merger agreement was entered into by the parties, representatives of Bookham and Avanex, respectively, communicated frequently with each other regarding due diligence, the terms of the merger agreement and other matters pertinent to the proposed business combination of Bookham and Avanex.
 
On January 4, 2009, the acquisition committee of the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s legal and financial advisors were present. The acquisition committee received an update on the status of discussions with Bookham and certain other parties to alternative potential business combinations. The acquisition committee also received an update from representatives of Wilson Sonsini Goodrich & Rosati on the status of the ongoing negotiations with respect to the draft merger agreement with Bookham. Management discussed with the acquisition committee the joint efforts of Avanex and Bookham with respect to the operating and integration models for the potential combination with Bookham. At the conclusion of the meeting, the acquisition committee authorized and directed management, with the assistance of Avanex’s advisors, to pursue further negotiations with Bookham and the certain other parties as discussed at the meeting.
 
On January 5, 2009, Dr. Barbarossa and Mr. Weinswig, together with representatives of Avanex’s financial advisor, met with senior executives of Company A to further discuss the possibility of a business combination involving the two companies.
 
On January 6, 2009, the acquisition committee of the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s legal and financial advisors were present. Dr. Barbarossa provided an overview of Avanex’s due diligence investigation of Bookham to date. The acquisition committee also received an update from the representatives of Wilson Sonsini Goodrich & Rosati on the status of the ongoing negotiations and material terms of the draft merger agreement with Bookham. The acquisition committee was further updated on the status of discussions with other interested parties to a potential business combination. At the conclusion of the meeting, the acquisition committee authorized and directed management, with the assistance of Avanex’s advisors, to pursue further discussions with Bookham and certain other parties as discussed at the meeting.
 
On January 6, 2009, Avanex and Company D entered into a confidentiality agreement to enable further due diligence and discussions between the parties.
 
On January 7, 2009, Dr. Barbarossa and Mr. Weinswig, together with representatives of Avanex’s financial advisor, met with senior executives of Company E to exchange information and discuss the possibility of a business combination involving the two companies. Also in early January 2009, Mr. Dougherty spoke again with a senior executive at Company E regarding the possibility of a business combination involving the two companies and the potential terms of such a combination.
 
On January 9, 2009, the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s legal and financial advisors were present. The Board discussed the status of discussions, due diligence and negotiations regarding the potential strategic transaction with Bookham. Mr. Couder and Mr. Turin then joined the meeting and discussed with the board the proposed strategic transaction with Bookham, including, among other things, potential business and operational synergies, strategic rationale, potential combined company financial model, strategic fit of the combined company by product line, operations, customer base, and intellectual property portfolio, and proposed management team. After Mr. Couder and Mr. Turin left the meeting, the board further discussed the potential combination with Bookham. The representatives of Wilson Sonsini Goodrich & Rosati discussed material terms that had been agreed to and those that were outstanding in the draft merger agreement with Bookham. At the conclusion of the meeting, the board authorized and directed management, with the assistance of Avanex’s advisors, to pursue further discussions with Bookham and certain other parties as discussed at the meeting.


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On January 12, 2009, Dr. Barbarossa and Mr. Weinswig, together with representatives of Avanex’s financial advisor, met separately with senior executives of Company D and Company E to exchange information and to further discuss the possibility of a business combination.
 
Also on January 12, 2009, Dr. Barbarossa and a senior executive of Company A spoke by telephone to further discuss the possibility of a business combination involving the two companies.
 
On January 13, 2009, Company E sent Avanex a preliminary, non-binding indication of interest proposing a combination transaction in which Avanex stockholders would receive a mix of cash and shares of Company E common stock and indicating other terms and conditions of a proposed transaction. Also on January 13, 2009, Company A and Company D separately sent Avanex revised non-binding indications of interest with respect to alternative combination transactions.
 
Also on January 13, 2009, the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s legal and financial advisors, including Avanex’s outside intellectual property counsel, were present. The representatives of Wilson Sonsini Goodrich & Rosati discussed the director’s fiduciary duties in connection with business combination transactions. The board discussed with management and Avanex’s legal and financial advisors material aspects of, and other factors regarding, the proposed combination transaction with Bookham and the other indications of interest received. Members of Avanex management and representatives of Avanex’s legal advisor also provided due diligence reports regarding the proposed transaction with Bookham. The representatives of Wilson Sonsini Goodrich & Rosati provided a detailed review of the principal terms of the merger agreement and voting agreements with Bookham and discussed a number of material open items in the draft merger agreement. The board then discussed the potential of contacting Company B to determine its interest in pursuing a strategic transaction since it had not responded to Avanex’s prior contact in November 2008. At the conclusion of the meeting, the board authorized and directed management, with the assistance of Avanex’s advisors, to pursue further negotiations and discussions with Bookham and the other parties as discussed at the meeting.
 
Also on January 13, 2009, a telephonic meeting of the board of directors of Bookham was held, which was also attended by members of Bookham’s senior management, representatives of Bookham’s financial advisor, a representative of Cooley Godward Kronish and a representative of Bookham’s outside securities counsel. The board discussed a number of topics relating to the possible transaction with Avanex, including the status and results of due diligence and the material outstanding issues under the draft merger agreement. In addition, representatives of Bookham’s financial advisor made a preliminary presentation regarding the fairness of the proposed exchange ratio to Bookham. Management also discussed with the Bookham board the strategic rationale for the transaction and the status of discussions with Avanex and reviewed financial aspects of the proposed transaction. The Bookham board authorized management to continue its discussions with Avanex.
 
On January 14, 2009, Nortel, a large customer of Bookham and Avanex, announced that it would file for bankruptcy protection in the United States of America, Canada and Europe. Later that day, the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s legal and financial advisors were present. The board discussed the potential impact of the Nortel bankruptcy announcement on each of Avanex, Bookham and the combined company and directed that further due diligence be conducted with respect to the potential impact of the Nortel bankruptcy on the combined company. Dr. Barbarossa also provided an update regarding recent discussions with Bookham and other potential parties to alternative business combinations. At the conclusion of the meeting, the board authorized pursuing further discussions and due diligence investigation with Bookham and continuing negotiations and discussions with the other parties as discussed at the meeting.
 
Later on January 14, 2009 and continuing through January 26, 2009, Avanex and Bookham continued to perform due diligence on one another, with additional focus on the potential effect of the Nortel bankruptcy on the combined company.
 
Also on January 14, 2009, Dr. Barbarossa and Mr. Weinswig, together with representatives of Avanex’s financial advisor, and a senior executive of Company B spoke by telephone regarding the possibility of a business combination involving the two companies.


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On January 15, 2009, at the direction of the Avanex board, representatives of Avanex’s financial advisor contacted a senior executive of Company D and indicated that, unless Company D could improve its revised non-binding indication of interest, Avanex would not be able to continue discussions with Company D and contacted the respective management teams at Company A and Company E to encourage them to improve their current non-binding indications of interest with respect to a combination transaction with Avanex. Company D did not subsequently provide Avanex with a revised indication of interest.
 
Also on January 15, 2009, the board of directors of Bookham met via teleconference to discuss further the topics that had been discussed at its meeting on January 13. Members of Bookham’s senior management, together with representatives of Bookham’s financial advisor and a representative of Cooley Godward Kronish, participated in this meeting. The Bookham board authorized management to continue its discussions with Avanex.
 
On January 19, 2009, Dr. Barbarossa and Mr. Weinswig, together with representatives of Avanex’s financial advisor, met with senior executives of Company B to exchange information and to further discuss the possibility of a business combination involving the two companies.
 
On January 20, 2009, the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s legal and financial advisors were present. Management discussed the company’s due diligence investigation related to the Nortel bankruptcy announcement and reviewed financial information under several alternative scenarios for Avanex and Bookham, both as stand-alone entities and as a combined company, with respect to forward operating performance and cash requirements in light of the Nortel bankruptcy. Also at this meeting, Avanex’s financial advisor reviewed with the board certain financial aspects of the proposed transaction with Bookham, including certain sensitivities, based on information provided by the managements of Avanex and Bookham, regarding potential effects of the Nortel bankruptcy on Avanex and Bookham. The board also was updated on discussions with certain other parties to potential alternative combination transactions. At the conclusion of the meeting, the board authorized and directed management, with the assistance of Avanex’s advisors, to pursue further negotiations, discussions and due diligence investigation with Bookham, in particular to pursue revised transaction terms with Bookham to reflect the impact of the Nortel bankruptcy, and to continue negotiations and discussions with certain other parties as discussed at the meeting.
 
On January 20 and 21, 2009, Dr. Barbarossa, Mr. Weinswig and other Avanex executives, together with representatives of Avanex’s financial advisor, spoke by telephone and met in person with senior executives of Company A to further discuss the possibility of a business combination involving the two companies. At the meetings, Company A executives updated Avanex management on Company A’s liquidity situation and its need to raise additional financing.
 
On January 21, 2009, Dr. Barbarossa informed Mr. Couder that due to the Nortel bankruptcy, Avanex believed it was necessary to increase the proposed exchange ratio. Later that same day, a meeting of the board of directors of Bookham was held via teleconference, which was also attended by members of Bookham’s senior management, representatives of Bookham’s financial advisor and a representative of Cooley Godward Kronish. The board discussed, among other matters, the financial aspects of the proposed transaction, including the impact (and expected impact) of the Nortel bankruptcy on Bookham and Avanex. The Bookham board authorized management to continue its discussions with Avanex and to increase the proposed exchange ratio within certain parameters.
 
Also on January 21, 2009, Mr. Couder and Kate Rundle, Bookham’s Executive Vice President and General Counsel, met with Dr. Barbarossa and Mr. Smith. The parties discussed valuation and possible exchange ratios for the proposed business combination transaction, as well as certain other outstanding material terms. Following discussion, the parties agreed that, subject to reaching agreement on the other material terms of the merger agreement and satisfactory completion of due diligence, they would be prepared to recommend to their respective boards of directors a transaction pursuant to which Avanex’s stockholders would receive 5.426 shares of Bookham common stock for each outstanding share of Avanex common stock (which corresponded to an approximate ownership for Avanex’s stockholders of 46.75% of the combined company). Thereafter and through the execution of the merger agreement and the voting agreements on


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January 27, 2009, Bookham and Avanex continued to perform due diligence, negotiate the terms and conditions of the merger agreement and finalize the disclosure schedules.
 
Also on January 21, 2009, Dr. Barbarossa spoke by telephone with a senior executive of Company B, who made a verbal non-binding indication of interest proposing a stock-for-stock transaction, subject to further due diligence. Dr. Barbarossa asked that the offer be provided in writing and indicated that due diligence would need to be completed quickly. Although Company B conducted further due diligence on Avanex in the following days, and discussions continued between the management team of Company B and the management team of Avanex and representatives of Avanex’s financial advisor, Company B did not subsequently provide a written indication of interest.
 
On January 22, 2009, at a telephonic meeting of the board of directors of Bookham, which was also attended by members of Bookham’s senior management, representatives of Bookham’s financial advisor and a representative of Cooley Godward Kronish, the Bookham board discussed further the topics that had been discussed at its meeting on January 21. In addition, representatives of Bookham’s financial advisor discussed with the board additional financial analysis related to the combination based on the revised exchange ratio. The Bookham board authorized management to seek to finalize its negotiations with Avanex.
 
On January 23, 2009, the acquisition committee of the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s legal and financial advisors were present. The acquisition committee was updated on recent discussions with Bookham and other interested parties to potential alternative combination transactions, including the company’s due diligence review of the Nortel bankruptcy and its potential impact on each of Avanex, Bookham and the combined company, and the current status and material terms of the non-binding indications of interest received from certain other parties. The representatives of Wilson Sonsini Goodrich & Rosati discussed material open items under negotiation in the draft merger agreement with Bookham and negotiations regarding the exchange ratio. The acquisition committee discussed the potential transaction with Bookham and several alternative combination transactions. Following such discussion, the acquisition committee directed that discussions with Company A be halted because of the updated information received concerning its liquidity situation and need for additional financing. At the conclusion of the meeting, the acquisition committee authorized and directed management, with the assistance of Avanex’s advisors, to pursue further discussions and due diligence investigation with Bookham and continue discussions with certain other parties to alternative combination transactions as discussed at the meeting. Subsequently on January 23, 2009, Company A was informed that Avanex would not be continuing discussions with Company A until it had improved its liquidity position.
 
On January 25, 2009, the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s legal and financial advisors were present to discuss the status of negotiations with Bookham, as well as additional due diligence conducted in connection with the Nortel bankruptcy. Representatives of Wilson Sonsini Goodrich & Rosati discussed material terms of the draft merger agreement with Bookham, including a number of open items that remained under negotiation. The board also was updated on the current status and material terms of the non-binding indications of interest received from the other parties interested in pursuing a combination transaction. The board discussed the advantages and disadvantages of the Bookham proposal as well as these other indications of interest. After discussion, the board authorized and directed management, with the assistance of Avanex’s advisors, to continue discussions and due diligence with Bookham and certain other parties as discussed at the meeting.
 
On January 26, 2009, representatives of Avanex and Bookham held a telephone due diligence call to discuss the potential financial impact of the Nortel bankruptcy announcement on each party and the combined companies.
 
In late January 2009, discussions between the management team of Company E and the management team of Avanex and representatives of Avanex’s financial advisor continued, but Company E did not subsequently provide a revised indication of interest.


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At various times in January 2009, Mr. Couder and Mr. Smith discussed communications that had occurred between the management teams and financial representatives of Bookham and Avanex with respect to a possible combination of Bookham and Avanex.
 
On January 27, 2009, the Avanex board of directors held a meeting at which members of management and representatives of Avanex’s legal and financial advisors were present. Management discussed the company’s due diligence investigation, particularly regarding the potential effect of the Nortel bankruptcy on Bookham, Avanex and the combined company. The board was updated on the current status of negotiations and discussions with the other parties interested in pursuing alternative combination transactions with Avanex, as well as the material terms of the non-binding indications of interest received from such parties. It was noted that Avanex had ceased discussions with Company A because of Company A’s liquidity situation, that Company D had not provided a revised indication of interest after being informed that its January 13, 2009 indication of interest would need to be improved, that Company E had engaged in additional discussions with and conducted due diligence on Avanex but had not provided a revised indication of interest after being informed that its January 13, 2009 indication of interest would need to be improved, and that Company B’s verbal, non-binding indication of interest had not been subsequently confirmed by Company B in writing. The board discussed the proposed transaction with Bookham as compared to the alternative indications of interest received based on a number of factors, including, without limitation, the implied equity value per share of the various offers, the implied premium of the various offers, potential synergies that may be realized by the combined companies, the strategic fit of the various parties, the status of negotiations and discussions and perceived interest of the various parties, the due diligence conducted by the various parties to date, the strategic rationale and risks of the various transactions, the histories of the various parties with Avanex, timing considerations and the relative regulatory risks of the potential business combinations. Following such discussion, representatives of Wilson Sonsini Goodrich & Rosati discussed the material terms of the merger agreement and voting agreements with Bookham. Also at this meeting, Avanex’s financial advisor reviewed with Avanex’s board its financial analysis of the exchange ratio provided for in the merger agreement of 5.426 shares of Bookham common stock for each outstanding share of Avanex common stock and delivered to Avanex’s board an oral opinion, which was confirmed by delivery of a written opinion dated January 27, 2009, to the effect that, as of that date and based on and subject to various assumptions and limitations described in its opinion, the exchange ratio provided for in the merger agreement was fair, from a financial point of view, to the holders of Avanex common stock. Following these discussions, and after careful consideration, the board determined that it was advisable, fair to and in the best interests of Avanex and its stockholders for the board to approve the merger and enter into the merger agreement with Bookham. The board then, among other things, unanimously approved the merger agreement with Bookham, the merger and the related transactions, and unanimously resolved to recommend that the stockholders vote in favor of the adoption of the merger agreement.
 
Also on January 27, 2009, the board of directors of Bookham held a special telephonic meeting, which was also attended by members of Bookham senior management, representatives of Bookham’s financial advisor and a representative of Cooley Godward Kronish. Management reported to the board on its further business due diligence findings. A representative of Cooley Godward Kronish discussed with the board certain changes to the terms of the merger agreement and voting agreements. Representatives of Bookham’s financial advisor presented the board with its financial analysis of the proposed transaction and rendered its oral opinion, subsequently confirmed in writing, to the Bookham board that, as of such date and based upon and subject to the assumptions, qualifications and limitations set forth in the opinion, the exchange ratio, pursuant to the merger agreement, was fair from a financial point of view, to Bookham. The Bookham board, after considering the due diligence findings, and the merits, risks and benefits of the proposed transaction with Avanex, concluded that the transaction was fair to and in the best interests of Bookham’s stockholders, and voted to approve the merger agreement and the merger.
 
Shortly thereafter, Avanex, Bookham and their representatives finalized the merger agreement and the disclosure schedules to the merger agreement, and the parties executed the merger agreement on January 27, 2009. Also, the directors and executive officers of Bookham and Avanex entered into their respective voting agreements, each dated as of January 27, 2009.


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After the stock market closed on January 27, 2009, Avanex and Bookham issued a joint press release announcing the execution of the merger agreement and the merger.
 
Reasons for the Merger
 
Mutual Reasons for the Merger
 
The boards of directors of Bookham and Avanex identified and considered many factors in evaluating the merger, including the following:
 
  •  Creating Synergies and Cost Saving Opportunities.  The integration of the product lines, supply chains, administrative functions and sales teams of the combined companies is expected to result in cost savings synergies and continuing increases in gross margins, both of which are expected to improve Bookham’s operating results. Both companies believe that the combination of the two companies will create synergies that are expected to improve financial performance faster than either of the two companies could accomplish on a stand-alone basis. It is expected that the combination will result in increased earnings before interest, taxes, depreciation and amortization, or EBITDA, accretive in the first full quarter after the consummation of the merger and will generate approximately $7 million of quarterly cost savings by the end of the fourth full quarter after the consummation of the merger. Moreover, the combined company is expected to have a better cash position after 12 months following the merger than the combination of the cash position of the two companies on a stand-alone basis at that time.
 
  •  Integration of Product Lines Resulting in Scale to Better Compete.  Both companies believe that the combination of the two companies with their technologies and capabilities will result in a stronger company with a more complete and broader product offering than either company would have on a stand-alone basis. A broader product line is expected to allow the combined company to better serve a broader customer base.
 
  •  Leader in the metro and long-haul markets.  Both companies believe that the combination of the two companies will create a leader in the metro and long-haul markets of the optical industry. As a result of the merger, the combined company will have a comprehensive portfolio of terminal and line product technologies that are critical for the metro and long-haul markets. Individually, each company has at times lacked scale, but together the combined company is expected to represent a key supplier within the metro and long-haul sector of the optical industry.
 
  •  Utilizing and Integrating Complementary Businesses.  There is little overlap between the businesses of Bookham and Avanex. Both companies believe that each company’s strong offerings are complementary to the other company’s products in areas where the other company is not as strong. Avanex primarily brings leadership in modules such as controlled amplifiers and integrated subsystems and Bookham primarily brings leadership in chips and component excellence and tunable products. Moreover, both companies believe that integration of more functionality within a single form factor (be it chip, package, module or system card) will be a key to driving down production costs while improving product performance.
 
  •  Integration of Technologies and IP.  Both companies possess strong intellectual property portfolios and together the combined portfolio is even stronger. The companies expect that the combined company’s technological capabilities will support more rapid development of next generation products, which could improve the combined company’s competitive position in its target markets.
 
  •  Expansion of Sales Opportunities.  Since there is very little overlap between the businesses of the companies and since the companies have complementary customer bases and relationships, both companies believe that the combination will allow them to quickly expand and improve sales opportunities and service to their customers.
 
  •  Maximizing Research and Development Resources.  The combination will allow the combined company to streamline research and development resources as opposed to pursuing the same research and


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  development projects as stand-alone companies. Both companies believe that combining the creative and operational capacities of the two companies will allow Bookham and Avanex to better serve customers by accelerating innovations. Both companies believe that the combined company will have significant opportunity to grow in both new and existing markets.
 
  •  Utilizing a Combination of Manufacturing Methods.  Both companies believe that the combination will allow them to leverage both in-house and outsourced manufacturing capacity to maximize flexibility, responsiveness to customers and gross margin opportunities. Avanex’s manufacturing activity is primarily based on outsourcing. Bookham’s manufacturing activities are vertically integrated and are primarily handled by Bookham. The combination of these two methods is expected to result in an efficient combination of outsourcing and vertically integrated manufacturing.
 
  •  Enhanced Geographical Footprint.  From a geographic standpoint, the combination is expected to enhance the strength of the geographic footprint of the combined company. For example, Avanex has established sales teams in Japan and Italy, whereas Bookham has established sales teams in the United Kingdom and China. Each company will be able to enjoy the benefits of an established team in countries where the other company has strong established team.
 
  •  Experienced Management Team.  It is expected that the combined company will be led by a combination of experienced senior management from both Bookham and Avanex, which will provide management continuity to support the integration of the two companies.
 
  •  Combined Board Representation.  The board of directors of the combined company will also enjoy the experience and skills of certain members of the board of each of Bookham and Avanex.
 
Bookham’s Reasons for the Merger
 
In addition to considering the strategic factors outlined above, the Bookham board of directors consulted with senior management, outside legal counsel and its financial advisor, reviewed a significant amount of information, and considered the following factors in reaching its conclusion to approve the merger and to recommend that the Bookham stockholders approve the issuance of shares of Bookham common stock in the merger and the amendment to Bookham’s restated certificate of incorporation to increase the number of authorized shares of Bookham common stock, all of which it viewed as generally supporting its decision to approve the business combination with Avanex:
 
  •  the complementary nature of Bookham’s and Avanex’s product lines;
 
  •  the potential opportunity for the two companies to integrate their products to meet a wider set of customer needs and to combine their technological resources to develop new products with increased functionality and bring them to market faster;
 
  •  the board’s and management’s assessment that the merger and Avanex’s operating strategy are consistent with Bookham’s long-term strategic objectives to grow into new markets;
 
  •  the competitive and market environments in which Bookham and Avanex operate, and the potential for the merger to enhance Bookham’s ability to compete effectively in those environments, particularly given current adverse economic conditions;
 
  •  historical and current information about each of the combining companies and their businesses, prospects, financial performance and condition, operations, technology, management and competitive position, before and after giving effect to the merger and the merger’s potential effect on stockholder value, including public reports filed with the SEC, analyst estimates, market data and management’s knowledge of the industry;
 
  •  the opinion of Bookham’s financial advisor that, as of January 27, 2009 and based on and subject to the assumptions, limitations, qualifications and other matters set forth in the opinion, the exchange ratio of 5.426 shares of Bookham common stock to be issued in exchange for each share of Avanex common


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  stock pursuant to the merger agreement was fair to Bookham from a financial point of view, and the related financial analyses and presentations;
 
  •  the potential improvement in the share price of Bookham common stock as a result of the cost savings synergies and improved operating results, thus enhancing stockholders value;
 
  •  the results of discussions and negotiations with other parties regarding potential alternative combination transactions and the potential value of such alternatives to the stockholders of Bookham and the risk of successfully consummating such a transaction;
 
  •  the results of the due diligence review of Avanex’s business and operations by Bookham’s management, legal advisors and financial advisors;
 
  •  the terms and conditions of the merger agreement, including the following related factors:
 
  •  the determination that an exchange ratio that is fixed and not subject to adjustment is appropriate to reflect the strategic purpose of the merger and consistent with market practice for a merger of this type and that a fixed exchange ratio fairly captures the respective ownership interests of the Bookham and Avanex stockholders in the combined company based on valuations of Bookham and Avanex at the time of the board’s approval of the merger agreement and avoids fluctuations caused by near-term market volatility;
 
  •  the reciprocal requirement that the merger agreement be submitted to a vote of the stockholders of Avanex and that the issuance of shares of Bookham common stock in the merger and the amendment to Bookham’s restated certificate of incorporation to increase the number of authorized shares of Bookham common stock be submitted to a vote of the stockholders of Bookham;
 
  •  the fact that the merger agreement is not subject to termination solely as a result of any change in the trading price of either Bookham’s or Avanex’s stock between signing of the merger agreement and consummation of the merger;
 
  •  the nature of the conditions to Avanex’s obligation to consummate the merger and the limited risk of non-satisfaction of such conditions;
 
  •  the no-solicitation provisions governing Avanex’s ability to engage in negotiations with, provide any confidential information or data to, and otherwise have discussions with, any person relating to an alternative acquisition proposal;
 
  •  the limited ability of the parties to terminate the merger agreement; and
 
  •  the possible effects of the provisions regarding termination fees and expenses;
 
  •  the likelihood that the merger will be consummated on a timely basis; and
 
  •  the likelihood of retaining key Bookham and Avanex employees to help manage the combined entity.
 
The Bookham board of directors also considered the potential risks of the merger, including the following:
 
  •  the risks, challenges and costs inherent in combining the operations of two major companies and the substantial expenses to be incurred in connection with the merger, including the possibility that delays or difficulties in completing the integration could adversely affect the combined company’s operating results and preclude the achievement of some benefits anticipated from the merger;
 
  •  the possible volatility, at least in the short term, of the trading price of Bookham’s common stock resulting from the merger announcement;
 
  •  the possible loss of key management, technical or other personnel of either of the combining companies as a result of the management and other changes that will be implemented in integrating the businesses;
 
  •  the risk of diverting management’s attention from other strategic priorities to implement merger integration efforts;


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  •  the negative impact of any delays in purchase commitments after the announcement of the merger;
 
  •  the potential loss of one or more large customers or partners of either company as a result of any such customer’s or partner’s unwillingness to do business with the combined company;
 
  •  the possibility that the reactions of existing and potential competitors to the combination of the two businesses could adversely impact the competitive environment in which the companies operate;
 
  •  the risk that the merger might not be consummated in a timely manner, or at all;
 
  •  the risk to Bookham’s business, sales, operations and financial results in the event that the merger is not consummated;
 
  •  the risk that the anticipated benefits of product integration and interoperability and cost savings will not be realized;
 
  •  the potential incompatibility of business cultures; and
 
  •  various other applicable risks associated with the combined company and the merger, including those described in the section of this joint proxy statement/prospectus entitled “Risk Factors.”
 
The foregoing information and factors considered by the Bookham board of directors are not intended to be exhaustive but are believed to include all of the material factors considered by the Bookham board of directors. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the Bookham board of directors did not find it useful, and did not attempt, to quantify, rank or otherwise assign relative weights to these factors. In considering the factors described above, individual members of the Bookham board of directors may have given different weight to different factors. The Bookham board of directors conducted an overall analysis of the factors described above, including thorough discussions with, and questioning of, Bookham’s management and Bookham’s legal and financial advisors, and considered the factors overall to be favorable to, and to support, its determination.
 
Avanex’s Reasons for the Merger
 
The Avanex board of directors consulted with senior management, outside legal counsel and Avanex’s financial advisor in evaluating the merger. In addition to considering the strategic factors outlined above, the Avanex board considered a number of factors in reaching its conclusion to approve the merger and to recommend that the Avanex stockholders adopt the merger agreement, including, but not limited to:
 
  •  the strategic rationale for the merger and the potential benefits of the contemplated transaction;
 
  •  the possible alternatives to the merger, including the possibility of continuing to operate as an independent entity and the perceived risks thereof, and the potential for an alternative combination transaction to the merger based upon the discussions held by Avanex and senior management, with the assistance of Avanex’s financial advisor, with a number of potential strategic partners over a period of several months;
 
  •  management’s assessment of the potential competitive advantages and operational and other synergies that potentially could be realized from a number of alternative strategic combinations;
 
  •  the current and historical market prices of Avanex’s and Bookham’s common stock, and the current and historical market prices of Avanex’s and Bookham’s common stock relative to those of other industry participants and general market indices, including the fact that the 5.426 shares of Bookham common stock for each share of Avanex common stock (which, based on the closing price of Bookham on January 26, 2009, would be equivalent to $35.4 million in the aggregate or $2.17 per share) to be paid as the consideration in the merger represented an implied premium over the implied current and historical exchange ratios over the 30-day, 60-day, and 90-day trading periods ended January 26, 2009 (the last trading day prior to the public announcement of the merger);


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  •  management’s dealings with other parties regarding potential alternative combination transactions and the potential value of such alternatives to the stockholders of Avanex and the risk of successfully consummating such a transaction;
 
  •  the current and prospective environment in which Avanex operates, including the global macroeconomic recessionary economy, the competitive environment, reductions in expenditures by Avanex’s customers, the trend toward consolidation in the optical components industry and the corresponding effect on Avanex’s revenues, the importance of scale in the increasingly competitive market environments in which Avanex operates, and the potential for the merger to enhance Avanex’s ability to compete effectively in those environments, and the likely effect of these factors on Avanex’s potential growth, development, productivity, profitability and strategic options;
 
  •  current and historical information concerning Avanex’s and Bookham’s respective businesses, operations, management, financial performance and conditions, technology, operations, prospects and competitive position, before and after giving effect to the merger and the merger’s potential effect on stockholder value;
 
  •  the potential business, operational and financial synergies that may be realized over time by the combined company following the merger;
 
  •  the results of the due diligence review of Bookham’s business and operations;
 
  •  the likelihood that the merger will be completed, including the lack of antitrust review of the merger;
 
  •  current financial market conditions and historical market prices, volatility and trading information with respect to Avanex’s and Bookham’s common stock;
 
  •  the terms of the merger agreement, including the parties’ representations, warranties and covenants, and the conditions to their respective obligations; and
 
  •  the consideration to be received by Avanex’s stockholders in the merger, including the form of such consideration, which enables Avanex’s stockholders to continue to have a substantial equity interest in the combined company following the merger, as well as the fact that the shares of Bookham common stock to be received by Avanex’s stockholders will be received in a tax-free exchange and would be registered on Form S-4 and will be freely tradable for Avanex stockholders who are not affiliates of Bookham.
 
The Avanex board of directors also identified and considered a number of positive factors in its deliberations concerning whether to approve the merger and enter into the merger agreement, including, but not limited to:
 
  •  discussions with Avanex’s management team regarding Avanex’s and Bookham’s respective businesses, financial performance and condition, technology, operations, competitive position, business strategy, strategic objectives and options and prospects, as well as risks involved in achieving these objectives; the nature of Avanex’s and Bookham’s respective businesses and the industry in which Avanex and Bookham compete; and current industry, economic and global market conditions, both on a historical and on a prospective basis, all of which led the board of directors to conclude that the merger presented an opportunity for the stockholders of Avanex to realize greater value than the value likely to be realized by stockholders in the event Avanex remained independent;
 
  •  a review of the possible alternatives to a sale of Avanex, including remaining independent and growing the business organically, pursuing a strategy of growth through acquisitions or pursuing corporate alliances; the value to the stockholders of Avanex of such alternatives; and the timing and likelihood of actually achieving additional value from these alternatives;
 
  •  specifically in connection with the potential combination transaction alternatives with other potential parties that were considered by Avanex, that such transactions did not clearly offer greater value to the stockholders of Avanex and would involve more risk for a successful negotiation and consummation of the transaction;


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  •  the risks associated with remaining an independent company, including increased competition, industry consolidation trends, difficulties of achieving scale, the significant and increasing cost of complying with obligations as a publicly traded company, anticipated operating performance and a review of ongoing product development initiatives;
 
  •  the belief by management that the merger would allow for enhanced products and opportunities for Avanex’s partners, clients and customers, and management’s view that the relatively limited overlap between Avanex and Bookham would minimize the impact of the merger on the customers and employees of Avanex;
 
  •  the value of the consideration to be paid in connection with the merger as analyzed through various valuation methodologies, including among others implied exchange ratio analysis, selected publicly traded companies analysis, selected precedent transactions analysis, and contribution analysis, including, in certain cases, taking into account certain sensitivities implied by the bankruptcy of Nortel Networks Corporation;
 
  •  the assessment, based on management’s negotiations and discussions with other parties to alternative potential combination transactions during the course of negotiations with Bookham, of the relative value of such potential combination transactions and the synergies that may be realized by the business combinations;
 
  •  the opinion of Avanex’s financial advisor, dated January 27, 2009, to Avanex’s board of directors as to the fairness, from a financial point of view and as of the date of the opinion, of the exchange ratio provided for in the merger agreement of 5.426 shares of Bookham common stock for each outstanding share of Avanex common stock, as more fully described below in the section “— Opinion of Avanex’s Financial Advisor” on page 96;
 
  •  the fact that the merger would be subject to the approval of the stockholders of Avanex and that if an alternative offer affording greater value to Avanex’s stockholders were to be made to the stockholders prior to the completion of the merger, the stockholders could elect not to adopt the merger agreement, and that the board of directors could change its recommendation regarding the merger in certain circumstances; and
 
  •  the belief that the terms and conditions of the merger agreement, including the parties’ mutual representations, warranties and covenants, deal support provisions, and closing conditions, are reasonable for a transaction of this nature, and
 
  •  the prospects for successful consummation of the transaction are high.
 
The Avanex board of directors also identified and considered a variety of risks and other countervailing factors in its deliberations concerning whether to approve the merger and enter into the merger agreement, including, but not limited to:
 
  •  the inability of Avanex’s stockholders to realize the long-term value of the successful execution of Avanex’s current strategy as an independent company;
 
  •  the possibility that the merger might not be completed and the potential effects of the public announcement and pendency of the merger on management attention, Avanex’s ability to retain employees, Avanex’s relationship with certain customers, suppliers and strategic partners, and Avanex’s sales, operating results and stock price and Avanex’s ability to attract and retain key management and sales, marketing and technical personnel;
 
  •  the risks of integrating the businesses of the combined companies and management and employee disruption associated with the merger, including the risks that the integration of the two companies’ management and cultures might not be accomplished quickly or smoothly and that despite the efforts of the combined company, key personnel might not remain employed by the combined company;
 
  •  the fact that because of the fixed exchange ratio of 5.426 shares of Bookham common stock for each share of Avanex common stock (which, based on the closing price of Bookham on January 26, 2009,


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  would be equivalent to $35.4 million in the aggregate or $2.17 per share), if Bookham’s share price declines prior to the consummation of the merger, the consideration to be received by the stockholders of Avanex would also decline;
 
  •  the recent trading values of Avanex’s common stock in the current recessionary environment relative to trading values of Avanex’s common stock in prior periods;
 
  •  the restrictions the merger agreement imposes on soliciting competing bids and the fact that Avanex may be obligated to pay to Bookham the $1.64 million termination fee under specified circumstances, or reimburse expenses of Bookham up to a maximum of $1.0 million in the event that the stockholders of Avanex do not adopt the merger agreement and the possibility that this termination fee could discourage a competing proposal to acquire Avanex or reduce the price in an alternative transaction;
 
  •  the restrictions the merger agreement imposes on the operations of Avanex during the period between the signing of the merger agreement and the completion of the merger and the fact that, should the merger not occur, such restrictions could have had an adverse effect on the operations of Avanex during such time;
 
  •  the fact that the merger agreement precludes Avanex from actively soliciting alternative proposals;
 
  •  the fact that certain of the directors and executive officers of Avanex may have conflicts of interest in connection with the merger, as they may receive certain benefits that are different from, and in addition to, those of the other stockholders of Avanex;
 
  •  that, while the merger is expected to be completed, there can be no assurance that all conditions to the parties’ obligations to complete the merger will be satisfied, and as a result, it is possible that the merger may not be completed, even if the merger agreement is adopted by the stockholders of Avanex; and
 
  •  various other applicable risks associated with the combined company and the merger.
 
The foregoing information and factors considered by the Avanex board of directors are not intended to be exhaustive but are believed to include all of the material factors considered by the Avanex board of directors. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the Avanex board of directors did not find it useful, and did not attempt, to quantify, rank or otherwise assign relative weights to these factors. In considering the factors described above, individual members of the Avanex board of directors may have given different weight to different factors. The Avanex board of directors conducted an overall review of the factors described above, including discussions with Avanex’s management and legal and financial advisors, and considered the factors overall to be favorable to, and to support, its determination.
 
Opinion of Bookham’s Financial Advisor
 
Citigroup Global Markets Inc., or Citi, was retained to act as financial adviser to Bookham in connection with the merger. Pursuant to Bookham’s engagement letter agreement with Citi, dated October 1, 2008, Citi rendered an opinion to the Bookham board of directors on January 27, 2009 to the effect that, as of the date of the opinion, and based upon and subject to the considerations and limitations set forth in the opinion, Citi’s work described below and other factors Citi deemed relevant, the exchange ratio was fair, from a financial point of view, to Bookham.
 
The full text of Citi’s opinion, which sets forth the assumptions made, general procedures followed, matters considered and limits on the review undertaken, is included as Annex D to this document. The summary of Citi’s opinion set forth below is qualified in its entirety by reference to the full text of the opinion. Holders of Bookham common stock are urged to read the Citi opinion carefully and in its entirety.
 
Citi’s opinion was limited solely to the fairness of the exchange ratio from a financial point of view as of the date of the opinion. Neither Citi’s opinion nor the related analyses constituted a


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recommendation of the proposed merger to the Bookham board of directors or any holder of Bookham common stock. Citi makes no recommendation to any holder of Bookham common stock regarding how such holder should vote with respect to the merger.
 
In arriving at its opinion, Citi reviewed the merger agreement and held discussions with certain senior officers, directors and other representatives and advisers of Bookham and certain senior officers and other representatives and advisers of Avanex concerning the businesses, operations and prospects of Bookham and Avanex. Citi examined certain publicly available business and financial information relating to Bookham and Avanex as well as certain financial forecasts and other information and data relating to Bookham and Avanex that were provided to, or otherwise reviewed by or discussed with, Citi by the managements of Bookham and Avanex. Citi reviewed the financial terms of the merger as set forth in the merger agreement in relation to, among other things: current and historical market prices and trading volumes of Bookham common stock and Avanex common stock; the historical and projected earnings and other operating data of Bookham and Avanex; and the capitalization and financial condition of Bookham and Avanex. Citi considered, to the extent publicly available, the financial terms of certain other transactions that Citi considered relevant in evaluating the merger and analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations Citi considered relevant in evaluating those of Bookham and Avanex. Citi also evaluated certain potential pro forma financial effects of the merger. In addition to the foregoing, Citi conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as Citi deemed appropriate in arriving at its opinion. The issuance of Citi’s opinion has been authorized by Citi’s fairness opinion committee.
 
In rendering its opinion, Citi assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with it and upon the assurances of the respective managements of Bookham and Avanex that they were not aware of any information relevant to Citi’s analysis that had been omitted or remained undisclosed to Citi. With respect to financial forecasts and other information and data relating to Bookham and Avanex provided to or otherwise reviewed by or discussed with it, Citi was advised by the respective managements of Bookham and Avanex that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the managements of Bookham and Avanex as to the future financial performance of Bookham and Avanex. Citi was informed by the respective managements of Bookham and Avanex that financial projections did not exist for any period after March 31, 2010 and, therefore, with the consent of the management of Bookham, Citi did not perform discounted cash flow analyses with respect to Bookham or Avanex.
 
Citi assumed, with the consent of the Bookham board of directors, that the merger will be consummated in accordance with the terms of the merger agreement reviewed by Citi, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary regulatory or third party approvals, consents and releases for the merger, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on Bookham, Avanex or the merger. Citi also assumed, with the consent of the Bookham board of directors, that the merger will be treated as a tax-free reorganization for federal income tax purposes. Citi’s opinion is related to the relative values of Bookham and Avanex. Citi did not express any opinion as to what the value of the Bookham common stock actually will be when issued pursuant to the merger or the price at which the Bookham common stock will trade at any time.
 
Citi did not make and was not provided with an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Bookham or Avanex, nor did Citi make any physical inspection of the properties or assets of Bookham or Avanex. Citi was not requested to, and did not, solicit third-party indications of interest in the possible acquisition of all or a part of Bookham. Citi expresses no view as to, and Citi’s opinion does not address, the underlying business decision of Bookham to effect the merger, the relative merits of the merger as compared to any alternative business strategies that might exist for Bookham or the effect of any other transaction in which Bookham might engage. Citi also expresses no view as to, and its opinion does not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or employees of any parties to the merger, or any class of such persons, relative to the exchange ratio. Citi’s opinion does not address the terms of any agreement entered into


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in connection with the merger other than the merger agreement to the extent described herein. Citi’s opinion was necessarily based upon information available to it, and financial, stock market and other conditions and circumstances existing, as of the date of its opinion.
 
The following is a summary of the material financial analyses presented to the Bookham board of directors in connection with Citi’s opinion on January 27, 2009. The summary includes information presented in tabular format. In order to understand fully the financial analyses used by Citi, these tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses.
 
The following quantitative information, to the extent it is based on market data, is, except as otherwise indicated, based on market data as it existed at or prior to January 27, 2009, and is not necessarily indicative of current or future market conditions.
 
Historical Exchange Ratio Analysis
 
Citi derived implied historical exchange ratios by dividing the closing price per share of Avanex common stock by the closing price per share of Bookham common stock for each trading day in the period from January 26, 2006 through January 26, 2009, the three years prior to announcement of the transaction. Citi noted the average implied exchange ratios over the following periods:
 
                 
        Average Implied
   
Time Period
  Exchange Ratio
 
1 Year Average Implied Exchange Ratio
    January 25, 2008 — January 26, 2009       5.832 x
2 Year Average Implied Exchange Ratio
    January 26, 2007 — January 26, 2009       7.941 x
3 Year Average Implied Exchange Ratio
    January 26, 2006 — January 26, 2009       7.513 x
 
Citi derived a reference range based on the lowest and highest implied exchange ratio over the last twelve months prior to announcement of the transaction, 1.955x to 10.030x.
 
Relative Contribution Analysis
 
Citi performed analyses of the relative revenue and cash contributions of Bookham and Avanex. The purpose of the relative contribution analyses was to derive implied exchange ratios by determining the relative implied contributions of Bookham and Avanex to the revenue and cash balance of the pro forma combined entity based on each company’s revenue and cash balance. Citi utilized publicly available information and forecasts prepared by the managements of Bookham and Avanex for the revenue and cash metrics.
 
Citi performed analyses of the relative revenue contributions of Bookham and Avanex to the pro forma combined company with respect to the following periods:
 
  •  projected revenue for the fiscal quarter ended December 31, 20081;
 
  •  projected revenue for the last twelve months as of December 31, 20081;
 
  •  projected revenue for the fiscal quarter ending March 31, 2009; and
 
  •  projected revenue for calendar year ending December 31, 2009.
 
Management of Bookham and of Avanex prepared two sets of financial projections for calendar year 2009, utilizing different assumptions regarding future market conditions. These sets of assumptions are referred to as “Case 1” and “Case 2.”
 
 
1 Actual revenue numbers for the fiscal quarter ended December 31, 2008 were not yet available.


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The following table sets forth the results of Citi’s analyses of the relative contributions of Bookham and Avanex to the combined pro forma entity:
 
                 
    Implied
  Implied
    Contribution of
  Contribution of
Financial Metric
  Bookham   Avanex
 
Projected Revenue for the Fiscal Quarter ended December 31, 2008
    57.1 %     42.9 %
Projected Revenue for the Last Twelve Months as of December 31, 2008
    56.5 %     43.5 %
Projected Revenue for the Fiscal Quarter Ending March 31, 2009
    61.3 %     38.7 %
Projected Revenue for the Calendar Year ending December 31, 2009 (Case 1)
    60.3 %     39.7 %
Projected Revenue for the Calendar Year Ending December 31, 2009 (Case 2)
    61.1 %     38.9 %
 
Based on this analysis, Citi derived a reference range for the implied exchange ratio of 3.963x to 4.860x.
 
Citi also performed analyses of the relative cash contributions of Bookham and Avanex to the cash balance of the pro forma combined company. For this analysis, Citi utilized the preliminary cash balances for December 31, 2008 and projected cash balances as of March 31, 2009, as provided by the managements of Bookham and Avanex.
 
The following table sets forth the results of Citi’s analyses of the relative cash contributions of Bookham and Avanex to the combined pro forma entity:
 
                 
    Implied
  Implied
    Contribution of
  Contribution of
Financial Metric
  Bookham   Avanex
 
December 31, 2008 Preliminary Cash Balance
    54.5 %     45.5 %
Projected March 31, 2009 Cash Balance
    55.1 %     44.9 %
 
Based on this analysis, Citi derived a reference range for the implied exchange ratio of 4.860x to 5.719x.
 
Comparable Companies Valuation
 
Citi compared stock market and historical and projected operating and financial data for selected publicly traded companies that Citi deemed appropriate with similar information for each of Bookham and Avanex. The selected comparable companies considered by Citi were:
 
  •  JDS Uniphase Corporation;
 
  •  Finisar Corporation;
 
  •  Opnext, Inc.; and
 
  •  Oplink Communications, Inc.
 
The forecasted financial information used by Citi in the course of this analysis with respect to Bookham and Avanex was based on forecasts prepared by the managements of the respective companies and Reuters consensus estimates. The forecasted financial information used by Citi in the course of this analysis for each of the comparable companies was based on information published by Factset and Reuters consensus estimates. The historical financial information used by Citi in the course of this analysis was based on publicly available historical information. Calculations were made based on the closing price per share of each company’s stock as of January 26, 2009.
 
For each of the selected comparable companies, Bookham and Avanex, Citi derived and compared, among other things, equity value as a multiple of each of:
 
  •  revenue for the last quarter annualized;


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  •  projected revenue for the 2009 calendar year; and
 
  •  cash.
 
Equity value was calculated as the sum of all shares of common stock, assuming the exercise of all in-the-money options and the conversion of in-the-money convertible securities, times the closing share price as of January 26, 2009, less the proceeds from the exercise of such in-the-money options.
 
Citi performed this analysis with respect to Avanex based on both the market value of Avanex common stock and the price of Avanex common stock price derived using the exchange ratio in the merger.
 
The results of this analysis were as follows:
 
                         
    Equity Value / Revenue   Equity Value /
    LQA   CY 2009E   Cash
 
Comparable Companies Median
    0.5 x     0.4 x     1.0 x
Comparable Companies Mean
    0.6 x     0.6 x     1.6 x
Bookham
    0.2 x     0.2 x     0.9 x
Avanex (valued at market)
    0.1 x     0.1 x     0.4 x
Avanex (value based on exchange ratio)
    0.2 x     0.2 x     0.7 x
 
Citi applied the results of this analysis to historical and projected revenue for Bookham and Avanex to determine implied equity value and implied value per share for both Bookham and Avanex. Based on this analysis, Citi derived a reference range for the implied exchange ratio of 2.521x to 7.437x.
 
Precedent Transactions Analysis
 
Citi reviewed publicly available information for merger and acquisition transactions in the optical component industry in two groups: optical components transactions consummated during the prior economic downturn of 2002-2003 and recent optical components transactions.
 
The selected precedent transactions considered were:
 
Transaction (Announcement Date: Acquiror / Target)
 
Optical Components Transactions from 2002-2003 Economic Downturn
 
  •  05/12/03: Avanex / Alcatel and Corning’s Optical Divisions
 
  •  01/22/03: Emcore Corporation / Agere Systems Inc. (Ortel Division)
 
  •  10/22/02: TriQuint Semiconductor / Agere Systems Inc. (Optoelectronics Division)
 
  •  10/07/02: Bookham / Nortel Networks Inc. (HPOCs Division)
 
Recent Optical Components Transactions
 
  •  07/09/08: Opnext, Inc. / StrataLight Communications Inc.
 
  •  05/16/08: Finisar Corporation / Optium Corporation
 
  •  01/07/08: JDS Uniphase Corporation / Westover Scientific (Fiber Division)
 
  •  12/18/07: Emcore Corporation / Intel Optical Platform (Telecom Business)
 
  •  05/14/07: Emerson Electric Co. / Stratos International
 
  •  04/23/07: Oplink Communications. Inc. / Optical Communications Products
 
  •  03/26/07: Finisar Corporation / Kodeos Communications
 
  •  03/26/07: Finisar Corporation / AZNA
 
  •  02/27/07: JDS Uniphase Corporation / Picolight, Inc.


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  •  01/26/07: MRV Communications, Inc. / Fiberxon, Inc.
 
With respect to the financial information for the companies involved in the selected precedent transactions, Citi relied on information available in public filings, company press releases and publicly available information from Mergermarket. For the selected transactions noted above Citi derived and compared, among other things, the ratio of the firm value paid in the transaction to both the revenue for the last twelve months prior to announcement of the transaction and to the forecasted revenue for the twelve months following announcement of the transaction. The results of these analyses were as follows:
 
                 
    Firm Value / LTM Rev     Firm Value / NTM Rev  
 
    Optical Components Transactions from 2002-2003 Economic Downturn
High
    0.8x       Not Available  
Mean
    0.4x       Not Available  
Median
    0.4x       Not Available  
Low
    0.2x       Not Available  
      Recent Optical Components Transactions          
High
    3.3x       1.3 x
Mean
    1.8x       0.9 x
Median
    1.4x       0.8 x
Low
    0.8x       0.6 x
 
Citi applied the results of this analysis to historical and projected revenue for Avanex to determine: the ranges of implied firm value, the ranges of implied equity value, and the ranges of implied value per share for Avanex. The projected revenue for Avanex used in these analyses was based on forecasts prepared by management and Reuters consensus estimates.
 
Based on these analyses, Citi derived a reference range of implied exchange ratios of 4.664x to 10.714x.
 
Citi’s advisory services and opinion were provided for the information of the Bookham board of directors in its evaluation of the merger and did not constitute a recommendation of the merger to Bookham or a recommendation to any holder of Bookham common stock as to how that holder should vote on any matters relating to the merger.
 
The preceding discussion is a summary of the material financial analyses furnished by Citi to the Bookham board of directors, but it does not purport to be a complete description of the analyses performed by Citi or of its presentation to the Bookham board of directors. The preparation of financial analyses and fairness opinion is a complex process involving subjective judgments and is not necessarily susceptible to partial analysis or summary description. Citi made no attempt to assign specific weights to particular analyses or factors considered, but rather made qualitative judgments as to the significance and relevance of all the analyses and factors considered and determined to give its fairness opinion as described above. Accordingly, Citi believes that its analyses, and the summary set forth above, must be considered as a whole, and that selecting portions of the analyses and of the factors considered by Citi, without considering all of the analyses and factors, could create a misleading or incomplete view of the processes underlying the analyses conducted by Citi and its opinion. With regard to the comparable companies and precedent transaction analyses summarized above, Citi selected comparable public companies and precedent transactions on the basis of various factors, including size and similarity of the line of business of the relevant entities and the general economic climate in which the precedent transaction was consummated; however, no company utilized in this analysis is identical to Bookham or Avanex and no precedent transaction is identical to the merger. As a result, these analyses are not purely mathematical, but also take into account differences in financial and operating characteristics of the subject companies and other factors that could affect the transaction or the public trading value of the subject companies to which Bookham or Avanex is being compared.
 
In its analyses, Citi made numerous assumptions with respect to Bookham, Avanex, industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Bookham and Avanex. Any estimates contained in Citi’s analyses are not necessarily indicative of


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actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by these analyses. Estimates of values of companies do not purport to be appraisals or necessarily to reflect the prices at which companies may actually be sold. Because these estimates are inherently subject to uncertainty, none of Bookham, Avanex, the Bookham board of directors, the Avanex board of directors, Citi or any other person assumes responsibility if future results or actual values differ materially from the estimates.
 
Citi’s analyses were prepared solely as part of Citi’s analysis of the fairness of the exchange ratio and were provided to the Bookham board of directors in that connection. The opinion of Citi was only one of the factors taken into consideration by the Bookham board of directors in making its determination to approve the merger agreement and the merger. See “Bookham Proposal No. 1 and Avanex Proposal No. 1 — The Merger — Reasons for the Merger.”
 
Citi is an internationally recognized investment banking firm engaged in, among other things, the valuation of businesses and their securities in connection with mergers and acquisitions, restructurings, leveraged buyouts, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. Bookham selected Citi to act as its financial adviser to Bookham in connection with the proposed merger on the basis of Citi’s international reputation.
 
Pursuant to its engagement letter with Citi, Bookham agreed to pay $250,000 earned by Citi upon delivery of its opinion. The engagement letter also provides for a fee contingent upon the consummation of the merger equal to $1,750,000 (less any amounts paid or payable, including amounts earned upon delivery of an opinion) and, in the sole discretion of Bookham, a potential additional $250,000 incentive fee. Citi also is entitled to 10% of any termination, break-up, topping or similar fee or payment received by Bookham in connection with the termination of transactions contemplated under the merger agreement. Any fees paid in respect of any termination, topping or similar fee will not exceed $2 million, less any fees previously paid. Bookham has also agreed to reimburse Citi for reasonable travel and other expenses incurred by Citi in performing its services, provided such expenses do not exceed $100,000, and to indemnify Citi against specific liabilities and expenses relating to or arising out of its engagement, including liabilities under the federal securities laws. Citi and its affiliates in the past have provided services to Bookham unrelated to the merger, for which services Citi and/or its affiliates have received compensation, including, without limitation, serving as sole bookrunner in November 2007 for a secondary offering of sixteen million shares of common stock of Bookham, for an aggregate public offering of $44 million. In the ordinary course of its business, Citi and its affiliates may actively trade or hold the securities of Bookham and Avanex for its own account or for the account of its customers and, accordingly, may at any time hold a long or short position in such securities. In addition, Citi and its affiliates (including Citigroup Inc. and its affiliates) may maintain relationships with Bookham, Avanex and their respective affiliates.
 
The exchange ratio was determined by arms-length negotiations between Bookham and Avanex, in consultation with their respective financial advisors and other representatives, and was not established by such financial advisors.
 
Opinion of Avanex’s Financial Advisor
 
Avanex has retained Banc of America Securities to act as Avanex’s financial advisor in connection with the merger. Banc of America Securities is an internationally recognized investment banking firm which is regularly engaged in providing financial advisory services in connection with mergers and acquisitions. Avanex selected Banc of America Securities to act as Avanex’s financial advisor in connection with the merger on the basis of Banc of America Securities’ experience in transactions similar to the merger, its reputation in the investment community and its familiarity with Avanex and its business.
 
On January 27, 2009, at a meeting of Avanex’s board of directors held to evaluate the merger, Banc of America Securities delivered to Avanex’s board of directors an oral opinion, which was confirmed by delivery of a written opinion dated January 27, 2009, to the effect that, as of the date of the opinion and based on and subject to various assumptions and limitations described in its opinion, the exchange ratio provided for in the


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merger agreement of 5.426 shares of Bookham common stock for each outstanding share of Avanex common stock was fair, from a financial point of view, to the holders of Avanex common stock.
 
The full text of Banc of America Securities’ written opinion to Avanex’s board of directors, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex E to this joint proxy statement/prospectus and is incorporated by reference in this joint proxy statement/prospectus in its entirety. The following summary of Banc of America Securities’ opinion is qualified in its entirety by reference to the full text of the opinion. Banc of America Securities delivered its opinion to Avanex’s board of directors for the benefit and use of Avanex’s board of directors in connection with and for purposes of its evaluation of the exchange ratio from a financial point of view. Banc of America Securities’ opinion does not address any other aspect of the merger and does not constitute a recommendation to any stockholder as to how to vote or act in connection with the proposed merger.
 
In connection with rendering its opinion, Banc of America Securities:
 
  •  reviewed certain publicly available business and financial information relating to Avanex and Bookham;
 
  •  reviewed certain internal financial and operating information with respect to Avanex’s business, operations and prospects furnished to or discussed with Banc of America Securities by Avanex’s management, including certain financial forecasts relating to Avanex prepared by Avanex’s management through the period ending March 31, 2010, which forecasts are referred to in this joint proxy statement/prospectus as the Avanex forecasts, and an alternative version of the Avanex forecasts prepared by Avanex’s management reflecting lower growth assumptions, which adjusted forecasts are referred to in this joint proxy statement/prospectus as the adjusted Avanex forecasts, and discussed with Avanex’s management its assessments as to the relative likelihood of achieving the future financial results reflected in the Avanex forecasts and the adjusted Avanex forecasts;
 
  •  reviewed certain internal financial and operating information with respect to Bookham’s business, operations and prospects furnished to or discussed with Banc of America Securities by Bookham’s management, including certain financial forecasts relating to Bookham prepared by Bookham’s management through the period ending March 31, 2010, which forecasts are referred to in this joint proxy statement/prospectus as the Bookham forecasts, and an alternative version of the Bookham forecasts prepared by Bookham’s management reflecting lower growth assumptions, which adjusted forecasts are referred to in this joint proxy statement/prospectus as the adjusted Bookham forecasts, and discussed with Bookham’s management its assessments as to the relative likelihood of achieving the future financial results reflected in the Bookham forecasts and the adjusted Bookham forecasts;
 
  •  discussed with members of senior managements of, and representatives of legal, bankruptcy and accounting advisors to, Avanex and Bookham certain matters pertaining to the bankruptcy filing of Nortel, including, without limitation, their assessments as to the potential impact of Nortel’s bankruptcy on Avanex, Bookham and the combined company;
 
  •  reviewed certain sensitivities to the Avanex forecasts prepared by Avanex’s management and certain sensitivities to the Bookham forecasts prepared by the managements of Bookham and Avanex, in each case excluding, in light of Nortel’s bankruptcy, revenues, accounts receivables and certain other items attributable to Nortel, which forecasts are referred to in this joint proxy statement/prospectus as the Nortel sensitivities;
 
  •  reviewed certain estimates as to the amount and timing of cost savings, which are referred to in this joint proxy statement/prospectus as cost savings, anticipated by the managements of Avanex and Bookham to result from the merger;
 
  •  discussed the past and current business, operations, financial condition and prospects of Avanex and Bookham with members of senior managements of Avanex and Bookham;
 
  •  discussed with members of senior managements of Avanex and Bookham their assessments as to (a) existing and future relationships, agreements and arrangements with, and the combined company’s


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  ability to retain, key employees, suppliers and customers of Avanex and Bookham, including, without limitation, Nortel, and (b) the products and technology of Avanex and Bookham, including, without limitation, the validity of, risks associated with, and integration by the combined company of, such products and technology;
 
  •  reviewed the trading histories for Avanex common stock and Bookham common stock and a comparison of such trading histories with each other and with the trading histories of other companies Banc of America Securities deemed relevant;
 
  •  compared certain financial and stock market information of Avanex and Bookham with similar information of other companies Banc of America Securities deemed relevant;
 
  •  compared certain financial terms of the merger to financial terms, to the extent publicly available, of other transactions Banc of America Securities deemed relevant;
 
  •  reviewed the relative financial contributions of Avanex and Bookham to the future financial performance of the combined company on a pro forma basis;
 
  •  reviewed certain financial data of Avanex on a standalone basis relative to that of the combined company after giving effect to potential cost savings based on the pro forma equity ownership of Avanex’s stockholders upon consummation of the merger;
 
  •  reviewed various public filings and announcements of Bookham with respect to, and discussed with Bookham’s senior management its assessments regarding, outstanding patent infringement litigation pertaining to certain of Bookham’s products, including the status and possible consequences of such litigation;
 
  •  considered the results of Banc of America Securities’ efforts to solicit, at Avanex’s direction, indications of interest from third parties with respect to a possible transaction with Avanex;
 
  •  reviewed the merger agreement; and
 
  •  performed such other analyses and studies and considered such other information and factors as Banc of America Securities deemed appropriate.
 
In arriving at its opinion, Banc of America Securities assumed and relied on, without independent verification, the accuracy and completeness of the financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with Banc of America Securities and relied on the assurances of the managements of Avanex and Bookham that they were not aware of any facts or circumstances that would make such information or data inaccurate or misleading in any material respect. Although Banc of America Securities requested financial forecasts with respect to Avanex and Bookham, Banc of America Securities was advised by the managements of Avanex and Bookham that such managements had not prepared, and were unable to prepare, current and reliable financial forecasts beyond March 31, 2010 and that there were no publicly available financial forecasts with respect to Avanex or Bookham beyond June 30, 2010. Accordingly, upon the advice of Avanex and Bookham, Banc of America Securities did not perform a financial analysis of the future cash flows of either Avanex or Bookham in connection with its opinion. With respect to the Avanex forecasts and the adjusted Avanex forecasts, Banc of America Securities was advised by Avanex, and assumed, that such forecasts were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of Avanex’s management as to Avanex’s future financial performance under the alternative growth scenarios reflected in such forecasts and, based on the assessments of Avanex’s management as to the relative likelihood of achieving the future financial results reflected in the Avanex forecasts and the adjusted Avanex forecasts, Banc of America Securities relied, at Avanex’s direction, on the Avanex forecasts for purposes of its opinion. With respect to the Bookham forecasts and the adjusted Bookham forecasts, Banc of America Securities was advised by Bookham, and assumed, with Avanex’s consent, that such forecasts were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of Bookham’s management as to Bookham’s future financial performance under the alternative growth scenarios reflected in such forecasts and, based on the assessments of Bookham’s management as to the relative likelihood of achieving the future financial results reflected in the Bookham


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forecasts and the adjusted Bookham forecasts, Banc of America Securities relied, at Bookham’s direction and with Avanex’s consent, on the Bookham forecasts for purposes of its opinion. With respect to the Nortel sensitivities and cost savings, Banc of America Securities was advised by Avanex and Bookham, and assumed, with Avanex’s consent, that such forecasts were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the managements of Avanex and Bookham as to such Nortel sensitivities and cost savings and that the cost savings would be realized in the amounts and at the times projected.
 
Banc of America Securities relied, at Avanex’s direction, on the assessments of senior managements of Avanex and Bookham as to existing and future relationships, agreements and arrangements with, and the combined company’s ability to retain, key employees, suppliers and customers of Avanex and Bookham, including, without limitation, Nortel, and assumed, at Avanex’s direction, that such relationships, agreements or arrangements with such employees, suppliers and customers would not be adversely impacted by the merger. Banc of America Securities also relied, at Avanex’s direction, on the assessments of senior managements of Avanex and Bookham as to the products and technology of Avanex and Bookham, including, without limitation, the validity of, risks associated with, and integration by the combined company of, such products and technology. Banc of America Securities further relied, at Avanex’s direction, on the assessments of senior managements of, and legal, bankruptcy and accounting advisors to, Avanex and Bookham as to the potential impact of Nortel’s bankruptcy on Avanex, Bookham and the combined company and assumed, at Avanex’s direction, that Nortel’s bankruptcy would not adversely impact Banc of America Securities’ opinion. With respect to outstanding patent infringement litigation pertaining to certain of Bookham’s products, Banc of America Securities assumed, with Avanex’s consent and without independent verification, that such litigation would not adversely affect Bookham or the combined company. Banc of America Securities did not make, and was not provided with, any independent evaluation or appraisal of the assets or liabilities, contingent or otherwise, of Avanex or Bookham, nor did Banc of America Securities make any physical inspection of the properties or assets of Avanex or Bookham. Banc of America Securities did not evaluate the solvency of Avanex or Bookham under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. Banc of America Securities assumed, at Avanex’s direction, that the merger would be consummated in accordance with its terms, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on Avanex, Bookham or the contemplated benefits of the merger. Banc of America Securities also assumed, at Avanex’s direction, that the merger would qualify for federal income tax purposes as a reorganization under the provisions of Section 368(a) of the Code.
 
Banc of America Securities expressed no view or opinion as to any terms or other aspects of the merger (other than the exchange ratio to the extent expressly specified in its opinion), including, without limitation, the form or structure of the merger. Banc of America Securities’ opinion was limited to the fairness, from a financial point of view, of the exchange ratio to the holders of Avanex common stock and no opinion or view was expressed with respect to any consideration received in connection with the merger by the holders of any other class of securities, creditors or other constituencies of Avanex. In addition, no opinion or view was expressed with respect to the fairness of the amount, nature or any other aspect of any compensation to any of the officers, directors or employees of any party to the merger, or class of such persons, relative to the exchange ratio. Furthermore, no opinion or view was expressed as to the relative merits of the merger in comparison to other strategies or transactions that might be available to Avanex or in which Avanex might engage or as to the underlying business decision of Avanex to proceed with or effect the merger. Banc of America Securities expressed no opinion as to what the value of Bookham common stock actually would be when issued or the prices at which Bookham common stock or Avanex common stock would trade at any time. In addition, Banc of America Securities expressed no opinion or recommendation as to how any stockholder should vote or act in connection with the merger.
 
Banc of America Securities’ opinion was necessarily based on financial, economic, monetary, market and other conditions and circumstances as in effect on, and the information made available to Banc of America Securities as of, the date of its opinion. It should be understood that subsequent developments may affect its


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opinion, and Banc of America Securities does not have any obligation to update, revise, or reaffirm its opinion. The issuance of Banc of America Securities’ opinion was approved by Banc of America Securities’ fairness opinion review committee. Except as described above, Avanex imposed no other limitations on the investigations made or procedures followed by Banc of America Securities in rendering its opinion.
 
The following represents a brief summary of the material financial analyses presented by Banc of America Securities to Avanex’s board of directors in connection with its opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses performed by Banc of America Securities, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses performed by Banc of America Securities. Considering the data set forth in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses performed by Banc of America Securities.
 
Financial Analyses
 
Implied Exchange Ratio Analysis.  Banc of America Securities calculated implied exchange ratios based on a selected publicly traded companies analysis and selected precedent transactions analysis of Avanex and a selected publicly traded companies analysis of Bookham as described below. For purposes of the selected publicly traded companies analysis and selected precedent transactions analysis described below, financial data of Avanex were based on the Avanex forecasts, the adjusted Avanex forecasts and the Avanex forecasts taking into account the Nortel sensitivities with respect to Avanex (which excluded 100% of revenues, accounts receivables and certain other items attributable to Nortel in calendar year 2009). For purposes of the selected publicly traded companies analysis described below, financial data of Bookham were based on the Bookham forecasts, the adjusted Bookham forecasts and the Bookham forecasts taking into account the Nortel sensitivities with respect to Bookham (which excluded 100% of revenues, accounts receivables and certain other items attributable to Nortel in calendar year 2009). As directed by the managements of Avanex and Bookham, Banc of America Securities assumed, for purposes of such analyses, that each company’s cash on its balance sheet was required for operations and, therefore, such cash amount was not considered excess cash and was not deducted in calculating the enterprise values of Avanex and Bookham, respectively.
 
Selected Publicly Traded Companies Analysis.  Banc of America Securities performed separate selected publicly traded companies analyses of Avanex and Bookham in which Banc of America Securities reviewed publicly available financial and stock market information for Avanex, Bookham and the following five selected publicly traded companies in the fiber optic communications industry, which is the industry in which Avanex and Bookham operate:
 
  •  EMCORE Corporation
 
  •  Finisar Corporation
 
  •  JDS Uniphase Corporation
 
  •  Oplink Communications, Inc.
 
  •  Opnext, Inc.
 
Avanex.  In performing a selected publicly traded companies analysis of Avanex, Banc of America Securities reviewed financial and stock market information of the selected publicly traded companies referred to above and Bookham, referred to as the Avanex selected companies. Banc of America Securities reviewed, among other things, enterprise values of the Avanex selected companies, calculated as equity values based on closing stock prices on January 26, 2009, plus total debt, minority interests and preferred stock, less cash and cash equivalents, as a multiple of calendar years 2008 and 2009 estimated revenue.
 
Bookham.  In performing a selected publicly traded companies analysis of Bookham, Banc of America Securities reviewed financial and stock market information of the selected publicly traded companies referred to above and Avanex, referred to as the Bookham selected companies. Banc of America Securities reviewed,


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among other things, enterprise values of the Bookham selected companies, calculated as equity values based on closing stock prices on January 26, 2009, plus total debt, minority interests and preferred stock, less cash and cash equivalents, as a multiple of calendar years 2008 and 2009 estimated revenue.
 
Estimated financial data of the selected publicly traded companies, Avanex (for purposes of the Bookham selected publicly traded companies analysis) and Bookham (for purposes of the Avanex selected publicly traded companies analysis) were based on publicly available research analysts’ estimates. Based on implied per share equity reference ranges for Avanex and Bookham calculated by applying a range of selected multiples of calendar years 2008 and 2009 estimated revenue derived from the Avanex selected companies and the Bookham selected companies to corresponding data of Avanex and Bookham, respectively, these analyses indicated the following implied exchange ratio reference ranges, as compared to the exchange ratio provided for in the merger agreement:
 
                                         
Implied Exchange Ratio Reference Ranges Based on        
Calendar Year 2008E Revenue
    Calendar Year 2009E Revenue
    Merger
 
Utilizing Avanex’s and Bookham’s     Utilizing Avanex’s and Bookham’s     Exchange
 
Forecasts
  Adjusted Forecasts     Forecasts     Adjusted Forecasts     Nortel Sensitivities     Ratio  
 
2.396x — 9.585x
    2.396x  — 9.585 x     2.045x — 8.182 x     1.982x — 7.930 x     2.195x — 10.570 x     5.426x  
 
No company used in these analyses is identical to Avanex or Bookham. Accordingly, an evaluation of the results of these analyses is not entirely mathematical. Rather, these analyses involve complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading or other values of the companies to which Avanex and Bookham were compared.
 
Selected Precedent Transactions Analysis.  Banc of America Securities performed, among other things, a selected precedent transactions analysis of Avanex in which Banc of America Securities reviewed, to the extent publicly available, financial information relating to the following 13 selected transactions involving companies in the fiber optic communications industry, which is the industry in which Avanex operates:
 
         
Announcement
       
Date
  Acquiror   Target
 
• 7/9/08
  •   StrataLight Communications, Inc.    •   Opnext, Inc.
• 5/15/08
  •   Finisar Corporation   •   Optium Corporation
• 4/23/07
  •   Oplink Communications, Inc.    •   Optical Communication Products, Inc.
• 3/23/07
  •   Finisar Corporation   •   AZNA, LLC
• 2/27/07
  •   JDS Uniphase Corporation   •   Picolight, Inc.
• 1/26/07
  •   MRV Communications, Inc.    •   Fiberxon, Inc.
• 7/13/06
  •   Optical Communication Products, Inc.    •   GigaComm Corporation
• 9/8/05
  •   JDS Uniphase Corporation   •   Agility Communications Inc.
• 2/25/05
  •   NeoPhotonics Corporation   •   Photon Technology Co. Ltd.
• 1/26/05
  •   Finisar Corporation  
•   Infineon Technologies AG (fiber optics
  business)
• 5/17/04
  •   JDS Uniphase Corporation   •   E2O Communications Incorporated
• 5/12/03
  •   Avanex   •   Alcatel Optronics France SA
• 10/7/02
  •   Bookham   •   Nortel (optical components business)
 
Banc of America Securities reviewed, among other things, transaction values, calculated as the equity value implied for the target company based on the consideration payable in the selected transaction, as a multiple of latest 12 months revenue and next 12 months estimated revenue to the extent such financial data were publicly available at the time of announcement of the relevant transaction. Based on implied per share equity reference ranges for Avanex calculated by applying a range of selected multiples of latest 12 months revenue and next 12 months estimated revenue derived from the selected transactions to the calendar years 2008 and 2009 estimated revenue of Avanex and implied per share equity reference ranges for Bookham calculated as described under the selected publicly traded companies analysis above, this analysis indicated the


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following implied exchange ratio reference ranges, as compared to the exchange ratio provided for in the merger agreement:
 
                                         
Implied Exchange Ratio Reference Ranges Based on    
Calendar Year 2008E Revenue
  Calendar Year 2009E Revenue
  Merger
Utilizing Avanex’s and Bookham’s   Utilizing Avanex’s and Bookham’s   Exchange
Forecasts
  Adjusted Forecasts   Forecasts   Adjusted Forecasts   Nortel Sensitivities   Ratio
 
4.792x — 21.566x
    4.792x — 21.566 x     3.068x — 16.363 x     2.974x — 15.860 x     3.418x — 21.713 x     5.426x  
 
No company, business or transaction used in this analysis is identical to Avanex, Bookham or the merger. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the acquisition or other values of the companies, business segments or transactions to which Avanex, Bookham and the merger were compared.
 
Contribution Analysis.  Banc of America Securities reviewed the relative financial contributions of Avanex and Bookham to the future financial performance of the combined company on a pro forma basis without giving effect to potential costs savings anticipated by the managements of Avanex and Bookham to result from the merger. As directed by the managements of Avanex and Bookham, Banc of America Securities assumed that each company’s cash on its balance sheet was required for operations and was not considered excess cash. Banc of America Securities reviewed the last quarter annualized (as of December 31, 2008) and calendar years 2008 and 2009 estimated revenue and gross profit based on the Avanex forecasts, the Bookham forecasts, the adjusted Avanex forecasts and the adjusted Bookham forecasts. Based on the aggregate equity ownership percentages for Avanex’s and Bookham’s respective stockholders in the combined company implied from these relative contributions, Banc of America Securities calculated the following implied overall exchange ratio reference ranges, as compared to the exchange ratio provided for in the merger agreement:
 
                 
Implied Exchange Ratio Reference Ranges Based on   Merger
Revenue
  Gross Profit   Exchange Ratio
 
3.965x — 4.792x
    2.615x — 5.430 x     5.426x  
 
Banc of America Securities also reviewed the last quarter annualized (as of March 31, 2010) and latest 12 months (as of March 31, 2010) estimated revenue and gross profit based on the Avanex forecasts and the Bookham forecasts, in each case taking into account the Nortel sensitivities assuming both 100% and 50% of revenues, accounts receivables and certain other items attributable to Nortel were excluded. In addition, Banc of America Securities reviewed the last quarter annualized (as of March 31, 2010) estimated earnings before interest, taxes, depreciation and amortization, referred to as EBITDA, based on the Avanex forecasts and the Bookham forecasts, in each case taking into account the Nortel sensitivities assuming that 100%, 50% and 0% of revenues, accounts receivables and certain other items attributable to Nortel were excluded. Based on the aggregate equity ownership percentages for Avanex’s and Bookham’s respective stockholders in the combined company implied from these relative contributions, Banc of America Securities calculated the following implied overall exchange ratio reference ranges, as compared to the exchange ratio provided for in the merger agreement:
 
                         
Implied Exchange Ratio Reference Ranges Based on   Merger
Revenue
  Gross Profit   EBITDA   Exchange Ratio
 
4.067x — 4.328x
    3.437x — 4.222 x     2.299x — 7.934 x     5.426x  
 
Has/Gets Analysis.  Banc of America Securities reviewed, among other things, the calendar year 2009 estimated revenue, gross profit, EBITDA and cash position of Avanex on a standalone basis relative to that of the combined company after giving effect to potential cost savings anticipated by the managements of Avanex and Bookham to result from the merger based on the pro forma equity ownership of Avanex’s stockholders upon consummation of the merger (calculated by multiplying such financial data of the combined company by the pro forma equity ownership percentage of Avanex’s stockholders in the combined company). Financial data of Avanex and Bookham were based on the Avanex forecasts and the Bookham forecasts, in each case after taking into account the Nortel sensitivities assuming both 100% and 0% of revenues, accounts receivables and certain other items attributable to Nortel were excluded, and after giving effect to potential cost savings


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assuming such cost savings were both realized over time and fully realized immediately following consummation of the merger, referred to as run-rate cost savings. This comparison indicated that, based on the exchange ratio provided for in the merger agreement, the proportionate share of Avanex’s stockholders in such financial data of the combined company on a pro forma basis could increase or (decrease) or that such change was not meaningful, referred to as NM, as compared to Avanex on a standalone basis as follows:
 
                                 
    Calendar Year 2009E Percentage
 
    Change for Avanex Stockholders Assuming  
    Cost Savings Over Time
    Run-Rate Cost Savings
 
    Utilizing Avanex’s and Bookham’s     Utilizing Avanex’s and Bookham’s  
          Nortel
          Nortel
 
Calendar Year 2009
  Forecasts     Sensitivities     Forecasts     Sensitivities  
 
Revenue
    17.8 %     13.4 %     17.8 %     13.4 %
Gross Profit
    29.6 %     18.6 %     37.2 %     26.5 %
EBITDA
    NM       NM       NM       NM  
Cash
    (19.6 )%     (48.3 )%     (5.2 )%     (31.1 %)
 
Illustrative Discounted Cash Flow Analysis of Cost Savings.  Banc of America Securities performed an illustrative discounted cash flow analysis of the potential cost savings anticipated by the managements of Avanex and Bookham to result from the merger. Banc of America Securities calculated the estimated present value of the unlevered, after-tax free cash flows that the combined company could generate as a result of such cost savings during the fourth quarter of the fiscal year ending June 30, 2009 through the full fiscal year ending June 30, 2011. Banc of America Securities calculated terminal values for the cost savings by applying a perpetuity growth rate of 0% and such cash flows and terminal values were then discounted to present value as of March 31, 2009 using discount rates ranging from 17.0% to 21.0%. This analysis indicated an implied present value for such potential cost savings of approximately $65.5 million to $83.7 million or, based on the exchange ratio provided for in the merger agreement and the number of shares of Avanex common stock outstanding as of January 26, 2009, approximately $1.87 to $2.40 per share of Avanex common stock.
 
Miscellaneous
 
As noted above, the discussion set forth above is a summary of the material financial analyses presented by Banc of America Securities to Avanex’s board of directors in connection with its opinion and is not a comprehensive description of all analyses undertaken by Banc of America Securities in connection with its opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to partial analysis or summary description. Banc of America Securities believes that its analyses summarized above must be considered as a whole. Banc of America Securities further believes that selecting portions of its analyses and the factors considered or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying Banc of America Securities’ analyses and opinion. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that such analysis was given greater weight than any other analysis referred to in the summary.
 
In performing its analyses, Banc of America Securities considered industry performance, general business and economic conditions and other matters, many of which are beyond the control of Avanex and Bookham. The estimates of the future performance of Avanex and Bookham in or underlying Banc of America Securities’ analyses are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than those estimates or those suggested by Banc of America Securities’ analyses. These analyses were prepared solely as part of Banc of America Securities’ analysis of the fairness, from a financial point of view, of the exchange ratio and were provided to Avanex’s board of directors in connection with the delivery of Banc of America Securities’ opinion. The analyses do not purport to be appraisals or to reflect the prices at which a company might actually be sold or the prices at which any securities have traded or may trade at any time in the future. Accordingly, the estimates used in, and the ranges of valuations resulting from, any particular analysis described above are inherently subject to substantial


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uncertainty and should not be taken to be Banc of America Securities’ view of the actual value of Avanex or Bookham.
 
The type and amount of consideration payable in the merger was determined through negotiations between Avanex and Bookham, rather than by any financial advisor, and was approved by Avanex’s board of directors. The decision to enter into the merger agreement was solely that of Avanex’s board of directors. As described above, Banc of America Securities’ opinion and analyses were only one of many factors considered by Avanex’s board of directors in its evaluation of the proposed merger and should not be viewed as determinative of the views of Avanex’s board of directors or management with respect to the merger or the exchange ratio provided for in the merger agreement.
 
Avanex has agreed to pay Banc of America Securities for its services in connection with the merger an aggregate fee currently estimated to be approximately $2.25 million, a portion of which was payable upon the rendering of Banc of America Securities’ opinion and a significant portion of which is contingent upon the completion of the merger. Avanex also has agreed to reimburse Banc of America Securities for reasonable expenses, including reasonable fees and disbursements of Banc of America Securities’ counsel, incurred in connection with Banc of America Securities’ engagement, and to indemnify Banc of America Securities, any controlling person of Banc of America Securities and each of their respective directors, officers, employees, agents, affiliates and representatives against specified liabilities, including liabilities under the federal securities laws.
 
Banc of America Securities and its affiliates comprise a full service securities firm and commercial bank engaged in securities trading and brokerage activities and principal investing as well as providing investment, corporate and private banking, asset and investment management, financing and financial advisory services and other commercial services and products to a wide range of corporations and individuals. In the ordinary course of its businesses, Banc of America Securities and its affiliates may actively trade the debt, equity or other securities or financial instruments (including bank loans or other obligations) of Avanex, Bookham and certain of their respective affiliates for its own account or for the accounts of customers and, accordingly, Banc of America Securities or its affiliates may at any time hold long or short positions in such securities or financial instruments.
 
Banc of America Securities and its affiliates in the past have provided, currently are providing, and in the future may provide investment banking, commercial banking and other financial services to Avanex and have received or in the future may receive compensation for the rendering of these services, including (i) having acted or acting as a lender under certain credit facilities of Avanex, (ii) having acted as agent and book runner in connection with certain equity offerings of Avanex, (iii) having provided or providing certain foreign exchange derivative trading services to Avanex and (iv) having provided or providing certain treasury management services to Avanex.
 
Interests of Bookham’s Directors in the Merger
 
In considering the recommendation of the Bookham board of directors with respect to approving the issuance of shares of Bookham common stock, Bookham stockholders should be aware that certain members of the board of directors of Bookham have interests in the merger that are different from, or are in addition to, their interests as Bookham stockholders. These interests may create an appearance of a conflict of interest. The Bookham board of directors was aware of these potential conflicts of interest during its deliberations on the merits of the merger and in making its decisions in approving the merger, the merger agreement, the issuance of shares of Bookham common stock pursuant to the merger agreement, the amendment to Bookham’s restated certificate of incorporation to increase the number of authorized shares of Bookham and the related transactions.
 
Indemnification and Insurance.  Pursuant to a resolution of the Bookham board of directors as of January 13, 2009, the members of the board of directors of Bookham who will not continue to serve in their position as directors of Bookham following the effective time of the merger (such directors are referred to as the Bookham departing directors) would be entitled to coverage under the current directors and officers liability insurance for a period similar to the period during which Avanex’s directors will be entitled to


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insurance coverage (six years following the effective time) for actions and omissions occurring prior to the effective time of the merger. The Bookham departing directors are currently expected to be Peter F. Bordui, David Simpson, Joe Cook and W. Arthur Porter; however, a final determination as to who the Bookham departing directors will be has not been made and the persons who will be Bookham departing directors may change. See “Management and Other Information of the Combined Company — Executive Officers and Directors of Bookham Following the Merger.”
 
Extension of Exercise Period of Bookham Departing Directors’ Stock Options.  Pursuant to a resolution of the Bookham board of directors as of January 13, 2009, effective as of the effective time of the merger, the exercise period of Bookham stock options held by the Bookham departing directors will be extended and they will be exercisable for a period of one year following the effective time of the merger; provided, however, that in no event may any such Bookham stock option be exercised after the date which is ten years from the date it was granted by Bookham.
 
Accelerated Vesting of Bookham Departing Directors’ Equity Awards.  Pursuant to a resolution of the Bookham board of directors as of January 13, 2009, effective as of the effective time of the merger, the vesting of each of the outstanding Bookham stock options, restricted stock units of Bookham common stock and restricted stock awards granted to the Bookham departing directors will accelerate in full and each such stock option, restricted stock unit or restricted stock award will become exercisable in full. With respect to the persons currently expected to be Bookham departing directors, as of January 27, 2009, Peter F. Bordui held unvested options to purchase 76,150 shares of Bookham common stock with a weighted average exercise price of $2.72 per share and restricted stock units for 5,000 shares of Bookham common stock; David Simpson held unvested options to purchase 88,231 shares of Bookham common stock with a weighted average exercise price of $7.77 per share and restricted stock units for 5,000 shares of Bookham common stock; Joe Cook held unvested options to purchase 77,783 shares of Bookham common stock with a weighted average exercise price of $2.99 per share and restricted stock units for 5,000 shares of Bookham common stock; and W. Arthur Porter held unvested options to purchase 85,420 shares of Bookham common stock with a weighted average exercise price of $6.39 per share and restricted stock units for 5,000 shares of Bookham common stock.
 
Interests of Avanex’s Executive Officers and Directors in the Merger
 
In considering the recommendation of the Avanex board of directors with respect to adopting the merger agreement, Avanex stockholders should be aware that certain members of the board of directors and executive officers of Avanex have interests in the merger that are different from, or are in addition to, their interests as Avanex stockholders. These interests may create an appearance of a conflict of interest. The Avanex board of directors was aware of these potential conflicts of interest during its deliberations on the merits of the merger and in making its decisions in approving the merger, the merger agreement and the related transactions.
 
Combined Company Board of Directors.  The merger agreement provides that Bookham will cause Giovanni Barbarossa, Greg Dougherty and Joel Smith to be elected or appointed to the board of directors of Bookham as of the effective time of the merger, and they will be eligible to receive compensation from Bookham as non-employee directors.
 
Indemnification and Insurance.  The merger agreement provides that for a period of six years after the merger, Bookham will cause Avanex, as the surviving corporation in the merger, to indemnify each current or former director and officer of Avanex from liability to the extent that applicable legal requirements permit a company to indemnify its own officers and directors. The merger agreement further provides that for a period of six years after the merger, Bookham and Avanex will maintain in place the existing policy of directors and officers liability insurance (or obtain a comparable replacement policy) in favor of Avanex directors and officers covered as of the effective time of the merger under the current policy. Such policy will cover acts or omissions occurring on or before the closing of the merger and provide coverage and amounts no less favorable than in effect on January 27, 2009, except that Bookham will not be required to incur annual premium expense in excess of $526,500. If the annual premium payable exceeds $526,500, Bookham and Avanex are obligated to obtain a policy providing the greatest coverage available at a cost not exceeding $526,500.


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Accelerated Vesting of Non-Employee Directors’ Equity Awards.  Pursuant to the terms of the Avanex 1999 Director Option Plan, upon the consummation of the merger, each non-employee director of Avanex will be entitled to accelerated vesting of all of their unvested options and restricted stock units issued and outstanding under the plan. Vinton Cerf, Greg Dougherty, Joel A. Smith, III, Paul G. Smith, Susan Wang and Dennis P. Wolf are members of the Avanex board of directors who are not employees of Avanex. As of January 27, 2009, Dr. Cerf held unvested options to purchase 1,333 shares of Avanex common stock with a weighted average exercise price of $1.61 per share and restricted stock units for 666 shares of Avanex common stock; Mr. Dougherty held unvested options to purchase 1,999 shares of Avanex common stock with a weighted average exercise price of $7.47 per share and restricted stock units for 666 shares of Avanex common stock; Mr. J. Smith held unvested options to purchase 1,333 shares of Avanex common stock with a weighted average exercise price of $1.61 per share and restricted stock units for 666 shares of Avanex common stock; Mr. P. Smith held unvested options to purchase 5,332 shares of Avanex common stock with a weighted average exercise price of $18.07 per share and restricted stock units for 666 shares of Avanex common stock; Ms. Wang held unvested options to purchase 1,333 shares of Avanex common stock with a weighted average exercise price of $1.61 per share and restricted stock units for 666 shares of Avanex common stock; and Mr. Wolf held unvested options to purchase 6,666 shares of Avanex common stock with a weighted average exercise price of $8.12 per share and restricted stock units for 666 shares of Avanex common stock. Pursuant to the terms of the outstanding option awards of those directors of Avanex who will resign and will not become a director of Bookham in connection with the merger (currently anticipated to be Dr. Cerf, Mr. P. Smith and Ms. Wang), the post-termination exercise period for such options is 24 months, provided, however, that in no event may any option be exercised later than the expiration date or term of option set forth in the agreement evidencing such option.
 
Change in Control Agreements.  Avanex entered into change in control agreements with each of Giovanni Barbarossa, Brad Kolb, Scott Parker and Mark Weinswig providing the following benefits:
 
  •  Upon a change in control (which would include consummation of the merger) 50% of each executive’s then outstanding and unvested equity awards will, if not already vested, fully vest and will otherwise remain subject to the terms and conditions of the applicable equity award agreements;
 
  •  If, within 12 months following a change in control, either (i) the executive is terminated without cause (as such term is defined in the agreement) or (ii) the executive voluntarily resigns for good reason (as such term is defined in the agreement), then, provided the executive timely executes and does not revoke a release of claims, the executive will receive: (a) a single cash lump sum severance payment equal to 12 months of the executive’s salary (for each of Dr. Barbarossa and Messrs. Kolb and Parker) or six months of the executive’s salary (for Mr. Weinswig); (b) a lump sum cash payment equal to the then current year’s target annual incentive (if a bonus incentive plan has been established), pro-rated to the date of the executive’s separation; (c) the vesting of 100% of the executive’s then outstanding and unvested equity awards; and (d) payment of premiums for continued health coverage and benefits pursuant to COBRA continuation coverage for a period of 12 months (for each of Dr. Barbarossa and Messrs. Kolb and Parker) or 6 months (for Mr. Weinswig).
 
The following table identifies, for each of Dr. Barbarossa and Messrs. Kolb, Parker and Weinswig the estimated values of the (i) cash severance payments, (ii) number of options (which have strike prices ranging from $0.79 to $43.20) and restricted stock units, or RSUs, that would vest, and (iii) the value of continued benefit coverage to which the executives would be entitled pursuant the change in control agreements, assuming that the executive is terminated for reasons other than cause or resigns for good reason as of the effective date of the merger.