Document:

exv10w2

 

    Exhibit 10.2

 

    Attachment
    C

 

    Recapture
    Agreement

 

 

	 	 	 
	
    Triggering Event
	
 
	
    The recapture will be triggered if, at any time during the
    executive’s employment with Freddie Mac (or, under certain
    circumstances after termination of the executive’s
    employment, as described below), the Board determines and
    notifies you in writing that any of the following
    (“Triggering Events”) occurred:

 

			
	 	    1. 
	
    The executive has obtained a legally binding right to bonus or
    incentive payment based on materially inaccurate financial
    statements (which includes, but is not limited to, statements of
    earnings, revenues, or gains) or any other materially inaccurate
    performance metric criteria.

	 
	 	    2. 
	
    As a result of misconduct, Freddie Mac is required to prepare an
    accounting restatement due to the material noncompliance of
    Freddie Mac with any financial reporting requirements under the
    federal securities laws.

	 
	 	    3. 
	
    The executive’s employment with Freddie Mac is terminated
    for “cause” under subclauses (i) or (iv) as
    defined below or, within two years of the termination of the
    executive’s employment at Freddie Mac, the Board makes a
    determination that circumstances existed at the time of the
    executive’s termination that would have justified
    termination for cause under subclauses (i) or (iv) or
    the executive was later convicted of or pleaded nolo contendere
    to a felony committed before the termination date and such
    felony resulted in material business or reputational harm to
    Freddie Mac.

	 
	 	    4. 
	
    The executive’s employment with Freddie Mac is terminated
    for “cause” under subclauses (ii) or
    (iii) as defined below, or within two years of the
    termination of the executive’s employment at Freddie Mac,
    the Board makes a determination that circumstances existed at
    the time of the executive’s termination that would have
    justified a termination for cause under subclauses (ii) or
    (iii) as defined below and that actions of the executive
    resulted in material business or reputational harm to Freddie
    Mac.

 

    Recapture Agreement

    Page 2 of 4
    

 

 

	 	 	 
	
    Definition of

    Cause
	
 
	
    For purposes of this Recapture Agreement, “cause”
    shall mean the occurrence of one or more of the following:

 

    (i) The executive is convicted of or pleads nolo contendere
    to a charge of a felony or any crime involving moral turpitude;

 

    (ii) In carrying out his duties, the executive engages in
    conduct that constitutes gross neglect or gross misconduct or
    any material violation of applicable Freddie Mac rule or policy,
    including any policy relating to investment by Freddie Mac
    employees in securities, the violation of which amounts to gross
    neglect or gross misconduct;

 

    (iii) The executive materially breaches any provision of
    the Memorandum Agreement dated September 24, 2009 from
    Charles E. Haldeman to the executive; or

 

    (iv) Any other willful or malicious misconduct on the
    executive’s part that is substantially injurious to Freddie
    Mac.

 

			
	 	    • 
	
    In each case, “cause” shall not exist unless and until
    Freddie Mac shall have provided: (i) reasonable notice to
    the executive setting forth Freddie Mac’s intention to make
    a determination that an event set forth in subclauses (i), (ii),
    (iii) or (iv) has occurred; (ii) where remedial
    action is appropriate and feasible, a reasonable opportunity for
    the executive to take such action; (iii) an opportunity for
    the executive, together with the executive’s counsel, to be
    heard before the Board; and (iv) executive with a copy of a
    resolution duly adopted by a majority of the entire Board of
    Directors at a meeting of the Board of Directors called and held
    for such purpose finding that in the good faith opinion of the
    Board an event set forth in subclauses (i), (ii), (iii) or
    (iv) has occurred. No act or failure to act by the
    executive will be considered “willful” unless it is
    done, or omitted to be done, by the executive in bad faith or
    without reasonable belief that the executive’s action or
    omission was in the best interests of Freddie Mac.

 

    Recapture Agreement

    Page 3 of 4
    

 

 

	 	 	 
	
    Recapture Period
	
 
	
 

 

			
	 	    1. 
	
    In the case of the first Triggering Event, compensation subject
    to recapture may include Recapture Eligible Compensation (as
    defined below) paid to the Executive for up to two years prior
    to the Triggering Event.

	 
	 	    2. 
	
    In the case of the second Triggering Event, compensation is
    subject to recapture consistent with Section 304 of the
    Sarbanes-Oxley Act of 2002.

	 
	 	    3. 
	
    In the case of the third Triggering Event, compensation subject
    to recapture may include Recapture Eligible Compensation paid to
    the Executive for up to two years prior to the date that the
    executive is terminated or subsequent to the termination of
    employment.

	 
	 	    4. 
	
    In the case of the fourth Triggering Event, compensation subject
    to recapture may include Recapture Eligible Compensation paid to
    the Executive at the time of termination of employment or
    subsequent to the date of termination.

 

 

	 	 	 
	
    Compensation

    Subject to

    Recapture
	
 
	
    For purposes of this Recapture Agreement, “Recapture
    Eligible Compensation” shall consist of the following:

 

			
	 	    1. 
	
    In the case of the first Triggering Event, Recapture Eligible
    Compensation consists of the annual short-term incentive
    (“STI”) (i.e., the annual bonus) and the annual
    long-term incentives (“LTI”).

	 
	 	    2. 
	
    In the case of the second Triggering Event, Recapture Eligible
    Compensation consists of bonuses and profits described in
    section 304 of the Sarbanes-Oxley Act of 2002.

	 
	 	    3. 
	
    In the case of the third and fourth Triggering Events, Recapture
    Eligible Compensation consists of the annual STI, the annual LTI
    and any severance benefits paid.

 

	 	 	 
	
 
	
 
	
    In the event that the executive is terminated for cause under
    any of the subclauses (i), (ii), (iii) or
    (iv) specified in the Definition of Cause above, the
    executive forfeits rights to any future payment of annual STI,
    LTI or severance benefits that might otherwise have been due
    pursuant to the terms of applicable plans or awards from the
    date of executive’s termination forward.

 

    Recapture Agreement

    Page 4 of 4
    

 

	 	 	 
	
 
	
 
	
    With respect to any recapture of compensation:

 

			
	 	    • 
	
    A recapture of STI or other cash paid, for such compensation
    that the Board determines is subject to repayment, would require
    the executive to repay the gross amount of the compensation
    previously paid. Additionally, any further obligation of Freddie
    Mac to make payments under such plans could be cancelled.

	 
	 	    • 
	
    A recapture of LTI or other stock-based award granted, for such
    awards that the Board determines, would require the executive to
    repay Freddie Mac the full fair market value of the award(s)
    based upon vesting date. Additionally, any unvested
    and/or
    unexercised stock-based awards could be cancelled.

	 
	 	    • 
	
    Base salary paid prior to the date of the Triggering Event is
    not subject to recapture.

	 
	 	    • 
	
    The executive’s assets acquired prior to employment by
    Freddie Mac or acquired from sources other than Freddie Mac
    directly are not subject to recapture under this agreement. The
    right to recapture is not retroactive prior to the date of
    employment.

 

	 	 	 
	
    Amount to be Recaptured
	
 
	
    The Board has discretion to determine the appropriate amount
    required to be recaptured, if any, upon a Triggering Event,
    which is intended to be the compensation in excess of what
    Freddie Mac would have paid the executive had Freddie Mac taken
    into consideration the impact of the Triggering Event at the
    time such compensation was awarded.

	
     
	
 
	
 

	
 
	
 
	
    Any disputes between the executive and Freddie Mac concerning
    the occurrence of a Triggering Event or the amount subject to
    recapture shall be determined exclusively in accordance with the
    substantive laws of the Commonwealth of Virginia, excluding
    provisions of the Virginia law concerning choice-of-law that
    would result in the law of any state other than Virginia being
    applied.

 

 

    I agree to the terms of this Recapture Agreement

 

 

	 	 	 	 	 	 	 
	

    By:

	
 
	
/s/ Ross J. Kari          
	
 
	
    Date:
	
 
	
September 24, 2009

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
    Ross J.
    KariExhibit
4.1

 

Annual Information Form

 

For
the year ended

February 28 2009

 

	
  DragonWave Inc. - Annual Information Form dated
  May 7, 2009

  	
  AIF

  

 

 

DragonWave Inc. – Annual
Information Form

May 7, 2009

 

TABLE
OF CONTENTS

 

	
  ARTICLE 1 : 

  	
  CORPORATE
  STRUCTURE

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2 :

  	
  GENERAL
  DEVELOPMENT OF THE BUSINESS

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3 : 

  	
  DESCRIPTION
  OF THE BUSINESS

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4 : 

  	
  RISK
  FACTORS

  	
  13

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5 : 

  	
  DIVIDENDS

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6 : 

  	
  DESCRIPTION
  OF CAPITAL STRUCTURE

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7 : 

  	
  MARKET
  FOR SECURITIES

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8 : 

  	
  ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL
  RESTRICTIONS ON TRANSFER

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9 : 

  	
  DIRECTORS
  AND OFFICERS

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10 : 

  	
  INTERESTS
  OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

  	
  33

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11 : 

  	
  LEGAL
  PROCEEDINGS

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12 : 

  	
  TRANSFER
  AGENT AND REGISTRAR

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13 : 

  	
  MATERIAL
  CONTRACTS

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE 14 : 

  	
  EXPERTS

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE 15 : 

  	
  AUDIT
  COMMITTEE

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE 16 : 

  	
  ADDITIONAL
  INFORMATION

  	
  38

  
	
   

  	
   

  	
   

  
	
  Schedule
  15.1 :

  	
  AUDIT
  COMMITTEE CHARTER

  	
  1

  

 

2

 

All information in this Annual Information Form is
presented as of February 28, 2009 unless otherwise indicated.  Certain statements included in this Annual
Information Form constitute “forward looking” statements, including those
identified by the expressions “will”, “continue”, “predict”, “may”, “would”, “could”,
“anticipate”, “believe”, “plan”, “estimate”, “expect”, “intend” and similar
expressions, to the extent they relate to DragonWave Inc. The forward looking
statements are not historical facts but reflect Management’s current
expectations regarding future results or events. These forward looking
statements are subject to a number of assumptions, risks, uncertainties and
other factors that could cause actual results, performance, achievements,
industry results or events to differ materially from current expectations,
including the matters discussed under “Risk Factors” and in other sections of
this Annual Information Form.  These forward
looking statements are made as of the date of this Annual Information Form and
DragonWave Inc. does not intend, and does not assume any obligation, to update
or revise them to reflect new events or circumstances, unless otherwise
required by law. Readers are cautioned not to place undue reliance on forward
looking statements.

 

Unless otherwise indicated, all currency
amounts referenced in this Annual Information Form are denominated in
Canadian dollars.

 

ARTICLE 1: 
CORPORATE STRUCTURE

 

1.1                               Name, Address
and Incorporation

 

DragonWave Inc. (“DragonWave”
or the “Company”) was incorporated on February 24, 2000 by
Certificate and Articles of Incorporation issued under the Canada Business Corporations Act (the “CBCA”).
DragonWave’s last financial year ended February 28, 2009.  The head office of DragonWave is located at
411 Legget Drive, Suite 600, Ottawa, Ontario, Canada.

 

1.2                               Intercorporate
Relationships

 

DragonWave
has two subsidiaries, DragonWave Corp., a corporation wholly-owned by the
Company and incorporated under the laws of Delaware, and 4472314 Canada Inc., a
corporation wholly-owned by the Company and incorporated under the CBCA. Unless
the context requires otherwise, references in this Annual Information Form to
“DragonWave” or “the Company” include DragonWave Corp. and 4472314 Canada Inc.

 

ARTICLE 2: 
GENERAL DEVELOPMENT OF THE BUSINESS

 

2.1                               Three Year
History

 

Founded
in 2000, DragonWave is a leading provider of high-capacity wireless Ethernet
equipment used in emerging internet protocol (IP) networks. DragonWave designs,
develops, markets and sells proprietary, carrier-grade microwave radio
frequency networking equipment, or links that wirelessly transmit broadband
voice, video and other data between two points. DragonWave’s wireless
carrier-Ethernet links, which are based on a native Ethernet platform, function
as a wireless extension to an existing fibre-optic core telecommunications
network. The principal application for DragonWave’s products is the backhaul
function in a wireless communications network. Backhaul links connect the large
amounts of network traffic aggregated by base stations and other collection
points on the edge of the network to the high-capacity fibre-optic
infrastructure at the core of the network. Additional applications for
DragonWave’s products include point-to-point transport applications in private
networks, including municipal and enterprise applications.

 

3

 

DragonWave’s
products principally perform the backhaul function in a communication service
provider’s network, connecting high-traffic points of aggregation such as
high-capacity wireless base stations (3G+ cellular, WiFi, WiMAX, Long-Term
Evolution (LTE)) and large “out of territory” enterprises to nodes on the fibre-optic
core network.

 

The
Company’s line of wireless carrier-Ethernet links is marketed under the AirPair
and Horizon product names. The AirPair and Horizon product lines are
carrier-grade and operate primarily in licensed spectrum bands to minimize
interference. DragonWave also offers a time division multiplexing
(TDM)-to-Ethernet multiplexer based on pseudowire technology, which enables
DragonWave’s native Ethernet links to support the network traffic generated by
emerging converged services based on IP such as data access, voice over
internet protocol (VoIP), and video streaming, as well as legacy
TDM services.  The Company believes
that its wireless carrier-Ethernet links are an attractive alternative to other
backhaul solutions such as leased lines and fibre-optic cable deployments.

 

The
demand for DragonWave’s products is driven by global trends, including IP
convergence and pressure on backhaul capacity caused by increased functionality
of mobile devices, the shift in demand from voice to multi-media content and
services, growing demand for wireless coverage, increasing numbers of
subscribers, and investment in radio access network spectrum. In DragonWave’s
target markets, network traffic is shifting from legacy TDM traffic to IP-based
traffic to improve network efficiency and enable IP-based services.

 

DragonWave
principally targets the global wireless communications service provider market
and, in particular, those service providers offering high-capacity wireless
communication services, including traditional cellular service providers and
emerging broadband wireless access (BWA) service providers. These service
providers offer high-speed digital communication services over wireless access
networks, employing IP-based wireless network access technologies such as
advanced (3G+) cellular technologies, as well as WiFi and WiMAX. The market
addressed by these wireless service providers is characterized by significant
growth in number of subscribers, coverage area, and bandwidth requirements per
subscriber, and a corresponding need to reduce the cost per bit of the backhaul
network. DragonWave also targets other markets, including wireless extension of
fixed-line networks to directly connect high-bandwidth end-customers to the
core network, and private networks of large multi-site organizations such as
Fortune 500 enterprises, municipalities and government organizations.

 

The
key elements of DragonWave’s solution include: high performance; carrier-grade
availability; cost-competitiveness; and the availability of advanced network
management and wireless network IP planning.

 

DragonWave commenced commercial
deployment of its products in 2002 and, as of February 28, 2009, had
shipped approximately 9500 of AirPair and Horizon product units. To date,
DragonWave’s wireless carrier-Ethernet links have been purchased and deployed
by customers in more than 56 countries. In its fiscal year ended February 28,
2009, the Company delivered product to 142 customers, including Clearwire LLC
(United States), wi-tribe Pakistan Limited (Pakistan), Altitude Infrastructure
(France), and Barrett Xplore (Canada).

 

On April 19, 2007, pursuant
to a prospectus (the “Prospectus”) filed with all of the securities
regulatory authorities in all of the provinces of Canada, DragonWave closed its
initial public offering  which involved
the issuance of 7,595,000 common shares from treasury at a price of $3.95 per
common share resulting in gross proceeds to DragonWave of $30,000,250 (the “IPO”).
In connection with the IPO, DragonWave’s common shares were listed on the
Toronto Stock Exchange (“TSX”) and admitted for trading on the
Alternative Investment Market (“AIM”) of the London Stock Exchange plc.
The IPO was underwritten by a syndicate of underwriters that was led by
Canaccord Capital Corporation and included CIBC World Markets Inc. and Genuity
Capital Markets (collectively, the “IPO Underwriters”). A copy of 

 

4

 

the Prospectus can be found on
SEDAR at www.sedar.com. On May 23,
2007, DragonWave closed the over-allotment option granted to the IPO
Underwriters in connection with the IPO (the “Over-Allotment Option”)
which resulted in a further 700,000 common shares being issued from treasury at
a price of $3.95 per common share and additional gross proceeds to the Company
of $2,765,000.

 

On September 20, 2007, pursuant to a short form
prospectus (the “Short Form Prospectus”) previously filed with all
of the securities regulatory authorities in all of the provinces of Canada,
other than Quebec, DragonWave closed a short form prospectus offering involving
the issuance of 3,800,000 common shares from treasury and the sale of 3,200,000
common shares by certain shareholders of the Company (the “Selling
Shareholders”), each at a price of $6.25 per common share resulting in
gross proceeds to DragonWave of $23,750,000 and gross proceeds to the Selling
Shareholders of $20,000,000 (the “Short Form Offering”). The Short Form Offering
was underwritten by a syndicate of underwriters that was led by Canaccord
Capital Corporation and included CIBC World Markets Inc., Genuity Capital
Markets G.P., Orion Securities Inc. and Raymond James Ltd. A copy of the Short Form Prospectus
can be found on SEDAR at www.sedar.com.

 

As of January 5, 2009, DragonWave cancelled the
admission of its common shares to trading on AIM (the “AIM delisting”).
The decision to proceed with the AIM delisting was based on a review of the
Company’s AIM listing by DragonWave’s board of directors and it was concluded
that the additional costs associated with maintaining a second listing on AIM
were not justifiable given the Company’s North American focused shareholder
base. This decision was based on several factors, including low trading volumes
in the UK and the cost and management resources involved in maintaining the AIM
listing.

 

Significant product and business developments over the last
three fiscal years have been as follows:

 

Fiscal Year 2009 (March 1, 2008 until February 28,
2009)

 

·                  Announced that Linkem SpA has chosen to
deploy DragonWave’s Horizon Compact radios in its new WiMAX (4G) network in
Italy.

 

·                  Adopted a shareholder rights plan (see below
under “Material Contracts”).

 

·                  Announced that ECAS Telecommunications &
Systems Ltd. has selected the Horizon Compact for IP backhaul of WiMAX, 3.5G,
Evolution Data Only (EVDO) and LTE services in Nigeria.

 

·                  Announced that in light of uncertainty in
some of its markets arising from global financial conditions, DragonWave has
implemented a number of measures aimed at reducing its operating expenses including:
the elimination of 20 positions from the Company’s workforce (a 13% total
headcount reduction), reducing spending in all areas, and the AIM delisting. As
a result of such global financial conditions, DragonWave also announced that
its strategic relationship with NextWave Broadband Inc. (“NextWave”) has
been terminated following NextWave’s announcement that it was restructuring its
business and as a part of this restructuring, it was working to divest its
infrastructure business units.

 

·                  Announced that Altitude Infrastructure, a
subsidiary of Altitude Group, has selected DragonWave products to provide high
capacity Ethernet backhaul as part of its rollout of WiMAX broadband services
across France.

 

·                  Announced that DragonWave has signed an
agreement with Brightstar Corporation, a global leader in customized
distribution and integrated supply chain solutions for the wireless industry.
Through the 

 

5

 

agreement, Brightstar will distribute DragonWave’s Horizon and AirPair
high-capacity wireless Ethernet backhaul solutions of point-to-point microwave
radios in the Caribbean and Latin American markets.

 

·                  Announced that Sprint Nextel Corporation has
selected DragonWave’s IP backhaul solutions for its XOHM-branded WiMAX
mobile-broadband services in North America. DragonWave’s Horizon Compact and
Horizon Duo products will be deployed initially in the Baltimore/Washington and
Chicago markets.

 

·                  Announced that Omnivision C.A. has
standardized on DragonWave its products for licensed-frequency wireless
backhaul as it expands its WiMAX service offering into markets across
Venezuela.

 

·                  Announced that M3 Wireless (“M3”) is
cost-effectively converging its WiMAX data and GSM voice services for business
and residential customers on a DragonWave IP backhaul solution. DragonWave’s
AirPair product interlinks 27 sites across M3’s meshed Ethernet network
spanning Bermuda.

 

·                  Announced that DragonWave has expanded its
coverage to include the 6 to 8 GHz range of licensed radio frequencies.

 

·                  Announced the Company’s service delivery unit
(SDU) product portfolio, enabling carriers to efficiently converge TDM and IP
services on a cost-effective, flexible Ethernet network foundation.

 

·                  Announced Horizon Duo, the latest addition to
the Company’s Horizon portfolio of native Ethernet radios. Horizon Duo delivers
industry-leading capacity of up to 1.6 Gbps per link and lowest-cost-per-bit
performance for wireless carriers offering increasingly bandwidth-intensive
WiMAX and 4G services.

 

Fiscal Year 2008 (March 1, 2007 until February 29,
2008)

 

·                  Completed a master purchase agreement with
Nextlink Wireless Inc. (“Nextlink”) to purchase AirPair and Horizon
Compact in support of Nextlink’s portfolio of broadband wireless services.
Nextlink owns licensed wireless spectrum covering 75 metropolitan US markets
and is the largest local multipoint distribution service (LMDS) wireless
spectrum holder in the United States.

 

·                  Announced that AirPair Wireless Ethernet
radio product has been approved by Russia’s Ministry of Communications for use
throughout Russia.

 

·                  Concluded a patent license agreement with NEC
Corporation (“NEC”). DragonWave paid NEC a one time past release fee and
an ongoing royalty payment.

 

·                  Announced the general availability of AirPair
Unite which converges Ethernet and TDM traffic across a single wireless, IP
stream.

 

·                  Announced the appointment of Clive Belfort as
Vice President, EMEA.

 

·                  Announced closing of Short Form Offering.

 

6

 

·                  Announced a global strategic network
solutions agreement with NextWave. NextWave selected DragonWave’s Ethernet
Radio as its preferred wireless backhaul solution. This strategic relationship
was terminated in the 2009 fiscal year.

 

·                  Announced closing of the Over-Allotment
Option.

 

·                  Announced the signing of a strategic
partnership agreement with Barrett Xplore Inc., Canada’s largest and fastest
growing rural broadband provider.

 

·                  In connection with the IPO, the Company’s
common shares commenced trading on the TSX and AIM on April 19, 2007.

 

·                  Introduced the Horizon Compact, which
integrates and enhances the functionality of traditional wireless indoor and
outdoor units (IDU and ODU) in a single, native Gigabit Ethernet microwave
transmission system. Horizon Compact enhances the value proposition—with 800
Mbps full duplex capacity at lower capital and operational costs—for enabling
Carrier Ethernet services.

 

Fiscal Year 2007 (March 1, 2006 until February 28,
2007)

 

·                  Announced the signing of a strategic
partnership agreement with Cedicom Company of Russia, a leader in the
telecommunication market in Russia and the CIS countries. The agreement will
allow the Company to significantly extend its market reach in the Russian
market.

 

·                  Instituted disruptive market pricing for the
AirPair product line, including Flex, AirPair 50/100/200, High Power and APX.
The new price represented up to a 25% reduction from previous price levels.

 

·                  Announced the expansion of the AirPairTM
product family with the addition of the APX-104E and APX-108E to optimize the
Company’s TDM service offering and complement its Ethernet market leadership.

 

ARTICLE
3:  DESCRIPTION OF THE BUSINESS

 

3.1                               General

 

(a)                                  Products and Services

 

(i)                                     Principal Markets

 

DragonWave
is focused on customers in three target markets: (i) emerging BWA service
providers, (ii) traditional service providers, and (iii) large
enterprises and government/municipal entities. These three target markets, as
well as emerging markets for DragonWave’s products, are detailed below.

 

Emerging BWA Service Providers

 

Customers
in this market are broadband access service providers that are new market
entrants. These new entrants compete with incumbent service providers in their
territory of operation, using wireless technology as an alternative delivery
mechanism for mobile or fixed broadband services. BWA service providers deliver
solutions using access equipment that operates in either licensed or unlicensed
spectrum. Examples of DragonWave’s customers within this segment are
Clearwire Corporation, Orascom Telecom Holding 

 

7

 

S.A.E.,
Barrett Xplore Inc., TowerStream Corporation and Business Only Broadband LLC,
ECAS Telecommunications & Systems Ltd. and Altitude Infrastructure.

 

Traditional Service Providers

 

This
target market includes incumbent service providers that require wire-line
extension, the ability to introduce high-capacity wireless service for mobile
applications, or additional infrastructure to support the delivery of broadband
services. Customers in this segment use wireless spectrum to offer advanced
wireless services on either BWA or 3G cellular technology platforms. Examples
of DragonWave’s customers within this segment include Sprint Nextel Corporation
and Bell Canada Inc.

 

Enterprise and Government/Municipal

 

This
target market includes large, multi-site enterprises and organizations that
build their own private communications networks rather than purchasing services
from service providers. Examples of DragonWave’s customers within this segment
include COTA, Washington Department of Transportation, Prosystel SAS and the
Dubai Police Department.

 

Other Target Customer Markets

 

DragonWave
also targets other markets of prospective customers that choose broadband
wireless networks as data transport solutions. DragonWave has been, or is
currently, in trials with customers such as satellite content providers
(content distribution and uplink channel for bi-directional services), cable companies
(extension of hybrid fibre/coax plant) and defence services (hardened
communications and remote telemetry).

 

(ii)                                  Distribution
Methods

 

DragonWave
distributes its products and services through a combination of direct and
indirect sales channels. This strategy permits the Company to broaden its
customer coverage, while at the same time retaining contact with its customer
base and managing costs. The Company’s sales cycles can be lengthy and often
includes network studies and trials of DragonWave’s equipment in laboratory and
field environments. Because DragonWave’s products are utilized in large network
deployments, the Company’s sales are project-based and accordingly are highly
variable from quarter to quarter. The Company’s direct customers are typically
service providers that operate networks in large geographical areas. The sales
cycle to this class of customer typically involves a trial (or trials),
and requires nine to twelve months from first contact before orders are
received. Once the order stage is reached, a supply agreement is usually
established and multiple orders are processed under one master supply
agreement.

 

Direct Sales Strategy

 

DragonWave’s
direct sales and business development team is comprised of 31 employees and is
organized across three geographic regions: North America; Europe, the Middle
East and Africa (EMEA); and Asia-Pacific. Direct sales employees are currently
based in the United States, Canada, the United Kingdom  France and the U.A.E.. DragonWave’s sales and
business development team is comprised of dedicated salespeople assigned to
specific customer accounts. The Company’s sales personnel have extensive
knowledge of network infrastructure. In addition to closely monitoring the
Company’s target markets for potential network deployments and new customer
opportunities, the Company’s sales team builds on the Company’s existing
relationships with its customers’ network planning organizations, including
participating in business case development and technical analysis of projects.
The Company’s direct sales team targets both traditional wireless service
providers and emerging BWA service providers.

 

8

 

The
Company has offices in the North America, UK, France and the Middle East.

 

Indirect Sales Channel Strategy

 

DragonWave’s
indirect sales channel consists primarily of distributors and regional
value-added resellers (VARs), and is involved in both channel-initiated sales
(sales initiated and serviced by third parties) and channel-fulfilled sales
(sales initiated by DragonWave’s direct sales team and serviced by third party
resellers). DragonWave’s principal North American distributors are TESSCO
Technologies Incorporated, Talley Communications Corp., Alliance Communications
Corporation and Hutton Communications. These distributors have been selected
based on geographic coverage and access to market verticals. Within North
America, the Company’s VARs are identified by these distributors. DragonWave
has agreements with several regional VARs in North America. Outside of North
America, the Company selects its VARs directly. All VARs are qualified by the
Company based on experience deploying microwave equipment, contacts in the
Company’s target customer segments, and financial stability. DragonWave’s VARs
receive ongoing training from DragonWave, work with dedicated DragonWave
account managers, participate in co-operative marketing programs and receive
market development funds and support materials for customer sales. DragonWave
personnel assist the Company’s VARs with initial installations of the Company’s
products to provide quality assurance to end-customers.

 

DragonWave
also works with original equipment manufacturers (OEMs), including system
integrators and network equipment vendors, to assist them in providing complete
network solutions for their end-customers. 
The majority of indirect revenues in North America are accounted for by
three distributors. DragonWave has agreements with regional VARs in the EMEA,
Asia-Pacific, and the United Kingdom. DragonWave now has installations in
45 countries around the world.

 

(iii)                               Revenues

 

The
Company’s revenue in the 2009 fiscal year was $43.3 million, compared with
$40.4 million for the 2008 fiscal year. 
Almost of all of the Company’s revenue originated from its AirPair and
Horizon product lines.  In the 2008 and
2009 fiscal years, the Company did not derive any of its revenues from sales to
customers who were investees (outside of the consolidated entity) or
controlling shareholders of the Company.

 

(b)                                 Production and Services

 

The
Company outsources most of its manufacturing and certain of its supply chain
management and distribution functions. The outsourcing of these functions
allows the Company to focus on the design, development, sale and support of the
Company’s products. In addition, the Company is able to leverage the economies
of scale and expertise of specialized outsourced manufacturers, reduce
manufacturing and supply chain risk and reduce distribution costs.

 

DragonWave’s
primary outsourced manufacturer is BreconRidge Corporation (“BreconRidge”),
one of the world’s top 50 electronics manufacturing services companies.
BreconRidge specializes in the communications, industrial and consumer market
sectors. BreconRidge is ISO 9001 certified and has manufacturing facilities in
Canada, the United States, the United Kingdom and China. The Company’s products
are manufactured at BreconRidge’s facility in Ottawa, Ontario, Canada. Terence
Matthews, a director of the Company, has a significant equity interest in
BreconRidge.

 

DragonWave
also outsources certain manufacturing functions to Plexus Corp. of the United
States. Plexus Corp. (“Plexus”) is an award-winning participant in the
Electronics Manufacturing Services (EMS) industry, providing product design,
supply chain and materials management, manufacturing, test, 

 

9

 

fulfillment
and aftermarket solutions to branded product companies in the
Wireline/Networking, Wireless Infrastructure, Medical, Industrial/Commercial
and Defense/Security/Aerospace market sectors.

 

Plexus’s
manufacturing model and global supply chain solutions are strategically
enhanced by value-added product design and engineering services. Plexus
specializes in mid-to low-volume, higher-mix customer programs that require
flexibility, scalability, technology and quality.

 

Plexus
provides award-winning customer service to more than 100 branded product
companies in North America, Europe and Asia.

 

The
manufacturing of the Company’s products has been allocated among key suppliers
to reduce the risks associated with using a single supply source and to ensure
competitive pricing and levels of service.

 

(c)                                  Specialized Skill and Knowledge

 

The Company’s ability to develop technologically superior and/or most
cost-effective solutions relative to its competitors can only be achieved
through its continued research and development (R&D) efforts.

 

DragonWave’s R&D activities take place at its headquarters in
Ottawa, Ontario, Canada. DragonWave currently has approximately 74 personnel in
its engineering group, representing approximately 51% of the Company’s total
personnel (including contractors). The majority of the Company’s engineering
staff holds technical degrees in engineering. A large number of the senior
engineering personnel have worked together for several years and have been
responsible for the development of DragonWave’s products. The Company’s R&D
team works closely with DragonWave’s growing customer base, and incorporates feedback
from the Company’s direct and indirect sales teams into its product development
plans to improve the Company’s products and address emerging market
requirements.

 

R&D expenses have historically been, and will continue to be, a
significant portion of DragonWave’s overall cost structure as DragonWave will
continue to invest in new product features and new platforms   to better serve the current and future needs
of its customers. The Company invested 25% and 26% of its revenues in R&D
during fiscal 2009 and fiscal 2008, respectively.

 

(d)                                 Competitive Conditions

 

DragonWave faces competition in its target markets from two types of
microwave equipment suppliers: PDH (Plesiochronous Digital Hierarchy) equipment
suppliers and Ethernet equipment suppliers. Microwave equipment has
historically been used to address the backhaul requirements of 2G cellular
applications and, today, the market is dominated by PDH products. The leading
suppliers of PDH microwave equipment are NEC Corporation, Alcatel Lucent, Telefonaktiebolaget
LM Ericsson and Nokia Corporation. While DragonWave competes with suppliers of
PDH backhaul products of T1s and E1s used in 2G networks, DragonWave’s native
Ethernet based products are optimized for the transport of packet based
networks and feature significantly higher capacity, and a manufacturing process
that delivers this high capacity at a lower price, than PDH equipment. A second
category of equipment suppliers for backhaul applications are, like DragonWave,
focused on Ethernet based products in IP networks. These suppliers are
DragonWave’s main competitors and include Ceragon Networks Ltd. of Israel and
Harris Stratex Networks, Inc. of the United States. DragonWave encounters
these competitors in network builds focused on IP traffic. Management believes
that DragonWave’s bandwidth capability/flexibility, and all-outdoor solution,
performance and simplicity differentiate the Company’s solution from products
offered by its competitors.

 

10

 

(e)                                  New Products or Services

 

DragonWave made
product announcements in fiscal 2009 in support of its strategy to continue to
introduce innovative products into the market place with enhanced functionality
and lower price points. Horizon was introduced as a new product line at the
beginning of fiscal 2008.  This product
line is currently available in the all outdoor version, Horizon Compact, and
the split mount version, Horizon Duo, which was introduced at the beginning of
fiscal year 2009.  The Company also
expanded its frequency coverage to the 6 to 8 GHz licensed radio frequencies
enabling it to address additional applications requiring longer reach in higher
rain rate regions. In addition , the Company has developed new offerings to
support legacy traffic in order to increase its addressable market size.  The Company introduced its Service Delivery
Unit (SDU) in three versions. A 16-port T1/E1 version, a two-port DS3 version
and a one-port OC3/STM1 version. The SDU enables carriers to gradually and
cost-effectively migrate more of their network from TDM circuits to
packet-based traffic and realize the benefits of true network convergence.

 

(f)                                    Components

 

DragonWave’s
solution consists of links, each comprised of two radios, two modems, and two
antennas.  Each set of links includes
DragonWave’s proprietary embedded software and FPGA firmware. DragonWave’s
links incorporate commercially-available electronic components sourced from
third party suppliers, including field programmable gate arrays, monolithic microwave
integrated circuits and micro processors. The antennas used in DragonWave’s
wireless carrier-Ethernet links are manufactured by third party suppliers.

 

The
manufacture of the Company’s products depends on obtaining adequate supplies of
third party components on a timely basis. The Company sources several key
components used in the manufacture of its products from a limited number of
suppliers, and in some instances, a single source supplier.  See under the heading  “Risk Factors” below.

 

(g)                                 Intangible Properties

 

In accordance with industry practice, the Company protects its
proprietary rights through a combination of patent, copyright, trade-mark and
trade secret laws and contractual provisions.

 

Patent law offers some protection for the Company’s current and future
products and may protect certain elements of the Company’s manufacturing
processes. DragonWave’s patent strategy is focused on protecting novel elements
of the following aspects of the Company’s product and manufacturing design:

 

·                  core design features
(including certain circuits and algorithms required for advanced, low-cost
point-to-point radio implementations);

 

·                  implementation technologies
(consisting of the proprietary aspects of the Company’s manufacturing design
that permit low-cost automated assembly and testing);

 

·                  certain key wireless
Ethernet networking technologies for high-speed, high performance metro
Ethernet networking applications (including bandwidth scaling feature (marketed
as “Flex”), mesh rapid link shutdown feature, mesh node packaging/integration);
and

 

·                  other key features of the
Company’s products (including AirPair Flex functionality, RF-loopback, mesh
nodes and tri-mode mesh panel features).

 

The Company’s active patent portfolio consists of 13 pending applications,
and 5 issued patents.

 

11

 

The source code for the Company’s software, the proprietary software
embedded in its hardware products and the Company’s manufacturing designs are
protected under trade secret law and as unpublished, copyrighted works. The
Company recognizes, however, that effective copyright protection may not be
available in some countries in which it distributes products. The Company
licenses the use of its software to its customers and resellers. These licenses
contain standard provisions prohibiting the unauthorized reproduction,
disclosure, reverse engineering or transfer of the Company’s software product.

 

The Company’s general practice is to enter into confidentiality and
non-disclosure agreements with its employees, consultants, manufacturers,
suppliers, customers, channel partners and others to attempt to limit access to
and distribution of its proprietary information. In addition, it is the Company’s
practice to enter into agreements with its employees that include an assignment
to the Company of all intellectual property developed in the course of
employment.

 

The Company has registered trademarks for the name “DragonWave” and “AirPair”
in Canada.  The company also has a registered
trademark for the name “DRAGONWAVE” in the United States.

 

(h)                                Cycles

 

There is no seasonal effect
on the Company’s sales patterns; however, quarterly results may fluctuate
especially when multi-year or multi-quarter projects are booked.

 

(i)                                    Economic Dependence

 

The Company has been dependent, and expects that in at least the next
twelve months it will continue to be dependent, on a key customer. This
customer represented approximately 19% of sales for the year ended February 28,
2009 versus 27% of sales for the year ended February 29, 2008. The Company
supplies products to its customers on a purchase order basis and, accordingly,
customers are under no ongoing obligation to buy the Company’s products. If one
or more of the Company’s customers discontinues its relationship with the
Company for any reason, or reduces or postpones current or expected purchases
of the Company’s products or services, the Company’s business, results of
operations and financial condition could be materially adversely affected.  See “Risk Factors” below.

 

(j)                                    Changes to Contracts

 

As of the date of this
Annual Information Form, DragonWave does not anticipate any changes to existing
contracts that would have a material effect on the current financial year’s
results.

 

(k)                                 Environmental Protection

 

Environmental protection
requirements currently have no material financial or operational effect on the
capital expenditures, earnings or competitive position of DragonWave, and are
not expected to have any material effect in future years.  However, there may be health and safety risks
associated with wireless products. See “Risk Factors” below.

 

(l)                                    Employees

 

As of February 28, 2009, DragonWave had 144 full-time and hourly
employees.

 

(m)                              Foreign Operations

 

DragonWave markets its products
to customers outside of Canada through both direct and indirect distribution
channels (see Section 3.1(a)(ii), and Section 4.1, “Risk Factors”).

 

12

 

(n)                                 Lending

 

As at February 28,
2009, DragonWave had a $5.0 million credit facility with a major U.S.-based
bank to support working capital.  This
credit facility is formula based whereby the Company is permitted to draw from
the line based on a percentage of accounts receivable. As at May 7, 2009,
the Company has updated its credit facility to include a $10.0 million USD line
to support operations and a $3.0 million USD line to support capital
expenditures.

 

DragonWave restricts its
investments to interest-bearing, short-term investment grade securities.

 

3.2                               Bankruptcy and
Similar Procedures

 

The Company has never been
subject to a bankruptcy, receivership or similar procedure and no such
procedures are proposed for the current fiscal year.

 

3.3                               Reorganizations

 

Immediately prior to the closing of the Company’s IPO on April 19,
2007, the Company completed a capital reorganization pursuant to which all of
the Company’s then-outstanding convertible debt and preferred shares were
converted into common shares.

 

ARTICLE 4: RISK FACTORS

 

4.1                               Risk Factors

 

Readers should carefully consider the following risk factors
in addition to the other information contained in this Annual Information Form.
The risks and uncertainties below are not the only ones facing the Company.
Additional risks and uncertainties not presently known to the Company or that
the Company currently considers immaterial also may impair its business
operations and cause the price of its common shares to decline. If any of the
following risks actually occur, the Company’s business may be harmed and its
financial condition and results of operations may suffer significantly. In that
event, the trading price of its common shares could decline, and a purchaser
may lose all or part of his, her or its investment.

 

Risks
Related to the Company’s Business and Industry

 

The Company’s growth is dependent on
the development and growth of the market for broadband wireless access.

 

The
market for broadband wireless access is still emerging and the market demand,
price sensitivity and preferred business model to deliver BWA service remains
highly uncertain. The Company’s growth is dependent on, among other things, the
size and pace at which the BWA market develops. If the BWA market does not gain
widespread acceptance and declines, remains constant or grows more slowly than
anticipated, the Company may not be able to grow or sustain its growth, and the
Company’s overall revenues and operating results will be materially and
adversely affected.

 

In
particular, the Company’s products are optimized for service providers that
wish to deploy networks based on emerging BWA technologies such as WiMAX and
WiFi. There can be no assurance that there will be sufficient end-user demand
for services offered using BWA network technologies. Other competing
technologies may be developed that have advantages over BWA technologies, and
service providers of other networks based on these competing technologies may
be able to deploy their networks at a lower cost, which may allow these service
providers to compete more effectively.

 

13

 

Service
providers that do choose to deploy emerging BWA technologies are also dependent
on suppliers other than DragonWave in order to build and operate their
networks. If these third party suppliers are not successful in developing the
network components, subscriber equipment and other equipment required by the
Company’s customers in a timely and cost-efficient manner, network deployments
by the Company’s customers and demand for the Company’s products will be materially
and adversely affected.

 

The Company relies on a small number
of customers for a large percentage of its revenue.

 

The
Company has been dependent, and expects that in at least the next twelve months
it will continue to be dependent, on a key customer. This customer represented
approximately 19% of sales for the year ended February 28, 2009 versus 27%
of sales for the year ended February 29, 2008. The Company supplies
products to its customers on a purchase order basis and, accordingly, customers
are under no ongoing obligation to buy the Company’s products. If one or more
of the Company’s customers discontinues its relationship with the Company for
any reason, or reduces or postpones current or expected purchases of the
Company’s products or services, the Company’s business, results of operations
and financial condition could be materially adversely affected.

 

The Company faces intense
competition from several competitors and if it does not compete effectively
with these competitors, its revenue may not grow and could decline.

 

The
Company has experienced, and expects to continue to experience, intense
competition from a number of companies. The Company competes principally with
Harris Stratex Networks, Inc. and Ceragon Networks Ltd. The Company’s
existing and/or new competitors may announce new products, services or
enhancements that better meet the needs of customers or changing industry
standards or deeply discount the price of their products. Further, new
competitors or alliances among competitors could emerge. Increased competition
may cause price reductions, reduced gross margins and loss of market share, any
of which could have a material adverse effect on the Company’s business,
financial condition and results of operations. The Company’s competitors may
also establish or strengthen co-operative relationships with sales channel
partners or other parties with whom the Company has strategic relationships,
thereby limiting the Company’s ability to promote its products.

 

Many
of the Company’s competitors and potential competitors have significantly
greater financial, technical, marketing and/or service resources than the
Company and/or have greater geographical reach to existing and prospective
customers. Many of these companies also have a larger installed base of
products, longer operating histories or greater name recognition than the
Company. Customers of the Company’s products are particularly concerned that
their suppliers will continue to operate and provide upgrades and maintenance
over a long-term period. The Company’s relatively small size and short
operating history may be considered negatively by prospective customers. In
addition, the Company’s competitors may be able to respond more quickly than
the Company to changes in end-user requirements and devote greater resources to
the enhancement, promotion and sale of their products.

 

The Company faces competition from
indirect competitors.

 

In
addition to direct competitors, the Company faces competition from broadband
technologies that compete with wireless transmission. The Company’s products
compete to a certain extent with other high-speed communications solutions,
including fibre-optic lines, DSL, free space optics, low and medium capacity
point-to-point radios and other wireless technologies. Some of these
technologies utilize existing installed infrastructure and have achieved
significantly greater market acceptance and penetration than high-capacity
broadband wireless technologies. The Company’s wireless products and many other
wireless products require a direct line of sight between antennas, potentially
limiting deployment options and the ability to deploy products in a
cost-effective manner. In addition, customers may wish to use transmission
frequencies 

 

14

 

for
which the Company does not offer products and therefore such customers may turn
to competitors of the Company to fulfill their requirements. The Company
expects to face increasing competitive pressures from both current and future technologies
in the broadband access market. In light of these factors, the market for
broadband wireless solutions may fail to develop or may develop more slowly
than expected. Any of these outcomes could have a material adverse effect on
the Company’s business, results of operations and financial condition.

 

The Company’s success depends on its
ability to develop new products and enhance existing products.

 

The
markets for the Company’s products are characterized by rapidly changing
technology, evolving industry standards and increasingly sophisticated customer
requirements. The introduction of products embodying new technology and the
emergence of new industry standards can render the Company’s existing products
obsolete and unmarketable and can exert price pressures on existing products.
It is critical to the success of the Company to be able to anticipate and react
quickly to changes in technology or in industry standards and to successfully
develop and introduce new, enhanced and competitive products on a timely basis.
In particular, the continued acceptance and future success of the Company’s
product offerings will depend on the capacity of those products to handle
growing volumes of traffic, their reliability and security, and their
cost-effectiveness compared to competitive product offerings. The Company
cannot give assurance that it will successfully develop new products or enhance
and improve its existing products, that new products and enhanced and improved
existing products will achieve market acceptance or that the introduction of
new products or enhanced existing products by others will not render the
Company’s products obsolete. The Company’s inability to develop products that
are competitive in technology and price and that meet customer needs could have
a material adverse effect on the Company’s business, financial condition and
results of operations. Accelerated product introductions and short product life
cycles require high levels of expenditure for research and development that
could adversely affect the Company’s operating results. Further, any new
products that the Company develops could require long development and testing
periods and may not be introduced in a timely manner or may not achieve the
broad market acceptance necessary to generate significant revenue.

 

As
the Company develops new products, its older products will reach the end of
their lives. As the Company discontinues the sale of these older products, the
Company must manage the liquidation of inventory, supplier commitments and
customer expectations. If the Company is unable to properly manage the
discontinuation of older products and secure customer acceptance of new
products, it could have a material adverse effect on the Company’s business,
financial condition and results of operations.

 

The Company has a history of losses
and cannot provide assurance that it will attain profitability. If the Company
fails to do so, its share price may decline.

 

The
Company reported net losses of $10.724 million for fiscal 2007 and $8.536 million
for fiscal 2008 and $5.989 million for fiscal 2009. The Company expects to grow
expenses in relation to revenue. The Company cannot provide assurance that it
will be able to attain profitability on a quarterly or annual basis or if
achieved, may not be able to sustain profitability. The Company’s business
strategies may not be successful. The Company’s results of operations will be
harmed if its revenue does not increase at a rate equal to or greater than
increases in its expenses or if the Company’s revenue is insufficient for it to
attain profitability. If the Company is not able to attain profitability, its
share price may decline and it may require additional financing, which may not
be available.

 

15

 

Failure to manage the Company’s
growth successfully may adversely impact its operating results.

 

The
growth of the Company’s operations places a strain on managerial, financial and
human resources. The Company’s ability to manage future growth will depend in
large part upon a number of factors, including the ability of the Company
to rapidly:

 

·                  build a network of channel
partners to create an expanding presence in the evolving marketplace for the
Company’s products and services;

·                  build a sales team to keep
customers and channel partners informed regarding the technical features,
issues and key selling points of its products and services;

·                  attract and retain qualified
technical personnel in order to continue to develop reliable and flexible
products and provide services that respond to evolving customer needs;

·                  develop support capacity for
customers as sales increase, so that the Company can provide post-sales support
without diverting resources from product development efforts; and

·                  expand the Company’s
internal management and financial controls significantly, so that the Company
can maintain control over its operations and provide support to other
functional areas as the number of personnel and the Company’s
size increases.

 

The
Company’s inability to achieve any of these objectives could harm the Company’s
business, financial condition and results of operations.

 

The Company’s quarterly revenue and
operating results can be difficult to predict and can fluctuate substantially.

 

The
Company’s revenue is difficult to forecast, is likely to fluctuate
significantly and may not be indicative of future performance from quarter to
quarter. In addition, the Company’s operating results may not follow any past
trends. The factors affecting the Company’s revenue and results, many of which
are outside of its control, include:

 

·                  competitive conditions in the
industry, including strategic initiatives by the Company or its competitors,
new products or services, product or service announcements and changes in
pricing policy by the Company or its competitors;

·                  market acceptance of the
Company’s products and services;

·                  the Company’s ability to
maintain existing relationships and to create new relationships with channel
partners;

·                  varying size, timing and
contractual terms of orders for the Company’s products, which may delay the
recognition of revenue;

·                  the project based nature of
deployments of the Company’s products;

·                  the discretionary nature of
purchase and budget cycles of the Company’s customers and changes in their
budgets for, and timing of, equipment purchases;

·                  strategic decisions by the
Company or its competitors, such as acquisitions, divestitures, spin-offs,
joint ventures, strategic investments or changes in business strategy;

·                  general weakening of the
economy resulting in a decrease in the overall demand for telecommunications
products and services or otherwise affecting the capital investment levels of
service providers;

·                  timing of product
development and new product initiatives; and

·                  the length and variability
of the sales cycles for the Company’s products.

 

Because
the Company’s quarterly revenue is dependent upon a relatively small number of
transactions, even minor variations in the rate and timing of conversion of its
sales prospects into revenue could cause it to 

 

16

 

plan
or budget inaccurately, and those variations could adversely affect its
financial results. Delays, reductions in the amount or cancellations of
customers’ purchases would adversely affect the Company’s business, results of
operations and financial condition.

 

A general global economic downturn
may negatively affect the Company’s customers and their ability to purchase the
Company’s products. Such events may decrease revenue and increase cost and may
increase credit risk with the Company’s customers and impact its ability to
collect accounts receivable.

 

Disruptions in the financial markets have had and may continue to have
an adverse effect on the U.S. and world economy, which could negatively impact
business spending patterns. Current tightening of credit in financial markets
could adversely affect the ability of the Company’s customers and
suppliers to obtain financing for significant purchases and operations and
could result in a decrease in or cancellation of orders for its products.

 

The extent of the current financial market conditions and the
accompanying economic downturn may exacerbate some of the risk factors the
Company is exposed to. The effects of a tighter credit market for consumer,
business, and operator spending may have several adverse effects, including reduced
demand for products, resulting in increased price competition or deferment of
purchases and orders by customers. 
Additional effects may include increased demand for customer finance,
difficulties in collection of accounts receivable and increased risk of
counterparty failures.

 

Economic and geopolitical
uncertainty may negatively affect the Company.

 

The
market for the Company’s products depends on economic and geopolitical
conditions affecting the broader market. Economic conditions globally are beyond
the Company’s control. In addition, acts of terrorism and the outbreak of
hostilities and armed conflicts between countries can create geopolitical
uncertainties that may affect the global economy. Downturns in the economy or
geopolitical uncertainties may cause customers to delay or cancel projects,
reduce their overall capital or operating budgets or reduce or cancel orders
for the Company’s products, which could have a material adverse effect on its
business, results of operations and financial condition.

 

Currency fluctuations may adversely
affect the Company.

 

A
substantial portion of the Company’s revenue is earned in U.S. dollars,
but a substantial portion of the Company’s operating expenses is incurred in
Canadian dollars. Fluctuations in the exchange rate between
the U.S. dollar and other currencies, such as the Canadian dollar,
may have a material adverse effect on the Company’s business, financial
condition and operating results. The Company’s policy is to hedge a portion of
its foreign currency exposure with the objective of minimizing the impact of
adverse foreign currency exchange movements. However, the Company may not hedge
entirely the exposure related to any one foreign currency and it may not hedge
its exposure at all with respect to certain foreign currencies.

 

Credit risk may adversely affect the
Company.

 

The
company is exposed to credit risk in respect to accounts receivable in the
event that its counterparties do not meet their obligations. The Company
minimizes its credit risk with respect to accounts receivable by performing
credit reviews for each of its customers. Both economic and geopolitical
uncertainty can influence the ultimate collectability of these receivable
amounts. Failure to collect outstanding receivables could have a material
adverse effect on its business, results of operations and financial condition.

 

17

 

If the Company is required to change
its pricing models to compete successfully, its margins and operating results may
be adversely affected.

 

The
intensely competitive market in which the Company conducts its business may
require it to reduce its prices. If the Company’s competitors offer deep
discounts on certain products or services in an effort to recapture or gain
market share or to sell other products and services, the Company may be
required to lower prices or offer other favourable terms to compete
successfully. Any such changes would reduce the Company’s margins and could
adversely affect the Company’s operating results.

 

If sufficient radio frequency
spectrum is not allocated for use by the Company’s products, or the Company
fails to obtain regulatory approval for its products, the Company’s ability to
market its products may be restricted.

 

Radio
communications are subject to regulation in North America, Europe and other
jurisdictions in which the Company sells its products. Generally, the Company’s
products must conform to a variety of national and international requirements
established to avoid interference among users of transmission frequencies and
to permit interconnections of telecommunications equipment. In addition, the
Company’s products are affected by the allocation and auction of radio
frequency spectrum by governmental authorities. Such governmental authorities
may not allocate sufficient radio frequency spectrum for use by the Company’s
products. Historically, in many developed countries, the unavailability of
frequency spectrum has inhibited the growth of wireless telecommunications
networks.

 

To
operate in any given jurisdiction, the Company must obtain regulatory approval
for its products. Each jurisdiction in which the Company markets its products
has its own regulations governing radio communications. Products that support
emerging wireless telecommunications services can be marketed in a jurisdiction
only if permitted by suitable frequency allocations and regulations, and the
process of establishing new regulations is complex and lengthy.

 

If
the Company is unable to obtain sufficient allocation of radio frequency
spectrum by the appropriate governmental authority or obtain the proper
regulatory approval for its products, the Company’s business, financial
condition and results of operations may be harmed.

 

If unable to secure a license for
applicable spectrum frequency, a customer or end-user may not deploy a wireless
network using the Company’s products.

 

The
Company’s products operate primarily on government-licensed spectrum
frequencies. Users of the Company’s products must either have a license to
operate and provide communications services in the applicable frequency or must
acquire the right to do so from another license holder. The obtaining of such
licenses is a lengthy process and is subject to significant uncertainties
regarding timing and availability. There is no assurance as to when any
government may license spectrum or as to whether the Company’s customers will
be successful in securing any necessary licenses.

 

In
addition, if a license holder of such spectrum frequency files for liquidation,
dissolution or bankruptcy, substantial time could pass before its licenses are
transferred, cancelled, reissued or made available by the applicable government
licensing authority. Until the licenses are transferred, cancelled, reissued or
otherwise made available, other operators may be precluded from operating in
such licensed frequencies, which could decrease demand for the Company’s
products. In addition, if the authorities choose to revoke licenses for certain
frequencies, demand for the Company’s products may decrease as well.

 

18

 

Change in government regulation, or
industry standards, may limit the potential markets for the Company’s products.
The Company may need to modify its products, which may increase the Company’s
product costs and adversely affect the Company’s ability to become profitable.

 

The
emergence or evolution of regulations and industry standards for wireless
products, through official standards committees or widespread use by operators,
could require the Company to modify its systems. This may be expensive and
time-consuming. Radio frequencies are subject to extensive regulation under the
laws of the United States, foreign laws and international treaties. Each
country has different regulations and regulatory processes for wireless
communications equipment and uses of radio frequencies. Any failure by
regulatory authorities to allocate suitable, sufficient radio frequencies to
potential customers in a timely manner could negatively impact demand for the
Company’s products and may result in the delay or loss of potential orders for
its products. In addition, if new industry standards emerge that the Company
does not anticipate, its products could be rendered obsolete.

 

The Company’s ability to sell
products and services is dependent upon it establishing and maintaining
relationships with channel partners.

 

The
Company is dependent upon its ability to establish and develop new
relationships and to build on existing relationships with channel partners,
which it relies on to sell its current and future products and services. The
Company cannot provide assurance that it will be successful in maintaining or
advancing its relationships with channel partners. In addition, the Company
cannot provide assurance that its channel partners will act in a manner that
will promote the success of the Company’s products and services. Failure by
channel partners to promote and support the Company’s products and services
could adversely affect its business, results of operations and financial
condition.

 

Some
channel partners also sell products and services of the Company’s competitors.
If some of the Company’s competitors offer their products and services to
channel partners on more favourable terms or have more products or services
available to meet their needs, there may be pressure on the Company to reduce
the price of its products or services or increase the commissions payable to
channel partners, failing which the Company’s channel partners may stop carrying
its products or services or de-emphasize the sale of its products and services
in favor of the products and services of competitors.

 

The Company relies primarily upon an
outsourced manufacturer and the Company is exposed to the risk that this manufacturer
will not be able to satisfy its manufacturing needs on a timely basis.

 

The
Company does not have any internal manufacturing capabilities and it relies
upon a small number of outsourced manufacturers to manufacture its products.
Substantially all of the Company’s products are currently manufactured by
BreconRidge Corporation (“BreconRidge”) and Plexus Corporation (“Plexus”).
BreconRidge is a company in which Terence Matthews, a director and a
shareholder of the Company, holds a significant equity interest. The Company’s
ability to ship products to its customers could be delayed or interrupted as a
result of a variety of factors relating to its outsourced manufacturers,
including:

 

·                  the Company’s outsourced
manufacturers not being required to manufacture its products on a long-term
basis in any specific quantity or at any specific price;

·                  early termination of, or
failure to renew, contractual arrangements;

·                  the Company’s failure to
effectively manage its outsourced manufacturer relationships;

·                  the Company’s outsourced
manufacturers experiencing delays, disruptions or quality control problems in
their manufacturing operations;

·                  lead-times for required
materials and components varying significantly and being dependent on factors
such as the specific supplier, contract terms and the demand for each component
at a given time;

 

19

 

·                  the Company underestimating
its requirements, resulting in its outsourced manufacturers having inadequate
materials and components required to produce its products, or overestimating
its requirements, resulting in charges assessed by the outsourced manufacturers
or liabilities for excess inventory, each of which could negatively affect the
Company’s gross margins; and

·                  the possible absence of
adequate capacity and reduced control over component availability, quality
assurances, delivery schedules, manufacturing yields and costs.

 

Total
net product and services purchases from BreconRidge in the fiscal year ended February 28,
2009 was $14.1 million. In the fiscal year ended 2008 it was $14.8 million.
Although Management believes that BreconRidge and Plexus has sufficient
economic incentive to perform the Company’s manufacturing, the resources
devoted to these activities by BreconRidge and Plexus is not within the Company’s
control, and there can be no assurance that manufacturing problems will not
occur in the future. Insufficient supply or an interruption or stoppage of
supply from BreconRidge and Plexus or the Company’s inability to obtain
additional manufacturers when and if needed, could have a material adverse
effect on the Company’s business, results of operations and financial
condition.

 

If
any of the Company’s outsourced manufacturers are unable or unwilling to continue
manufacturing its products in required volumes and quality levels, the Company
will have to identify, qualify, select and implement acceptable alternative
manufacturers, which would likely be time consuming and costly. In addition, an
alternate source may not be available to the Company or may not be in a
position to satisfy the Company’s production requirements at commercially
reasonable prices and quality. Therefore, any significant interruption in
manufacturing would result in the Company being unable to deliver the affected
products to meet its customer orders.

 

The Company relies on its suppliers
to supply components for its products and it is exposed to the risk that these
suppliers will not be able to supply components on a timely basis, or at all.

 

The
manufacturers of the Company’s products depend on obtaining adequate supplies
of components on a timely basis. The Company sources several key components
used in the manufacture of its products from a limited number of suppliers, and
in some instances, a single source supplier.

 

In
addition, these components are often acquired through purchase orders and the
Company may have no long-term commitments regarding supply or pricing from
their suppliers. Lead-times for various components may lengthen, which may make
certain components scarce. As component demand increases and lead-times become
longer, the Company’s suppliers may increase component costs. The Company also
depends on anticipated product orders to determine its materials requirements.
Lead-times for limited-source materials and components can be as long as
six months, vary significantly and depend on factors such as the specific
supplier, contract terms and demand for a component at a given time. From time
to time, shortages in allocations of components have resulted in delays in
filling orders. Shortages and delays in obtaining components in the future
could impede the Company’s ability to meet customer orders. Any of these sole
source or limited source suppliers could stop producing the components, cease
operations entirely, or be acquired by, or enter into exclusive arrangements
with, the Company’s competitors. As a result, these sole source and limited
source suppliers may stop selling their components to the Company’s outsourced
manufacturers at commercially reasonable prices, or at all. Any such
interruption, delay or inability to obtain these components from alternate
sources at acceptable prices and within a reasonable amount of time would
adversely affect the Company’s ability to meet scheduled product deliveries to
its customers and reduce margins realized.

 

Alternative
sources of components are not always available or available at acceptable
prices. In addition, the Company relies on, but has limited control over, the
quality, reliability and availability of the components

 

20

 

supplied
to it. If the Company cannot manufacture its products due to a lack of
components, or is unable to redesign its products with other components in a
timely manner, the Company’s business, results of operations and financial
condition could be adversely affected.

 

If the Company’s intellectual
property is not adequately protected, the Company may lose its competitive
advantage.

 

The
Company’s success depends in part on its ability to protect its rights in its
intellectual property. The Company relies on various intellectual property
protections, including patents, copyright, trade-mark and trade secret laws and
contractual provisions, to preserve its intellectual property rights. The
Company’s present protective measures may not be adequate or enforceable to
prevent misappropriation of the Company’s technology or third party development
of the same or similar technology. Despite these precautions, it may be
possible for third parties to obtain and use the Company’s intellectual
property without its authorization. Policing unauthorized use of intellectual
property is difficult, and some foreign laws do not protect proprietary rights
to the same extent as the laws of Canada, the United States or the
United Kingdom.

 

To
protect the Company’s intellectual property, the Company may become involved in
litigation, which could result in substantial expenses, divert the attention of
its management, cause significant delays, materially disrupt the conduct of the
Company’s business or adversely affect its revenue, financial condition and
results of operations.

 

The Company’s business may be harmed
if it infringes on the intellectual property rights of others.

 

The
Company’s commercial success depends, in part, upon the Company not infringing
intellectual property rights owned by others. A number of the Company’s
competitors and other third parties have been issued patents and may have filed
patent applications or may obtain additional patents and proprietary rights for
technologies similar to those used by the Company in its products. Some of
these patents may grant very broad protection to the owners of the patents. The
Company cannot determine with certainty whether any existing third party
patents or the issuance of any third party patents would require it to alter
its technology, obtain licenses or cease certain activities. The Company may
become subject to claims by third parties that its technology infringes their
intellectual property rights due to the growth of products in the Company’s
target markets, the overlap in functionality of these products and the
prevalence of products. Aggressive patent litigation is not uncommon in the
Company’s industry and can be disruptive. The Company may become subject to
these claims either directly or through indemnities against these claims that
it routinely provides to its customers and channel partners.

 

In
addition, the Company has received, and may receive in the future, claims from
third parties asserting infringement and other related claims. Litigation may
be necessary to determine the scope, enforceability and validity of such third
party proprietary rights or to establish the Company’s proprietary rights. Some
of the Company’s competitors have, or are affiliated with companies having,
substantially greater resources than the Company and these competitors may be
able to sustain the costs of complex intellectual property litigation to a
greater degree and for a longer period of time than the Company. Regardless of
their merit, any such claims could:

 

·                  be time consuming to
evaluate and defend;

·                  result in costly litigation;

·                  cause product shipment
delays or stoppages;

·                  divert the attention and
focus of management and technical personnel away from the business;

 

21

 

·                  subject the Company to
significant damages, noting that in the United States plaintiffs may be
entitled to treble damages if intellectual property infringement is found to
be willful;

·                  subject the Company to
significant other liabilities, including liability to indemnify end-customers
pursuant to standard contractual indemnities entered into by the Company in
favour of those customers;

·                  require the Company to enter
into costly royalty or licensing agreements; and

·                  require the Company to
modify, rename or stop using the infringing technology.

 

The
Company may be prohibited from developing or commercializing certain
technologies and products unless the Company obtains a license from a third
party. There can be no assurance that the Company will be able to obtain any
such license on commercially favourable terms, or at all. If the Company does
not obtain such a license, its business, results of operations and financial
condition could be materially adversely affected and the Company could be
required to cease related business operations in some markets and to
restructure its business to focus on operations in other markets.

 

Moreover,
license agreements with third parties may not include all intellectual property
rights that may be issued to or owned by the licensors, and future disputes
with these parties are possible. Current or future negotiations with third
parties to establish license or cross license arrangements, or to renew
existing licenses, may not be successful and the Company may not be able to
obtain or renew a license on satisfactory terms or at all. If required licenses
cannot be obtained, or if existing licenses are not renewed, litigation
could result.

 

The loss of rights to use software
currently licensed to the Company by third parties could increase the Company’s
operating expenses by forcing it to seek alternative technology and adversely
affect the Company’s ability to compete.

 

The
Company licenses certain software used in its products from third parties,
generally on a non-exclusive basis. The termination of any of these licenses or
the failure of the licensors to adequately maintain or update their software,
could delay the Company’s ability to ship its products while the Company seeks
to implement alternative technology offered by other sources and could require
significant unplanned investments on the Company’s part if it is forced to
develop alternative technology internally. In addition, alternative technology
may not be available on commercially reasonable terms from other sources. In
the future, it may be necessary or desirable to obtain other third party
technology licences relating to one or more of the Company’s products or
relating to current or future technologies to enhance the Company’s product
offerings. There is a risk that the Company will not be able to obtain
licensing rights to the needed technology on commercially reasonable terms, if
at all.

 

The Company has a lengthy and
variable sales cycle.

 

It
is difficult for the Company to forecast the timing of revenue from sales of
its products because its customers typically invest substantial time, money and
other resources researching their needs and available competitive alternatives
before deciding to purchase the Company’s products and services. Typically, the
larger the potential sale, the more time, money and other resources will be
invested by customers. As a result, it may take many months after the Company’s
first contact with an end-customer before a sale can actually be completed. In
addition, the Company relies on its channel partners to sell its products to
customers and, therefore, the Company’s sales efforts are vulnerable to delays
at both the channel partner and the end-customer level.

 

During
these long sales cycles, events may occur that affect the size or timing of the
order or even cause it to be cancelled, including:

 

22

 

·                  purchasing decisions may be
postponed, or large purchases reduced, during periods of economic uncertainty;

·                  the Company or its
competitors may announce or introduce new products or services;

·                  the Company’s competitors
may offer lower prices; or

·                  budget and purchasing
priorities of customers may change.

 

If
these events were to occur, sales of the Company’s products or services may be
cancelled or delayed, which would reduce the Company’s revenue.

 

The Company’s ability to recruit and
retain management and other qualified personnel is crucial to its ability to
develop, market, sell and support its products and services.

 

The
Company depends on the services of its key technical, sales, marketing and
management personnel. The loss of any of these key persons could have a
material adverse effect on the Company’s business, results of operations and
financial condition. The Company’s success is also highly dependent on its
continuing ability to identify, hire, train, motivate and retain highly
qualified technical, sales, marketing and management personnel. Competition for
such personnel can be intense, and the Company cannot provide assurance that it
will be able to attract or retain highly qualified technical, sales, marketing
and management personnel in the future. Stock options comprise a significant
component of the Company’s compensation of key employees, and if the Company’s
share price declines, it may be difficult to recruit and retain such
individuals. The Company’s inability to attract and retain the necessary
technical, sales, marketing and management personnel may adversely affect its
future growth and profitability. It may be necessary for the Company to
increase the level of compensation paid to existing or new employees to a
degree that its operating expenses could be materially increased. The Company
does not currently maintain corporate life insurance policies on
key employees.

 

The Company may be unable to
identify and complete acquisitions. Acquisitions could divert management’s
attention and financial resources, may negatively affect the Company’s
operating results and could cause significant dilution to shareholders.

 

In
the future, the Company may engage in selective acquisitions of products or
businesses that it believes are complementary to its products or business.
There is a risk that the Company will not be able to identify suitable
acquisition candidates available for sale at reasonable prices, complete any
acquisition, or successfully integrate any acquired product or business into
its operations. The Company is likely to face competition for acquisition
candidates from other parties including those that have substantially greater
available resources. Acquisitions may involve a number of other risks,
including:

 

·                  diversion of management’s
attention;

·                  disruption to the Company’s
ongoing business;

·                  failure to retain key
acquired personnel;

·                  difficulties in integrating
acquired operations, technologies, products or personnel;

·                  unanticipated expenses,
events or circumstances;

·                  assumption of disclosed and
undisclosed liabilities;

·                  inappropriate valuation of
the acquired in-process research and development, or the entire acquired
business; and

·                  difficulties in maintaining
customer relations.

 

If
the Company does not successfully address these risks or any other problems
encountered in connection with an acquisition, the acquisition could have a
material adverse effect on the Company’s business, results of operations and
financial condition. Problems with an acquired business could have a material
adverse 

 

23

 

effect
on the Company’s performance or its business as a whole. In addition, if the
Company proceeds with an acquisition, the Company’s available cash may be used
to complete the transaction, diminishing its liquidity and capital resources,
or shares may be issued which could cause significant dilution to existing
shareholders.

 

Defects in the Company’s products
could result in significant costs to the Company and could impair its ability
to sell its products.

 

The
Company’s products are complex and, accordingly, they may contain defects or
errors, particularly when first introduced or as new versions are released. The
Company may not discover such defects or errors until after a product has been
released and used by its end-customers. Defects and errors in the Company’s
products could materially and adversely affect the Company’s reputation, result
in significant costs to it, delay planned release dates and impair its ability
to sell its products in the future. The costs incurred in correcting any
product defects or errors may be substantial and could adversely affect the
Company’s operating margins. While the Company plans to continually test
its products for defects and errors and work with customers through the Company’s
post-sales support services to identify and correct defects and errors, defects
or errors in the Company’s products may be found in the future.

 

If a successful product liability
claim were made against the Company, the Company’s business could be seriously
harmed.

 

The
Company’s agreements with its customers typically contain provisions designed
to limit its exposure to potential product liability claims. Despite this, it
is possible that this limitation of liability provisions may not be effective
as a result of existing or future laws or unfavourable judicial decisions. The
Company has not experienced a material product liability claim to date;
however, the sale and support of the Company’s products may entail the risk of
those claims, which are likely to be substantial in light of the use of its
products in critical applications. A successful product liability claim could
result in significant monetary liability and could seriously harm the Company’s
business.

 

There may be health and safety risks
relating to wireless products.

 

In
recent years, there has been publicity regarding the potentially negative
direct and indirect health and safety effects of electromagnetic emissions from
cellular telephones and other wireless equipment sources, including allegations
that these emissions may cause cancer. The Company’s wireless communications
products emit electromagnetic radiation. Health and safety issues related to
the Company’s products may arise that could lead to litigation or other actions
against the Company or to additional regulation of the Company’s products. The
Company may be required to modify its technology and may not be able to do so.
The Company may also be required to pay damages that may reduce its
profitability and adversely affect its financial condition. Even if these
concerns prove to be baseless, the resulting negative publicity could affect
the Company’s ability to market its products and, in turn, could harm its
business and results of operations.

 

Risks Related to the Company’s Common Shares

 

The Company’s share price may be
volatile.

 

The
market price of the Company’s common shares is volatile and subject to wide
fluctuations due to a number of factors, including:

 

·                       low trading
volumes of the Company’s common shares;

·                       actual or
anticipated fluctuations in the Company’s results of operations;

·                       changes in
estimates of the Company’s future results of operations by it or securities
analysts;

 

24

 

·                       announcements
of technological innovations or new products or services by the Company or its
competitors;

·                       changes
affecting the telecommunications industry; and

·                       other events or
factors.

 

In
addition, the financial markets have experienced significant price and value
fluctuations that have particularly affected the market prices of equity
securities of many technology companies and that sometimes have been unrelated
to the operating performance of these companies. Broad market fluctuations, as
well as economic conditions generally and in the telecommunications industry
specifically, may adversely affect the market price of the Company’s common
shares.

 

The Company does not currently
intend to pay dividends on its common shares and, consequently, a shareholder’s
ability to achieve a return on its investment will depend on appreciation in
the price of the Company’s common shares.

 

The Company’s current policy is to retain earnings to finance the
development of new lines of products and to otherwise reinvest in our company.
Therefore, the Company does not anticipate paying cash dividends in the
foreseeable future. The Company’s dividend policy will be reviewed from time to
time by the Company’s Board of Directors in the context of its earnings,
financial condition and other relevant factors. Until the Company pays
dividends, which it may never do, its shareholders will not be able to receive
a return on the Company’s common shares unless they sell them.

 

Future sales of the Company’s common
shares by the Company’s existing shareholders could cause the Company’s share
price to fall.

 

If
the Company’s shareholders sell substantial amounts of the Company’s common
shares in the public market, the market price of the common shares could fall.
The perception among investors that these sales will occur could also produce
this effect.

 

The Company may require additional
capital in the future and no assurance can be given that such capital will be
available at all or available on terms acceptable to the Company and if it is
available, may dilute each shareholder’s ownership of the Company’s common
shares.

 

The
Company may need to raise additional funds through public or private debt or
equity financings in order to:

 

·                       fund ongoing
operations;

·                       take advantage
of opportunities, including more rapid expansion of the Company’s business or
the acquisition of complementary product, technologies or businesses;

·                       develop new
products; or

·                       respond to
competitive pressures.

 

Any
additional capital raised through the sale of equity will dilute the percentage
ownership of each shareholder’s common shares. Capital raised through debt
financing would require the Company to make periodic interest payments and may
impose restrictive covenants on the conduct of the Company’s business.
Furthermore, additional financings may not be available on terms favourable to
the Company, or at all. A failure to obtain additional funding could prevent
the Company from making expenditures that may be required to grow or maintain
the Company’s operations.

 

25

 

ARTICLE
5:  DIVIDENDS

 

5.1                               Dividends

 

The Company currently
intends to retain any future earnings to fund the development and growth of its
business and does not anticipate paying any cash dividends in the foreseeable
future. Any future determination to pay dividends will be at the discretion of
the Company’s Board of Directors and will depend upon many factors, including
the Company’s results of operations, capital requirements and other factors as
the Board of Directors deems relevant. 
There are no restrictions in the articles of the Company preventing
DragonWave from declaring dividends or paying dividends to its
shareholders.  The Company has not paid
any dividends during its last three financial years.

 

ARTICLE 6:  DESCRIPTION OF
CAPITAL STRUCTURE

 

6.1                               General
Description of Capital Structure

 

DragonWave is authorized to
issue an unlimited number of common shares. 
The holders of common shares are entitled to vote at all meetings of the
shareholders of DragonWave, and each common share carries the right to one vote
in person or by proxy.  The holders of
the common shares are also entitled to receive any dividends declared by
DragonWave, and to receive the remaining property of DragonWave on the
liquidation, dissolution or winding up of DragonWave.

 

ARTICLE
7:  MARKET FOR SECURITIES

 

7.1                               Trading Price
and Volume

 

DragonWave’s common shares
are publicly traded on the TSX under the symbol “DWI”.  Trading of the common shares on the TSX and
AIM commenced with the closing of the IPO on April 19, 2007.  The company’s common shares ceased trading on
AIM as at January 5, 2009.

 

The
volume of trading and price ranges of the Company’s common shares on the TSX
and AIM for the fiscal year ending February 28, 2009 are set out in the
following table:

 

26

 

	
   

  	
   

  	
  Common
  Shares - TSX

  	
   

  	
  Common
  Shares - AIM

  	
   

  
	
  Month

  	
   

  	
  Price
  Range (C$)

  	
   

  	
  Average
  Volume

  	
   

  	
  Price
  Range (£)

  	
   

  	
  Average
  Volume

  	
   

  
	
  March 2008

  	
   

  	
  2.33 – 4.51

  	
   

  	
  168,810

  	
   

  	
  125 – 2.40

  	
   

  	
  1,030

  	
   

  
	
  April 2008

  	
   

  	
  2.87 – 3.55

  	
   

  	
  40,250

  	
   

  	
  1.41 – 1.63

  	
   

  	
  91

  	
   

  
	
  May2008

  	
   

  	
  3.22 – 6.00

  	
   

  	
  141,581

  	
   

  	
  1.78 – 3.13

  	
   

  	
  540

  	
   

  
	
  June 2008

  	
   

  	
  5.08 – 5.45

  	
   

  	
  82,381

  	
   

  	
  2.45 – 2.80

  	
   

  	
  381

  	
   

  
	
  July 2008

  	
   

  	
  3.41 – 5.08

  	
   

  	
  90,677

  	
   

  	
  1.98 – 2.31

  	
   

  	
  204

  	
   

  
	
  August 2008

  	
   

  	
  3.60 – 3.80

  	
   

  	
  15,325

  	
   

  	
  Nil

  	
   

  	
  Nil

  	
   

  
	
  September 2008

  	
   

  	
  2.64 – 3.67

  	
   

  	
  26,310

  	
   

  	
  1.43 – 1.62

  	
   

  	
  91

  	
   

  
	
  October 2008

  	
   

  	
  1.10 – 2.79

  	
   

  	
  132,686

  	
   

  	
  0.65 – 1.40

  	
   

  	
  455

  	
   

  
	
  November 2008

  	
   

  	
  1.22 – 1.80

  	
   

  	
  62,600

  	
   

  	
  0.70 – 0.81

  	
   

  	
  152

  	
   

  
	
  December 2008

  	
   

  	
  0.95 – 1.29

  	
   

  	
  104,124

  	
   

  	
  0.56 – 0.67

  	
   

  	
  13,505

  	
   

  
	
  January 2009

  	
   

  	
  1.15 – 1.36

  	
   

  	
  41,048

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  
	
  February 2009

  	
   

  	
  1.26 – 1.65

  	
   

  	
  26,621

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  

 

27

 

ARTICLE
8:  SECURITIES SUBJECT TO CONTRACTUAL
RESTRICTIONS ON TRANSFER

 

8.1                               Securities
Subject to Contractual Restriction on Transfer

 

The following table contains certain information with
respect to common shares of the Company that is subject to contractual
restriction on transfer as at February 28, 2009:

 

SECURITIES SUBJECT TO CONTRACTUAL
RESTRICTION ON TRANSFER

 

	
  Designation of Class

  	
   

  	
  Number
  of Securities that are

  Subject to a Contractual

  Restriction on Transfer

  	
   

  	
  Percentage
  of Class

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common Shares

  	
   

  	
  95,648

  	
  (1)

  	
  0.003

  	
  %

  

 

Note
(1): Represents the unvested portion of Restricted Shares issued and
outstanding as at February 28, 2009.

 

ARTICLE 9:  DIRECTORS AND OFFICERS

 

9.1                               Name,
Occupation and Security Holding

 

The Directors of the Company
as at February 29, 2008 were as follows:

 

	
  Name and
  Municipality of 

  Residence

  	
   

  	
  Principal Occupation

  	
   

  	
  Director Since

  	
   

  	
  Holdings of Outstanding

  Common Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GERALD SPENCER(1)(3)

  Kingswood, Surrey, U.K.

  	
   

  	
  Retired

  	
   

  	
  February 3,
  2006

  	
   

  	
  Nil

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PETER ALLEN

  Ottawa, Ontario, Canada

  	
   

  	
  Chief Executive Officer,
  DragonWave Inc.

  	
   

  	
  March 4,
  2004

  	
   

  	
  541,107
  common shares (4)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TERENCE MATTHEWS

  Ottawa, Ontario, Canada

  	
   

  	
  Chairman,
  March Networks Corporation

  	
   

  	
  March 30,
  2000

  	
   

  	
  1,118,242
  common shares (5)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AKE PERSSON(1)(2)

  Del Mar, California, U.S.A.

  	
   

  	
  Retired

  	
   

  	
  June 22,
  2005

  	
   

  	
  nil

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CARL
  EIBL(2)(3)

  La Jolla, California, U.S.A.

  	
   

  	
  Managing Director,
  Enterprise Partners

  	
   

  	
  November 15,
  2005

  	
   

  	
  nil
  (6)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CLAUDE HAW(1)(2)(3)

  Ottawa, Ontario, Canada

  	
   

  	
  President and Chief
  Executive officer of OCRI

  	
   

  	
  November 10,
  2003

  	
   

  	
  nil
  (7)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  RUSSELL FREDERICK

  Ottawa, Ontario, Canada

  	
   

  	
  Vice-President, Chief
  Financial Officer and Secretary, DragonWave Inc.

  	
   

  	
  March 23,
  2007

  	
   

  	
  158,141(8)

  

 

28

 

	
  (1)

  	
  Audit committee members are
  Claude Haw (Chair), Ake Persson and Gerry Spencer.

  
	
  (2)

  	
  Compensation committee
  members are Carl Eibl (Chair), Ake Persson and Claude Haw.

  
	
  (3)

  	
  Nominating and governance
  committee members are Gerry Spencer (Chair), Carl Eibl and Claude Haw.

  
	
  (4)

  	
  Mr. Allen owns 541,107
  Common Shares. As of May 7, 2009, 2,371 of these Common Shares may be
  repurchased by the Corporation in the event that Mr. Allen’s employment
  with the Corporation is terminated. This repurchase right lapses over time,
  and will terminate on the change of control of the Corporation.

  
	
  (5)

  	
  Sir Matthews controls
  Wesley Clover International Corporation and Wesley Clover Corporation, which
  together own 1,118,242 Common Shares and a warrant to purchase up to 21,100
  Common Shares.

  
	
  (6)

  	
  Enterprise
  Partners V, L.P. and Enterprise Partners VI, L.P. is controlled by Enterprise
  Partners Venture Capital, of which Mr. Eibl is Managing Director. Each
  of these Enterprise funds own 2,456,942Common Shares and warrants to purchase
  up to 57,183 Common Shares. See: “Voting Shares and Principal Shareholders”.
  Mr. Eibl and his associates beneficially own less than 5% of the limited
  partnership units of Enterprise Partners V, L.P. and Enterprise Partners VI,
  L.P. Mr. Eibl does not exert control or direction over the Common Shares
  owned by Enterprise Partners V, L.P. and Enterprise Partners VI, L.P.

  
	
  (7)

  	
  Venture
  Coaches Fund L.P., of which Mr. Haw is Managing Partner, owns 711,835
  Common Shares and a warrant to purchase up to 10,126 Common Shares. Claude
  Haw and his associates beneficially own less than 5% of the limited
  partnership units of Venture Coaches Fund L.P. Mr. Haw does not exert
  control or direction over the Common Shares held by Venture Coaches Fund L.P.

  
	
  (8)

  	
  Mr. Frederick owns
  158,141 Common Shares. As of May 7, 2009, 1,650 of these Common Shares
  may be repurchased by the Corporation in the event that Mr. Frederick’s
  employment with the Corporation is terminated. The repurchase rights lapse over
  time, and will terminate on the change of control of the Corporation.

  

 

The directors of the Company
as at the date of this Annual Information Form are as set forth above.
Each director of the Company holds office until the next annual meeting of
shareholders or until his successor is duly elected or appointed, unless his
office becomes vacant by resignation, death, removal or other cause.

 

The Company’s directors and
executive officers, as a group, beneficially own, or control or direct,
directly or indirectly, a total of 2,774,955 common shares, representing 9.7%
of the total outstanding common shares as of the date of this Annual
Information Form.

 

The executive officers of
the Company as at February 28, 2009 were as follows:

 

	
  Name and
  Municipality of Residence

  	
   

  	
  Offices with the Company

  
	
   

  	
   

  	
   

  
	
  PETER ALLEN

  Ottawa, Ontario, Canada

  	
   

  	
  President, Chief Executive
  Officer and Director

  
	
   

  	
   

  	
   

  
	
  RUSSELL FREDERICK

  Ottawa, Ontario, Canada

  	
   

  	
  Chief Financial Officer,
  Vice President and Secretary

  
	
   

  	
   

  	
   

  
	
  BRIAN MCCORMACK

  Atlanta, Georgia, U.S.A.

  	
   

  	
  Vice President, Sales

  
	
   

  	
   

  	
   

  
	
  ERIK BOCH

  Ottawa, Ontario, Canada

  	
   

  	
  Vice President, R&D
  and Chief Technology Officer

  
	
   

  	
   

  	
   

  
	
  DAVE FARRAR

  Ottawa, Ontario, Canada

  	
   

  	
  Vice President, Operations

  
	
   

  	
   

  	
   

  
	
  ALAN SOLHEIM

  Ottawa, Ontario, Canada

  	
   

  	
  Vice President, Product
  Management

  

 

29

 

The executive officers of
the Company as at the date of this Annual Information Form are as set
forth above.

 

As at the date of this
Annual Information Form, the Board of Directors has four committees: the audit
committee, the compensation committee and the nominating and governance
committee, and disclosure committee. Detailed information regarding the mandate
and procedures of the audit committee can be found below at Article 15, “Audit
Committee”, as required by National Instrument 52-110 - Audit Committees
promulgated under applicable securities legislation.

 

The principal occupations of
the directors and executive officers of the Company, as at February 28,
2009 and for at least the five preceding years, are as follows:

 

Directors

 

Gerry Spencer, Director (Chair).  Gerry Spencer retired as senior vice
president of British Telecommunications plc (“BT”) in late 2000 after a career
of nearly 30 years in finance, product management, marketing, sales and
business development. During his final 6 years with BT, he served on the board
of BT Global plc, with particular responsibility for international wholesale
and marketing. Since retiring, Gerry has assumed consulting and advisory roles in
international wholesale strategy and profitability (both switched minutes and
IP streams), local networking, network equipment supply and business customer
equipment and applications. Gerry has also served as a non executive on the
boards of two UK AIM listed companies; Redstone plc and AT Communications Group
plc (the latter as chairman). Currently, Gerry is a member of the chairman’s
advisory board at Wesley Clover Corporation. Gerry is a graduate of Cambridge
University in the United Kingdom.

 

Dr. Terence Matthews, Director.  Terence Matthews is the non-executive
chairman of a number of technology companies including March Networks
Corporation, Mitel Networks Corporation, Newport Networks Ltd., Bridgewater
Systems Corporations and Solace Systems, Inc. Terry founded Newbridge
Networks Corporation (“Newbridge”) in 1986 where he served as chief
executive officer and chairman until its acquisition by Alcatel of France in May 2000.
At Newbridge, Terry built the company into a leader in the worldwide data networking
industry. Terry also co-founded Mitel Corporation in 1972. A Fellow of the
Institution of Electrical Engineers and the University of Wales, Terry received
an honorary doctor of technology degree from the University of Glamorgan, Wales
and an honorary doctor of engineering degree from Carleton University, Ottawa,
Ontario,  Canada. In May 1994, he
was appointed an Officer of the Order of the British Empire.

 

Ake Persson, Director. Ake Persson, who retired
from Telefonaktiebolaget LM Ericsson (“Ericsson”) in 2004, was a member of the
Ericsson group executive management team. He held a variety of executive
positions in the Ericsson group, most recently prior to retiring as the
president of business unit CDMA Systems and president of Ericsson Wireless Communications
Inc. in San Diego, California. Ake has served as a board member and chairman of
several Ericsson companies around the world and has been instrumental in
forming strategic business alliances with other leading vendors and partners in
the telecom and IT industries. Ake has assumed consulting and advisory roles in
the telecommunications industry and is a member of the Advisory Board of the
Jacobs School of Engineering at the University of San Diego California. Ake
holds a Bachelor of Science degree from the University of Uppsala, Sweden.

 

Carl Eibl, Director.  Carl Eibl has been a managing director with
Enterprise Partners Venture Capital since 2003. Prior to joining Enterprise
Partners, Carl was the chief executive officer of several 

 

30

 

technology and life science
companies in San Diego, including Maxwell Technologies, Inc.
(Nasdaq: MXWL) (1999-2003). Before joining Maxwell Technologies, Inc.,
Carl served as president of Stratagene Corporation (Nasdaq: STGN). Carl
also served as chief executive officer and president for Mycogen Corporation, a
publicly held agricultural biotechnology company, which was sold to The Dow
Chemical Company in 1998 for US$1.1 billion. Carl is a former chairman of the
board of trustees of The Burnham Institute, a life sciences research
institution in La Jolla, California. Carl holds a J.D. degree from the Boston
University School of Law in Boston, Massachusetts, United States and a
bachelor of arts degree from Cornell University in Ithaca, New York,
United States.

 

Claude Haw, Director.  Claude Haw is president, chief executive officer and a
board member of the Ottawa Centre for Research and Innovation (“OCRI”),
Ottawa’s lead economic development organization. He is also founder and
managing partner of Venture Coaches Services Ltd. (“Venture Coaches”),
an Ottawa based venture capital firm providing venture capital for technology
companies. From 2003 to early 2007, Claude was also a general partner at
Skypoint Capital Corporation, an Ottawa based venture capital firm. Prior to
Venture Coaches, Claude held a number of executive positions at Newbridge,
including vice-president of corporate business development. In this role, he
managed strategic investment programs in more than 20 companies. Claude has
also held senior management positions at Mitel Corporation and Leigh
Instruments Ltd. Claude holds a bachelor of electrical engineering degree from
Lakehead University in Ontario, Canada and has completed the Canadian
Securities Course.

 

Executive Officers

 

Peter Allen, President & Chief
Executive Officer.  Prior to joining DragonWave
in 2004, Peter Allen was president and chief executive officer of Innovance
Networks Inc., a private reconfigurable optical networking company. Prior
to 2000, Peter was the vice-president of business development for the Optical
Networks Division of Nortel Networks Inc. (“Nortel”), holding
leadership responsibility for Nortel’s optical components business as well as
business development responsibility for system activities. At Nortel, Peter led
a 5,000-employee global operation spanning R&D, manufacturing and sales and
marketing. Peter has also held managerial positions at Ford Motor Company and
Rothmans International plc, and has lived and worked in North America,
Europe and Africa.

 

Russell Frederick, Vice President, Chief
Financial Officer and Secretary.  Prior to joining DragonWave
in 2004, Russell Frederick was the chief operating officer and chief financial
officer of Wavesat Wireless Inc. (“Wavesat”) (2000 to 2003). Prior
to Wavesat, Russell was the chief financial officer of PRIOR Data
Sciences Ltd. (1994 to 2000) where he played a key role in the management
buy-out and subsequent sale of the company. Prior thereto, Russell was employed
with Digital Equipment of Canada Ltd. in various financial roles. Russell holds
a master of business administration degree in finance, as well as a bachelor of
science degree from McMaster University in Hamilton, Ontario, Canada.

 

Brian McCormack, Vice President, Sales.  Prior to joining DragonWave in 2003, Brian
McCormack held senior sales and marketing positions at SS8 Networks, Inc.
(2002 to 2003), Teem Photonics Corporation (2001 to 2002), TelOptica Inc.
(2001) and Avici Systems Inc. (1999 to 2001). At Avici Systems Inc., a
recognized leader in the carrier-class switch/router market, Brian was senior
vice president of worldwide sales. Prior to 1999, Brian held senior sales and
marketing positions at Nortel, Cisco Systems, Inc. and DSC/Alcatel. Brian
holds a bachelor of arts degree from St. Anselm College in Manchester,
New Hampshire, United States.

 

Erik Boch, Founder, Vice President, R&D
and Chief Technology Officer.  Prior to co-founding DragonWave in February 2000,
Erik Boch held senior engineering or technical management positions at a number
of communications and aerospace companies, namely Litton Systems Inc.,
ComDev International Ltd., Lockheed Martin Corporation and Newbridge. Erik
has been involved in various aspects 

 

31

 

of microwave and millimetre
wave subsystem and system design for more than 22 years. While at
Newbridge, Erik became assistant vice president of the wireless systems group.
Where he led the R&D team at Newbridge that introduced the first ATM-based
fixed wireless access system in the industry. Erik has been published
extensively in major networking publications, including Telephony, Microwave
Journal, Wireless Review, Internet Telephony and America’s Network. Erik holds
several approved RF design patents and numerous patents pending. Erik holds a
bachelor and master degrees in electrical engineering from Carleton University,
Ottawa, Ontario, Canada and is a registered professional engineer.

 

David Farrar, Founder & Vice
President, Operations.  Prior to co-founding DragonWave in February 2000,
David Farrar was employed by Newbridge, where he held senior management
positions in product management, research and development, operations, and
information technology. Prior to joining Newbridge, Dave was director of
engineering at Synapse Corporation, a private data communications design
company, and an engineering manager at Mitel Corporation. Dave holds a bachelor
of science in electrical engineering from the University of Waterloo in
Waterloo, Ontario, Canada.

 

Dr. Alan Solheim, Vice President,
Product Management.  Prior
to joining DragonWave in 2005, Alan Solheim was chief technology officer at
Innovance Networks Inc. (“Innovance”) (2000-2004), a private
reconfigurable optical networking company. Prior to Innovance, Alan was a vice
president at Nortel, responsible for market strategy in the metro transport
group. Alan has extensive experience in the telecommunications industry,
notably working on six generations of fibre-optic transmission systems, and was
the system design authority for Nortel’s OC-192 program. Alan holds
35 patents, has an additional 15 patent applications under review and is
the principal or co-author of numerous papers published in respected industry
journals. Alan holds a doctoral degree in electrical engineering from the
University of Waterloo in Waterloo, Ontario, Canada and a bachelor degree in
engineering from the University of Saskatchewan in Saskatoon, Saskatchewan,
Canada.

 

9.2                               Bankruptcies,
Penalties or Sanctions

 

Peter Allen, a director and
President and Chief Executive Officer of the Company, was a director and the
president of Innovance Inc. (“Innovance”), a private, venture capital
funded company that developed photonics networking solutions. Alan Solheim, the
Vice President, Product Management of the Company, was the chief technology
officer of Innovance. On December 23, 2003, Innovance filed a Notice of
Intent to make a proposal pursuant to Part III of the Bankruptcy and
Insolvency Act (Canada) (the “BIA”). PricewaterhouseCoopers LLP
consented to act as proposal trustee. On July 12, 2004, a majority of the
creditors of Innovance voted to accept the proposal, and the proposal received
court approval on September 16, 2004. The proposal trustee reported in the
applicable court materials that there was no conduct of Innovance that was
subject to censure, and no irregular facts to report in accordance with Section 173
of the BIA.

 

Terence Matthews, a director
and principal shareholder of the Company, routinely invests in and acts as a director
on the boards of businesses that are at an early stage of development and that,
as a result, involve substantial risks. Dr. Matthews was a director of
Ironbridge Networks Corporation, which went into receivership in January 2001
and West End Systems Corporation, which went into receivership in February 1999.

 

Carl Eibl, a director of the
Company, was a director of TwinStar Systems, Inc. (“TwinStar”), a
private start up company that developed tools for semiconductor fabrication
facilities. TwinStar ceased operations in May 2005 and all of the assets
of TwinStar were sold and a settlement with its creditors was completed by the
end of August 2005.

 

32

 

 

None of the directors,
officers or principal shareholders of the Company have been subject to a
corporate cease trade or similar order.

 

ARTICLE 10:  INTERESTS OF MANAGEMENT AND OTHERS

IN MATERIAL TRANSACTIONS

 

Convertible
Debt and Warrants Issued to Investors

 

Between
October 12, 2005 and November 7, 2006, the Company borrowed funds
from a group of its shareholders comprised of Enterprise Partners V, L.P.
and Enterprise Partners VI, L.P. (together “Enterprise”), Wesley
Clover International Corporation (“WCIC”), Venture Coaches
Fund L.P. (“Venture Coaches”), The Business, Engineering, Science &
Technology Discoveries Fund Inc., VentureLink Brighter Future
Fund Inc. and William Sinclair. Three of these lenders had nominees on the
Board of Directors of the Company, namely, Carl Eibl of Enterprise, Terence
Matthews of WCIC, a wholly-owned subsidiary of Terence Matthews, and Claude Haw
of Venture Coaches.  As of April 19,
2007, the Company owed the lenders a total of $13,378,472, consisting of
$12.5 million in principal and $878,472 in accrued interest.  On the closing of the Company’s initial
public offering on April 19, 2007, all principal and interest owed to
these lenders was converted into an aggregate of 3,763,283 common shares
(representing a 10% discount to the price per common share of the initial
public offering). As an inducement to extend the above referenced credit to the
Company, each lender was also granted a warrant to purchase that number of
common shares equal to X/Y, where is X is equal to 6% of the principal amount
advanced by the lender and Y is equal to $3.95, at an exercise price of $3.55
per share. The warrants expire on April 19, 2010.

 

Kanata
Research Park Corporation

 

The principal office of the
Company at 411 Legget Drive, Ottawa, Ontario is leased by the Company from
Kanata Research Park Corporation (“KRPC”) pursuant to a lease dated February 14,
2000, as most recently amended on October 25, 2006. The term of this lease
expires on November 30, 2011. The Company currently leases approximately
25,926 square feet of rentable space. Aggregate lease payments (base
rent and all other rent and charges) are approximately $595,000 per annum. The
Company also leases a warehouse facility at 362 Terry Fox Drive, Ottawa,
Ontario, from KRPC pursuant to a lease dated August 30, 2006, as most
recently amended on October 23, 2008. The term of this lease expires on October 31,
2009. These premises consist of approximately 6,737 square feet of
rentable space. Aggregate annual lease payments (base rent and all other rent
and charges) are approximately $138,600. Additional warehouse space (2,700 square feet)  located at 349 Terry Fox Drive, has been
leased from KRPC on a six-month lease effective February 1, 2008 and
month-to-month thereafter.  Total rent
payments for the year are estimated at $21,400. The Company believes that the terms of its
leases reflect fair market terms and payment provisions at the times that the
leases were negotiated. KRPC is a corporation wholly-owned by Terence Matthews,
a director of the Company.

 

BreconRidge
Corporation

 

On November 4, 2005,
the Company entered into a supply agreement with BreconRidge (the “Supply
Agreement”). Pursuant to the Supply Agreement, BreconRidge has agreed to
provide the Company with production and pre-production products and related
services which may included prototype development and manufacturing,
pre-production and production product manufacturing for materials by way of
purchase orders and forecasts from the Company. In fiscal 2009, the Company
purchased manufacturing and other services in the approximate amount of $14.1
million from BreconRidge. The Company negotiated the terms of the Supply
Agreement on an arm’s-length basis and Management believes that the terms
reflect market terms and payment provisions. The Company has no minimum
purchase commitments pursuant to the Supply Agreement. Upon request from the
Company, BreconRidge 

 

33

 

provides the Company with
price quotations for pre-production and production products and services. If
such quotation is acceptable to the Company, the Company then issues purchase
orders to BreconRidge based on the pricing set forth in the quotation. The
Supply Agreement provides that, so long as DragonWave has established approved
credit terms with BreconRidge, purchase orders submitted by DragonWave are paid
within 30 days from the date of invoice. The term of the Supply Agreement
is continuous until termination. Either the Company or BreconRidge may
terminate the Supply Agreement on 30 days notice. Terence Matthews, a
director of the Company, owns a significant equity interest in BreconRidge and
is a member of BreconRidge’s board of directors.

 

Wesley
Clover Corporation

 

The Company also
purchased services from Wesley Clover Corporation, a company controlled by
Terence Matthews, a director of the Company. 
Total net service purchases in the year ending February 28, 2009
was $204,504 as compared to $100,000 in fiscal 2008. These purchases have been
recorded in sales & marketing expenses in the financial statements of
the Company for fiscal 2009.

 

ARTICLE 11:  LEGAL
PROCEEDINGS

 

It is common in the Company’s
industry to receive notices alleging patent infringement arising in the normal
course of business. The Company has set up internal procedures to deal with
such notices, which include assessing the merits of each notice and seeking,
where appropriate, a business resolution. Where a business resolution cannot be
reached, litigation may be necessary. The ultimate outcome of any litigation is
uncertain, and regardless of outcome, litigation can have an adverse impact on
the Company’s business because of defence costs, negative publicity, diversion
of management resources and other factors. The Company’s failure to obtain any
necessary license or other rights on commercially reasonable terms, or
otherwise, or litigation arising out of intellectual property claims could
materially adversely affect the Company’s business. For the fiscal year ended February 28,
2009 and as of the date of this Annual Information Form, the Company is not
party to any litigation that the Company believes is material to the Company’s
business.

 

ARTICLE 12:  TRANSFER
AGENT AND REGISTRAR

 

The
transfer agent and registrar for the Company’s common shares in Canada is
Computershare Investor Services Inc. at its principal offices at 100 University
Avenue, 9th Floor, North Tower, Toronto, Ontario, M5J 2Y1, Canada.

 

ARTICLE 13: MATERIAL
CONTRACTS

 

On January 29, 2009,
DragonWave’s Board of Directors approved a Shareholder Rights Plan Agreement
(the “Rights Plan”) between DragonWave and Computershare Investor
Services Inc. which is designed to encourage the fair and equal treatment of
shareholders in connection with any take-over bid for the outstanding securities
of the Company.  The Rights Plan is
intended to provide DragonWave’s Board of Directors with adequate time to
assess a take-over bid, to consider alternatives to a take-over bid as a means
of maximizing shareholder value, to allow competing bids to emerge, and to
provide the Company’s shareholders with adequate time to properly assess a
take-over bid without undue pressure.

 

Under the terms of the
Rights Plan, one right (a “Right”) was issued by the Company in respect
of each outstanding common share of the Company at the close of business on January 29,
2009 and one Right will be issued in respect of each common share issued
thereafter (subject to the terms of the Rights Plan).  The Rights issued under the Rights Plan
become exercisable only if a person acquires or announces its intention to
acquire 25% or more of the common shares of the Company without complying with
the 

 

34

 

“permitted bid” provisions
of the Rights Plan or without the approval of the Company’s Board of
Directors.  Should such an acquisition
occur, Rights holders (other than the acquiring person or related persons) can
effectively purchase $2 worth of Common Shares for $1 at the time the Rights
become exercisable.

 

Although effective as of January 29,
2009, the Rights Plan is subject to ratification by the Company’s shareholders
within six months of such effective date. If not ratified within six months
from January 29, 2009, the Rights Plan and all of the Rights outstanding
at the time will terminate. So long as the Rights Plan is ratified by the
Company’s shareholders within six months from the effective date, the Rights
Plan will terminate as of the date of the Company’s 2012 annual meeting of
shareholders unless the Rights Plan is extended by the Board of Directors of
DragonWave and ratified by the Company’s shareholders at the Company’s 2012
annual meeting of shareholders.  The
complete Rights Plan is available on SEDAR at www.sedar.com.  The Company will request ratification of the
Rights Plan at its Annual and Special Meeting of Shareholders scheduled for June 9,
2009.

 

The Company did not enter
into any material contracts out of the ordinary course of business during the
fiscal year ended February 28, 2009 other than the Rights Plan.

 

ARTICLE 14:  EXPERTS

 

14.1                        Names of
Experts

 

The Consolidated Financial
Statements of the Company for the year ended February 28, 2009 (the “Financial
Statements”) filed under National Instrument 51-102 - Continuous
Disclosure, portions of which are incorporated by reference in this Annual
Information Form, have been audited by Ernst & Young LLP (“E&Y”).  The Financial Statements can be found on
SEDAR at www.sedar.com.

 

14.2                        Interests of
Experts

 

The Company’s auditors,
E&Y, report that they are independent of the Company in accordance with the
rules of professional conduct of the Institute of Chartered Accountants of
Ontario.

 

ARTICLE 15:  AUDIT COMMITTEE

 

15.1                        Audit Committee
Charter

 

Attached as Schedule  15.1
is the charter for the Company’s Audit Committee.

 

15.2                        Composition of
the Audit Committee

 

The members of the audit
committee are Claude Haw (Chair), Ake Persson and Gerry Spencer.  Each member of the audit committee is
independent and financially literate.

 

35

 

15.3                        Relevant Education and Experience of Members of the Audit
Committee

 

	
  Name

  	
   

  	
  Relevant
  Education and Experience

  
	
   

  	
   

  	
   

  
	
  Claude Haw

  	
   

  	
  Claude Haw is President and Chief Executive Officer and a board
  member of OCRI, Ottawa’s lead economic development organization. He is also
  founder and managing partner of Venture Coaches Services Ltd., an
  Ottawa-based venture capital firm providing venture capital for technology
  companies. He has served as president and board member of Venture Coaches
  Services Limited, Venture Coaches Limited and Venture Coaches Capital
  Corporation since 2000. From 2003 to early 2007, Claude was also a general
  partner at Skypoint Capital Corporation, an Ottawa-based venture capital
  firm. Prior to Venture Coaches, Claude held a number of executive positions
  at Newbridge Networks Corporation (“Newbridge”), including general
  manager, ATMnet Business Unit where he had profit and loss responsibility for
  the global unit. In addition at Newbridge, he also had the position of
  vice-president of corporate business development where he managed the
  strategic investment programs for more than 20 companies. Claude has also
  held senior management positions at Mitel Corporation and Leigh Instruments
  Ltd. Claude holds a bachelor of electrical engineering degree from Lakehead
  University in Ontario, Canada and has completed the Canadian Securities
  Course. Claude served as a board member of Meriton Networks Corporation from
  2000 to 2009 (also compensation committee and chairman from 2002),
  TrueContext Corporation from 2003 to 2007 (compensation and audit
  committees), Mindtrust Inc. from 2001 to 2009, Elliptic Semiconductor from
  2008 to 2009, Energate Inc from 2008 to 2009, and 3324699 Canada Inc. (Severn
  Bridge Investments) since 1998. He has also served as a board member for
  Accedian Networks (also audit and compensation committees), Spotwave
  Networks, Teradici Corporation (also compensation committee), TimeStep
  Corporation, The Ottawa Network and the Canadian Venture Capital Association
  (CVCA). Claude has been a member of the compensation and audit committees at
  DragonWave since November 2003.

  
	
   

  	
   

  	
   

  
	
  Ake
  Persson

  	
   

  	
  Ake
  Persson, who retired from Telefonaktiebolaget LM Ericsson (“Ericsson”)
  in 2004, was a member of the Ericsson group executive management team. He held
  a variety of executive positions in the Ericsson group, most recently prior
  to retiring as the president of business unit CDMA Systems and president of
  Ericsson Wireless Communications Inc. in San Diego, California. Ake has,
  during his time with Ericsson, established and managed several business units
  including the business units for Cellular, Two-Way Radio, Vehicular
  Electronics and Wireless Voice and Data Systems. Ake has served as a board
  member and chairman of several Ericsson companies around the world and has
  been instrumental in forming strategic business alliances with other leading
  vendors and partners in the telecom and IT industries. Ake has served on the
  board of Axesstel Inc. (Amex:AFT) as a member of the audit and
  governance/nomination committees. He is the chairman of the board at Sky
  Mobilemedia Inc. and serves on the board of advisors to Rayspan Inc. and is a
  member of the advisory board of the Jacob’s School of Engineering at the
  University of California San Diego. Ake holds a bachelor of science degree
  from the University of Uppsala, Sweden. Ake has been a member of the
  Company’s audit committee since June 2006.

  

 

36

 

	
  Name

  	
   

  	
  Relevant
  Education and Experience

  
	
   

  	
   

  	
   

  
	
  Gerry Spencer

  	
   

  	
  Gerry Spencer retired as
  senior vice president of British Telecommunications plc (“BT”) in late
  2000 after a career of nearly 30 years in finance, product management,
  marketing, sales and business development. During his final 6 years with BT,
  he served on the board of BT Global plc, with particular responsibility for
  international wholesale and marketing. Since retiring, Gerry has assumed
  consulting and advisory roles in international wholesale strategy and
  profitability (both switched minutes and IP streams), local networking,
  network equipment supply and business customer equipment and applications.
  Currently, Gerry is a member on a number of boards. Gerry is the chairman of
  the board as well as the chair of the compensation committee and sits on the
  audit committee of AT Communications PLC. Gerry is a member of the
  compensation committee of Redstone PLS. Gerry is also a director of
  NewHeights and is a member of the chairman’s advisory board at Wesley Clover
  Corporation. Gerry is a graduate of Cambridge University in the United
  Kingdom. Gerry has been a member of the Company’s audit committee since
  June 2006.

  

 

15.4                        Pre-Approval
Policies and Procedures

 

The audit committee has
delegated to the Chair of the committee the authority to act on behalf of the
committee between meetings of the committee with respect to the pre-approval of
audit and permitted non-audit services provided by E&Y from time to
time.  The Chair reports on any such
pre-approval at each meeting of the committee.

 

15.5                        External
Auditor Service Fees

 

The following table sets out
the fees billed to DragonWave by E&Y and its affiliates for professional
services in each of the years ended February 29, 2008 and February 28,2009.  During these years, E&Y was the Company’s
only external auditor.

 

	
   

  	
   

  	
  Year Ended

  	
   

  
	
  Category

  	
   

  	
  February 28, 2009

  	
   

  	
  February 29, 2008

  	
   

  
	
  Audit
  Fees

  	
   

  	
  $

  	
  125,400

  	
   

  	
  $

  	
  232,344

  	
   

  
	
  Audit
  Related Fees

  	
   

  	
  $

  	
  60,210

  	
   

  	
  $

  	
  7,805

  	
   

  
	
  Tax
  Fees

  	
   

  	
  $

  	
  38,240

  	
   

  	
  $

  	
  13,487

  	
   

  
	
  All
  Other Fees

  	
   

  	
  $

  	
  34,410

  	
   

  	
  $

  	
  53,743

  	
   

  
	
  Total

  	
   

  	
  $

  	
  258,260

  	
   

  	
  $

  	
  307,379

  	
   

  

 

37

 

ARTICLE
16:  ADDITIONAL INFORMATION

 

Additional financial
information is provided in DragonWave’s comparative financial statements and
management’s discussion and analysis for the year ended February 28, 2009.

 

A copy of the above-mentioned
financial statements and management’s discussion and analysis for the year
ended February 28, 2009, as well as this Annual Information Form, may be
found on SEDAR at www.sedar.com and otherwise may be obtained upon request from
Investor Relations, at the Company’s head office:

 

DragonWave Inc.

Suite 600-411 Legget
Drive

Ottawa,
Ontario K2K 3C9

Telephone Investor
Relations: 1 613 599 9991

Fax: 1 613 599 4225

E-Mail: investor@dragonwaveinc.com

 

Additional information,
including directors’ and officers’ remuneration and indebtedness, principal
holders of the Company’s securities and securities authorized for issuance
under the Company’s equity compensation plans will be contained in the Company’s
Management Information Circular to be distributed in advance of the next annual
general meeting of shareholders.

 

Additional information
relating to the Company may also be found on SEDAR at www.sedar.com and at the
Company’s website at www.dragonwaveinc.com.

 

38

 

 

SCHEDULE 15.1

 

DRAGONWAVE INC.

 

AUDIT COMMITTEE CHARTER

 

1.                                      Policy Statement

 

It
is the policy of DragonWave Inc. (the “Corporation”) to establish and maintain
an audit committee (the “Audit Committee”) to assist the directors
(individually a “Director” and collectively the “Board”) of the Corporation in
carrying out the Board’s oversight responsibility for the internal controls,
financial reporting and risk management processes of the Corporation.  The Audit Committee shall be provided with
resources commensurate with the duties and responsibilities assigned to it by
the Board including appropriate administrative support.  If determined appropriate by the Audit
Committee, it shall have the discretion to institute investigations of
improprieties, or suspected improprieties within the scope of its
responsibilities, including the standing authority to retain special counsel or
other experts.  The Audit Committee shall
have unrestricted access to the Corporation’s external auditors, is authorized
to seek any information that it requires from any employee and all employees
are directed to co-operate with any request made by the Audit Committee.

 

2.                                      Composition of Committee

 

(a)                                  The Audit Committee shall be
established by a resolution of the Board. 
The Audit Committee shall consist of a minimum of three (3) Directors.
The Board shall appoint the members of the Audit Committee and may seek the
advice and assistance of the Nominating and Governance Committee in identifying
qualified candidates. The Board shall appoint one member of the Audit Committee
to be the Chairman of the Audit Committee. The Chairman of the Audit Committee
shall have such accounting or related financial management expertise as the
Board may determine in its business judgment to be required in order to
properly perform the duties of the Chairman.

 

(b)                                 Each member of the Audit
Committee must be a Director who is independent and financially literate within
the meaning of (and subject to the exemptions and other provisions set out in)
applicable laws, rules and regulations, and stock exchange requirements
(collectively “Applicable Laws”).  In
this Charter, the terms “independent” and “financially literate” includes the
meanings given to similar terms by Applicable Laws, including the terms “non-executive”,
“outside” and “unrelated” to the extent such terms are applicable under
Applicable Laws.

 

(c)                                  A Director appointed by the
Board to the Audit Committee shall be a member of the Audit Committee until
replaced by the Board or until his or her resignation.

 

(d)                                 If an Audit Committee member
serves on the audit committees of more than three public corporations,
including the Corporation, the Board must determine that such service would not
impair the ability of the member to effectively serve on the Audit Committee
and disclose such determination in the annual proxy circular.

 

3.                                      Meetings of the Committee

 

(a)                                  The Audit Committee shall
convene a minimum of four times each year at such times and places as may be
determined by the Chairman of the Audit Committee, and whenever a meeting is
requested by the Board, a member of the Audit Committee, the auditors or senior
management of

 

 

the
Corporation. Scheduled meetings of the Audit Committee shall correspond with
the review of the quarterly and year-end financial statements and management
discussion and analysis.

 

(b)                                 Notice of each meeting of
the Audit Committee shall be given to each member of the Audit Committee and to
the auditors of the Corporation, who shall be entitled to attend each meeting
of the Audit Committee and shall attend whenever requested to do so by a member
of the Audit Committee.

 

(c)                                  Notice of a meeting of the
Audit Committee shall:

 

	
  (i)

  	
  be
  in writing, which includes electronic communication facilities;

  
	
   

  	
   

  
	
  (ii)

  	
  state
  the nature of the business to be transacted at the meeting in reasonable
  detail;

  
	
   

  	
   

  
	
  (iii)

  	
  to
  the extent practicable, be accompanied by a copy of any documentation to be
  considered at the meeting; and

  
	
   

  	
   

  
	
  (iv)

  	
  be
  given at least two business days prior to the time stipulated for the meeting
  or such shorter period as the members of the Audit Committee may permit.

  

 

(d)                                 A quorum for the transaction
of business at a meeting of the Audit Committee shall consist of a majority of
the members of the Audit Committee. However, it shall be the practice of the
Audit Committee to require review, and, if necessary, approval of important
matters by all members of the Audit Committee.

 

(e)                                  A member or members of the
Audit Committee may participate in a meeting of the Audit Committee by means of
such telephonic, electronic or other communication facilities as permits all
persons participating in the meeting to communicate with each other. A member
participating in such a meeting by any such means is deemed to be present at
the meeting.

 

(f)                                   In the absence
of the Chairman of the Audit Committee, the members of the Audit Committee
shall choose one of the members present to be chairman of the meeting. In
addition, the members of the Audit Committee shall choose one of the persons
present to be the secretary of the meeting.

 

(g)                                The Audit
Committee may invite such persons to attend meetings of the Audit Committee as
the Audit Committee considers appropriate, except to the extent exclusion of
certain persons is required pursuant to this Charter or by Applicable Laws.

 

(h)                                The Audit
Committee may invite the external auditors to be present at any meeting of the
Audit Committee and to comment on any financial statements, or on any of the
financial aspects, of the Corporation.

 

(i)                                    The Audit
Committee (i) shall meet with the external auditors separately from
individuals other than the Audit Committee and (ii) may meet separately
with management of the Corporation.

 

(j)                                    Minutes shall
be kept of all meetings of the Audit Committee and shall be signed by the chairman
and the secretary of the meeting.  The
chairman of the Audit Committee shall circulate the minutes of the meetings of
the Audit Committee to all members of the Board.

 

4.                                      Duties and Responsibilities of the Committee

 

(a)                                  The primary duties and
responsibilities of the Audit Committee are to:

 

2

 

(i)                                    identify and
monitor the management of the principal risks that could impact the financial
reporting of the Corporation;

 

(ii)                                 monitor the
integrity of the Corporation’s financial reporting process and system of
internal controls regarding financial reporting and accounting compliance;

 

(iii)                             monitor the
independence, objectivity and performance of the external auditors;

 

(iv)                             deal directly
with the external auditors to approve external audit plans, other services (if
any) and fees;

 

(v)                                directly
oversee the external audit process and results (in addition to items described
in subsection 4(d) below);

 

(vi)                             provide an
avenue of communication between the external auditors, management and the
Board;

 

(vii)                          review annually
with management of the Corporation the anti-fraud and risk assessment programs
of the Corporation;

 

(viii)                      carry out a
review designed to ensure that an effective “whistle blowing” procedure exists
to permit stakeholders to express any concerns regarding accounting or
financial matters to an appropriately independent individual; and

 

(ix)                              oversee all
pension and retirement benefit plans if and when established.

 

(b)                                 The Audit
Committee shall have the authority to:

 

	
  (i)

  	
  inspect
  any and all of the books and records of the Corporation and its subsidiaries;

  
	
   

  	
   

  
	
  (ii)

  	
  discuss
  with the management of the Corporation and its subsidiaries, any affected
  party and the external auditors, such accounts, records and other matters as
  any member of the Audit Committee considers appropriate;

  
	
   

  	
   

  
	
  (iii)

  	
  engage
  independent counsel and other advisors as it determines necessary to carry
  out its duties; and

  
	
   

  	
   

  
	
  (iv)

  	
  set
  and pay the compensation for any advisors engaged by the Audit Committee.

  

 

(c)                                  The Audit Committee shall,
at the earliest opportunity after each meeting, report to the Board the results
of its activities and any reviews undertaken and make recommendations to the
Board as considered appropriate.

 

(d)                                 The Audit
Committee shall:

 

(i)                               review the
audit plan with the external auditors and with management;

 

(ii)         discuss with
management and the external auditors any proposed changes in major accounting
policies or principles, the presentation and impact of material risks and
uncertainties and key estimates and judgements of management that may be
material to financial reporting;

 

3

 

(iii)                             review with
management and with the external auditors material financial reporting issues
arising during the most recent financial period and the resolution or proposed
resolution of such issues;

 

(iv)                             review any
problems experienced or concerns expressed by the external auditors in
performing any audit, including any restrictions imposed by management or any
material accounting issues on which there was a disagreement with management;

 

(v)                                review with
senior management the process of identifying, monitoring and reporting the
principal risks affecting financial reporting;

 

(vi)                             review the
audited annual financial statements (including management discussion and
analysis) and related documents in conjunction with the report of the external
auditors and obtain an explanation from management of all material variances
between comparative reporting periods;

 

(vii)                         consider and
review with management, the internal control memorandum or management letter
containing the recommendations of the external auditors and management’s
response, if any, including an evaluation of the adequacy and effectiveness of
the internal financial controls of the Corporation and subsequent follow-up to
any identified weaknesses;

 

(viii)                       review with
financial management and the external auditors the quarterly unaudited
financial statements and management discussion and analysis before release to
the public;

 

(ix)                              before release,
review and if appropriate, recommend for approval by the Board, all public
disclosure documents containing audited or unaudited financial information,
including any prospectuses, annual reports, annual information forms,
management discussion and analysis and press releases, focusing particularly
on:

 

A                                      any changes in accounting
policies and practices;

 

B                                        any important areas where
judgment must be exercised;

 

C                                        significant adjustments
resulting from the audit;

 

D                                       the going concern
assumption, if any;

 

E                                         compliance with accounting
standards; and

 

F                                         compliance with stock
exchange and legal requirements;

 

(x)                                  oversee the
financial affairs of the Corporation and its subsidiaries, and, if deemed
appropriate, make recommendations to the Board, external auditors or
management.

 

(e)                                  The Audit
Committee shall:

 

(i)                                   evaluate the
independence and performance of the external auditors and annually recommend to
the Board the appointment of the external auditors or the discharge of the
external auditor when circumstances are warranted and the compensation of the
external auditor;

 

4

 

(ii)                                consider the
recommendations of management in respect of the appointment and terms of
engagement of the external auditor;

 

(iii)                             pre-approve all
non-audit services to be provided to the Corporation or its subsidiaries by its
external auditors, or the external auditors of subsidiaries of the Corporation,
subject to the overriding principle that the external auditors not be permitted
to be retained by the Corporation to perform internal audit outsourcing
services or financial information systems services; provided that
notwithstanding the above, the foregoing pre-approval of non-audit services may
be delegated to a member of the Audit Committee, with any decisions of the
member with the delegated authority reporting to the Audit Committee at the
next scheduled meeting;

 

(iv)                            approve the
engagement letter for non-audit services to be provided by the external
auditors or affiliates thereof together with estimated fees, and consider the
potential impact of such services on the independence of the external auditors;

 

(v)                                 when there is to be a change
of external auditors, review all issues and provide documentation related to
the change, including the information to be included in the notice of change of
auditors and documentation required pursuant to the then current legislation,
rules, policies and instruments of applicable regulatory authorities and the
planned steps for an orderly transition period; and

 

(vi)                              review all reportable
events, including disagreements, unresolved issues and consultations, as
defined by Applicable Laws, on a routine basis, whether or not there is to be a
change of the external auditors.

 

(f)                                    The Audit Committee shall
enquire into and determine the appropriate resolution of any conflict of
interest in respect of audit or financial matters which are directed to the
Audit Committee by any member of the Board, a shareholder of the Corporation,
the external auditors or senior management.

 

(g)                                 The Audit Committee shall
periodically review with management the need for an internal audit function.

 

(h)                                 The Audit Committee shall
review the accounting and reporting of costs, liabilities and contingencies of
the Corporation.

 

(i)                                     The Audit Committee shall
establish and maintain procedures for:

 

(i)                                   the receipt,
retention and treatment of complaints received by the Company  regarding accounting controls or auditing
matters;

 

(ii)                                the
confidential, anonymous submission by employees of the Corporation of concerns
regarding questionable accounting or audit matters; and

 

(iii)                             reviewing
arrangements by which staff of the Corporation may, in confidence, raise
concerns about possible improprieties in matters of financial reporting and
ensuring that arrangements are in place for proportionate and independent
investigation and follow-up action.

 

5

 

(j)            The Audit
Committee shall review all related party transactions and discuss the business
rationale for these transactions and determine whether appropriate disclosures
have been made.

 

(k)           The Audit
Committee shall establish a policy for release of earnings press releases as
well as for the release of financial information and earnings guidance provided
to analysts and rating agencies.

 

(l)            The Audit
Committee shall discuss with management the Corporation’s process for
performing its quarterly certifications pursuant to Multilateral Instrument
52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings.

 

(m)          The Audit
Committee shall discuss the Corporation’s major financial risk exposures and
the steps management has taken to monitor and control such exposures.

 

(n)           The Audit
Committee shall review the Corporation’s compliance and ethics programs,
including consideration of legal and regulatory requirements, and shall review
with management its periodic evaluation of the effectiveness of such programs.

 

(o)           The Audit
Committee shall review the Corporation’s code of conduct and programs that
management has established to monitor compliance with such code.

 

(p)           The Audit
Committee shall establish, monitor and review policies and procedures for
internal accounting, financial control and management information.

 

(q)           The Audit
Committee shall review and approve the Corporation’s hiring policies regarding
employees and former employees of the present and former external auditors.

 

(r)            The Audit
Committee shall receive any reports from legal counsel of evidence of a
material violation of securities laws or breaches of fiduciary duty by the
Corporation.

 

(s)           The Audit
Committee shall review with the Corporation’s legal counsel, on no less than an
annual basis, any legal matter that could have a material impact on the
Corporation’s financial statements and any enquiries received from regulators
or government agencies.

 

(t)            The Audit
Committee shall assess, on an annual basis, the adequacy of this Charter and
the performance of the Audit Committee.

 

Approved by the Directors on February 23, 2007.

 

6

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